Category: Management

Old Wisdom Revisited

To paraphrase Kurt von Hammerstein-Equord (1878-1943), an anti-Nazi German general, there are four personality types:

Smart and hard-working (good middle manager)

Stupid and lazy (lots of these around, hire for simple, routine tasks and watch closely)

Smart and lazy (promote to senior management — delegates routine work and keeps his eye on the main prize)

Stupid and hard-working (dangerous to have around, screws up things, should be taken out and shot)

It would be fun to classify presidents accordingly, but my target today is a former boss. He wasn’t very smart, but he put up a good front by deploying rhetorical tricks (e.g., Socratic logic-chopping of a most irritating kind). But he was hard-working, if you call constant motion without a notion (my coinage) hard-working.

His rhetorical tricks and aimless energy impressed outsiders who couldn’t appreciate the damage that he did to the company. Both traits irritated intelligent insiders, who were smart enough to pierce his facade and understand the damage that he did to the company.

He kept his job for 25 years because he had only to impress outsiders — the board of directors and the senior officials of client agencies — who had no idea what he actually did from day to day. Good things were accomplished in spite of him, but the glory reflected on him, undeservedly.

Economics Explained – Part I: What Is Economics About?

This is the first installment of a long entry. I may revise it as I post later entries. The whole will be published as a page, for ease of reference.

Economics, as a discipline, often seems counterintuitive, when it is not downright paradoxical. Perhaps the most counterintuitive principle of economics is that unregulated markets are the best mechanism for meeting human wants, given limited resources. Despite that principle, most economists emulate politicians and rabble-rousers in their penchant for second-guessing market outcomes and devising ways of manipulating those outcomes. This penchant does not negate the principle; it merely underscores the unwarranted vanity of the “intellectual” class.

Economics is mysterious to laymen because its practitioners have embellished it with unduly complex mathematical theorizing. In other words, when economics is not counterintuitive it is simply incomprehensible.

There is no need for economics to be counterintuitive or mysterious. Many writers have essayed simple — and correct — expositions of the principles of economics. The most notable effort, perhaps, is Henry Hazlitt’s Economics in One Lesson. Another good source is The Concise Encyclopedia of Economics at The Library of Economics and Liberty (a web site). (Good places to start there are “Basic Concepts” and “Ten Key Ideas“.)

Unfortunately, Hazlitt’s short book is more than 200 pages long. And the entries at The Library of Economics and Liberty are disjointed. What the world needs is a truly concise but coherent and comprehensive statement of the principles of economics. Thus this post, in which I use not a single equation or graph. Why? Because equations and graphs can be off-putting to readers who are not habituated to them. Moreover, equations and graphs imply a degree of precision that is not found in the real world; verbal explanations, hedged with qualifications, give a more accurate picture of reality (albeit one that necessarily remains incomplete).

I begin with the basic question: What is economics about? The answer to that question leads to observations about the principles of economics, which are shaped by politics and culture. From there, I illustrate the principles by working through an example that eventually takes them all into account.

What Is Economics About?

Economics is about the satisfaction of human wants through the production and exchange of goods (a term that encompasses information, services, and tangible products). That simple definition raises several issues, which are the fundamental subjects of economic inquiry:

  1. What are human wants, and how do they arise?
  2. Are all human wants (e.g., love) the proper domain of economics?
  3. By what mechanisms are resources transformed into goods and then matched (or not) to human wants?
  4. What determines the rate of output of all goods, that is, the aggregate degree of satisfaction of human wants?
  5. What is the proper role of government in the satisfaction of human wants?

The brief answers to these questions, upon which I elaborate below, are as follows:

1. Human wants arise from basic human requirements and impulses (e.g., the need for food, clothing, shelter, transportation, and status). Another way to say it is that human wants are both biological and emotional. Particular human wants, therefore, arise from a combination of biological impulses and cultural influences. Some wants clearly are essential to life (e.g., food); some wants clearly are nonessential but nevertheless fill emotional needs (e.g., yachts and mansions). But, like mountains and molehills, the extremes are distinguishable but they are connected by many indistinguishable intermediate stages; that is, there is no telling when wants transition from essential, to beneficial, to frivolous. Moreover — and this is an essential point to which I will return — the striving to fulfill what might seem to be frivolous wants can lead (by steps to be discussed later) to the creation of jobs that yield income from which the job-holders are able to fulfill essential wants (and others, as well).

2. Some human wants arise from impulses that economists should be wary of trying to analyze and measure. The most obvious of these is the kind of love that leads to marriage, sex, and children. Yes, there are sexual arrangements outside marriage that are purely economic transactions. But love of the kind that leads to marriage, sex, and children (and thence to love of parents for their children) is beyond the ken of economics. So, too, are other relationships that are non-transactional, such as friendship and membership in various voluntary organizations (churches, clubs, etc.).

3. Economics is therefore about arms-length transactions — transactions that aren’t bound up in non-contractual relationships like marriage, family, friendship, church, and club. Voluntary exchange and prices are the default mechanisms for matching goods with wants in arms-length transactions. The simplest example is barter: Andy makes bread and wants butter to put on it; Babette makes butter and wants bread for it: Andy and Babette strike a bargain that yields a rate of exchange between bread and butter (i.e., a price for bread in terms of butter and vice versa); the exchange makes both Andy and Babette better off (i.e., there are mutual gains from trade). The prices established by Andy and Babette also serve as signals (provide information) to others who seek to exchange bread and butter; for example, Chuck (a potential producer of butter) might be willing to make butter and trade with Andy on more favorable terms than those offered by Babette.

4. There is no such thing as an aggregate measure of the output of goods — though aggregation is implicit in macroeconomic constructs (e.g., gross domestic product). Thinking only of the United States, for example, how is it possible to aggregate the value of myriad goods that are produced and bought by dozens of millions of businesses and individuals? Hint: Because statistical sampling is arbitrary and uncertain, the answer cannot be found in the common denominator of money. It is nevertheless possible for an economy to move generally in the direction of growth or decline, with exceptions around the trend. It is obvious, for example, that most Americans use goods that are superior in number and quality to the goods that most Americans enjoyed 50 years ago. It is also obvious that during the episode known at the Great Depression, most Americans were materially worse off than they had been before the depression began, and that relatively few became better off. How such things happen, and how economic growth can be sustained and economic declines can be reversed, are valid subjects of economic analysis.

5. Voluntary exchange, unalloyed, can leave some persons “behind” (e.g., those who are incapable of producing bread in exchange for butter, those whose output is worth less to buyers than it used to be). But there is another human impulse (call it “altruism” for now) that leads to the voluntary redistribution of wealth and income, thus enabling the beneficiaries of the redistribution to buy more goods than they can afford on their own. Government action taken in the name of altruism displaces and discourages private altruistic action. More generally, government action throttles economic vitality, causes and exacerbates economic disruptions, and interferes with the constructive resolution of those disruptions. The proper role of government is to provide a framework of defense and justice within which economic actors can operate voluntarily and with little fear that their efforts to improve their lot (and the lot of others less fortunate) will be stymied by force or fraud. Government intervenes legitimately only when it prevents or discourages force and fraud (e.g., defending foreign sources of oil, detecting and preventing terrorism on U.S. soil, prosecuting thieves and murderers, prosecuting “boiler room” operators).

The Times Are Changing … Sometimes for the Better

I was struck by what just happened to McDonald’s (now-ex) CEO Steve Easterbrook:

Steve Easterbrook has been fired as chief executive of McDonald’s, the fast-food chain announced on Sunday [November 3, 2019], after he engaged in a consensual relationship with an employee that violated company policy.

In a statement announcing the firing, McDonald’s said the company’s board had determined that Mr. Easterbrook had “demonstrated poor judgment.”

Mr. Easterbrook, who became the chief executive in March 2015, wrote an email to employees acknowledging the violation. “This was a mistake,” he wrote. “Given the values of the company, I agree with the board that it is time for me to move on.”

The board met on Friday and voted to fire Mr. Easterbrook after an investigation of his relationship with the employee, the company said.

The “error in judgment” is one that ought to be obvious to any senior executive who has risen through the ranks of corporate America. An intimate relationship with a subordinate employee — even one who doesn’t directly report to you — can have several untoward consequences:

The CEO might favor the subordinate over other employees, thus conferring advantages on the subordinate that work against the interests of other employees. Other employees would therefore have grounds for discrimination complaints, leading to costly litigation and harm to the company’s reputation.

Even if the CEO doesn’t favor the subordinate over other employees, the perception of such favoritism could have the same consequences: costly litigation and harm to the company’s reputation.

In either case, if the relationship ends on a sour note (or even if it doesn’t), the subordinate might claim that he or she was coerced into the relationship. The truth or falsity of the claim wouldn’t preclude costly litigation and harm to the company’s reputation.

Many employees would (rightly) view the relationship as indicative of improper management. One result would be a lowering of morale. Another result would be the loss of valued employees who don’t wish to work in a company where “sleeping up” might be acceptable and expected behavior.

In sum, the board of McDonald’s acted responsibly when it fired Easterbrook.

Some might believe that the board cowered cravenly to the Me Too movement. Me Too (like environmentalism and “warmism”) has become extreme (e.g., accusations are taken as proof, all advances seem to be unwelcome ones), but the underlying principle is correct: Persons in high places (women included) shouldn’t be allowed to coerce employees (even subtly) into sexual relationships. Moreover, persons in high places shouldn’t allow themselves to be enticed into such relationships (for the reasons given above).

By firing Easterbrook, the board of McDonald’s acted on principle and acted in the company’s best interest.

It wasn’t always thus, as I can attest.

(“The Best Revenge” and “Another Anniversary” are related to this post, in ways that I prefer not to divulge.)

Consulting

There is a post at Politico about the adventures of McKinsey & Company, a giant consulting firm, in the world of intelligence:

America’s vast spying apparatus was built around a Cold War world of dead drops and double agents. Today, that world has fractured and migrated online, with hackers and rogue terrorist cells, leaving intelligence operatives scrambling to keep up.

So intelligence agencies did what countless other government offices have done: They brought in a consultant. For the past four years, the powerhouse firm McKinsey and Co., has helped restructure the country’s spying bureaucracy, aiming to improve response time and smooth communication.

Instead, according to nearly a dozen current and former officials who either witnessed the restructuring firsthand or are familiar with the project, the multimillion dollar overhaul has left many within the country’s intelligence agencies demoralized and less effective.

These insiders said the efforts have hindered decision-making at key agencies — including the CIA, National Security Agency and the Office of the Director of National Intelligence.

They said McKinsey helped complicate a well-established linear chain of command, slowing down projects and turnaround time, and applied cookie-cutter solutions to agencies with unique cultures. In the process, numerous employees have become dismayed, saying the efforts have at best been a waste of money and, at worst, made their jobs more difficult. It’s unclear how much McKinsey was paid in that stretch, but according to news reports and people familiar with the effort, the total exceeded $10 million.

Consulting to U.S.-government agencies on a grand scale grew out of the perceived successes in World War II of civilian analysts who were embedded in military organizations. To the extent that the civilian analysts were actually helpful*, it was because they focused on specific operations, such as methods of searching for enemy submarines. In such cases, the government client can benefit from an outside look at the effectiveness of the operations, the identification of failure points, and suggestions for changes in weapons and tactics that are informed by first-hand observation of military operations.

Beyond that, however, outsiders are of little help, and may be a hindrance, as in the case cited above. Outsiders can’t really grasp the dynamics and unwritten rules of organizational cultures that embed decades of learning and adaptation.

The consulting game is now (and has been for decades) an invasive species. It is a perverse outgrowth of operations research as it was developed in World War II. Too much of a “good thing” is a bad thing — as I saw for myself many years ago.
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* The success of the U.S. Navy’s antisubmarine warfare (ASW) operations had been for decades ascribed to the pioneering civilian organization known as the Antisubmarine Warfare Operations Research Group (ASWORG). However, with the publication of The Ultra Secret in 1974 (and subsequent revelations), it became known that code-breaking may have contributed greatly to the success of various operations against enemy forces, including ASW.

The End of an Era?

What do these people have in common?

Roy Moore
Harvey Weinstein
Kevin Spacey
Louis C.K.
Al Franken
Charlie Rose
John Conyers
Matt Lauer
Garrison Keillor

I’m sure I’ve missed some names. They’ve been coming too fast for me to keep up. And that’s just this year’s crop — though Bill Clinton always heads the list of past offenders (proven and alleged).

What they have in common, of course, is a rap for sexual harassment or worse — sometimes much worse.

What they also have in common is that they are all public figures who are either in politics or entertainment (which includes “news”).

The most important thing that they have in common, with the exception of Roy Moore, is their attachment to left-wing politics. Oops, here comes Clinton, again.

The day of the free pass because “his heart’s in the right place”* seems to be over.
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* This is a reference to following passage in “The Devolution of American Politics from Wisdom to Opportunism“:

The canonization of Ted Kennedy by the American left and its “moderate” dupes — in spite of Kennedy’s tawdry, criminal past — reminds me of the impeachment trial of William Jefferson Clinton. Clinton’s defense attorney Cheryl Mills said this toward the end of her summation:

[T]his president’s record on civil rights, on women’s rights, on all of our rights is unimpeachable.

In other words, Clinton could lie under oath and obstruct justice because his predatory behavior toward particular women and the criminal acts they led to were excused by his being on the “right side” on the general issue of “women’s rights.” That makes as much sense as allowing a murderer to go free because he believes in capital punishment.

American Express Scores an “Own Goal”

Looking for a cash-back rewards card? Enticed by the offerings of American Express? Think twice. I’ve had an American Express cash-back card for 15 years, but I’m no longer using it. Why? Because American Express owes me three months’ worth of rewards. American Express keeps promising to bring my account up to date, but the promises have been empty ones.

I’ve switched to two other cards that offer cash-back rewards, at a slightly lower rate than I used to earn at American Express. (You can find such cards by going to this page at Bankrate.com.) But the two cards offer generous bonuses ($150 and $100) for charging $500 to them in the first 90 days of use, so in the course of a year, that will more than make up for American Express’s slightly higher but unreliable cash-back rate.

Will I go back to American Express? Probably not. Even in the unlikely event that the issuers of both cards that I’m now using prove as unreliable as American Express, I’ll just try other cards with similar cash-back rates.

American Express has scored an “own goal“; that is, its own actions have prompted me to give my business to its competitors.

More Lessons from Baseball

Regular readers of this blog will know that I sometimes draw on the game of baseball and its statistics to make points about various subjects — longevity, probability, politics, management, and cosmology, for example. (See the links at the bottom of this post.)

Today’s sermon is about the proper relationship between owners and management. I will address two sets of graphs giving the won-lost (W-L) records of the “old 16” major-league franchises. The “old 16” refers to the 8 franchises in the National League (NL) and the 8 franchises in American League (AL) in 1901, the first year of the AL’s existence as a major league. Focusing on the “old 16” affords the long view that’s essential in thinking about success in an endeavor, whether it is baseball, business, or empire-building.

The first graph in each set gives the centered 11-year average W-L record for each of the old teams in each league, and for the league’s expansion teams taken as a group. The 11-year averages are based on annual W-L records for 1901-2013. The subsequent graphs in each set give, for each team and group of expansion teams, 11-year averages and annual W-L records. Franchise moves from one city to another are indicated by vertical black lines. The titles of each graph indicates the city or cities in which the team has been located and the team’s nickname or nicknames.

Here are the two sets of graphs:

W-L records of old-8 NL franchises

W-L records of old-8 AL franchises

What strikes me about the first graph in each set is the convergence of W-L records around 1990. My conjecture: The advent of free agency in the 1970s must have enabled convergence. Stability probably helped, too. The AL had been stable since 1977, when it expanded to 14 teams; the NL had been stable since 1969, when it expanded to 12 teams. As the expansion teams matured, some of them became more successful, at the expense of the older teams. This explanation is consistent with the divergence after 1993, with the next round of expansion (there was another in 1998). To be sure, all of this conjecture warrants further analysis. (Here’s an analysis from several years ago that I still like.)

Let’s now dispose of franchise shifts as an explanation for a better record. I observe the following:

The Braves were probably on the upswing when they moved from Boston to Milwaukee in 1953. They were on the downswing at the time of their second move, from Milwaukee to Atlanta in 1966. It took many years and the acquisition of astute front office and a good farm system to turn the Braves around.

The Dodgers’ move to LA in 1958 didn’t help the team, just the owners’ bank accounts. Ditto the Giants’ move to San Francisco in 1958.

Turning to the AL, the St. Louis Browns became the latter-day Baltimore Orioles in 1954. That move was accompanied by a change in ownership. The team’s later successes seem to have been triggered by the hiring of Paul Richards and Lee McPhail to guide the team and build its farm system. The Orioles thence became a good-to-great from the mid-1960 to early 1980s, with a resurgence in the late 1980s and early 1990s. The team’s subsequent decline seems due to the meddlesome Peter Angelos, who became CEO in 1993.

The Athletics, like the Braves, moved twice. First, in 1955 from Philadelphia to Kansas City, and again in 1968 from Kansas City to Oakland. The first move had no effect until Charles O. Finley took over the team. His ownership carried over to Oakland. Finley may have been the exceptional owner whose personal involvement in the team’s operations helped to make it successful. But the team’s post-Finely record (1981-present) under less-involved owners suggests otherwise. The team’s pre-Kansas City record reflects Connie Mack’s tight-fisted ways. Mack — owner-manager of the A’s from 1901 until 1950 — was evidently a good judge of talent and a skilled field manager, but as an owner he had a penchant for breaking up great teams to rid himself of high-priced talent — with disastrous consequences for the A’s W-L record from the latter 1910s to late 1920s, and from the early 1930s to the end of Mack’s reign.

The Washington Senators were already resurgent under owner Calvin Griffith when the franchise was moved to Minnesota for the 1961 season. The Twins simply won more consistently than they had under the tight-fisted ownership of Clark Griffith, Calvin’s father.

Bottom line: There’s no magic in a move. A team’s success depends on the willingness of owners to spend bucks and to hire good management — and then to get out of the way. (Yes, George Steinbrenner bankrolled a lot of pennant-winning teams during his ownership years, from 1973 to 2010, but the Yankees’ record improved as “The Boss” became a less-intrusive owner from the mid-1990s until his death.)

There are many other stories behind the graphs — just begging to be told, but I’ll leave it at that.

Except to say this: The “owners” of America aren’t “the people,” romantic political pronouncements to the contrary notwithstanding. As government has become more deeply entrenched in the personal and business affairs of Americans, there has emerged a ruling class which effectively “owns” America. It is composed of professional politicians and bureaucrats, who find ample aid and comfort in the arms of left-wing academicians and the media. The “owners’ grip on power is sustained by the votes of the constituencies to which they pander.

Yes, the constituencies include “crony capitalists,” who benefit from regulatory barriers to competition and tax breaks. Though it must be said that they produce things, and would probably do well without the benefits they reap from professional politicians and bureaucrats. Far more powerful are the non-producers, who are granted favors based on their color, gender, age, etc., in return for the tens of millions of votes that they cast to keep the “owners” in power.

Far too many Americans are whiners who grovel at the feet of their “owners,” begging for handouts. Far too few Americans are self-managed winners.

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Related posts:

Ten Commandments of Bad Management

Which of these “commandments” do you habitually obey? Tally your score and check it against the scale at the end of the list.

  • Flaunt the privileges of rank: Spend on frills and perks in the face of adversity.
  • Flout the rules you expect others to obey.
  • Put off hard decisions as long as possible so that rumors can grow wildly on the grapevine.
  • Pepper your staff with meaningless projects and pointless questions — hire consultants to give you the “straight scoop.”
  • Hire outsiders for senior management positions and create make-work jobs for your cronies.
  • Keep your door open to whiners and let them second-guess your managers’ decisions.
  • Promise vision but deliver pap.
  • Talk teamwork but don’t let anyone in on your game plan — keep ’em all guessing.
  • Talk empowerment but micromanage.
  • Keep your board in the dark, except when you turn on the rosy spotlights.

Score of 0: You lie to yourself all the time; see a psychiatrist.

Score of 1-3: You sleep a lot during the day; see a physician.

Score of 4-6: You’re a normal boss, which isn’t necessarily good news.

Score of 7-9: You could give “Chainsaw Al” Dunlap a run for his money.

Score of 10: So you’re the model for the pointy-haired boss!

Ethics and Everyday Leadership

What Is Leadership?

Leaders inspire groups — groups as small as a two persons or as large as nations — and guide them toward exalted aims. Such aims may be, for example, winning instead of losing, turning out excellent products instead of mediocre ones, or adopting a more effective form of government.

Leadership bestows a legacy of accomplishment or continued striving, or both.

We often inappropriately call a person a leader because he or she has leadership responsibilities (e.g., supervisor of a work group, manager of an enterprise, pastor of a church, elected official, coach or quarterback of a football team). But a formal title does not bestow leadership, just as the lack of a formal title does not deny it.

Leading is not managing, preaching, or speech-making, though such activities may play a part in leadership. Leading is not commanding, bullying or manipulating, though leaders sometimes resort to such actions, and risk of losing their followers. Leadership is not a perquisite of high position, celebrity, or wealth, though these may be useful springboards to leadership.

The Importance of Example

Enduring leadership requires respect, respect for the leader’s aims and respect for the leader. Thus the importance of leading by example.

It may be trite to say “lead by example,” but there is no better way to lead than by example, that is, to follow a code of conduct that is not only true to one’s stated aims but also worthy of respect.

Consider the Jesus of Matthew, Mark, and Luke, who preached that bliss was to be found in the hereafter, not on earth. He forswore possessions and gave his life rather than deny his beliefs. He practiced what he preached, as the saying goes. His ethics — demonstrated in his deeds — buttressed the message upon which the Christian church was built.

In sum, Jesus was believed not just because his message was compelling but because his behavior was compelling. His behavior compelled trust which carried over from his person to the message he preached.

The Ethical Elements of Everyday Leadership

In today’s world, a person who would lead for longer than a day or a week must lead by example. The essential traits of leadership by example in the everyday worlds of business and politics are these: personal integrity — first and foremost — followed by fair and consistent behavior toward others, the instillation of institutional ethics, and a candid respect for the rule of law. Let us consider these traits in reverse order.

Candid Respect for the Rule of Law

We confront the law at almost every turn in the everyday world of business and politics. An ethical leader will insist on obedience to the law while openly questioning particular laws that seem unjust.

Take, for example, the obligation of most businesses to practice affirmative action. A business-person may legitimately believe that the mandate to practice affirmative action is unjust to those it disfavors, demeaning to those it is intended to favor, and economically unwise. That person has a dual obligation: to state his reservations about affirmative action and to insist on strict adherence to it for as long as it is the law.

To flout the law invokes disrespect for the rule of law. To obey an unjust law without voicing reasoned objections to it is an act of moral negligence.

Institutional Ethics

Leadership usually takes place within or gives rise to an institution — a business, a volunteer organization, an elective body. The ethics of an institution must be consistent with its aims. A profit-seeking business, for example, might have an ethic of honesty and craftsmanship; a volunteer organization, an ethic of respect for persons of all abilities; an elective body, an ethic of adherence to the Constitution regardless of transitory opinion.

A leader will articulate and personnify the institution’s ethics. A leader will take every opportunity to inculcate in its members the institution’s ethics and will resist staunchly any efforts to subvert or pervert those ethics.

Giving lip service to ethics but not practicing them is not leadership. Giving lip service to ethics but subverting or perverting them is moral fraud.

Fair and Consistent Behavior Toward Others

There may be “different strokes for different folks” but “different rules are for fools.” Nothing — nothing — breeds deeper disrespect for a would-be leader than special treatment of individuals based on their status rather than their performance.

Consider, for example, a senior manager who lets subordinate managers break the rules while enforcing them against the rank-and-file, who fires the rank-and-file while overlooking the failures of managers, or who hires or promote on the basis of “political correctness” instead of merit. That manager can forget leadership because he will not command the respect of anyone whom he can trust as a follower.

Personal Integrity

American history is littered with the husks of would-be leaders who thought they were above the law and above common decency. Bill Clinton is but the current, notorious specimen of the ilk.

A person cannot command respect who habitually lies, dissembles, or cuts corners with the truth; who takes advantage of his position for personal gain beyond reasonable compensation; who insists on and flaunts the privileges of rank; or who flouts the rules that others must obey. Neither President nor preacher — no-one.

How to Manage

1. Do not read books, listen to audio presentations, watch videos, or attend lectures or seminars on the subject of management. The perpetrators of such material are “consultants,” not managers with decades of hands-on experience.

2. Do not hire “consultants,” unless you want someone you can blame for sweeping changes in your organization or its personnel structure. Don’t do it even then, because you will have wasted money to no avail; you employees won’t be fooled by the blame game.

3. Accept the traditional perks of your office, otherwise your employees might doubt your standing (and thus theirs) in the organization. But don’t grab new perks for yourself. If you do, your employees (rightly) will think that your perks may (in lean times) cost some of them their jobs. Of course, if you don’t mind envious, suspicious, and low-motivated employees, go right ahead and treat yourself to more perks. Better yet, pay lavish sums to have a “consultant” justify your new perks.

4. Do not agonize over decisions. It is better to make a few mistakes — and correct them as necessary — than to reveal yourself as an indecisive worrier. Gather the relevant facts, but don’t chase down every loose end. Rely on the counsel of persons with relevant experience whose independence of judgment and discretion you trust.

5. Do not befriend any of your employees. Boss-subordinate friendships cause suspicion and resentment among the excluded, and can lead to nothing but trouble when an employee-friend screws up or stops being a friend.

6. Be friendly toward all of your employees. If you have an effective employee whom you can’t stand, avoid him. If you can’t avoid him, find a (legal) way to fire him. But don’t put up with employees whose attitudes and behavior you dislike. Dislike breeds distrust. Distrust breeds bad decisions on your part.

7. Make it abundantly clear that you reward employees only for good performance. Make your standards of performance abundantly clear, through praise, perks, and pay. (See no. 11.)

8. Micro-manage, if that helps you sleep better at night. But accept the fact that your most effective employees will resent your micro-management, require extra compensation to put up with it, and curb their creativity and initiative in the face of it. In other words, try like the devil to avoid micro-managing, but do not go to the opposite extreme of complete hands-off management. Go to the middle ground: clearly stated expectations and prompt, regular feedback. If you are uncomfortable in the middle ground, you shouldn’t be a manager; find a job doing something instead of managing it. If you wait too long to drop out of the management game, you’ll be locked into it financially and to avoid the appearance of failure. The resulting stress will make you ill, and may kill you.

9. Do not undercut those you have placed in supervisory jobs by criticizing them openly or by implication (e.g., encouraging their subordinates to come through your “open door”). But do keep your ear to the ground; people love to gripe. If you hear of unacceptable behavior, dig into it (discreetly). If the story checks out, act on it, quickly. If a subordinate isn’t doing his job, or has done something egregious, talk to him about it and explain what you expect him to do (or not do). If that doesn’t fix the problem, find a job that he’s better suited for, or help him move on to greener pastures.

10. Be sure that your employees know the bounds of their authority and initiative. Lack of clarity in such matters leads to frustration and poor performance. Give your employees as much leeway as you can, but not so much that they are put in conflict with each other or “empowered” to sabotage your operations or relations with customers.

11. Most importantly, know what you want your organization to accomplish. Be sure that your employees know what it is. Be sure that every part of your organization is aimed toward the same objective. Tie praise, perks,and pay to it.

12. If you have a boss, you have an additional job, which is to be a boss-manager. Your challenge as a boss-manager is to get your boss to observe the eleven preceding rules. You must be subtle but firm in that effort. You cannot expect down-the-line success, but if you fail on too many points, you will be miserable in your job. When you are miserable in your job because of your boss, you have three options: find another job, retire, or put up with your boss if you cannot do either. Nobody promised you a rose garden.

13. There is a fourth option for dealing with a “bad” boss, if the boss is incompetent or has committed an improper act: try to have him fired. But, as the adage goes, “if you strike at the king, you must slay him, lest he rise and seek retribution.” If you are going to strike at your “king,” you must have your exit plan ready.

Good News Sometimes Comes in Small Packages

It’s not headline news, but it’s good news for employers and for employees — who benefit when their employers are allowed to operate their businesses for a profit. PointofLaw.com has the story:

Courts in [California] had been in the forefront of chipping away employers’ right to terminate employees at will, a process I documented in my book The Excuse Factory some years ago. But the trend has been in retreat in recent years, and earlier this month the state Supreme Court delighted employers with a ruling declaring that when a company tells a worker that employment is at will, it means just that. . . .

The California Supreme Court . . . threw out the appellate precedent which had creatively conjured a tenure promise out of the very effort to deny one. . . .

Being offered a job, with no guarantee of getting to keep it forever or of it never changing its character. Imagine that.

Yes, imagine that. It might be an incentive to do a good job, help your employer turn a profit, and earn more money as a result. The chipping away at the doctrine of at-will employment by the courts has enabled the “worst and the weakest” to keep jobs for which they are not qualified or that they do poorly, to the detriment of their fellow employees.

The Best Revenge

I have just learned of the recent death of a former colleague — a man who was my nemesis for most of the thirteen years of our association. That he was a nemesis is evident from his actions toward me; for example:

  • He tried, in vain, to block my promotion to the senior position that he sought for himself in order to justify his presence in the company. (He had been kicked out of what was then our parent organization and given the courtesy title of general counsel of the company that employed both of us.)
  • When I was trying to block a “sweetheart” real-estate deal — one that resulted in the relocation of our company to inferior quarters — he pretended to side with me and then informed the chairman of our board of the blocking effort, thus putting an end to it.
  • Years later, while I was working to relocate our company to more suitable quarters, he tried — clandestinely but unsuccessfully — to block my efforts.
  • He insisted on involving himself in legal matters affecting my operation, even though he was incompetent in those matters.
  • Although he was nominally our general counsel, that title was a “cover” for his role as our lobbyist on Capitol Hill. He failed spectacularly at that job except when he called, reluctantly, for the help of me and others who were knowledgeable, competent, and articulate.
  • He consistently sought compromise on issues where compromise would weaken the company’s reputation for integrity and management’s ability to manage. He and I were invariably opposed in such matters.

There is much more to our history, but you get the picture. He was an incompetent, inarticulate lawyer who held what was essentially a “political” appointment in a hard-nosed, non-political research organization. When he ran up against a competent, articulate, organized, and tenacious non-lawyer whom he saw as a competitor for leadership, his envy and resentment got the better of him. Being unable to compete openly, he resorted to treachery, regardless of the cost to the company and its effects on those touched by his treachery.

I last saw him almost nine years ago, on the occasion of my retirement. He was true to form even then, trying to put a good face on our relationship, which had become openly hostile. Soon after my retirement, however, he tried to sully my name, which only earned him a rebuke from our mutual boss, the CEO.

What do I feel now that he is gone? Nothing more than a vague sense of closure. Because I had prevailed over him on the issues that mattered most to me, the news of his death did not come as a kind of vicarious victory for me. Rather, the news simply drained from me the last, faint traces of bitterness I had felt toward him. Those traces were faint because when I retired I simply walked away from my job and looked back only to keep an eye on my final project — relocating the company to a better place — which came to a successful conclusion within a few years. And then I moved away from the dank environs of the D.C. area to a warm, sunny clime, where I lead a relaxed and serene life.

The best revenge is doing a good job and then living well after the job is done. I have done both.

More than Enough of Armchair Critics

I wrote “Enough of Amateur Critics” in response to all the finger-pointing and blame-shifting that ensued the devastation caused by Hurricane Katrina. The principles therein apply to matters other than natural disasters. There’s war, for instance. In that regard, Jay Tea of WizBang! advances my theme in “Everyone makes missteaks.”

The Joys of Sole Proprietorship

Glen Whitman, in a post at Agoraphilia, says that

[l]oosely speaking, accounting profit considers only expenditures as costs, whereas economic profit counts both expenditures and forgone income as costs. The classic example is a sole proprietor who works 60 hours/week running his store. On paper, he might appear to be making a large (accounting) profit. But if you subtracted the income he could have received had he taken a job working the same number of hours for someone else, his (economic) profit would be smaller, maybe even negative.

I think Whitman omits an important aspect of economic income, which is sometimes called “psychic income.” The sole proprietor gains a non-pecuniary benefit by working for himself: being his own boss. That’s why many persons choose the long hours and greater risks of sole proprietorship to the generally shorter hours and more stable income of salaried employment.

Then, too, there’s always the possiblity that one’s sole proprietorship will be bought out by a larger company for millions of dollars. That’s a potential pecuniary benefit that usually isn’t available to a salaried employee. But I think that potential benefit is secondary to the psychic income derived from being one’s own boss.

Analysis Paralysis Is Universal

Spengler observes that “The West will attack Iran, but only when such an attack will do the least good and the most harm.”

I worked for a CEO who knew that he would have to fire a goodly number of employees because of a funding cut. And everyone in the company knew it, as well. By acting quickly in response to the funding cut, the CEO could have reduced the number of firings and relieved the minds of those who worried needlessly that they would be fired. But the CEO couldn’t bring himself to act quickly, and so he put off the firings for several months. The result: more employees fired, a prolonged period of reduced productivity during the months of delay, and a less functional company after the firings (because the firings disproportionately affected the support staff).

Delaying the inevitable usually makes matters worse.

Here’s why.

(Thanks to American Digest for the link to the Spengler piece.)

I Knew It All the Time

I always hated meetings convened for the purpose of “problem solving.” Here’s why:

So you need some fresh, innovative ideas. What do you do? Get a group of your best thinkers together to bounce ideas of each other…? No, wrong answer. Time and again research has shown that people think of more new ideas on their own than they do in a group. The false belief that people are more creative in groups has been dubbed by psychologists the ‘illusion of group of productivity”. But why does this illusion persist? . . .

[I]t’s because when we’re in a group, other people are talking, the pressure isn’t always on us and so we’re less aware of all the times that we fail to think of a new idea. By contrast, when we’re working alone and we can’t think of anything, there’s no avoiding the fact that we’re failing.

But if you’re constantly coming up with good ideas when you work alone, you know that a group endeavor will simply be a waste of your time. And sure enough — it is.

That’s an INTJ for you.

Workplace Whiners

I was thinking earlier today about the prevalance of whining in the workplace. Then I came across this, from Suits in the Workplace: An Employment Law Blog:

In this age of easily hurt feelings and heightened sensitivity to just about everything, it’s nice to see a common sense decision in an employment case. The Tenth Circuit just ruled – brace yourself – that a supervisor who “set goals and deadlines for an ongoing project, requested that [an employee] 1) keep track of her daily activities in fifteen-minute intervals for seven days, 2) work in her cubicle so [the supervisor] could more closely supervise her, and 3) inform [the supervisor] of dates she would be out of the office” did not constructively discharge the employee she was managing. Turnwall v. Trust Co. of America, No. 04-1303 (10th Cir. 2005). . . .

Thankfully, the Tenth Circuit held that the working conditions weren’t objectively intolerable, and that there was no outrageous conduct, so they got it right. But what does this lawsuit say about the average supervisor’s ability to manage an employee who admittedly had problems prioritizing her work? Goal setting and regular monitoring of progress are textbook management techniques, and were perfectly appropriate under these circumstances. Nevertheless, the employer here had to defend a federal lawsuit, and a subseqent appeal, at no small cost, essentially because somebody couldn’t handle criticism from a supervisor.

We are blessed with excellent Federal Judges here in the Eastern District of Virginia. . . .

Yes, you are blessed. I speak from experience. The experience of putting up with workplace whiners like Ms. Turnwall, and the experience of having been backed up by the Eastern District of Virigina whenever one of those whiners went to court.

Understanding Outsourcing

What U.S. consumers should (and do) care about is getting the most for their money. If more of their dollars happen to flow across international borders as American companies strive for efficiency, so what? If American companies “send jobs” to Juan in Nuevo Laredo, Mexico, and Pierre in St. Stephen, New Brunswick, Juan and Pierre wil use the extra dollars they earn to buy things of good value to them that are made in the U.S., things that they couldn’t afford before. That’s called job creation.

In sum, Juan and Pierre outsource to us because we outsource to them, just as you outsource auto repair to your local mechanic and he outsources, say, computer programming to you. And if Juan and Pierre don’t spend all of their dollars on consumer goods, they put some of their dollars (directly or indirectly) into U.S. stocks and bonds, which helps to finance economic growth in the U.S.

Outsourcing, which is really the same thing as international trade, creates jobs, creates wealth, and raises real incomes — for all. Economics is a positive-sum “game.”

If you’re not convinced, think of it this way: If product X is a good value, does it matter to you whether it was made in Poughkeepsie or Burbank? Well, then, there’s nothing wrong with Laredo, Texas, or Calais, Maine, is there?

Now imagine that the Rio Grande River shifts course and, poof, Nuevo Laredo, Mexico, becomes Nuevo Laredo, Texas. Or suppose that the Saint Croix River between Maine and New Brunswick shifts course and the former St. Stephen, New Brunswick, becomes St. Stephen, Maine. Juan and Pierre are now Americans. Feel better?

What’s in a border? A border is something to be defended against an enemy. But do you want a border to stand between you and lower prices, more jobs, and economic growth? I thought not.

The Economics of Corporate Fitness Programs

One of the many fads to sweep the corporate world in recent years is the fitness fad. The fad has two components: real costs and putative benefits. The real costs involve the installation of exercise facilities on company property, subsidies for off-site health-club memberships, a certain amount of paid time off for fitness programs, the hiring of nutritionists for company-subsidized cafeterias, and on and on. The putative benefits of the fitness fad are (1) more productive workers (healthy bodies, healthy minds, and all that); (2) workers who, in the longer run, will be less costly to insure; and (3) greater competitiveness in the labor market (i.e., being able to hire and keep employees who value fitness programs).

The fitness fad has five main proponents:

  • Executives who wish to be known as “progressive” and “interested in employee welfare”
  • Consultants who are hired by executives for the purpose of recommending the fitness programs that executives already favor
  • Vendors of fitness-related products and services
  • Those employees who already are physically fit, but who find it easier and cheaper to stay fit because of company programs
  • Other employees who want to be part of the “in” crowd or to curry favor with bosses who preach fitness.

As for the immediate benefits of company fitness programs, I have observed that the already-fit tend to stay fit, but at the company’s expense, while the less-fit give fitness a try, but it doesn’t last. If it did, Americans wouldn’t be getting fatter, would they?

What about the returns to the company in the form of lower health-insurance costs? Health-care costs rise with age. Assuming that fitness programs actually make employees more fit, which I doubt, a company is unlikely to reap long-run returns unless (a) its employees are exceptionally loyal or (b) it is able to hire equally fit replacements from other companies that have similarly effective (or ineffective) fitness programs.

And what about hiring and retention? Well, it’s like an arms race in which the objective isn’t to fight a war but to spend more than the other guy. If “everyone does it” in a certain industry, here’s what happens:

  • Workers who don’t participate in fitness programs (that is, most of them) lose because compensation has been shifted from wages and non-fitness benefits toward fitness benefits. Therefore, that industry finds it harder to hire and retain workers for whom fitness isn’t an important consideration; that is, productivity declines and costs rise.
  • If firms in the industry try to raise prices in order to cover the costs of fitness programs, consumers find substitute products or services, thus cutting into the industry’s sales and profits.
  • And so, one way or the other, shareholders take a hit in the form of lower stock prices.

Who benefits? Trendy executives and employees who’d rather work out than work.

That’s my hypothesis, and I’m sticking with it until I see hard numbers that prove it wrong.