Progress Is Despite Management
A Harvard Business School professor’s notion about the managerial skills that got these remarkable endeavors to where they are today is no less important than the achievements themselves. Instead of attributing the performances to any matching management skills, Robert Hayes (ex-IBM and McKinsey employee) suggests that the achievements are despite management’s best efforts. Business pundits seem to be forever rediscovering the truths known to those who lived two generations earlier, he says (Hayes, 1984). He considered calling this the Hayes Law of Circular Progress until he discovered a similar proposition in an 1843 edition of the Edinburgh Review: “In the pure and physical sciences, each generation inherits the conquests made by its predecessors. But in the moral sciences, particularly the art of administration, the ground never seems to be incontestably won” (Hayes).
What he is saying is that organizations and their managers generally do not learn well from experience, a statement illustrated by the pandemic of repeated mistakes, reinvented wheels, and other unlearned lessons that litter many parts of modern industry and commerce—all of which make productivity gains and associated competitiveness increasingly difficult to achieve (Kransdorff, 2006). Alongside the raft of statistics that confirm this observation, international management consultant Proudfoot estimates that the 2005 cost of wasted productivity in the United States was 7.6% of gross domestic product (see Table 1 for other countries’ costs; Groningen Growth and Development Centre and The Conference Board, 2004; Proudfoot Consulting, 2005). The fact that the United States is the world’s most productive country makes this a more tangible marker of wider managerial ability.
The world’s productivity rankings contain another clue to needlessly high costs (Groningen Growth and Development Centre and The Conference Board, 2004). Using 2003 figures, for example, the variable position of nations showed that it cost more in France than in the United States to perform similar tasks. In France, the outlay was lower than in the United Kingdom; in the United Kingdom, the cost was less than in Spain; and in Spain, the cost was lower than in New Zealand. The difference in outlay between the United States and New Zealand was more than 40%. If one country can do it, why can’t another?
Productivity’s importance is critical in several ways. At the end of the day, it is the ability to do things efficiently, and particularly more efficiently than others, that determines wealth. It is also one of the main requirements for businesses staying in business. In bull-market times, productivity is often seen as less than compulsory, but when the bear rears its ugly head—as it is doing at the moment—productivity is indispensable. In fact, short of government intervention (subsidies, interest rate cuts, etc.), the only way for organizations to survive without too much pain is to improve their productivity.
Productivity’s shortfalls and Proudfoot’s calculation of the weighty display of innate inefficiency—assessed in a fat year—have their genesis in a number of puzzling oversights by both educators and employers who rob managers of the means that would make their decision making more akin to the way faster learning scientists work in high-tech.