Contents | Quality Encyclopedia | Discussion Blogs

The Failure of Management

The following is an excerpt from Chapter 2 of The End of Management by Thomas Pyzdek, © 1996 by Quality Publishing. It may be ordered from the Quality Publishing Order Form.

The collapse of planned economies

History has presented us with several "quasi-designed experiments" that not even the most callused researcher could ever recommend. The experiments involve controlled manipulation of entire societies that are alike in every way except one: the way the economy is managed. In one set the economy will be controlled by centralized planning authorities. This involves conscious direction of all economic activity. Of course, since a great deal of human activity (some would say nearly all human activity) is economic in nature, control of the entire economy requires totalitarian dictatorship. The other set of people will have an economy relatively free from government controls. The experiment will be conducted in three places: East Germany versus West Germany, Hong Kong versus the People’s Republic of China, and North Korea versus South Korea.

Table 1

Economic Performance Comparison--Free Market Versus Command-and-Control Economies

Sources: The Economist Book of Vital World Statistics (1990), CIA World Factbook, 1991. Statistics do not reflect quality differences.

These numbers show the economic disaster that resulted from centrally planning economies. Of course, the human suffering which this approach produced is unimaginably worse than can ever be conveyed by statistics. It is now clear to all but the most adamant ideologue that freedom works better than centralized control.

The Parallel Between Planned Economies and Modern Firms

But what happens when we walk through the office door or the factory gate? Too often, we leave our freedoms, and our brains, at the door. Suddenly, every decision we make is subject to review by a higher authority. As a free agent in the economy we can decide what we need and don’t need and what price we will pay for goods and services, whether we will obtain more education, and so on. As employees we have no such choices. Management dictates that copies will be purchased from the copy center and sets the copy center’s budget more by fiat. If it results in excessive waiting time for your hot jobs, too bad. Fiat dictates that you can’t take your work to an outside service. Getting reports you don’t need, or in a format you don’t like? Tough. The Information Systems department has been directed to produce the report and you have been directed to read it. Don’t think you need "Quality Training?" Sorry, HQ has mandated it for everyone.

Have you ever heard of "budget battles" being "fought" by department managers who "play politics?" Do you feel that your time could be much better spent contacting an important customer than attending yet another management briefing on the latest strategic plan or budget? Who cares what you think? Besides, you can’t afford to give the wrong impression to the higher-ups in the organization. After all, if management’s pet program fails "heads will roll" and those believed to have "sabotaged" the effort will be fired (i.e., "purged"). Vladimir Lenin would understand all of this completely.

Compare the command and control society to the traditional command and control firm. In a command and control society social planners make decisions that determine the structure of the economy and coordinate all economic activity. In a command and control firm planners at the top of the firm determine the structure of the organization and coordinate the activities and resource flows within the firm. In a command and control society orders are communicated from the top of the hierarchy downward. Ditto for the command and control firm. In a command and control society anyone who doesn’t follow the plan is punished, or rewards are withheld ("He who does not work, shall not eat.") In a command and control firm workers are disciplined if they don’t follow top management’s strategic plan. Given the similarities between traditional management and command and control societies, it seems reasonable to ask: might improvements of the magnitude seen in table 2.1 be possible by changing from command and control management to an approach based on free market principles?

This book answers that question with a resounding Yes!