More managers please, we’re unproductive
Some economists argue that poor management skills explain the UK’s productivity problem. But we need a more expansive view of the nature and limitations of management practice
In Idleness, Katy Jones and Ashwin Kumar offer a labour-centred account of the UK’s recent employment experience, arguing that poor economic performance is explained at least in part by a failure to both train and empower workers. The book – which I cannot recommend highly enough – is part of a series of five published by Agenda updating the Beveridge Report’s 80 year-old analysis of ‘the giant evils’.
The chapter focused on productivity arrives, however, at in interesting conclusion; that is, that poor management skills help to explain the UK’s poor productivity growth (which in turn holds back earnings growth).
There is a question around how much causal force we can attribute to such relationships; it may be that poor management and poor productivity are both symptoms of the same disease. And even where we can isolate the impact of poor management practices on lagging productivity, are we confident this argument would not lead us down a politically regressive path?
I would certainly agree that poor management is part of the UK’s productivity struggle, narrowly conceived. It is probably part of why UK companies have been slow to automate. And we know that low-productivity sectors in the UK tend to perform worse than low-productivity sectors in comparable countries. It is right that policy-makers take such evidence seriously. As Jones and Kumar argue:
Rather than roaming the streets of Manchester in search of graphene, ministers should be walking down local high streets in search of how to help the ordinary firms that explain more of the UK’s productivity gap.
However, we also know that the slowdown in productivity growth that the UK has experienced in the last 10-15 years has been concentrated among the most productive firms: larger and more innovative firms, which are actually more likely to encompass good management practices. UK government initiatives in this area, such as Be the Business, focused in part on encouraging such firms to share best practice with ‘the long tail’.
It should be possible therefore to argue that management matters, while acknowledging that we have a limited understanding of what conditions shape management effectiveness. Poor management is not only, or even largely, about poor managers.
Just about managing
There is of course plenty of evidence that better management leads to higher productivity at the micro level of firms, workplaces, and individual workers.
But it is not immediately obvious that such evidence should lead us in the direction of advocating generic management skills as a public good. It is often the extent of real-world experience among managers, and specifically of the production processes they are overseeing, that leads to the biggest productivity impacts.
The danger here is that we equate management effectiveness with only the application of a ‘performance management’ perspective which relies on greater monitoring and disciplining of individual employees, with management skills related to know-how in applying the relevant ‘human resources’ technologies and techniques. (Invariably, these are the management practices which are usually being measured in assessments of management effectiveness.)
Irrespective of the moral dimension of such practices – they clearly benefit some workers, if they can demonstrate superior performance, while harming others – we should be sceptical of their viability as the basis of an economy-wide strategy. Improving performance management skills might be good for a short-term boost, but I have seen little evidence that it is a significant factor in the enhancement of productive capacity over the long term.
It is worth bearing in mind too that managers are themselves being monitored, and displaced, to a greater extent, as managerial labour is threatened as much as manual labour by algorithm-based business practice. This may – or may not – lead to better management performance. But in this context, it is not really management performance that is being measured.
We also know that in many workplaces managers are required to take on administrative tasks as support functions are ‘rationalised’ – a result of poor choices by executives, not managers, around automation and outsourcing. It is difficult to evaluate management effectiveness if the central task of leading people is marginalised within actual manager workloads.
In fairness to Jones and Kumar, they have a much more expansive view of good management, including recognition of the adoption of the real living wage as both an example of good management, and an opportunity to rethink the division of labour and career structures within low-productivity firms. This aligns with what we know about what makes individual firms more innovative (the main source of productivity gains over the long run). As William Lazonick has argued, firms innovate in part through organisational integration: ‘a set of relations that creates incentives for people with different hierarchical responsibilities and functional capabilities to apply their skills and efforts to strategic objectives’. Good managers oversee organisational learning, with workers at the heart of this process.
But if managers are being denied the opportunity to do this by the wider business environment – including ownership structures and sources of finance – upskilling managers themselves will make only a marginal difference.
Macro matters
A Marxist perspective on industrial relations can help us to make sense of some of this terrain. At its inception, neoclassical economics took the limitations of management as given – it is one of the reasons that firms were conceived as price-takers, unable to pursue expansionary strategies that might lead to market distortions due to the difficulty of managing a larger workforce. And Keynesian macroeconomics (which I obviously sympathise with) pays little attention to firm-level factors: aggregate demand will determine production, and therefore productivity.
The social class lens of Marxism allows however an account of how management may be both effective and destructive at the same time – disciplining labour to enable productivity gains, but ultimately undermining the productive capacity of labour in the process.
Interestingly, we also get from subsequent Marxist scholarship an account of managerial capitalism, in which a stratum of professionalised managers exercise significant control within firms (and within society more generally). But this is not really an argument about managerial power, but rather executive power, and indeed of mismanagement on an epic scale, as the executive class acts to separate firm strategy from the generation of real economic value. Firms increase in size through M&A ahead of innovation, both reflecting and enabling executive power.
This essentially means that managers are now less involved in the oversight of production processes as a whole (in contrast to performance-managing individual workers), or have less autonomy to act when they do have more direct involvement. The lesson here is that it might be good middle managers that make the most difference to productivity, but that this function has become rarer, or reimagined as one which serves only executives’ interests rather than a firm’s wider community of stakeholders (including managers themselves).
This has several implications. First, we need to acknowledge the reorganisation of production as a macro-level phenomenon before we identify the significance of management quality in determining productivity. Are firms actually focused on improving their productivity, in the way economists would conventionally understand it?
Second, while scholarship on management quality within microeconomics and business studies might be highly nuanced – and even aligned to progressive politics – we should be sceptical about how it lands in the real world, insofar as it may justify the (highly skilled) application of tools of labour surveillance and disciplining.
Third, although government support for management training is helpful, it does not negate the structural barriers to long-term investment by SMEs in the UK – including reinvesting in management quality over time.
Managing the meltdown
The broader policy agenda proposed by Jones and Kumar, focused on skills and welfare provision, and strengthening employment rights, is essential, not least because it would transform the business and labour market contexts in which management skills are being applied. Macro solutions for the seemingly micro problem of management quality. There are clearly also imperatives around reforming corporate governance and the finance sector, insofar as these determine the firm strategies managers must uphold.
It is absurd that it still needs saying, but we obviously also need to consider the demand-side drivers of productivity improvements (even if Keynes did not give us all the tools we need to understand these drivers). rather than focusing exclusively on the supply side. Neither side tells the whole story.
Greater devolution would also help, if it entails more public procurement via local governments who have more knowledge about business practice in their area. (It would help on the supply side too, if local authorities were given the opportunity to establish a social and environmental conditionality regime for the firms which want to trade on their patch.)
Alas, there is another can of macro worms that it would be irresponsible not to mention in this context: the looming ecological catastrophe, which must rid us, once and for all, of ‘productivist preoccupations’ which assume that growth and productivity are the only prerequisites of progress. But whatever road we take, or are forced to take, to address climate change – producing less, producing better – the journey will require effective management at the organisational level.
This view perhaps leaves my argument in a strange place. We need good managers more, but we cannot expect a destructive economic paradigm to produce them. What is to be done?
To respond effectively to climate change at the micro level, arguably we need to complete the proletarianisation of managers that managerial capitalism encompasses. But only if we then decouple both workers and managers from corporate executive and ownership functions.
I am aware that this probably sounds utopian, but this is not the intent. It would almost certainly involve a greater role for the public sector (therefore state managers) in production. This is already the direction of travel. But it would also involve more co-operative and community-based forms of ownership in the sphere of production — an agenda which is now firmly established within centre-left progressive politics. Above all, the decoupling imperative is a recognition that we need to take seriously the how of production, if we are to radically change the what of production as now required.
It would be a mistake to assume that hierarchical workplaces and the division of labour will not survive into this new era. Middle managers will arguably matter more than they do within today’s capitalist economy, repositioned and replenished as the interface between mission-based corporate strategies and the front line of production. Management quality should therefore be a priority. However, a sustained attempt to improve management quality in the dying days of the current paradigm has to be undertaken with an eye on the economy’s long-term needs, and only alongside a range of other reforms, rather than being subsumed by the immediate interests of today’s executives and owners.