Previously, corporate leadership structures where delicate balancing acts between technocratic engineers and production experts, conservative accountants, obfuscating HR "professionals", militant trade unionists, and upstart marketeers. Globalisation and computerisation has taken the Unions and middle management out of the picture. Now doers are derided and the Powerpoint strategist is king.
Businesses are re-organised every 6 months and a permanent state of anxiety and compliance induced by everyone having to re-apply for their own job twice a year. Short-termism and self preservation are king. Anyone there for more than 5 years must be dead wood. If you don't have a plan to radically transform the business within 2 years you're yesterday's man. There is always someone else more willing to comply. Career planning becomes a sort of personal brand management.
When top management achieve almost absolute power, why wouldn't they use it to their own advantage? The corporate stakeholder model of Shareholders, Management, employees, customers, suppliers, and government is dead. There is no effective control of top management unless absolute disaster ensues, and in that case, the real perpetrators are usually long gone. They don't stay long enough to be found out. notes from no w here
I can understand how the Reagan version of globalisation has destroyed the trade unions. What I don't understand is how it has given management an advantage over the technocrats and engineers. But it may be a cultural thing; once it becomes culturally acceptable for management to exercise its formal powers, things start changing.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
The organisational memory has reduced from 60 years to 6 months. No one knows or cares what you did 12 months ago. Your job is to address the personal agenda of your direct superior - and he will probably also be gone or elsewhere within a year or two. Organisational knowledge is contained, not in people, but in manuals and IT systems - maintained by external contractors.
One of my last jobs was to oversee the introduction of a major MRP system across several countries. There were huge problems at the transition basically because senior managers had signed off on a system design which bore little relationship to what happened in the real world. Why? Because they had never "worked their way up" though the business, didn't know or understand what their underlings did, and didn't care anyway, as their main objective was to ditch the underlings.
Problem was that the business was actually a lot more complex than they ever realised, and their underling's jobs a lot more skilful than they appreciated. However that RW business knowledge was being rapidly lost as people were made redundant. I ended up having to ask third party IT contractors how the business actually worked, because they knew a huge amount more about how the business worked than the so called management "process owners". Of course the IT contractors moved onto the next business once their contract with us ended. notes from no w here
Powerpoints are newspeak with diagrams.
IT has dramatically changed the structure of power in a modern global corporation. Organisational structures are much flatter, less hierarchical, and more directly answerable to the CEO. Middle managers, once "lifers" who had built of huge social, collegial and professional networks within the organisation, are now all gone, replaced by "yellow pack" generic managers brought in from other organisations and discarded at will, cogs in a wheel.
I don't buy that explanation. If this hypothesis were correct, we these changes should have been manifesting themselves in the '90s, when mass deployment of IT in the corporate organisation took off in earnest (in the early '90s there were still typewriters around and as late as the mid-'90s it was still not ridiculous to picture a highly professional office without computer terminals). But they actually began in the early '80s, back when personal computers were glorified typewriters, all the world was a VAX, serious computing tasks were carried out on mainframes, the internet consisted of ARPAnet, MILNET and a handful of university departments, and BASIC was considered a new and exciting invention.
Furthermore, if electronic communications were the fulcrum that the robbers used to shift the technostructure out of power, we should have seen that the organisations which were early adopters of electronic communication should be the ones that were first to succumb to the CEO plague. They were not. University departments were the very first to begin using electronic computers on an industrial scale, and they have been some of the last holdouts against the new management culture.
The computerisation since the late 1990's has been fundamentally different. The huge SAP implementations I was involved in then completely globalised business processes throughout global businesses. Thus there is one procurement process for procuring everything from paper clips to power stations anywhere in the world. One supplier file. One processes for approving purchases. One process for approving new suppliers. ALL pre-existing paper and computer purchasing processes are replaced. There is no need for local procurement managers or system administrators in local markets. A purchasing manager in HQ can control ALL purchases. We reduced our supplier file in one market from 11,000 suppliers to 3,000 globally.
Multiply this for every business process from finance to production, to logistics, to sales, to customer management, to marketing, to business intelligence, to product innovation and design. Local in market managerial staffs are almost not required for many business functions. A global function controls all these activities and has direct access to all the data available to the organisation to faciliate decision making. We are talking 1,000's of redundencies amongst managerial and professional staff, never mind production line, clerical or admin staff.
University departments are tiny admin units by comparison. The complexity of their business processes - lecturing, producing research, accessing funding for research, monitoring student performance - are almost trivial and very small scale by comparison. Perhaps if you had one global department teaching economics to millions of students worldwide in multiple locations in most countries in the world you might have a comparable organisation or computerisation project. You would have one syllabus, one exam process, one list of acceptable approaches to the subject, one set of lecture notes, one system for monitoring students etc... .please don't give THEM any ideas! notes from no w here
Perhaps if you had one global department teaching economics to millions of students worldwide in multiple locations in most countries in the world you might have a comparable organisation or computerisation project. You would have one syllabus, one exam process, one list of acceptable approaches to the subject, one set of lecture notes, one system for monitoring students etc... .please don't give THEM any ideas!
Um, I'm afraid this may be where we are heading with online education already . . . Sure, there will remain the Harvard boutiques for the fortunate few and a small number of brilliant students every year, but everyone else will get their degrees from their local branch of "Bain" university easily accessed through the facebook ad on their desktop at home, from "instructors" making minimum wage, "course designers" making a little more, "deans" whipping everyone into shape, keeping the gravy train running on time for the "vice presidents," "chancellors," who will be taking home their HUGE profits, er "salaries." Outsource the "library" to Google books, and the "tutoring" to 24/7 hotline operation in Bangalore (or whereever), and you've pretty much covered everything. No need to keep the bathrooms clean or the lawns mowed. You could even keep a virtual campus center or quad where students could gather electronically under the watchful eye of management. In case of radical ideas or rebelliousness, students could be locked out at any time. Same goes for the instructors. Meanwhile, the Olde Time Professors will be hanging out behind the shrubs, should anyone care . . .
annotated Diversity is the key to economic and political evolution.
students but knowledge capitalists in training.
i see them as greyhound whippets being trained for the track, where their trainers will bet on them...
...or money-making machines, shiny, glossy, active info-bank-ATM's, geared to unquestioningly feed the profits from their labour 'upstairs', while their own doubts about the process are rendered silent under a barrage of tantalising carrot-images, winning the lottery, 'making it big', philippe patek watches, the sailing channel, celebrity-obsession and the like.
consumer coma, in the sunset flare of a passing era. ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
"the sailing channel" . . . help . . .
"tantalising carrot-images" . . . <keels over>
and, "the sunset flare of a passing era" is just too timely for words today . . . farewell Michael Jackson, icon of an age and true genius
But that is precisely my point: The outrageous CEO power grabs began a full decade before the electronic automation you mention. Almost all the faults in corporate culture that we bemoan today were already present during the Savings and Loan crisis. So they are clearly antecedent to the technical revolution at the heart of your experience.
Interests in preserving structural relationships between (actual) people prevents deep IT penetration of FIN and COMMOD sectors. Asymetrical market knowledge (and adverse selection) is a feature not a bug. Diversity is the key to economic and political evolution.
enron was the smoke coming out of the financial engine, now bits are falling off by the mile and the day... ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
I'll also note that this has coincided with the European institutions turning from French-speaking and French-inspired to English-speaking and English-inspired, because of the arrival of the Scandinavian countries, the replacement of fundamentally pro-European Mitterrand by euro-skeptic Chirac, in addition to overall trends. In the long run, we're all dead. John Maynard Keynes
the real, massive increases in CEO pay mainly happened in two phases: in the dotcom bullrun of the late 90s, and in the more recent Bush years.
and this to show that most of the increase in incomes have come in the form of higher wages rather than in the form of capital gains:
Wage increases are associated with the managerial class, ofcourse. In the long run, we're all dead. John Maynard Keynes
So it's not just about the dot-com starting in the 1990's as you claim. A man of words and not of deeds is like a garden full of weeds; a man of deeds and not of words is like a garden full of turds — Anonymous
After that, the smash-and-grab was on, and the CEO class never looked back.
http://www.highbeam.com/doc/1P2-8010445.html
and here is a link to some document related to the FDIC investigation a decade later which mentions his base pay and bonuses in 1987 adding up to over $2million. I can't remember what eventually happened to Baldini, but he got into some trouble after the bank/mortgage company failed. It was an 80s thing.
http://www.qui-tam.net/USga1121.htm
In 1987, Jim Baldini, the president of Comfed mortgage made over 2 million dollars. Less than $400,000 was salary; the rest was "bonus." As I recall at the time, it was shocking to think that anyone could possibly "earn" that much money in one year.
Was poor performance punished before the 80ies? Was there too powerful countervailing forces (and how did they decline)? Was there a fear of a workers revolution? A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
IT has also had the effect of making drive-by trading possible. It also meant that share prices could be monitored minute by minute, which has an obvious short-term influence.
Previously share dealing was a more leisurely affair, and there wasn't such an obsessive interest in talking up prices with bullshit - or reorienting towards a growth maximising corporate performance landscape, if you prefer.
It's an equilibrium, of sorts: If the norm is that executives have long tenures, it becomes hard to get a slot, so a short-termist rape-and-run executive will hit a brick wall because he'll have a hard time getting new positions when he runs from the company he looted. Not because he'll have a problem being accepted into a new slot (he'll still be hired by his golfing buddies, after all) but because there are much fewer vacancies. This pressure to do a proper job while you are in the business will naturally tend to promote a long-term outlook that will in turn make it valuable to retain the executives over the long term.
On the other hand, you can get a new equilibrium in which the CEO can expect only a short tenure - in which case asset stripping becomes much more attractive as a strategy relative to real work, because the guy who benefits from his work will be the next CEO. At the same time, rape-and-run becomes more viable because there is a greater CEO turnover (so there will, at any given time, be more open slots when he has to run from the crashing company into a new top job). Obviously, this further reinforces the culture of short CEO tenures, which makes long term vision increasingly precarious.
It's entirely possible (but I won't claim to have evidence for it) that corporate culture can jump between these two states given the right (wrong?) external shocks. The Raygun Revolt may have been one such shock.
And once it started it amassed power in the hands of a few who could finance people who promoted its spread. A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
What I'd like to do is read through the diary and comment thread in one sitting and synthesise the suggestions into a single reasonably coherent explanation (or, if that is impossible, at least make it clear which models are being proposed).
Abstract: "This paper revises growth accounting methodology to take into account the value of intangible assets [read, "human capital"], particularly those associated with the computerization of many firms in recent decades. We propose a modification of the production function, adopted from the q theory of investment, that treats the adjustment costs and costs associated with the creation of intangible complementary assets as investments instead of current expenditures. We present evidence that the computer-related protion of these intangivle investments is substantial and growing. ...In particular, we find that the magnitude of the intangible capital investments that accompany computerization of the economy is plausibly far larger than the direct investments in computers themselves. A revised estimate that takes intangible investments [read, conversion to automated business processes] into account that the TFP [read, total factor productivity] of the US economy grew up to 1% per year faster during the past decade than previously estimated."
::
"in the '90s, when mass deployment of IT in the corporate organisation took off in earnest". To rephrase: "in the '90s, the corporate organisation began to lever installed, private IT by migrating most of their distribution (marketing) functions to public telecom networks."
i.e. web-based, self-administered (client, employee) data collection and transaction further eliminate residual costs associated with FTEs.
Abstract: "This paper investigates the proposition that the widespread use of information technology has increased investment in intangible organizational assets [read, "human capital"]. Using firm-level data, we find that each dollar of installed computer capital [read, hardware and software] in a firm is associated with at least five dollars of market value, after controlling for other assets. We interpret this value as revealing the existence of a large stock of intangible assets [read, automated business processes] that are complementary with computer investment. Using data on organizational practices at each firm, we identify [sic] a specific cluster of practices that appear to represent at least some portion [read, FTE labor] of these intangible assets. Not only are these practices correlated with computer investments [read, replacement, modification, and license costs], but firms that combine higher computer investments with these organizational characteristics have disproportionate increases in their market valuations. We conclude that investors believe that the contribution of computers is increased when they are combined with certain intangible assets, specifically including the cluster of organizational changes [read, FTE labor substitution] that we have identified."
