What’s Wrong with Management?

Mark L. Johnson / May 2017

In my opinion, academics and consultants perform a great service. They study subjects such as management at length and offer valuable conclusions. They help us to see who we leaders and managers really are. They reinforce our good behaviors and traits and help us see the need for correction.
This column is about making correction. Recently, I came across some thinking on management that I’d like to share it with you.

Two Egregious Errors
Firms tend to make two top-line mistakes.
First, businesses employ too many managers, says the Harvard Business Review article “Excess Management Is Costing the U.S. $3 Trillion per Year.” This leads to inertia—the inability of firms to respond quickly and perform at their best.
Second, companies dilute the potential of their star players, says consulting firm Bain & Company. They fail to deploy enough top performers to business-critical processes. Instead of concentrating top assets where they could do the most good, they spread them out evenly within the company.
Let’s address these one at a time.

Too Many Managers
The U.S. Bureau of Labor Statistics says that American firms employ 23.8 million managers and front-line supervisors—one manager per 4.7 employees. HBR says such bureaucracy creates a huge drag. The managers are buried in budgeting, reporting, performance reviews, committee decision-making and many other things that stymie creativity and innovation.
Do wall and ceiling firms need one manager per 4.7 employees? Can we build structures with fewer managers? HBR says most companies could prune 15 percent of their managers and boost results. If all firms actually did that, they’d raise the GDP from $120,000 per worker to $141,000 per worker.
Think of how a reallocation of managers could be immensely productive for your firm. Capable managers and supervisors could be deployed to value-creating activities, such as starting up Building Information Modeling departments or heading more prefabrication shops. Your field workers could get by with fewer managers on hand—don’t you think?
This would require a significant change in thinking in your part. It’s a “DNA level problem,” says Gary Hamel of the London Business School and co-founder of the Management Information eXchange. Are you willing to do it?
Tim Wies, president of T.J. Wies Contracting, Inc. in Lake St. Louis, Mo., has admitted that some of the planning meetings in his company’s lean construction program have turned out to be less critical than he originally thought.
“The crews like to keep working, rather than pause to hold a meeting,” he says.
So, Wies has eliminated some lean management steps rather than keep them. Everyone is still busy, but for the better.

Dilution of Star Players
Bain & Company studied several large companies and drew this conclusion: Apple, Dell, Google and Netflix are 40 percent more productive than the average company. If company A produces 1,000 widgets, Apple can produce 1,400 widgets in the same span of time—or 1,000 widgets with significantly fewer people.
The secret lies in how Apple, Dell, Google and Netflix deploy their high performers. Instead of allocating high performers evenly across the company, they deploy them to just a handful of business critical roles. This allows them to achieve up to 50 percent higher profit margins than their industry norms.
What’s interesting is that all companies have the same proportion of star players, Bain & Company says. Apple, Dell, Google and Netflix just assign key performers differently and get better results than the typical firm.
Can you imitate this practice?
Maybe a high performer could head up a new BIM department. Maybe another achiever could run a company initiative to find and adopt virtual reality technologies, new automation applications, a role for 3D printers, more.
“This is how your business becomes competitive,” says Travis Vap, president of South Valley Drywall, Inc., Littleton, Colo. “This is how you drive down costs. You use BIM, you recycle, you find out what’s next on the horizon.”
Consultants don’t have a playbook they can just hand out and, voila!, your problems are solved. That would be nice, because executives usually find it hard to migrate their business models to something new. It’s an art figuring out how to streamline operations and maintain output. Hamel says it comes down to a company’s mindset.
What’s your mindset? What do you plan to do?

Mark L. Johnson writes regularly about management theory and practice. Reach him on Twitter, @markjohnsoncomm, and at linkedin.com/in/markjohnsoncommunications.