Is management going out of fashion? I ask this apparently absurd question because of some disturbing facts. All the mainstream publishers in Britain have dropped their business management lists, leaving only specialists in the field. As that suggests, book sales have in many cases been feeble. Then, before Peter Drucker died, he was told by the head of the b-school which bore his name of its proposed change to that of an Asian company which was promising $20m of endowment: Drucker, said the head man kindly, was becoming a ‘tired brand’.
Nor can I recall any important business book appearing in the last few years, Setting modesty aside, I would nominate my The Fusion Manager as an exception, but the sales achieved don’t support the nomination. Tom Peters put his usual terrific energy behind a book called Re-Imagine!, designed to change the face of the market with bold design and punchy language. The revolution has not materialised. ‘Leadership’, not management, is the flavour of the times; I have accordingly received an invitation from a firm called LDL to a one-day seminar that will ‘unlock 30% discretionary effort’ by ‘Inspirational Leadership’.
Now, I don’t want to knock LDL or its own leader, Robin Fielder. But neither do I believe that a single day, spent mastering 16 items of ‘best practice’, will be enough to get an organisation to optimum effectiveness. Management, of which leadership is a crucial component, demands much more effort and education than that. But effectiveness – to which Drucker devoted so much of his teaching and preaching – may no longer be the objective which top managers pursue. The change that I see is a switch to maximisation: and what’s being maximised is personal reward.
This shift in values has been seen coming from a long way off. CEOs and their cohorts began paying themselves larger and larger sums long ago. At the start of the Seventies I wrote in The Naked Manager as follows: ‘Most managers are badly paid, not in the sense that they get too little (many get far too much), but because they are paid in the wrong way….Come rain or shine, their dinner pail stays full’. True, in those days the sums were mostly much smaller, although Henry Ford II paid himself a thumping $214,500 in 1969; and that was far outweighed by the value of his stock holdings.
Other managers had already got the message. If a multi-millionaire proprietor insisted on paying himself hugely, the hired hand should imitate both the high pay and the high holdings. Enter the stock option culture, in which virtually free financial arrangements, coupled with great salaries and phoney bonus payments, gave hired hands fortunes to match those earned by founding, owning and running a successful private business. That’s become a higher and higher benchmark because of the supersonic rise of private equity capital.
Not only do the VCs provide rich and enriching streams of cash for privately owned businesses; they stimulate orthodox bankers into betting on similar horses, Jim Ratcliffe, the man singled out by Management Today as Britain’s top entrepreneur, beat several VC competitors to the punch when buying BP’s Innovene chemicals business for £5 billion. Naturally, Ratcliffe didn’t have that kind of cash lying around himself, despite annual profits of nearly a billion. But Barclays Capital, Merrill Lynch and Morgan Stanley were happy to underwrite the offer.
That’s made Ratcliffe a billionaire. If you have a convincing business plan, like his acquisition of unloved chemicals plants, which gets assets cheap and swiftly sorts out the earners, backing is available in limitless quantity. As a private firm, you are free of many restrictions that hold the public company in check. So the latter’s managers turns to contractual agreements to establish or protect his position – or hers: remember Carly Fiorina, who was ejected from Hewlett-Packard with many millions of compensation, after a disastrous record at the top.
But don’t forget, either, the gang of turnround flops who led the Rover car company into bankruptcy while clinging on to £40 million of capital gains neatly arranged for themselves. That was a private deal, which illustrates that today’s managers have unprecedented ability to feather their own nests in perfectly legal but deeply imperfect ways, The consequences for management are clear, If the use of corporate funds for private enrichment becomes the rule, the long-term health of the business must suffer – and successful long-term corporate management will be sacrificed for short-term monetary success.
