Running a business may not look like the cold war but to those involved it often feels that way. By David James and Leon Gettler
Management is political. This is the unwritten rule confronting anyone trying to change an organisation or make their way through it.
Mergers, for example, often result in hotly contested turf wars that produce winners and losers. Camps emerge everywhere – those for, those against and the fence-sitters. The tensions may blow over, but they simmer below the surface and can break out in internecine war.
It also goes to the heart of why change programs have such a high failure rate. Studies find that as few as 20% achieve success. Change programs – no matter how important or necessary – can destroy existing power relationships and bring down empires built on systems and processes. One study of 300 medium and large European companies by the consultancy AT Kearney found that two out of three re-engineering programs failed, more than half the mergers and acquisitions destroyed value, fewer than half the total quality management programs in Britain actually delivered, and three out of four alliances had zero benefits.
The sub-text is that managers lack political nous. This is to be expected: their job involves process-driven tasks such as planning and budgeting, setting targets, organising and monitoring, staffing, establishing structures and identifying problems.
Yet all of these are political acts: they reinforce or redistribute power in some way. Even the policies being implemented by companies – flexitime, job sharing, telecommuting, parental leave, family leave and child care services – are political. But officially politics is not regarded as part of the usual skill set.
Studies suggest that many change agents regularly ignore political cues and overlook the fuzzy networks and intangible systems that help people work and communicate. The boxes and lines in organisational charts ignore the informal and messy networks of influencers and fixers who make it all happen – ambitious and talented “young turks” rocketing to the top and the old guard who have spent 20 years or more climbing the corporate ladder.
In his book Management And Machiavelli, Antony Jay says the workings of every business are intrinsically political. He draws parallels with medieval kingdoms, headed by a king (chief executive), with courtiers and advisors (directors and specialists). The king’s rule (queens are rare in these settings) may take in provinces (subsidiaries) and barons (division heads, plant managers) to make sure things are running smoothly.
In his book Antilogic, Burdett Buckeridge Young chief executive Bruce McComish expands on this, pointing out that this is one reason for managers not being big on succession planning. McComish writes: “This emphasises survival of the organisation, although these actions are often concentrated on dominant managers who recruit acolytes in their own image with the purpose of ensuring their own survival rather than permitting their departure.”
Jack Welch, former head of GE, was one of the most impressive political players. His slogan was: “Control your destiny or someone else will.” He chose people to push through changes and weed out “resisters”. He replaced GE’s ornate structure with a “cartwheel” – 13 spokes of business units radiating from his office, reminiscent of the “kingdoms” model.
However, there are many examples of business leaders ruling over companies like dictators, stamping out discontent and ignoring the faint signs of trouble. Their companies went under, suffering self-inflicted wounds. The evidence suggests that political savvy is not just about controlling destiny.
A study last year by the British management school Roffey Park found that 70% of managers claimed to have been on the receiving end of political games. The question is why the other 30% were less forthcoming in their response.
Many of the managers surveyed took a pragmatic view, 65% saying that politics involved doing what came naturally. One said: “I look at my work and career and say two times out of 10 it is going to go against me, that’s life. As long as eight out of 10 times I can make it go in the direction I want, that’s fine.”
The Roffey Park study, Politics In Organisations, found office politics was about networking to build a power base, taking every chance to raise a profile, withholding useful information from rivals, passing the buck to avoid personal blame, taking credit for other people’s successes and burying bad news. The main strategies and tactics cited were building a support system and power base, getting others to buy into a vision, seeding ideas at different levels in the organisation; using different forms of behavior according to the situation, role or person involved; grasping every opportunity to increase one’s profile; releasing information selectively; presenting strong arguments; playing favorites; manipulating people.
According to the study, politics was rife at all organisational levels. Senior managers were the biggest players (43%), then middle management (11%) and the board (9%). About half (49%) said office politics had increased in the previous three years. Only 7% felt it had waned. This was attributed to the pace of change and competition for limited opportunities.
Most participants saw office politics as bad for organisations – even worse than actual politics. The implication was that executives were less trustworthy than politicians. Half (49%) agreed it was necessary to play the game to get things done. A word of caution: the results were compiled by self-reporting, raising the question of whether office politics was more rampant than suggested. Also, no one confessed to back-stabbing, stealing ideas, scape-goating or wiping out opponents.
What the study shows clearly is widespread ambivalence towards organisational politics. This is borne out by scanning management literature, which shows the difficulty of arriving at a definition. Some see it as the “dark side” of organisational life, conflict theorists segment entities into interests pushing their own barrow, and others say politics just comes with the management territory.
There are those who focus on the political actors. An anthropomorphic version talks about the foxes (clever, game-playing and quick to exploit weaknesses in allies and opponents), donkeys (emotionally illiterate without personal skills but like to be associated with authority), sheep (politically naive innocents who play by the rules) and owls (non-defensive, politically astute, who cope with being disliked, use coalitions and know how to make processes work for them).
Others focus on political stereotypes: the “officials” committed to running the organisation, “activists” intensely involved in the organisation’s politics, “attentives” who generally do not get involved but step in when hot issues emerge, and “apathetics”.
The Roffey Park study argues that managers cannot afford to overlook the political dimension.
“The notion of organisational politics appears to induce selective blindness – such as where managers believe that they can eliminate organisational politics by decree, not recognising that this in itself is a political act as well as potentially unrealisable.” The study said political awareness should be a key part of management training; this was a skill that could be learnt.
Managers have more than enough to do, and there is a risk that politics would further muddy the waters of the complex realities they face each day in running an organisation. However, as former US president Lyndon Johnson said: “I’m a compromiser and a manoeuvrer, I try to get something. That’s the way our system works.” He could have been talking about management.
Management is a deeply political practice: it could even be argued that it is concerned with politics first and productivity second. The obvious conclusion has been that good managers should concern themselves with politics. A corollary is also implied: whoever is not interested in politics is unlikely to make a good manager. To the extent that organisations are social organisms, managers must be attentive to social forces.
Less self-evident is the effect of political ideologies on management. The influence of the left is clear: Marxism lionised the workers, management controls the workers, therefore management is a bourgeois monolith that must be reined in.
During the four decades of the Cold War, it was this divide that occupied management, refracted through the prism of industrial relations. Against a Marxist-based agenda, management sought to prove its case that efficiency should take precedence over work practices, profit over the sharing of wealth. A more nuanced version of this was to interpret politics as part of strategy development.
Philip Scanlan, former chief executive of Coca-Cola Amatil, who took the company into Asia and eastern Europe, describes the method: “Understanding geopolitics, geo-economics, the power of ideas and their relationship to sustained commercial success is an inherent part of global enterprise leadership. Like nations, enterprises must practice the art of multilayered strategic engagement, by understanding the underlying societal and cultural imperatives.
“In the central and eastern Europe of 1990, the great issue of the day was the integrity of the unfolding democratic process initiated by the fall of the Berlin Wall. Agile, knowledgeable, innovative, adaptable and culturally sensitive managements were able to take first-mover advantage.”
The fall of the Berlin Wall and the changes to work practices that occurred under Margaret Thatcher in Britain and Ronald Reagan in the US (although in that country’s less unionised workforce the effects were less obvious) partly clouded the neat divisions between right and left, bosses and workers – not least because workforces began to be spread around the world.
Some close examination would have also revealed that the political picture was nowhere near as clear as the cliches of industrial relations. Lenin, for example, was a great admirer of Frederick Taylor, the progenitor of scientific management. Much of the industrialisation of Russia was influenced by Taylor’s ideas, just as in the West. Yet in the English-speaking world the left demonised Taylor because, as management thinker Peter Drucker observed, US unions after World War II were threatened by the work practices implications.
Roll forward three decades and Taylor was depicted as being behind the restriction of worker creativity, his ideas responsible for shackling workers in repetitive tasks that encouraged docility and intensified management control. The push by unions to “multi-skill” the workforce in Australia in the 1980s was depicted as an attempt to shake off Taylorism.
Prima facie, management inclines to the right of the political spectrum: the world of Adam Smith’s “invisible hand” of free market forces and innovation. Wealth distribution is seen to be a function of how much wealth can be created rather than how it is shared – a view no doubt encouraged by the fact that managers receive a larger share of the rewards than employees.
But scratch the canvas a little, and the picture changes. Many of the most successful capitalists have been able to use very democratic methods. Henry Ford was notorious for his near fascist political attitudes, but this was only possible because of the simplicity of his product range: “You can have any color you like as long as it is black.” Elsewhere, the approach was less divisive. Alfred Sloan, the founder of General Motors, was renowned for an assumption that all men were on an equal footing. Dick Dusseldorp says he was accused of being a communist when developing a participative style at Lend Lease, yet in founding one of Australia’s more durable companies he was anything but.
Most managers incline towards right-wing ideologies of free markets and a world of unequal rewards, but the practice of management is often the opposite – a stress on collective spirit and the democratisation of work. Such ambiguity should not be surprising. The political ideologies have origins that are more than a century old. Marx’s ideas of exploitation may have had piquancy in 19th century industrial England but are hardly relevant in 21st century Australia, where workers literally (legally) own the means of production through institutions such as superannuation funds and insurance companies.
Equally, ideologies on the right are having trouble keeping pace in a globalised, rapidly changing economy. Francis Fukuyama neatly mirrors the tension. “Liberal democracy and capitalist free markets are really the only serious way of organising a modern society,” he says.
However, capitalism has profoundly changed. The political ideologies have atrophied but the markets have not. Ownership and control of industry have diverged in the developed economies. The sharp increase in executive share ownership in the 1990s – in the US the proportion of shares owned by senior executives quadrupled to 12% – is still far below the level of the 1940s, when senior executives owned more than 30%.
That is because public markets are no longer capitalist, at least not in the sense that the owners are proprietors. Instead, the owners in English speaking countries are “punters” (through pension funds, insurance funds, small investment, government funds) who do not expect to directly influence the company’s operations.
Meanwhile, senior managers are being drawn into thinking as though they were the object of bets rather than proprietors of a lasting enterprise. Knowing they have only a few years to “win the bet” (stay in the job), they are less likely to ask the question: “Where will this business be in 10 or 20 years?” And in between are the boards, whose job is becoming one of calling the bet off when the losses seem to be too great or the gains too small.
There is little in conventional political ideologies to deal with an emerging pattern of ownership and control structures that has workers largely as owners, albeit indirectly, and “bosses” in control to a limited degree, for a limited time, and to the extent that the punters have seen their bets pay off.
For bosses there is little cost in failure – evident in absurdly high payouts for departing executives. A political backlash against high executive remuneration is inevitable. A report, The Buck Stops Here by the Labor Council of New South Wales, estimates that the gap between Australia’s top 100 chief executives and ordinary employees is three times greater than that required to maximise organisational organisational performance. The report says: “If senior management truly want employee commitment and involvement, then the trend to wider pay inequality between senior management and ordinary employees will have to be reversed.”
Perhaps, but this largely misses the point. Excessive pay for senior managers is a response to new conditions: there is nothing new about greed. What is different is that greed is harming indirect owners in a new way.
Most senior executives being paid excessively do not have their financial fate strongly linked to the fortunes of the company (the infamous stock options entailed gain but involved only negligible risk). They are managers – professional administrators, indirectly owned by workers, answerable to boards that act on behalf of the owners, and given only a short time to have an effect.
This does not fit the world picture of Karl Marx or Adam Smith. The roots of indirect ownership, the savings vehicles, are civic rather than political and ideological.
The obvious answer is to make ownership more active, to make institutions that represent shareholders more politically active. It may also be time to find some new political ideas. The century-old ideologies look ready for retirement.
Jay, Antony. Management and Machiavelli. Pfeiffer & Company, 1994.
McComish, Bruce. Antilogic: Why Businesses Fail While Individuals Succeed. John Wiley & Sons, 2001.
Ledeen, Michael A. Machiavelli on Modern Leadership: Why Machiavelli’s Iron Rules are as Timely and Important Today as Five Centuries Ago. Truman Talley Books.
Dobson, Michael S. & Dobson, Deborah S. Enlightened Office Politics. AMACOM, 2001.
Hawley, Casey F. 100+ Tactics for Office Politics. Barrons Educational Series, 2001.
DeLuca, Joel R. Political Savvy: Systematic Approaches to Leadership Behind the Scenes. The Evergreen Business Group, 1999.