Macho management is irrational and inefficient

Chris Dillow, author of Stumbling and Mumbling, asks:

if centrally planned economies are a bad idea, how come centrally planed companies are a good one?

It's a good question.

Much of my political philosophy comes from Karl Popper - or at least from Bryan Magee's explication of his work. And, in his Fontana Modern Masters monograph, Magee writes of Popper:

Because he regards living as first and foremost a process of problem-solving he wants societies that are conducive to problem-solving. And because problem-solving calls for the bold propounding of trial solutions which are then subject to criticism, he wants forms of society which permit of the untrammelled assertion of differing proposals, followed by criticism, followed by the genuine possibility of change in the light of criticism. 

Regardless of any moral considerations (and it is of the highest importance to grasp this) he believes that a society organised on such lines will be more efficient at solving its problems, and therefore more successful at achieving the aims of its members, than if it were organised on other lines. The common notion that the most efficient form of society, in theory at least, would be some form of dictatorship, is on this view utterly mistaken.

Chris argues that the Royal Bank of Scotland was organised like one of these inefficient dictatorships "complete with the suppression of dissent and cult of personality. And look what happened".

An article in The Times from last month shows just how RBS operated:

Prime suspect among the bankers behind the meltdown is Sir Fred Goodwin, former chief executive of Royal Bank of Scotland. Goodwin, nicknamed “Fred the Shred” for his brutal cost-cutting, was an autocratic and fearsomely controlling boss. He even set dress rules for fellow executives that included wearing ties with RBS logos. 

At Goodwin’s “morning prayers”, where he delivered decisions and rarely accepted dissent, he pursued an ambitious expansion strategy.

Or you could try Adam Applegarth at Northern Rock. In his The Crunch (a book I reviewed for Liberal Democrat News) Alex Brummer wrote of Adam Applegarth:

He had a reputation as a martinet who was difficult to challenge. 

An insider said: 'He had an iron grip on the company. Any alternative plan or idea was rejected by those close to him on the basis that "Adam wouldn't like it".' There was no feedback. He surrounded himself with 'yes men' and Northern Rock ended up with people in senior positions who were not fit for purpose. 

The company raced on, brushing aside worries about rising interest rates (which might leave its customers unable to pay their monthly mortgage) and a faltering housing market (which could drop them into negative equity). Applegarth rode roughshod over the bank's board of directors, who lacked the confidence or ability to call a halt to this imprudent expansion.

It follows that the macho view of business propagated in popular television programmes like The Apprentice and Dragons' Den is harmful. Liberals should support the establishment of more cooperative forms of organisation - as indeed we used to do.

Perhaps there are situations - a ship at sea, a sports team -where dictatorship is necessary. But even then, challenging authority can lead to the elimination of errors.

Fred Goodwin's fondness for the right sort of tie reminds me of Ron Waldron. At the start of the 1990s he was the coach to the Welsh national rugby union team. He tried to duplicate the tactics - fast, lightweight forwards; lots of tapped penalties - that had gained him success at Neath. But he found that this approach left his team hopelessly outgunned, against England in particular.

Waldron also introduced lots of petty dress regulations. One evening the centre Mark Ring came down for dinner at the team hotel and was accosted by him.

"Wrong tie," said Waldron, jabbing him in the chest.

"Wrong coach," said Ring, jabbing him back.

Ron Waldron was sacked shortly afterwards.