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Monday, June 13, 2016

Authoritarian Business Leaders Threaten Freedom

Management Doesn’t Make the World Go Round

How many American workers are happily engaged at their jobs? Gallup has been doing surveys of employee engagement for years, and the latest results again find that less than one-third of American workers are engaged at work. Seventeen percent of employees are “actively disengaged,” which means they are so disgruntled that they are working to harm the organization. The rest are going through the motions, doing the minimum to get the job done and giving the organization little discretionary effort. Many of us know workers like this or have felt disengaged ourselves.

Are authoritarian business leaders fueling authoritarian politicians? 

In my experience, a major cause of worker disengagement is a top-down organizational hierarchy whose leaders make liberal use of command and control as a management style. Employees come to believe that their intelligence and expertise aren’t valued. They don’t trust management and fear speaking out. Disengaged, dissatisfied, and uncommitted employees are the result. Shirking, lethargy, and apathy are common in organizations where innovation is resisted and resources are squandered or underused.

Participants who are sympathetic to free-market ideas but who run their organizations in a command-and-control fashion often attend my leadership workshops. I ask them, “Why do you believe central planning will work in your organization when you know it doesn’t work in economies? Heads may drop sheepishly, but no one has ever replied. I hope the question helps them see that the consequences of top-down hierarchical controls at work are similar to the consequences of central planning in the economy.

The late Richard Cornuelle was a libertarian pioneer who advocated volunteerism as the most effective way to solve social problems. Cornuelle served as an executive vice president of the National Association of Manufacturers, the nation’s oldest and largest industrial trade association. A question that weighed heavily on his mind was how regimented hierarchical controls at work influenced employees’ politics. In his essay, “The Power and Poverty of Libertarian Thought,” reprinted in David Boaz’s Libertarian Reader, he observes,

The regimentation of work has created a political majority whose attitudes about themselves and their world are heavily conditioned by a lifelong habit of subordination.… There is little in their daily experience which would cause them to conclude that a society is kept alive by a continuous process of adaptation, led by independent enterprising people. They are bound to see society as something static — something to be administered. Employed people can scarcely be expected to revere qualities they have been carefully instructed to repress. They tend to become what the work requires: politicized, unimaginative, unenterprising, petty, security-obsessed and passive.

It’s hard to disagree with Cornuelle’s conclusion. This election year, we will choose between two dreary candidates who are eager to “administer” the country. Leadership expert Jim Collins in his book Good to Great show that ego-driven command-and-control leaders damage their organizations. Perhaps more importantly, as Cornuelle argues, they contribute to a political environment where those who champion more centralization rise to the top. Are authoritarian business leaders fueling authoritarian politicians?

New Ways to Organize Firms

In his book De-managing America, Cornuelle writes that people are inherently “self-propelling, self-actualizing.” Yet, because we don’t understand the “invisible processes” that help to guide us “so that the necessary work of society is done,” we “cling desperately to the discredited conviction that management makes the world go round.”

Employees don’t trust management and become fearful to speak out.

Dee Hock, the founding CEO of Visa, does not cling to that discredited conviction. While there is no evidence that Hock ever studied Hayek, he used principles of spontaneous order to grow Visa into an organization that does over a trillion dollars in sales a year in over 200 countries. On the growth of Visa, Hock observed, “It was beyond the power of reason to design an organization to deal with such complexity, and beyond the reach of the imagination to perceive all the conditions it would encounter.”

Arguing that human ingenuity is the “most abundant, least expensive, most underutilized, and constantly abused resource in the world,” Hock explains in his book One from Many: VISA and the Rise of Chaordic Organization how he learned that, by setting simple rules, leadership taps and engages dispersed employee intelligence: “Simple, clear purpose and principles give rise to complex, intelligent behavior. Complex rules and regulations give rise to simple, stupid behavior.”

Hock kept rules to a minimum by insisting that those who promulgate the rules and regulations “must submit to them as well if they were to be continued.” Universal enforcement of all rules was enough to prevent their proliferation at Visa.

“At bottom,” Hock tells us, a “desire to command and control is a deadly destructive compulsion to rob others of the joy of living.… Tyranny is tyranny no matter how petty, how well rationalized, how unconscious or how well intended.”

Hock is not the only CEO who has successfully employed elements of what Charles Koch, CEO of Koch Industries, and others call market-based management. Koch, Bill Gore at W.L. Gore, John Mackey at Whole Foods, Tony Hsieh at Zappos, Larry Page and Sergey Brin at Google, and Gabe Newell and Mike Harrington at Valve Software, among others, have flattened or eliminated the hierarchy and relied on imbued principles, values, and purpose to guide behavior.

Leaders Are Not the Value

Authoritarian CEOs are acting out the legacy left by manufacturing efficiency expert Frederick Taylor, who wrote Principles of Scientific Management in 1911, when the model of manufacturing was standardized jobs. He believed most workers would shirk if given the chance: “Hardly a competent workman can be found who does not devote a considerable amount of time to studying just how slowly he can work and convince his employer that he is going at a good pace.”

As a consequence of that observation, Taylor believed, “All possible brain power should be removed from the shop and centered in the planning or laying-out department.”

Are vestiges of Taylorism still creating disengaged workers today? Does disengagement create the need for command and control, or does command and control create disengaged workers? Corneulle believed it was the latter, and so do many of today’s most successful CEOs.

In organizations, authoritarian leaders think they are the value, while effective leaders understand that their job is to free organizational intelligence so that the organization can create value. Authoritarian leaders can’t imagine a world where their right to command others is not guaranteed by virtue of their position on the organizational ladder.

Hierarchical controls at work are similar to central planning in the economy.

Similarly, authoritarian leaders such as Hillary Clinton and Donald Trump both think that they are the value as they contrive new ways to “administer” us and the economy.

As more Americans find jobs in the expanding areas of the economy that do not rely on command and control, a reverse Cornuelle effect could emerge. The population may become more open to those candidates who see the economy as a spontaneous order “kept alive by a continuous process of adaptation, led by independent enterprising people.” A 2012 IBM survey shows that CEOs see command and control as an “outdated and ineffective” leadership style. Firms organized like W.L. Gore, Google, and Visa may be playing a large role in the future of freedom.

  • Barry Brownstein is professor emeritus of economics and leadership at the University of Baltimore. 

    To receive Barry's essays subscribe at his Substack, Mindset Shifts.

    His essays also appear at the American Institute for Economic Research, Intellectual Takeout, Learn Liberty, The Epoch Times and many other publications. Barry’s essays have been translated into many languages, most frequently Spanish and Portuguese. He is the author of The Inner-Work of Leadership.

    Barry holds a Ph.D. in economics from Rutgers University and a B.S. in mathematical statistics from CCNY.