Charlie McMenamin says that no-one should be allowed to pontificate about public spending cuts until they have read this article by former Revolutionary Communist Party organiser James Heartfield. Given that I intend to continue banging on about the public sector and the need for intelligent cutbacks, I thought I had better read it.
In summary, Heartfield’s view is that British capitalism is now so crap that it needs to be supported by the state. That is why the government is nationalising and privatising at the same time. Privatisation, he argues, allows the private sector to make money from state functions while nationalisation and state intervention is used to prop up failing banks and car companies. Both are a result of capitalism’s decreasing ability to generate profits in the traditional way; by creating products that sell in the marketplace. It is because capitalism is now so feeble, says Heartfield, that it needs propping up by state spending on outsourced services and bailouts.
Given the catastrophic bank failures, it’s difficult not to give this argument some credence. But for Heartfield, the problem runs deeper than just the collapse of a few banks. In his view, capitalism needs to be supported by the state because today’s business managers are rubbish.
But it was not only government that is paralysed by doubts, the private sector, too is in the grip of an existential fear of change. Today’s Managerial Class are not used to confrontation:
‘CEOs have an average age of 50 in Europe meaning that their earliest experience of working life (1980, if they started age 22) was dominated by recession, whereas their career development would have taken place in an era of boom, from age 34 to 50.’13
Cowardly managers of bloated businesses usually call in the consultants to make the difficult and unpopular decisions about which divisions to close down, and which to develop.
Risk aversion among business leaders is their reaction to the industrial conflicts of the 1980s. The capitalist class’ historic mission to revolutionise production belongs to another era. These days they prefer stability to change.
Now I’d be the first to agree that conflict avoidance, especially over issues of performance and over-manning, is endemic in organisations. It has been a long-running theme on this blog. Where James Heartfield is wrong though, is in his assumption that this is a generational issue.
Conflict avoidance has been a problem in large organisations for at least as long as I have been in working in them; that’s twenty-three years if anyone’s interested. The previous generation of managers that Heartfieldrefers to, who made those swingeing cuts during the 1980s, were just as reluctant to confront performance issues as managers are today. Back then, I remember swapping stories about this problem with other junior HR managers from large corporations. We decided it was so bad that, in the late 1980s, a few of us designed a series of courses to encourage managers to confront poor performance, which we then helped to run in each other’s firms.
Apart from a few individuals who love a good scrap, most human beings steer clear of conflict. That was just as true among the senior managers of the 1980s as it is for today’s business leaders.
That said, in many ways it has become harder to downsize organisations and to confront performance issues. While macho management may have played a part in the corporate restructures of the 1980s, many of the redundancies were, in fact, bought with offers of early retirement. Companies used what were then extremely wealthy pension schemes to buy their way out of the conflicts they would have had to deal with if they had simply fired people. As the Observer noted last week:
At the time of the sale of British Telecom, thousands of unwanted staff were offered early retirement rather than redundancy by ministers who saw the company pension scheme as a no-cost solution to cutting jobs. It was a trick repeated many times during the 1980s as government-owned businesses were slimmed down in readiness for sale to the private sector.
Now that many pension schemes are under-funded, that option is no longer open.
Since the 1980s a number of other factors have combined to make it more difficult to dismiss people. Employment protection, to an extent dismantled by the Thatcher government, has been built up again since. Legislation in the past decade has encouraged employees to pursue grievances and increased the number of issues about which they can raise those grievances. Add to that the decline of deference and the ever more litigious nature of our society and managers are faced with workers who are much more difficult to discipline than they were twenty years ago.
None of this is an excuse for not managing performance. Good managers can still discipline and, where necessary, fire people for poor performance if they are properly trained and have the right skills. However, the minefield of laws, procedures, grievances and implicit threats of litigation gives the conflict avoiders plenty of excuses not to take action. The myth that “you can’t discipline people any more because of employment protection/equality legislation/health & safety/grievance procedures/threats of litigation/reputational risk/politically correct processes/interfering feminist HR directors” (delete as applicable) is prevalent in many organisations. It provides a never ending list of excuses for inaction.
The myth is so strong that in some organisations it has become self-fulfilling. Nowhere more so than in the public sector, where, in some organisations, the grievance culture is so entrenched, and the employee so protected by complex procedure that managers struggle to cope. As one HR Director for a large London borough explained to me:
As soon as we try to manage performance in a particular department the grievances start. They can be about anything – anything that will stall the process. If you invite someone to a meeting to review their performance, they submit a grievance and go off sick. When you try to contact them at home, they lob in another grievance for harassment and so it goes on.
Public sector unions are particularly adept at using employment legislation to thwart management initiatives. They are already making plans to use the new equality laws to disrupt attempts to downsize the public sector with a rash of rights-based grievances and legal challenges to shared-services and outsourcing programmes.
Of course, there are ways of dealing with this and good managers and HR staff can face down this sort of behaviour but it requires skill, patience, resolve and sheer bloody tenacity.
And, to return to James Heartfield’s argument, that is what is lacking in many parts of the public sector, which is why, after failing to improve the performance of some of their activities, public sector organisations simply call in the consultants or outsource those functions to companies who are not so hamstrung by procedure.
Managers today are no more or less cowardly than they were a quarter of a century ago. There are, however, more obstacles to managing performance than there were then. Although some public sector organisations have made massive improvements in productivity, as a general rule, the private sector has proved better at managing performance despite the legal and procedural barriers. By contrast, many public sector organisations have allowed themselves to become bogged down in cumbersome and legalistic procedures, many of which go much further than legal compliance demands. It is for this reason, rather than a generation of cowardly private sector managers, that so many state functions have had to be outsourced to private firms.