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reduction of all
social facts to
economic dimensions. The
term is often used to criticize economics as an
ideology, in which
supply and demand
are the only important factors in decisions, and outstrip or permit ignoring all other factors.
It is believed to be a side effect of neoclassical economics and blind faith in an "invisible hand" or "laissez-faire" means of making decisions, extended far beyond controlled and regulated markets, and used to make political and military decisions.
Conventional ethics would play no role in decisions under pure economism, except insofar as supply would be withheld, demand curtailed, by moral choices of individuals. Thus, critics of economism insist on political and other cultural dimensions in society.
Managerialism ( https://en.wikipedia.org/wiki/Managerialism ) leads to burnout of rank and file staff. An people are searching for escape. Also the stability of most jobs is deteriorating and one does not want to be caught "holding the bad" -- working loyally for the corporation, which at the next opportune moment discard him/her like a used bag.
From Wikipedia, the free encyclopedia (Managerialism):
Managerialism is a belief in the value of professional managers and of the concepts and methods they use. Contemporary management writers such as Thomas Diefenbach associate managerialism with hierarchy. But managerialism is also linked to control, accountability and measurement, and an ideologically determined belief in the importance of tightly managed organizations, as opposed to individuals, or to groups that do not resemble an organization.
Following Enteman’s classic on Managerialism: The Emergence of a New Ideology (1993), American management experts Robert Locke and J C Spender  see managerialism as an expression of a special group – management – that entrenches itself ruthlessly and systemically in an organization. It deprives owners of decision-making power and workers of their ability to resist managerialism. In fact the rise of managerialism may in itself be a response to people’s resistance in society and more specific workers’ opposition against managerial regimes.
Building on Enteman (1993) and Locke/Spender (2011) the most up-to-date definition of Managerialism has been delivered by Thomas Klikauer in “Managerialism – Critique of an Ideology”  (2013)  defining Managerialism as
"[....] Managerialism combines management knowledge and ideology to establish itself systemically in organisations and society while depriving owners, employees (organisational-economical) and civil society (social-political) of all decision-making powers. Managerialism justifies the application of managerial techniques to all areas of society on the grounds of superior ideology, expert training, and the exclusive possession of managerial knowledge necessary to efficiently run corporations and societies." 
As Fayol’s and Taylor’s simple management mutated into managerialism, managerialism became a full-fledged ideology under the following formula:Management + Ideology + Expansion = Managerialism 
So loyalty is destroyed on both sides, but first on all on the side of upper management. Only inability to find better or equal position often now is holding people in place.
This is reflected in the name "bean-counters" for such managers -- typically Harvard or Wharton business school
graduates -- trained to behave without any human compassion -- that are filling technical managers
position in large corporations, destroying existing work culture and enforcing "austerity" and "shareholder
values" in a given corporation.
With the main concern about "bottom line" and their own job prospects. http://hcrenewal.blogspot.com/2017/04/part-of-solution-or-part-of-problem.html
May be it should be called "trained sociopathy" -- as partially such a behavior is the result of indoctrination, not innate traits.
Managerialism is about the existence of a fake discipline, called "generic management" and id promoted by such entities as Harward Business School and Wharton Business School. But it is more them that. It is the manager's coup d'etat when managers who experienced the Great Depression and have had some compassion for workers were replaced by "trained sociopaths" and ruthless careerists. It is also called a "mission-hostile management."
Managerialism pretends that ideas and method of running organizations can be distilled into concepts, and those concepts can be wrapped into a single package -- a new discipline. While some common core of concepts of running of the large organization does exists, trying to pretend that this is the only "right way" of managing large ornization is a pseudo science and the spectrum organization is too large (from military suppliers with their strict discipline and hierarchy resembling the army, to professional societies like ACM with their meritocracy). It implicitly promotes a very destructive idea: the idea that that all organizations ought to be run people with generic management training and background, not necessarily by people with specific backgrounds or training in the organizations' areas of operation, who proved to have management talent as well. In other word this is an absolutization of the value of the management talent.
Thus, for example, hospitals ought to be run by MBAs, not doctors, nurses, or public health experts. IT should be run by financial specialists, who understand nothing in It (Gersner at IBM was the first swan and it completely destroyed the IBM culture).
Furthermore, all organizations ought to be run according to the same basic principles of business
management. These principles in turn ought to be based on current neoliberal dogma, with the prime
directive that short-term revenue is the primary goal.
If, for example top IT honcho do not perceive their own unfamiliarity with programming and system administration a problem, they are unlikely to perceive their subordinates unfamiliarity with this specific discipline as a problem too. Similar in hospital bean counters seldom think about the necessary to better educate their own board about what really goes on in hospitals outside board rooms and management suites.
At a really "Managerialist" hospital, whose management is dominated by people with business backgrounds, and does not have any top managers who have health care background, and whose board is dominated by wealthy businesspeople with backgrounds outside of health care, the management would likely not bother trying to improve their board members' or their own familiarity with health care. Were they to do so for some reason, I hypothesize that an immersion day for board members would have little effect. The apparent, but not clearly proven success of "immersion day" at Mission Health may be due to the important presence of health care professionals in top management and on the board of trustees, but may not generalize to most other hospitals.
The current leadership of hospitals as well as IT department more often then not is run by "generic managers", reporting to boards made up almost entirely of generic managers. No wonder that often thier actions defies common sense. Although trying to give board members some rudimentary familiarity with the health care context, during one day of the year, is obviously better than nothing, it clearly is only a tiny bandage on a gaping wound. When one hospital deploys such a bandage, it is news. That most hospitals' managers and boards would not even think of deploying such measures is a scandal.
Two examples of the extension of management into the non-management domain – the not for profit sphere of human existence – are public schools and universities.  In both cases, managerialism occurs when public institutions are run “as if” these were for-profit organization even though they remain government institutions funded through state taxes. In these cases, the term new public management has been used.  But the ideology of managerialism can even extend into more distant institutions such as, for example, a College of Physicians.
At a time when much of this started Albert A. Anderson summarized managerialism as the ideological principle that sees societies as equivalent to the sum of the decisions and transactions made by the managements of organizations. This carries connotations to the Historian James Hoopes wrote (2003):
"[...] the main genesis of managerialism lay in the human relations movement that took root at the Harvard Business School in the 1920s and 1930s under the guiding hand of Professor Elton Mayo. Mayo, an immigrant from Australia, saw democracy as divisive and lacking in community spirit. He looked to corporate managers to restore the social harmony that he believed the uprooting experiences of immigration and industrialization had destroyed and that democracy was incapable of repairing."
The managerialist society is not one which responds to the needs, desires, and wishes of a majority of its citizens, but one which is influenced by organizations. The managerialist society responds to the managements of various organizations in relation to their transactions with each other. The needs, desires and wishes of the individual are heard through their membership of an organization. Furthermore, managerialism is both a process and a substantive ideology. Managerialism says that the fundamental social units are not individuals, as capitalism would declare, but rather that the fundamental social units are organizations. Ultimately, managerialism specifically denies that the fundamental nature of society is an aggregation of individuals.[need quotation to verify]
Instead, managerialism sees the core building-block of contemporary society as the modern business company or corporation. To further business, companies, and corporations is the ideological goal of managerialism. How managerialism functions as such an ideology has been perfectly expressed by one of managerialism's main ideological flagships – the Harvard Business Review - when the HBR's former editor Joan Magretta (2012: 80-81) made the following stunning revelation:[i]
Business executives are society's leading champions of free markets and competition, words that, for them, evoke a world view and value system that rewards good ideas and hard work, and that fosters innovation and meritocracy. Truth be told, the competition every manager longs for is a lot closer to Microsoft's end of the spectrum than it is to the dairy farmers'. All the talk about the virtues of competition notwithstanding, the aim of business strategy is to move an enterprise away from perfect competition and in the direction of monopoly.
[i] Magretta, J. 2012. What Management Is: How it works and why it's everyone's business, London: Profile.
Managerialism in political science is a set of beliefs, attitudes and values which support the view that management is the most essential and desirable element of good administration and government. It follows that in all enterprises and services, both private and public, expertise in management must be taught by training and by incentives to excel. In the political world this may take the form of asserting that much conflict and argument are unnecessary for solving problems. All that is needed is a rational assessment of the problem and this involves gathering and collating information, listing the options, calculating costs of each, evaluating consequences and choosing the best course of action. Recent managerialism has included such devices as "performance indicators" (purporting to measure the relative efficiencies of different managers) and "market testing" (which compares public sector managers' responsibilities and tasks with those of managers in the private sector in order to assess their pay). Managerialism is criticized for weakening the public-service ethos.
If one were to conceive of society as a nation, such as the United States, managerialism concludes that there is no single United States and that individual Americans should not be identified as the fundamental nature of the country. Rather, the country is basically composed of numerous groups which collectively make up the country we call the United States. The government is a part of the managerial process. The management of different groups will attempt to influence the direction of government action. Their success or failure will depend upon their ability to pursue their case and upon their ability to blunt the cases of competitors. The success of the subunits depends upon the ability of their managements and other factors such as size, cohesiveness, managerial discretion, and control of resources. Government itself is a collection of governmental units. The government is not state.
Economically, managerialism is the application of managerial techniques in businesses. Managerialism in this regard has to do with the strategic approach of goal-setting. In order to achieve previously unimagined levels of accumulation and production, businesses within a capitalist economy needed a way of connecting their strategic plan of actions to desired implementations of those plans. Within an organization, the individuals at the top of the organizational hierarchy determine a mission or set of goals, which is then strategically analyzed by individuals lower on the hierarchy (managers) to devise local goals to carry out the overall mission. Put simply, the managerial standard is to receive goals from above and to create new goals for those below.
There is a belief that in managerialism, organizations have more similarities than differences, and thus the performance of all organizations can be optimized by the application of generic management skills and theory. To a practitioner of managerialism, there is little difference in the skills required to run a college, an advertising agency or an oil rig. Experience and skills pertinent to an organization's core business are considered secondary.
The term "managerialism" can be used disparagingly to describe organizations perceived to have a preponderance or excess of managerial techniques, solutions, rules and personnel, especially if these seem to run counter to the common sense of observers. It is said[by whom?] that the MBA degree is intended to provide generic skills to a new class of managers not wedded to a particular industry or professional sector.
There have been mixed reviews on the efficacy of managerialism, explored extensively in university studies of the State. Some have accepted the flaws in the theory, building upon it and putting it forth as a valid theory of the State. Others have outright rejected such a proposition, responding that - regardless of the few similarities - such a system could not be successful on a political level.
The word "managerialism" can also be used pejoratively, as in the definition of a management caste. Robert R. Locke defines it accordingly as:
"What occurs when a special group, called management, ensconces itself systemically in an organization and deprives owners and employees of their decision-making power (including the distribution of emolument), and justifies that takeover on the grounds of the managing group's education and exclusive possession of the codified bodies of knowledge and know-how necessary to the efficient running of the organization."
Managerialism – also called New Managerialism and New Public Management – is an ideology used for legitimizing the development of new organizational forms and relationships. It is has been coined a practical ideology of being 'business-like' in order to make the new arrangements work for all forms jobs, organizations, and education systems. The 'business-like' indicates what is called "as if" ideologies. Managerialism is conceptualized in that it seeks firstly to explain the socioeconomic and political reasons behind why particular organizations have been developed and, secondly, to describe the ways in which public services are currently being delivered. The idea of Managerialism came to fruition when new organizational forms originated from a view that professional bureaucratic modes of organization were inefficient and could not cope with the challenges rising from increasing globalization. Managerialism, however, has not remained static over the years as it has had many different versions of its implementation. Its linkage to the changing practices associated with an agenda moves away from a purely Neo-liberal framework. While neo-liberalism uses politics (e.g. elections) to achieve its goals, Managerialism is fundamentally anti-democratic following instead management's command-and-control concept. While using business-like mechanisms to ensure great cost effectiveness is still used as a great technique. There have been movements away from purely market based systems that were in place strictly for efficiency, to contractual mechanisms and performance measurement through audit and review. In practice of Managerialism, consumers are redefined as well. Not only do consumers have choice in regard to where and how they receive their services, but they should be actively involved in determining what services should be provided as well. In new Managerialism consumers are redefined as well. Not only should they have choice regarding where and how they receive their services, but they should be actively involved in determining what services should be provided as well.
The Managerialism explains public services not as production functions or firms, but as governance structures. What is at stake is not so much the ethos and practice of management as the culture and structure of governance. Here governance means the organisational culture and structure of the relationship between what Weber called legitimate domination and the self-constitution of those who are subject to it. What Weber meant by legitimate domination was justified by an authority structure, which was, in turn, legitimated by rational authority. Hence, one finds a renewed interest of Managerialism in fostering managerial leadership. But governance through Managerialism was never only dependent for its legitimization on Weber's notion of legal-rational authority, but more on forms of rationality that depend upon, for example, strategic management, cost-benefit-analysis, efficiency in the market, etc. Although this Managerialism draws on models of corporate Managerialism as well as accounts of New Public Management, it is also imbued with the practices of self in everyday life. What is new here, is recognition of the technologies of self that individuals employ to implicate themselves in their own governance. This creates what became known as "The Entrepreneurial Self".
The way Managerialism achieves this, for example, at university levels is through a re-formulation of research and science, as outlined in the table below.
From Science ..... Prof. Tina Fey's research proved hunter-gatherers have higher levels of cooperation in harsher climate Prof. Tina Fey wrote the most seminal research work on hunter-gatherer societies Prof. Tina Fey is the leading authority on hunter-gatherers in the world Prof. Tina Fey published a key article in the journal "Fancy Evolutionary Science" Prof. Tina Fey published an article in a top-rated 5-star (A*) journal Prof. Tina Fey published five journal articles last year Prof. Tina Fey received a grant for 750,000 dollars last year ..... to Managerialism
"One friend, one person who is truly understanding, who takes the trouble to listen to us as we consider our problems, can change our whole outlook on the work"
George Elton Mayo was an Australian psychologist and organizational theorist. A former professor of Industrial Management at the Harvard Business School, Mayo heavily researched the behavior of workers at Western Electric; a manufacturing facet of AT&T. Today he is considered a major contributor to the intellectual though process and ideas of business management, as well as critical theories of industrial and organizational psychology. His book, The Human Problems of an Industrialized Civilization articulates his collective thoughts taken from the famous Hawthorne research study conducted while at Harvard University.
The history of Managerialism is linked to the teachings of Karl Marx. In his collection of books over capitalism appropriately named Das Kapital he writes about how when capitalist merge with other capitalist and two corporations come together, they are more likely to become diluted and when that happens those who were once wise business leaders were to be just aimless managers he stated his belief in his books (only volume 1 was published while he was alive) as follows, "Transformation of the actually functioning capitalist into a mere manager, an administrator of other people's capital, and of the owners of capital into mere owners, mere money-capitalists.". Marx is talking about what would later be known as Managerialism which is first used by James Burnham who in his book The Managerial Revolution expresses his ideas on the difference between Capitalism and Managerialism stating that when the owners of capital are no longer the ones in charge, and managers, relying on only principle are in charge then it is no longer Capitalism, it is now considered Managerialism.
Burnham's ideas, in both that book and a subsequent book The Machiavellians and also in articles which were published in Partisan Review, and elsewhere are thoroughly criticised by George Orwell in his 1946 essay Second Thoughts on James Burnham (first published in Polemic (London).
"Society does not consist of individuals but expresses the sum of interrelations, the relations within which these individuals stand."
Karl Marx has set many standards in the fields of philosophy, economics, and sociology as one of the worlds most prominent thinkers. Commonly known for his ideas outlined in The Communist Manifesto and Das Kapital Marx has exemplified ideas of management and order with his very apparent socialistic views. Sociologically Marx has identified core interrelations between groups of people classified by class structures, and how those relations lead to the success or failures of a collective society.
"To do great things is difficult; but to command great things is more difficult"
A 19th century German philosopher, Friedrich Nietzsche heavily contributed to the fields of management and leadership. Focussing in on ideas of morality; particularly distinguishing the differences between what he labeled the, "master morality," and "slave morality," Nietzsche has exemplified the development of managerial practices through the subjections of moral emphasis and control.
"He was especially interested, therefore, in a probing analysis and evaluation of the fundamental cultural values of Western philosophy, religion, and morality, which he characterized as expressions of the ascetic ideal. "http://www.britannica.com/biography/Friedrich-Nietzsche
Jan 19, 2019 | www.moonofalabama.org
Jackrabbit , Jan 15, 2019 9:31:08 PM | lin kkarlof1
According to Wolin, domestic and foreign affairs goals are each important and on parallel tracks, as summarized at Wikipedia, the United States has two main totalizing dynamics:The first, directed outward, finds its expression in the global War on Terror and in the Bush Doctrine that the United States has the right to launch preemptive wars. This amounts to the United States seeing as illegitimate the attempt by any state to resist its domination.
The second dynamic, directed inward, involves the subjection of the mass of the populace to economic "rationalization", with continual "downsizing" and "outsourcing" of jobs abroad and dismantling of what remains of the welfare state created by President Franklin D. Roosevelt's New Deal and President Lyndon B. Johnson's Great Society. Neoliberalism is an integral component of inverted totalitarianism. The state of insecurity in which this places the public serves the useful function of making people feel helpless, therefore making it less likely they will become politically active and thus helping maintain the first dynamic.
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Wolin's Inverted Totalitarianism provides the ground work for my suspicions regarding faux populists Obama and Trump:By using managerial methods and developing management of elections, the democracy of the United States has become sanitized of political participation, therefore managed democracy is "a political form in which governments are legitimated by elections that they have learned to control".
Under managed democracy, the electorate is prevented from having a significant impact on policies adopted by the state because of the opinion construction and manipulation carried out by means of technology, social science, contracts and corporate subsidies.
Oct 06, 2017 | www.nakedcapitalism.com
By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website
The Idea That Businesses Exist Solely to Enrich Shareholders Is Harmful Nonsense
In a new INET paper featured in the Financial Times , economist William Lazonick lays out a theory about how corporations can work for everyone – not just a few executives and Wall Streeters. He challenges a set of controversial ideas that became gospel in business schools and the mainstream media starting in the 1980s. He sat down with INET's Lynn Parramore to discuss.
Lynn Parramore: Since the 1980s, business schools have touted "agency theory," a controversial set of ideas meant to explain how corporations best operate. Proponents say that you run a business with the goal of channeling money to shareholders instead of, say, creating great products or making any efforts at socially responsible actions such as taking account of climate change. Many now take this view as gospel, even though no less a business titan than Jack Welch, former CEO of GE, called the notion that a company should be run to maximize shareholder value "the dumbest idea in the world." Why did Welch say that?
William Lazonick: Welch made that statement in a 2009 interview , just ahead of the news that GE had lost its S&P Triple-A rating in the midst of the financial crisis. He explained that, "shareholder value is a result, not a strategy" and that a company's "main constituencies are your employees, your customers and your products." During his tenure as GE CEO from 1981 to 2001, Welch had an obsession with increasing the company's stock price and hitting quarterly earnings-per-share targets, but he also understood that revenues come when your company generates innovative products. He knew that the employees' skills and efforts enable the company to develop those products and sell them.
If a publicly-listed corporation succeeds in creating innovative goods or services, then shareholders stand to gain from dividend payments if they hold shares or if they sell at a higher price. But where does the company's value actually come from? It comes from employees who use their collective and cumulative learning to satisfy customers with great products. It follows that these employees are the ones who should be rewarded when the business is a success. We've become blinded to this simple, obvious logic.
LP: What have these academic theorists missed about how companies really operate and perform? How have their views impacted our economy and society?
WL: As I show in my new INET paper " Innovative Enterprise Solves the Agency Problem ," agency theorists don't have a theory of innovative enterprise. That's strange, since they are talking about how companies succeed.
They believe that to be efficient, business corporations should be run to "maximize shareholder value." But as I have argued in another recent INET paper , public shareholders at a company like GE are not investors in the company's productive capabilities.
LP: Wait, as a stockholder I'm not an investor in the company's capabilities?
WL: When you buy shares of a stock, you are not creating value for the company -- you're just a saver who buys shares outstanding on the stock market for the sake of a yield on your financial portfolio. Public shareholders are value extractors , not value creators.
By touting public shareholders as a corporation's value creators, agency theorists lay the groundwork for some very harmful activities. They legitimize "hedge fund activists," for example. These are aggressive corporate predators who buy shares of a company on the stock market and then use the power bestowed upon them by the ill-conceived U.S. proxy voting system, endorsed by the Securities and Exchange Commission (SEC), to demand that the corporation inflate profits by cutting costs. That often means mass layoffs and depressed incomes for anybody who remains. In an industry like pharmaceuticals , the activists also press for extortionate product price increases. The higher profits tend to boost stock prices for the activists and other shareholders if they sell their shares on the market.
LP: So the hedge fund activists are extracting value from a corporation instead of creating it, and yet they are the ones who get enriched.
WL: Right. Agency theory aids and abets this value extraction by advocating, in the name of "maximizing shareholder value," massive distributions to shareholders in the form of dividends for holding shares as well as stock buybacks that you hear about, which give manipulative boosts to stock prices. Activists get rich when they sell the shares. The people who created the value -- the employees -- often get poorer.
###p"downsize-and-distribute" -- something that corporations have been doing since the 1980s, which has resulted in extreme concentration of income among the richest households and the erosion of middle-class employment opportunities.
LP: You've called stock buybacks -- what happens when a company buys back its own shares from the marketplace, often to manipulate the stock price upwards -- the "legalized looting of the U.S. business corporation." What's the problem with this practice?
WL: If you buy shares in Apple, for example, you can get a dividend for holding shares and, possibly, a capital gain when you sell the shares. Since 2012, when Apple made its first dividend payment since 1996, the company has shelled out $57.4 billion as dividends, equivalent to over 22 percent of net income. That's fine. But the company has also spent $157.9 billion on stock buybacks, equal to 62 percent of net income.
Yet the only time in its history that Apple ever raised funds on the public stock market was in 1980, when it collected $97 million in its initial public offering. How can a corporation return capital to parties that never supplied it with capital? It's a very misleading concept.
The vast majority of people who hold Apple's publicly-listed shares have simply bought outstanding shares on the stock market. They have contributed nothing to Apple's value-creating capabilities. That includes veteran corporate raider Carl Icahn, who raked in $2 billion by holding $3.6 billion in Apple shares for about 32 months, while using his influence to encourage Apple to do $80.3 billion in buybacks in 2014-2015, the largest repurchases ever. Over this period, Apple, the most cash-rich company in history, increased its debt by $47.6 billion to do buybacks so that it would not have to repatriate its offshore profits, sheltered from U.S. corporate taxes.
There are many ways in which the company could have returned its profits to employees and taxpayers -- the real value creators -- that are consistent with an innovative business model. Instead, in doing massive buybacks, Apple's board (which includes former Vice President Al Gore) has endorsed legalized looting. The SEC bears a lot of blame. It's supposed to protect investors and make sure financial markets are free of manipulation. But back in 1982, the SEC bought into agency theory under Reagan and came up with a rule that gives corporate executives a "safe harbor" against charges of stock-price manipulation when they do billions of dollars of buybacks for the sole purpose of manipulating their company's stock price.
LP: But don't shareholders deserve some of the profits as part owners of the corporation?
WL: Let's say you buy stock in General Motors. You are just buying a share that is outstanding on the market. You are contributing nothing to the company. And you will only buy the shares because the stock market is highly liquid, enabling you to easily sell some or all of the shares at any moment that you so choose.
In contrast, people who work for General Motors supply skill and effort to generate the company's innovative products. They are making productive contributions with expectations that, if the innovative strategy is successful, they will share in the gains -- a bigger paycheck, employment security, a promotion. In providing their labor services, these employees are the real value creators whose economic futures are at risk.
LP: This is really different from what a lot of us have been taught to believe. An employee gets a paycheck for showing up at work -- there's your reward. When we take a job, we probably don't expect management to see us as risk-takers entitled to share in the profits unless we're pretty high up.
WL: If you work for a company, even if its innovative strategy is a big success, you run a big risk because under the current regime of "maximizing shareholder value" a group of hedge fund activists can suck the value that you've created right out, driving your company down and making you worse off and the company financially fragile. And they are not the only predators you have to deal with. Incentivized with huge amounts of stock-based pay, senior corporate executives will, and often do, extract value from the company for their own personal gain -- at your expense. As Professor Jang-Sup Shin and I argue in a forthcoming book, senior executives often become value-extracting insiders. And they open the corporate coffers to hedge fund activists, the value-extracting outsiders. Large institutional investors can use their proxy votes to support corporate raids, acting as value-extracting enablers.
You put in your ideas, knowledge, time, and effort to make the company a huge success, and still you may get laid off or find your paycheck shrinking. The losers are not only the mass of corporate employees -- if you're a taxpayer, your money provides the business corporation with physical infrastructure, like roads and bridges, and human knowledge, like scientific discoveries, that it needs to innovate and profit. Senior corporate executives are constantly complaining that they need lower corporate taxes in order to compete, when what they really want is more cash to distribute to shareholders and boost stock prices. In that system, they win but .
LP: Some academics say that hedge fund activism is great because it makes a company run better and produce higher profits. Others say, "No, Wall Streeters shouldn't have more say than executives who know better how to run the company." You say that both of these camps have got it wrong. How so?
WL: A company has to be run by executive insiders, and in order to produce innovation these executives have got to do three things:
First you need a resource-allocation strategy that, in the face of uncertainty, seeks to generate high-quality, low-cost products. Second, you need to implement that strategy through training, retaining, motivating, and rewarding employees, upon whom the development and utilization of the organization's productive capabilities depend. Third, you have to mobilize and leverage the company's cash flow to support the innovative strategy. But under the sway of the "maximizing shareholder value" idea, many senior corporate executives have been unwilling, and often unable, to perform these value-creating functions. Agency theorists have got it so backwards that they actually celebrate the virtues of " the value extracting CEO ." How strange is that?
Massive stock buybacks is where the incentives of corporate executives who extract value align with the interests of hedge fund activists who also want to suck value from a corporation. When they promote this kind of alliance, agency theorists have in effect served as academic agents of activist aggression. Lacking a theory of the value-creating firm, or what I call a "theory of innovative enterprise," agency theorists cannot imagine what an executive who creates value actually does. They don't see that it's crucial to align executives' interests with the value-creating investment requirements of the organizations over which they exercise strategic control. This intellectual deficit is not unique to agency theorists; it is inherent in their training in neoclassical economics .
LP: So if shareholders and executives are too often just looting companies to enrich themselves – "value extraction," as you put it – and not caring about long-term success, who is in a better position to decide how to run them, where to allocate resources and so on?
WL: We need to redesign corporate-governance institutions to promote the interests of American households as workers and taxpayers. Because of technological, market, or competitive uncertainties, workers take the risk that the application of their skills and the expenditure of their efforts will be in vain. In financing investments in infrastructure and knowledge, taxpayers make productive capabilities available to business enterprises, but with no guaranteed return on those investments.
These stakeholders need to have representation on corporate boards of directors. Predators, including self-serving corporate executives and greed-driven shareholder activists, should certainly not have representation on corporate boards.
LP: Sounds like we've lost sight of what a business needs to do to be successful in the long run, and it's costing everybody except a handful of senior executives, hedge fund managers, and Wall Street bankers. How would your "innovation theory" help companies run better and make for a healthier economy and society?
WL: Major corporations are key to the operation and performance of the economy. So we need a revolution in corporate governance to get us back on track to stable and equitable economic growth. Besides changing board representation, I would change the incentives for top executives so that they are rewarded for allocating corporate resources to value creation. Senior executives should gain along with the rest of the organization when the corporation is successful in generating competitive products while sharing the gains with workers and taxpayers.
Innovation theory calls for changing the mindsets and skill sets of senior executives. That means transforming business education, including the replacement of agency theory with innovation theory. That also means changing the career paths through which corporate personnel can rise to positions of strategic control, so that leaders who create value get rewarded and those who extract it are disfavored. At the institutional level, it would be great to see the SEC, as the regulator of financial markets, take a giant step in supporting value creation by banning stock buybacks whose purpose it is to manipulate stock prices.
To get from here to there, we have to replace nonsense with common sense in our understanding of how business enterprises operate and perform.
Enquiring Mind , October 6, 2017 at 10:44 amRepubAnon , October 6, 2017 at 12:14 pm
Owners come first!
That was the slogan of our former board chair. He didn't disclose to the employees that his compensation was influenced mightily by how big the net income was. He did tell the employees that they were well down the hierarchy, after Owners (capital O) and then vendors and then customers. His former employees deserted in droves.Tim , October 6, 2017 at 2:21 pm
I'd say that maximizing long-term shareholder value is a great idea the problem is, as is so often the case these days, short-term thinking.
Driving away a company's best employees makes that quarter's numbers look better, but destroys long-term value. Same thing for so many other short-term, "I'll be gone, you'll be gone" strategies.
One step to fixing things – change the definition of long-term capital gains from the current 1 year to, say, 5 years. This "one simple trick" would fix everything from the carried interest loophole to the abuses inherent in the current Wall Street gambling mentality.
It won't happen, of course, but it'd be nice.a different chris , October 6, 2017 at 10:47 am
We can talk about what is best in theory, but reality is just that, shareholders come first.
They control the board and the CEO and the CEO institutes the will of the shareholders down into the business entities, determining the level of reinvestment in the business units and the level of employee compensation. That will continue to be the case until the company goes bankrupt at which point shareholders are entitled to nothing.
I agree with others that Jack Welch is saying what he is saying after the fact. Way too easy to do.RepubAnon , October 6, 2017 at 12:20 pm
>Welch had an obsession with increasing the company's stock price and hitting quarterly earnings-per-share targets, but he also understood
Yeah so he talks a good game but when he had the reins – one of the most powerful men in the world meekly (ok, that's a hilarious adjective when applied to Jack Welsh) followed the herd. Or more accurately, found out where the herd was heading and got out in front of it. The true sign of modern "leadership".digi_owl , October 6, 2017 at 1:06 pm
Folks at GE back in the day nicknamed him "Neutron Jack" – if he visited a site, all the employees disappeared, leaving only the buildings standingLeft in Wisconsin , October 6, 2017 at 1:06 pm
Or more accurately, found out where the herd was heading and got out in front of it. The true sign of modern "leadership".
Reminds me of something i have read, supposedly a quite from some politician or other, going to the tune of "i need to find out where the mob is going, so i can lead them there".Synoia , October 6, 2017 at 11:18 am
Welch's primary business strategy at GE was to exit every product market in which GE's market share was not in the top two in the industry (selling them off or closing them down) and reallocate resources to industries where GE was market dominant, often buying up the competition rather than truly investing in innovation. A truly awful human being.Vatch , October 6, 2017 at 11:27 am
As I personally have always believed, Employees have more invested in their employers than shareholders. Shareholders can sell quickly and have no loyalty. Employees do not enjoy such a liquid "jobs market."
There also seems to be a turning point in companies, where they change the perception of the customers form a group to be treasured, to a group who are to b exploited – change the relationship so the customers become "marks."
I also believe there should be an almost automatic "break -up" provision for companies who reach a certain market share.
Finally there should be one definition of income, and it should include Wages, Dividends, and Capital Gains.readerOfTeaLeaves , October 6, 2017 at 12:15 pm
there should be an almost automatic "break -up" provision for companies who reach a certain market share.
Yes, anti-trust enforcement would be nice. Hypothetical President Sanders might actually do that. Real and hypothetical Presidents Bush, Obama, Romney, B. Clinton, H. Clinton, and Trump have other priorities.JTMcPhee , October 6, 2017 at 12:05 pm
Sen Bernie Sanders sees right through the neoclassical fetters, blinders, and bullshit. He recognizes how intellectually and economically stagnant and dangerous it is. He has the most powerful conceptual, articulate grasp of economics that I've seen the past 40 years. He also, IIRC, had MMTer Stephanie Kelton as an advisor, and had her advise the Senate Finance Committee. Also notable: Sen Elizabeth Warren.
The other political operators that you mention are still in thrall to neoclassical assumptions. They mistake 'takers' for 'makers' and are economically bamboozled. And it has worked out well for all of them, on a personal basis, so it is not surprising that they don't see the problems.
Anyone actually trying to build an innovative business, OTOH, has to see through the bamboozlement or else you're out of business pronto.Left in Wisconsin , October 6, 2017 at 1:14 pm
Chicken and egg question:
The class of humans that by inclination and opportunity become C-Suite and VC looters and "owners:" did they precede the imprimatur of "economists" with their notions of price, value, and crossing of curves, or did the "economists" do a Martin Luther, nail up a bunch of theses, and preach fire and brimstone to turn the greedheads loose?
And was/is any other outcome for the species and the planet even possible?Carla , October 6, 2017 at 3:05 pm
Neil Fligstein wrote a good book awhile back called The Transformation of Corporate Control that shows how most large manufacturing companies were initially run by engineers, then sales people, then finance people (as corporations came to be seen as bundles of assets as opposed to businesses). I think this transformation paralleled the rise of neoclassical economics. So, not so much "chicken-and-egg" as "class war." In Germany, at least until recently, I believe CEO's of manufacturing firms were still disproportionately engineers.readerOfTeaLeaves , October 6, 2017 at 12:30 pm
"most large manufacturing companies were initially run by engineers, then sales people, then finance people"
The Lincoln Electric Company, which became famous for its "Incentive Management" program of compensating employees, was a client of mine. Over three decades I saw it progress through precisely those stages, and gradually lose every characteristic that had made the company unique.JTMcPhee , October 6, 2017 at 12:59 pm
This post was a genuine pleasure to read. Especially:
If you work for a company, even if its innovative strategy is a big success, you run a big risk because under the current regime of "maximizing shareholder value" a group of hedge fund activists can suck the value that you've created right out, driving your company down and making you worse off and the company financially fragile .
And we've had a government by and for hedge fund managers for about the same amount of time that we've had economic woes. One problem is that hedge funders like Romney, who actually don't think about consumer product development, actually don't have to test and deploy products, bring their bean-counter assumptions to business and make a hash of things. I mention Romney specifically, because he presents himself to the world as a paragon of economic wisdom.
Romney has a prestigious business school background. Which makes me want to highlight this:
Innovation theory calls for changing the mindsets and skill sets of senior executives. That means transforming business education, including the replacement of agency theory with innovation theory .Disturbed Voter , October 6, 2017 at 12:36 pm
Just a thought: "innovation theory," like MMT, is maybe just a tool set? "Innovation" includes "autonomous combat devices," and CRSP-R, and nuclear weapons, and the F-35, and fracking, and derivatives, and plastics, and charter schools, stuff and ideas that for some of us constitute "value" are corporations as the category has grown to be, any more likely to "innovate" in the areas of social improvements and possibilities, or stewardship of the planet, or close down the toll stations and all the other rent collection scams and extortions they have "innovated" to date? Or release their chokehold on "policy?"
Says the proponent: "Major corporations are key to the operation and performance of the economy. So we need a revolution in corporate governance to get us back on track to stable and equitable economic growth. Besides changing board representation, I would change the incentives for top executives so they are rewarded for allocating corporate resources to value creation. Senior executives should gain along with the rest of the organization when the corporation is successful in generating competitive products while sharing the gains with workers and taxpayers." There seems to be so much wrong and just more Biz-babble about this, one hardly knows where to start unpacking.
"Major corporations are key?" Really? Monsanto? GM? Bechtel? The Big Banks? And "back on track": When has the political economy, writ small or large, ever been "on track to stability and equitable growth," said "growth' itself seemingly one of the pathologies that's killing us? And who's going to write the entries for the corporate senior executives' dance cards that will measure their "success," in those feel-good categories?
But it's a good conversation piece, and maybe an opening into Something Better, however us inherently mostly self-interested, self-pleasing omnivorous predators might define "better "JTMcPhee , October 6, 2017 at 1:06 pm
Badly run companies, naturally extinguish themselves. Unfortunately they take down their customers, owners, vendors and employees in the process. But the government can step in and either save a company that otherwise would die, or act as a crony corruption partner on behalf of a well connected company. Same as it always was.
But since gigantism is the norm, rather than family run farms in a mostly agrarian economy such failures are catastrophic. The linkage between these elephants tends to create systemic risk. Previously, failure was small and isolated.allan , October 6, 2017 at 12:48 pm
Welcome to our wonderful new world of infinite mutual vulnerability! Risk On! Nuclear weapons, Equifax, Googleamazon, NSApanopticon, FIRE, hacking, crapification The Soviet Union vanished as an entity, many starved, but the mopes there at least still knew how to raise up edible crops and live on "less" and maybe do better collective response to that sharp peak on the entropy curve. Wonder how things might play out exceptionally, here in the Empire?
It should be noted that Michael Jensen of HBS, one of the originators of the `maximize shareholder value' of corporate governance, is on some short lists for this year's not-exactly-the-Nobel Prize in Economics.
Jun 28, 2017 | www.nakedcapitalism.comng , December 17, 2015 at 5:08 amUlysses , December 17, 2015 at 7:36 am
some one ought to do a study of/ a book on generic management. it goes back a long way. i first saw it in 1973 where i was working in boomingdale's food department. almost all the managers in the store had worked their way up fom being staff members. in 1973 the board hired a young impressive- looking harvard mba to oversee about a fifth of the departments. he was an energetic man who spent one whole day throwing boxes around in the foof department stockroom to "show the stockmen how to be more productive." after two years his section of the store was the only one to lose money, but by then he had been hired by neiman marcus. in an even higher position.
the managerial class, useless and self-rewarding, is what every corrupt society needs.- endless administrators in the college system, inventing tests for the teachers. red cross, whatever. the destruction of substance and brains and heart. its replacement with ignorance and cluelessness. what a society we're (not) building!Barry , December 18, 2015 at 11:57 am
"The managerial class, useless and self-rewarding, is what every corrupt society needs."
The eloi will continue to become ever more useless, putting insane pressures on the few remaining morlocks they allow to do all the work. Will robots save us? Not very likely, since they will be used to further enrich the parasites above all.Clive , December 17, 2015 at 5:35 am
You might want to look up Henry Mintzberg, particularly Managers Not MBAs (2004).Lexington , December 17, 2015 at 5:38 am
The BBC is another good example of how managerialism has wrecked a not-for-profit corporation. Until McKinsey infiltrated the place, the BBC didn't really have a "brand" to speak of; if it considered its corporate identity at all, it was only in terms of how its output of programming conveyed what it was supposed to be about as an organisation.
Then, it brought in the brand consultants to develop an image of what it thought it should be. Nothing necessarily wrong with that. What caused the rot to set in was when the brand image started to define the programming output. Was, the brand managers asked the producers and directors, this-or-that programme compliant with the brand guidelines?
If the BBC's brand was not merely delivering communications which are honest and have integrity but also now need to be "simple to understand", "completely neutral at all times" or "a balance of positive as well as negative content" then you end up, as we largely have, with a lot of cosy-consensus mediocrity and an institution which only serves its own internal vested interests.jgordon , December 17, 2015 at 7:55 am
some one ought to do a study of/ a book on generic management
Managerialism: A Critique of an Ideology
You're welcome ;)Sam Adams , December 17, 2015 at 8:54 am
I'm seeing a parallel to the Obama strategy of branding/looting. Corporate and government decay seem to be mirroring each other, and this new obsession among the intelligentsia with messaging over substance is a major component of that.
I'd say that this is also the reason it's impossible to get the government in order. The corporate media is in bed with the corporate state, because patriotism, and most Americans are simply too burned-out or drug-addled to question anything. And if people do sense something is wrong and want a drastic change–well then there's Trump.Procopius , December 18, 2015 at 9:54 am
This branding/looting/communications has been building since at least 1977 when undergraduate communication majors multiplied. It accelerated by 1982 when every corporate finance and law professor taught short term quarterly profit was the only responsibility of management. The combination could only lead to the current 'propaganda as responsible management' philosophy.mad as hell. , December 17, 2015 at 9:05 am
I don't know when the turning point was, but it had something to do with neoliberalism becoming the "Washington Consensus" and the dogma that everything had to be "run like a business" became universally accepted. I would guess about the Carter administration.petal , December 17, 2015 at 9:06 am
Wow -- It's an amazing story yet I should not be surprised. It's become a common theme throughout American society. We have the usual suspects, greedy, self centered individuals looking out for their interests, using the established modus operandi. Cut, slash and burn as many systems as possible while painting over the truth with colorful, truth distorting logic while enriching your self on the way.
An organization founded by Clara Barton in the 1880″s that has evolved into such a grab bag of I want my share thinking is an American tragedy of epic proportions.Melody , December 17, 2015 at 9:24 am
Funny timing. Just yesterday I was passed on the road in my area of NH by a Red Cross Hummer. It as white all over and the doors emblazoned with the red cross. In tiny print toward the back it said "donated by GM". Made me sick. Got me thinking about all of the mismanagement going back decades.flora , December 17, 2015 at 10:53 am
Personally, I'll throw any charitable discretionary money I might have into the gutter before I'd send a cent to the Red Cross. Took three strikes–but I'm done with them.
My father-in-law served in the SeaBees during WWII and initially influenced my dislike for the organization. He reported how Red Cross care packages were "SOLD" rather than distributed to intended service personnel. [Strike one!]
Much later the Twin Towers came down and I felt compelled to donate. When several weeks later I heard officials talk about the amount of contributions received, and asked us to dig deeper–they also revealed that they were setting aside (toward future disasters) at least half of donated dollars. (Whether this was true I don't know–but the fact that it made it into public discussion was not a skillful marketing ploy.) [Strike two!]
I then heard horror stories from local volunteers here on the (unaffected) part of the gulf coast who dropped what they were doing to offer help and support to Hurricane Katrina victims in myriad ways A veterinary friend–after describing the absolute chaos he encountered in the area–reported that late one night, after a gut-wrenching and exhausting day, he walked into the Red Cross tent for a cup of coffee. Not without paying for it–$1/cup–he was told. [Strike three!]
There are local charities still deserving of my small discretionary donations–so I won't truly be throwing money into the gutter; but if my only choice was give to the RC or throw it away: I'd throw it away.
Thanks for the article. I think further investigation would show that others charities–particularly those like the American Diabetes Association (with which I'm familiar)– have adopted that same managerialism model.JEHR , December 17, 2015 at 11:11 am
"The Marketers' Best Laid Plans Led to Declining Contributions"
This year, for the first time ever in my adult life, I did not sent a contribution to the Red Cross. All the reasons listed in this excellent post went into my decision not to contribute. I still feel bad about it, but I can't 'enable' continued bad management of the Red Cross.RUKidding , December 17, 2015 at 11:24 am
This article proves yet again that by their words shall they be known. In this day and age when almost everything from politics to education is being subsumed by business lingo, it's interesting to see by the Red Cross example where it will all end up.
The Red Cross which depends on volunteers and donors gets master marketers and business expertise and becomes "branded" as a business; helping others in distress becomes being efficient; preventing and alleviating suffering becomes creating a profitable place where executives get mighty big bonuses; the bottom-up organization becomes a top-down monolith; taking care of emergencies becomes profit-making exercises; all in all, this Red Cross refurbishment reflects the society that we have become–the 1% versus the 99%. When organizations are defined in financial and business terms, there is no room for alleviating or preventing human suffering.cyclist , December 17, 2015 at 11:27 am
Crapification of "charities" abounds. I've lived in So CA at least part time since the '90s. San Diegans don't have a lot of love for the San Diego Red Cross:
I stopped giving to the Red Cross a long time ago bc of mis-mangement of money and making sure that the Big Wigs at the top get THEIRS first and screw everyone else. It's unfortunate, as this organization probably does some good stuff, but it's priorities are not good.
I donate a certain amount every year, and I look very closely and carefully at the organizations to whom I give my hard-earned dollars. Advise everyone else to do the same. There's a lot of "charities" out there that exist primarily to enrich those at the top, and any good that's done for others – whom the "charity" alleges to serve or support – is strictly incidental.
Good article re American Red Cross. Crapified.Jim A , December 17, 2015 at 11:29 am
This is a great dissection of the decline at this august organization. Partners In Health is an example of a charity worth supporting.
BTW, I found the Wikipedia bio of the Bonnie McElveen-Hunter very creepy. Looking at the website of her company, Pace Communications, it took me awhile to figure out what they really do, which seems to be something on par with publishing airline magazines. It really isn't clear why this woman should have attained her power and status – e.g. trustee of the RAND Corporation? Really? Seems emblematic of the rot at the top of the US elite.reslez , December 17, 2015 at 4:37 pm
Well publicized failures in the Hurricane Sandy response and the failure of their attempts at increased revenues through price raises, "branding" and marketing aside, the ARC WAS in increasingly dire straits when she took over. By many accounts centralizing things and closing many local branches WAS a necessity, because cutting overhead was desperately needed in an organization that was loosing large amounts of money every year. This is often that case with these "superstar managers," If everything is working well the organization doesn't bring them on. But when an organization is already floundering, the Boards look for a "superstar" that can "turn it around." It's a perfect situation for these guys: (they're mostly men) If the company goes bankrupt, they say that it was in worse shape than they thought and nobody could have saved it and it it DOES turn around (often for completely exogenous reasons) they can take the credit.
The Washington Metropolitan Area Transit Authority, which runs the subways and buses in Washington DC recently went through a protracted process of hiring a new director because there was a real deep divide on the board between those who wanted a transit executive and those who wanted a "turnaround specialist." They ended up with the latter and there's already talk about a "charm offensive" to try and woo more ridersMichael G , December 17, 2015 at 12:30 pm
The Red Cross was bleeding red ink, partly because of less demand for blood products in surgery (they sell the blood that gets donated) and partly because their labeling system was out of date, which reduced demand compared to their competitors' products. This is something the ProPublica article makes clear that isn't really referenced in the HCR post.
So the Red Cross brought in a generic marketer/manager who did what they do best–chopping off employee heads while destroying what made the organization viable. The Red Cross isn't the kind of non-profit that can survive the loss of goodwill in a community. And they still haven't addressed the labeling problem.KYrocky , December 17, 2015 at 1:42 pm
NC readers might be interested in this report, which caused quite a stir in the UK yesterday. Needless to say it has been denounced as worthless by the charities concerned.
I guess the question is whether you mind that when you give a dime, a nickel goes to getting money from the next person
http://www.trueandfairfoundation.com/content/file/feature/review-hornets-nest-report-into-charitable-spending-UK-charities-12-dec-15.pdfdigi_owl , December 17, 2015 at 2:59 pm
Labeling these people generic managers or whatever is far too kind. The goal and driving force of these people was to extract more money from those most in need of charity and assistance. These people are shitty human beings, so call them what they are. The changes that they have wrought within the Red Cross organization has deprived countless suffering peoples of the good will and needed services that would have been provided by this organization BUT FOR THESE ASSHOLES.
Charities are not businesses. Charities, by definition, plan to GIVE things or services to others, not sell them, not to make profit. Putting profit loving Randians, possessed with the goal of using corporate profit taking methods, in charge of a charity is like putting "arsonists for profit" in charge of the fire department. The people that suffer are those that NEED charity, be it in the form of shelter, services, goods, or information, and we, as a society, are diminished.
Sacrificing the Red Cross on the alter of conservative economic ideology is tragic.bob , December 17, 2015 at 4:28 pm
Sadly the problem is spreading internationally, as US universities is seen as cream of the crop.just_kate , December 17, 2015 at 5:18 pm
I have to bring up the post 911 witchhunt by fox news on the red cross too.
That seemed to the the turning point, or near it.
"you mean not all of our donations are going to NYC?"
With Bill Oreilly yelling and throwing spittle at the TV cameras, a change had to be made. I'm sure more than a few of his budddies, who are very Professional Managers, were first in the door.
It's just another part of the planned destruction of any sort of locally based ability or lobby.Brooklin Bridge , December 17, 2015 at 6:43 pm
years ago i worked for a marketing firm that did a significant amount of work for the organizer of the avon 3 day breast cancer walks and the amount of money wasted on frivolous items and activities made me sick. really opened my eyes about charities and how greed and fraud can be rampant in the least expected places. don't think i can get any more cynical abt the world at this point :(BRUCE E. WOYCH , December 17, 2015 at 7:27 pm
There is not enough money in the world to pay McGovern a bonus that would make up for what she has done to the RC. Perhaps a 1000 year stint in a max security prison would be a start though.
Asset Grabbing "Capture" (University of Chicago Economics? Harvard Business ?) and pervasive Control Fraud ( credits to William Black: https://www.ted.com/talks/william_black_how_to_rob_a_bank_from_the_inside_that_is?language=en )
is a revenue seeking parasitic mission creep in the MBA world of executive profiteering and predator capitalism.
In the source article mentioned above ( https://www.propublica.org/article/the-corporate-takeover-of-the-red-cross ) we see century+ old organization established with a charter for public service disaster relief, being marketed as a revenue stream with a potential for mass returns based upon the "brand" quality of saving peoples lives in catastrophic events. The article is part and parcel with how private interests have been dominated by profit driven incentives even in the most sacred trust areas of the public domain of non-profit charities essentially built on the back of American volunteers. How AT&T crony capital took over this organization and adopted it for their own monetary interest is not just a story of lost vision but of totally perverted revision gone off track from its founding purpose.
But make no mistake about it, this is only the tip of the iceberg where private asset stealth is involved in milking and bilking the public trust. the medical Institutions generally across the country have been insidiously going the same perverted path dependent way of revenue streaming as health and wealth as the definition of healthy relief.
The American Red Cross is a storied non-profit organization. It provides disaster relief, provides a major part of the US blood supply, and has important public health teaching functions, such as teaching cardio-pulmonary resuscitation (look here ). Nonetheless, its operations have become increasingly controversial. ProPublica has been investigating them for years . The latest ProPublica report, entitled "The Corporate Takeover of the Red Cross," showed how this renowned organization has suffered under generic management/ managerialism , providing another case study showing how bad generic management and mangerialism are for health care and public health.
We have frequently posted about what we have called generic management , the manager's coup d'etat , and mission-hostile management. Managerialism wraps these concepts up into a single package. The idea is that all organizations, including health care organizations, ought to be run people with generic management training and background, not necessarily by people with specific backgrounds or training in the organizations' areas of operation. Thus, for example, hospitals ought to be run by MBAs, not doctors, nurses, or public health experts. Furthermore, all organizations ought to be run according to the same basic principles of business management. These principles in turn ought to be based on current neoliberal dogma , with the prime directive that short-term revenue is the primary goal (sometimes in the for-profit sphere called the shareholder value principle, look here .)
The ProPublica article showed how the leadership of the American Red Cross was given over to generic managers; how they ran the organization based on generic business management principles; and how the results were bad for the organization's mission. I will address each point with quotes from the article, and add the commentary that was lacking in a straight investigative journalistic report. The New CEO is a Generic Manager who Specialized in Marketing
Gail McGovern became Red Cross CEO in 2008. Her academic background was in the "quantitative sciences." Her first job was as a computer programmer. Then,McGovern climbed steadily through the ranks at AT&T. By the mid-1990s, she was head of the company's consumer markets division .
McGovern left AT&T in 1998, then spent four years at Fidelity Investments, where she was promoted to be the head of the retail mutual fund and brokerage business. Then came six years as a marketing professor at Harvard Business School....
On the other hand, she apparently had no specific experience, training or expertise relating to the mission of the Red Cross, and specifically no experience, training or expertise in public health, health care, blood banking, or disaster relief.
She Believes in the Primacy of MarketingHer academic writings spell out her theory of corporate leadership. 'In many organizations, marketing exists far from the executive suite and boardroom,' she and her coauthors wrote in the Harvard Business Review. Companies that make this mistake are doomed to 'low growth and declining margins.'One could argue that perhaps in the long run, a good product that sells itself might be better for a manufacturing firm than a temporarily persuasive marketing campaign. Even so, the mission of the Red Cross is not first to grow and make more money, or even to sell products, but instead it is
The American Red Cross prevents and alleviates human suffering in the face of emergencies by mobilizing the power of volunteers and the generosity of donors.
She was Hired by the Red Cross to Promote Generic Management with Emphasis on Marketing.
Ms McGovern was hired at a time when the dogma that business managers ought to run everything was becoming very prominent.
McGovern, selected after a global search by a headhunting firm, was seen as a candidate who would bring private-sector methods to the nonprofit.
"Isn't it great that we have someone that really has had that business expertise in developing and working with a brand and recognizing the power of it ?" [Red Cross Board Chairwoman Bonnie] McElveen-Hunter told the Washington Post at the time.
Note that the Chairwoman of the Board of Governors herself was
a wealthy Republican donor appointed by President George W. Bush in 2004
According to Wikipedia , she is a businesswoman whose undergraduate degree was in business, who worked for Bank of America and then founded Pace Communications, and who also has no discernable experience or expertise in health care, public health, or disaster relief.
The ProPublica article did not suggest that Ms McElveen-Hunter or anyone else really thought through how a generica manager practicing managerialism would actually benefit the mission of the Red Cross.
The CEO Recruited Other Generic Managers
As part of her effort to run the Red Cross more like a business, McGovern recruited more than 10 former AT&T executives to top positions. The move stirred resentment inside the organization, with some longtime Red Cross hands referring to the charity as the 'AT&T retirement program.'
Again, one would expert a generic manager to feel most comfortable amongst others of her ilk. Again, any consideration of whether running the Red Cross "more like a business" would improve its success as a charity was not evident. The New Generic Managers Relied on Generic Management Dogma
They Established Centralized Control
The work of the Red Cross was traditionally done by local chapters. The new generic managers sought to decrease their independence from "corporate." So,Each of the Red Cross' more than 700 chapters had its own bank account, tracked its own volunteers, and ran its own computer system. McGovern hoped to realize considerable savings by consolidating these back-office functions, creating what she dubbed 'One Red Cross.'The notions that different chapters might face different challenges, and hence that flexible local control might do better addressing these challenges than would centralized top-down command were not apparently considered.
They Cut Costs, Particularly Through Cutting Employee Benefits and Laying Them Off
and hence tried to enhance short-term revenue:She also got to work cutting costs : there was a round of layoffs ; she killed the charity's generous pension program and to employees' retirement accounts.Also,
When McGovern was hired as CEO, there were over 700 Red Cross chapters across the country. Today, there around 250, though some former chapter offices stayed open even as they were folded into other chapters. The Red Cross declined to say how many offices it closed.
Over the course of McGovern's tenure, the number of paid employees fell from around 36,000 to around 23,000 and the Red Cross today spends several hundred million dollars less a year than it did in 2008. (Most of the staff cuts were from local chapters, not the blood business, though the Red Cross declined to provide a breakdown.)
They Focused on Marketing and Public Relations
consolidated, powerful, breathtaking marketing .'
a brand to die for ,' she often said.
In addition,The Red Cross' chief of fundraising, a former colleague of McGovern's from Fidelity, told the assembled officials that the organization should attract far more than the $520 million in donations it was bringing in annually. ' Strength of brand ,' his PowerPoint said, 'justify results inAlso, CEO McGovern chose Jack McMaster to run the public health training operation, praising McMaster to Red Cross staff as a master marketer and a trusted former colleague [at AT&T].
As an aside, actually,After leaving AT&T, he took a job in 1999 as CEO of a Dutch telecom company called KPNQwest. In just a few years, he had run it into what Reuters called a ' spectacular collapse prompting a bankruptcy, a storm of lawsuits, and comparisons to Enron . Just months before the company went under, McMaster publicly boasted that it was poised for dramatic growth.This suggests that McGovern placed far more priority on hiring "master marketers" than finding trustworthy leaders. Of course, a CEO who is mainly a professional marketer may see marketing as central to whatever organization she is running. The notion that the Red Cross had such a wonderful brand because it used to do wonderful things did not apparently occur to the new generic marketers. Furthermore, the notion that even "master marketing" may not hide the undermining of the organization's mission also did not occur.
They Suppressed Opinions They Did Not Want to Here
As discontent among staff rose (see below), leading to anguish expressed on social media,critical posts later disappeared from the Facebook page. Moderator Ryan Kaltenbaugh reminded participants that the group was intended to be ' a POSITIVE forum sharing ideas, stories, pictures, links, videos and more across our great country.'
' [P]lease (please) refrain from posting your negative personal views
To a leadership obsessed with marketing, appearance may have seemed to be everything. Yet again, suppressing the bad news does not make what generated it disappear.
They Paid Themselves Very WellWe have often discussed how executive compensation in health care now seems to rise beyond any level that could be justified by the executives' actions and performance. A central problem with managerialism seems to be that now top managers can virtually set their own pay. Thus, they have become value extractors, more focused on their own enrichment than their organizations' ultimate success. The ProPublica article did not explicitly discuss executive compensation except after the failure of the expansion plans by the "master marketer" McMaster,Amid layoffs in the division last year, bonuses given to McMaster and his team raised eyebrows within the Red Cross, a former headquarters official said.Regardless, the division failed to reach its real goal, expansion of its business.
In a statement, the Red Cross said the bonuses were appropriate because the division hit 'strategic milestones' including establishing 'a national tele-service platform and national sales and service delivery models.'
Furthermore, there is evidence that during the reign of McGovern, the top managers as a group have been very well paid, especially given that they were running a charity whose good works are largely supported by contribuations and the taxpayers. We noted in a 2011 post thatIn 2009, then CEO Gail McGovern received over a million in total compensation, $1,032,022 to be exact. Its President for Biomedical Services got $850,489. Its Executive VP for Biomedical Services got $596,309. Twelve other executives got more than $250,000. Of those, ten got more than $350,000.
Since then, while Ms McGovern's compensation has actually declined, the number of very well paid managers has actually grown. According to the organization's latest available IRS Form 990 filing, for 2013, Ms McGovern had total compensation of over $597,000, and 15 managers had total compensation over $250,000, of these, 10 were over $400,000.
So despite all the problems afflicting the Red Cross (see below, and the larger ProPublica series), the top managers still managed to pay themselves very well.
The Results were Bad
The Marketers' Best Laid Plans Led to Declining ContributionsMcMaster laid out how the CPR unit would attract more customers while at the same time hiking prices for classes and training materials in CPR, swimming, and babysitting. He believed the Red Cross brand justified higher prices than were being charged around the country.
'We thought if we raised prices, American Heart [Association] would probably raise prices, and life would be good,' McGovern said at a 2013 employee town hall meeting, referring to the Red Cross' competitor in the CPR class business. 'Didn't happen.'
Also,'A halfway competent market analysis would have told you that the bulk of our business was in selling to small businesses who viewed us as a business expense,' recalled one former chapter executive director. 'When the massive price increases arrived, it was too much and customers bailed.'This illustrates that the generic managers did not even achieve their business goal, increasing sales and increasing revenue. What did they care, though, if the bonuses still rolled in?
Centralized Control, Benefit Cuts, Layoffs, and the Marketing Focus Wounded Employee Morale and Discouraged Volunteers. Those who push generic management practices often seem blind to their adverse effects. So, many of those who taught classes - including volunteers who did the work for free - quit after being turned off by headquarters' poor communication .
Also,But much like the organization's paid staff, many of its volunteers appear deeply disillusioned . An internal survey obtained by ProPublica found volunteers around the country had a satisfaction rate of 32 percent this year - down 20 points from last year.Furthermore, driving the alienation, longtime employees and volunteers say, is a gulf that has opened up between McGovern's executive suite and the rank and file who have spent decades in the mission-focused nonprofit world.
She has surrounded herself with a tight-knit group of former telecom colleagues, they say. 'They're all people from the period when AT&T imploded,' said one former senior official. ' The priorities seem to be a reflection of what that team is comfortable with: sales and marketing .'
An internal assessment previously reported by ProPublica and NPR said national headquarters' focus on image slowed the delivery of relief aid during Hurricane Isaac and Superstorm Sandy. Officials engaged in ' diverting assets for public relation purposes ,' according to the assessment.
Layoffs and Cutback Reduced Capacity to Respond to Disasters
One example was the response in West VirginiaIn West Virginia, where several chapters have been shuttered, emergency management officials said the group's response to recent disasters has been anemic . After a recent water shortage caused by a chemical leak, the charity declined to provide any help to residents, the Register-Herald of Beckley reported . Local officials described that as business as usual for the charity. When a tornado hit in the southern part of the state, the Red Cross' inadequate response left scores of victims without enough food , according to the newspaper.Another was the response in northern California,In Northern California last year, the Red Cross shuttered the Napa County chapter and laid off disaster relief staff, according to anAlso,
presentation. Then, in September, a drought-fueled fire swept through the area, consuming more than 75,000 acres and 1,200 homes.
Because of the issues with the Red Cross' shelter , nearly all of 1,000 displaced people at the Napa County Fairgrounds - including the elderly, new mothers and children, and anyone with a pet - ended up sleeping outside in tents, cars or RVs . The problems were first reported by the Press Democrat newspaper.Local officials were furious. They say the Red Cross showed up lacking basic supplies such as Band-Aids, portable toilets, and tarps to protect against the rain. Instead the group's volunteers handed out Red Cross-branded bags of items that weren't urgently needed like lip balm and tissues.
The Red Cross responders were inexperienced and, according to residents, not enough of them spoke Spanish, the language of many of the fire victims.
In general, as told by former Red Cross volunteer Becky Maxwell, a self-described "die-hard Red Cross person for 25 years," who quit after becoming increasingly frustrated,' McGovern has fired almost all of the trained and experienced volunteers and staff, ' Maxwell told ProPublica, replacing them 'with people who have absolutely no knowledge of what the Red Cross is or does in a disaster. Not only is she setting these people up to fail but she is compromising the service delivery that is so important to the clients.'
The Red Cross Board of Governors , largely composed of well paid business managers (e.g., a former Vice Chairman of Goldman Sachs, a senior vice president of Eli Lilly, the chief financial officer of Home Depot, the executive vice president of Target), decided that a generic manager using a managerialist approach could cure the organization's perceived ills. The new CEO, who lacked any obvious experience or training relevant to the Red Cross mission, hired her former cronies at AT&T and Fidelity as managers. The new team cut costs, laid off employees, centralized management, and focused on marketing. The apparent results were fewer, less experienced, upset staff; fewer volunteers; declining interest in public health training products; and worsening disaster response.
Thus, once again, generic managers and managerialism have laid low a formerly proud charity. Unfortunately, this one also happens to have vital public health and disaster relief roles that have now been severely compromised.
Based on previous experience, it should come as no surprise that generic managers who do not know much or care much about public health and health care, and who rely on a one-size fits all management dogma uninformed by the public health or health care context or public health or health care values will end up undermining patients' and the public's health.
The real surprise is that the generic managers have up to now had no problem maintaining the managers' coup d'etat , that is, their iron grip on the leadership of most public health and health care organizations.
To prevent our ongoing downward spiral, we need to reverse the managers' coup d'etat, and return leadership to those who understand health and health care, support their values, and are willing to be accountable for doing so.
ADDENDUM (17 December, 2015) - This post was republished on the Naked Capitalism blog .
Anonymous said... December 17, 2015 at 10:36:00 AM ESTGreat post - clarifies why I am seeing the increasingly generic promotion/fund-raising communication "relationships" from many non-profit and advocacy groups lately. -Paul Rowan
afraid said... December 17, 2015 at 5:07:00 PM ESTIs Shkreli a prime example of managerialism?
Roy M. Poses MD said...
I'm afraid Shkreli is not really a typical generic manager, and certainly not typical of the CEO of a big pharma (or other health care) corporation.
Shkreli is a small time player.
Also, he is basically a hedge fund guy, and I don't believe there is any love lost between big corporate CEOs and hedgies. Finally, Shkreli was willing to say out loud what most big corporate managers would not: it's all about the money.
From the AP ( http://bigstory.ap.org/article/763ef9ae0809445e817438a79fcc979b/turing-ceo-martin-shkreli-custody-after-securities-probe )
"'No one wants to say it, no one's proud of it, but this is a capitalist society, a capitalist system and capitalist rules,' he said in an interview at the Forbes Healthcare Summit this month. 'And my investors expect me to maximize profits, not to minimize them or go half or go 70 percent but to go to 100 percent of the profit curve.'"
So I wouldn't be surprised if the big-time managerialists are cheering now that he was arrested. They can use his arrest to pretend that regulation and law enforcement are tough, and that the big-time managers don't have impunity. Furthermore, they can claim that he was just the rare bad apple.
However, a reader of this blog can see the problems are systemic. See in particular:
- December 18, 2015 at 11:48:00 AM EST
Jun 28, 2017 | www.nakedcapitalism.comPosted on October 29, 2015 by Lambert Strether Lambert here: As we dig deeper into the health care system, concepts like those expressed in this article will become increasingly useful. The patterns identified by Poses here remind me of the university, which is also being eaten alive by a bloated and parasitical administrative layer.
By Roy Poses , MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Cross posted from the Health Care Renewal website
I just found an important article that in the June, 2015 issue of the Medical Journal of Australia(1) that sums up many of ways the leadership of medical (and most other organizations) have gone wrong. It provides a clear, organized summary of "managerialism" in health care, which roughly rolls up what we have called generic management , the manager's coup d'etat , and aspects of mission-hostile management into a very troubling but coherent package. I will summarize the main points, giving relevant quotes.
Recent Developments in Business Management Dogma Have Gravely Affected Health Care
Many health practitioners will consider the theory of business management to be of obscure relevance to clinical practice. They might therefore be surprised to learn that the changes that have occurred in this discipline over recent years have driven a fundamental revolution that has already transformed their daily lives, arguably in perverse and harmful ways.
These Changes Have Been Largely Anechoic
these changes have by and large been introduced insidiously, with little public debate, under the guise of unquestioned 'best practice'.
See our previous discussions of the anechoic effect , how discussion of facts and ideas that threaten what we can now call the managerialist power structure of health care are not considered appropriate for polite conversation, or public discussion.
Businesses are Now Run by Professional Managers, Not Owners
The traditional control by business owners in Europe and North America gave way during the 19th century to corporate control of companies. This led to the emergence of a new group of professionals whose job it was to perform the administrative tasks of production. Consequently, management became identified as both a skill and a profession in its own right, requiring specific training and based on numerous emergent theories of practice.
These Changes Were Enabled by Neoliberalism (or Market Fundamentalism , or Economism )
Among these many vicissitudes, a decisive new departure occurred with the advent of what became known as neoliberalism in the 1980s (sometimes called Thatcherism because of its enthusiastic adoption by the Conservative government of Margaret Thatcher in the United Kingdom). A reaction against Keynesian economic policy and the welfare state, this harshly reinstated the regulatory role of the market in all aspects of economic activity and led directly to the generalisation of the standards and practices of management from the private to the public sectors. The radical cost cutting and privatisation of social services that followed the adoption of neoliberal principles became a public policy strategy rigorously embraced by governments around the world, including successive Liberal and Labor governments in Australia.
Note that this is a global problem, at least of English speaking developed countries. The article focuses on Australia, but we have certainly seen parallels in the US and the UK. Further, note that we have discussed this concept, also termed market fundamentalism or economism.
Managerialism Provides a One-Size Fits All Approach to the Management of All Organizations, in Which Money Becomes the Central Consideration
The particular system of beliefs and practices defining the roles and powers of managers in our present context is what is referred to as managerialism. This is defined by two basic tenets: (i) that all social organisations must conform to a single structure; and (ii) that the sole regulatory principle is the market. Both ideas have far-reaching implications. The claim that every organisation - whether it is a mining company, a hospital, a school, a professional association or a charity - must be structured according to a single model, conforming to a single set of legislative requirements, not so long ago would have seemed bizarre, but is now largely taken for granted. The principle of the market has become the solitary, or dominant, criterion for decision making, and other criteria, such as loyalty, trust, care and a commitment to critical reflection, have become displaced and devalued. Indeed, the latter are viewed as quaint anachronisms with less importance and meaning than formal procedures or standards that can be readily linked to key performance indicators, budget end points, efficiency markers and externally imposed targets.
Originally conceived as a strategy to manage large and increasingly complex organisations, in the contemporary world, no aspect of social life is now considered to be exempt from managerialist principles and practices. Policies and practices have become highly standardised, emphasising market-style incentives, devolved budgets and outsourcing, replacement of centralised budgeting with departmentalised user-pays systems, casualisation of labour, and an increasingly hierarchical approach to every aspect of institutional and social organisation.
We have frequently discussed how professional generic managers have taken over health care (sometimes referred to as the manager's coup d'etat .) We have noted that generic managers often seem ill-informed about if not overtly hostile to the values of health care professionals and the missions of health care organizations.
Very Adverse Effects Result in Health Care and Academics
In the workplace, the authority of management is intensified, and behaviour that previously might have been regarded as bullying becomes accepted good practice. The autonomous discretion of the professional is undermined, and cuts in staff and increases in caseload occur without democratic consultation of staff. Loyal long-term staff are dismissed and often humiliated, and rigorous monitoring of the performance of the remaining employees focuses on narrowly defined criteria relating to attainment of financial targets, efficiency and effectiveness.
The principles of managerialist theory have been applied equally to the public and the private sectors. In the health sector, it has precipitated a shift in power from clinicians to managers and a change in emphasis from a commitment to patient care to a primary concern with budgetary efficiency. Increasingly, public hospital funding is tied to reductions in bed stays and other formal criteria, and all decision making is subject to review relating to time and money. Older and chronically ill people become seen not as subjects of compassion, care and respect but as potential financial burdens. This does not mean that the system is not still staffed by skilled clinicians committed to caring for the sick and needy; it is rather that it has become increasingly harder for these professionals to do their jobs as they would like.
In the university sector, the story is much the same; all activities are assessed in relation to the prosperity of the institution as a business enterprise rather than as a social one. Education is seen as a commodity like any other, with priority given to vocational skills rather than intellectual values. Teaching and research become subordinated to administration, top-down management and obsessively applied management procedures. Researchers are required to generate external funding to support their salaries, to focus on short-term problems, with the principal purpose being to enhance the university's research ranking. The focus shifts from knowledge to grant income, from ideas to publications, from speculation to conformity, from collegiality to property, and from academic freedom to control. Rigid hierarchies are created from heads of school to deans of faculties and so on. Academic staff - once encouraged to engage in public life - are forbidden to speak publicly without permission from their managers.
Again, we have discussed these changes largely in the US context. We have noted how modern health care leadership has threatened primary care . We have noted how vulnerable patients become moreso in the current system, e.g., see our discussions of for-profit hospices . We have discussed attacks on academic freedom and free speech , the plight of whistle-blowers , education that really is deceptive marketing, academic institutions mired in individual and institutional conflicts of interest , and the suppression and manipulation of clinical research . We have noted how health care leaders have become increasingly richly rewarded , apparently despite, or perhaps because of the degradation of the health care mission over which they have presided.
The Case Study
The article provided a case study of the apparent demise of the Royal Australasian College of Physicians as a physician led organization, leading to alleged emphasis on "extreme secrecy and 'commercial in confidence," growth of conflicts of interest, risk aversion on controversial issues. When members of the organization called for a vote to increase transparency and accountability, the hired management apparently sued their own members.
Whether the damage done to the larger institutions - the public hospitals and the universities - can be reversed, or even stemmed, is a bigger question still. The most that can be said is that even if the present, damaging phase of managerial theory and practice eventually passes, its destructive effects will linger on for many years to come.
I now believe that the most important cause of US health care dysfunction, and likely of global health care dysfunction, are the problems in leadership and governance we have often summarized (leadership that is ill-informed, ignorant or hostile to the health care mission and professional values, incompetent, self-interested, conflicted or outright criminal or corrupt , and governance that lacks accountability, transparency, honesty, and ethics.) In turn, it appears that these problems have been generated by the twin plagues of managerialism ( generic management , the manager's coup d'etat ) and neoliberalism (market fundamentalism, economism) as applied to health care. It may be the many of the larger problems in US and global society also can be traced back to these sources.
We now see our problems in health care as part of a much larger whole, which partly explains why efforts to address specific health care problems country by country have been near futile. We are up against something much larger than what we thought when we started Health Care Renewal in 2005. But at least we should now be able join our efforts to those in other countries and in other sectors.
1. Komesaroff PA, Kerridge IH, Isaacs D, Brooks PM. The scourge of managerialism and the Royal Australasian College of Physicians. Med J Aust 2015; 202: 519- 521. Link here .
We have to leaven this dismal post with the 1980 live version of "Down Under" by Men at Work
JLCG , October 29, 2015 at 3:18 amEleanor , October 29, 2015 at 9:21 am
The managerial class is the universal class Hegel wrote about. It is the enemy of the productive classes, the agricultural and the industrial. Perhaps managers are like the eunuchs in former empires, grabbing power without production, always zealous that no idea will threaten their standing.Ed , October 29, 2015 at 10:05 am
It is unfair to eunuchs to compare them to managers. The man who led the great Ming dynasty naval journeys to SE Asia and Africa was a eunuch. The man credited with the invention of paper was a eunuch attached to the Han Dynasty court.
Narses, one of the emperor Justinian's great generals, was a eunuch.
He began his military career at the age of sixty and continued until he was murdered by the then-emperor at the age of ninety-five.
(This post is the result of very quick checking and memories of Robert Graves' wonderful book Count Belisarius. But I am mostly right.)jgordon , October 29, 2015 at 10:21 am
This comment completely misses the point of JLGC's excellent comment, and I refer you to the opening chapters of the Romance of the Three Kingdoms for remedial reading. Its become striking, at least to me, how much the developed western world is imitating the declines of the Chinese dynasties.Lexington , October 30, 2015 at 12:22 am
Pick any empire on the verge of collapse in history and you'll find terrifying parallels to America today. I think all failing empires/societies must follow roughly similar trajectories on their way to oblivion.S M Tenneshaw , October 29, 2015 at 4:45 am
One of those parallels is surely that authentic historical memory has been lost and replaced by the authority of works of fictionPIGL , October 29, 2015 at 4:48 am
Back in 1975 at my local technical college, I was fortunate enough to snag a part-time COBOL programming job at the school. My colleagues and I noticed that several managers above the department level had little to do but sit around in their offices. Periodically they would emerge to engage some unlucky soul in dumb conversation. One of my co-workers summed it up admirably: "The more they make, the less they do."
A couple years later while reading the Sunday paper job ads, I ran across this job title: Manager of Management Development. A sign of very bad things to come.dk , October 29, 2015 at 6:03 am
Let me say this about that:
John Raulston Saulnorm de plume , October 29, 2015 at 6:35 am
I have to wonder if it's a coincidence that both healthcare and education are given as especially notable victims of inappropriate/ineffective management
Because both healthcare and education are things that can best and primarily be done by and for oneself. And there is overlap here: organic chemistry is a special case of molecular physics. Regardless of how well instructors present it, there is a wealth of well understood information on molecular physics (with a lot of special examination of organic chemistry), and so far the bulk of that information remains easily available (although it's starting to disappear at an increasing and alarming rate). I know that many will say, "there's a lot more to it than that!", but this only indicates that they themselves have made no sustained effort to understand these matters. It's not rocket science (which is, indeed, quite demanding).
I think the authors may somewhat overlook collateral (and undoubtedly mutually synergistic with managerial phenomena) issues in the quality of teachers and doctors, which has also degraded in a similar way, possibly for similar reasons. Rote learning increasingly replaces comprehension in both fields. Inundated with unproven, and often unsound, commercial and theoretical dogma, rudimentary performance is still possible, but results are mediocre. Excellence in these fields requires patience, precision and and familiarity with underlying principles; "caring", bonhomie and rote knowledge are admirable, but not viable substitutes.
Does it even make sense to pay to undertake courses in order to get a certificate of achievement? From a commercial career perspective, certainly. But such a certificate is no sure guarantee of skill. "Qualified" personnel are not necessarily capable. In a time of ever increasingly complex systems and disciplines, capability is more needed than ever. The management sector is not the only area where performance, and fulfillment of actual (in contrast to nominal) responsibility, degrades.
For that matter, does it even make sense to have somebody undertake to diagnose your own health, without detailed information about your diet, your regular environment, your physical history, and any exceptions to these; information for which you yourself should be the best source? The consulting physician enters at an immediate disadvantage, facing a significant information deficit; it behooves individuals to become more proactive, especially when rudimentary diagnostic equipment (sphygmomanometers, simple blood test kits, etc) and reference information (anatomical references, drug chemistries and interactions, etc) are readily available. True, there are some thing's you can't do yourself, surgery is surely a valuable skill and worthy of respect, but it has significant limits as well (replacing a bad heart in an unhealthy body won't cure the body, etc).
Managerialism is a scourge, a calamity, a great threat; no argument from me. But it's not the only problem we face, as a culture, and as an economy, of human beings, in these fields and others. And the authors acknowledge this tangentially, but perhaps somewhat over-emphasize the impact if managerialism on the ongoing degradation of these and other fields, at least by omission of other evident and significant factors.norm de plume , October 29, 2015 at 6:09 am
'Does it even make sense to pay to undertake courses in order to get a certificate of achievement? From a commercial career perspective, certainly. But such a certificate is no sure guarantee of skill. "Qualified" personnel are not necessarily capable'
I think in time there will be a move away from official credentialing toward companies and organisations testing candidates – 'qualified' or not – themselves, with a professional or a dept (depending on the size of the concern) whose job it is to sort the wheat from the chaff. They would be in constant liaison with the various sections (and not just the heads) to keep abreast of what skills and knowledge are required in appointees, and test candidates accordingly. The net enables enterprising people too poor to afford expensive laurels to become as skilled and knowledgeable and probably more flexible than those born with 'advantages'. The twin drivers of this change will be, for the employers, the degradation of quality in 'qualified' applicants that you refer to, and, for the employees, the debt peonage involved in becoming 'qualified'
'For that matter, does it even make sense to have somebody undertake to diagnose your own health, without detailed information about your diet, your regular environment, your physical history, and any exceptions to these; information for which you yourself should be the best source?'
Not to mention your genetic heritage yes, human variation is the big blind spot not just in medicine but health generally. Almost nothing can be generalised, yet whole industries in health and wellbeing rely on generalisation.Ed Walker , October 29, 2015 at 6:11 am
'The claim that every organisation - whether it is a mining company, a hospital, a school, a professional association or a charity - must be structured according to a single model, conforming to a single set of legislative requirements, not so long ago would have seemed bizarre, but is now largely taken for granted. The principle of the market has become the solitary, or dominant, criterion for decision making, and other criteria, such as loyalty, trust, care and a commitment to critical reflection, have become displaced and devalued'
Put me in mind of this :
'And, so, finally the floodgates were open. Nowadays, every expected income stream is a fair candidate for capitalization. And since income streams are generated by social entities, processes, organizations and institutions, we end up with the 'capitalization of every thing'. Capitalists routinely discount human life, including its genetic code and social habits; they discount organized institutions from education and entertainment to religion and the law; they discount voluntary social networks; they discount urban violence, civil war and international conflict; they even discount the environmental future of humanity. Nothing seems to escape the piercing eye of capitalization: if it generates earning expectations it must have a price, and the algorithm that gives future earnings a price is capitalization'guest , October 29, 2015 at 1:50 pm
The number of healthcare administrators has soared. Here's a nice chart. The huge increase occurred in the early 90s.
http://www.google.fr/imgres?imgurl=http%3A%2F%2Fimage.slidesharecdn.com%2Fpnhplongsetweisbartversion-121221105916-phpapp01%2F95%2Fpnhp-long-setweisbartversion-52-638.jpg%253Fcb%253D1356087906&imgrefurl=http%3A%2F%2Fwww.slideshare.net%2FPNHP%2Fpnhp-long-setweisbartversion&h=479&w=638&tbnid=jrT8UrwLVoOZbM%3A&docid=udNUOrYIofj7GM&ei=NfAxVpKnNYLjUc_foeAP&tbm=isch&iact=rc&uact=3&dur=1757&page=1&start=0&ndsp=15&ved=0CCoQrQMwBGoVChMI0pXI_LfnyAIVgnEUCh3Pbwj8redleg , October 30, 2015 at 8:14 pm
Does anybody have an idea of what changed in 1990 to lead to such a sudden jump in the management overhead of health organizations? It must have been something crucial in the legal or economic environment of the sector.abynormal , October 29, 2015 at 6:24 am
It takes time to achieve a critical mass of MBA-wielding managers in order for group-think to establish itself.
I'm not going to exhaust myself fact-checking this data, so if anyone finds better please correct me and post it. Based on my own experience in a STEM field, this looks about right.Wade Riddick , October 29, 2015 at 9:32 am
Sadistic Managerial 'teams' have existed too long in too many areas. my mother recently received a notice on the door of her apartment, she's occupied for 5yrs. this letter was short and to the point 'if you do not pay .23 (cents) before the end of the business day, you will vacate your apartment'. mom, 81yro, called me in hysterics. i got to her apt. and immediately had to attend to her racing heart and hyperventilating. i read the letter slowly and see where mom missed the "you will voluntarily vacate your apartment".
after a few deep breaths, i hiked down to the den of smiling sadist offering coffee and cake. they introduced themselves as the 'new management', when i asked how many of the group of 5 it took to pull the 3yro .23 Cent delinquency i was assured by the head honcho, she was involved with the entire process. i explained my CPA sister and myself, Corporate Analyst (stretch), were off a few zero's and hadn't even bothered to account for the home office reconciliations.
back to 'healthcare/hospitals': "-owned hospitals. How many are there? Two hundred and thirty-eight of them in the whole country (out of more than five thousand)–somewhere between four and five percent of the total in the U.S. (numbers courtesy TA Henry from this excellent piece).
What are the issues?
Obamacare effectively bans doctors from owning hospitals in the U.S.
Those already in existence are grandfathered in under the law.
We know that doctor-owned hospitals have higher average costs–hence the rationale for banning them under a law with the intent of "bending the cost curve."
In the most recent Medicare data (December 2012 report on "value-based purchasing"), doctor-owned hospitals did well in terms of achieving quality milestones.
Really well. Physician-owned hospitals took nine out of the top ten spots in the country. And in spite of their low relative number, forty-eight out of the top one hundred.
What's the secret sauce? Here's a little tidbit on the #1 ranked hospital from another excellent piece on this issue:
The top one is Treasure Valley Hospital in Boise, Idaho, a 10-bed hospital that boasts a low patient-to-nurse ratio and extra attention, right down to thank-you notes sent to each discharged patient.
A 10-bed hospital? Thank you notes for each discharged patient? Sign me up to go there next time I need hospital services.
Who cares? Well, we all should. Why?
It boils down to incentives.
When doctors own the hospitals, they stand to directly share in profits. If you're a doctor-owner, and the hospital you both run and own is functioning at a high level, you think, "This is what America is all about. Free enterprise. Why shouldn't I make more money if my hospital runs well?"
As a taxpayer, do I want government incentives going to hospitals that are privately owned and known for cherry-picking insured patients?
Moreover, what does it say about public hospitals, or academic centers, that often see the sickest, poorest, most vulnerable patients? Yes, their quality is measurably lower, according to this data. But now, in spite of staying true to their core missions (serving the public) they're being further penalized.
Is this just another case of the rich simply getting richer?
Maybe Obamacare's got it wrong. Maybe we should build upon the model of doctor-ownership and turn over public hospitals to their workers. All of them. Let the nurses buy in. And the food handlers. And the "environmental services" folks (i.e. custodial crews). Let's really let the workers own the means of production. Then we can see where incentives get us." http://www.kevinmd.com/blog/2013/05/doctor-owned-hospitals-rich-richer.html
Sister Act: Gov. Perry's Little-Known Sister is a Lobbyist for Lucrative Doctor-Owned Hospitals; Milla Perry Jones is vice president of government relations at United Surgical Partners International, an Addison, Texas company that runs hospitals and surgery centers co-owned by doctors. Sister Jones works with trade groups to rebut claims that doctor-owned medical facilities inflate American medical bills. Both Governor Perry and his sister have championed doctor-owned facilities in Texas and Washington.
2006 federal report found that Medicare costs are 20 percent higher at doctor-owned orthopedic surgical hospitals than at competing community hospitals. These studies typically do not determine if the extra procedures are beneficial. The doctor-owned industry says it delivers superior care and points to contradictory research that does not associate doctor ownership with higher costs.
doctor-owned facilities are money machines. A 2009 study found that Texas' doctor-owned hospitals pumped $2.3 billion into the economy each year. The industry has had to use some of this money to fend off political meddling. Heavily favoring Republicans, Perry Jones' United Surgical PAC spent almost $250,000 on federal politicians from 2005 to 2010, according to the Center for Responsive Politics. The New York Times reported that Doctors Hospital at Renaissance donors gave congressional Democrats $1.3 million in that period, with then-House Speaker Nancy Pelosi visiting that hospital in 2007. Surpassing the powerful Texas Medical Association, the Doctors Hospital's Border Health PAC spent close to $4 million on Texas state elections from 2005 through 2010, becoming Texas' 13th largest PAC. Houston's doctor-owned North Cypress Medical Center pumped another $500,000 into Texas state races, ranking as Governor Perry's No. 5 donor in 2010.
In one of his last presidential ads, Rick Perry skewered Washington as a twisted place where, "You can't say that Congressmen becoming lobbyists is a form of political corruption." United Surgical, North Cypress and Doctors Hospital at Renaissance have paid federal lobbyists-including ex-Congressman Tom Loeffler-almost $3 million since 2005. Joined by two Perry Jones-affiliated trade groups, these same doctor-owned interests paid 24 Texas lobbyists-including U.S. Senator John Cornyn's daughter-up to $3.4 million in that period. These lobbyists do not include Milla Perry Jones, whose advocacy activities may not trigger Texas' registration requirements. (A Texas lobbyist generally must register if she receives more than $1,000 a quarter for direct communications with public officials). http://www.texasobserver.org/obamacare-jags-rick-perrys-lobbyist-sister/
can you imagine the independent sadist managing these hospitals?washunate , October 29, 2015 at 9:50 am
It's about confiscating public budgets – and, as such, it fits into the broader pattern of privatized jail and war. When you have for-profit war, you never get any peace; there's no money in it. For profit medicine is about sickcare and not healthcare. There's no profit in cure or prevention, only treatment.
Sickness creates natural captive markets for rent-seeking monopolies and cartels to exploit. Once you've got a disease there are only so many chemical options to treat it. Corporate America is often actively blocking cheap treatments to steer patients toward patented medicine. See my earlier comment about Pharmacy Benefit Managers. The recent epidemics of drug shortages aren't a coincidence; they are engineered. It's only happening with cheap, effective, often public domain chemicals (e.g., methotrexate, 2ml vials of MgSO4). This is by design. Rent-seekers confiscate public goods like public domain chemicals and provide inferior, expensive, patented substitutes.
Some of these are baffling if you don't understand the recent breakthroughs in biochemistry. When you take gel helminths (worms like whipworms) out of the body you get autoimmune diseases like m.s. and crohn's. This has been clear for about ten years but have you heard about that research from drug company-funded "patient" groups? When you feed people antibiotics that kill their gut flora and sell people food stripped of necessary fiber to nourish said bacteria, you get inflammation and insulin resistance – contributing to, sometimes outright causing, Alzheimer's, diabetes, autism, atherosclerosis, cancer and polycystic ovaries, among many diseases. What news company wants to tell the public the food companies in creating an addictive sugar-laden product by removing fiber is also creating disease? Big Tobacco wasn't an anomaly. It's a pattern of regular conduct across industries.
Patients are being tortured to death in this system.tyaz , October 29, 2015 at 11:19 am
Love the read. The quaint notion that the top employees in healthcare aren't in it for the money still lingers in some corners of our society.
One quibble with using this quote
A reaction against Keynesian economic policy and the welfare state, this harshly reinstated the regulatory role of the market in all aspects of economic activity and led directly to the generalisation of the standards and practices of management from the private to the public sectors.
It does not apply very well to the American context. Healthcare in the US context is all about the welfare state. US taxpayers give more money to both medical and non-medical managers/administrators/specialists/etc. than any other taxpayers in any other country on the planet. Markets play no role in the monstrosities that have become our hospital franchises, drug dealers, and equipment peddlers. These corporations (many of them 'nonprofit') are the anti-thesis of price takers in a competitive marketplace.JTMcPhee , October 30, 2015 at 8:47 am
Health care in the US is a mess in more than one dimension. Many aspects of managerialism are certainly a major problem contributing to increased costs and reduced quality. But there is an aspect of "overconsumption" of health services as well. I put it in quotes because the framing of "overconsumption" puts the blame on patients (as if they are "consumers"), rather than where I think the blame truly belongs - health care providers and management.
The existing system is largely setup to pay by the number of procedures (easy to measure with electronic health records) rather than the actual quality of care (not as easy to measure). Specialized doctors and managers have an incentive to push for unnecessary procedures and clinical visits, because it means they get paid more.
Perhaps the strongest evidence for doctors responding to these perverse incentives is the specializations that doctors choose. Primary care specializations like family medicine, general practice, and pediatrics are being decimated because these specializations are largely focused with preventative or long-term care. As a result, the pay is substantially lower than other specializations that perform many procedures. The evidence is that there is a critical shortage of doctors in these primary care fields, especially in rural areas of the country. Doctors flock to specializations that offer many procedures and consequently higher pay.Lambert Strether Post author , October 30, 2015 at 12:10 pm
Smaal example of "wallet biopsy" structuring of "health care:" You have a lab test or MRI or tissue biopsy done, under the "provider's" order. To be "given the results," even if normal or benign, you have to " be seen in clinic." A nurse or paraprofessional may actually "give you your results," but that will be billed as an office visit with the doctor. Don't want to pay f9r the wallet biopsy? Fine, the doc doesn't "give you yor results." And if you find a more compassionate, maybe even more skilled, provider? If there's a balance due on your account with the first, S/he effectively has a "chart lien," like a lawyer's "file lien," on your very own personal medical records.
And maybe that's "against the law," some places, but as always, where there's ño effective remedy (sue the doctor or the corporation? No effective remedy), there's no right
My wife went through this with a "Chr8stoan" DO primary-care dude who discovered Mammon was a more compelling god than YHWH, corporations and privatized his practice and got into peddling "procedures" like in-office ablation of throat tissue to "cure apnea and snoring," and Trusting Patient enrollment in drug trials for Bad Meds
Anyone who thinks clinicianscare all Albert Schweitzers needs to read "The House if God," learn the real rules of practice, understand what a "GOMER" is, and hope you won't get the "buff and turf" treatment. It's a hilarious book, but a check on the irrational exuberance that endows practitioners of the
calling artbusiness of medicine with universal expectations of virtue https://en.m.wikipedia.org/wiki/The_House_of_God
And Lambert, don't credit me with invention of that "wallet biopßy" phrase– it's a commonplace in the business of medicine.JTMcPhee , October 30, 2015 at 8:59 am
We need more such commonplaces! The language will be very revealing. Readers?TedWa , October 29, 2015 at 11:31 am
"Wallet biopsy:". http://csn.cancer.org/node/253191
Another less cynical take: http://www.urbandictionary.com/define.php?term=wallet%20biopsy
And closer to the real meaning: http://insureblog.blogspot.com/2009/01/wallet-biopsy.html?m=1
And more: http://www.healingwell.com/community/default.aspx?f=35&m=3346181
Why the vast majority of us humans will" never have nice things," like comity and empathy and simple decency, 'cuz more than enough of us are "all too human."TedWa , October 29, 2015 at 3:04 pm
Good read. Self-sustainability in all aspects of our lives is being usurped by un-free markets created by rent seekers or their lackeys. There is no longer a desire for America to be the best nation in the world because that would mean it's self-sustaining. And I'm not talking budgets. I'm talking people running things instead of corporations. No longer does Buy American mean anything – actually, it's been outlawed by our trade agreements. There is no drive among our leaders anymore for America to be self-sustaining, which includes taking care of the least of us because we're all in this together. Capitalism as practiced by corporations is dead, it just refuses to be buried. Supported by the Fed handouts it's busy handing out crutches for the entities it's crippled – which it then intends to kick the crutches out from under. Hilarious ehh? Universities, hospitals, pharma, the post office you name it used to all be self-sustaining entities that people could afford or that provided needed services at low prices and actually cared about people. Self-sustaining to me means America having the best food, the best health care, the best education, the happiest people and on and on – the shining city on the hill so to speak. Instead we get crapification of everything we need and it's all for sale to the highest bidder who then crapifies everything even more. It's a race to the bottom and the ultimate goal is a floor full of crutches and no one left standing.Masonboro , October 29, 2015 at 5:23 pm
I meant : "It's a race to the bottom and the ultimate goal is a floor full of broken crutches and no one left standing."Adam Eran , October 29, 2015 at 2:23 pm
The medical association I use actually has a C-level job called "Chief Efficiency Officer". Her latest was raising the bar for hospital referrals thus reducing insurance company costs and increasing consumer (I have stopped saying patient) risk. The incentive is the insurance companies are kicking back part of the extra profit. Another case of privatize profit – socialize cost since the added cost to consumers is impossible to measure. If I can find the letter from the association announcing (and attempting to rationalize) the change, I will email a copy to Lambert.
JimMickey Marzick , October 29, 2015 at 2:29 pm
Worth a look: Matthew Stewart's The Management Myth . It discloses that the very foundations of "scientific management" originating with Frederick Winslow Taylor were flawed. Taylor cooked the results of his "scientific" experiments in getting more productivity from the workforce to fit his theories. The first MBA - Penn's Wharton School - was founded on this con. Similar cons were at the inception of the Harvard MBA.
The "MBA Mentality" - embodied by W, among others - says everything can be measured, and measurement is what makes it real. Hence testing our students until their eyeballs bleed is now an endorsed strategy to improve educational outcomes. No actual science supports this conclusion, but that hasn't stopped the people who want to leave No Child Behind(tm).
Turns out, management is a liberal art! Who knew?!Jesper , October 29, 2015 at 5:13 pm
"The particular system of beliefs and practices defining the roles and powers of managers in our present context is what is referred to as managerialism. This is defined by two basic tenets: (i) that all social organisations must conform to a single structure; and (ii) that the sole regulatory principle is the market. Both ideas have far-reaching implications. The claim that every organisation - whether it is a mining company, a hospital, a school, a professional association or a charity - must be structured according to a single model, conforming to a single set of legislative requirements, Originally conceived as a strategy to manage large and increasingly complex organisations, in the contemporary world, no aspect of social life is now considered to be exempt from managerialist principles and practices."
This is an apt description of MARKET TOTALITARIANISM.
MBAs and project managers armed with their metric-driven spreadsheets in pursuit of "best practice" – market lebensraum – speak the same language and spearhead this offensive against the welfare state. A managerial elite devoted to the belief that the the market will set you free functions much like the Waffen SS did in another regime with explicit totalitarian aspirations. The need for concentration camps is not needed in this version of totalitarianism because "no aspect of social life is exempt from managerialist principles and practices." The institutions of civil society have been captured by this "weltanshuung/zeitgeist" and dissent is lost in the "nacht und nebel" of the eternal present.
Herbert Marcuse [One Dimensional Man], Eric Fromm, [Escape From Freedom] and the Frankfurt School broached the idea of what has evolved into "market totalitarianism" shortly after the Second World War. Dismissed largely as a Marxist rant it did not garner much traction inside or outside of academia, especially in this country. I suspect many of you are too young to be familiar with this body of work – no fault of yours. Nevertheless, LIBERALISM 2.0 [aka neoliberalism] did not capture the hearts and minds of the political classes until the 1970s signified by Ronald Reagan's election in 1980. From then on it gathered steam and by the 1990s it was apparent that "market totalitarianism" was on the rise, if not yet ascendant.
Orwellian concepts like "doublethink/doublespeak" resonated as the language employed in political discourse became little more than smoke and mirrors. "Reform" signified a revamping of welfare and criminal justice. It also has come to mean little more than slash-and-burn CUTS to programs associated with the welfare state or their outright privatization under the rubric of "choice" . Natural gas and electric rate "choice" programs exemplify this approach. Indeed, the two biggest prizes – Social Security and Medicare – are subject to calls for "entitlement reform" by Republicans and Democrats alike. That both programs have been internalized in the minds of many as "entitlements" destined for "reform" testifies to this. The federal deficit matters now and the hysteria surrounding it will likely be a primary talking point in the 2016 elections. The question of how will we pay for the expansion of any program barring tax increases will become the retort by those opposed to both, MMT notwithstanding.
The Great Recession has been portrayed as an anomaly or as a normal part of the business cycle and precipitated some rethinking. But make no mistake about it, the market totalitarian impetus in this country continues unabated. If anything, the monotheism of the market has accelerated in some respects as "businesspersons" – Donald Trump and Carly Fiorina – from the private sector now vie for the presidential nomination of the Republican Party. The very idea that business acumen/experience is now of paramount importance in running this country – as a business – testifies to the pervasiveness of market totalitarianism. It is now deep rooted in civil society.
Even here in Akron, there are plans to rename the University of Akron: the Ohio Polytechnic University! Fans of Firesign Theater back in the day will recall the rivalry between "more science high" and "commie-martyrs' high school! It would be funny in most circumstances. but who's laughing now? Many a former rubber rat plan to vote for Trump!
I have come to the conclusion that "market totalitarianism" now has to run its course in this country. The Achilles' heel of market totalitarianism may be how and where it stifles/smothers innovation, subjugating research and development to market criteria in which the short term trumps the long term. To the extent that dissent/conflict is fundamental to innovation and cannot be confined to the laboratory, then resistance is NOT futile. It remains to be seen whether that dissent can be co-opted or reappropriated indefinitely by market totalitarianism in this country or not, yet alone outside of its borders.Jim , October 29, 2015 at 5:47 pm
Ban collective bargaining and the collective will suffer. If a government was allowed to negotiate for the collective against the suppliers then maybe the outcome would be different. But as we all know, letting the government co-ordinate and negotiate for the collective will make it worse for some individuals so ..
The needs of the many do not(?) outweigh the needs of the few. Be it for healthcare, education or?
"The Scourge of Managerialism" raised some profoundly important issues.
But its fundamental assumption " the traditional control by business owners in Europe and North American gave way during the 19th century to corporate control of companies. This lead to the emergence of a new group of professional whose job it was to perform the administrative tasks of production"–is only half correct.
The creation of "professional managers" was not simply shaped by market fundamentalism but also by the progressive movement itself. Robert H. Wiebe's book "The Search for Order: 1877-1920, does a remarkable job of detailing this process.
The trajectory runs from local autonomy once being the heart of American democracy, to the incremental erosion of the autonomy of community, to the supposedly necessary regulatory, managerial needs of urban-industrial life. and finally to the creation of flexible administrative devices that tended to encourage the creation of professional managers(in both the public and private sectors) and the increasing centralization of authority.
Can any renewal of democracy begin without a dismantling of professional managerial authority in both the market and the state?
Is a breakdown of centralized bureaucratic power (both public and private) a precondition for democratic renewal?
Apr 06, 2017 | hcrenewal.blogspot.comGeneric Management of Health Care Non-Profits, Brought to You by Leaders of (Sometimes Failed, or Bailed Out) Finance on the Board? Introduction - Managerialism
We have frequently posted about what we have called generic management , the manager's coup d'etat , and mission-hostile management. Managerialism wraps these concepts up into a single package. The idea is that all organizations, including health care organizations, ought to be run people with generic management training and background, not necessarily by people with specific backgrounds or training in the organizations' areas of operation. Thus, for example, hospitals ought to be run by MBAs, not doctors, nurses, or public health experts. Furthermore, all organizations ought to be run according to the same basic principles of business management. These principles in turn ought to be based on current neoliberal dogma , with the prime directive that short-term revenue is the primary goal.
One Explanation - Finance Leaders Ascendant on the Boards of Health Care Non-Profits
I just found a useful article that provides one explanation for the rise of managerialism in health care non-profit organizations. It postulated that the increasing prevalence of leaders of finance firms on the baords of trustees of such organizations led to increasingly managerialistic leadership.
Thanks to a link from Naked Capitalism to a post on ShadowProof that led to an article in the Stanford Social Innovation Review by Garry W Jenkins, entitled, " The Wall Street Takeover of Nonprofit Boards ." It described a study of the membership of the boards of 23 of "the nation's leading private research universities," most of which have medical schools and academic medical centers, and all of which have major biomedical and/ or health care research operations, as well as leading liberal arts colleges and large New York City non-profit organizations, including a few hospitals. (We will restrict our discussion of the quantitative results to the former group of leading universities.)
The most important result was that 40% of trustees of the universities in 2014 "had a substantial professional career in finance," up from 19% in 1989 . Futhermore, in 2014, 56% of university board leadership positions were held by people from finance, up from 26% in 1989 . The author noted that the prevalence of people from the finance sector on university boards was far bigger than their prevalence in the population. Only 6% of the private non-farm workforce in the US was in finance in 2012.
The author summarized his findings:Over the past twenty-five years the compostion of the boards at some of America's most important nonprofit organizaI I has dramatically changed. Without much notice, a legion of Wall Street executives (investment bankers, hedge fund managers, and others) has taken a growing number of seats in nonprofit boardrooms. Not only that, they hold a disproportionate share of the leadership positions on these boards.He then linked the increasing dominance of non-profit governance to the increasing tendency of these organizations to be run like for-profit businesses, that is, the rise of "managerialism."Scholars and practitioners have documented various pressures placed on nonprofit organizations by donors and private foundations to adopt business approaches.The list of practices above and the description of financialization sound very much like standard operating procedures of generic management which we have previously described . The discussion of pathologies above sounds similar to our discussions of how managerialism distracts from or undermines the mission.
Although some of the pressure to adopt business approaches has come from external forces, it may also be true that the concepts and norms of philanthrocapitalism are also now carried into nonprofit organizations by the directors of public charities themselves.
He then provided a much more detailed discussion:
As financiers come to dominate the boards of leading nonprofits, it is not surprising that their approaches and priorities have made their way, very explicitly and fundamentally, into the governance of the nonprofit sector. Practices such as data-driven decision-making, an emphasis on metrics, prioritizing impact and competition, managing with three- to five-year horizons and plans, and advocating executive-style leadership and compensation have all become an essential part of the nonprofit lexicon.
Nonprofit leaders regularly hear about these finance practices from board members and donors whose native habitat is the financial services world. Moreover, nonprofit managers have come to accept them as reasonable principles upon which donors base their giving . More often than not, organizations are also expected to incorporate these principles in the management of the not-for-profit enterprises for which managers and boards share responsibility.
Although many of these business approaches may strengthen nonprofit capacity, we should also be mindful of the ways in which these same tools can morph into pathologies, ignore the costs or trade-offs associated with extending business thinking to the charitable sector, or distort organizational priorities. Numerous critics have written thoughtfully about the ways in which market-based thinking and approaches applied to the nonprofit sector provide false promise, with the potential to dilute charitable values, undermine long-term mission focus, incentivize small, incremental goals, and threaten shared governance and other forms of participatory problem-solving.
Beyond leading to the borrowing of financial concepts and tools in the boardroom, the rise in the number of nonprofit directors with ties to finance may also contribute to deeper changes in the underlying institutional values and motivations, a trend that economic sociologists refer to as the financialization of the nonprofit sector.
Financialization describes a spread of financial logics, influence, and strategies into new fields and organizations in ways that transform the culture, policies, and values of institutions . Indeed, wealthy nonprofits-like colleges, universities, and museums-have long engaged with financial markets as endowment investors, but the scope and scale of today's nonprofit borrowing, aggressive debt financing, securitization transactions, and complex real estate transactions is unprecedented . Such shifts may affect the organization's strategic direction and orientation in a number of ways, including directing board and management attention to debt service, incentivizing organizations to invest resources on activities that return higher profit margins to cover debt service, elevating the centrality and importance of financial managers in strategic planning and decision-making, and increasing the need for and power of senior staff well versed in complex financial instruments .
The one quibble I have with Jenkins' discussion is that it puts almost the entire onus on the financial leaders on the boards of trustees, rather than the top managers of the organizations. It may be that increasingly financialized boards hire increasingly generic managers , but there may be a symbiosis between the two groups.
So Jenkins' conclusion seems reasonable:if boards are to operate as designed, and if they are to be maximally effective, then the composition of nonprofit boards must be more diverse and not dominated by financiers.But the problem of financial sector domination of health care non-profit boards may be even worse than that Jenkins describes.
The Dark Side of Finance
Even though Mr Jenkins is concerned about excess of influence of too many financially oriented people on the boards of non-profits, he is quite respectful of those in the finance field. "Individual finance professionals do bring skills, wisdom, and other positive attributes to nonprofit boards." He also wrote, "This is not to say that finance professionals care less (or more) about a nonprofit organization or its mission. Nor do I believe that all finance professionals think alike." Many finance professionals may be very well-intentioned, of course. But Jenkins seems to thus ignore the dark side of finance's recent history.
Finance firms are certainly known for the use of "financial logics, influence and strategies," and the employment of specific practices. However, after 2008, they were also known for dangerously slipshod, if not unethical, sometimes corrupt management.
In 2008, the global financial collapse/ great recession reshaped the global economy, and has been linked to the stagnation of the middle class and growth of plutocracy. There have been numerous discussions of the role of the leadership of financial organizations in these events. The blog Naked Capitalism has been covering these issues from the global financial collapse to the current day. Some of the very many excellent sources on this era include the movie Inside Job ,
and books such as Predator Nation by Charles Ferguson , 13 Bankers by Simon Johnson and James Kwak , and Bailout Nation by Barry Ritholtz .
A chapter in Predator Nation was entitled "Crime and Punishment: Banking and the Bubble as Criminal Enterprises. In it, Mr Ferguson noted the following list ofprosecutable crimes committed during the bubble, the crisis, and the aftermath period by financial services firms ...Most of these never led to prosecution in an era of the revolving door and exceedingly lax law enforcement of actions by big corporations ("too big to jail") Yet Ferguson argued for investigation of possible illegal acts by many large companies, and specifically named Citigroup, AIG, Lehman Brothers, Goldman Sachs, JP Morgan Chase as worthy of investigation.
Securities fraud (many forms)
Accounting fraud (many forms)
Honest services violations (mail fraud statute)
Perjury and making false statements to federal investigators
Sarbanes-Oxley violations (certifying false accounting statements)
RICO offences and criminal antitrust violations
Federal aid disclosure regulations (related to Federal Reserve loans)
Personal conduct offenses (many forms: drug use, tax evasion, etc)
Many of these organizations' leaders also were on the boards of health care organizations. Since 2008, we began noting that the governance of prominent health care non-profits was often dominated by finance firms, including those implicated in the 2008 collapse, although our observations were case-based, not quantitative. The concern was not simply that health care organizations were being led into generic management and "managerialism," but that that the incompetence, unethical behavior, and corruption in the finance sector could cause equally bad problems in health care. We have no systematic proof of that, but consider some of our more colorful cases, which include leaders of the financial firms named by Mr Ferguson...
What Linked the Parallel Declines of Citigroup and the Harvard University Endowment? - In 2008, the collapse of the value of the Harvard endowment occurred on the watch of Harvard Corporation (board of trustees) members half of whom were leaders of big finance firms.
The Leadership of an Elite American University - Brought to You by the People Who Brought You the Global Financial Collapse - Six of the seven "charter trustee" members of the board of Dartmouth College who led a crusade, facilitated by packing the board with self-appointed as opposed to alumni elected members, to discredit elected board dissidents were leaders of big finance firms. Of the six new people whom they packed on as "charter trustees," half were also leaders of such firms.
Hedge Fund U - Bernie Madoff, the supposed finance wizard who went to jail for a huge Ponzi scheme was on the board of Yeshiva University . The chairman of the board's finance committee was Ezra Merkin, a hedge fund operator who ran a "feeder" operation for Madoff's Ponzi scheme.
A Board of Trustees, or a Social Club for the Superclass? - Of the 29 non-physician board members of the Hospital for Special Surgery , 23 had major relationships with, and many of these had leadership roles in finance firms, including such bailed out, too big to fail firms as AIG, Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, and Wachovia.
Members of the Board of Now Bankrupt Lehman Brothers as Leaders of Health Care? - Members of the board of Lehman Brothers, whose failure was related to the onset of the financial crisis, also served on the boards of Vanderbilt University, the American Red Cross (as CEO), New York - Presbyterian Hospital , New York University , and Tel Aviv University.
A "Very Well Paid Boob" on the Harvard Corporation? - the university's governing board included one of the architects of the overgrowth of Citigroup, which had to be bailed out, and also of the deregulation of finance which allowed the company to be too big to fail.
Failed Leaders of Citigroup as Leaders of Health Care - The bailed out Citigroup board of directors also served on the boards of trustees of Johns Hopkins Medicine, Health System and Hospital, Brown University , Tufts University, Columbia University , Howard University, the Rockefeller Foundation, Harvard (as mentioned above), and Cornell University.
New York - Presbyterian Hospital Trustee Advocated Novel Cardiac Procedure - "Reach In, Rip Out Their Heart, and Eat It Before They Die" - Richard Fuld, the former CEO of Lehman Brothers, whose failure was related to the onset of the crisis, and who once advocated, presumably only symbolically, eating the hearts of his financial competitors, was on the board of the prestigious hospital.
The Medical School as Hereditary Plutocracy - Retiring Board Chair Sanford Weill of Cornell Weill Medical School Names His Own Daughter as New Chair - the board chairmanship of the medical school went from the former CEO and chairman of the bailed out, too big to fail Citigroup (see above) to his daughter, who runs her own finance firm.
Yet outside of a few grumpy bloggers, the continuing presence of leaders of too big to fail, too big to jail, often bailed out financial firms on the boards of some of our most notable health care organizations and universities has attracted almost no comment, and less concern.
The continuing dysfunction of US health care, with ever rising costs, stagnant quality, and still inadequate access, is well known. There is constant loud argumentation over "Obamacare." (Congress just passed a repeal of it, which the president has threatened to veto.) Yet there is little in depth discussion or inquiry about what is really going wrong. The really unpleasant issues rarely surface in polite discussion. We have called this aversion to direct discussion of big problems the anechoic effect .
So I hope that there is more discusison of who gets to lead health care organizations, and who gets to sit on the boards that exercise stewarship over them. We need far more light shined on who runs the health care system, using what practices, to what ends, for the benefits of whom.
True health care reform would enable transparent, honest, accountable governance and leadership that puts patients' and the public's health over ideology, self-interest, and self-enrichment.
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Last modified: March, 19, 2019