Members of Ronald Reagan’s cabinet and subcabinet are busy telling business audiences around the country that the White House delivered the budget and tax relief that corporations have been clamoring for and now it is up to these corporations to produce this country out of the recession.
There is more than an undertone of irritation in their remarks. Stung by Wall Street’s negative response to the Reagan economic policies, the Reaganites feel undercut. So they are becoming more candid bout a major problem adversely affecting the economy poor corporate management.
Secretary of Commerce Malcolm Baldridge, a former big business executive from Connecticut, recently described many managers as “fat, dumb and happy.” He was echoing not only his own view but that of increasing numbers of business observers and executives who are saying publicly what they had been thinking privately.
It started a couple of years ago with men like the heads of Xerox and Control Data bewailing the lack of innovation and entrepreneurial spirit. These were the days when large companies blamed Washington for everything troubling them. For the auto companies in Michigan, who missed the fuel-efficiency boat and lost ground to the Japanese and Germans, Uncle Sam was the all-purpose scapegoat. According to auto moguls, it was not the gas guzzlers and other forms of technical stagnation that were the culprits, but federal regulations, though it was the 1975 federal fuel efficiency law that saved the U.S. companies from even worse loss of sales to foreign imports.
Last year, the Harvard Business Review weighed in with a critique of business executives. Authors Robert Hayes and William Abernathy concluded that the corporate economy is “managing our way to economic decline.” The recently retired head of General Electric, Reginald Jones, blamed the low quality control of consumer products to “management malaise.” Friends of tycoons Sen. Lloyd Bentsen (D-Texas) told a business gathering that “part of our problem with competitiveness and productivity resides not in public policy, but right here at this seminar—in the corporate boardroom.”
A Wall Street Journal survey reported that 80 percent of the top managers at 221 companies cite “poor management” as a key reason for inadequate productivity. But it was Lewis Young, editor in chief of Business Week, who touched the nerve of many a corporate person who wants to get things done when he declared that executives “are building corporate hierarchies and bureaucracies that are every bit as lethargic, obstructive and non-productive as those in government about which business people complain so bitterly.”
John DeLorean, a fast-rising GM executive star, quit at age 48 when he was a vice president because “you were too harassed and oppressed by committee meetings and paperwork. It (GM) has gotten to be a total insulation from the realities of the world.”
A little-noted penalty of enormous consequence is that executives, or at least those who get along by going along, usually drive out the bold, innovative management types. Which is why most innovations still come from small businesses headed by the founding entrepreneurs. Later the large conglomerates buy them out.
Maybe the Reagan government, by removing Washington as a scapegoat, will inadvertently place top corporate management under a more critical spotlight. Certainly some internal evaluation by many younger managers is going on, given the best-seller popularity of current books on Japanese styles of management.
But the best prodders for better management remain quality market competition and strong consumer organizations from the outside, and an improved environment for worker productivity from the inside.
Government programs and laws which have shown in the past how to stimulate the economy (government research money helped mightily in the development of microprocessing, computer chips and airline design improvements, for example) will not be much of a factor during the Reagan years. So big business, it’s your alarm clock.