The price of poor managers

Phillip Inman, writing in the Guardian, headlines his article ‘Bad managers on brilliant pay: that’s why the UK’s not working’ – he claims UK productivity is much lower than in comparable countries, yet bosses just award themselves millions – and hire consultants (Given his last point, I must declare an interest, having been one myself, but I agree that too many big management consultancies provide their clients with few if any  quantifiable benefits and too many managers, business schools and representative groups show little interest in productivity improvement)


Banker bonuses are on the rise again. NatWestHSBCLloyds and Barclays have just reported shelling out millions of pounds to bosses and assorted directors as a reward for their exceptional efforts. Almost £20m was doled out between the four chief executives.

And a glance at the FTSE 100 shows that all chief executives seem to believe they are exceptional – the data shows their pay and bonus packages averaging a whopping £3.4m each, or 103 times the £33,000 average salary for full-time UK workers.

One might ask what makes them worth such enormous sums when Britain’s productivity, judged by output per worker, is 20% to 30% lower than most other industrialised economies. Could it be perhaps that, in the main, they are not very good managers, and that their financial rewards are related to other factors, often beyond their control?

Banks, for instance, have seen profits soar as a result of higher interest rates, which have allowed them to earn fatter returns by boosting charges to borrowers by more than the returns they offer savers. They might cast themselves as the backbone of the economy, allocating loans to drive investment, but between 80% and 90% of their lending is against residential property. And although many of us will invest in our homes, upgrading the country’s housing stock in the process, that is not how the UK will pay its way in the world.

Should he become prime minister, Keir Starmer will be undermined by Britain’s legacy of poor management, just as Rishi Sunak is now. We need to set aside two centuries’ worth of colonial-era habits and methods copied from the military handbook, subjecting workers to a culture of command and control.

How can a prime minister implement any policies when the standard of management in public institutions and private companies is so poor? What chance has Britain of stepping into the fourth industrial age, without undue reliance on the finance industry’s chancers and tricksters, if managers across the rest of economy are stuck in the 19th century? An electric car industry worthy of the name will be a mirage. Likewise, relationships that underpin long-term service industry contracts, and especially with clients based abroad, will founder.

This is the theme of The Big Con, by UCL economics professor Mariana Mazzucato and her colleague Rosie Collington, which is subtitled: “How the consulting industry weakens our businesses, infantilises our governments and warps our economies.”

Last year the UK public sector spent £2.8bn on consulting contracts, a 75% increase on 2019. Most of this work was commissioned by ministers and senior civil servants, acting out a personal yet pervasive crisis of confidence. Companies that cannot bring themselves to trust their staff to solve problems are equally likely to draft in the big consulting firms, and see little in return. That’s not to say all consulting firms “con” their way to a big payday or that all managers are clueless; it’s just that too many are and very little is happening to make things better.

London School of Economics professor John van Reenen has tracked the impact of managers since 2004. He says the first 18 years of his world management survey “confirmed a significant link between management practices and productivity”, suggesting that up to a third of the productivity gap between countries, and between companies in a country like the UK, could be attributed to management.

There have been many attempts to get managers to behave in a way that promotes long-term productivity improvements (or, more mundanely, just gets the job done) – whether that means repairing what is broken or creating something that is, according to William Morris’s dictum, useful or beautiful.

Van Reenen’s study shows the UK’s reasonable standing in the management league tables relies on executives in British subsidiaries of foreign companies. And Brexit means many of them are leaving.

Bankers are here to stay. Yet like the consultants in Mazzucato and Collington’s book, they are too busy calculating when to cash in their casino chips to help solve the productivity puzzle.

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