Want Higher Profits: Reduce Management, Not Employees | Mike Cook

Do you ever wonder, when you hear stories about workforce reductions followed shortly by record earnings and generous management bonuses why some people get rewarded for failing and stay employed and others seemingly get penalized for doing exactly what was expected of them? Me too!

Do you ever wonder why you couldn’t make a decision to spend $500 in company money without getting a manager’s approval but you can apply for a mortgage without asking anybody? Me Too!

Do you ever wonder why we give managers an office with a door, maybe even a window, and everyone reporting to them sits in an 8-foot-by-8-foot, sound muffling half-walled enclosure? Me too!

Do you ever wonder whether management necessarily means managers? Me Too!

I was once again reminded of all these questions, and more, when I made a visit to a small business in Bellingham where one of my friends is helping the owners establish work practices…that don’t require managers!

Fortunately for me when I was a business owner, I was able to arrange to bring a top-notch manager in as a partner and he took care of all our management needs. One thing I had been clear about from my time as an employee was that I preferred as much autonomy as possible while pursuing my objectives so I sought to attract employees who liked operating in the same fashion. In fact I told several of them on more than one occasion that if they needed to be managed they were not the kind of people we were looking for. I would much prefer paying them more to manage themselves.

As for my friend and her employers, since her arrival she has reduced labor costs by around $20,000 per month. That’s a tidy sum that drops right to the bottom line for the owners and it has been achieved while improving service overall and reducing errors. Her first recommendation? Eliminate one of the management positions and begin to allow the employees to step up to greater levels of freedom and responsibility.

What quickly followed was the recognition that there were too many employees for the work that needed to be done. Too many employees meant people with time on their hands; idle hands are the devil’s workshop, etc., etc. Within a short time after eliminating the manager, the “keepers” made themselves known and those who needed to be managed moved on.

Over the years a great deal has been written about the need for more leadership, engagement and innovation in the workplace. Only recently have management experts begun to recognize that some of the greatest barriers to these capabilities developing naturally are manager’s need to have something or somebody to manage. The purpose of the business is to create a customer and generate a profit. While that may seem obvious to the casual observer of many businesses, what is often found in practice are managers who work hard to create a reason to be part of the business. Keep in mind these are not bad folks, just folks who recognize that without something of value to do they show up as excess baggage and become expendable.

In the mind of at least one prominent management thinker, Gary Hamel, too many managers is emblematic of too much bureaucracy and too much bureaucracy creates a tax on the future of an organization. In an article earlier this year he cited the following examples of bureaucratic taxation:


  • Adds overhead—by creating multi-tiered structures where hundreds of managers spend their time managing other managers.
  • Creates friction—by forcing new ideas to run a multi-level gauntlet of approval that creates significant lag between “sense” and “respond.”
  • Distorts decisions—by giving too much power to managers who often have much of their emotional equity invested in the past.
  • Misallocates power—by rewarding those who are the most politically adept rather than those who are the most capable leaders.
  • Discourages dissent—by creating asymmetric power relationships that make it difficult for subordinates to speak up.
  • Misdirects competition—by encouraging individuals to compete for promotion and political advantage.
  • Thwarts innovation—by over-weighting experience and under-weighting unconventional thinking.
  • Hobbles initiative—by throwing up barriers to risk-taking.
  • Obliterates nuance—by centralizing too many decisions and demanding compliance with uniform rules and procedures.

It isn’t that Hamel believes that all management is bad; he’s out to reduce the “management for the sake of management” that has characterized bureaucracies for many years.

Don’t think you have any bureaucracy? How much company money can an employee spend before coming to you? If an expenditure of any amount must be approved you are paying a pretty high management tax.

Mike Cook lives in Anacortes. His columns appear on BBJToday.com every other Tuesday. He publishes a semi-weekly blog at www.heartofengagement.com and also facilitates a monthly business book reading group at Village Books.


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