Have we reached peak management hubris? Two very different events over Christmas suggest that the tide might at last be turning.
In a landmark judgement in France, on 20 December the telecoms company France Télécom (later to become Orange) and seven of its executives, including the CEO and HR director, were found guilty of ‘institutionalised mental harassment’ of employees. The offences took place from 2007 as the firm underwent a ‘forced-march’ transformation after privatisation that among other things aimed to shrink the 120-strong workforce by 22,000 and transfer 10,000 more.
The tribunal decided that their behaviour constituted a systematic campaign of destabilisation designed to create a climate of fear and insecurity to induce people to quit. Ploys included unreasonable work demands and arbitrary job transfers in which managers found themselves working in call centres and employees were shifted from one end of the country to another at a moment’s notice. Over a three-year period 19 memployees committed suicide, some of them explicitly blaming company policy; one woman jumped from a fifth-floor window in front of colleagues.
The ruling is important for a number of reasons, both positive – the definition of managerial abuse as a criminal offence – and negative – the arguments for the defence that the tribunal unceremoniously dismissed. All too predictably, the defendants argued that what happened wasn’t their fault. There was no alternative to retrenchment; there was never an official policy of harassment, unfortunate consequences being the result of individual psychological fragility or job inadequacy, or alternatively of excessive zeal on the part of middle managers (to whom the direct responsibility for getting rid of people was delegated); and in any case the tribunal had no business querying corporate strategy.
The court threw out all these defences. It wasn’t querying the ends of strategy, it declared, but rather abusive means to those ends that amounted to a deliberate and systematic attack on working conditions. For the same reason, TINA (‘there is no alternative’) was no defence, whether to top or middle managers who implemented the hostile climate.
And despite the craven attempt of the brass to hide behind their inferiors, the policy of harassment had clearly originated at the top – the abuse was management policy, ie institutional. Interestingly, the company immediately accepted the tribunal’s verdict, somewhat undermining the top three defendants’ decision to appeal.
In quite another neck of the woods, the resignation of Boeing CEO Dennis Muilenburg on Christmas Eve was the culmination of a story that contains almost every element of overweening management ambition and entitlement: a once-great manufacturer whose physical engineering was corrupted by the financial variety; where soaring share price and executive pay were dependent on extravagant stock buybacks that could have funded a brand new aircraft design instead of the cheaper compromise that became the ill-fated 737 Max; where warnings of worker overstretch and poor-quality outsourcing were ignored; where despite warning pilot training and software instruction were economised on to get aircraft into the air quickly; and where relations with the industry regulator became unhealthily cosy; all these being complicit in the two crashes that killed 346 people and resulted in the 737 Max’s unprecedented 10-months grounding that shows little current sign of coming to an end.
The sorry story was compounded by the company’s hamfisted response to the crashes, characterised by The Economist as ‘an ugly mixture of remorse, evasion and swagger’, which it initially attributed to pilot error. For the record, Muilenburg was paid around $70m for his 4.5 years tenure as CEO, with another $30 to $40m due as a golden parachute, something unfortunately unavailable to those in the doomed aircraft; while between 2013 and 2019, Boeing donated a whopping $43bn to shareholders through stock buybacks.
In their different ways, these are both fairly extreme cautionary tales about the perils of managing backwards. The first casualty of reverse-engineering the way to desired results – 22,000 job losses for France Télécom, share-price appreciation in the case of Boeing – is legitimate purpose. The more single-mindedly the foreordained results are pursued, the greater the distortion, and the more likely it is that the means become ends in themselves.
As I have observed before, the end point of this fiercely top-down process – little different in its essential elements from Soviet-style central planning – is means that so overwhelm the original ends or purposes that organisations become their own opposite. At France Télécom, the perversion of purpose turned HR into the persecutor rather than protector of the workforce, increasing the sum of human misery rather than workplace fulfillment. Something similar is happening at Boeing: an aircraft manufacturer whose own employees express doubts about their families using products they have helped to build is in deep trouble, to say the least.
More broadly, such organisations are a reversal, and a grim travesty, of the model of capitalism that capitalists like to present to the world. As entrepreneur Nick Hanauer explains in a TED talk, ‘capitalism is an evolutionary system in which prosperity emerges through a positive feedback loop between increasing amounts of innovation and increasing amounts of consumer demand’.
Both are obviously necessary; absent either one of them there is no system to produce anything. What today’s capitalists have wilfully erased is the link between the two – which is jobs, without which there are no income and no consumers to create the demand for the innovations that entrepreneurs boast of. ‘Only consumers can set in motion this virtual cycle of increasing demand and hiring. In this sense, an ordinary consumer is more of a job creator than a capitalist like me,’ Hanauer observes.
As well as facing specific charges of managerial abuse and product failure, then – the Justice Department having opened a criminal probe into the 737 Max crashes – companies like the old France Télécom and Boeing stand accused of sabotaging the virtual cycle that sustains market capitalism itself. This time, history may be less inclined to forgive them.
With that, a happy New Year!