Saturday, 18 July 2015

Managerialism and Innovation

Chris Dillow asked an interesting question recently: "Could it be that the spread of managerialism and the pursuit of 'efficiency' in the static sense of trying to maximize output for given inputs has squeezed out innovation?" I'm not convinced that innovation is generally in decline (the Robert Gordon thesis), but I do think there have been significant changes in its institutional form, and this - combined with a generational misunderstanding of the significance of software - may lead some to pessimism. Where I think Chris errs is in building the following claim: "If this is the case, then perhaps secular stagnation is not so much an aberrant feature of hierarchical capitalism as its logical consequence ... managerialism squeezing out the slack space in which innovation can occur." This implies that managerialism, and its deleterious effect on innovation, is the main cause of secular stagnation, and it further implies that managerialism is a recent development. In contrast, I'm of the view that stagnation is largely the fruit of innovation, and specifically the revolutionary dynamics of software, and that managerialism was born with capitalism and reached maturity over a century ago.

In theory, manageralism is the belief that professional managers are best equipped to administer and plan activity. This isn't the simple advocacy of management (planning, checking and so forth), but the insistence that there is a orthodox body of knowledge and techniques, supported by qualified professionals, that should be applied universally to optimise human activity. Because this orthodoxy is exogenous, it necessitates hierarchy (the dominance of the expert over the non-expert), accountability (feedback between the two) and measurement (the close inspection of the non-expert by the expert). These characteristics are often taken to be managerialism, but it is important not to lose sight of the significance of the word "professional". If its mode is control, its motivation is power. At root, managerialism is elitist and therefore anti-democratic. Like much of business practice, its roots lie in religion (consider the etymology of "professional" and "clerical") and the wider social transition of the Early Modern era.

The notion of a meritocratic elite independent of the social order was crucial to the development of both Protestantism (e.g. the Calvinist elect) and Counter-Reformation Catholicism (e.g. the Jesuits). Emerging from scholasticism, professionalism would first absorb post-Renaissance empiricism and then the "bourgeois revolutionary" mode of the Enlightenment during its secular diffusion. The growth of industry in the eighteenth and early nineteenth centuries saw it increasingly adopt the practices and language of engineering. Though the occult habits of old lived on in Freemasonry, there was a clear shift in the first half of the nineteenth century from the adept who masters arcane knowledge to the "practical man" (or woman, if you consider Florence Nightingale's exemplary managerialism at Scutari) who masters public knowledge, both in the sense of the corpus of scientific evidence and quotidian data within his sphere.

This is the point when we can start to talk of "managerialism" as a generic approach. By the late nineteenth century, it had expanded beyond engineering to business more generally, notably in the form of the "scientific management" of F W Taylor in the USA, which was influential on both the Fabians and the Bolsheviks (it's wrong to assume the managerialist infection of government started with neoliberalism). It was also influenced in Europe by the contemporaneous growth of corporatism. This was a response to industrialisation that combined both Catholic notions of organic community and reactionary political notions of nationhood, seeking to reconcile different interest groups in the service of social "harmony". It was a major ideological current that fed into Fascism and Nazism, and the remnants of it could be seen in the postwar era in Christian Democracy and the co-determination of the social market economy.

In practice, managerialism is fundamentally teleological, in its insistence on purpose (mission statements, targets) and its emphasis on perfectibility, seen in such practices as CQI, TQM and Six Sigma. It is also evangelical and imperial, in its insistence on a single truth that can be applied universally. MBA courses are sold as "object lessons", and thus commodities, a form that they have inherited from mass-produced religious tracts (the same influence can be seen in the "parables" of neoclassical rational agents and behavioural economics). Managerialism is also prescriptive, in its reliance on magisterial texts supported by "case histories" (which often turn out to be convenient fictions). Popular business books exist to emphasise the transformative power of simple rules, the need for intervention and close inspection (unfettered by society), and the inevitability of ongoing corporate reinvention.

Ideologically, shifts in management theory reflect the changing needs of capital. For example, the diffusion and disempowering of labour was enabled by process reengineering and human capital theory; the first abstracting work design from consideration of actual workers, and the second emphasising the need to cultivate (and thus divide) workers as individuals rather than as members of a group. It also gave rise to organisational learning, as institutional and tacit knowledge were eroded through outsourcing, offshoring and casualisation. Similarly, the reverse takeover of the state has witnessed not only the adoption of market-based mechanisms by the public sector, but also the assumption by the private sector that it has equivalent rights to the state but without similar responsibilities, for example in the area of data privacy and surveillance.

Managerialism is now so pervasive that it is more helpful to define it in terms of the things that it prohibits. Chief among these is autonomy (the claims for the value of autonomy within businesses, like the notion of "managed democracy", are specious). Managerialism assumes that intervention by outside experts is always beneficial and routinely denigrates tacit knowledge ("not invented here syndrome"). Behind this is the premise that organisations are inherently inward-looking and traditional ("always done that way"). But rather than a critique of capitalist hierarchy, this is framed as an individual failing, with the objective being to "save" or "turn around" the specific organisation. In the same way that modern notions of addiction and rehabilitation employ the traditional tropes of demonic possession, weakness of the flesh and personal religious salvation, so the practice of managerialist intervention is big on missions and revivals.

Managerialism also deprecates unpredictability (famously satirised in the "mystery" scene in Shakespeare in Love). This is more than risk-aversion. Capitalism appreciates the value of speculative ventures and creative destruction, but this is because it is optimistic about its own ability to overcome obstacles and setbacks. What it cannot abide is the presumed unpredictability (i.e. unreliability) of labour, which is why it is fundamentally pessimistic about human motivations (people are naturally lazy, greedy etc). Where it has occurred, the corporate indulgence of "obliquity" (the investment in curiosity and thus the possibility of serendipity) has tended to be either the result of independent funding guarantees (e.g. the importance of US Department of Defense money for the original "skunkworks") or a combination of low R&D costs and a desire to motivate staff (e.g. Google Time depends on the material cost of self-directed projects being trivial, while labour time is recouped through a willingness to overwork on other days).

Outside such formal arrangements, and particularly those tech companies that make a fetish of research as part of their brand, informal slack space has clearly declined as many businesses have become leaner. R&D has been increasingly outsourced, however this may ultimately be a good thing if it bridges the traditional pure/applied divide between business and academia. Globally, both pure and applied research resources are growing due to rapid expansion in the developing world, and there seems little let up in its cultural celebration, from The Theory of Everything to the current Pluto mission (essentially academia's inheritance of the medieval "duty of prayer"). Innovation has increasingly left the building (of the large company) and become dispersed among many more nodes, of which startups are just one class. This reflects the way that ICT is reducing the cost of research in many areas, both as as a general purpose technology and through the leverage of new information networks (let's not forget the origins of the Internet).

It's plausible to imagine that the flexibility and virtuality of the modern economy (from the "precariat" to Uber) is facilitating "decorporatization", whereby lower transaction costs allow businesses to move towards the Coasian ideal of a small group of contract managers. With labour dispersed and atomised, and the "slack space" of the old corporate world no more, it would be easy to conclude that innovation was in decline and that this was sapping capitalist vitality. But it's worth noting here that one of the criticisms of Taylorism a century ago was that it stifled innovation. Clearly that was unfounded. Managerialism is inimical to innovation (or at least undirected innovation) because it is a technology of power and innovation potentially challenges the established order (see The Man in the White Suit for an emblematic mid-century critique), but the evidence is that managerialism is no more successful in taming or inhibiting innovation than predestination and the Jesuits were in preventing the advance of atheism.

Innovation is the product of human curiosity rather than the availability of corporate space. What has happened is that the technological changes that have been exploited by managerialism to create leaner organisations and disperse labour have also served to disperse and democratise innovation. Whether this will lead to the final crisis of capitalism, as Paul Mason thinks, I will leave till another day.

1 comment:

  1. Herbie Destroys the Environment19 July 2015 at 19:41

    The belief that for a society or organisation to flourish you need managerial overmen or overwomen, who firms must compete to attract, and are paid way to infinity and beyond over the average wage appears to me to be a product of a decline in industry and a risk in financialisation. It would appear to go hand in hand with the structural changes that have taken place over the last 30 or so years.

    Certainly in the Public sector New Labour introduced this belief in the power of the manager.

    But, a bit like Ordoliberalism, it really is nothing much new when you consider it is just another way of disciplining workers.

    I think innovation and technological advancement have been squandered over the last 20 years. We could be working and retiring less but we are in a desperate struggle to avoid a return to Dickensian values. That may not signal a final struggle of capitalism but it seriously suggests a system that has become a fetter not only on production but on the advancement of humanity.

    For a fetter to become a crisis requires revolutionary actors and so far that hasn't come to the fore in any serious way.