Friday, August 01, 2008

Battle over Management Ideas

Nothing like rough economic times to shake out bad ideas and managers. The coerced stakeholder approach is one of them (Megan McArdle, h/t Instapundit):

GM's historical pension and healthcare obligations, and the vast difficulties they have in permanently laying off workers, mean that the company had to maximize cash flow as best they could. Indeed, I find it interesting that I spent so many years listening to europhile economists assure me that the Germans were going to kick our ass because their cooperative management style, with labor having a seat on the board, allowed them to engage in long-term planning. The industries in America where labor has the most power are the ones that have the hardest time making strategic choices to lower profits now in order to raise them in the future.
I'm in total agreement that culture is probably the only real sustainable form of advantage for firms. I doubt though that it can be easily achieved where labor through unions has had such significant power over managers and shareholders. Call me old school, but I believe that managers should answer first and foremost to shareholders but this isn't to say that abusing and subjugating your employees is consistent with this view - in fact, far from it.

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