My beloved former history professor has a bunch of thoughts on how corporations drop the ball, and why such failures may be intrinsic to corporate bureaucracy.
This is a subject that’s intrigued me for a while. Even if it’s not in the interest of every person at a corporation for said corporation to not screw up, someone somewhere in the organizational chain ought to have a desire to prevent a bad mistake. And I’m not talking about strategic errors (Professor Burke isn’t either) such as Krispy Kreme’s overexpansion, New Coke, or even the Hewlett-Compaq-ard merger; I’m talking about screwups that cannot possibly be anything other than screwups. Professor Burke cites the example of calling a Safeway complaint number and being unable to reach an actual person, which he regards, rightly, as ridiculous and off-putting. There’s another customer gone, right there. Now, I’m assuming that Safeway has among its employees at least a couple people who (a) are not stupid to the point of imbecility and (b) have had to deal with an automated phone maze at some point in their lives. They know customers will react badly to such blatant contempt. So:
Possibility #1: Someone somewhere in Safeway’s organization knows its lousy phone system is losing customers, but doesn’t have the power to change things.
Possibility #2: Someone somewhere in Safeway’s organization knows its lousy phone system is losing customers, but doesn’t care enough to change things.
Possibility #3: No one in Safeway’s organization simultaneously possesses the two pieces of knowledge necessary, that the phone system doesn’t work and that lousy phone systems drive away customers.
Note that this breakdown points to three different types of problems. Possibility #1 points to an overly rigid hierarchy; #2 is a motivation issue; and #3 is a knowledge management problem. (Given a look at Safeway’s management team, I’d guess a combination of #1 and #3. One senior VP for supply operations, one for “real estate and engineering,” and one who serves as CIO? That sounds a little overly fragmented to me. And well-run corporations usually don’t have a senior vice-president of corporate re-engineering, because . . . they don’t need to be re-engineered.) That makes it, from a business-academia perspective, somewhat hard to (to mix metaphors) diagnose and treat. Is it an organizational behavior problem? Operations management? Strategy? All three? It’s the kind of example a professor could present to his or her MBA students so they could prove themselves anti-lousy phone systems, but actually tracking down the chain of command at Safeway which controls the phone system and saying, “This is lousy; what do you plan to do about it?” would be a different matter.
The only person I know of who studies organizational failure is Diane Vaughn, and she does it in a fairly specific context – how “routine non-conformities” can become part of how an organization works. There are a fair number of people doing work on communication breakdowns, and I’m fairly certain there’s a lot of work on motivational theory, but nobody (as of yet) gets a PhD in blatant corporate screwups. Professor Burke wants to see a lot more academic work done on small-scale screwups; I think he’d be pleasantly surprised to discover some of it already going on (he might like, for example, Leslie Perlow’s When You Say Yes But Mean No). But corporate screwups like Safeway’s are, as it were, multidisciplinary. The corporation in its modern form, as the film (which I enjoyed) points out, is less than 200 years old; there’s a lot of stuff still to learn about how it works, and doesn’t.
Where I part ways with Professor Burke is when he writes: “There’s no reason to prefer [lumbering corporations] to government bureaucracies—in fact, they’re much worse, because as ‘private’ institutions, they can hide information about their own incompetence and malfeasance much more effectively.” That’s true – it’s entirely possible for one division to hide its mistakes from the rest of the firm, or Nick Leeman to hide his trades from Barings – but the flip side is that, usually, the private corporation suffers for its mistakes long before the government institution would. All other things being equal, one corporation’s blatant screwup is another one’s market opportunity – see Delta/US Air/United and Southwest/JetBlue/AirTran, or Detroit vs. Japan in the 1970s, or Microsoft’s taking advantage of John Scully’s screwing up Apple to establish Windows domination in the late 1980s to mid-1990s. (When I entered Swarthmore, in 1995, the campus was Mac-only. I regard my since-lightning-fried Power Mac 7200 with affection, but God, that was a terrible computer.) It’s true, as Professor Burke says, that “a combination of inertia, accumulated capital and crony capitalist manipulation of public policy” can keep a company alive far longer than it should (see: Daiei), which is what makes the last so damaging to the workings of a capitalist system in general. But it’s hard to believe a private firm would be able to get away with, say, the Tennessee Valley Authority’s debt levels for decades.