December 4, 2013

Why Your Office Is So Screwed Up

Ray Fisman, a Chazen senior scholar and author of a new book, serves up plain talk about why your company is so darned dysfunctional.

Betsy Wiesendanger

If, as Henry David Thoreau famously suggested, most men lead lives of quiet desperation,he may as well have been talking about middle managers. Who among us has not surreptitiously played Candy Crush Saga on our iPhones during an interminable meeting? Who hasn’t grumbled about the boss’s latest bone-headed scheme? Sometimes, being a working stiff stinks.

Raymond Fisman, a Chazen Senior Scholar and the Lambert Family Professor of Social Enterprise at Columbia Business School, has written a rationalization of sorts for the dysfunction that pulses through the corporate world. His new book, “The Org: The Underlying Logic of the Office” (2013, TwelveBooks.com), serves up plain talk about the trade-offs corporations and its employees make — and why one can’t live without the other.

Yes, all those meetings are necessary

The average office worker spends more than a year in meetings over the course of a career, according to a survey done by Epson, the business equipment maker. If it seems like most of that time is spent in pointless lip-flapping, those deadly-dull meetings are in fact vitally important, says Fisman.

Specifically, CEOs, managers, and workers need face-to-face time to ferret out what he calls “soft information:” the innuendos that can’t be conveyed in a spreadsheet or e-mail.

By way of illustration, Fisman points to Merck Pharmaceuticals. “Merck has been wanting to recruit more innovative scientists by telling them that a job there will be almost like being at a university,” he says. “It’s going to be hard for the CEO to produce a document to scientists he’s recruiting that characterizes this. It’s the stories he tells, and the interactions they have, that will allow him to really triangulate which parts of the message are getting through and which aren’t.”

“Anything you and I say, or write down, has multiple interpretations,” Fisman adds. “Think about some of the vacuous statements that appear in annual reports, like ‘we spur innovation to maximize shareholder value.’ What, exactly, does that mean?” It’s only through examples, stories, Q&A sessions, and other personal interactions that those sorts of ambiguities can be clarified, he says.

Yes, managers are good for something

One of the great divides in corporate life is doers versus managers. Churning out reports and making presentations to higher-ups seems to detract from the real business of making money. But in fact, all that oversight — if done correctly— actually makes companies more profitable. (Yes, you read that right.)

As proof, Fisman cites a fascinating study from the Wharton School’s Ethan Mollick, who examined the manufacturers of 854 computer games, which together accounted for over $4 billion in revenues. Mollick’s goal was to determine which parts of the organization — the designers, the programmers and engineers, or the managers — were most responsible for a game’s success.

Game production is typically done on a project basis. Designers, producers, and programmers group together and then regroup in different permutations (sometimes different companies), depending on the project. This enabled Mollick to tease out the relative contribution of a designer, producer, and programmers in how well a game sold. If, for example, a designer always generates blockbusters, irrespective of which producer or company he worked with, it was safe to say that success was due to his creative brilliance rather than who he was working with.

What Mollick found turns conventional wisdom on its head. Around 22 percent of the variation in revenue among projects could be attributed to managers — and just 7 percent to designers. Another 21.3 percent explained by the organization itself , including firm strategy, leadership, and practices. (The rest is variation in a game’s success that isn’t accounted for by the factors Mollick considers.)

Managers have many roles, one of which is to extend the control of the owners. You may not like having someone breath down your neck making sure projects come in on time and on budget, but unfortunately, that’s the way organizations function. “We blame managers for oppressing us,” says Fisman. “But in fact, that’s the only way they can do their job.”

Yes, red tape is necessary

One of the most oft-cited passages in Fisman’s book is a memo, dating back to the 1990s, from Egyptian Al Qaeda leader Mohammed Atef to a subordinate. Atef wrote:

I was very upset by what you did. I obtained 75,000 rupees for you and your family’s trip to Egypt. I learned that you did not submit the voucher to the accountant, and that you made reservations for 40,000 rupees and kept the remainder claiming you have a right to do so…Also with respect to the air-conditioning unit…furniture used by brothers in Al Qaeda is not considered private property…I would like to remind you and myself of the punishment for any violation.

Putting aside any trepidation about what the punishment might be, what’s interesting about this memo is that, in essence, Al Qaeda required a T&E report. If, in your world, filing four receipts for an $8 cab ride seems like overkill, consider a world without checks and balances, or at least fewer of them. It may seem obvious to point out that accountants exist to prevent you from absconding with company funds and that lawyers protect you from contracts you’ll live to regret. But Fisman’s hope is that his book will convey that “we might not live in the best of all possible worlds. We’re encouraging people to engage in some rationalization for current structures before they throw them out the window.” The org, he says, is not a problem but a solution — to the demands of the market and need for companies to grow — that comes with messy realities.

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