Managing Managers

To obtain economic performance there must be an enterprise. Management’s second function is therefore to make a productive enterprise out of human and material resources. Concretely this is the function of managing managers.

The enterprise, by definition must be capable of producing more or better than all resources that comprise it. It must be a genuine whole: greater than – or at least different from – the sum of its parts, with its output larger than the sum of all inputs.

The enterprise cannot therefore be a mechanical assemblage of resources. To make an enterprise out of resources it is not enough to put them together in logical order and then to throw the switch of capital as the nineteenth-century economists firmly believed and as many of their successors among academic economists still believe. What is needed is a transmutation of the resources. And this cannot come from an inanimate resource such as capital. It requires management.

But it is also clear that the ‘resources’ capable of enlargement can only be human resources. All other resources stand under the laws of mechanics. They can be better utilized or worse utilized, but they can never have an output greater than the sum of the inputs. On the contrary, the problem in putting non-human resources together is always to keep a minimum the inevitable output shrinkage through friction etc. man, alone of all the resources available to man can grow and develop. Only what a great medieval political writer (Sir John Fortescue) called the ‘Intencio populi’ the directed, focused, united effort of free human beings can produce a real whole. Indeed to make the whole that is greater than the sum of its parts has since Plato’s days been the definition of the ‘Good Society.

When we speak of growth and development we imply that the human being himself determines what he contributes. Yet, we habitually define the rank and file worker as distinguished from the manager as a man who does as he is directed, without responsibility or share in the decisions concerning his work or that of others This indicates that we consider the rank and file worker in the same light as other material resources, and as far as his contribution to the enterprise is concerned as standing under the laws of mechanics. This is a serious misunderstanding. This is however is not in the definition of rank and file work, but rather in the failure to see that many rank and file jobs are in effect managerial or would be more productive if made so. It does not, in other words affect the argument that it is managing managers that makes an enterprise.

Managers are also the costliest resource of the enterprise. In the big companies one hears again and again that a good engineer or accountant with ten or twelve years of working experience represents a direct investment of $50,000 over and above the contribution he has made so far to the company’s success. The figure is, of course, pure guess – though the margin of error may well be no greater than that in the accountant’s meticulous and detailed calculation of the investment in and profitability of a piece of machinery or a plant . But even if figure were only a fraction, it would be high enough to make certain that the investment in managers, though of course never shown on the books, outweighs the investment in every other resource in practically all businesses. To utilize this investment as fully as possible is therefore a major requirements of managing a business.