THE ORG: The Underlying Logic of the Office. By Ray Fisman and Tim Sullivan. Hachette/Twelve. 320 pages. $26.99.
“The Org” is a book on organizational economics by a Columbia Business School professor and the editorial director of the Harvard Business Review. It touts itself as “The Underlying Logic of the Office,” but examines more the lack of logic in corporate, non-profit and governmental offices.
What is the reason for dysfunction we face every day in the workplace or in our interactions with these organizations? Why is it so frustrating to deal with red tape and an inability to get things done?
Reading this book is like an intellectual approach to Scott Adam’s “Dilbert” cartoon. Dilbert pieces come often from suggestions from the experiences of its readers as they interact with the organizations they work for. But the book is not as much fun.
Why does the organization exist? Because by joining together we can do things that we could not do alone. But the price is that we spend more of our waking time with coworkers than we do with our loved ones. Since 1980, the amount of time spent working has been on an upward trajectory; email and iPhones put the workplace wherever we are. We can’t avoid them. And when we are at work how often have we observed “I can’t believe this place actually gets anything done?”
Failing companies pay millions of dollars to executives who lead them to their demise. Are they worth those salaries?
Often bloated organizations in their quest for efficiency end in disaster. Probably because they have lost sight of the goal of creating, improving and delivering goods and services people want to buy.
The authors examine real-life examples to show the difficulty of making an organization function efficiently. Enron, Arthur Anderson, Hewlett Packard and other organizations are examined as examples of lack of innovation and improvement of the product or service provided; with disastrous results. Just look to the recent troubles of the financial industry.
Leaders who encourage innovation and provide motivation are worth it; but how can you find and retain good leaders?
Adam Smith said the “invisible hand” is the magic of the marketplace that will produce the right mix and build the economy. Nobel Prize Economist Ronald Coase expanded this concept explaining why companies that outdo the efficiency of market forces prosper.
The authors look to agency and costs: sometimes the org (the author’s term, not mine) can save money by lowering costs and thereby becoming more efficient than others in the industry: success. But at some point the costs of managing outstrip the efficiencies; and higher costs make the enterprise inefficient. A part of cost is supervision known as monitoring: how to “control” through checks and balances. But when does centralized administration stifle innovation that comes from independent initiative?
Today, the question is whether technology will move the organization to a revolution in the way it interacts with employees, customers, suppliers and even the public to provide a better, perhaps cheaper and more efficient company and thereby strengthen the economy. How can an organization run smoothly and increase productivity and communication and ultimately succeed beyond the managers’ wildest dreams?
Isn’t this what the capitalistic model of Adam Smith is geared to do, with the intended result of facilitating a stronger, more vibrant, growing economy and creating a higher standard of living for the workers?
The authors examine how the organizational structure really affects the results. Which ones seem to work and which ones don’t. They analyze aspects of many “orgs.” They present case studies on McDonalds, Kayak.com, American Airlines, Proctor & Gamble, the U.S. Army, NASA, the Baltimore Police Force, the 9/11 Commission, BP’s Deepwater Horizon Well explosion, Lockheed Martin, Google, al Qaida and the Catholic and Methodist churches.
In 1912, Henry Ford shocked the world when he raised salaries from $2.30 to $5 a day, which improved the company’s bottom line. The goal is success, which is hard to achieve if a company becomes complacent, sloppy or inefficient. This is the key concept the studies cited in this book try to make sense of.
Workers are just another ingredient in the mix. Efficiency improves the bottom line. Loyalty be damned on both sides. An organization must grow, merge, morph or die, often with no regard for its employees or the community at large, and sometimes even with little real concern for the product or service. Paramount is cost reduction. Economics rule. For good or for bad.
Reviewer J. Kirkland Grant is distinguished visiting professor of law at the Charleston School of Law.