MANAGEMENT

The bigger the worse?

NIGEL VINSON

In the quest for growth through increased industrial efficiency, we accept take overs, amalgamations, and larger and larger com- pany groupings as a wholly desirable and indeed necessary factor if the ultimate goal of a higher standard of material living is to be achieved.

In accountancy terms it is easy to demon- strate the apparent improvements, econ- omies, and savings in production and over- head costs that come from bigness. Such facts can be numerated, computerised and recorded—if it's not quantifiable then it's ignored. But because the sociological im- portance of job satisfaction cannot be evaluated, why should it be disregarded?

The accountancy approach has had a good run—now it's time the problem of industrial efficiency was looked at in the far less easy to quantify but no less important terms of human attitudes and human need. We must question whether in our quest for growth we are establishing a framework that not only raises the material standard of life, but gives full regard to the importance of greater personal fulfilment and the attitude of mind that comes from liking what you do.

There's a fair chance that if we recast our present priorities, we may even surprise ourselves by finishing up with an industrial structure not only more efficient but infinitely more enriching in every sense of the word. In a world where increasingly people are being educated to think for them- selves, being encouraged to have a sense of identity, we are simultaneously creating an economic structure that is concentrating political power and the control of resources in fewer and fewer, rather than more and more pairs of hands—a negation of the personal freedom that money power should be bringing.

The Tory alternative to socialism—the alternative to politically controlled economic power—should be to spread wealth as widely as possible, so that more people have a real stake in the community, and by being part of it feel they have something to lose, if things go wrong.

But the opposite is happening : the growth of big companies is helping to fulfil the power aspirations of the few, but it's ques- tionable whether it is really enhancing the quality of life of the many. Sadly how often has the real motive behind take overs been personal megalomania rather than the need to increase industrial efficiency?

The bigger the organisation the more impersonal it becomes. A sense of individual isolation and frustration is inevitable when the ultimate decisions affecting a man's daily life are not taken by a boss he sees regularly, but are taken by 'they' and 'them', remote faceless people deep in Whitehall and the City.

How much social unrest is due to the fact that people now have the money and educa- tion to know they should be treated as some- body—and yet are still treated as nobodies? In the rush for growth through bigness we have gone for wealth and forgotten self- respect. It must be possible to aim for both. There is a basic sociological need for smaller groupings, in which it is possible to preserve a sense of identity, possible for a man to know that his contribution not only counts, but can be seen to count, be he manager or managed.

It is a policy of despair to bow to the inevitability of increasing bigness and centralisation. The efficiency-mongers must be made to see the inhibiting outcome in terms of personal liberty and choice, of pur- suing a purely superficial financial approach.

The Tory party with its fundamental be- lief in the importance of individuality and personal freedom should be the first to re- cognise the consequences of the cult of bigness, and to see how totally self-defeating it is, not only in terms of man's wider aspirations, but as a limitation on the fair working of a market economy, the pre- requisite of freedom of choice in jobs as well as goods, in a free society.

What then is the practical alternative to bigness? Is it possible to have companies large enough to provide the resources to meet international competition, and yet at the same time to satisfy man's growing desire to be more than an unimportant cog in a giant machine?

Well, the new Tory philosophy of 'less government', if applied to the private as well as to the public sector, could be the first sign of a change in fashion and the swan song of the 'bigger is better' school.

Throughout history there are endless examples (not least of our own Empire) of the centralisation of power being inevitably followed by decentralisation, and it's likely that the same economic and social forces will play a similar role on corporate man- agement, if given half a chance.

We may have prevented the tyranny of totally nationalised industry, but if current market forces continue unchecked we shall finish up by substituting the no less undesir- able alternative monopoly of a few inter- national companies that virtually own everything.

Logically then there is just as good a case for making the private company sell off its marginal activities, as there is for slimming down the nationalised ones. What purpose has ict in zip fasteners, Imperial Tobacco in plastic hoses, and a mining company like Rio Tinto Zinc, in manufacturing windows?

A start needs to be made now in dis- membering corporate octopuses, private as well as public, where there are no self- evident advantages in the economies of scale.

A promising sign is the restructuring of the Ministry of Industry under John Davies. His declared intention to hand back to the private sector those functions which proved irresistible to power-grasping Wedgwood Benn is a rare gesture—politicians don't like giving back authority once acquired.

A similar phenomenon is happening in GEC, a specific case of a company that is both internationally competitive, and yet has identifiable units. Before the war AEI was a big company by any standards, and had grown through amalgamation and take over. As it slipped into inevitable senility there was no other suitor than GEC with which to share the rigours of old age. But there is after all nothing in common between the manufacture of turbo-alternators and tran- sistors, except that they use electricity.

There is no industrial logic for them being in one company—it is merely an accident of industrial history. Fortunately their new Managing director does not suffer from the cult of personality, and has recognised that the only workable alternative to one-man- bandism in such a conglomerate is a policy of decentralisation and maximum local management autonomy.

Herein lies one answer to bigness. The next step in the natural evolution of the large company is for it to adopt the role of banker and management consultant, leaving the individual units to pursue their own market policy, their senior management having full control coupled with a real per: sonal interest, answerable only to head office for profitability—as if they were a private company owing allegiance to the bank.

Having established corporate viability, the interest of shareholders would in many instances, be better served by the unit being sold off at a good price and the capital redistributed.

There is at present no anti-conglomerate legislation to encourage such hiving-off and company chairmen, like politicians, show a marked reluctance to give up money power once acquired.

Far from creating inefficiency, encourag- ing big companies to un-diversify and give rebirth to the smaller company in this way, would through the sense of participation engendered by a more widely held direct shareholding, substantially accelerate national growth.

Many big companies are in fact nothing but a lot of little companies held together by a common name or annual report. Likewise substantial portions of the nation- alised industries are a mass of localised undertakings with financial control held cen- trally.

Both are ripe for handing back to private management. A government that recognises the real freedom that comes from well spread, enlightened capitalism, should work to promote a genuine policy of re-enter- prising those areas where there is no case for control from Whitehall, and every case for employee managers to become owner managers.

For a start, is there any good reason why the electricity and gas showrooms and the household installation and repairs that are run from these centres, should not be handed back to the small shopkeeper and entre- preneur? Equally, should municipal authori- ties continue to control many activities better done by the smaller company? Private enter- prise with its reputation for making muck from money could well cope with refuse disposal, in the same way as it now success- fully handles scrap iron and waste paper.

There are dozens of situations throughout the public and the private sector where handing back the day-to-day control to an increasingly educated and sophisticated private citizenry would work wonders for the national rate of growth by engendering a real sense of urgency, efficiency, and profit- ability that comes with owner management.

What is needed to help this is a change in taxation that will reverse the tendency of companies to expand themselves into con- glomerates, by forcing them to distribute funds that are currently retained, but for which the original purpose of the business has no further call.

As in Germany, companies should be en- couraged to distribute and then borrow back from the market, and thus be subject to the monetary discipline of having to earn a return on capital. This same sanction would of course keep many a small company fit and on its toes, instead of becoming overfed and lethargic, with ploughed-back profits earning no return but merely keeping the company alive.

The Bolton Committee on Small Firms is due to report soon. A fair guess is that it will come out strongly in recognising the important social as well as economic role that the small company plays in society.

It is no coincidence that offering the chance to be a more important cog in a wheel, however small, to employer and em- ployee alike, is one of the reasons why the smaller company has better labour relations, fewer strikes, and a higher return of capital than the larger—and in terms of economic efficiency surely this is what the argument is all about?

People who have an interest in their own show really care. Giving more citizens a real stake in the economy would, by freeing of frustration those who like to be more per- sonally responsible, release the entrepreneur- ial energies that made this country financially strong before, and could do so again.

If at the same time it lessened the concen- tration of economic power that comes with excessive socialism and with excessive capi- talism—well isn't this the way that demo- cracy ought to go?