Management in One Lesson

Economics is the study of human action, specifically in groups. A workplace is comprised of a group of people. Therefore, it follows that economic philosophies could apply to a workplace; this is, at least, conceivable.

So Mr. Manager, when you enforce excessive, strict policies on your employees, overwork them, reward loyalty, make examples of people who are at odds with your beliefs, allow double standards, and belittle employees, what kind of politician do you remind yourself of?

A manager should always think of the workplace as a small society, and the manager as politician. Think, if I managed an economy like I do my business, would it be a functional economy? This thought experiment does not have to be as hard as it sounds. Don’t put yourself in the terribly responsible position of fixing the world economy, think simply:

Would an economy be more productive it were comprised of happy individuals, or sad ones?

Would individuals in an economy be more productive if their every action was guided by procedure, with constant threat of punishment for every mistake?

Would individuals in an economy be more productive if they had proper incentives to work, or should individuals be expected to work under any condition?

You could go much deeper, but these three simple questions are a great place to start.

An economy would, of course, be more productive if it were comprised of happy people; I can’t think of any thriving emo nation. It is not, however, the manager’s responsibility to ensure the happiness of the his/her employees, no one is responsible for the happiness of another. But, as many can attest to, a bad manager can make maintaining happiness, difficult. Always be the best person you can be, always treat others with respect, always encourage, seldom criticize, and always avoid humiliating people. I think everyone should read, How to Win Friends and Influence People; I personally believe it to be one of the greatest books ever written, and it’s especially great for managers.

The second question is not as simple, but just as important. We are all in general contempt of a police state, but often fail to see them forming right in front of our eyes. Laws start with good intentions, in favor of protecting people or limiting failures. Unlimited and constant law-making, however, creates bureaucracy, where every action is accompanied with the proper procedure.

We always say, “think before you speak,” but imagine a world where you actually had to think before you spoke, where conscious, logical thought was required to choose each and every individual word that left the mouth. Sure, you might prevent yourself from saying something foolish, but there would be no such thing as brief conversation. There needs to be a serious risk/reward conversation to every new rule. Constantly ask, is this really necessary, is this rule worth punishing its violators, could there be exceptions to this rule? You don’t want to wake up in a world where you commit three felonies a day.

The third question involves understanding human nature. Humans, like most beings on the planet, are very self-interested. People don’t apply a great deal of effort to things that won’t benefit them. Management often forgets this fact of human nature, and expects work to be done under any condition.

Socialism fails for a variety of reasons, but perhaps its greatest breakdown is the lack of incentives. People are not accurately rewarded for their work in a socialist state; the idea of profit is looked down upon. And so eventually, the idea of work too, is looked down upon, because what sense does it make, to the self-interested human being, to work for no reward? Work, in many cases, is pain, so why would a human being bear pain for no reason?

Often times, a manager simply assumes that an unwillingness to work is simply laziness. I’m not saying this is always the wrong conclusion, for I have met many people in my life who are. truly. lazy…But I’m going to go out on a limb to say that at least half of those “lazy” people are simply missing the proper incentives to work.

Charles Koch, the 7th richest man in the world, applies this concept to his every part of his management style, what he calls, “market-based management.” His businesses are designed to allow entrepreneurship within the business. Employees are always encouraged to take risks in the effort of creating real value. If an employee finds a way to partner with another business that brings a 10% increase to company profits, the employee is granted a 10% raise. Under this system, there is no limit to how much money an employee can make. In Koch’s book, “Good Profit,” he explains how he adapted the principles of economics into a full-proof management system. He believes that this is what created his business empire; we can learn a great deal from him.