One of the more interesting theories I’ve heard bruited about in conjunction with the obscenely high pay that many CEOs in the US get, is that not only is the pay extremely high, but there’s very little value to be had from them. That’s because executives don’t really make decisions, they just ratify the decisions that areimplicit in the research their employees or contractorswhen they research whatever issue is of concern.
Makes perfect sense to me. Wondering if it’s time to move into the breadbasket maufacturing market? You have your research department look into it, finding out how much demand there is for such a product, how well it’s currently satisfied, what prospects there are for growth in the future, how well it fits with current growth plans for the company. The executive summary of whatever report is produced will pretty much tell the CEO whether it’s a good idea, although in general the exec will just grill the department head about the report to get his ideas.
I’ve worked for organizations that worked this way, I imagine many Dopers have or do. I think execs are just glorified clerks, the real decision making is done by the information gatherers, since they’re the ones on the ground floor. Of course, somebody has to have final say, or the department heads will squabble endlessly about whose report should be considered. That’s why I think the exec should be a sort of glorified clerk, paid a very nice salary to decide which reports to endorse and which not to endorse, but not the megabucks CEOs now get.
Remember that, in your sample of how research is done, the project was started by the manager because he thought it would be a good idea to research it. Left to their own devices, would the research team have done what they did? That model may work, at least in part, for 3M, but it wouldn’t work for most corporations.
Most of the higher-ups I’ve known have worked 60-80 hours a week reading those reports and tracking the progress of the projects they’re overseeing, going to meetings, and trying to keep all the bills paid. You’re absolutely right that they are in many ways glorified clerks, but they are also clerks who keep the company running. Without them, the company would go belly-up or fracture into a bunch of different squabbling work groups, and that’s why they pay them the big bucks.
I think executives get payed silly amounts of money because the real people behind most companies (boards of directors and stockholders) want to have one individual “in charge.”
This has practical advantages, such as organizing the different groups in a company towards the single goal of making money for the stockholders, but it also has an effect that deals more with human nature. If things go bad, the money (board & stockholders) can simply remove the leader and think that it will change everything. It keeps confidence in the system by having scapegoats when things go bad, and kings when things go well.
While I agree that the hugely compensated (tens of millions per year) ‘celebrity CEOs’ are carried away in that I seriously doubt any one person is bringing that level of annual value to a company I think there’s no doubt at all that upper management does provide value to a firm. If only providing experience and vision that’s still value.
Could a number of people do it? Sure, but it’s unknown whether they’d be good at it until they try.
Disclaimer: I have been senior or upper management (though never a CEO I have been VP and now President) of corporations. Never on the ‘tens of millions of dollars’ level. More several steps below that! Dang!
As a mid-level manager, I make decisions every day, all day long. In the larger picture, I decide which programs we are going to pursue and which are DOA, how we will conduct our business and ourselves, who will go where to do what, what we will or will not purchase, etc. Some of it is clerklike work on a daily basis, but somebody has to set policy or it will tend to descend into chaos.
If you do not make your decisions based on the research brought to you by your workers ,then how are they made? By the time the research is done ,the data makes the decision in most cases.
Does this mean that the clerks are subject to shareholder lawsuits for doing bad work? Are they now subject to the rules and regulations of SOX, the SEC, etc, liable for measures of jail time, penalties, and fines? Can we demand, on a whim, to have them drop their weekend plans because “there’s 78 hours between now and Monday at 6:00pm, and this opportunity was just dumped in our laps so I need all of you to drop everything and come in the office tonight, tomorrow, and Sunday”?
Over and over?
I mean, hell, as an entreprenuer I would love to dump the responsibility of my companies decisions on to some lower-level person… which is what your proposal would allow me to do: “Hey, I was just mislead by the shoddy research provided me by Evil Captor. Sue him, not me.”
BTW… who is it that tells the researchers what to research?
I have been the guy who writes reports on things like, “Should our company set up an email system?” and “should we place job ads online as well as in print publications?”
OK, these reports were written a few years ago (though not more than a decade) and although the results seem a “gimme” to me now, they were an unknown to the deciderers, since they weren’t particularly techno people. (They were :::ugh::: people people.) But the reports told them all they needed to know, and their level of ignorance was such that they pretty much had to go with whatever I came up with. Fortunately, they had the good sense to do so, though they were stupidly slow about getting email going.
So, yeah, I’ve been close enough to the game to know how it works, and I’m not buying the stuff being vended in the preceding posts for a nanosecond.
To an extent. The data does an amount of the work (the amount we can argue about) but the person has to hit the “yes” or “no” button.
I can see paying for a figurehead in your organization, but that sounds like a blatant waste of cash.
Also, I’m sure there are some CEOs that put in gobs of time, and some that put in relatively little time. It sounds like the CEO that spends 80 hours a week needs a restructuring plan to get an ombudsman or three or someone else to help with the workload. 80 hours a week, unless there is an extenuating circumstance, denotes poor management (whether it be actual management skill or time management, or what have you).
Sure, that’s why they get the big money. Maybe half a millioin a year. Just not stupidly big money. You’ll note I said to pay them very well. I was thinking ahead, I was.
The data does tell a story, but a good manager will know how to read it - he won’t get a decision sponfed by his subordinates.
Also, a manager has to do many things other than set policies and make decisions on “stuff over X amount”. They manage personnel; depending on the specific management position and on the company, a single person may manage directly one single person or several hundred. In turn, each of those people may manage none or many. If a CEO has chosen bad “human tools” and does trust them, he’ll get bad info and make bad decisions. I’ve seen (ok, long-distance) a CEO make the opposite decision of what a report said because he knew that he never agreed with the guy who’d directed the report. This is not necessarily a good thing for the company, nor necessarily a bad thing (although having such a source of tension was probably pretty bad to the ulcers of both CEO and VP); it’s just a tactic. Knowing which tactics and strategies to use takes a lot more than a rubber stamp.
Fortune has a recent article about Jeffery Immelt (GE) and AG Lafley (P&G) whom have the responsibility of growing their companies revenues by $14 billion/year and $7 billion/year, respectively. That’s the equivalent of generating a brand-new Eli Lilly ($14.65 billion in revenues) and SW Airlines ($7.5 billion), this year.
And next year they have to repeat the process. If they cannot do this, repeatedly, they will lose their jobs. Their highly paid jobs, true, but when you have to generate $14 billion in new sales per year in order to meet Wall Street expectations and shareholder demands, why is $50 million in compensation, .3% of your added-value to the company, so out of hand? If you landed a $5 million dollar contract and received $15,000 in compensation for doing so, would you feel as if you were taking advantage of anybody?
But setting up an email system is not what Fortune 500 CEO’s deal with. If your CEO and President are concerning themselves inordinately with a new email system, than they’re not doing their job correctly. If their low-level executives are doing so… well, that’s their job. Why complain about it?
The “:::ugh::: people people” quote is very telling. Much, if not most, of doing business on high levels is having “people skills”, the ability to meet 'n greet, to give speeches, to develop relationships that close deals, to generate revenue as opposed to being in operations.
Well, if people skills are so important, I suggest we hire actors to be company CEOs, as they will work for much lower wages and have excellent people and presentation skills.
Ask any techie dealing with management. The higher up they are the less they know. If the manager is wise ,he shoves it back down to the proper level for decision. If he is arrogant, he shows his power ,and hopefully gets lucky when he decides.
J.K. Galbraith called them ratifiers in "The New Industrial State’ many years ago.
Bush for example rejects his science advisors when it does not meet his pre conceived concepts.
Then we’re back to my “hiring a figurehead” quote. I can see how that COULD be helpful, but in the long run, paying a person to JUST be a “people person” might be counter productive (at least without any further training. In that case, why not find a jack-of-all-trades so you don’t have to go through training from the ground up?)
Why not hire someone who already is a good people person and presenter, who understands the company and its products, and can make good decision. Call him a “CEO” or something like that. Pay him well to keep him on.
