The 'Underlying Logic' Behind The Madness Of The Office

Transcript

NEAL CONAN, HOST:

This is TALK OF THE NATION. I'm Neal Conan, in Washington. Those of us who work in companies know that there's at least some part of the company that's completely crazy. A new book cites the case of a customer infuriated by his experience on the American Airlines website. Any idiot could do a better job, he thought. And to prove it, the customer threw together a redesign himself. An anonymous employee actually responded.

Yes, wrote Mr. X, your redesign is a lot better than ours, but there are reasons our webpage ended up that way. A dozen different departments all had vested interests in what it looks like and how it works, so the page represents a series of compromises. But, Mr. X concluded optimistically, even a large corporation can effect change. It did. AA tracked down Mr. X, and it fired him. They also improved their website, but not in time to save the company, which declared bankruptcy in 2011.

What's the most obvious structural dysfunction in your office? Give us a call, 800-989-8255. Email us, Talk@NPR.org. You can also join the conversation on our website. It's at NPR.org; click on TALK OF THE NATION. Later in the program, re-reading the books you were assigned to read back in high school. But first, co-authors of that new book, "The Org: The Underlying Logic Of The Office." They join us from our bureau in New York. Tim Sullivan is the co-director of the social enterprise program at the Columbia Business School. Welcome. [POST-BROADCAST CORRECTION: The book authors' credentials were accidentally reversed. Tim Sullivan is editorial director at the Harvard Business Review Press. Ray Fisman is co-director of the social enterprise program at the Columbia Business School.]

TIM SULLIVAN: Thanks, Neal.

CONAN: And Ray Fisman is editorial director at the Harvard Business Review Press. Thanks very much for coming in.

RAY FISMAN: Thanks for having us.

CONAN: And American Airlines is just one of the many examples you describe of some aspects of dysfunction, and the reasons behind it. You also cite another organization that - it doesn't necessarily leap to mind as a maze of bureaucratic nightmares, al-Qaida.

SULLIVAN: Absolutely. So al-Qaida, especially in the late '90s and also leading up to 2001 to 9/11 and afterwards, al-Qaida was often cited as kind of the optimal organization. It was networked, had cells. It had these fiercely devoted employees, if you will, who were willing to kill themselves for the cause. And people pointed out that al-Qaida would be something that could never be taken down by a big centralized organization like the U.S. military.

In fact, we see that at play in Iraq in the first years of the war, but there is a discovery of documents by the U.S. military and they find a memo. You don't think of al-Qaida as writing memos. There's a memo from the head of al-Qaida to the guy who runs the branch office in Cairo. And it says something like, dear Mohammed, I hope this note finds you well. You may remember that we sent you some money to buy an air conditioner for the office, for the brothers' comfort, some time ago.

It has come to our attention that, in fact, you may not have used that money to buy the air conditioner. You may have used it to take your family on vacation. We, of course, don't believe this to be true, but we really need to see that receipt for the air conditioner. You can imagine what the consequences are. So the point being that even if you have this nimble cellular organization, the weight of organizing is such that it's going to cause certain things to happen to it.

It's going to face certain kinds of tradeoffs.

CONAN: The weight of organizing. And that really is the thrust of this book. Any organization, if it's bigger than one, has to organize. Bureaucracy is therefore inevitable and then you get different departments and there's some kinds of dysfunctions that are inevitably going to arise.

SULLIVAN: Yeah, that's exactly right. But if you think about - we all sit in the organizations and we - I think, because we're all part of them, we kind of have difficult time defining exactly what an organization is. And the way we think about organizations, the way economists think about organizations is that they are, you know, there's an owner and the owner has a bunch of decisions that they can make because they own all those decisions.

And they hire somebody new and they pass off some of those decisions to the next person; and you can imagine as the organization grows, it's this cascade of handing decisions down the organization of kind of loaning decision rights as our economists put it. But at the same time as you're loaning those decision rights and as you grow and you hand them down the hierarchy, you have got to make sure that people actually through on the jobs, on the decisions that you're giving them.

And that can lead to, of course, all the stuff that we don't like about organizations, all the bureaucracy, all the monitoring, the fact that when you go to look at certain websites on your computer at work, you might get this big red hand that tells you to stop. All the stuff we don't like is this tradeoff again that you get between those decision rights and then making sure people are actually doing what they're supposed to.

CONAN: So you need to have people doing the job and you need to have people watching the people doing the job and watching those people watching the people - and pretty soon you're ending up in, you know, Saddam Hussein's Iraq.

SULLIVAN: Exactly. It's like that old - I think it's a Faberge shampoo commercial, if you remember. You know, one person tells her friend and then she tells two friends and they multiply across the screen. I could be dating myself.

CONAN: Until you're looking at so many pictures, it looks like the eyeball of a fly. And Tim Sullivan, there's another example you give, in the book, of an organization that started out as innovative and nimble and, indeed, as it started out, Hewlett Packard was lauded for the Hewlett Packard way, a revolutionary new way, of engaging and motivating its workers.

SULLIVAN: Well, I think it's easy to see in an organization of one or an organization of five, if there are two bosses and three employees, you really can have the sense of everyone in it for the good of the organization, for the organization's mission. But at some point, at HP, between having five employees and ten employees; and the HP of today with hundreds of thousands of employees, that's where you've got lots of people showing up because of that paycheck that appears at the end of each month.

And that's where it's not going to be enough to just tell people to go forth and be productive for the good of the company. You actually have to have some carrots and sticks to make them do so. I mean, the fact is, for all of us, no matter how much we love our jobs, there will be aspects of it that we're not so crazy about. And again, no matter how much we love our jobs, there will be times when, to the detriment of the company, we'd rather just put our heads on our desks and take a nap.

And that's where the cameras and the oversight, and the checks and balances come in - to make sure, even when we may not want to, we're still getting the job done for the organization.

CONAN: But is it simply a function of size? A great friend of mine with long experience in journalism has said it was an example of the Bolivian Army syndrome - is what he called it. Easy enough to have an elite squad of 200 men who are trained to a T, and sharply dressed and marched perfectly - they can do anything - but you look at a whole army, and they're pretty ragged, and they don't march so well and their equipment doesn't work so well.

Is it simply a function of size?

SULLIVAN: Well, it's partly a function of size. I think the army is a great example, because you can think of the Special Forces in the U.S. Army as distinct from the infantry. That is, you actually want to give more initiative and more scope for innovation to the people at the top tier of the organization, but you don't necessarily want to, as we're actually told by one army colonel.

He had aspirations to make every soldier an innovator. And I'm not sure that that's the right model for the army as an organization. I think sometimes you want people to just blindly follow orders.

CONAN: Yes, sir. Thank you very much, sir. We're talking with the authors of a new book called "The Org: The Underlying Logic of the Office." What's the most dysfunctional thing in your company? Give us a call, 800-989-8255. Email us talk@npr.org. And let's see if we can start with...this is Jerry, Jerry on the line with us in O'Fallon, in Missouri.

JERRY: Yes. My company no longer exists but I worked for many years for Trans World Airlines which ironically was absorbed into or bought by American Airlines. And I worked from the middle '80s until - until, essentially, we were bought. And what I found interesting was that when TWA was growing very quickly in the '50s and '60s, you know, they had all these different departments. And then as it was essentially shrinking nobody wanted to give up anything from their department. It was more like managers wouldn't be thinking or directors, is this good for the company, but is this good for my department.

So we had so much duplication of - you know, we had - in training we had people that could only teach customer service training. And a different division would have to teach the safety training. And it was probably at one time necessary, due to the volume - sheer volume of employees. But even though the - that had shrunk quite a bit in the entire footprint of the airline, nobody wanted to be - wanted their individual fiefdom, so to speak, to be done away with. And that became a huge detriment to trying to save any costs anywhere.

CONAN: Ray Fisman, is there an underlying logic to turf battles like the one he's describing at TWA?

FISMAN: Well, I want to preface my answer by saying the point of our book and the zest of our argument isn't that we live in the best of all possible worlds. Of course there are office dysfunctions that have no underlying logic to them and you can see a better way. What's being described here, is an entirely common phenomenon, like the notion of internecine conflict within an organization happens everywhere. And it is a natural outgrowth of an organization trying to do a number of things for which there might be benefits to lumping these things together.

Like if you take a company like Proctor and Gamble, it's pretty efficient to have a single sales force pitching toothpaste as well as laundry detergent in a particular country somewhere in the world. That is, we have economies of scale in this sense. But then you end up having turf battles across countries. You end up having turf battles across product lines. You have turf battles between the people who are producing products and the people who are selling them in these individual country offices.

CONAN: Or you give the example of Tide in your book. They came up with this wonderful new detergent. The company salesman didn't want to sell it, they didn't want to make it, because, of course, it would compete against their own existing products.

FISMAN: Right. So another big issue that arises in a well established corporation is the fact that, you know, they're naturally risk averse. And they, in fact, should be in the sense that P & G has a lot of well established brands. The last thing they want to do is undercut that brand value by putting out on the market a product that causes cancer or kills babies. So there are many, many - I can't remember how many dozen levels there are to the P & G product review cycle. But it is an immense amount of bureaucracy and red tape and probably is as it should be.

CONAN: Jerry, thanks for the call and we're sorry for the demise of TWA.

JERRY: I am too.

CONAN: We're talking about obvious structural dysfunction in your office. If there's an outstanding example give us a call, 800-989-8255. Our email address is talk@npr.org. You can also join the conversation at our website. That's at npr.org, click on TALK OF THE NATION. Stay with us. I'm Neal Conan. It's the TALK OF THE NATION from NPR News.

(SOUNDBITE OF MUSIC)

CONAN: This is TALK OF THE NATION from NPR News. I'm Neal Conan. In the early 1930s a British economist named Ronald Coase came to this country to examine how businesses work, especially the new, much bigger businesses that America pioneered. And he emerged with a theory that matched the idealism of the free market with the often dysfunctional reality of the corporation. There is no reason to suppose, Coase wrote, that most human beings are engaged in maximizing anything unless it be unhappiness, and even this with incomplete success.

Many years later Ronald Coase received the Nobel Prize. His pioneering work on business administration forms the basis of Ray Fisman and Tim Sullivan's new book "The Org: The Underlying Logic of the Office." So what's the most dysfunctional aspect of your company? Tell us your story, 800-989-8255. Email talk@npr.org. Again, you can join the conversation at the website as well. That's at npr.org, click on TALK OF THE NATION.

Ray Fisman and Tim Sullivan are our guests from our bureau in New York. And Ray, Coase was asking the question, why do we have companies - organizations at all? Why doesn't everybody work for themselves?

FISMAN: Well, you can imagine how expensive it would be, for example, if as an individual enterprise, I decided I would build my very own toaster. So it's the nature of production. There are some things that are just done a lot more efficiently in groups. And the moment we come together in groups we get the bureaucracy that comes to characterize every organization. So it's a tradeoff between doing stuff as a team, with a manager bossing people around versus taking care of anything - everything through a set of market transactions, where effectively prices decide what gets done.

So you can think about it from an economist perspective as thinking about what form of organizing is going to do things more efficiently and cheaply, with a boss telling people what to do or a market and prices essentially directing traffic in our economy.

CONAN: And Tim Sullivan, we've also - your book finds many examples of corporations that say, well it's much more efficient to bring these new functions into the company and then a few year later deciding, no we need to be lean and focused on our product line and we should outsource this.

SULLIVAN: Yeah, which isn't totally unreasonable, even though it can feel that way when your job is being in-sourced and outsourced and you're getting bounced around. Figuring out which is cheaper is really hard to do. Some things are obvious, right. It's self evident that you probably don't want to have like a snow shoveling division in your company waiting at the ready to, like, jump into your parking lot the second that it's time to shovel the snow out before your employees arrive in the morning. Because you can just pay somebody to do that, right.

It's easy to know when they ought to come. You can write that into a contract.

CONAN: This afternoon, here in Washington - but go ahead.

SULLIVAN: Yes, exactly. Or - and you know when they've done a good job because you can, you know, look out your window or drive your car across the parking lot. So you can write that contract pretty easily. There are a lot of other jobs where it's just not that clear whether they ought to be inside the company or outside the company. And that accounts for some of the bouncing back and forth of that kind of in source, outsource ping pong.

CONAN: Let's get another caller in. This is Nancy. Nancy, with us from Louisville.

NANCY: Hi.

CONAN: Hi.

NANCY: This immediately made me think of a church (unintelligible). And we're not, you know, terribly dysfunctional. But one of the things that's happening is that churches are decreasing in size. And we're looking at a book called "Fruitful Congregations"(ph). And one of the things that's part of that is what kind of structure you have and whether you've got, you know, ten committees that they could be flattened down into, you know, teams of five, that sort of thing.

And it really makes sense because a lot of times I think we just are kind of like over in our own little world doing our own little thing when working across, you know, collaboratively, would be really a better way. And I think that's one of the problems with, like, you've talked about, not only the fights, but just that kind of isolation, you know. This group over here is doing their thing and then suddenly you realize that this group is doing something similar. And oh, maybe they're even doing it two weeks apart.

And it - I just think that we really truly need to keep looking at our structure. Not that it's in their DNA in their very name, you know. We have that trouble anyway but, yeah, I'm really glad we're looking at it. And one of the other problems is that when you have kind of a dense structure like we sometimes can develop, new people coming in have trouble figuring it out. It's like really hard for them to figure out, like, if I want to do this thing, which we want to encourage, than who do I go to to figure out which room I can be in. And, you know, how will I get it on the calendar and all those things. It makes it hard for anybody new to come in and be (unintelligible)...

CONAN: Doesn't every organization do that to make itself sort of special and impenetrable to outsiders, Ray Fisman?

FISMAN: Well, there are a lot of components to that question so let me try to pick up on a couple of themes. One is that this notion that we all have to come together, now and again, to make sure we all have the sense of what's going on within the organization, there are two things this reminds me of. One is a friend of mine, Drew Curtis, who is the founder of a company called Fark.com which mostly involves people working from home and coffee shops.

He says they have to get together now and again, otherwise a certain level of paranoia just builds up, layer upon layer, of misunderstanding. And this actually does - you know, the much maligned meeting, which many people see as a source of pointless inefficiency, they're just - inefficiency rather. There's a lot that just can't be conveyed by a spreadsheet and written report.

So as inefficient as it may seem, to have these meetings where we get together to exchange what I guess I'll call soft information, it's the only way that certain critical scraps get uncovered. It's also, you might say, a mark of a great leader, a great manager, someone who can essentially extract the necessary information he needs to make decisions from these face-to-face meetings.

You know, at some point you have to look people in the eye and say, really? Can you explain to me how that's going to work? You made loans to whom?

CONAN: Mike in Jacksonville's boss, evidently, does not meet that criteria for a good boss. "What is the reasoning for bogging people down with meetings up meetings?" he writes on email. "Sometimes there has to be a meeting to discuss future meetings. It's crazy." So that may be a dysfunctional corporation. It's interesting though that our caller mentioned the Methodist Church. You write a chapter about the incentives that are provided. There's effectively a reward for pastors who gain new converts, new members of their church. Yes, new converts are good, but they also gain by stealing members from the parish across town.

FISMAN: Right. So this is really about how one would design an organization. And so the way the Methodist Church in Oklahoma works, and in fact in the country overall, is that as Tim described previously, there are certain decisions that the Bishop passes down to local committees. And among other things, local committees are charged with setting the local pastor's pay. Which makes some sense, because the Bishop off in the state capitol - in the case of Oklahoma, off in Tulsa, doesn't necessarily see all of what's going on at the local church and can't necessarily collect all the information that's needed to tell whether the pastor's doing a good or bad job. So he lets the local community set the pastor's pay.

But the local community may have incentives and interests that are at least somewhat at odds with the Bishops. And in this case, they may have an incentive to try to poach other Methodists from neighboring congregations.

CONAN: Flock stealing, I think you called it.

FISMAN: Yes. It's not - we didn't coin the term but we borrow it from elsewhere. So the Bishop does have the last word, in a sense, because to, you know, put limits on poaching from other flocks, essentially the promotion decisions within the church - so again promoted to big congregation in Tulsa or Oklahoma City, is associated with much higher pay and better perquisites like a fancy house and so on. That is much more determined by how many conversions you create for the church, rather than stealing from other's churches.

CONAN: Here's a Tweet. This is from Melissa Dunmore responding to our request to tell us the most obvious structural dysfunction at her company: emailing someone who you sit right next to. I guess that could happen too. Let's see, we get Dan on the line and Dan's on the line with us from Shawnee in Kansas.

DAN: Hi, Neal. How are you?

CONAN: Good, thanks.

DAN: It's so nice to be able to share this story with such a large audience. The most dysfunctional thing I saw in corporate America - I could probably give you, like, 12 examples, but I'll give you one short one that's pretty simple to understand. I used to work for a large shipping company. And, you know, the drivers that would go out every day would be required to work a certain amount of hours in order to stay under, you know, DOT requirements and these sorts of things.

So on any given day, a driver would work nine-and-a-half hours, plus a half-hour lunch break. And, you know, so the directives would come down from on high in the company that would say, you know, a driver must not work longer than nine-five, right?

So let's say the driver has 10 extra boxes that would cause him to go seven or eight minutes over nine-five. Rather than letting that driver go a few minutes over nine-five, they would call another driver, who would have to drive 15, 20 minutes out of his way, take those boxes, go deliver them in an area he wasn't, you know, familiar with, and end up spending an hour doing what that first driver would do in about 10 or 15 minutes.

Now, in the long run, they have spent more money to get those packages delivered. But because the report would look bad if they went over nine-five, they don't, you know, they don't allow that to happen.

CONAN: So this was just a matter of the report, not a safety issue.

DAN: I call it being a slave to the report. It happens all the time.

(LAUGHTER)

CONAN: Is there a rationale behind that, Ray Fisman?

SULLIVAN: I'll grab this one. This is Tim. The - it's partly just a question of monitoring, but it's also of standardization, right? You might say like I'm one of the good drivers, like even if I go nine-and-a-half hours, I'm going to be fine. So why won't you let me drive the truck and unload the boxes the way I want to do it? That's like, you know, what you hear about serial killers. They were perfectly quiet and nice, and the neighbors never knew anything was wrong.

(LAUGHTER)

CONAN: Oh, good. I'll look at my UPS driver in a new light.

SULLIVAN: Exactly. It's always the other guy. That's the point. It's always the other person who needs it. You know, we all know somebody who, after they drove for nine-and-a-half hours, really shouldn't have been doing anymore work. And what the - what a organization can't do is kind of distinguish very clearly between all of the different drivers' capabilities, especially in a case of driving when they're out on the road.

There's a great case of, like, of long-distance truckers. And you can imagine back when you really couldn't monitor anything they were doing. So if you go back to 1980, no company wanted to own its own fleet of long-distance trucks, because you - the terrible things that drivers could get up to on the road. We all know the stories that revolve around truck stops, right? There are prostitutes. There are drugs. It's where teenage hitchhikers got killed. You would not want to be liable for that stuff, even if you had the cleanest truck drivers in the world.

So it wasn't until the introduction of GPS technology - when you could track exactly where drivers were going to be, how fast were they going, how long they stopped for stuff - that companies started to bring trucking fleets back under the corporate umbrella. It's all about being able to monitor very closely your employees.

CONAN: Dan, thanks very much for the call.

DAN: Neal?

CONAN: Yeah.

DAN: I might say that - I think he makes a great point there. But I must say that in my example, the distinction, the nine-five distinction, was simply for saving money, not for safety purposes. The DOT restrictions are more like 12 hours.

CONAN: All right. Well, thanks very much for the call.

DAN: Sure. Bye-bye.

CONAN: We're talking with the authors of a new book called "The Org: The Underlying Logic of the Office." They are Ray Fisman and Tim Sullivan. You're listening to TALK OF THE NATION, from NPR News.

And let's go next to Tom, Tom with us from Colorado Springs.

TOM: Hi. Thank you very much for taking my call. I am a trucker myself. We - I'm with a larger company, about 5,000 trucks, about 12,000 trailers. But my story is I'm a trainer, and when I graduated one student, I was on the list, waiting for 67 trainers to get their students. And the student that I eventually got after a long wait had been at home, waiting for a trainer from another division for a whole month, and he was out of work that whole time. And so it was a miscommunication between one division to another, just like earlier in the program.

And it turns out that even after he got on my truck and we started the training process, geographically, I live in Colorado Springs, and he was in Texas. So even with the pairing of my - finally, my pairing of my student to my truck, when it was time for us to take home time, it was actually very, very unproductive, because it took two days to get from Colorado to Texas where he lived.

CONAN: Or somebody was going to take a very expensive cab ride.

TOM: Yeah. And just the production that was lost by pairing me with someone because of an original mistake, I think a lot of the corporate policies and procedures that are there is holding back corporations, such as a very time-sensitive one as I'm in, simply because they don't empower their middle-managers.

CONAN: Well, that goes to how much control you have and where the checks and balances are and how you - well, Ray Fisman, there's a lot in your book about you want to empower the people who are the stars, maybe the Toms, truck driver of your company, the people who are going to really rack up the sales and deliver the goods. At the same time, you have to have people who are behind them in middle-management, saying, wait a minute, maybe Tom's driving a little too much and being unsafe.

FISMAN: Right. So you always want people - you know, if you run a pharmaceutical company, you want R&D staff who will swing for the fences, so to speak, like you need the next blockbuster drug. You need the next Viagra. I apologize. That's the only drug name that keeps popping into my head right now.

CONAN: We're not going to ask why.

FISMAN: Because I'm on national radio, probably.

(LAUGHTER)

FISMAN: But at the same time, you don't want them spending recklessly. So, ideally, you'd divide up these tasks. You have the superstars, you know, going for the home-run discovery. But at the same time, there is inevitably the oversight of the bean-counter who makes sure the lab expanses are not too lavish.

CONAN: And the same example you give in the mortgage industry. Yes, you want the stars who put out tremendous numbers of loans. On the other hand, you have to have somebody behind them, saying, wait a minute, you made that loan to who - to make sure that we don't have, well, what we just had.

FISMAN: And I think critically, here, the person approving the loans has to have some autonomy from pressure within the organization to blindly - from blindly -simply blindly approving every loan that comes across his desk, because that was essentially the problem we saw in the Subprime crisis.

CONAN: Here's an email from Lindsey in Denver: I work a government job. Last week, we discovered the printer needed toner. Apparently, we are only allowed to buy such supplies from one vendor where the cartridge costs over $500. You can buy the same cartridge on Amazon for $150. Just one example of the crazy stuff that goes on here. No wonder people complain about the government so much. We just have a few seconds left, but surely, Tim Sullivan, you can arrive at some formula that'll make Congress work a little bit better.

SULLIVAN: It would be great. I think one of the things, if I could - if I could, I can make a lot of money, Neal. The - that - we look at organizations like Congress, or we look at the Baltimore Police Department or other public organizations and we say, they're really screwed up. Look at the jobs they - they're doing. They're during a terrible job. It turns out that those organizations have really, really hard jobs, which is why they're public organizations in the first place

CONAN: The book is called "The Org: The Underlying Logic of the Office." Our thanks to Ray Fisman and Tim Sullivan who joined us from our bureau in New York, where everything works smoothly and wonderfully. Thank you very much.

SULLIVAN: Thanks, Neal.

FISMAN: Thanks a lot.

CONAN: If you spent the last few days of summer vacation before your senior high school class cramming through books, stay with us. It's NPR News. Transcript provided by NPR, Copyright NPR.