Tax but don't spend

Last February I wrote a post in which I peevishly listed various experiences of organizations not working very well. One item on the list concerned the problems of getting through the HMRC (the British tax office) on the telephone. So I was interested to see that this week the National Audit Office (NAO) published a report on HMRC’s quality of service. This identified a “collapse” in customer service over 18 months in 2014-15 with call waiting times tripling and some customers being kept on hold for up to an hour.

What lay behind this were massive cuts in staffing levels, which in personal tax fell from 26,000 to 15,000 between 2010-11 and 2014-15. This of course is just one of the many consequences emerging across all parts of the public sector as ‘austerity economics’ bites deep under the ideology that eliminating the government’s budget deficit is the sole aim of policy (what Nobel economist Joseph Stiglitz calls “deficit fetishism”). But there is more to it than that: associated with the cuts was the technocratic fantasy of paperless (on line) tax returns and automated telephony.

We’ll break here for another oldster rant: why does everything have to be done online, with endless passwords and usernames in hundreds of different formats? How I long for the days when you could just fill in a form and send a cheque in the post. There are still a few places you can do this and I would single out from my own experiences the insurance company NFU Mutual as particularly good not just for this but for that fact that they have an ordinary phone number that goes to the local office where I talk to a person I have met and who has been in post through all the years I have dealt with them. And, on the one occasion I’ve had to make a claim, they are excellent to deal with. Is it because they are a mutual organization?

Back to the HMRC and what is interesting is to note how this story illustrates some of the recurring – and linked - themes of my book, namely those of unintended consequences and of the ambiguity of efficiency. In terms of unintended consequences the issue is how cost savings in one budget show up as new costs somewhere else. This is especially obvious in relation to HMRC because an effective tax gathering system is vital to meet the costs of government spending departments. So to impinge on the first inevitably has consequences for the second.

The issue of efficiency is linked in that what may be efficient for the HMRC maybe inefficient for other departments but, beyond that, inefficient for the user – in this case the taxpayer or, as they are now called, with tragic inevitability, customers. And let’s just have another break here to remind ourselves how crass, how nonsensical, it is to describe people paying taxes as ‘customers’. The NAO Report is helpful in quantifying this by reference to the HMRC’s own costings of people’s time (£17 per hour, apparently). On this basis, the time spent waiting and talking, and the cost of the call, added up to £97M (of which £66M was the cost of waiting to be answered) in 2015-16. So HMRC’s efficiency savings become its “customers’” costs. According to the NAO and the HMRC things are now getting better, though I must say that this is not my personal experience and, anyway, we have been here before. A damning 2012 NAO Report on phone call waits was also met with promises of improved performance and assurances that this was beginning to happen.

There’s a bigger organizational story here. The HMRC is the result of a merger, in 2005, between what were previously the Inland Revenue and the Customs and Excise office. Culturally very different, many date the problems at HMRC from this archetypical example of reform through reorganization. Subsequently, there have been repeated high-profile scandals. Dave Hartnett, its boss until 2012 when he joined global accountancy firm Deloitte as a consultant, was accused of cutting lax ‘sweetheart deals’ with big corporates like Vodafone and Goldman Sachs, and called “a liar” by the chair of the Public Accounts Committee. His successor, Lin Homer – dubbed ‘Dame Disaster’ by satirists – was criticised for failures in relation to the HSBC tax scandal and also for claiming the HMRC to have had its best year ever in 2015 despite – yet again – massive problems with phone systems. She stood down in April 2016.

As for the future, who knows? HMRC have taken on more staff, but the ongoing closure of 137 local tax offices in favour of 13 regional centres does not bode well, and the latest NAO Report says that HMRC’s capacity to sustain planned cost reductions rest upon its Making Tax Digital initiative, another techno-fantasy, which has already been met with scepticism, if not outright derision, by tax accountants.

It’s tempting to ascribe all this to the well-attested failures of neo-liberal ideology in general and the effects of its application to the public sector in particular. But it’s more complex, and worse, than that. Even the most assiduous neo-liberal assumes, accepts and expects that the State will act as a ‘nightwatchman’, undertaking the basic functions of tax collection, law and policing. But cuts have “brought the court system close to breaking point” and are causing a crisis in policing and in the prison system. It used to be the leitmotif of anti-state ideologues that cuts could be achieved by getting rid of ‘five-a-say Czars’, ‘diversity officers’ and, of course, that perennial favourite ‘faceless bureaucrats’. Now it turns out that even the most basic functions of the state are up for grabs. If proof of that were needed, look no further than current plans to privatise the Land Registry, the body that administers that most basic feature of any capitalist economy, property ownership.

Unsurprisingly shocking

I have not posted for a few weeks now, partly because I took some holiday at the beginning of April, partly because of pressure of work, and partly because I have been writing several blog posts for various sites working with the EU Remain campaign. The most recent of these can be found here for anyone interested and there are several more in the pipeline. And in the even more unlikely event of anyone being interested in my holiday, my new profile picture shows me emerging from a Norfolk pub (quite sober, I should say) whilst I was away.

So there’s plenty I could write about but I’ll focus on the news this week that the retailer British Home Stores (BHS) has gone into administration, with debts of over £1.3Bn and a pension deficit of £571M, leaving the 11,000 employees across its 164 UK stores in limbo, and creating much insecurity for former employees with deferred pension rights. Like all statistics, this depersonalises the reality but I visited my mother this week and, by coincidence, her care assistant used to work for BHS and told me how worried she was about her deferred pension. I tried to reassure her that the Pension Protection Scheme meant that 90% of her rights were assured, but for someone on (I guess) the minimum wage and with limited pension expectations that 10% matters, even if she trusts that the 90% will be forthcoming.

BHS is one of those high street stalwarts that seems to have been there forever – I can remember one of my sisters having a Saturday job there in the 1960s. In fact it goes back to 1928 and joins the long list of British companies, some of which I mention in my book (pp. 105-106), that have fallen by the wayside. There are all sorts of reasons for that, of course, from the rise of the internet to the growth of Pound shops. I actually go to BHS quite regularly to – look away now, kids – buy cigarettes and that branch, at least, seems faded, dilapidated and dated, and the staff demoralised.

That is because underneath the general trends in retailing there is another story to be told about BHS. Bought by the fabulously wealthy tycoon Sir Philip Green for £200M in 2000 he sold it for just £1 in 2015. In the interim, rather than investing in modernising the business it had been used as an enormous cash cow and systematically pillaged for massive dividend payments. Far from ‘adding value’ in the manner self-righteously claimed as the hallmark of dynamic entrepreneurship, value was ripped out of BHS and pocketed. There are now calls for a public inquiry into what happened but, whatever the details specific to BHS, it is just another case of the consequence of rapacious financial engineering of the new capitalism (discussed in chapter 5 of my book). Hardly less noteworthy is that its post-2015 owner was a company run by a twice bankrupt former racing driver with no retailing experience, and the demise of BHS comes as no surprise. Interweaved into this sorry saga are the usual array of offshore tax avoidance schemes and global investment bank advice.

Such stories have become so commonplace that they lose the power to shock. Even so, there is still a jolt of surprise in recollecting that as recently as 2010 Green was commissioned by the British government to make recommendations on improving its efficiency. Reading his report today, my immediate reaction was to think how thin it seemed – I have seen undergraduate student workplace projects with more depth. My second reaction was to recall how similar it was to the 2004 review of public sector efficiency by Sir Peter Gershon. In fact, on government procurement especially, the Gershon recommendations were nearly identical. It makes you wonder what the point is of these endless reviews – perhaps they have the same ritualism as public inquiries, about which I have written before.

Anyway, Green’s review concluded – surprise, surprise – that the way forward was for government to adopt the methods of the private sector, apparently unaware that this has been exactly the approach since the early 1980s, so what he was observing was the consequence of precisely the course of action he was advocating. And his headline finding was that the government was “failing to leverage both its credit rating and its scale”. In other words, the government should get on the wagon of the same financial engineering techniques that he was at the time so assiduously applying to bring BHS to disaster.

With the controversy now surrounding him, it’s unlikely that Green will in the future be asked to give advice on how the government should organize itself. But there will always be someone else – whether a faceless but fresh faced MBA from a big league consultancy, or whoever the currently lauded tycoon may be – to apply the same failed logic. Because however often it fails it is never discredited; worse, each failure provides the impetus for its re-application. That, too, has lost the power to shock.

Nothing works

One of the persistent themes in the book (which I am engaging with closely at the moment as I prepare the fourth edition) is to probe the meanings of efficiency to argue that these are often ethically deficient, and beyond that to say that it is not just that they are deficient and yet ‘work’, but that often they simply don’t work.

With that in mind, I have been thinking about a series of things which have happened in the last week or so. These include:

·       I arrived in good time at a train station. The ticket office was closed and two of the four machines were out of order, with long queues at the remaining ones. I missed my train. Soon after one of the ticket booths opened and the ticket seller told me that the company now only employed one seller because there were now machines, and so when she had her break the office was closed. When I finally got the train, there were no seats and it arrived 20 minutes late due to faulty signals.

·       I received payment for some work I did – last May. It has taken seven reminders to get paid.

·       I was due to pick my wife up from the airport. She texted me to say that boarding was two hours delayed, but the airport website still showed her arrival as being on schedule even after that scheduled time had passed. I phoned them (on a premium rate number), went through a long automated sequence, then was put on hold, then spoke to someone who told me the flight had landed. I pointed out that it had not even taken off yet, and that the flight he mentioned was the earlier one from the same destination. He hung up.

·       My phone line and hence broadband connection went down (this happens every couple of months). The usual horrible process of the automated phone call system to report it, and it was almost 24 hours until the fault was fixed.

·       I needed to contact HMRC (the UK tax office). This isn’t the usual horrible process of the automated phone call system. It’s far worse. Because it has a voice/word recognition system that doesn’t seem to recognize anything I say. I gave up.

·       I had arranged to have some ironing and dry cleaning picked up one afternoon (yes, I know, a first world problem if ever there was one). They don’t turn up so I call them – they say that they came in the morning when I was not in. And this, unlike the other examples, is a small, family-run firm.

I think that this was a fairly typical week. Now it could be said that I am ignoring the many other transactions and interactions I have had with organizations this week that have gone perfectly well. That is true (although I could add to my list of problems as well, although with fairly trivial examples). But even so I experience these transactions and interactions as a constant struggle. A struggle against inefficiency, against organizations just not being very well organized, but also a struggle against efficiency in that many of the problems (the ticket office closure, the automated phone systems) derive from company’s introducing what for them are efficient systems.

It might also be said that I am unusually tetchy or impatient with such problems. That may be true – it’s difficult for me to judge. But my sense is that I am not alone and certainly things like train overcrowding and delays, automated phone lines in general, and the HMRC phone line in particular are quite widely complained about. There seems to be some basic sense in which, across a wide range of transactions and interactions, organizations just don’t work very well.

It’s also the case, to reprise another of the book’s themes, that the notion of choice in all this is quite bogus. In most of the cases listed above I had no choice about using the company I did, even though with the exception of the HMRC they are private companies (albeit often formerly public utilities). And even in cases where similar problems are common like banks where I can choose a different bank (although not, realistically not to have a bank at all) I’m unlikely to find much difference between them.

It’s not just that these things are irritating - although they are – it’s that they transfer inefficiency to others. When my broadband connection isn’t working, there are many work tasks I can’t do; when my train is late, I miss a meeting (actually, I didn’t, because knowing that delays are highly likely I factor them in, but that still means that had I got the train I planned I would have wasted time hanging around due to being early). These things in turn mean that I may cause problems for other people. It’s not that I am wedded to some productivist notion of constant work – I quite enjoy, for example, the ‘wasted’ hour when I am early for a meeting, or the respite from emails when the broadband is down - but there is an irony in the fact that those who are create through their practices the unintended consequence of eroding its possibility.

Volkswagen and Weber

A huge scandal has erupted in the United States – but with global consequences – about the German car company Volkswagen. In brief, it has been revealed that VW installed software so that their diesel cars would meet emission targets when being tested, but when in actual use emissions were way greater than permitted.

We don’t yet know the full details of how and why this happened but, for sure, it is an organizational story, and one which well-illustrates some of the core arguments in my book. In particular, I make a lot of use of the distinction, derived from Max Weber’s work, of formal and substantive rationality (introduced pp. 21-25) and the various ways that this sets up conflicts and contradictions in organizations, including goal displacement (where following a formal regulation becomes an end in itself, forgetting the substantive purpose of the regulation).

I go on to say that these “are not anomalies and anyone who works in an organization or reads the news will know how pervasive they are” (p.30), and give a couple of examples. One was from education, and the way that faced with a target designed to raise educational attainment teachers focus on that target to the detriment of educational attainment. Another was from healthcare, with rules about waiting times designed to improve healthcare being followed blindly so that all that matters is meeting the formal target, to the detriment of substantive healthcare. The VW case provides a further illustration of this. The organizational response to a formal rule designed to achieve the substantive goal of protecting the environment by controlling emissions was … to follow the formal rule without regard for the substantive purpose.

The VW scandal also illustrates an aspect of another of the main themes of the book, again derived from Weber, about the inefficiencies of efficiency. Presumably, some person or people in VW decided that the best way to sell cars in the US market was to cheat on the tests. And, indeed, VW enjoyed very successful US sales. But the unintended consequence of this decision has been to wreak massive damage on the company, its brand image and very likely its future sales and profitability, as well as potentially crippling legal actions. Where’s the efficiency in that? My guess – it’s only a guess – is that as with the Enron scandal the decision will have been made by ‘the smartest guys in the room’ – so smart that they are stupid.

So I think that this case once again shows the enduring relevance and explanatory power of the concepts of formal and substantive rationality, goal displacement, bureaucratic dysfunctionalism and so on. This in turn means that the likely proposed solutions – smarter regulations on emission testing, more stringent internal procedures within VW and perhaps other car firms – are unlikely to have much traction: they will just provoke further goal displacements, new rules to blindly work to. Not until emission minimization – in this case – forms as much of the taken for granted for engineers and their managers as any other principle of engineering, rather than being seen as something external and alien to those principles, is anything really likely to change. The same analysis could be applied to huge numbers of other cases: prudential banking regulation being an obvious example.

Finally, although this blog is connected to the ‘very short etc’ book, I will shamelessly plug my next book (Jana Costas & Christopher Grey, Secrecy at Work. The Hidden Architecture of Organizational Life. Stanford University Press, to be published March 2016). Because from what is known so far it does seem likely that the decision to rig the tests was kept secret from VW’s senior managers by those who took it. How and why such a thing might happen is explained by …. well, read the book to find out!

Healthy bureaucracy

This post relates in some ways to my previous one about NHS management, but is both more specific and yet with a wider import. In the current issue of the satirical magazine Private Eye the Medicine Balls column discusses one of the consequences of recent NHS reforms (the column is not available on the Private Eye website, but appears on p.17 of Issue 1394). These reforms, like most or even all public sector reforms, purports to reduce bureaucracy. Yet the column describes how the new rules mean that whereas a doctor’s surgery seeking to run community health services from its premises used to have simply to make a contract with the local health trust, now it involves a negotiation between four different bodies with multiple convoluted procedures.

This is a story that could be repeated endlessly across both private and public sector organizations. Bureaucracy is the enemy above all others (see p.81 of the book) and yet in the name of defeating it ever-more complicated bureaucracies are developed. What sense might we make of this? I think that one answer is that ‘bureaucracy’ has ceased to mean anything very precise (and certainly nothing like Max Weber’s meaning), but instead has become a catch all terms for ‘things we don’t like in organizations’. It takes a brave person to argue, as Paul du Gay does in a book I refer to several times in my book, in praise of bureaucracy (by which he does indeed mean Weberian bureaucracy), and for a practicing manager, civil servant or politician it would be simply unthinkable.

The irony of this, though, is that it is not just thinkable but necessary for managers, civil servants and politicians to devise systems which conform not to Weberian bureaucracy but to precisely its everyday sense of inefficient red-tape. We thus have the worst of all worlds: a crusade against the praiseworthy features of bureaucracy (accountability, impartiality, clarity) in the name of an anti-bureaucracy that embodies the most deleterious features of bureaucracy (complexity, sclerosis, proceduralism).

There are so many examples that it is difficult to know where to start in naming them but they range from the impossibility of switching internet service provider without a ‘key’ from your current provider to allow it, through to the chaos caused in courts because of ‘efficiency savings’ to interpreting services. But to take one recent example, last week a new system for driving licences was introduced in the UK. According to the government minister responsible this would “reduce unnecessary red tape” (aka bureaucracy). The result? Chaos.

Of course any one example can be dismissed as both minor and specific. But the cumulative effect is general and major. A huge array of transactions, both economic and civic, are becoming all but impossible. Weber would have found this completely understandable because it is emblematic of some of the problems to which bureaucracy was as a solution. He might also have observed, had he been alive, that bureaucracy would be the best way of addressing the FIFA corruption scandal. Or, at a more local level, a way of controlling free-wheeling head teachers, freed from bureaucracy to do their own thing.

The association of bureaucracy with ‘something bad’ goes back many decades but it’s a misnomer. It’s difficult to imagine an effective campaign for bureaucracy. Yet a good dose of bureaucracy, in its healthy sense, would make all our lives better.

Reference

Du Gay, P. (2000). In Praise of Bureaucracy. Weber, Organization and Ethics. London: Sage.

Unhealthy management

The British National Health Service (NHS) is one of the largest and most interesting organizations in the world. It is perhaps the key legacy of the post-1945 Labour government, establishing the principle that healthcare is available free at the point of use and on the basis of clinical need. Almost 70 years later, an authoritative report by the Commonwealth Foundation in 2014 identified it as the best overall healthcare system of a range of developed countries (the others were New Zealand, Australia, France, Germany, Norway, Sweden, the Netherlands, Switzerland, Canada and the US), and the best in eight of the eleven criteria of the report, and in the top three for two of the other three criteria. And this was achieved despite having lower spending per head of population and/or as a percentage of GDP than those, and other, countries.

Perhaps as a result, the NHS has always been a target of dislike, even hatred, for neo-liberals because (rather like the BBC) it demonstrates how non-market, collective provision of services can be both more efficient and more equitable than market provision (by contrast, the US system was the worst of those covered by the CF Report). As such, it has for the last thirty years or more been subject to endless reforms to marketise it through actual private provision or internal competition, and to introduce private sector disciplines and management to make it more efficient. Successive governments have insisted that ‘throwing money’ at the NHS is no good – what is needed is this market-accented reform. Yet, despite this, it is constantly depicted as being in crisis, with daily stories of its failure.

The irony is that these stories reflect, precisely, the consequences of the neo-liberal reforms. This week, there are two such stories. One is about the spiralling cost of employing agency nurses and doctors (i.e. not employed by the NHS directly but bought in). The other is the ‘fatcat’ pay and perks of senior managers. It’s true that both these things are problems – but why have they come about?

In the first case, it’s because of the demand for labour market flexibility and the assumed wastefulness of paying the overheads (sick pay, pensions etc) of permanent staff and the government have been warned for some time that their market-focussed policies were causing the problem. In the second case, the roots of the problem go right back to the 1980s when the neo-liberal claim was that to get the ‘best’ managers the public sector had to pay the going private sector rate. So in both cases supposed public sector waste is a direct consequence of the assault on … public sector waste.

These are case studies in the problematic nature of efficiency which I discuss a lot in the book (especially pp 130-131), but in the case of the NHS this has a particular inflection. The efficiency of the NHS, as attested by the study mentioned earlier and others, arises from the fact that the benefits of healthcare are themselves collective. Innoculation is an obvious example: it is effective to the extent that it is widespread across the population, and it will only be widespread across the population if it is not rationed by price but available on clinical grounds. But the same is true even in less obvious cases – for example, the ill-health of an individual employee impacts upon his or her employer and colleagues. And, for that matter, a collective system will always be able to get better prices on drugs than an individualised system, and the costs of medical procedures always fall as they become mass, standardised procedures (think cataracts and hip replacements).

It has become a truism that the costs of healthcare are rising in all developed countries because of ageing populations, the fact that healthcare inflation is higher than general inflation, and the costs of new medical procedures arising from almost daily scientific advances. The only way to address this is, precisely, by throwing money at it. It’s getting more expensive and that expense can’t be met from efficiency savings. It’s a pervasive meme of neo-liberalism to imagine national finances as if they were household finances. Very well, then. Knowing that granddad and grandma are going to be living longer and needing increasingly expensive healthcare you divert resources to that. But we know that this works best (it’s cheaper, and the outcomes are better) when it is done collectively. The US spends 17.7% of GDP on healthcare compared with 9.4% in the UK (2011 figures) but with much worse health outcomes because of its system. Imagine if the UK spent at US levels using the NHS system! It would be a Rolls-Royce health system.

There are two familiar objections to this, both of them fallacious. One is that the NHS entails the rationing of care. That is true, but it is true in all systems. In an insurance-based system such as the US it is done by insurance companies adjudicating on individual cases, whereas in a socialised health system like the UK it is done via expert assessment of the cost-benefit ratio of treatments.

The other objection is that a tax-based system like the NHS is unsustainable because there is only so much tax that people can pay, so what is needed is a mixed private-public system of the sort found in France or Germany. It’s worth noting, though, that those co-payment systems are also under strain. Even more to the point, people don’t miraculously have money to spend on health insurance that they don’t have available for taxes. To see the problems of co-payment systems one only has to look at what has happened to NHS dentistry which has moved to such a model. And let's be clear what this means: it means people pulling out their own teeth without anaesthetic.

The issue, then, remains one of the best mechanism for translating spending into healthcare. In Britain, no politician is really willing to challenge the free at the point of use principle, an interesting illustration of how deeply embedded the collective principle is, despite the neo-liberal decades. Instead they say that so long as the free at point of use principle is retained, it does not matter whether the provider is public or private. In this model, the NHS is simply a commissioner of services. But this neglects the other cornerstone of the NHS: provision on the basis of clinical need. In other words, private providers will only provide services at no charge if it is cost-effective for them to do so, hence they ‘cherry-pick’. There is no way of squaring this circle: collective provision is both cost-effective and equitable because it is collective provision.

The real welfare scroungers

I have posted elsewhere on this blog (e.g. The New Barons and Impoverished by outsourcing) about the consequences of public sector outsourcing, picking up on some brief comments in the book (e.g. p. 86-7 and 124-5), but I want to return to it with a particularly egregious example that has just been reported, relating to the sub-contracting of the UK Probation Service:


“Taxpayers will face a £300m-£400m penalty if controversial probation privatisation contracts are cancelled after next May's general election under an ‘unprecedented’ clause that guarantees bidders their expected profits over the 10-year life of the contract.”


The neo-liberal theory behind outsourcing public services, which grows out of the general assumption that markets are efficient, is three-fold. First, that the private provider bears the risk and profit is the reward and incentive for this. Second, that providers who do not deliver will lose their contracts. And third that private providers will deliver at lower cost.


The probation case is the latest and perhaps most flagrant demonstration that the first is simply not true. It is not true in a general way – because, in the end, if a private provider fails then the State will ultimately have to step in, as happened when G4S failed to provide adequate security for the London Olympics, for example. But it is true in a more specific way, as well. For the providers of these probation services will get their profits come what may. For a long time now, research has shown how risk transference in this context is a myth – best documented in the case of Private Finance Initiatives (PFI) as, for example, in this study by Ball, Heafey & King (2003).


This in itself blunts the second rationale, because there is no downside to losing a contract if the provision fails. And in case it might be thought that a firm which keeps failing to deliver will no longer be awarded new contracts, then that too is false. Even whilst under investigation for fraud in relation to previous contracts, the same firms are in the running for new contracts (see also p.87 of book for older examples).


As for lower costs, these are achieved in two ways. One is simply by reducing the number of staff and their wages, which saves money on one government budget but increases the costs on other budgets, such as unemployment and tax credits. Beyond that – and the probation service is again an example – all the difficult, complex and expensive cases are left as in the rump of the public service provision.


There are simply too many examples of public outsourcing failure for it to be remotely credible any more in the terms that it is justified. On some internet discussion forums I have seen, apparently in all seriousness, a last ditch attempt to do so through the argument that these failures are the consequence of public sector incompetence in drawing up contracts. It is a breathtakingly circular and unfalsifiable argument: outsourcing must work because private is better than public and if it doesn’t work then it proves that private is better than public. One might admire the audacity of such market ideologues but, really, this no longer has any discernible roots in market ideology. It is better understood through another meme of the neo-liberal right: welfare-scrounging. It is the welfare-scrounging of the super-rich, living voraciously and vicariously off the hollowed-out shadow state.

Insanely hot

Some years ago, a senior person at a university where I then worked told me how he had met the then boss of Tesco, a supermarket chain that was at the time the doyen of British business. Breathlessly, he enthused about how each year they made 3% efficiency gains. That’s what we should be doing in universities, he declared. Do more with less!

I was reminded of this conversation because l came across a quote where, faced with declining performance, a subsequent Chief Executive of Tesco acknowledged that it had been “running too hot for two long”. What this means in ordinary language is that they did not have enough people to staff the tills and stack the shelves and, as a result, they are now taking on 8000 new staff. To put it another way – those efficiency savings turned out to be anything but efficient, and the business is now paying the price.

It is a pattern which can be seen repeatedly across both private and public sector organizations, reflecting the contested nature of what efficiency means, which is a major theme of my book (e.g. pp. 130-132). In the public sector, what often happens is that ‘efficiency’ means reducing costs in one budget only to find that they re-appear in another. To take just one of literally countless examples:

“A government deal with Applied Language Solutions (ALS) was supposed to cut £18m off the Ministry of Justice's (MoJ) bill for court translation services in England and Wales- around 23 per cent of the budget. But what was intended as a cost-cutting measure will cost the government thousands of pounds every day in delays and adjournments” (Channel 4 News, 2012).

It seems such an obvious point, evidenced by so many cases that one might have thought that the lesson would have been learned. But whilst on holiday last week I caught a TV show (I don’t recall the details, so can’t link to it) in which a panel of business leaders discussed the challenges facing the global economy. And what did they have to say? Well, it won’t be a surprise. That businesses in a globally competitive world had to become leaner, fitter and ever more efficient. In short, that they had to ‘run hotter’.

There is a quote usually, although possibly wrongly, attributed to Albert Einstein to the effect that the definition of insanity is doing the same thing over and over again and expecting a different result. It is a lesson our business leaders have yet to learn.

Under the microscope

Issues of privacy are a hot topic at the moment, mainly in terms of the way that governments and corporations may access and our data. The debate there is about the privacy of citizens and consumers - but what about employees? In the book (p.73) I talk about surveillance in the workplace and remark that after initial enthusiasm for the use of Foucault's discussion of the Panoptic prison in organization studies, more recently authors have been rather sniffy and dismissive of it. In particular, it is seen as too totalizing, too inattentive to resistance.


What, then, to make of Hitachi's new Business Microscope device? This allows employees' movements to be tracked - something that has long existed in 'smart buildings' - but also monitors who they speak to, for how long and how 'energetically', how close they stand to each other, how much they contribute in meetings and many other things as well. The rationale, of course, is greater productivity and efficiency plus the obligatory humanistic nod to checking on employees' health and well-being.


The notion of privacy has less traction here than in the debates about consumers and citizens, for in what sense does privacy, or the right to privacy, exist at work? When at work, what part of us is not the legitimate purview of management? It was long ago ceded that organizations could legitimately manage our motivations and emotions, so why should anything be off limits? If you are at work, doesn't your employer have the right to know what you are doing and feeling?


Indeed, there is a fashionable school of thought that says that privacy was a passing historical moment, sandwiched between traditional pre-industrialism and technological high capitalism; an interlude of sentimental humanism. I understand and feel attracted to that argument in that I also think that what constitutes personhood (and, thence, privacy) is historically variable (and, again, argue that in the book, pp. 46-51). But it is a bit too glib, as well. Privacy may be a specific historical construct but it continues to have much purchase. Indeed, the current controversies about privacy would hardly be 'controversial' were this not so.


From this perspective, privacy can serve as the basis of resistance - that is, we resist by trying to hold private to ourselves certain thoughts and feelings in the face of surveillance. George Orwell's 1984 is an obligatory reference here: even the omniscient Big Brother engendered resistance from Winston Smith as he sought to guard his thoughts and his love affair from the telescreens. I'm not sure that this is a comforting, though, given Winston's fate and, more prosaically, the way that in organizations such resistances typically act as the spur for further and more intense surveillance.


But what if the most effective resistance lay not in trying to close ourselves to surveillance but in being more fully open than our surveyors can bear? What if we insisted on our right not to privacy but to 'tell all' - to speak of the truths, mundane and dramatic, of our lives?  To say to those who demand that we bring our 'whole selves' to work: 'very well, then, here it is, warts and all'? So, for example, in meetings we would blurt out what, presumably, most of us often feel: that we are bored, preoccupied by domestic worries, or afflicted by sciatica or whatever it might be. To disclose not less but more than the 'Business Microscope' can discern? If surveillance is not to be thought of as a one way street, how might it work to overwhelm those who want to know everything by letting them know, precisely, that? To make it inefficient to be known?

Beef with efficiency

The current horsemeat in frozen beef meals scandal is an interesting illustration of the issues around what constitutes efficiency which I discuss at several points in the book. The story reflects many different dimensions of this. The way that a hugely complex globalized supply chain has developed reflects one particular, dominant, understanding of organizational efficiency: driving down costs by all means possible. That presents some serious problems even leaving aside the use of horsemeat, such as the unappetising use of mechanically recovered meat products. Thus, even if our microwaveable lasagne only contained beef, we might be rather horrified to see just what that really consisted of, as this selection of charming images allows us to do. But this is what ‘efficient’ use of carcasses means in the dominant understanding. Passing off horsemeat as beef, of course, represents something beyond this ‘normal’ efficiency, because it involves fraud and misrepresentation. But it is only the extension of the same logic. For the suppliers and producers involved it is, precisely, efficient.

To prevent such frauds, and to control the adulteration of foodstuffs in general, requires state regulation, and such regulation is one of the earliest examples of regulation of the free market. This becomes much more complex in extended global supply chains which span national jurisdictions, another of the ways that politics has not caught up with economics as I said in an earlier post about tax avoidance. But it also makes it bizarre that, in the UK, recent years have seen a reduction of food inspectors. Of course this, too, is ‘efficient’ with respect to government budgets, ‘removing the burden of red tape’ from businesses, and ‘getting value for money’ for the taxpayer. In other ways it is grossly inefficient. For a little more paid in tax, the supermarkets and food brands now suffering a catastrophic collapse of confidence in their products - and maze of expensive legal actions - could have had an ‘efficient’ system of inspection.

Then, beyond this, there is you and me, the consumer. Unwilling to spend our time buying ingredients and cooking them, we find it more efficient to buy packaged up meals for the microwave. Worldwide, consumption of ready meals increased by about 10% in volume 2010-2011. And not only do we want it quick, we want it cheap. Efficient? Perhaps not, considering the very high amounts of salt and fat that some of these meals contain. So maybe the time we saved on cooking will turn out to be dwarfed by the time we end up spending in hospital. There will be plenty of time on the cardiac ward to ponder the meaning of efficiency.

Tax Avoidance

The tax avoidance strategies of large international firms like Starbucks, Google and Amazon have become a big political story in the UK recently. But of course it isn’t only a UK story – it’s a global issue precisely because these are global companies. In my book, I give a little explanatory one-liner (p.128, note 5) that tax evasion means illegal tax-dodging, whilst tax avoidance means legal ways of reducing tax liability. That’s true so far as it goes, and it is the defence wheeled out by these companies. But it hides a more complex reality: what constitutes legal tax avoidance is a matter of interpretation and of negotiation between companies and tax authorities. And beyond that it constitutes a matter not of legal technicality but ethics and political philosophy.

What lies behind this is the way that economics has run ahead of politics. Globalization was to a large extent produced by national political decisions to open up world markets but, having done that, the capacity of national polities to regulate global companies has disappeared, as s I mention in the book (p.107). The genie can’t be put back into the bottle. It may be possible for national governments and national public opinion to ‘shame’ global companies into paying more tax, but that is only going to be limited in effect, and possibly contradictory. For example, Starbucks has just said that it will pay more UK tax, but it is also cutting back on the rights and benefits of its employees. This is also, by the way, an indication of why issues of economics and politics are inseparable from those of studying organizations, something I am so keen to argue in the book.

If there is an answer to these issues it can surely only come from inter-governmental action, and an internationally agreed tax regime, but at the present time the institutions to take such action are pitifully weak. One thing which is worth saying is that concern about the conduct of these companies is not, inherently, anti-capitalist. Some of the biggest losers in all this are the local coffee shops and book shops which have no choice other than to pay their taxes and, as a result, are severely disadvantaged. And hence their employees, the local high street, and our sense of community. To make organizations work we have to re-connect ownership, employment and place. That may also mean that we all – me included, as someone who, for example, buys and sells books through Amazon – need to pay a bit more. More importantly, we have to be prepared to vote for political parties that tell us that uncomfortable truth.

Because the bottom line is that for all that we may bemoan its consequences, for 30 years or so significant numbers of us have deemed ‘unelectable’ any political party which questions the orthodoxy of economic globalization, or the doctrine of self-interest that makes it both inevitable and justifiable that companies will minimise their tax liabilities if they can get away with it.