Saturday, 16 July 2011

Why Rupert Murdoch's News International Big Business Is Too Big

There's nothing new in the idea that big business, big media, and big pharma are not necessarily good for society. Arguments against big business run along the lines of consolidation of wealth in a few hands, the homogenization of society, exploitation of scarce resources, and risks associated with single supply.

The scandal that has engulfed Rupert Murdoch and News International hint at another consequence that might be of direct concern to business owners rather than markets customers governments and suppliers. The elephant in the room involves the capability of any business owner to be in touch with what their business is doing operationally.

Taylorian approaches to management have implied that division of labour and hierarchical structures will solve that problem. Corporate Governance rules approach the solution to size from legislative point of view. These mechanistic processes have little hope influencing human action on the ground in advance of mistakes. Large corporates and large institutions per se are in this fundamental sense un-manageable.

Financiers and economists will hanker after economies of scale. This excludes any conversation to be had about the organisational downside of scale. Systems have a way of re-balancing themselves. This homeostatic effect seems to have tripped in with News International. Too big, too obsessed with profit, and too out of control. Put arguments about monopoly to one side and business leaders need to think about the size of an organization in proportion to capability to manage what it does.

There are unintended consequences for any action. Owning a big business means less awareness of the specifics, more distance from the sharp end, more chance of the organisation doing something you didn't expect. The bigger the barrel of apples the more probability you will find some bad ones. Big organizations mean that their owners and senior executives are pre-disposed to reactive fixing rather than proactive leadership and management. Setting up management reporting structures, delegating responsibility doesn't mean a business owner can delegate accountability. Omnipotence doesn't necessarily mean you are omniscient or omnipresent.

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