Corporate Waste and Failure in America
THE CHALLENGE OF HIDDEN PROFITS
Reducing Corporate Bureaucracy And Waste
By Mark Green and John F. Berry
Morrow. 453 pp. $19.95.
MAYBE THERE ARE A FEW FOLKS out there who still believe that big corporations actually are efficient, but the rest of us know otherwise. We know the truth.
We’ve called the telephone company and gotten: 1) a busy signal, or 2) disconnected. We’ve squinted, far too many times, at the small print that says, “Please allow 6-8 weeks for delivery.” We’ve tasted New Coke.
Something tells us that even the phenomenal success of Federal Express is a grand testament to corporate inefficiency and waste — not its own, of course, but that of other businesses, whose executives and underlings can buy, with company money, an extra day or two to get the job done. If corporations suddenly got more efficient and cost-conscious, there’s no doubt that Federal Express and its imitators would find themselves in big trouble overnight.
Now come Mark Green and John F. Berry, in The Challenge of Hidden Profits, to tell us what we already know: that corporate America’s rathole is bigger than the federal government’s. They figure that American corporations waste, in all kinds of ways, at least $861 billion a year, and that’s not even counting sky-high executive salaries, exorbitant legal fees and assorted corporate crimes and cons. “Here is a book,” the jacket copy breathlessly promises, “that will do for the American business community what the Grace Commission tried to do for the federal government.” (If that’s what the authors really had in mind, heaven help us.)
So it should come as no surprise that The Challenge of Hidden Profits amounts to little more than a catalogue of corporate excesses, evils, and errors. Green and Berry attribute nearly all of these sins to something they call “corpocracy” (shorthand for corporate bureaucracy). The concept works fine as a catch-all ailment; only problem is, Green and Berry never quite manage to put their fingers on what causes it and what will cure it.
Moreover, the book’s grab-bag approach may leave many readers more befuddled than enlightened. The characters, with few exceptions, are cast in three neat categories: good guys, bad guys, and detached analysts and observers. As for the villains, Green and Berry have, regrettably, rounded up more than a few of the usual suspects.
One of them, for instance, is Archie McCardell, a onetime Ford Motor Company executive and president and chief operating officer of Xerox. McCardell left Xerox in 1977 to take the reins of an ailing International Harvester, where, Green and Berry write, “he took that famous company to the brink of bankruptcy.”
Perhaps. But Green and Berry conveniently overlook McCardell’s impressive record s a corporate waste-buster. At Xerox, McCardell went after padded payrolls with a vengeance, letting 8,000 employes loose in a single year. And at International Harvester, he relentlessly chipped away at the company’s entrenched bureaucracy — just the kind of thing Green and Berry might be expected to applaud.
The authors make no mention of International Harvester’s real problems, none of which McCardell could fairly be blamed for: staggering debt, the highest labor costs in the industry, and a deep recession that left many of its customers unable to buy its products. And while Green and Berry take an exceedingly dim view of McCardell’s management, other business writers have interpreted his achievements in an altogether different light. “Without the hundreds of millions of dollars he slashed from the company’s yearly operating costs,” journalist Patricia O’Toole wrote in 1984, “it is doubtful that International Harvester would have been able to withstand the pounding it would have taken while it waited — and waited — for better times.”
THE BOOK’S BETTER MOMENTS, and there are many of them, come in its engaging illustrations of corporate incompetence and misbehavior. Here we are reminded, for example, that it took Procter & Gamble two years to figure out whether to market Folger’s instant-coffee crystals in 2-, 6-, and 10-ounce jars, or in 2-, 4-, and 8-ounce jars. And that the drawing boards of the Grumman Corporation, which peddled $89 million worth of “advanced design buses” to the New York City Transit Authority, produced vehicles whose windows didn’t open and whose dashboards had no fuel gauges. (Green and Berry properly point out that Grumman and other major defense contractors, which ply their trade with the Pentagon under cost-plus contracts, are the business world’s leading wastemongers. They lose money in the unlikely event they happen to be efficient.)
Most readers are likely to find The Challenge of Hidden Profits to be a thoughtful, incisive, and occasionally amusing look at what’s wrong with corporate America. Yet some of the basics go begging. Is inefficiency, in itself, bad? (One company’s profits, as in Federal Express’ case, may be generated by another’s inefficiencies.) Why, after all, have so many American businesses turned into bloated bureaucracies? And why do they waste money and talent in such wanton ways? Finding meaningful answers to these and other questions requires a lot of reading between the lines, because Green and Berry’s explanations often are annoyingly simplistic. At the outset, for example, they write: “Despite laissez-faire theory, corporations are run by real people with real flaws and real discretion.” Who could argue with that?
The real nuggets of wisdom, more often than not, come from a handful of atypical executives with admirable, against-the-grain approaches. Listen to Warren Buffett, who, as chief executive of Berkshire Hathaway, has become known as one of the nation’s most astute investors. “A compact organization,” Buffett wrote in the company’s 1982 annual report, “lets all of us spend our time managing the business rather than managing each other.”
In painting so many little pictures, Green and Berry manage to let the big one slip out of focus. And some of their solutions to the $861 billion hidden-profits problem are anemic, even aimless. The challenge might be met, they say in the final chapter, “if only our leading companies can insitutionalize the ethic of anti-corpocracy.” Huh?
The simple solution isn’t trendy. America doesn’t need to “exit bureaucratic capitalism and enter the new Partnership Economy,” as Green and Berry put it. And business executives can’t be counted on to right the wrongs in the system, which the authors apparently expect them (as soon as they are enlightened) to do.
Only one thing will price corporate bureaucracy and waste out of the marketplace. It’s called competition, and it wilts whenever government leaves corporate America to its own devices: price-fixing and -gouging, unwanted takeovers, and the like. History has shown, sad to say, that competition is something most of the nation’s biggest businesses would rather do without.
This review originally appeared in the December 22, 1985, edition of The Washington Post Book World.
Bill Hogan