Peter Cochrane's Blog: How can firms manage with so many bosses?

More management equals less output...

...high. For example, in the trade, transportation and utility category, resignations are occurring at a rate of 474,000 per month or so, while in IT the figure is 35,000.

Apparently, a large proportion of those quitting believe that they can get a better job elsewhere, but what of the rest?

Many cite oppressive and excessively demanding management regimes. And certainly the evidence is that the ratio of managers to active contributors and material expenditure has grown excessively, as depicted in this graph for one first-world nation.

This graph shows how the ratio of managers to active contributors and material expenditure has grown excessively over the past 50 years

The ratio of managers to active contributors and material expenditure has grown excessively over the past 50 yearsPhoto: Peter Cochrane/silicon.com

But this graph tells a fraction of the story, with many countries having between 40 per cent and 55 per cent of the working population employed by government.

This phenomenon raises two key questions: how big can the management population become before a company collapses, and how big can government become before a country collapses under the non-contributory bureaucratic weight?

My guess is that it will turn out that a ratio of management to productive people of about 55 per cent will do the trick.

How come? Certain EU countries have been plunged into huge debt by the same mechanism and are effectively bankrupt. Some companies have also collapsed at about this level.

We might have expected technology to reduce the number of managers everywhere, but the number just seems to keep growing. Startups are the exception, along with modern companies, and biological organisms - all of which appear to be stable and get by with single-figure overheads.

However, our technology and software are often worse in their impact on overheads, and therein lies a big opportunity for engineering to the lowest possible overhead.

I have only found a few examples of this opportunity being seized, but whenever I do, the company and the product have always turned out to be exceptional.

As a general principle, to be more creative, efficient and competitive, we need far less management in companies, government, and indeed in our electronic systems, and not more.