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September 09, 2005

Are They Learning?

Leader in the Groan:

In his provocative recent book Why Most Things Fail, the economist Paul Ormerod calls on planners and executives to face what he calls the last taboo in modern commercial and public policy - the predominance of failure. Companies and governments, argues Mr Ormerod, pretend that they are more successful than they are. Both public and private sectors promote planning, strategies, targets and monitoring, even though they may not work.

Not all of these criticisms are identical. Some focus on over-activity by the government; others highlight inactivity. But it is hard not to see that centralisation, complexity and micro-management are strongly related to many of these failed systems. It is also important to restate that these problems apply in the private sector too.

It isn’t just centralisation, although that is certainly part of it. It’s the absence of a feedback loop. It happens in large companies as they point out, but rarely in small ones. For there the feedback is obvious and near instant. Small companies have such precarious finances that one error and they go bust. As we know, errors in bureaucracies get "more resources". In the end, this is the value of the profit motive. It allows us to keep score on who is adding value. Wonder if the Guardian will be able to take that last, oh so difficult, step?

September 9, 2005 in Economics | Permalink


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