Corporate Dreams: Big Business in American Democracy from the Great Depression to the Great Recession

Chapter 17 - McNamara and the Staffers

Chapter 17 McNamara and the Staffers Long before the modern business corporation existed, armies distinguished between “line” and “staff” positions. Authority over military operations flowed down the line from generals to colonels to sergeants to corporals. But a staff officer, say a quartermaster whose job was to procure blankets and boots, guns and ammunition, had no authority in military operations, no matter how high his rank. The quartermaster could require a line officer to submit a requisition form for new weapons. But the quartermaster had no authority over how the line officer used the weapons to fight the enemy. When business corporations became large organizations in the nineteenth century, they adopted the military distinction between line and staff positions. A line position carried operational authority; a staff job did not. A railroad conductor, for example, could order a train to start or stop but a maintenance manager could not. As far as train operations went, a conductor had a line job whereas the maintenance manager only had a staff function. As railroads and then manufacturers became complex organizations, they began to chart the relationships among their officers, including the distinction between line and staff positions. Operating authority, as shown in figure 17.1, flowed from the top down, along solid lines. Managers with operating responsibility were “on the line.” On the other hand, a staff member such as a chief accountant might report to the railroad president but was connected to the functional departments by a dotted line showing that he had no operating authority. One weakness of organization charts is that they depict only formal structure and ignore informal relationships in which staff, despite their official lack of authority, often have considerable power. If there had been (or maybe there was) an organization chart for the Continental 115 Army during the American Revolution, it might have suggested that Colonel Alexander Hamilton, a member of General George Washington’s staff, had little power. But Hamilton was one of Washington’s most influential advisers, a position that he parlayed into a brilliant career. This flaw of organization charts, which focus solely on formal authority, was recognized in the twentieth century. As the corporate leadership ideology rose, the distinction between line and staff became less fashionable . Everyone was supposed to throw themselves enthusiastically into the organization’s work. Inspirational leadership was supposedly more important than line authority. But although modern managerial ideology put the distinction between line and staff into disfavor, organizational reality created ever more staff positions. The rise of the M-form (described in chapter 14) with its CEO loftily presiding over decentralized operating divisions opened the way for a large, top-level staff. To measure the short-run performance of division managers while also planning the firm’s longterm strategy, the CEO might need the help of expert staff in finance, accounting, legal affairs, human relations, research and development, and many other specialties. Corporate America’s early- and mid-twentieth-century surge in staff positions gave young people opportunities for quick success. The fastest way to get to the top of a corporation was to start there, as a staff member for senior management. An able staff member at corporate headquarters could get noticed quickly and be moved into a high-level line position. On the other hand, to start at the bottom, in operations, could make for a hard climb to the top. By the 1950s, some large business corporations were being run by managers who had started on the staff. T h e C o r p o r a t i o n i n t h e W i l d e r n e s s A g a i n 116 President Accountant Purchasing Manufacturing Marketing 17.1. A line-and-staff organization. The practice of recruiting top managers from staff positions exacerbated the risk of bad management. Over time, a business corporation could develop a senior management with little knowledge of the company ’s core operations. A steel company might be run by a finance whiz, a department store by a human relations specialist. By “freeing” the CEO from operations, the M-form had increased the risk of top-level negligence, the risk that the CEO might not stick to his or her knitting. Now, the recruitment of senior management from staff increased the risk of top-level incompetence, the risk that the CEO might not know how to knit...