You likely have an understanding of what a cartel is, and know some historic and contemporary examples – collusion on price in the international shipping industry, gold cartels, and the diamond cartel – all alleged, of course.
Cartels simply agree when they should be competing. Those who support “cartel busting” do so because they believe agreeing when you should be competing breaks the competitive processes that make capitalism good for consumers. It reduces choice and keeps prices artificially high.
While the benefits of capitalism may not be universally accepted, those arguments only make the following analogy more interesting:
What is a cartel really? It’s a group of people that sit around, don’t like to write anything down, and agree on the value of something. Also, they agree on the value of things based on their own interests rather than letting market forces decide.
Is this not precisely what your management team is there to do? Isn’t your management team in that case rather like a cartel?
This isn’t a problem in itself. You need a management team (right?). Otherwise you are admitting your organisation’s aggregation of services, directed by your management team, has no chance of delivering value beyond what your customers could source themselves via a number of coordinated transactions on the market.
The problem isn’t that your management team is like a cartel. The problem is not acknowledging the market-like processes within your organisation that are bypassed when a management team simply “agree amongst themselves” on the value of something. The problem is seeing your organisation only as a governance structure and not seeing the internal market.
The more a management team struggle to “get along” or “be a strong team” the more they loose touch with clients, markets, and employees. How many times have you heard about the need for a “strong management team”? In contrast, how rarely does your management team get pushed internal “market indicators” that they can’t control, or that haven’t been filtered for their consumption?
The problem isn’t the management team agreeing, the problem is the management team agreeing too readily, without sufficient evidence, or without sufficient engagement with the organisation as a whole. In other words, without being linked with the internal market of value within the organisation.
Wherever side of the economic arguments you might sit on – the Austrian economists, for example, don’t have an issue with cartels – the idea of busting cartels is exciting. If you want to bust your management team cartel, the tool of choice is information.
Real cartels bypass the market, bypass the price system. The problem is that organisations don’t even have a price system. They have financial accounting systems, but they only cover a very small proportion of the internal market and are often too readily manipulated and “gamed” by the management team.
In fact, your management team exists in lieu of a price system. That’s almost the very nature of a firm. But the nature of firms is changing. Social media technologies, direct communication channels, and alternative organisational structures such as communities of practice, broadly open the information channels within and across organisations. When this happens the flow and valuation of information become a sort of price system.
While I might once have suggested organisations could benefit from introducing a price system, I believe the tide has turned and it’s now just as important to ensure the management process is re-engaged with this information-based price system that already exists. Not to be driven by it, but to ensure it both informs decision-making and supports the implementation of decisions.
All of our information systems – when implemented with this explicit purpose – can provide a view of this internal market. They can all be viewed as part of this price system. Every activity brokered through an information system can be viewed as a transaction in a market that contributes to one or more market indicators.
Busting your management team cartel is reconnecting with this internal information market. What steps might you take to ensure that your management team isn’t acting like a cartel?
- ensure the management team is presented with external information, that they didn’t generate themselves or that wasn’t directly generated for their consumption.
- ensure the information used to make decisions is shared across the organisation when possible. This uses the internal market to value the information used in decision making.
- Openly compete within the management team. Any management team, particularly one structured across functional lines, has a fundamental conflict of interest regarding which function gets the most resources. If the management team isn’t arguing about resource allocation they aren’t trying to optimise their respective functions.
- Don’t compete. The specific structure of the management team is important. If the organisation’s strengths and weaknesses are understood and agreed within the management team then some roles within the management team are more difficult than others. There are allowed to be “losers”. Some regions are more competitive, some functions are first to struggle when external conditions change. A rich model of the organisation’s operating model should inform the management team’s decisions.
So go cartel busting. If your management team is used to making decisions by simply agreeing amongst yourselves – with little reference to information not explicitly produced for consumption by your team – you may be acting like a cartel, and your consumers, the whole organisation that depends on your services, may be suffering.