Agency theory: Workers unite vs. stupid managers

JUST like you, I’ve visited many comfort rooms of various shapes, sizes and smell. Some are exclusively reserved for executives, while the rest are for the general public—employees and customers alike.

In one Makati office last week, there was this restroom for everyone that appeared distinctly different when it transmits the state of its boss-subordinate relationship. A sticker note was pasted on the hot air dryer saying:

“Push here for a word from the boss [name of person deleted].”

It looks as if its management was hit by an anti-charm missile right into its bottom. That’s the trouble of having two separate restrooms for executives and “others.” Management, not knowing what is hitting them (because it is using a different CR), has the bad fortune of being demolished right then and there by one or two (or even a sizeable number) of its employees.

That’s how labor-management relations could turn an ugly head. This leads us to one important lesson: We must be actively conscious of the “agency theory” which assumes that management and its employees have opposing goals and interests.

These differences often lead to misunderstanding. One of the biggest problems—all the business books warn you about since the glorious days of W. Edwards Deming (1900-1993)—was that management is extremely ignorant of what’s happening around them, if not unreceptive to good ideas.

Let me give you an example. Manager X (as in Theory X) is having a hell of a time, because he’s having conversations like this:

Worker: Boss, I’ve a good idea on how to make this work process efficient.

Manager: What are you doing now? Could you bring that folder over here?

Worker: Here it is. What do you think?

Manager: Yes, I am listening.

Worker: This should save the company a lot of money.

Manager: Saving company money? (What the hell? It’s not my money!)

Worker: Would you like me to implement it right away?

Manager: Put it down in writing. I’ll let you know in one month.

Worker: But, it’s a simple idea.

Manager: I’m busy right now.

Worker: When is the right time?

Manager: Just write it down and I’ll start from there.

Worker: Any further delay would cost us some few thousands more.

Manager: That policy was established a long time ago by the owner.

Worker: I’m sure that he will appreciate it if given the full explanation.

Manager: Making it cost-effective? (What the hell? It’s not my money!)

Worker: Yes.

Manager: I’m busy right now. Send me an e-mail.

And so it would go with a circuitous talk. Inevitably, by the time the worker left the room, he would be raving with frustration.

What’s the problem? Why can’t Manager X show some semblance of positive reaction? And why can’t he make it easy for the worker to make a suggestion?

The answer, of course, at least according to some dictatorial-traditionalist managers is that a rank-and-file worker is presumed not qualified to give a good idea. That’s the idea behind the agency theory. A worker is treated as a doer than a thinker. “You’re being paid to work like a robot. Do what I say, you booger brain!”

And so, what’s the cure against the agency theory? My answer of course, is to fire Manager X. Then make sure that there’s a reward system to successfully align employee goals and actions with the owner’s interests.

Any savings you can get from not paying the likes of Manager X is enough to motivate an employee even without the company paying him good money.

Rey Elbo is a consultant specializing in human resources and total quality management as a fused interest. Feedback may be sent to <kairoshq@info.com.ph> –Reylito A.H. Elbo, Manila Times