The Wisdom of Robin Hanson, #n
By Arnold Kling
My guess is that most intellectuals underestimate just how dysfunctional most firms are.
This is part of a discussion of why businesses pay consultants. I think a pretty standard view is that CEOs bring in consultants to help overcome resistance in the internal bureaucracy. Intellectuals do not get that concept, because they assume that the CEO is a dictator with complete autonomy in the firm. As I have said before, that model is incorrect.
At Freddie Mac, I would have told you that they brought in McKinsey when it would have been easier if senior management had just listened to me in the first place (I was sort of full of myself in those days). I really resented the consultants, because I was jealous of all the power they could wield based on relatively little knowledge. But they probably helped me on net, because I tended to be pushing for things that a lot of executives did not want.
One of my fantasies is to have Cabinet Secretaries hire McKinsey to go through their agencies and whip them into shape. The problem is that a Cabinet Secretary has even less power than a CEO in dealing with the internal bureaucracy. And, unlike a CEO, a Cabinet Secretary has nothing to gain by making his organization more effective.