Howard S. Schwartz

Oakland University

Rochester, MI  48380


 (This paper was adapted from my book Narcissistic Process and Corporate Decay: The Theory of the Organization Ideal. New York University Press, 1990. Versions have also appeared in Business Ethics Quarterly, 1 (3), 1991, 249-268. and in Richard M. Coughlin (ed.) Socio-Economic Perspectives 1990 Armonk, NY: M.E. Sharpe. 1991.)





Organizational participants learn that "getting ahead" in organizational life comes from dramatizing a fantasy about the organization's perfection. The fantasy is the return to narcissism, in which the organization and its highest participants are seen as the center of a loving world. Since the return to narcissism is impossible, orienting the organization to the dramatization of this fantasy means that the organization loses touch with reality. The result is organizational decay—a condition of systemic ineffectiveness. Organizational decay is illustrated through the case of General Motors. Specific dimensions considered are: commitment to bad decisions; advancement of participants who detach themselves from reality and discouragement of reality-oriented participants who are committed to their work; creation of the organizational jungle; isolation of management; development of a hostile orientation to the environment; transposition of work and ritual; loss of creativity; dominance of the financial staff; development of cynicism or the loss of reality; and overcentralization. Organizational decay may be compared with the consequences of hubris.


  When I left graduate school and began teaching organizational behavior courses, I was struck by the irrelevance of what I had learned to the actual organizational experience of my students. My students experienced and understood organizational life as a kind of "vanity fair," in which individuals who were interested in "getting ahead" could do so by playing to the vanity of their superiors. One needed to do this in two respects. One needed to flatter the superior as an individual and as an occupant of the superior role. This latter process tended to trail off into an adulation of the organization in general. Work either fit into this process of adulation, in which case it made sense; or it did not, in which case it did not make sense. Work which did not make sense in this way, my students felt, was best left to the suckers who hadn't figured out yet how to get ahead and who deserved whatever torment this system led them to inherit. If, through this process, important, valid information was lost to the system by being withheld or simply unappreciated, that was not their concern. Through luck or guile, the consequences would, or could be made to, occur on somebody else's watch.

  At first glance, my students' attitude looked to me like cynicism. But closer analysis suggested that, although they had a great deal of cynicism in them, they were not simply being cynical, for they believed in the righteousness of what they were doing.

  For them, getting ahead was a moral imperative, which justified any means necessary for its accomplishment. But more than this, the system itself which called upon subordinates to idealize it was held morally sacrosanct. A person who refused to go along with the system was seen as not only stupid and naive, but as morally inferior. And this was so even if the individual in question was offering a point of view that was essential for the organization to do its work effectively and efficiently.

  It thus seemed to me that, for my students, the organization's processes were held to define moral value. As defined by its processes, the organization seemed to exist in a moral world of its own, which served to justify anything done on its behalf, and which did not require justification on any grounds outside of itself. This view was inconsistent with a view of the organization as an instrument to do work. For my students, the organization did not exist in order to do work; it did work in order to exist.

  Yet even while holding this point of view, many of my students did not appear to have a deep loyalty to the organizations which they so supported. On the contrary, for the most part they were willing to change organizations with no regrets or guilt. Their loyalty, if that is what it was, seemed to be to an abstract idea of organization, an idea of the organization as a vehicle for the revelation of their own grandiosity. Ultimately, therefore, their loyalty appeared to be directed at themselves.

  Over time, trying to be a good empiricist, I came to take their stories about organizational life increasingly seriously. I made the assumption that organizational life was just what my students, whom I came to consider my research subjects, and sometimes informants, appeared to be living. Relegating what I had learned in graduate school to the status of a fantasy, I tried to fashion a theoretical conception that would explain this organizational reality. Following Shorris (1981), I called the syndrome "organizational totalitarianism" (Schwartz, 1987a).

  I first understood organizational totalitarianism in moral terms, in terms of the psychological damage done to the individuals involved (Schwartz, 1987a). But as time went by it became more and more clear to me that the processes I was coming to understand must have practical consequences as well—consequences for the effective functioning, the efficiency, the profitability, the competitiveness of organizations. In a word, it did not seem to me that organizations as I understood them could possibly be successful even in terms of the narrowest economic criteria, without regard to the moral costs involved. So, when American industry seemed to be incapable of competing with foreign enterprises, I did not find myself at all surprised.

  Getting beyond my students' accounts to gain evidence of the systemic effects of the process, however, proved to be a problem. There is a kind of "uncertainty principle" that applies here. Organizational participants who are in a position to be able to describe these systemic effects have given up the moral autonomy that would have enabled them to perceive them. Participants who insist on retaining their moral autonomy are typically excluded from important positions in the system precisely because of that insistence. Thus, the closer one is to the data, the less likely one is to be able to see it.

   Accordingly, in the present paper I am going to rely heavily on one of the very few accounts that I know of by a highly positioned insider who became alienated from the system and reported on its processes to the outside. This is a book by John Z. De Lorean, co-written by J. Patrick Wright and published by the latter under his own name, called On A Clear Day You Can See General Motors (1979). There are two problems with using De Lorean's testimony, arising primarily from his subsequent problems with the law and from the apparent mismanagement of his own car company. Fortunately, therefore, there is a more recent account of GM by Maryann Keller (1989), which bears none of his taint. I will be using her work to lend secondary support to my case.

  An independent source for a description and explanation of the process of decay is a remarkable book by Robert Jackall called Moral Mazes: The World of Corporate Managers (1988). Unfortunately, I came upon this book too late to integrate it into the present paper. Jackall's approach is sociological, and takes for granted that "striving for success ... is a moral imperative in American society" (p.43). My concern is to reveal the psychodynamics of this striving and to show how decay follows from these psychodynamics. Aside from that, and from my increased emphasis on the loss of reality that follows from this, I see our approaches as being strikingly complementary. I might add that the high degree of descriptive and explanatory agreement between these two entirely independent works represents a satisfying level of mutual confirmation and cross-validation.

Organizational Totalitarianism and the Theory of the Organization Ideal

  The theory I shall use to discuss organizational totalitarianism begins with the premise that, for people like my students, the idea of the organization represents an ego ideal—a symbol of the person one ought to become such that, if one were to become that person, one would again be the center of a loving world as one experienced oneself as a child. The ego ideal represents a return to narcissism (Freud, 1955, 1957; Chasseguet-Smirgel, 1985). It represents an end to the anxiety that entered our lives when we experienced ourselves as separate from our apparently all-powerful mothers.

  With regard to organizations, this means that individuals redefine themselves as part of an organization, conceived of as perfect. Thus, the image of such an organization is one in which members are perfectly integrated  into a collectivity which is perfectly adapted to its environment. An image of an organization serving as an ego ideal may be called an "organization ideal" (Schwartz, 1987a,b,c). The organization ideal, thus, represents a project for the return to narcissism.

  The problem with the organization ideal, like any ego ideal, is that it can never be attained. It represents a denial of our separation, finitude, vulnerability and mortality; but these remain with us by virtue of our existence as concrete individual human beings (Becker, 1973; Chasseguet-Smirgel, 1985; Schwartz, 1987b).

  Given the importance of maintaining belief in the possibility of attaining the ego ideal, organizations often attempt to generate a way of preserving the illusion of the organization ideal in the face of the failure of the organization to exemplify it. The attempt to manage an organization by imposing this illusion is what I call "organizational totalitarianism."

  Organizations attempt this imposition in a number of ways. As Klein and Ritti (1984) observe, they give and withhold information to create a myth of the organization as more effective than it really is. They impose patterns of speech and behavior on participants that make them seem more integrated than they really are. They promote the attribution that their problems are due to forces which do not belong in the world, which is to say to "bad" forces. And they generate an image of a gradient of Being, an "ontological differentiation," in the organization (Schwartz, 1987a,b,c; also see Sievers, 1987, and Schwartz, 1987d) which idealizes the higher figures in the organization (Klein and Ritti, 1984: 170-172) as individuals who have fulfilled the project of the return to narcissism and become centers of a loving world. This provides the drive to climb the hierarchy that my students experience as the central spirit in their moral world (Schwartz,1987a). Moreover it delegitimates those who are farther down (Sennett and Cobb, 1973). This makes it possible for organizations to maintain the idea of the perfection of the organization's core and blame its imperfections on peripheral elements.

Organizational Decay

  The problem is that such symbolic manipulation places falsehood right at the core of organizational functioning and therefore cannot help but lead to a loss of rationality. For the return to narcissism is impossible, short of psychosis (Chasseguet-Smirgel, 1985), and therefore organizational totalitarianism means the superimposition of a psychosis upon organizational functioning. Ultimately, whatever the gains in motivation, such a loss of rationality leads to generalized and systemic organizational ineffectiveness.

  Moreover, I suggest that this condition of generalized and systemic ineffectiveness has a unity to it, and therefore represents something like an organizational disease. I would like to give it the name "organizational decay," with the intention being to convey the impression of an internal process of rot, not occasioned by outside forces; and with the intention as well to give the impression of a holistic process, not taking place in isolated parts of the organization but typically and increasingly sapping the vitality of the organization as a whole. This decay eventually may manifest itself in any of a number of ways. I shall discuss a few of them, relying on De Lorean's and Keller's books about General Motors to provide illustrations.

Some Causes of Decay

Commitment to bad decisions

  Perhaps the most obvious symptom of organizational decay is the commitment to bad decisions. Staw (1980) has noted that the tendency to justify past actions can be a powerful motivation behind organizational behavior and can often run counter to rationality. As he notes, the justification process leads to escalating commitment. When mistaken actions cannot be seen as mistaken actions, the principle on which they are based is not seen as being mistaken. Worse yet, our feeling that it is a valid principle becomes enhanced through our need to defend our decision and subsequent decisions made on the basis of it.

  This process must be especially lethal in the case of the totalitarian organization, where the idea of the perfection of the organization provides the organization's very motivational base. Here, the assumption of the identity of the individual decision maker and his or her organizational role turns the tendency to justify past actions from a defensive tendency on the part of individuals to a core organizational process—a central element of the organization's culture.

  The case of the Corvair illustrates the process of commitment to bad decisions. Modeled after the Porsche, the Corvair was powered by a rear engine and had an independent, swing-axle suspension system. According to De Lorean, any car so powered and so suspended is going to have serious problems—problems which were well known and documented by GM's engineering staff long before the Corvair was offered for sale. Engineers put up a desperate fight against the design but:

...Management... told dissenters in effect to "stop these objections. Get on the team, or you can find someplace else to work." The ill fated Corvair was launched in the fall of 1959 (p.66).

  Despite the fact that the Corvair demonstrated itself to be unsafe almost immediately, and despite the fact that a stabilizer bar costing only $15 a car would have provided a solution, GM did not correct the problem until the release of the 1964 models, by which time numerous lives had been lost and millions had been spent in legal expenses.

Advancement of participants who detach themselves from reality and discouragement of reality-oriented participants who are committed to their work

  When core organizational process becomes the dramatization of the organization and its high officials as ideal, the evaluation of individuals for promotion and even for continued inclusion comes to be made on the basis of how much they contribute to this dramatization. This means that, increasingly, promotion criteria shift from achievement and competence to ideology and politics[1].

  Thus, De Lorean says that whether or not someone was promoted often depended on something other than competence:

That something different was a very subjective criterion which encompassed style, appearance, personality and, most importantly, personal loyalty to the man (or men) who was the promoter, and to the system which brought this all about. There were rules of this fraternity of management at GM. Those pledges willing to obey the rules were promoted. In the vernacular, they were the company's "team players." Those who didn't fit into the mold of a manager, who didn't adhere to the rules because they thought they were silly, generally weren't promoted. "He's not a team player," was the frequent, and many times only, objection to an executive in line for promotion. It didn't mean he was doing a poor job. It meant he didn't fit neatly into a stereotype of style, appearance and manner. He didn't display blind loyalty to the system of management, to the man or men doing the promoting. He rocked the boat. He took unpopular stands on products or policy which contradicted the prevailing attitude of top management.(40)

  Keller (1989) adumbrates this point in a number of places, for example this about recently retired chairman Roger Smith:

For thirty-one years, Smith moved up through the ranks of GM as the consummate corporate player—the GM culture coursed in his veins. Admiration for and loyalty to the organization was at the core of his being. He was one of a new breed of corporate politicians whose success depended on their ease in wearing the corporate mantle. Translated, that meant, "Above all, be loyal to your superior's agenda." (p.66)

  One result of this will be that those individuals who are retained and promoted will be those who will know very well how things are supposed to look, according to the viewpoint of the dominant coalition, but who will know less and less about reality insofar as it conflicts with, or simply is independent of, this viewpoint. The problem is, of course, that since no organization is, or can be, the organization ideal, this means that those individuals who are retained and promoted will be those who can cut themselves loose from discrepant reality.

  Another result of this sort of selection must be that realistic and concerned persons must lose the belief that the organization's real purpose is productive work and come to the conclusion that its real purpose is self-promotion. They then are likely to see their work as being alien to the purposes of the organization and must find doing good work increasingly depressing and useless.

  De Lorean gives this example of the clash between the incompetent who have been promoted and their competent but discouraged subordinates:

Increasingly, group and upper managers seemed to look upon their jobs in such narrow terms that it was impossible to competently direct broad corporate policy. Often misplaced, unprepared or simply undertalented, these executives filled their days and our committee meetings with minutiae. After one particularly frustrating meeting of the Administrative Committee, John Beltz and I were picking up our notes when he looked down at the far end of the conference table at the corporate management and said to me, I wouldn't let one of those guys run a gas station for me." It was a bitter and sad indictment of our top management by one of the then young, truly bright lights of General Motors management. (256)

A third effect, made obvious by this point, is that higher management is effectively isolated from criticism,[2] or even serious discussion, of its thought and actions. De Lorean gives this account:

Original ideas were often sacrificed in deference to what the boss wanted. Committee meetings no longer were forums for open discourse, but rather either soliloquies by the top man, or conversations between a few top men with the rest of the meeting looking on. In Fourteenth Floor meetings, often only three people, Cole, Gerstenberg, and Murphy would have anything substantial to say, even though there were 14 or 15 executives present. The rest of the team would remain silent, speaking only when spoken to. When they did offer a comment, in many cases it was just to paraphrase what had already been said by one of the top guys. (47)

  Indeed, as organizational promotion and retention criteria shift toward the dramatization of the perfection of the organization, this shapes the very job of the subordinate into what Janis (1972) calls "mindguarding"—the suppression of criticism.

  Keller also comments on the conflict between what one needs to do to get promoted and the quality of one's work:

One retired executive rails against a system that creates vertical thinkers and cautious leaders. "The whole system stinks once you're in it. You continue to want to make vertical decisions: 'What is it that I should decide that will be good for me. Never make a horizontal decision based on what is good for the company. I want to get promoted.'

“So you get promoted because you're sponsored by someone; you get promoted before they catch up with you. I can go through a litany of those clowns. They go from this plant to that complex and then, all of a sudden, they've got plaques all over the walls that say how great they've done—but the plant's falling apart and the division's falling apart." (p.34)

The Creation of the Organizational Jungle

  The more successful the organization is at projecting the image of itself as the organization ideal, the more deeply must committed participants experience anxiety. For the image projected, the image of the individual as perfectly a part of the perfect organization, is only an image; and the more perfect it is, the more acute the discrepancy between the role and the role player. Given the importance of the organization ideal in the individual's self-concept, some way must be found in which the individual can reconcile the discrepancy between the centrality in a loving world he or she is supposed to be experiencing and the wretchedness he or she in fact feels. As we have seen above, the typical way is to attempt to deepen the identity of self and organization by rising in the organization's hierarchy and by fighting off what are perceived as threats to the organizational identity one has attained—perceived threats which are often projections of one's own self-doubts.

  The result of this is that individuals become obsessed with organizational rank. They become compelled to beat down anyone who threatens or competes with them in their pursuit of higher rank or who is perceived as threatening the rank they have already acquired. Thus, ironically, behind the display of the organization ideal, of everyone working together to realize shared values, the real motivational process becomes a Hobbesian battle of narcissism project against narcissism project.[3] The consequences of this for coordination, cooperation, and motivation are clear enough. De Lorean says:

Once in a position of power, a manager who was promoted by the system is insecure because, consciously or not, he knows that it was something other than his ability to manage and his knowledge of the business that put him in his position.... He thus looks for methods and defense mechanisms to ward off threats to his power. (49)

Isolation of Management and Rupture of Communications

   A related problem is that the greater the success of the totalitarian manager, the more the manager is isolated from his or her subordinates. The world that the subordinates live in is the world of the organization ideal as created by the totalitarian manager. The world that the totalitarian manager lives in is the world of the construction of the image of the organization ideal. These two worlds are incommensurable and it cannot help but happen that communication and trust must break down between them. For communication and trust mean two different things to these groups. Indeed, for totalitarian management, communication to subordinates is not communication at all—it is deception.[4]

   In this fashion, the organization comes to be stratified in an insider/outsider dimension that has been likened to the structure of an onion (Shorris, 1981; Arendt, 1966) and which serves the same function as party membership in the totalitarian state. This must make a mockery of all attempts to break down status barriers that stand in the way of effective communication—as appears to be the idea behind various "quality of working life" efforts.

Development of Hostile Orientation Toward the Environment

  If the totalitarian manager is successful, as we have seen, organizational participants take the organization as an organization ideal. It must follow, in their thinking, that such an organization will be successful in its dealings with the world. This poses a difficulty of interpretation for the necessarily problematic relationships between the organization and its environment.

  Thus, in the nature of things (Katz and Kahn, 1966) the environment places constant demands on the organization. Failure to meet them will result in the organization's death. But from the standpoint of the totalitarian manager committed to portraying the organization as the organization ideal, this sort of reasoning cannot be acknowledged. From this point of view it is the organization that is the criterion of worth. The environment is not conceived of as existing as an independent environment at all; it exists only in order to support the organization. From this standpoint the demands of the environment must be presented as hostile actions on the part of bad external forces—hostile actions to which a legitimate response is equally hostile action.

  The General Motors Corporation, in response to Ralph Nader's (1965) book about the Corvair, Unsafe At Any Speed, hired private detectives to find ways to discredit him. Sending private detectives to find out the dirty details of his private life suggests something about their attitude toward him. It suggests that they expected to find something to show that he was a bad person. He had to be a bad person: he had attacked GM, hadn't he?


Criticism from the outside is generally viewed as ill-informed. General Motors management thinks what it is doing is right, because it is GM that is doing it and the outside world is wrong. It is always "they" versus "us." (257)

  And when Peter Drucker, wrote The Concept of a Corporation (1946), a work which was generally regarded as decidedly pro-business and pro-GM, "he was resoundingly criticized within the company for daring to criticize the organization of the corporation." (258)

    Thus, the picture of the organization as organization ideal leads to an orientation toward the world that can best be described as paranoid. It is clear enough that such a conception must degrade the relationships with the environment that ultimately the organization requires for its survival.

The Transposition of Work and Ritual

  When work, the productive process, becomes display, its meaning becomes lost. Its performance as part of the organizational drama becomes the only meaning that it has. Accordingly, the parts it plays in the organization's transactions with the world become irrelevant. When this happens, it loses its adaptive function and becomes mere ritual.

  At the same time, those rituals which serve to express the individual's identification with the organization ideal, especially those connected with rank, come to be infused with significance for the individual. They become sacred. Thus, reality and appearance, signified and signifier, trade places. The energy that once went into the production of goods and services of value to others is channeled into the dramatization of a narcissistic fantasy in which the organization's environment is merely a stage setting.

  Consider how this shows up in the matter of dress. One can easily make a case that patterns of dress among organizational participants often have some functionality. But when the issue comes to be invested with great meaning, one must suspect that ritual has supplanted function. Thus, De Lorean describes how half of his first meeting as a GM employee was taken up in a discussion of how a vice-president had been sent home for wearing a brown suit. (p.40)

  The dynamics of the ways in which ritual comes to assume the importance work should have helps to explain the dynamics of the ritualization of work. For the willingness to allow one's behavior to be determined by meaningless rituals comes to be justified by an idealization of the organization that elevates its customs above, and discredits, one's values—one's sense of what is important. This willingness to subordinate and delegitimate, in a word to repress, one's own sense of what is important, even about matters that should be within the competence of anyone's judgment, must have its consequences magnified when the matters in question become more abstruse and difficult to make judgments about, as is the case with real executive work. Then the repression of one's values deprives one of any basis for making such judgments, and leads naturally to a superimposition of the rituals with which one is familiar, even where, patently, they do not belong.

Thus, De Lorean recalls that when he was elevated to the Fourteenth Floor, GM's executive suite, as group executive in charge of the domestic Car and Truck Group:

...I saw that the job... often consisted only of ... little, stupid, make-work kinds of assignments, things which I thought should have been decided further down the line.

  Some of these things, which had little or no impact on the business, were an insult to a person's intelligence.... As I recall, [for example, my boss] asked me to catalogue service parts numbers and to prepare reports on the size of parts inventories. (26-27)

  De Lorean, feeling that a person at his high level should be involved in planning, rather than in trivia, set up a meeting with Vice-Chairman Thomas Murphy to straighten out his job assignment. But Murphy found nothing peculiar, and:

I suddenly realized that what I felt was a weakness of life on the Fourteenth Floor, he and others thought was "business as usual." They were quite happy to let their jobs drag them from one place to the next, trying to solve problems as they came up, but not getting into the kind of long-range planning that Fourteenth Floor executives were supposed to be doing.

Loss of Creativity

  The delegitimation of one's sense of what is important gives rise to a special case of the ritualization of work—the loss of creativity. Thus, Schein (1983) describes the condition of "conformity" which follows from an insistence by the organization that all of its norms be accepted as being equally important. Under that condition, the individual

... can tune in so completely on what he sees to be the way others are handling themselves that he becomes a carbon-copy and sometimes a caricature of them.

And he notes:

... The conforming individual curbs his creativity and thereby moves the organization toward a sterile form of bureaucracy, (p. 197)

  Maslow (1970) gives us insight into the psychodynamics of this when he observes that creativity is characteristic of both ends of the continuum of personality development, but not of the stages in the middle (pp.170-1). Creativity, this suggests, is a function of spontaneity, a function of taking seriously our actual affects and interacting in the world in consideration of our spontaneous feelings. But as the self comes to be dominated by a concern for how things appear to others, which is characteristic of the middle stages of personality development (Schwartz, 1983), creativity disappears as a mode of interacting with the world. As the organization requires that the individual subordinate his or her spontaneous perception to an uncritical acceptance of the ideal character of the organization, it thus determines that the affective basis of creativity will be repressed.

  The lack of creativity, since it is a lack of something, cannot be positively demonstrated. As an experience, it makes itself known as a feeling of missing something different that has not occurred, even though one does not know what the different element would have been. Thus, De Lorean found himself introducing a "new" crop of Chevrolets that were not really new at all:

This whole show is nothing but a replay of last year's show, and the year before that and the year before that. The speech I just gave was the same speech I gave last year, written by the same guy in public relations about the same superficial product improvements as previous years.... Almost nothing has changed.... there was nothing new and revolutionary in car development and there hadn't been for years. (pp.60-1)

  In benign times, one may experience boredom: the consciousness of a sameness, a lack of originality. When circumstances are harsh, partly as a result of the lack of creativity that the organization needed if it was to have adapted, one may simply experience the intractability of the situation. Adding up the figures in the usual way simply shows one, again and again, how hopeless the situation is. One may then experience the loss of creativity as a wish for a savior who will make the organization's problems disappear.

  In the hard times, I suspect, one rarely comes to recognize that the ideas that the organization needed in order to have avoided its present hopeless state may have been upon the scene a long time ago. But the individuals who had them might have been passed over for promotion because they were not "team players," or perhaps they were made to feel uncomfortable because they did not fit it in, or maybe they were scapegoated whenever the organization needed a victim. Indeed, ironically, the very ideas that were needed might have been laughed at or ignored because they were not "the way we do things around here."

Dominance of the Financial Staff

  Another hypothesis may be used to account for the emergent dominance of the financial function of the corporation that De Lorean finds in General Motors and that others, for example Halberstam (1986) have partly blamed for the decline of American industry.

  As envisioned by Alfred P. Sloan, the financial function and the operations side of the corporation were both supposed to be represented strongly at the top level of the corporation. But, as De Lorean notes, over time, and specifically through the rise of Frederick Donner, the financial side came to dominate the corporation- Why?

   I propose that finance, rather than operations, offers the greater narcissistic possibilities. As Nader and Taylor (1986) note, operations, the productive process, tends to temper grandiosity. The recalcitrance of matter, so to speak, exerts a humbling influence. Not so with finance. I suggest that the financial world-view can be understood as a kind of latter-day Pythagoreanism in which the world is seen as mere instantiation of number, and as imposing no bounds on the imagination's flights. Everything seems possible as long as the numbers can be made to work, and the one who can make them work can take this as a sign of omnipotence. When the matter comes to competitive elevation of the organization ideal, who can do it better, who can represent it better, than the officer whose bonds to earthly substance are the lightest. Who better than the specialist in finance?[5] Keller's analysis is similar

   The tyranny of the number crunchers has evolved, to a great extent, from GM's reluctance to hear bad news about itself. If the finance guys can present the right numbers, everyone breathes a sigh of relief, and the finance people look like heroes. There's no incentive for executives in finance positions to give bad news; the more facile they can be with numbers, the higher their fortunes rise, (pp.27-28)

Cynicism and Corruption or Self-Deception and the Narcissistic Loss of Reality

  Referring to the ways people are related to their own presentations, Goffman (1959: 17-18) notes that one can either be taken in by one's own performance or not taken in by it, using it only "to guide the conviction of his audience ... as a means to other ends." In the latter case we refer to the individual as a cynic. Such persons disassociate themselves from discrepant information consciously and through deception. In the former case, the individual "comes to be performer and observer of the same show." Goffman adds:

It will have been necessary for the individual in his performing capacity to conceal from himself in his audience capacity the discreditable facts that he has had to learn about the performance; in everyday terms, there will be things he knows, or has known, that he will not be able to tell himself, (p.81)

  Goffman notes that these persons cut themselves loose from discrepant information through repression and disassociation, a point which corresponds perfectly with psychoanalytic theory concerning the maintenance of the ego ideal.

  We may refer to such individuals as self-deceptive. Thus, in the totalitarian organization, no matter what its espoused values, promotion and even continued inclusion will tend to go to deceptive cynics whose moral involvement in their organizational activity is attenuated, or to self-deceptive persons whose involvement in reality is attenuated.

  Of the two, it is difficult to say which is to be preferred. Cynics at least know what is going on around them; and if their moral involvement in their organizational role is attenuated, that does not seem inappropriate in an organization as deceptive as one which is managed by totalitarian means. Indeed, in organizations which have seriously degenerated as a result of these processes, it is often only the cynics who can get anything done at all.

  Nonetheless, there is no doubt that cynicism tends toward corruption. Corruption does not play a major role in De Lorean's picture of General Motors, but he does note its presence (p.83).

  Our analysis leads us to suspect that, as time goes by, if GM continues to deteriorate, it will become increasingly difficult for even minimally functioning individuals to idealize it. Then, corruption will increasingly become a problem.

  For the present, I think the more serious problem comes in with those who deceive themselves and distance themselves from reality. For as the processes I have described operate, and as the organization degenerates accordingly, it becomes increasingly difficult to see it as the ideal, and individuals who are able to do so must become increasingly self-deceptive. A point must come when such individuals may not be said to be psychologically living in the same world that the real organization is in. What makes this even worse is that, since this capacity for self-deception is an important advantage in the race for promotion, the total disassociation of the individual from organizational reality is likely to be correlated with the individual's position in the hierarchy. Then the most important processes within the organization come to be under the authority of people who are not operating in the real world as far as the organization's requirements are concerned.

Keller hints at this:

During the 1970's, a writer for Fortune magazine set out on a quest for dissenting views at General Motors, and found it hard "to find a top executive at GM who does not evidence enthusiasm for what he or the company is doing." One view might hold that GM had achieved a state of management consensus that would be the envy of any company. But more likely, the lack of dissension was motivated by self-interest. It was managerial suicide to be the person who got labeled a naysayer. There was also an element of denial; in the same way that children of alcoholics often refuse to accept their parents' addiction, GM employees refused to admit the truth about their corporate parent. They didn't want to believe.(pp. 65-66)


  The narcissistic loss of reality among those at the top of the corporation may be a major cause of overcentralization of operational decision making. De Lorean found this overcentralization to characterize General Motors, and with it the tendency to provide simplistic answers to complex questions. The idea that, having risen to the top of the corporation, individuals would hold themselves as bearing all of its knowledge and virtues follows immediately from what we have been saying.

  From this would follow the tendency of top management to believe themselves more capable than anyone else of providing answers to any questions that arise. Having no command of specific details beyond those in their imaginations, the answers which they give, and which would come to bind the rest of the corporation, would necessarily be simplistic and inappropriate. Moreover, as the decay process continues, and as the competence of top management declines accordingly, both their tendency to impose simple answers to complex problems, and the specific inadequacy even of the simplistic answers they propose, would tend to increase. Moreover, the capacity of the system to correct itself would tend to decrease, since the increasing power of the higher echelons of the corporation, and their increasing narcissism, would tend toward an attribution of blame to the lower levels of the organization. This would delegitimate those whose judgment would be necessary to reverse the decay process.

  De Lorean and Keller provide a number of examples of this. This one, from De Lorean, will serve our purpose:

... the corporate program for maximum standardization of parts across product lines was a knee-jerk cost-cutting reaction to the incredible proliferation of models, engines and parts which took place in the uncontrolled and unplanned boom of the 1960's. However, the program was not intelligently thought out. It was not thoroughly analyzed for its actual effect on the company. On paper the concept looked good and seemed like a sure way to save money. In reality it wasted money. The car divisions rebelled at various stages of the standardization program. Their cries were unanswered. When Chevrolet rebelled against using the new corporate U-joint... Keyes told me, "Use the corporate one or I'll get someone in Chevy who will."

   We used it, at an investment of about $16 million in tooling, and our costs rose $1.40 per car. In addition, the corporate design failed in use and Chevy paid out about $5 million extra in warranty claims.

  Instead of saving money, the standardization program at GM wound up costing the corporation about $300 million extra per year....

  The last straw came in 1972, however, when management asked us: "Why is the cost of building a Chevrolet $70 closer to Oldsmobile today than it was in 1964?" The question from the top was offered in the usual "you aren't doing your job" manner. The irony was incredible. (252-3)

An Overview

  Before concluding this discussion of the practical consequences of totalitarian management, it is worthwhile to note a characteristic that the consequences mentioned have in common: they are all cumulative and interactive with each other. They all tend to build within the system and, interacting with each other, take over the system bit by bit. This is the way in which the ineffectiveness characteristic of the decadent organization becomes systemic and generalized. Thus, for example, the accumulation of bad decisions taken within the system suggests that those who manifest belief in it as an organization ideal must increasingly be self-deceptive or cynical, which in turn decreases the retention of realism and concern for work, which leads to a further increase in bad decisions, further degradation of the relationship with the environment, and so on.

   The result of this is that the rate of decay will tend to accelerate. On the basis of this the fact that GM's market share took six years to decline from 46% to 41%, but only three more years to go to 35% (Ingrassia and White, 1989), comes to make a certain chilling sense.

Conclusion: On Averting Organizational Decay

  There is no doubt that fantasy plays an important part in our mental lives. To say this one does not need either to approve of fantasy or to regret its inroads into the psyche. Fantasy simply is. So it is with the ego ideal, which is a particularly central fantasy in our lives.

  But the same cannot be said for organizational totalitarianism and organizational decay. These are not either necessary or inevitable features of organizational life. They become features of organizational life when the desire to be the center of a loving world becomes a demand and when the power is available to turn this demand into a program of action.

   What this suggests is that (1) organizational totalitarianism and organizational decay, which first appeared to us as systemic problems that concern the organization are at their root existential, moral, even spiritual problems which concern the individual; and (2) these problems at the individual level become systemic problems for the organization when organizational power is used to effect this transformation.

   Putting the matter this way enables us to perceive a continuity between our analysis of organizational decay, on one hand; and the Greek conception of tragedy, on the other. What we see in both cases is the horror that comes from the claims of powerful mortals to be more than mortal. The Greeks called this hubris and they knew that the gods, whom we might refer to as reality, do not stand for it. They demand humility.


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[1] Note the connection here with the findings of Luthans, Hodgetts, and Rosenkrantz (1988) on the unrelatedness of competence and success in organizations. From the point of view of the theory of organizational decay, the further intriguing possibility presents itself that Luthans et. al have managed to capture only a phase of the decay process. On the basis of the considerations adduced here, one would expect to find that as the organization decayed further, the correlation between competence and success would become negative. In organizations of this sort, bad management drives out good.


[2] It is interesting to note that the isolation of management from criticism takes place outside of the corporation as well. Thus, in the August 28,1989 issue of Fortune magazine, an article by Julie Connelly called "The CEO's second wife" details what happens to the first: As their husbands rise in the corporation, first wives may become convinced that power is corrupting the presumably wholesome lads they married. "They become self-appointed critics and consciences," says Manhattan psychiatrist Clifford Sager, who specializes in marital therapy. "They try to cut their husbands down to size. "(p. 55)


[3]  Note here the obvious connection to Argyris and Schon's (1974) distinction between "espoused theory" and "theory-in-use."


[4] Actually, what we have here is a form of "retreat from language" of the type that concerned John R. Searle (1969: 198), when he wrote:

The retreat from the committed use of words ultimately must involve a retreat from language itself, for speaking a language .... consists of performing speech acts according to rules, and there is no separating those speech acts from the commitments which form essential aspects of them, (cited in Hummel, 1987)


[5] The reasoning here suggests that the appointment of Robert Stempel, an engineer, to succeed Roger Smith as head of GM was a step in a positive direction. How much impact it is likely to have will depend on the extent to which it represents a genuine, system wide, choice of reality.