Tuesday, March 06, 2007

Theory of Comparative advantage and micromanagement

Comparative advantage was first described in an essay on the corn trade. It was to England's advantage to trade various goods with Poland in return for corn, even though it might be possible to produce that corn more cheaply in England than Poland.

The details available at http://en.wikipedia.org/wiki/Comparative_advantage

Micro management is more common than is obvious.

So often you'll see team leads doing the role of engineers, managers doing the work of leads (even engineers), and directors micro managing managers and so on. Maybe (note maybe) they do it better than the people they manage but it doesn't necessarily follow that they much do it just because they do it better (or think that they do it better!)

Setting aside the cliched (though sensible) arguments like - let your team learn from the mistakes etc; it makes business sense for people to to do they own job and leave their team's job to the team - even at the perceived penalty of doing it less efficiently, less quality etc.

Given your limited resources of time and scalability, The law of comparative advantage kicks in. The overall advantage of you doing your job is much higher than you doing the role of someone else who is lower in the food chain. This comparative advantage more than offsets the penalty of your team doing what you would do potentially better, faster, cooler, whatever!

What happens if you can do your staff's role better than they can and if you don't have enough work for yourself? should you?
Unless you are paid very poorly (in which case you should anyway leave your job) you run the risk of not adding enough value to justify your cost and should start looking for a better match between your price and value.

1 comment:

Anonymous said...

I work as a sales manager. I like the concept of micro management because it gives me visability of problems I need to fix - for example, there is not eneough marketing activity focused on generating real opportunities for my team. However, having to ask individuals lots of questions to understand if they are doing their job properly is not productive.

One of the best tools I have found to help with this is http://www.micontacts.com/ I participated in an initial trial of the solution and found it help my sales people be better organised & more active but it also helped me to get the information I needed to better manage my team - from an appropriate distance!!! Also, this solution lets sales people compare their activity levels with anyone else in the company - how cool is that!! This has two effects - 1. It rewards the positive practices of the few and 2. It encourages thoes who are of a lazier persuasion to be more active. Everyone ultimatly wins because the customer gets lots of attention and sales will / should increase over time. I beleive micontacts are now making some of the changes recomended and are scheduled to launch in January 2009. Keep an eye on it as it could be the next big sales automation tool.