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  • Zachary Collier

What Adam Smith Can Teach Us about Management

One of my favorite passages from the great economist Adam Smith is where he describes the so-called “Man of System”:


“The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them..." (1)


While Smith was warning about planning and control at the scale of the economy as a whole, the same idea applies to planning and controlling an organization, or even a complex project - attempting to control everything from the top down will invariably result in unanticipated downstream results and probable failure.


As an example, imagine that you have a micromanaging boss. Your boss insists on imposing constraints on the way you do your job, demanding that you do every little thing a certain way, and your boss probably thinks that he can do your job better than you can. Your meddling boss is not exerting effective control over the process – there is no feedback in the system.


Of course there is often a need for policies and instructions to come from the top down to the rest of the organization. But the trouble is when information doesn’t flow back from the bottom up. While good planning involves flexibility and feedback, the other kind of planning is top-down, inflexible, and centralized, and involves imposing someone’s will upon the system. This might work in certain limited cases, but as systems get more complex and involve more stakeholders, they tend to be less effective. As the size, scope, and complexity of systems increases, the probability decreases that any single person possesses all of the necessary information to effectively manage the system from a top-down perspective.


So what can be done? From the last few blog posts, a few suggestions emerge regarding good management approaches:

- Recognize which things are within your control and which are not

- Build a good model of the system you are trying to manage

- Incorporate flexibility and feedback into your planning process

- Don’t try to orchestrate things exclusively from a rigid top-down posture


Collier Research Systems can help your company make tough strategic decisions, and devise a plan for you to achieve success. To learn more, visit www.collierresearchsystems.com.


References:

(1) Adam Smith, Theory of Moral Sentiments. https://www.goodreads.com/quotes/309945-the-man-of-system-on-the-contrary-is-apt-to