The Mallaby column was interesting. I've worked in a number of countries including the US, UK, Nederlands, Germany, and Italy.

I am a knowledge worker and as a rule of thumb none of the European outfits I've worked for managed knowledge workers as well as the typical US firm. Nor do European workplaces seem to have the diversity which is a hallmark of the typical US office I've worked in. The closest would be the Nederlands and the UK, in order.

Even so it was a major culture shock coming to the UK from an extremely mixed US office (diverse racially, culturally, and sexually) to the London office which was set up as a 'young mens' network. There was lots of talk about sports and office social life revolved around drinking large amounts of beer at the local pub.

The Nederlands work environment was more comfortable in some ways (more diverse for one, not a bunch of boozy boys), but the 'get it done' ethic was much weaker than in the US or the UK. They were more careful than the typical US office but at the cost of frustrating delays. It was difficult to get a dutch manager to make a decision.

The Italian environment was a joint US/Italian venture, and I didn't work directly for the Italians so it's hard to judge. US-born tech workers had very high status in the company - but the Italian techies didn't. They weren't treated or paid well which led me to doubt that they develop many good ones.

That went double in Germany. The managers of the German company were German men with the rare rare German female. Lots of Eastern Europeans and Irish at lower levels but they apparently weren't promotable no matter how good they were. The Germans were more consistent (but less effective) than the Italians; they tended to treat all us technical types poorly regardless of nationality. I saw only one German working in an exclusively technical role; he was a poor downtrodden bedgraggled specimen indeed! All the other Germans held fancy titles and handed out orders to the lower orders whether they were managers or merely 'Lead Designer' or 'Senior Architect'.

I read a piece from Germany recently denouncing German technical experts for taking their expensive German educations and migrating to the US. Given what I saw in Germany I'm not surprised they want to go!

My impression is that top notch Japanese firms (think Toyota) or European firms (think Nokia) are every bit as dynamic as the best American firms. However, there are more American firms that are world class.

Incidentally America's strength was originally built on manufacturing companies, so Malloy's claim about American not being good at coaxing productity out of factory workers is very likely incorrect.

It may well be that America is better at managing knowledge workers. However, as with factory workers, it remains to be seen whether this advantage is inherent or can be overcome by determined competitors.

Nokia may be better than any US firm. I'm not su8re about Toyota generally though. They seem to set up design studios ion the US and run them on American lines to get what they need. At Nokia it's top to bottom from what I hear.

I don't think that managing knowledge workers well is inherently an American thing. It's an artifact of the very free US labor market in part in that US employers have to compete for skilled people or lose compettive advantage.

I think the anti-discrimination laws in the US enforced by litigation) have had a positive effect on the workplace as this has tended to break up the 'old boy' workplaces I used to see and gave other talented people a chance.

"Better managed." What was the metric? Profits? Growth? Customer satisfaction? Employee turnover? Productivity? Some combination? My impression is that this type of broad statements is very difficult to support, since management and business practices tend to vary over business sectors, rather than over cultures or countries. The management of Nokia and Lucent has much more in common than the management of Lucent and Wal-Mart.

The obvious question is why, if US firms are so much better than the competition, are they losing market share, as reflected in the trade deficit?

It's clear that either the trade figures are wrong (dark matter) or the productivity figures are wrong (overstatement of hedonics perhaps).

The corporations that are doing well, both here in the U.S. and around the world, have significantly less in the way of union representation. The big fly in the ointment, here in the US, is the auto industry, which of course is union dominated.

I find it interesting, and somewhat annoying, the Maltby finds it necessary to dance around that particular issue.

> The managers of the German company were German men
> with the rare rare German female. Lots of Eastern
> Europeans and Irish at lower levels but they
> apparently weren't promotable no matter how good
> they were. The Germans were more consistent (but
> less effective) than the Italians; they tended to
> treat all us technical types poorly regardless of
> nationality.

I really don't think the situation is much different in the United States. Perhaps for a few Silicon Valley and NYC firms, but other than that US business is still pretty much the domain of white ex-fratboys who drink together at the club.

Cranky

The obvious question is why, if US firms are so much better than the competition, are they losing market share, as reflected in the trade deficit?

I don't think you can draw that conclusion from the trade deficit. The trade deficit could be increasing because US consumption is very high in which case the trade deficit would have nothing to do with America's competitive position in the global economy. The trade deficit may also simply be a reflection of high foreign investment in the United States, which might be motivated by our high productivity.

@John Quiggin: The obvious question is why, if US firms are so much better than the competition, are they losing market share, as reflected in the trade deficit?

It's clear that either the trade figures are wrong (dark matter) or the productivity figures are wrong (overstatement of hedonics perhaps).

Excellent questions, but the real question is whether the trade deficit and/or the productivity figures measure what is going on with the US economy. There was a thread a couple months ago on Drezner which discussed this. Dan began:

"I've got an advanced degree in economics, and I'm here to tell you that the official numbers on the U.S. economy are just plain strange."

http://www.danieldrezner.com/archives/002563.html

The answer seems to be that we don't know and we don't know what we don't know. I think the fact that the US has been running an immense trade deficit for 30 or 40 years is a slight indication that not everything is kosher with the numbers. That isn't supposed to happen! The Federal reserve is aware of the problem and is working on better metrics.

"The management of Nokia and Lucent has much more in common than the management of Lucent and Wal-Mart."

It depends upon what part of Wal-Mart you are rferring to. Just as Toyota treates its people in their car design centers much differently than factory workers in Japan, I'm certain that Wal-Mart treats it's retail workers differently than the people who work on their crown jewel - the Supply Chain operation which keeps Wal-Mart stores stocked.

I did a gig at Lucent a few years ago - and they weren't as well-mananged as competitors whom I have also worked with such as Nortel Networks and Alcatel. I suspect that Walmarts Supply Chain groups shares more in comman with Nokia (which has a superlative reputation) than with either does with Lucent. Unless Lucent has cleaned up it's act in the meantime.

@Cranky, "I really don't think the situation is much different in the United States. Perhaps for a few Silicon Valley and NYC firms, but other than that US business is still pretty much the domain of white ex-fratboys who drink together at the club."

My experience is mixed. I've seen a few fratboy firms in the US, but not for a decade or more. It may be more prevalent in the middle of the US than on the coasts or in the urban centers, which is where I spent most of my time before moving to the UK. The last real 'fratboy' US outfit I worked at was US Sprint in Kansas City in 1990-91. Except for a weird small firm in Connecticut I did a short gig for in 1994. That was family run and not really fratboy. More like facist and terminally strange....

No, I had to come to the UK to find fratboys again. The difference between the UK and the US operations of this outfit (a Canadian firm) could not have been more pronounced.....

Two words: transfer pricing. Yeah Americans are creative, but that includes the accountants.

Just my two cents here b/c I've consulted all over the world, and I hate to burst the Sebastian Mallaby bubble-- but honestly, when I go to the top companies in each country, I don't see Mallaby's supposed management quality gap. Sony, Nokia, and BMW run as tight a ship as GE or IBM in my experience. I suspect that there may simply be more creme-de-la-creme companies in the US because we have freer capital here and it's easier to take a start-up, build it up and make it public (better taxation and interest rate policies and all that-- more on this below), but I don't think there's some magical difference in management at least among the top companies. When you have competitive industries, the best companies are gonna be on the ball wherever you are.

In Germany, for example, you have three very large global automobile companies all in ruthless competition for domestic and foreign market share, so the best companies in this field have especially strong management which is orders of magnitude above their US counterparts in crucial areas. Ditto for companies like Bayer. I'm sorry, because I'm as patriotic an American as a globetrotting American consultant can get, but I don't think Mallaby's looking in the right places here-- the real reasons for America's business advantage probably tend to be a lot more mundane.

BTW Don S, it's very uncommon for German engineers and technical specialists to permanently relocate (at least to the US-- there is some exchange with Austria and Switzerland). A large number do spend some time in the US, or in other Western countries, broadening their training, but by and large they don't relocate entirely. Part of this is that Germany (in part because the state subsidizes education so much, which the US government does not) obviously *does* have good reason to retain its engineers, or else it would have to scrap the state funding for education. So in fact there's a treaty arrangement with the US that encourages German engineers to work for a spell abroad (thus obviously boosting the US economy), but makes it extremely difficult to relocate permanently (very nasty, almost evil tax penalties IMHO, plus all kinds of obligations back home)-- which in turn helps the engineers to bring their skills acquired abroad back home to Germany. Besides, to even get a visa to work in the US, most German engineers have a form of sponsorship with companies that hire them after graduation, and it's easier to leave a Mafia crime family than to leave a company that's sponsored you. All in all, I think it works out to be mutually beneficial for both sides. But please, don't confuse training abroad with permanent relocation. The former is very common, the latter increasingly rare.

It's also not better "diversity" in the US-- Don, I have no idea where you were working, but in the companies in Germany I consulted for, I routinely saw a little UN everywhere I went. There was a big base of native Germans in most places, tons of Eastern European whiz kids (Hungarian, Polish, Czech, Slovakian, Russian, and Ukrainian slang routinely filled the halls and coffee shops around the big plants and offices), a surprising number of Indians and other South Asians especially in the computer industry, a big Korean and Chinese contingent, the best and brightest among the big Greek and Turkish populations here, and a good number of very well-educated Africans who could speak decent German and really knew what they were doing. Frankly, many of the German companies are the most diverse I've ever seen, to my great surprise. Also, as far as women not holding top positions-- Don, you must be 10 years off the mark here. Women have been in charge of all kinds of divisions in my recent trips, not because of any affirmative action but because they were really darn good at what they did. Just as in the US a big majority of top management consisted of native-born German men, but there was a decent amount of diversity at all levels in the company.

All this being said, I do think there are certain areas where the US really excels in comparison to foreign countries here, I just don't think it's some secret management acumen that we have over and above the rest of the world. The main factor IMHO is that the US simply has far more competitive industries which tend to bring out the best among the top competitors-- you just don't have that sort of volume in other places. We have lower tax rates and strong intellectual property laws that reward inventors and innovators. We also have a very open and professional venture capital network that's second to none in the world. These are the factors that give the US our competitive edge. But I wouldn't count on other countries (and that includes Europe) standing still-- they're learning from our example in these respects.

Another head-scratcher to add here, which is-- if US companies really are doing so well, then why have the share values of US companies (and the value of the US stock market overall) been so flat now for almost 5 years? If US firms really were so dominant, expanding into and seizing control of new markets, then their share prices should be going up as a reflection of their greater value. But they haven't been doing that-- while there has been somewhat of a bump recently, the Dow, S&P, and especially the Nasdaq have basically been moving sideways for years. For some reason, perhaps, good performance of these companies in some areas has not been reflected in investor confidence in those firms.

"if US companies really are doing so well, then why have the share values of US companies been so flat now for almost 5 years?" May be it has something to do with the prospect of growth? No?It is easier for China to grow since they virtually started from ground zero. There's no way a mature economy could or should grow that much. For all intent and purpose, the best for the US economy is to maintain its current rate of growth which is extremely hard to do. So we expect slower growth in the US. Thus a flat stock market.
BTW, what do we produce to warrant such a high GDP? Another BTW, they include real estate price growth in the GDP. So when our real estate bubble bursts, our GDP plummets. Another article will explain how we've lost our edge, how incompetent our management really is. As a matter of fact, these insights always appear when the dust has already settled, when the trend has peaked, and began reversing. They wrote off the US, and praised Japan at the very moment that Japan began to falter. The consolation is the US is too impatient to stay down when the time comes.

Comparing the competitive proclivity of US firms to that of culturally isolated, rigid and insular Japanese and European firms is a bit like comparing the US's olympic basketball team of 1992 (the Dream Team full of NBA stars) to that of other countries. There really was no competition. The US invented the modern, globalised company. One shouldn't, however, overestimate American MBA programmes or any 'innate-ness' to America's current success.

Quite a lot of the competitive comparison problem is that we're looking the wrong way. Many American academics are obsessed with Europe or have a limited knowledge of the entire value chain. Much of America's success (and Europe's for that matter) is due to firms in Asia which produce the goods that make these firms look so good, efficient and globalised. Yes, there is insularity and protection in Asia, but the humility in many Asian firms (not remotely present in Europe and disappering in the US) may create an environment of learning and/or emulation which could lead to some interesting world-class competition.

Just my two cents here b/c I've consulted all over the world, and I hate to burst the Sebastian Mallaby bubble-- but honestly, when I go to the top companies in each country, I don't see Mallaby's supposed management quality gap.

I think you've missed a good part of the point. You've been at 'top companies', and one would expect to see best practices at top firms no matter where they are located. One of Mallaby's points is that in smaller firms family dynasties tend to persist more in Europe than in the US these days. Early in my career I worked for a firm run by sons of the founder - the management was pretty bad. This was in the US, BTW.

I'm not surprised that Nokia, Sony, and BMW excel. You might have noticed me complimenting Nokia in my earlier posts.

I might also point out that as a 'globe-trotting consultant' you may have worked at an entirely different level than I have and therefore observed different things than I did.

I worked with an software engineering group at Alcatel's huge Stuttgart campus early in the decade, BTW. I did not state that I thought Germans would readily leave for jobs in the US - they were the King of the Hill and had no reason to go. The bulk of the actual work was done by Eastern Europeans employees and Irish contractors, and I can readily see how the Eastern Europeans might wish to leave given the management behavior I saw.

As for the rest of it - I have a narrow data base to judge Germany by - just the one group. But from what I saw Alcatel was no better run than Lucent was & management fell far short of what I saw at Nortel Networks - much less the management quality which Nokia and Cisco Systems are reputed to have.

Perhaps you have a wider exposure but I do wonder whether you have actually ever had to work directly for the managers of these companies. Having consulted for a Big Five firm I can tell you it's a MUCH different experience......

To repeat; I don't think American managers are inherently superior to others around the globe - particularly at 'top companies'. I think perhaps that under current circumstances the average US company may well manage knowledge workers - particularly IT workers somewhat better than the average European company does. Not necessarily out of any particular virtue on their part but because they are driven to do so by the necessity to compete for quality labor in a dynamic labor market.

Don S: Alcatel is french and Nortel is Canadian. What are these companies supposed to tell us about German/US compartive mgt.?

read "The Disposable American"

Charles Stewart:

Alcatel may be listed on the French Bourse, but on the campus where I worked at there was nary a Frenchman to be seen. A number of Japanese and German firms are co-listed on the NYSE. Does that make them American? I think not....

I've had two contacts with Nortel. The first when I worked a contract with BNR (Bell Northern Research, the Nortel equivalent of Bell Labs), the second when a small Canadian owned software firm I worked for was bought by Nortel in the summer of 2000. The latter was nominally controlled by Canadian management but there was nary a Canadian to be seen in the London office where I was transferred. The only non-Brits in that place were myself (US citizen) and a French pieds noir woman. Brit boozy-boy culture all the way; more so than any British-owned firm I've seen in the years since.

One thing which is getting missed in this debate is the different viewpoints. I don't mean this in the fuzzy wuzzy feelgood psychospeak manner but literally.

A Fortune 100 CEO will have a viewpoint from Earth orbit. Very high level, lacking detail.

A management consultant's viewpoint may be from 50,000 feet - a lot more detail but lacking the specifics of how things actually work on the ground.

A working engineer (which I am) gets a lot of specific detail but has a much harder time generalizing. I tend to see individual organizations at a high level of detail but don't have a lot of data points. If Zhivago and Charles Stewart review my posts they will find, I think, that I report what I saw on the ground as opposed to generalizing about an entire culture. How could I know? In reporting about Germany, Nederlands, and Belgium I have one data point each, in Italy two data points. In the UK perhaps ten counting both the companies I have directly worked for and the ones they have sent me to consult with on site.

I have found that enough information to form some theories but that is about all. Moreover, I know from my experience with US and Canadian organizations (perhaps 30 data points) that considerable variations are to be expected both between different firms and even among different divisions of the same company.

Another caveat is that I know a good deal about software engineering and have fairly strongly held views on what good management in this area looks like. I think perhaps I can generalize to some degree to some ideas on how to manage most knowledge workers. Beyond that I can't go too far beyond the Golden Rule 'Do unto others'....

I'm persuaded that a rigorous comparison of management styles internationally is probably impossible because of the viewpoint problem. The people at high level can't possibly know enough detail about numerous oganizations. A working engineer can know enough about one workgroup but can't generalize rigorously. I can form opinions but sorry - I cannot defend them in a peer-reviewed journal.

John Quiggin,

The trade imbalace is a measure of capital inflows.

Which says that Americans are not losing in trade because if they were it would not be a good place to invest.

M Simon, do you believe the USA is a good place to invest?

Which industries do you invest in?

Here are some suggestions:

Pharmaceuticals. It takes a great big investment to get a new drug started, it takes a whole lot of money to get FDA approval. That keeps out the little folks. And once you have the new drug, it takes some marketing to get MDs to prescribe it. But then you're home free, the money rolls in. Most of the consumers don't even notice, they just pay the co-pay and let the insurance companies handle the rest. The insurance companies raise premiums but that isn't the pharma company's problem, and for a lot of people the government picks up the bill anyway. Choose a company that's big enough to have a steady stream of winners coming out and you can't lose.

Prisons. The prison industry is booming, both the guys who build prisons and the guys who run them. It's a sweet deal. And if the state governments start running out of money, in the short run it's no problem, there are lots of ways to cut expenses by spending less on prisoners, and the guys who pay the bills won't mind at all. Plenty of time to get out before profits are hurt, if sales drop.

Oil industry. You have to be a little careful here, but if you pick the right company they have guaranteed profits unless management decides to be unprofitable on purpose. They get the kind of subsidies that guarantee it. But stay away from those GWB specials, and watch that you pick companies where management doesn't decide it benefits by showing a loss.

Defense. Defense is a boom-or-bust industry, but we can expect it to boom for a good long time. And there are companies that aren't guaranteed to get the contracts even in the boom times. You want the ones who are guaranteed to get the contracts. Pick the right company and you can't lose.

You might have noticed that these are all one-way-or-another selling to the government. Stay away from companies that sell to the public, they're risky.

You might want to speculate on US companies that depend on exports for their profits. They might do real well compared to everything else, or they might lose quick -- it all depends on the fickle international market. Be careful about companies that depend on selling to china, unless they sell raw materials like wood or food. The chinese are notorious for buying just until they get their own production up, and then freezing out the imports. But if it's stuff they can't ever make enough of for themselves, then it's likely to work out OK.

Now, do you believe the capital flows are coming because foreign investors want to invest in the USA?

Or is it perhaps that foreign banks are holding our money for some other purpose.