From Lego to McKinsey, bureaucratic managers hurt companies

Already a subscriber?If the best management minds agree on anything, it is the importance of corporate focus. Peter Drucker repeatedly argued that deciding what not to do is as important as deciding what to do.

In developed economies diversified companies suffer from a 13 to 15 per cent discount on the sharemarket compared with single-segment competitors . The one company that seemingly defied the curse of the conglomerate in the late 1990s – General Electric Co – eventually succumbed and, in 2021, began breaking itself up into three more focused companies.

In one of the many ironies of this dismal tale, Tom Peters came up with the phrase “sticking to your knitting” when he was working for McKinsey. Regulation not only diverts companies’ focus from outside to inside . It also contributes to internal bureaucratisation.

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