The 12-Week MBA Chapter 11: Joy and Frustration - The Human Side of Management
Everything we covered so far in this book was about numbers. Profit, growth, risk, cash flow, cost structures, valuation. Important stuff. But here is the thing: none of it works without people. And people are messy.
This is post 13 in my 12-Week MBA retelling series.
Chapter 11 marks a big turning point in the book. The authors move from finance to management. From spreadsheets to human beings. And they open with one of the oldest ideas in economics to explain why management even exists in the first place.
The Pin Factory That Changed Everything
Adam Smith’s famous book Wealth of Nations starts with a pin factory. One person working alone could maybe produce twenty pins in a day. Ten people working alone could make two hundred. But ten people working in sequence, each doing one small step, could produce tens of thousands.
That is the division of labor. Each person gets really good at their one step. The process becomes fast and efficient. And because each worker needs fewer skills, they are easier to replace, which makes labor cheaper. Cheaper pins mean more people can afford better clothes, shoes, and other goods. The whole society gets richer.
The authors say it is hard to overstate how foundational this idea is. Not just to business. To civilization itself. We have been dividing labor into more and more specialized jobs for thousands of years. Today, none of us can meet our own basic needs alone. You cannot build the laptop you are reading this on. You cannot code the apps you use. You probably cannot even make the paper in a book from scratch.
We have thrown ourselves at each other’s mercy as a species. The authors call it exhilarating and terrifying. I think that is about right.
Why Management Exists
The division of labor sounds great on paper. But try helping out in someone else’s kitchen during a holiday dinner. You will quickly learn how hard it is to coordinate even a few people working together.
Under the surface of every workplace, every factory, every team, there is a massive amount of effort going into planning, negotiating, sharing information, and making decisions when nobody knows for sure what will happen next. That effort is management.
Through management, we make sure the whole is greater than the sum of the parts. We make sure the individual pin-making steps actually add up to finished pins, not useless metal fragments.
But management is not the only way to coordinate people. Markets do it too. That is the premise of our whole economic system. Prices go up and down based on supply and demand, and somehow things get produced and distributed without anyone planning it from the top.
So if markets work so well, why do companies even exist? Why are we not all just independent contractors selling services to each other?
When Markets Beat Management
The authors bring back a familiar example: General Electric. In 2021, GE’s board looked at everything happening under their giant corporate umbrella and decided it was too much. They split GE into three separate companies. The board basically said: these businesses will do better competing independently in markets than being managed together under one roof.
There is a whole branch of economics called the theory of the firm that studies exactly this question. When does it make sense to coordinate people through management inside a company? And when is it better to let the market handle it?
The answer seems to be that there is a tipping point. At some scale, trying to manage everything together stops working. The whole becomes less than the sum of its parts, and the parts do better on their own.
But clearly, we still need companies and managers. Some things are too complex, too fast-moving, or too interdependent to leave to market forces alone. And that brings us to the real topic of this part of the book.
The Human Factor
Whether you are running a pin factory, a film production, an insurance company, or a software team, one thing is always the same: you are coordinating people. And people come with what the authors call “the human factor.”
The book splits this into two big questions for the remaining chapters. First, how do you get work done through other people? Second, how do you make decisions under uncertainty along with other people?
These are not just business questions. They apply to families, volunteer groups, sports teams, rock bands, and housing cooperatives. Formal education spends almost all its time on individual achievement. Very little of school teaches you how to actually work with other people. Sometimes it even makes it harder.
Why This Part of the Book Matters Most
The authors say something here that really stuck with me. When we look back on our lives at the end, few of us will say “I am so glad I helped create all that shareholder value.” We are more likely to remember the relationships we built at work than the work itself. The work was just the vehicle.
That is a quiet but powerful statement from a business book. The financial chapters taught you how to measure value, growth, and risk. But the human chapters are about the stuff that actually makes work meaningful.
The authors also point out that we are living through a time of huge change in how people think about work. Shows like The Office, WeCrashed, Veep, and Ted Lasso are not just entertainment. They are part of a bigger conversation about what it means to manage, to lead, and to follow. Technology, demographics, and events like the pandemic have shaken up all the old assumptions.
That is exactly why a traditional two-year MBA feels so risky right now. The ground keeps shifting. The authors hope these chapters give you something solid to stand on while it does.
Key Takeaway
Management exists because the division of labor requires coordination. Markets handle some of that coordination through prices and competition. But inside companies, teams, and families, we need people to plan, communicate, negotiate, and decide together. That coordination is management.
The human side of management is messy and hard in ways that spreadsheets never capture. But it is also where the real meaning of work lives. The next few chapters dive into the practical side: how to build trust, set expectations, give feedback, and get work done through other people without losing your mind or theirs.
Book: The 12-Week MBA by Nathan Kracklauer & Bjorn Billhardt | ISBN: 978-0-306-83236-9
Previous: Chapter 10 - Creating Value
Next up: Chapter 12 - Trust and Expectations - Building relationships that work.
Part of the 12-Week MBA retelling series