Management and the Market: An Overview

In a competitive market, managers are motivated by the ability to keep their own jobs and succeed in them by maximizing profits at market prices.  In essence, this means keeping costs down, and workers and supplies represent a lot of the variable cost in a firm.  When a market shrinks, laying off workers becomes (on paper) an easy way to trim costs, but much of the time this decision seems to be avoided if at all possible.  Practically speaking, this may do more harm than good if workers are trained and skilled in their jobs, though I think no one would disagree with letting workers go that consistently are performing poorly or lack the necessary skill set.  Public opinion of a firm directly influences business however.  Managers in competitive enterprises are therefore kept "honest" I think by the threat of losing shares of the market to companies that seem more fair to their workers.  This type of market seems to value employee satisfaction, and if absolutely necessary, socially responsible ways of cutting worker costs are used, including freezing of new hires, reducing overtime, putting workers on hourly wage and fixed hours, or reducing salaries and demading more hours. Rather than lose qualified workers or have them under-perform, managers now can see the marginal benefit of training seminars, buying birthday cake, recognizing achievements, etc.

For a monopoly, this all breaks down.  We all know about disgruntled Postal Workers and DMV workers, and from the management side, it makes sense: There is no other DMV in town to take their skills to and the jobs/benefits pay well enough that each worker could be replaced.  Furthermore, cutting costs by cutting workers would, at least initially, actually increase business.  For example, if the Celtics decided to lay off all of its ticket booth workers to lower ticket prices, people would probably buy more tickets.  However, there still would be a limit; if they started laying off everyone at the stadium, there would be no concession service and no T-shirts and no half-time entertainment etc and people would go less frequently because the experience wasn't too great.  But the managers in a monopoly basically aren't kept in line by public opinion the same way competitive markets are, and this is part of why people see them so unfavorably.  I think this becomes especially apparent when managers make cuts in the workforce to trim costs but don't take any sort of pay decrease themselves, like the US airlines did recently.  The public is well aware of this and doesn't take kindly to it, but the cheaper seats on flights keep customers buying more anyway.