> What incentive does a manager have to increase the size?
Personal satisfaction, looking more important, all the usual human motivations.
> What incentive does he have to improve performance in general?
The manager's own manager will likely notice increased output and reward it. Under normal circumstances an empire-building manager is kept in check by the need to justify their headcount in terms of their output (both of which are visible to their managers). It's only technological productivity increases (which are invisible to higher management, because they take effect in the technical details of the work) that gives managers cover to continue to employ people who have become redundant, or even add further redundant people (because the team is more productive): the overall team productivity (in terms of output/headcount) is going up, and so from the outside it looks like the team is simply performing well, when in fact the manager has siphoned off the fruits of technological advances.
Personal satisfaction, looking more important, all the usual human motivations.
> What incentive does he have to improve performance in general?
The manager's own manager will likely notice increased output and reward it. Under normal circumstances an empire-building manager is kept in check by the need to justify their headcount in terms of their output (both of which are visible to their managers). It's only technological productivity increases (which are invisible to higher management, because they take effect in the technical details of the work) that gives managers cover to continue to employ people who have become redundant, or even add further redundant people (because the team is more productive): the overall team productivity (in terms of output/headcount) is going up, and so from the outside it looks like the team is simply performing well, when in fact the manager has siphoned off the fruits of technological advances.