Quoting from http://www.businessfinancemag.com/archives/Static/wcd00003/wcd00358.htm
Usually occurs when micromanagers don't know what to do, and don't trust anyone else to decide. Look for lots of meetings full of frightened looking people. Good time to get out of Dodge, or if you are a contrarian like myself, to ask for a payrise. RichardHenderson.
I believe the term "MushroomManagement" was coined by TracyKidder in TheSoulOfaNewMachine. He also described another common strategy: pinball reward. The "prize" for playing pinball well (for those who remember the game!) is the chance to play again for free. Similarly, a common "reward" for successful engineering in high-tech is the "chance" to do another project. MushroomManagement was not necessarily viewed as negative during that era -- and many (on both sides of the management fence) still subscribe to it today. --TomStambaugh
"...and if someone sticks their head up, cut it off."
See also SeagullManagement.