Although you are concerned with your supervisor's fixation on making your office resemble Santa's workshop, the larger issue is that you are afraid to talk to him. There can be any number of reasons for his busy-work approach to work, but it sounds like he has not created a work environment that is open, communicative, and mutually respectful, and that is a more serious problem.
The reasons for his heightened emphasis on keeping the troops busy can be based on any number of factors. For example, perhaps management informed him at the outset that he is replacing an overly lax supervisor whose employees have too much freedom and power. Or, he may simply be an over-controlling and untrusting leader.
You and your associates should discuss the situation with him and present documentation proving that your department is more energized, motivated, and productive with more flexible supervision. Be sure to let him see the amount of time that he can save by such an approach as well. If he truly senses that he can win by being more flexible, there is a chance you will win too.
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