Summary:
It took me a long time to sign up for a MBA degree because of my expectation that it would be tough to get through. When researching for business schools, the one consistent requirement I noted was some ability with math and science. The perception that business schools strive for, of a program that is grounded in "hard" skills of science and math. After graduating successfully, I realized I had overestimated the level of difficulty of an MBA degree. I read this book after I had finished my MBA degree and had started paying off my student loans. To portray the realization about the uselessness of MBA degree after reading this book, as disappointment is an understatement. I have gotten over the disappointment by coming up with (fictional) justifications that have helped me move on. This book takes the reader through history of business management as it is currently taught in business schools. The fluffiness of business management curriculum is a surprise to many students once the classes begin. Reading the book is also an exercise in debunking claims made by business management authors whose works were staples of my business education - Jim Collins, Michael Porter, Barry Nalebuff, Gary Hamel, C K Prahalad etc.,. Lest anyone think MBA is totally useless, there are some benefits to attending business schools and graduating with an MBA degree. It allows one to hoodwink recruiters on the way to a business management career, it serves as a signaling device to prospective employers that you are employable because of the MBA degree, it provides brand benefits from attending famous business schools, it allows students to learn the language of business and it provides a ton of networking opportunities. However, if there is an alternative path to these benefits for a professional, they should take that instead of signing up for a MBA degree. For a vast majority of people, a degree in business management is a total waste of time and money (unless of course it is fully paid for, by the employer).
This book analyzes the basis considering business management as a profession. Current view of management (that is promoted in business schools) is that it is a kind of technology that when mastered by students, allows them to practice it for the benefit of clients (while making a handsome profit in the process). Because business management deals with political and moral problems, the author argues that it properly belongs to humanities than science. A business manager would benefit more from being well versed in philosophy than in "hard" skills of math and science. That does not completely remove the need for science and math in business management, just that they should not be the primary requirement for those in business management profession. Science and math are useful in arenas where some level of certainty is useful. Business Management is about people in their various capacities (employees, employers, regulators, team members etc.,.) and as such, using math and science as the basis provides a false certainty when its practitioners should be comfortable with uncertainty. A good manager should be able to analyze and make sense of the information in front of them. They should be interested in the minutiae while keeping track of the big picture. They should be curious and learn for the sake of knowledge. They should treat people with respect and should be honest and have integrity. Those are usually the characteristics of a good person, nothing more nothing less. The curriculum of business schools do not lend themselves to developing good managers. It might even do harm in leading good people astray by teaching them to rely more on "hard" skills in their management of people.
Analysis:
MBA is like a shiny object that people usually regret after buying it. It has only become more popular in recent years. As of 1968, American Universities awarded only 18,000 masters degrees in business annually. By 2008, it had grown up to 140,000. As anyone who has spent anytime in consulting business has figured out, the actual performance of someone without an MBA is better, on average, than someone with a MBA (even though MBAs probably earn more). Research coming out of business schools is not considered that useful to the actual practice of business. Because business management is portrayed as a science that requires "hard" skills (while not emphasizing rigorous experimentation that science demands), it has been hijacked by charlatans who serve up shiny new ideas that do not work - examples would be Tom Peters, Jim Collins etc.,. The sad fact that popular business management books sell more than academic business management books by positioning themselves as opposed to academic research (this is in contrast to popular books on science which usually are written by scientists who are leading academics in their field) is a devastating indictment of the usefulness of business management as an academic discipline. The only reverence the popular business management authors display is for those "fathers" of business management, now long deceased - Frederick Winslow Taylor, Elton Mayo etc.,.
Management consultants consider their profession to be based on science instead of what it actually is - a business. They portray themselves as experts in whatever problem areas the clients are interested in at that point in time. Their adherence to a dress code serves to paint them as not too dissimilar from ancient priestly castes that were also close minded and zealous about their "special" position on the totem pole. A consulting gig generally goes through the following phases:
Marketing - Consultants offer a "diagnostic" for the client at a steep discount to get their feet in the door
Diagnosis - Consultants portray the client's business in starkly scary terms. Once the client is suitably scared, consultants offer up a solution that will make the problem go away. The solution is usually positioned such that it generates significant consulting fees over a long period of time
Implementation - Consultants plonk themselves down in a premier department of the client and issue complicated demands. When the client is busy trying to satisfy the queries asked of their business, consultants slowly embed themselves into the department's core functions
Follow ons - Identify other departments within the client where consulting services can be extended
Break up - At a certain point, the client starts getting tired of the consultants. That signals the end of the engagement. If the consultants are too greedy, this end can get messy.
Getting a generous client allows a consulting company to stash its brand new employees or mediocre performers with the client while billing them for services rendered. Small clients might offer interesting problems to solve but they also require significant effort with much smaller payout. Working at a big client, the consultants hone their professional knowledge within the confines of the client culture, essentially becoming well dressed and better paid versions of the client's employees. The relationship between a client and a consultant is similar to that of a host with a virus - Virus (consultant) enters the host (client) with pithy sounding slogans and learns its organizational practices. Virus starts establishing itself in the host's body and charges higher fees for doing activities the host does not do because of sheer laziness. Once the virus has spread everywhere within the host, the host is unable to object even when the virus brings in obviously unqualified consultants. Once the host outlives its utility, the virus kills off the host (either the client company closes down or the consultant ends the engagement). The virus then propagates (through business contacts and references) to other hapless hosts.
The pathway to become the next hottest guru in business management is to follow the steps below:
Scare the hell out of your audience (usually business managers)
Point to the abject failure of current organizational structure
Tell them there is some good news
The good news is that they have the power to transform their organization
Show them how how successful you are to serve as proof that your principles work (even though your success might have come from selling books based on your new idea in business management, not from implementing those ideas)
Business management was birthed in America and is imbued with the popular idea of America. Americans love the pleasures that science provides without necessarily enjoying the rigor or implications of its methods. Because business management thinks of itself as a science, it has a high opinion of its essential decency. It refuses to acknowledge the reality of economic power. It is antithetical to the founding fathers' perception of power in America - that people with power tended to abuse their power and democracy in America needed to have checks and balances on the exercise of that power (which is how the current gridlocked system of power sharing between Executive, Legislature and the Judiciary came to be). It is a fallacy to think of business management as a general approach to solving problems in the workplace. That is not to say, its systematic approach is not useful in solving specific problems - example, operations research.
Frederick Winslow Taylor is considered the father of business management. Prior to his theories, management was focused on accounting (who did what). His theories shifted the emphasis to accountability (who did what and why did they not finish their assigned task in their allotted time). He is credited with bringing analytical approach to business management. He pioneered time and motion studies of workers and also developed cost accounting methods that traced the financial value of a company down to product level. His time and motion studies at Bethlehem Steel company helped to determine optimum output of a worker, how to select workers to achieve that target (forerunner of today's Human Resources department), how to improve relations between Labor and Capital (clear communication of goals) and creation of planning function within a company. To implement these measures, he advocated the creation of a managerial layer between Labor and Capital. Management as a practice has been present for millenia (after all, temples across India would not have been constructed without it). Taylor's invention was the idea of management - that the broad principles he outlined, based on his study at Bethlehem Steel, could be used across industries, no matter their unique constraints. His ideas were originally supported by Labor in the hope that they would bring science into managing human affairs in an organization, thereby providing for improvement of social justice within the society. His book, Principles of Scientific Management, published in 1914, popularized business management across the world - even communist Russia was very fond of the 'Taylor system' and used it to fashion their five year plans. Taylor worked with Harvard and other top universities to set up business management curriculum, providing academic respectability to the practice. Present day researchers have concluded that Taylor exaggerated and misrepresented his findings from the experiments at Bethlehem Steel. Science experiments are evaluated based on their verifiability - other independent observers can replicate the findings following the same steps. Because Taylor manipulated his experiments and did not publish data pertaining to his experiments, they have not been replicated. Bethlehem Steel quietly dropped Taylor's programs after realizing their futility. However, by that time, Taylor had already made $100,000 in consulting fees ($2.5 million in today's dollars) paving the way for future consultants to make money without having to show proof that their solutions worked. Taylor's approach to business management was systematic but he confused it with science. Systematic approach calls for testing hypotheses against facts under
controlled observation. It does not require verifiability or falsifiability that science requires. Taylor's success in popularizing his business management ideas papered over the following weaknesses in its formulation:
Dogma of efficiency - Taylor's approach raised efficiency as the end goal of Business Management pushing aside other worthy goals (quality, profitability etc.,.)
Dogma of Singular Metric - Taylor's obsession that business management was a scientific discipline meant he expected to judge its success by a single metric. These days, that singular metric is Shareholder Value. A single metric can be used in hyper rational situations where level of information and degree of certainty is close to perfect. In their desire to achieve that single metric, corporations push other goals (quality, customer service etc.,.) to the wayside.
Dogma of "hard" measures - Taylor's success at collecting "hard" data from his time and motion studies enshrined the primacy of quantitative data over qualitative approaches to a firm's success.
To implement his ideas of business management, Taylor envisioned a separate group of managerial elite that would use its accumulated store of knowledge to direct labor of its workers to improve productivity(something that appealed more to communist sympathizers than capitalist adherents). Taylor also advocated separating planning and execution domains that would be performed by separate sets of people within the same organization. The wholesale adoption of this approach by American companies put them at a disadvantage in 1980's against Japanese companies which did not have the artificial separation between planners and doers in their manufacturing processes. Taylor's ideas even found acceptance with Henry Ford in his car assembly plants. After initially being supportive of Taylor's theories of scientific management, Labor realized their negative effect on worker rights. Taylor had no love lost for capitalism as well as he considered its volatility to be wasteful and wanted his new managerial elite to counter its vagaries. His influence with policymakers across the world was extensive enough that he was able get governments listen to his arguments about transferring the control of national economy into the hands of experts - the five year plans of socialist and communist countries takes its inspiration from the business management principles of the 'Taylor system'.
After Taylor, it was the turn of Elton Mayo to push scientific management forward. Born in Australia, he made his name in America by expounding on the theory that discontent among workers came about not because of hazardous working conditions or low pay but from lack of concern of corporations for their workers' psyche. He contributed to the growing field of Industrial Psychology and pitched it to corporations as the solution to understand the psychology of their workers. Taylor had focused primarily on manufacturing which made it difficult for business schools to include them in their curriculum as generalized teaching (even though Taylor did think of his work as applicable generally and not specific to a particular industry). Mayo's lessons was much more generalized and fit in perfectly with the requirements of business schools. Both Mayo and Taylor pitched their business management work in response to the worker unrest at that time (which would culminate in Russian Revolution in 1917). Mayo's popularity provided him the opportunity to explain the results of Relay Assembly Test conducted at Hawthorne facility of Western Electric Company in 1927. The company wanted to find out the factors behind variations in productivity of its workers on a daily basis and had conducted the test on its own (without Mayo's input). Mayo conveniently interpreted the results of the test as validating his observations - that teamwork between participants led to increased productivity even though the results clearly showed the strong influence of financial incentives for the workers participating in the experiment. This allowed Mayo to codify that a good worker is a happy worker, that road to worker happiness passes through the satisfaction of psychological and social needs (as opposed to material needs like increased pay or health benefits) and that the "soft" side (culture and values) of the organization are far more important than its formal hierarchy. Mayo used his interpretation to provide a patina of scientific respectability to the results of the Relay Assembly Test even though the results showed nothing of what he claimed.
The present day business management stars (Peter Drucker, Gary Hamel, Tom Peters) and the whole field of Organizational Behavior taught in business schools rely on Mayo's theories. Following Mayo, Chester Barnard used the Hawthorne experiments to push the importance of "mission statements" and "core values" of an organization. Hawthorne experiments also form the basis of Douglas McGregor's Theory X and Theory Y. Theory X holds that human beings are lazy and irresponsible and need to be given stern direction to accomplish their goals. Theory Y holds that humans are active seekers of fulfillment through work and can do the job if they are provided the freedom to seek that fulfillment. The belief that trust between people in a workplace matters for productivity has a long lineage tracing back to Greek Philosophers. By trying to interpret a philosophical idea as a scientific truism, Mayo (and his famous successors of business management) provide an illusion of certainty where none exists. The practical implication of Mayo's work was to provide scientific cover for corporations to beat back Labor's efforts to improve material well being of workers through pay raises and health benefits and replace them with much more nebulous wellness programs targeted towards the psychological and social well being of the workers.
Strategy is a buzzword that confers managerial aura on anyone who uses it. The predominant form of organization across the business world is the M Form organization (M stands for multi divisional or multi functional). In these types of organizations, the headquarters (people at the top) concern themselves with the general functions of planning, resource allocation and coordination while subordinate divisions assume operational responsibility for a particular line of business or function. Strategy spread its tentacles everywhere because it is a form of justification for the existence of headquarters in a M form organization. Since management consultants primarily worked with headquarters staff, it was in their interest to evangelize about strategy as well. Business schools jumped into the action designing curriculum for both the corporations and the consultants. The idea of strategy as a discipline that moves the organization forward was the handiwork of 3 theorists - Igor Ansoff who used his book Corporate Strategy to define strategy for a corporation and also published a set of strategic planning tools that the practitioners could use to develop strategy for an organization, Bruce Henderson who founded the Boston Consulting Group that developed Experience curve and Portfolio Matrix that are mainstays of strategy practice today, Michael Porter - who popularized the 5 forces framework through his book Competitive Strategy. Lesser known contributors include Adam Brandenburger and Barry Nalebuff (for their theory of Co-opetition), Gary Hamel and C.K.Prahalad (for their theory of Core Competence of Organizations). While top management perceives strategic planning to be a process that arrives at the best strategy for the organization, assumptions underlying strategic planning usually mean an implicit bias towards a particular strategy choice (which usually coincides with what the CEO of the organization wants - after all, what management consultant is going to forego their juicy profit by challenging their client ?).
Strategic planning as a discipline has given rise to a new tier of middle managers who sit between Labor and Capital. While middle managers fancy themselves as having more power than workers, both of them are usually disposable in the hands of the owners. Middle managers justify their existence by arguing that their work of strategy is generalized in nature across the organization while the specific details are carried out by operational managers (who are usually one step above the workers). To justify their higher wages, strategy practitioners also paint it as more cerebral, complex and reflective in contrast to operational management which is described as more of a mechanical replication of market practices to achieve market returns. Research has shown that organizations that did strategic planning historically decreased shareholder value instead of increasing it. Because strategy as a discipline is vacuous, it tends to run as fads. It starts with the conviction that a solution to corporate world's problems is there for the taking. A limited number of organizations bite the bullet and implement the solution. The small sample size shows the solution in a rosy light. Other organizations follow them in implementing the solution. As the sample size grows larger, issues crop up with the solution and support among consultants for that solution starts decreasing. Corporations now start looking for new solutions and the cycle repeats itself. Strategy has also served to make Shareholder Value Maximization model of management dominant across business schools. Business school students learn that Shareholder Value Maximization is the name of the game and give honesty and fairness a short shrift in their desire to hit that target.
Other Books for Reference:
Flavor of the month: Why Smart people fall for fads - Joel Best
One market under God: Extreme Capitalism, Market Populism, and the end of Economic Democracy - Thomas Frank
From Higher Aims to Hired Hands: The social transformation of American Business Schools and the Unfulfilled Promise of Management as a profession - Rakesh Khurana
Dangerous Company: Management Consultants and the businesses they save and ruin - James O'Shea and Charles Madigan
It took me a long time to sign up for a MBA degree because of my expectation that it would be tough to get through. When researching for business schools, the one consistent requirement I noted was some ability with math and science. The perception that business schools strive for, of a program that is grounded in "hard" skills of science and math. After graduating successfully, I realized I had overestimated the level of difficulty of an MBA degree. I read this book after I had finished my MBA degree and had started paying off my student loans. To portray the realization about the uselessness of MBA degree after reading this book, as disappointment is an understatement. I have gotten over the disappointment by coming up with (fictional) justifications that have helped me move on. This book takes the reader through history of business management as it is currently taught in business schools. The fluffiness of business management curriculum is a surprise to many students once the classes begin. Reading the book is also an exercise in debunking claims made by business management authors whose works were staples of my business education - Jim Collins, Michael Porter, Barry Nalebuff, Gary Hamel, C K Prahalad etc.,. Lest anyone think MBA is totally useless, there are some benefits to attending business schools and graduating with an MBA degree. It allows one to hoodwink recruiters on the way to a business management career, it serves as a signaling device to prospective employers that you are employable because of the MBA degree, it provides brand benefits from attending famous business schools, it allows students to learn the language of business and it provides a ton of networking opportunities. However, if there is an alternative path to these benefits for a professional, they should take that instead of signing up for a MBA degree. For a vast majority of people, a degree in business management is a total waste of time and money (unless of course it is fully paid for, by the employer).
This book analyzes the basis considering business management as a profession. Current view of management (that is promoted in business schools) is that it is a kind of technology that when mastered by students, allows them to practice it for the benefit of clients (while making a handsome profit in the process). Because business management deals with political and moral problems, the author argues that it properly belongs to humanities than science. A business manager would benefit more from being well versed in philosophy than in "hard" skills of math and science. That does not completely remove the need for science and math in business management, just that they should not be the primary requirement for those in business management profession. Science and math are useful in arenas where some level of certainty is useful. Business Management is about people in their various capacities (employees, employers, regulators, team members etc.,.) and as such, using math and science as the basis provides a false certainty when its practitioners should be comfortable with uncertainty. A good manager should be able to analyze and make sense of the information in front of them. They should be interested in the minutiae while keeping track of the big picture. They should be curious and learn for the sake of knowledge. They should treat people with respect and should be honest and have integrity. Those are usually the characteristics of a good person, nothing more nothing less. The curriculum of business schools do not lend themselves to developing good managers. It might even do harm in leading good people astray by teaching them to rely more on "hard" skills in their management of people.
Analysis:
MBA is like a shiny object that people usually regret after buying it. It has only become more popular in recent years. As of 1968, American Universities awarded only 18,000 masters degrees in business annually. By 2008, it had grown up to 140,000. As anyone who has spent anytime in consulting business has figured out, the actual performance of someone without an MBA is better, on average, than someone with a MBA (even though MBAs probably earn more). Research coming out of business schools is not considered that useful to the actual practice of business. Because business management is portrayed as a science that requires "hard" skills (while not emphasizing rigorous experimentation that science demands), it has been hijacked by charlatans who serve up shiny new ideas that do not work - examples would be Tom Peters, Jim Collins etc.,. The sad fact that popular business management books sell more than academic business management books by positioning themselves as opposed to academic research (this is in contrast to popular books on science which usually are written by scientists who are leading academics in their field) is a devastating indictment of the usefulness of business management as an academic discipline. The only reverence the popular business management authors display is for those "fathers" of business management, now long deceased - Frederick Winslow Taylor, Elton Mayo etc.,.
Management consultants consider their profession to be based on science instead of what it actually is - a business. They portray themselves as experts in whatever problem areas the clients are interested in at that point in time. Their adherence to a dress code serves to paint them as not too dissimilar from ancient priestly castes that were also close minded and zealous about their "special" position on the totem pole. A consulting gig generally goes through the following phases:
Marketing - Consultants offer a "diagnostic" for the client at a steep discount to get their feet in the door
Diagnosis - Consultants portray the client's business in starkly scary terms. Once the client is suitably scared, consultants offer up a solution that will make the problem go away. The solution is usually positioned such that it generates significant consulting fees over a long period of time
Implementation - Consultants plonk themselves down in a premier department of the client and issue complicated demands. When the client is busy trying to satisfy the queries asked of their business, consultants slowly embed themselves into the department's core functions
Follow ons - Identify other departments within the client where consulting services can be extended
Break up - At a certain point, the client starts getting tired of the consultants. That signals the end of the engagement. If the consultants are too greedy, this end can get messy.
Getting a generous client allows a consulting company to stash its brand new employees or mediocre performers with the client while billing them for services rendered. Small clients might offer interesting problems to solve but they also require significant effort with much smaller payout. Working at a big client, the consultants hone their professional knowledge within the confines of the client culture, essentially becoming well dressed and better paid versions of the client's employees. The relationship between a client and a consultant is similar to that of a host with a virus - Virus (consultant) enters the host (client) with pithy sounding slogans and learns its organizational practices. Virus starts establishing itself in the host's body and charges higher fees for doing activities the host does not do because of sheer laziness. Once the virus has spread everywhere within the host, the host is unable to object even when the virus brings in obviously unqualified consultants. Once the host outlives its utility, the virus kills off the host (either the client company closes down or the consultant ends the engagement). The virus then propagates (through business contacts and references) to other hapless hosts.
The pathway to become the next hottest guru in business management is to follow the steps below:
Scare the hell out of your audience (usually business managers)
Point to the abject failure of current organizational structure
Tell them there is some good news
The good news is that they have the power to transform their organization
Show them how how successful you are to serve as proof that your principles work (even though your success might have come from selling books based on your new idea in business management, not from implementing those ideas)
Business management was birthed in America and is imbued with the popular idea of America. Americans love the pleasures that science provides without necessarily enjoying the rigor or implications of its methods. Because business management thinks of itself as a science, it has a high opinion of its essential decency. It refuses to acknowledge the reality of economic power. It is antithetical to the founding fathers' perception of power in America - that people with power tended to abuse their power and democracy in America needed to have checks and balances on the exercise of that power (which is how the current gridlocked system of power sharing between Executive, Legislature and the Judiciary came to be). It is a fallacy to think of business management as a general approach to solving problems in the workplace. That is not to say, its systematic approach is not useful in solving specific problems - example, operations research.
Frederick Winslow Taylor is considered the father of business management. Prior to his theories, management was focused on accounting (who did what). His theories shifted the emphasis to accountability (who did what and why did they not finish their assigned task in their allotted time). He is credited with bringing analytical approach to business management. He pioneered time and motion studies of workers and also developed cost accounting methods that traced the financial value of a company down to product level. His time and motion studies at Bethlehem Steel company helped to determine optimum output of a worker, how to select workers to achieve that target (forerunner of today's Human Resources department), how to improve relations between Labor and Capital (clear communication of goals) and creation of planning function within a company. To implement these measures, he advocated the creation of a managerial layer between Labor and Capital. Management as a practice has been present for millenia (after all, temples across India would not have been constructed without it). Taylor's invention was the idea of management - that the broad principles he outlined, based on his study at Bethlehem Steel, could be used across industries, no matter their unique constraints. His ideas were originally supported by Labor in the hope that they would bring science into managing human affairs in an organization, thereby providing for improvement of social justice within the society. His book, Principles of Scientific Management, published in 1914, popularized business management across the world - even communist Russia was very fond of the 'Taylor system' and used it to fashion their five year plans. Taylor worked with Harvard and other top universities to set up business management curriculum, providing academic respectability to the practice. Present day researchers have concluded that Taylor exaggerated and misrepresented his findings from the experiments at Bethlehem Steel. Science experiments are evaluated based on their verifiability - other independent observers can replicate the findings following the same steps. Because Taylor manipulated his experiments and did not publish data pertaining to his experiments, they have not been replicated. Bethlehem Steel quietly dropped Taylor's programs after realizing their futility. However, by that time, Taylor had already made $100,000 in consulting fees ($2.5 million in today's dollars) paving the way for future consultants to make money without having to show proof that their solutions worked. Taylor's approach to business management was systematic but he confused it with science. Systematic approach calls for testing hypotheses against facts under
controlled observation. It does not require verifiability or falsifiability that science requires. Taylor's success in popularizing his business management ideas papered over the following weaknesses in its formulation:
Dogma of efficiency - Taylor's approach raised efficiency as the end goal of Business Management pushing aside other worthy goals (quality, profitability etc.,.)
Dogma of Singular Metric - Taylor's obsession that business management was a scientific discipline meant he expected to judge its success by a single metric. These days, that singular metric is Shareholder Value. A single metric can be used in hyper rational situations where level of information and degree of certainty is close to perfect. In their desire to achieve that single metric, corporations push other goals (quality, customer service etc.,.) to the wayside.
Dogma of "hard" measures - Taylor's success at collecting "hard" data from his time and motion studies enshrined the primacy of quantitative data over qualitative approaches to a firm's success.
To implement his ideas of business management, Taylor envisioned a separate group of managerial elite that would use its accumulated store of knowledge to direct labor of its workers to improve productivity(something that appealed more to communist sympathizers than capitalist adherents). Taylor also advocated separating planning and execution domains that would be performed by separate sets of people within the same organization. The wholesale adoption of this approach by American companies put them at a disadvantage in 1980's against Japanese companies which did not have the artificial separation between planners and doers in their manufacturing processes. Taylor's ideas even found acceptance with Henry Ford in his car assembly plants. After initially being supportive of Taylor's theories of scientific management, Labor realized their negative effect on worker rights. Taylor had no love lost for capitalism as well as he considered its volatility to be wasteful and wanted his new managerial elite to counter its vagaries. His influence with policymakers across the world was extensive enough that he was able get governments listen to his arguments about transferring the control of national economy into the hands of experts - the five year plans of socialist and communist countries takes its inspiration from the business management principles of the 'Taylor system'.
After Taylor, it was the turn of Elton Mayo to push scientific management forward. Born in Australia, he made his name in America by expounding on the theory that discontent among workers came about not because of hazardous working conditions or low pay but from lack of concern of corporations for their workers' psyche. He contributed to the growing field of Industrial Psychology and pitched it to corporations as the solution to understand the psychology of their workers. Taylor had focused primarily on manufacturing which made it difficult for business schools to include them in their curriculum as generalized teaching (even though Taylor did think of his work as applicable generally and not specific to a particular industry). Mayo's lessons was much more generalized and fit in perfectly with the requirements of business schools. Both Mayo and Taylor pitched their business management work in response to the worker unrest at that time (which would culminate in Russian Revolution in 1917). Mayo's popularity provided him the opportunity to explain the results of Relay Assembly Test conducted at Hawthorne facility of Western Electric Company in 1927. The company wanted to find out the factors behind variations in productivity of its workers on a daily basis and had conducted the test on its own (without Mayo's input). Mayo conveniently interpreted the results of the test as validating his observations - that teamwork between participants led to increased productivity even though the results clearly showed the strong influence of financial incentives for the workers participating in the experiment. This allowed Mayo to codify that a good worker is a happy worker, that road to worker happiness passes through the satisfaction of psychological and social needs (as opposed to material needs like increased pay or health benefits) and that the "soft" side (culture and values) of the organization are far more important than its formal hierarchy. Mayo used his interpretation to provide a patina of scientific respectability to the results of the Relay Assembly Test even though the results showed nothing of what he claimed.
The present day business management stars (Peter Drucker, Gary Hamel, Tom Peters) and the whole field of Organizational Behavior taught in business schools rely on Mayo's theories. Following Mayo, Chester Barnard used the Hawthorne experiments to push the importance of "mission statements" and "core values" of an organization. Hawthorne experiments also form the basis of Douglas McGregor's Theory X and Theory Y. Theory X holds that human beings are lazy and irresponsible and need to be given stern direction to accomplish their goals. Theory Y holds that humans are active seekers of fulfillment through work and can do the job if they are provided the freedom to seek that fulfillment. The belief that trust between people in a workplace matters for productivity has a long lineage tracing back to Greek Philosophers. By trying to interpret a philosophical idea as a scientific truism, Mayo (and his famous successors of business management) provide an illusion of certainty where none exists. The practical implication of Mayo's work was to provide scientific cover for corporations to beat back Labor's efforts to improve material well being of workers through pay raises and health benefits and replace them with much more nebulous wellness programs targeted towards the psychological and social well being of the workers.
Strategy is a buzzword that confers managerial aura on anyone who uses it. The predominant form of organization across the business world is the M Form organization (M stands for multi divisional or multi functional). In these types of organizations, the headquarters (people at the top) concern themselves with the general functions of planning, resource allocation and coordination while subordinate divisions assume operational responsibility for a particular line of business or function. Strategy spread its tentacles everywhere because it is a form of justification for the existence of headquarters in a M form organization. Since management consultants primarily worked with headquarters staff, it was in their interest to evangelize about strategy as well. Business schools jumped into the action designing curriculum for both the corporations and the consultants. The idea of strategy as a discipline that moves the organization forward was the handiwork of 3 theorists - Igor Ansoff who used his book Corporate Strategy to define strategy for a corporation and also published a set of strategic planning tools that the practitioners could use to develop strategy for an organization, Bruce Henderson who founded the Boston Consulting Group that developed Experience curve and Portfolio Matrix that are mainstays of strategy practice today, Michael Porter - who popularized the 5 forces framework through his book Competitive Strategy. Lesser known contributors include Adam Brandenburger and Barry Nalebuff (for their theory of Co-opetition), Gary Hamel and C.K.Prahalad (for their theory of Core Competence of Organizations). While top management perceives strategic planning to be a process that arrives at the best strategy for the organization, assumptions underlying strategic planning usually mean an implicit bias towards a particular strategy choice (which usually coincides with what the CEO of the organization wants - after all, what management consultant is going to forego their juicy profit by challenging their client ?).
Strategic planning as a discipline has given rise to a new tier of middle managers who sit between Labor and Capital. While middle managers fancy themselves as having more power than workers, both of them are usually disposable in the hands of the owners. Middle managers justify their existence by arguing that their work of strategy is generalized in nature across the organization while the specific details are carried out by operational managers (who are usually one step above the workers). To justify their higher wages, strategy practitioners also paint it as more cerebral, complex and reflective in contrast to operational management which is described as more of a mechanical replication of market practices to achieve market returns. Research has shown that organizations that did strategic planning historically decreased shareholder value instead of increasing it. Because strategy as a discipline is vacuous, it tends to run as fads. It starts with the conviction that a solution to corporate world's problems is there for the taking. A limited number of organizations bite the bullet and implement the solution. The small sample size shows the solution in a rosy light. Other organizations follow them in implementing the solution. As the sample size grows larger, issues crop up with the solution and support among consultants for that solution starts decreasing. Corporations now start looking for new solutions and the cycle repeats itself. Strategy has also served to make Shareholder Value Maximization model of management dominant across business schools. Business school students learn that Shareholder Value Maximization is the name of the game and give honesty and fairness a short shrift in their desire to hit that target.
Other Books for Reference:
Flavor of the month: Why Smart people fall for fads - Joel Best
One market under God: Extreme Capitalism, Market Populism, and the end of Economic Democracy - Thomas Frank
From Higher Aims to Hired Hands: The social transformation of American Business Schools and the Unfulfilled Promise of Management as a profession - Rakesh Khurana
Dangerous Company: Management Consultants and the businesses they save and ruin - James O'Shea and Charles Madigan
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