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Bad management

Realised pathologies in management behaviours (The not-for-profit sector isn't immune!)

Our theories and ideas have done much to strengthen the management practices that we are all now so loudly condemning.

..."The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood," wrote John Maynard Keynes (1953: 306). "Indeed the world is run by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences are usually the slaves of some defunct economist.... It is ideas, not vested interests, which are dangerous for good or evil" Keynes (1953: 306).

This is precisely what has happened to management. Obsessed as they are with the "real world" and sceptical as most of them are of all theories, managers are no exception to the intellectual slavery of the "practical men" to which Keynes referred. Many of the worst excesses of recent management practices have their roots in a set of ideas that have emerged from business school academics over the last 30 years.

MBA students are not alone in having learned, for decades, these theories of management. Thousands—indeed, hundreds of thousands—of executives who attended business courses have learned the same lessons, although the actual theories were often not presented to them quite so directly.

Even those who never attended a business school have learned to think in these ways because these theories have been in the air, legitimizing some actions and behaviours of managers, delegitimizing others, and generally shaping the intellectual and normative order within which all day-to-day decisions were made.

Why then do we feel surprised by the fact that executives in Enron, Global Crossing, Tyco, and scores of other companies granted themselves excessive stock options, treated their employees very badly, and took their customers for a ride when they could? Besides, the criminal misconduct of managers in a few companies is really not the critical issue.

Of far greater concern is the general delegitimization of companies as institutions and of management as a profession (The Economist: 25-31 October, 2003) caused, at least in part, by the adoption of these ideas as taken-for-granted elements of management practice...

...I argue that academic research related to the conduct of business and management has had some very significant and negative influences on the practice of management. These influences have been less at the level of adoption of a particular theory and more at the incorporation, within the worldview of managers, of a set of ideas and assumptions that have come to dominate much of management research. More specifically, I suggest that by propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral responsibility...

The 'pretence of knowledge' ...has demanded theorizing based on partialization of analysis, the exclusion of any role for human intentionality or choice, and the use of sharp assumptions and deductive reasoning (Bailey & Ford, 1996). Since morality, or ethics, is inseparable from human intentionality, a precondition for making business studies a science has been the denial of any moral or ethical considerations in our theories and, therefore, in our prescriptions for management practice.

Unlike theories in the physical sciences, theories in the social sciences tend to be self-fulfilling. A theory of subatomic particles or of the universe—right or wrong—does not change the behaviors of those particles or of the universe. If a theory assumes that the sun goes round the earth, it does not change what the sun actually does. So, if the theory is wrong, the truth is preserved for discovery by someone else. In contrast, a management theory—if it gains sufficient currency—changes the behaviors of managers who start acting in accordance with the theory.

A theory that assumes that people can behave opportunistically and draws its conclusions for managing people based on that assumption can induce managerial actions that are likely to enhance opportunistic behavior among people (Ghoshal & Moran, 1996). A theory that draws prescriptions on corporate governance on the assumption that managers cannot be trusted can make managers less trustworthy (Osterloh & Frey, 2003).

Whether right or wrong to begin with, the theory can become right as managers - who are both its subjects and consumers - adapt their behaviours to conform with the doctrine. ...This is precisely what has happened to management practice over the last several decades, converting our collective pessimism about managers into realised pathologies in management behaviours.

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Compiled by Dr. Bruce D. Watson

10 November 2008

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