MANAGEMENT: SERMONS AND REALITY

One of the luxuries I enjoyed in Stanford was the range of subjects on which I could read. So I tried to catch up on management. I got the impression that if economics was commonsense made difficult, management was commonsense made bombastic. This column was published in Business Standard of 18 June 2001. 100 LEADING IDEAS: AREA AND ORIENTATION
	Goal-setting	Management	Marketing	Personnel	Production	Total
(a) Positive ideas
Economics		5	6	1	8	20
Empirical constructs		1	2	1	1	5
Sociology		2				2
Programming						0
Military Studies				1		1
Psychology			1			1
Accounting						0
Geography					1	1
Biology						0
High-sounding humbug				1		1
Total	0	8	9	4	10	31
(b) Normative ideas
Economics	8	1	5	1	4	19
Empirical constructs	1	6	4		7	18
Sociology				6		6
Programming	1	2	1		1	5
Military Studies	1	1				2
Psychology	1	1				2
Accounting	1	1				2
Geography						0
Biology		1				1
High-sounding humbug		12	1	1		14
Total	13	25	11	8	12	69
(c)  All ideas
Economics	8	6	11	2	12	39
Empirical constructs	1	7	6	1	8	23
Sociology	0	2	0	6	0	8
Programming	1	2	1	0	1	5
Military Studies	1	1	0	1	0	3
Psychology	1	1	1	0	0	3
Accounting	1	1	0	0	0	2
Geography	0	0	0	0	1	1
Biology	0	1	0	0	0	1
High-sounding humbug	0	12	1	2	0	15
Total	13	33	20	12	22	100

COMMONSENSE MADE BOMBASTIC?

Managers are people who do nothing with their own hands; their job is to get other people to work, and they have to do so with little power over the managed. Their most powerful weapon is getting rid of employees; but even that is difficult except in the US and Britain; and even there, engagement and disengagement of people are attended with substantial costs. Hence managers have to achieve results with some combination of persuasion and harassment. If the market punishes their companies, managers are the first to share their misfortune. And within many companies they face a competitive and uncertain environment. Hence their lives are full of hazard. For a minority, there await substantial rewards. In other words, management is a lottery. So it is no surprise if managers are in the search for the winning number. They are also well heeled; so they offer a lucrative market to anyone who can reveal the secret of management to them.

Those who can, manage; those who can’t, teach. The brightest management graduates go into management. That leaves a gap in management teaching, which is often filled by those who have specialized in other disciplines. Thus, management teaching turns out to be a melting pot for ideas from many disciplines. It attracts teachers from economics, sociology, psychology, political science and engineering; but MBA courses are generally organized around the various aspects of management, such as strategy, marketing, personnel management etc. 

One would therefore expect that these courses would draw upon a number of disciplines. But the disciplines do not dissolve unrecognizably into a common body of knowledge. It is usually possible to trace the teaching material to one or other discipline; and often the author’s discipline is betrayed by what he writes. This is illustrated by the 100 foremost management ideas selected by Tim Hindle (Guide to Management Ideas, The Economist Books). Most of the ideas can be traced back to one or the other discipline; those that cannot, fall into two classes. One relates to phenomena observed in real life that then are analysed and enter the teaching; the other is what I have irreverently called high-sounding humbug – slogans which are supposed to hand managers the magic key, but which, however well clothed in beautiful and inspiring language, are too woolly to be of much help. This is my description, which the initiators of the fads can be expected to disagree with; they would even find victims who would testify to the great value of their ideas. But I am not the first one to discover fads in management literature; Pascale (Managing on the Edge, Penguin) listed dozens of them.

Thus out of Hindle’s list of 100 ideas, 39 – the largest number - came from economics. This may represent a bias on his or my part. Some could have come from empirical observations, but if so, the observations were made by economists, and have generally led to much thinking and literature in economics. The next largest number – 23 – in fact comes from the field. And another five come from programming, which is a mathematical offshoot of economics. So observed facts and economic analysis between them account for two-thirds of the ideas. Nor do the rest come from other disciplines. Almost a half – 15 out of 33 – are fads; if they must be placed anywhere, it would be in theology. Thus, disciplines other than economics account for only about a sixth of the ideas.

Is management, then, just economics with an icing of humbuggery? Non-economists would hardly agree with this; they would surely claim a larger share of the pie. It would be interesting to make a calculation based on publications. Although an accurate estimate of this sort is impossible, it is almost certain that it will raise the contribution of psychology; for group psychology has an enormous following amongst managers. Right till the 1980s, economics was a flourishing discipline, at any rate in the US, and management teaching (and research) attracted a smaller proportion of economists than of other social scientists. The proportion of publications by non-economists is almost certainly higher than the one-sixth of leading ideas they account for. If, as the leading ideas suggest, the disciplines remain fairly distinct in the teaching, the mix of social sciences that management students imbibe must also reflect these differing propensities of social scientists to enter management teaching.

This is, however, the supply side; the final mix would also be affected by the demand. The number of students specializing in various branches of management depends on relative pay. In recent years, finance has led to the highest earnings; hence the demand for courses in finance would have been the highest. It is commonly believed that specialization in marketing leads to higher posts and earnings than production; hence courses in marketing should be in greater demand. Jobs in personnel management are least prized; so should courses.

One test of Hindle’s list would be to see whether this rank ordering is reflected in his leading ideas. In the Table, they are classified by the management areas they fall into. (Finance is not distinguished because none of the ideas are unequivocally financial; evidently, Hindle has neglected this field). The highest number of ideas (33) falls under general management; but the number is boosted by a dozen fads. The next highest is in marketing and production; the number in personnel management is distinctly lower. Thus, the numbers are broadly consistent with the demand pattern.

Whatever their area, people turn to management studies because they want to know how to manage: they are looking for sermons. The Table also distinguishes between ideas that embody advice – normative ideas – and other, positive propositions. The distinction yields interesting results. As is to be expected, normative ideas outnumber positive ones by over two to one; and the proportions vary across disciplines. High-sounding humbug is almost always normative – only one out of 15 fads is positive. Surprisingly perhaps, an overwhelming proportion of ideas originating in the field are normative: those who research management study reality for lessons, not to find out how things work.

The lowest proportion of normative ideas is in economics; almost half the ideas are positive. This, in my view, betrays the reason for the preponderance of economics in management. No discipline can advance on just such minatory sermons as “Be good” and “Don’t sleep with your neighbour’s wife”; it needs a backbone in the form of an idea of how things work in reality. All social sciences at least seek to provide such a backbone. But only economics provides one that is directly relevant to business. Not all of economics does; macroeconomics, for instance, is only remotely relevant to the day-to-day running of business. But economics embodies an understanding, however imperfect, of how business works; that is why it must form a major part of management studies. This also suggests to me that all the stress on how to manage yields little real wisdom; what one needs to manage well is a thorough understanding of the business one is in.