Masters of management

Masters of Management How the business gurus and their ideas have changed the world – for better and for worse

By Adrian Wooldridge

Presented by Thys Pretorius

We Read for You: September 2013

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Adrian Wooldridge is The Economist's management editor and writes the Schumpeter column. He was previously based in Washington, DC, as the Washington bureau chief where he also wrote the Lexington column. Previously he has been The Economist's West Coast correspondent, management correspondent and Britain correspondent. He is the co-author of "The Company: A Short History of a Revolutionary Idea", "A Future Perfect: The Challenge and Hidden Promise of Globalisation", "Witch Doctors", a critical examination of management theory, and "The Right Nation", a study of conservatism in America.

Adrian Wooldridge

1. Management gurus (theories) are the power behind the thrones

2. Management theory is an immature discipline, unusually open to charlatans and congenitally prone to fads

3. Management theory also contains a great deal of good. The world is a much better place because of innovations such as M.B.O., lean manufacturing and frugal innovation

Overall argument

• Part 1: How it works

• Part 2: The Prophet and the Evangelists

• Part 3: Three Management Revolutions

• Part 4: The Great Debates

• Part 5: Workers of the World

Lay-out

• The Fad in Progress: from Reengineering to CSR

• The Management Theory industry

Part 1: How it Works

• Business schools are responsible for developing the intellectual machinery of capitalism as well as training the people who operate that machinery

• Critics lambaste business schools for inventing doomsday machines like collateralized debt obligations and for failing to give their charges any sense of risk and responsibility. MBA graduates should be know a “masters of the apocalypse”.

• This is also the story of management theory: extraordinary success compromised by equally extraordinary failure

Part 1: How it Works

• Frederick Winslow Taylor

– scientific management

– Henry Gantt & Five-Year Plans

• W. Edwards Deming

– Total Quality Management

• The Overdrive of the 1980’s

– Tom Peters’ In Search of Excellence

– Jack Welch and Tom Friedman

Part 1: How it Works – the rise of management theory

• Business Schools

– The Cult of the MBA

• Management Consultancies……

– …have offices wherever firms lose money.

• Business Press….

– …has learned how to tap into two primal human instincts: fear and greed.


• The need: – Companies everywhere are going through

contortions that their predecessors could hardly imagine

– As companies change, so do careers.

– The number of people that need to know about management is growing relentlessly

– Just as companies have been forced by competitors and shareholders to question how they manage them selves, so have governments, prodded by growing budget deficits and angry taxpayers


• The Management Theory Paradox:

– Management theory matters because management matters, BUT

– A discipline that matters as much – is very far from respectable.

– Perfectly respectable on the one hand, YET all sorts of doubts about its intellectual credentials.


• The Charges against Management Theory: – Incapable of self-criticism

– Management writing is incomprehensible gobbledygook

– Underneath this could of obfuscation, most of what gurus says is blindingly obvious

– Faddishness

• The paradox at the heart of the management theory industry : a surplus of overhyped new ideas and a dearth of level-headed criticism

• The contradictory corporation – Scientific management vs. humanistic management


• Reengineering was the most successful fad of the Clinton era, BUT

– Corporate anorexia

– Catastrophic collapse of trust

– Corrupted by greed

• Corporate Social Responsibility (CSR)

– CSR is the tribute capitalism pays to vurtue

Part 1: How it Works The Fad in Progress: from Reengineering to CSR

• Corporate Social Responsibility (CSR)

– CSR is the tribute capitalism pays to virtue

– Reputation management

– CSR is nothing more than a polite mask that companies put on smart decisions

– Management taking money out of the shareholders’ pockets for their own ego’s

– Loss of focus. The disaster in the Gulf was a calamity for CSR as well as for BP

– The rise of Social Entrepreneurs “philanthrocapitalists”

Part 1: How it Works The Fad in Progress: from Reengineering to CSR

• Marvin Bower – The Founding Father of the Management (Consulting) Industry

• Management Industry consists of three parts:

– Business Schools

– Management Consulting Business

– The Guru Business

• Management theory (and then selling it) is at the heart of the management industry

Part 1: How it Works The Management Theory industry

• Management theory (and then selling it) is at the heart of the management industry

• Thriving on anxiety; management gurus are virtuosos at exploiting the combination of fear and greed

Part 1: How it Works The Management Theory industry

• Peter Drucker: The Guru’s Guru

• Tom Peters: Management for the Masses

• Flat Worlds, Tipping Points, and Long Tails

Part 2: The Prophet and the Evangelists









• The road to Drucker – Scientific management

– Human-relations school

• Drucker – an intellectual refugee – One of the few thinkers from any discipline who can

claim to have changed the world

– “Companies have a social dimension as well as economic purpose”

– Decentralisation

– The rise of the knowledge workers

Part 2: The Prophet and the Evangelists Peter Drucker: The Guru’s Guru

• Not just an airy-fairy; the “hard” side of Drucker:

– Management by Objectives – Structure must follow strategy

• “At best , good management will bring economic progress and social harmony in its wake.”

• Three problems that make manager’s life hell: 1. The sheer scale of contemporary managerial change 2. The frequency of managerial failure 3. The growing tension between the business and the

environment

Part 2: The Prophet and the Evangelists Peter Drucker: The Guru’s Guru

Part 2: The Prophet and the Evangelists Tom Peters: management for the masses

• The man who has done more than anybody else to market management theory to the masses

• Strategy and structure had gone beyond the point of diminishing returns, and that other, softer factors, such as management style and culture were also crucial to success (In Search of Excellence)

Part 2: The Prophet and the Evangelists Tom Peters: management for the masses

• Two serious flaws mark his work:

1. He got it wrong too often 2. He contradicts himself even more often than the

average politician

• A point of consistency – his critique of scientific management and the rationalist model:

1. To much emphasis on financial analysis and too little motivating workers or satisfying customers

2. The Rationalist model encouraged bureaucratic conformity at the expense of entrepreneurial innovation

3. The rational model rests on a misunderstanding of human nature.

• Gurus:

– Superstar professors (Rosabeth Moss Kanter, Jim Collins)

– Journo-gurus (Tom Friedman, Malcolm Gladwell)

– Academic entrepreneurs (Howard Gardner)

Part 2: The Prophet and the Evangelists Flat worlds, Tipping Points & Long Tails

• Journo-gurus: Tom Friedman

(The Lexus and the Olive Tree “ The World is Flat)

– Globalisation Is not a fad or a freak; it is driven by a combination of:

• Technological innovation (killing distance)

• Financial regulation (making it easy to shift vast sums of money)


• Journo-gurus: Malcolm Gladwell

(Tipping Point, Blink, Outliers, etc.)

– When a trend becomes an avalanche

– Thinking without Thinking, Thin Slicing and the power of intuition

– Successful people are invariably beneficiaries of hidden advantages and extraordinary opportunities and cultural legacies that allow them to learn and work hard and make sense of the world in ways that others cannot


• Journo-gurus: Christopher Anderson (The Long Tail: how the future of business lies in selling more of less, and, Free: the future of a Radical Price))

– Moving from a world of big hits to one of niche products

– Rise of the micro-markets

– Technological innovation is removing bottlenecks in distribution

– Information wants to be free

– Stop fighting the inevitable (piracy) and start reconceptualising it as a marketing opportunity


• Professors as Prophets: Robert Reich (The Next American Frontier; Who are we?; The Work of Nations; The Future of Success, Supercapitalism; Locked in the Cabinet)

– Country’s competitiveness depends on its human capital rather than the profitability of the companies

– “We live in the age of the terrific deal.” This has replaced the ethic of loyalty with the “logic of disloyalty”.

– Economies of attention rather than economies of scale is the currency of business success


• Professors as Prophets: Robert Reich (The Next American Frontier; Who are we?; The Work of Nations; The Future of Success, Supercapitalism; Locked in the Cabinet)

– Turbo-charged capitalism is at the sam time both generating profound social problems and using its political muscle to prevent this problems from being solved

– CSR is nothing but PR ploy; advertising with a bit of sociology

– Governments represent the democratic will; the only people who can be trusted to put general interest above the profit motive.


• Professors as Prophets: Richard Florida (a specialist on urban studies)

(The Rise of the Creative Class; The Great Reset.)

– The Creative Class is at the heart of the post-industrial economy.

– Mobility of the creative class

– Crises such as the “great crash” reinforce the power of the creative class.


• Professors as Prophets: Howard Gardner (Multiple intelligences; Creating Minds; Leading Minds; Five minds for the Future; Frames of Mind; Changing Minds

– Multiple intelligences

– Preoccupied with creativity and persuasion

– The five mind-types; disciplined, synthesising, creative, respectful and ethical

– Best way to overcome resistance to change – “representational redescription”


• Lessons of the insurgents

– Management profession’s immaturity, but also its vitality

– Simplifying and exaggerating

– Management theory is more accessible to ordinary people


• Rethinking the Company

• Entrepreneurs unbound

• The World upside down

Part 3: Three Management Revolutions

• Seismic shift in corporate organisations, e.g. Shell vs. Google

• The end of certainty

• The forces; Internet, the Capital Markets and globalisation

• The “demise of size”? Big AND small companies

Part 3: Three Management Revolutions Rethinking the Company

• Who killed Alfred Sloan?

– Japanese lean production based on teamwork

– Firms hijacked by managers more interested in pay & perks rather than shareholder value

– Intrapreneurs and cross-functional teams

– Growing uncertainty about the future

– Rising importance of knowledge


• Self-sufficient organisations vs. connected corporations

• Collaborative consumption, e.g. CouchSurfing and ThredUP

• Collaborative production, communities of meaning

• Sloan’s vertical integration vs. the hybrid company

• From decentralisation to empowerment


• The new building blocks:

1. Core competencies

2. Renewal

3. Networking

4. Culture and values

• Fault lines in the new model:

1. Reliance on “The Leader”

2. As companies grow more complicated the job of managers become more ill-defined

3. Reliance on trust and self-discipline to manage risk


• Capitalism is destined to be transformed by an entrepreneurial revolution (Norman Macrae)

• The bureaucratization of capitalism is killing the spirit of entrepreneurship. But, there has been a shift from managerial capitalism to entrepreneurial capitalism (Joseph Schumpeter)

• The United States of Entrepreneurs – Worlds’ most mature venture-capital industry

– Close relations between universities and industry

– Open immigration policy

Part 3: Three Management Revolutions Entrepreneurs unbound

• Entrepreneurs by the Million: India and China

• Entrepreneurs from everywhere


• An idea whose time has come – the conversion to entrepreneurship:

1. In a knowledge-based economy entrepreneurs play a central role

2. Breaking of the old-fashioned social contract between employers and the employed

3. The support of powerful institutions

4. Governments are competing to see who can create the most pro-business environment


• The Secrets of success

– Replicative and innovative entrepreneurship

• Entrepreneurship myths

– Orphans and outcasts

– Must be 20-somthings or even adolescents

– Driven by primarily driven by venture capital

– Need to produce some world-changing new product

– Incompatible with big companies

• Then think seriously about the rules


• The power and opportunities of the emerging markets

• The combination of challenges and opportunities is producing a fizzing cocktail or creativity

• Growth is breeding optimism and optimism is breeding self-confidence and self-confidence is breeding a distinctive approach to business

Part 3: Three Management Revolutions The World turned upside down

• The charms of frugal innovation

– Producing simpler (not inferior) products to reduce costs

– Adaptable to circumstances

– Three ways of reducing costs:

1. Contract out even more work

2. Use existing technology in imaginative new ways

3. Apply mass-production in new and unexpected areas

– The Chinese contribution

• Use of flexible networks (Guanxi)

• Bandit or guerrilla innovation (Shanzhai)


• Easier said than done

– Consumers in emerging markets are far more difficult to reach; distribution is tricky

– Even more thought has to go into marketing because of lack of brand loyalty

– Heavy investment in consumer education is essential

– “straddling the pyramid”, i.e. serving both ends of the pyramid (market segmentation)


• New Masters of Management

– Using modern (mobile) technology to replace scaling up with scaling out

– Pull models (as opposed to traditional push models);

– Applying mass-production techniques to sophisticated services


• The power to disrupt. Many of the most disruptive innovation will hail from emerging markets; it will move fast and much further:

1. Markets for corporate control and for senior managerial talent are much more liquid

2. The sheer size of the emerging market

3. Emphasis on volume to make up for slim profit margins

4. The best companies have grasped the potential of emerging markets


• Managing workers by hand and brain, is a tough business.

• Managing “clevers”; how to apply the bridle and the whip:

1. Apply a light touch, point them in the right direction and allow them to decide on the route

2. Massage their egos

3. Use at thief to catch a thief

4. Treat them like precocious children

Part 4: The Great Debates Knowledge, Learning and Innovation

• The innovation machine

– Need to be able to tolerate failure

– The best way to have a good idea is to have lots of ideas (Linus Pauling)

– Looking outside the borders of the organisation

• Co-creation - CK Prahalad

• Crowdsourcing – Jeff Howe

• Wikinomics – Don Tapscott

– Staying inside ala Apple


• The innovation machine

– Big is beautiful

– Balancing efficiency and innovation.

– Dedicated innovation machines

– Dealing with the challenge of “Innovator’s dilemma”


• The ability to predict and control the future – if only.

• Corporate Planning degenerated into a pedantic annual ritual rain dance. Strategy, however is the most powerful business idea of the past half-century

• Michael Porter: – Five competitive forces

– Value chain

– Market differentiation & cost-based leadership

Part 4: The Great Debates Lords of Strategy

• The power of vision; taking the long-term view and inventing the future

• Prahalad and Hamel: – Strategy as vision

– Strategy as stretch

– Core competencies

• The “indirect” route; profits are best pursued as a by-product of other things, such as service

• Strategy and technology – the Balanced Scorecard (Kaplan & Norton)


• Strategic thinking; the three propositions:

1. Successful strategies are based on “platforms” rather than on products

2. Pull strategies can be just as powerful as push strategies

3. Strategy need to bubble up from the bottom rather than being imposed from the top down


• Is the earth flat? Failure of the flat earth strategy for the following two reasons:

1. Reports of the death of distance is exaggerated

2. Taste continues to vary dramatically from lace to place

• Business and politics …… and corruption and risk

• Yet, globalisation cannot be ignored

Part 4: The Great Debates What does Globalisation mean?

• Falling trade barriers, the ability to move ideas, people and money around the present enormous opportunities. The trick is to get the balance between global scale and local relevance. HOW?

1. The transnational corporations abolish unnecessary duplication and bring national resources to bear on local problems

2. The globally integrated enterprise where functions / specialised components, e.g. procurement, manufacturing are organised on a global scale

Part 4: The Great Debates What does Globalisation mean?

• The boardroom debate:

– What are companies for? To enrich shareholders or to please stakeholders?

– Is there a single best way of organising companies?

– How much should bosses be paid?

– Leadership and / or management

Part 4: The Great Debates Storm in the Boardroom

• Shareholder value ……..stakeholder needs • Long term results cannot be gained by piling short

term results on short term results (Drucker) • Shareholder value is the dumbest idea on the

planet (Welch) • Shareholder capitalism give way to customer-driven

capitalism • Employees first, customers second • Contended workers deliver better service;

contended customers make for a profitable company; together you have a recipe for happy shareholders


• Executive pay; can you justify the fact that in 1980 average American CEO earned 42x as much as the average blue-collar worker. This has increased to 531….

• The case for: – Constant pressure

– Job tenure shorter and shorter

– Much higher reputational risk

– Impact of CEO on corporate performance is ± 15%

– The “Tournament Theory”


• The leadership debate;

– leadership – management

– Dealing with change

– Executive coaching

– 360° feedback

– Out with the Superman CEO???


• Management consultants invading the public sector and government

• Mintzberg argued that management consultants should not be allowed close to the public sector

Part 4: The Great Debates Managing Leviathan

• FixTheStae.com

– Citizens will take a more active role in shaping public service

– Disruptive innovation and the education system

– Make more use of the voluntary sector

– Government should persuade rather than force people into improving behaviour

Part 4: The Great Debates Managing Leviathan

• The Common Toad

• The Battle for Brainpower

• Managing Yourself

Part 5: Workers of the World

• The changing nature or work: Charles Handy – The Shamrock organisation

– Portfolio Life

• So what…..could it be an economy dominated by free agents rather than organisations? – Fashion for temporary workers

– Workers (Knowledge) are getting more footloose and fancy-free

– People are social animals

Part 5: Workers of the World The Common Toad

• The core of modern companies consists of company people who are repositories of the company’s distinctive values and skills

• Loyalists work harder, but are better rewarded

• Associates / free agents / freelancers


• Woman power

• The old certainties – a stable job, a stable career – are being replaced by bombardment of tasks and an all pervading angst.

• New technology – new opportunities

• More family friendly workplaces


• The Dark Side: – The Animal Farm syndrome;

– Overstretch

– Disengaged workforce

– Anxiety about work / unemployment

• The Levity Principle

• The complexity of careers

• The social / moral contract – Employees / employers / the state


• Relationship between brainpower and economic success

• War for talent is going global

• Relatively cheap brainworkers in the East

• Rapid growth and skills shortages; companies are growing faster than the education infrastructure

• HR departments have gained status

Part 5: Workers of the World The Battle for Brainpower

• Talent management, rules of thumb:

1. Elitism pays; the vital few

2. Plan ahead

3. More imagination required in recruitment and retention practises

4. Internal markets can help circulate talent

5. Senior managers , specifically the CEO, should be involved in talent management


• Talent and inequality

• Meritocracy and its discontents

• The backlash to inequality: steps to prevent it:

– Affirmative action - comes too late

– Progressive taxation – bright flight

– Invest in childhood nutrition and early quality education


• At the core of Coveyism lies a serious point: character matters

• It is expected of employees to take more responsibility for managing their careers and continuing with their training

• The brand “YOU”

• The boundaries between the corporate and the personal are becoming more fluid

Part 5: Workers of the World Managing Yourself

• At the core of Coveyism lies a serious point: character matters

• It is expected of employees to take more responsibility for managing their careers and continuing with their training

• The brand “YOU”

• The boundaries between the corporate and the personal are becoming more fluid


• The meaning of life

– To get the most out of life was to live in many dimensions (Drucker)

– Clayton Christensen: advising high achievers to spend more of their time on enduring things

• Machiavelli in the Boardroom

– Rewards of success have grown dramatically

– The greasy pole is getting harder to climb and once you have climbed it more difficult to cling on to


• Power; Pfeffer’s rules: – People who want to wield power need to rid

themselves of the illusion that power is just

– Best way of getting to the top is by joining the right department

– Learn to project yourself

– Learn to manage upward

– The ability to network

– Loyalty still counts

– Powerful people need to cultivate a combination of paranoia and humility


• Mens Sana in Corporation Sano

– Health and wellness

– Mental and emotional health

– Individual (positive) psychology


• Two immediate impressions: 1. Enormous commercial success

2. Management theory is a mish-mash

• The combination of easy-money and low barriers to entry means that charlatans flock in

• Only one great thinker – Peter Drucker

• The vitality of business ensures that the study of business is vital – The impact of the Internet

– Rise of the emerging markets

– Rise of social entrepreneurship

Conclusion: Masters of Management