Bad management theories: mistaken conclusion.

Recently, the Economist (Feb. 17, 2005) argued that scholars in management education faulted economics theories of maximization and rationality for what is wrong with corporate management. The magazine asserted that it was the mistake of other disciplines, rather than economics, for not coming

In a provocative article, "Bad Management Theories are Destroying Good Management," Sumantra Ghoshal genuinely challenged scholars to be in tune with societal trends and needs and not to seek narrow goals at the expense of the well-being of the world community and existing circumstances. His article has stimulated genuine debate and raised serious questions. Indeed, the points that were raised and the debate that followed have created a healthy intellectual environment and is certain to lead to a refinement of many management concepts and approaches.

It should be noted that Professor Ghoshal addressed several theoretical and organizational issues. Three points, however, deserve particular attention from management and international business scholars. These points are: pessimistic assumptions, scholarly laborers, and lack of intellectual environment that encourages competing models. The pessimistic assumptions are the most troubling and are more likely the foundation for what professor Ghoshal termed "bad management theories." The management literature and theories have been influenced by three primary assumptions: mankind is imperfect and deficient, rationality in behavior, and profit maximization tendency. The belief that mankind is deficient has penetrated management theories and the field of psychology. Sigmund Freud was instrumental in promoting this thinking when he stated, "in the depth of my heart, I can't help being convinced that my dear fellowmen, with few exceptions, are worthless" (quoted in Wrightsman, 1992, p.57). The assumption that human beings are worthless and deficient implies that people are not dependable and should not be trusted and, therefore, their aspirations should be disregarded. Consequently, this proposition has become the basis for many behavioral and organizational theories which stress that employees must be closely directed, monitored, and controlled.

At the same time, Milton Friedman's assumption and theories have influenced economics and management writing. According to Ghoshal, Friedman's assertion that ethical problems are a personal matter and must be left for the individual to wrestle with and that human behavior is homogenous and is based on self-interest, has produced a stream of theories that are not only based on negative assumptions about people and institutions, but has also misled managers and impeded sound theory development. Furthermore, considering ethical matters as personal has led to the evolution and the acceptance of flexible ethics where wining at any expense is the end game.

In the fields of economics and management the assumption that people are rational self-interested maximizers has profoundly changed the direction of scholarship and the nature of discourse, leading to the emergence of theories that discount the role of personal conscience, choice, morality, and emotions. In organizational and personal life, most, if not all, people under normal conditions are influenced by societal values and personal feelings. Nevertheless, the rational self-interest seeking model projects employees as those subjects who primarily seek material gain and power. The collective experience of mankind, across history, evidences that human beings look far beyond material gains in their relationships. In fact, it is impossible to frame human interaction in terms of economics. This assumption not only eliminates emotions, love, devotion, and natural aspirations, but also minimizes human creativity and reduces civilization to mere repetitiveness and physical progression. A quick survey of the history of mankind and civilization demonstrates that people's interests are not limited to materialism and power grasping, but conspicuously include spiritual, leisure, and intellectual needs among others.

The institutionalization of these theories in the minds of chief executives, policy makers, and scholars, including students of management have led to the unbridled promotion of selfish pursuit and flexible ethics and have in recent years produced far reaching consequences, socially and economically. Socially, the widening gap between the rich and poor and the dwindling size of the middle class in many countries is more likely responsible for increasing crimes, unrest, and the diminishing role of traditional families in the society. Economically, in many parts of the world, the urge to maximize profits have led managers to overlook societal and community needs, resulting in the collapse and disappearance of various traditional and national economic institutions. Furthermore, the rising corporate scandals and rapid eclipsing of family businesses have left many people out of work, furthering endangering collective economic well being and the existence of a functional world economic system.

The linkage between scholarly laborers and lack of intellectual environment is clear. Professor Ghoshal referred to "the pretense of knowledge." The term was coined by Frederick Hayek to denote theories that are based on partialization of analysis, exclusion of any role of human choice, and the use of deductive reasoning. Ghoshal argued that the pretense of intellectual inquiry has not produced a rich environment for knowledge creation and has not facilitated the weeding out of each other's absurdities in theory. More importantly, Ghoshal seems to advocate that most of the scholars in the business fields have departed from the scholarship of common sense--the epistemology of disciplined imagination- and has espoused the epistemology of formalized falsification. Consequently, scholars in business schools in their desire for respect from scholars in other fields "have become even more intolerant of the scholarship of common sense than those whose respect we seek."

In his essay, Ghoshal recognized that the pessimistic view and the lack of incorporating common sense theories in business teaching is almost the sole result of what he called the "Chicago agenda." He seemed to be sure that the "Chicago agenda" was responsible for not only adopting pessimistic, deterministic theories, but also in tolerating unethical behavior. Specifically, Ghoshal was critical of Milton Friedman and his promotion of his pessimistic views i.e. that morals are matters that must be left to the individual, that man is motivated solely by self-interest, and that human beings are imperfect. While Ghoshal rightly recognized other scholars (e.g., Posner, Coleman, Thaler, Burt,) of the "Chicago agenda," he overlooked the wide and deep impact that Leo Strauss, political scientist at the University of Chicago, has on the political, social, and economic scene in the United States and abroad (for more detail on the Straussian philosophy see Atlas, 2003; Heer, 2003, Mason, 2004). Strauss was a political philosopher who stressed the necessity of deceiving the public, promoted secrecy, and a large government. Strauss seems to take Friedman's pessimistic view of mankind much further by emphasizing the wickedness of man and the necessity of the elite to govern and control the society. Mason (2004) claims that that Strauss has inspired a following in many academic, think tank institutes, and governments. He asserts that there is a Straussianism movement with its own interests, ideas, and purpose. In recent years, this school of thought has not only strengthened and revitalized the gloomy outlook of the "Chicago agenda," but has also legitimized Friedman's theory of rationality and selfish behavior and propagated it with extraordinary zeal. Strauss's views have been promoted aggressively at home and abroad as the only possible salvation and pragmatic organizational view of employees and the nature of the market. Indeed greed "was legitimated as producing a better society, not just better companies" (Kanter, (2005).

In her comments on Ghoshal's essay, Rosabeth Moss Kanter (2005) attributed the successes of the "Chicago agenda" primarily to the fact the "economic man" theories are easier to teach, easier to do. She asserts that the popularity of theories that foster suspicion will find receptive policy makers. In contrast, theories that project man as trust worthy, capable, and responsible do not create a sense of security, a need for elaborate control systems and organizational hierarchies, and or feeling among decision makers of being powerful and in control. Indeed, Kanter seems to suggest that it is a societal rather than the academic environment that gives rise to theories that are based on false security. Academic institutions do not exist, grow, and evolve on isolated islands. Rather, they are influenced by prevailing cultural norms and values and by groups and institutions that provide them with funding. A culture that values domination, employees or on a larger scale other countries; elitism, aggressiveness; and materialism usually gives rise to theories that mistrust employees and their ability for positive involvement.

Very much in line with the above thinking, Pfeffer (2005) suggests that business scholars have to tackle broader societal issues and that the applications and implications of business ideas have to be discussed and debated in a spirited way with a particular focus on what is good for people. Pfeffer, too, calls for business scholars to be more explicit and more thoughtful about the values we are imparting by what we teach and how we teach it. He adamant in his call for creating conditions and organizations and management practice that take into consideration ethics and values that serve the society as the whole, not only the shareholders.

It is more likely that the Economist misunderstood professor Ghoshal's main points in his thoughtful essay. Encouraging creative and critical thinking in business schools and among business scholars is a scholarly responsibility and primarily a moral imperative. Scholars' mission and the essence of their existence are not merely to validate existing models and to mold their thinking and ideas into sanctioned frameworks. Rather, the essence of scholarship is to be creative and disregard boundaries that restrict imagination and possibilities.

REFERENCES

Atlas, James. (2003, May 4). A classicist's legacy: New empire builders. The New York Times, Section 4, p.1.

Economist (2005, Feb. 17). School for scandal. Available: www.economist.com.

Ghoshal, Sumantra. (2005). Bad management theories are destroying good management practices. Academy of Management Learning and Education, 4(1), 75-91.

Heer, Jeet. (2003, May 11). The philosopher. The Boston Globe, H 1.

Kanter, Rosabeth Moss. (2005). What theories do audiences want? Exploring the demand side. Academy of Management Learning and Education, 4(1), 93-95.

Pfeffer, Jeffrey. (2005). Why do bad management theories persist? A comment on Ghosal. Academy of Management Learning and Education, 4(1), 96-100.

Mason, John G. (2004, spring). Leo Strauss and the Noble lie: The Neo-Cons at war. Logos, 3(2).

Wrightsman, L. S. (1992). Assumption about human nature: Implications for researchers and practitioners. CA: SAGE Publications Inc.