In a provocative article in Times Higher Education (THE), Douglas Board compares business schools with the motor industry in the light of the VW emissions fraud. He notes that while both sectors are the same age, global in reach and have profound whole-system effects on the rest of the world, only one is tarnished by scandal caused by its behaviour or its secondary consequences: we’re up in arms about vehicle recalls, emissions and damage to the environment, but ‘society has barely registered the existence, let alone the scale, of business schools’ harms’.
It’s an important and useful thought. Thus, in automotive terms, you'd describe the Great Financial Crisis as a head-on global pile-up caused by MBA-licensed drivers all driving by the rear-view mirror in vehicles whose engine management system, also conventionally approved, was based on superstition rather than science. While the drivers were unscathed thanks to massive cockpit protection, there were no airbags for other passengers or society. As Board points out, VW-style ethics-lite are themselves the product of the results-above-all doctrine sanctioned by business schools over the last 40 years.
There are many management products freely on sale that would be outlawed as unsafe or bogus if they came out of any other industry. As Sumantra Ghoshal wrote in 2005, ‘business school faculty need to own up to our own role in creating Enrons. It is our theories and ideas that have done much to strengthen the management practices that we are all so loudly condemning'. He singled out governance based on agency theory, conventional versions of strategy, and hierarchical performance management. That's fairly comprehensive. ‘Management is out of date...’, acknowledged Gary Hamel in 2007, ‘a technology that has stopped evolving, and that’s not good.’
We don’t on the whole buy cars that don’t work, so why do we continue to take management at its own valuation? One reason is precisely that we don’t consider it as the product of an industry, as we do aspirin or a car. We treat it more like a religion, a faith-system derived by top-down deduction from immutable principles that allows movement only at the margins, rather than induction upwards from what works empirically. Like religion management has little predictive value, and most estimates are that firm performance has more (or much more) to do with factors external to the firm than to management. Stanford’s Jeff Pfeffer has likened much leadership advice to lay-preaching, and Rakesh Khurana at Harvard notes a belief in the powers of ‘charismatic’ leaders that is ‘quasi-religious’. In one view leadership functions like myth, as a way of simplifiying complex reality into a narrative that allows it too be reassuringly understood in human terms.
Yet management’s current normative effect is something most churches (not to mention industries) might look on with envy. In Hamel’s description, management is a paradigm in the proper Kuhnian sense – more than a way of thinking, ‘it’s a worldview, a broadly and deeply held belief about what types of problems are worth solving, or are even solvable’, one now so profoundly taken for granted that for most people it is invisible and its wrongness therefore not even discussable.
But the problem is not just that so much of it is wrong – it’s that if enough people believe it it becomes right. While cars don’t act on changing beliefs, humans do. Is it coincidence that business students (the dominant subject group at masters level in both the US and UK, note, and in the UK at undergraduate level too) come to take a more instrumental view of others, be more likely to cheat, free-ride and generally behave like the ‘economic man’ of the textbooks than students in other subjects? Probably not. ’There is a growing body of evidence that self-interested behaviour is learned behaviour, and it is learned by studying business and economics,’ conclude Pfeffer and others in a paper self-explanatorily entitled ‘Economics Language and Assumptions: How Theories Can Become Self-Fulfilling’.
The self-reinforcing tendencies that turn people at work into shirkers, mercenaries and control freaks ('arseholes', in Board's terminology) have hollowed companies too of their human purpose. As Jerry Davis has demonstrated, firms no longer look like the socially and geographically anchored entities of the past, but instead increasingly resemble the affectless ‘bundles of contracts’ (markets by another name) hypothesized by 1970s and 1980s economists and business-school theorists. And the paradigmatic circle is completed by the infection of their parent universities by the market thinking that in the absence of higher professional aims governs the management education industry. Anyone with doubts about the degree to which this ethos now dominates higher education should look at this winter’s Green Paper on the future of the higher education sector, ‘Fulfilling our Potential’, which describes universities as ‘providers’, talks of market exit and entry, the importance of employer needs and value for money for customers – everything, as a response from Cambridge University notes, except the university’s fundamental purpose of pursuing knowledge for the benefit of society as a whole, and '[helping] students grow into thoughtful and critical citizens, not just earners and consumers.’
So government too is in thrall to business-school values. One industry's currency has imposed itself as the value by which all others are judged. That makes management far more important than most people imagine, with more potential for both good and ill than any other technology, since it is the one that decides how the others are applied. Ironically, industries, and even sports, that are physically dangerous are subject to regulation or strict safety rules; medicine has its Hippocratic Oath. Management, on the other hand, is responsible only to the market. It's long past time we should reconsider.