Meltdown and Management 1.2
Meltdown and Management
Dr. Ashutosh IP Bhupatkar
Director,
Pearl School of Business, Gurgaon
Faced with a crisis, it is easy to adopt an ostrich-like stance and pretend things will be alright soon. The current meltdown in the global economy is a crisis of such proportions that it will take some time to assess its magnitude and impact. There would be lessons for management education, just as economics, political science and sociology would grapple with the issues to bring relief and learn something of value to the entire humankind. Of course, the precondition for learning is to know that we don’t know. So lessons would be drawn when we realize the futility of the old solutions.
To characterize the situation in terms of management, one can note a few striking phenomena. First, it is the professional managers who got rewarded for the performance on the stock exchange and got carried away. Secondly financial services moved higher up in the realm of abstractions and farther out in terms of geographies. The whole profession of BFSI acquired unprecedented clout in the post-Information era. Thirdly the corporate governance mechanism proved highly inadequate to stem the growing clout of finance capital.
One of the lessons that seemed obvious for quite some time since the 70’s concerns the limits to growth. No industry can go on growing endlessly, since such growth implies corresponding growth in the resources needed for production and in the purchasing power needed for consumption, to which we must now add the requirement of infrastructure. So growth has historically come from new markets and new technologies that yield new products and new processes. Yet management education focuses on the corporation in its case studies most of the time and not on the industry or the economy. The result is the cultivation of a mindset that thinks of the corporation as a closed system, concerned with its objectives of profit maximization to the exclusion of everything else.
Market fundamentalism became the convenient ideology, though care was taken to make the Consumer into a constitutional monarch in whose name corporations became a law unto themselves. Information exploded but the Information Asymmetry (knowledge gap) between the customer and the corporation has continued to widen with new technology; as a result, new models of products are introduced as though they were new products. The knowledge gap ensures that the consumer remains at the mercy of the corporation. Without combinations of products and businesses, it became difficult to achieve growth in revenues and profits. Industry structure moved towards consolidation and oligopolies.
The corollary of such preoccupation with growth has been the notion of individual performance. Now we know that an individual performs in a context. There is the individual, the organization and the third dimension, of the relationship of the individual with the organization. It is the third dimension that really causes performance to be either very high or very low. That is why research shows that high performing individuals may change jobs but are not able to transfer their performance from one organization to another. Individual’s relationship with the organization in concrete terms involves his/her equation with the bosses, colleagues and juniors. Rewarding individual performance does not seem to be a good idea beyond a point. It created an inveterate appetite for incentives that soon turned into incurable greed. To be sure, there have been thought leaders like Deming who opposed the practices of individual performance rating on philosophical and practical grounds. But greed has no need for wise counsel.
Closely allied to the incentive system is the myth of the number game. We have seen how numbers can be manipulated and fabricated. We have to closely look at measurements – metrics, if you like – that are dished out day in and day out. The numbers tumble out of the measures, which in turn come out of some thought. That thought is based on the imagery. In the case of sub-prime mortgages, the end product came to be structured in such a way as to have very little relation with the component loans. Abstract numbers took their ethereal flights while the ground reality below cracked up. The old adage, ‘profits are a fiction, cash is hard reality’, came to be proven again. So one has to be careful in looking at numbers and not get fooled in the process – not by numbers – but by the players.
Economic growth ever since the industrial revolution shows that constraints to growth are overcome with radical measures either in technology or in socio-political dynamics or in both. Management Education has never paid attention to the dynamics of forces of technological and social change. It has believed that the evolution of management thought has been a linear development brought about by one great thinker after another. For instance, the role of the long depression in 1890’s in US in engendering Scientific Management is never analyzed. The economic disequilibrium leading up to the great depression is also not investigated while discussing the Human Relations movement. It was believed similarly that corporations achieved excellence by following a set of practices. History quickly showed to the contrary as a large number of so-called excellent companies ran into problems soon after being labeled Excellent. That many of them thrived on Defence contracts was never factored into the success stories.
All these developments raise some fundamental concerns regarding the place of Management as a discipline. Its narrow emphasis on functions of executive management is reminiscent of the earlier emphasis on book keeping before it evolved into accounting and then finance. Management Education has served the needs of the corporate sector in ensuring that a specialist gets groomed into a generalist who is loyal to the corporation and not to his specialist profession. The quintessential General Manager of today thinks corporate, not beyond. They do not possess the broad sweep and the independent mind of several of the corporate leaders of the 60’s and the 70’s. The seeds of professional disaffection are scattered thus in the education of general management. It is no wonder that issues of corporate governance sprout and grow in the fertile soil of management. In recent cases of corporate failures, the heat forced the management gurus to beat hasty retreats into academia.
But the corporate sector despite the hype remains only a part of the whole industrial landscape. Large Indian companies run on traditional lines and thousands of SME’s have remained thankfully unaffected by the Management of the corporate hype. Their style of management is hands on, driven by operational concerns and powered on specific – not generic – knowledge of business and technology. Their strategy is to look for the opportunity at the next street corner and move in quickly. They do not want to dominate the stock market or make media splashes. They grow in step with their environment. This very large landscape of management in India has remained unexplored and unresearched. Their mantra is to listen to all the gurus in the world, but do exactly that which seems best in the given situation. For long this Indian style of management has been derided. It’s time to take a closer look.
It may then give us a better understanding of rapid versus steady growth, domination versus harmony, individual and organizational performance, abstractions and concrete reality and the place of management in the dynamics of social, economic and political forces.
Contributed by : Dr. Ashutosh IP Bhupatkar
For further details about MBA courses and colleges pleases click below
Comments