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Bad management 
theories are destroying 
good management 
practices by: Sumantra Ghoshal 
Arlind Rexhepi
‘’Academic research related to the 
conduct of business and management has 
had some very significant and negative 
influe...
Two major causes for this phenomenon: 
• The pretense of knowledge 
• Ideology-based gloomy vision
The pretense of knowledge 
• Transition from Romanticism to Scientific approach 
• It Is an error to pretend that the meth...
The pretense of knowledge
The pretense of knowledge 
• Nowadays management theories are causal or functional in 
their modes of explanation 
• Inten...
The pretense of knowledge 
• Ghoshal was critical of Milton Friedman where he says that 
managers job is to maximize share...
The pretense of knowledge 
• Labor markets are perfectly efficient- if employee is not satisfied 
he can costless move to ...
The pretense of knowledge 
• Agency theory: support shareholders value maximization 
– Expand the number and influence of ...
Ideology-based gloomy vision 
• Pessimistic view of human nature 
• Based essentially on an ideology 
– The roots of the i...
Ideology-based gloomy vision 
• Criticism of the Transaction cost economics - Oliver Williamson 
– To ensure coordination,...
Reverse the Trend 
• Delightful Organizations 
• Focus on both the negative and the positive problems 
• Reverse the manag...
Reverse the Trend 
• The role of business schools governors should be more 
stewardship involved 
– Supporting and challen...
‘’A theory must illuminate and explain and, if 
it cannot do those things, it is not a theory - 
neither good nor bad’’ - ...
„What can we do about any of this? 
• BUT: Is this enough? 
• These are examples for evolutionary change processes and – 
...
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Sumantra Ghoshal: Bad management theories are destroying good management pracitces

Sumantra ghoshal, bad management theories are destroying good management pracitces

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Sumantra Ghoshal: Bad management theories are destroying good management pracitces

  1. 1. Bad management theories are destroying good management practices by: Sumantra Ghoshal Arlind Rexhepi
  2. 2. ‘’Academic research related to the conduct of business and management has had some very significant and negative influences on the practice of management’’ • Business schools have freed their students from any sense of moral responsibility
  3. 3. Two major causes for this phenomenon: • The pretense of knowledge • Ideology-based gloomy vision
  4. 4. The pretense of knowledge • Transition from Romanticism to Scientific approach • It Is an error to pretend that the methods of the physical sciences can be indiscriminately applied to business studies • Distinguish between the natural science and the humanities
  5. 5. The pretense of knowledge
  6. 6. The pretense of knowledge • Nowadays management theories are causal or functional in their modes of explanation • Intentional – for example moral and ethics are ignored from management practices – Example: CEO’s claim that competition or capital markets are relentless in their demands, companies and managers have no scope for choice, they free themselves from moral or ethical responsibility and put the blame to external factors (slide 1)
  7. 7. The pretense of knowledge • Ghoshal was critical of Milton Friedman where he says that managers job is to maximize shareholders value • After all, Shareholders do not own the company, they should not be considered as the only value of the company • According to theory: Employees, including managers, contribute their capital for example, while shareholders contribute financial capital. If Yes, than why should the value distribution favor only the later?
  8. 8. The pretense of knowledge • Labor markets are perfectly efficient- if employee is not satisfied he can costless move to another job. • With this assumption the shareholders are carrying the greater risk by making their financial contribution more important than the human capital • The truth- Most shareholders can sell their stocks far more easily than most employees can find another job
  9. 9. The pretense of knowledge • Agency theory: support shareholders value maximization – Expand the number and influence of independent directors on corporate boards, split the roles of chairman and CEO, pay managers in stock…bla bla bla – A review of 54 studies on performance of boards composition shows that the proportion of directors has no effect on corporate performance. – 31 studies about the effects of separating leadership roles demonstrates that there is no affect on corporate performance.
  10. 10. Ideology-based gloomy vision • Pessimistic view of human nature • Based essentially on an ideology – The roots of the ideology lie in the philosophy of radical individualism • Example of ideology-based gloomy vision: – Friedman ideology=liberalism – A major aim of the liberalism is to leave the ethical problem within individuals – For the last 40 years theory has focused on negative problems of preventing bad people from doing harm as of enabling good people to do good – pessimistic view
  11. 11. Ideology-based gloomy vision • Criticism of the Transaction cost economics - Oliver Williamson – To ensure coordination, managers must know what everyone ought to be doing, give them strict instructions, monitor them, reward - punishment system to ensure that everyone is doing what is told to do. – Consequences: The dilemma of the supervisor – The situation when the use of surveillance, monitoring, and authority leads to managements distrust of employees, decreases its intrinsic motivation, damages self-perception. – Solution: focus on positive Psychology
  12. 12. Reverse the Trend • Delightful Organizations • Focus on both the negative and the positive problems • Reverse the management theory • Reshape the context of business schools – Deans have to take leadership by building the positive agenda • Avoid the pessimistic, deterministic theories – Researchers and teachers have to define and adopt a different path
  13. 13. Reverse the Trend • The role of business schools governors should be more stewardship involved – Supporting and challenging rather than detached and controlling • Institutions such as the Academy of management will also have to play a key role – Leaders of academy can ensure that all the academy journals dedicate special issues to legitimize the new intellectual agenda
  14. 14. ‘’A theory must illuminate and explain and, if it cannot do those things, it is not a theory - neither good nor bad’’ - GHOSHAL
  15. 15. „What can we do about any of this? • BUT: Is this enough? • These are examples for evolutionary change processes and – indeed – we need revolutionary change processes!!!

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