Philosophy of Management

Philosophy of Management
Togar M. Simatupang
a.k.a. Rector of Del Institute of Technology
School of Business and Management
Bandung Institute of Technology
Presented on the Matriculation for MSM Students
Bandung - Monday, 19 August 2019
1

Proposition…
The cluster of business discipline consits of four fields, namely
Management
Administration
Entrepreneurship
Stewardship
Togar M. Simatupang in Pikiran Rakyat on Wednesday, 15 may 2013, p. 26
2

Overview
1. Introduction
2. Research Approach
3. Disputes
4. Business Discipline
5. Cluster of Business Discipline
6. Body of Knowledge of Business Fields
7. Concluding Remarks
3

Introduction
• The field of entrepreneurship has been organized to merely redefine
the phenomenon of business creation not as a field of business.
• The question remains unanswered to look the posture of
entrepreneurship as one of fields of scholarship within the discipline
of business.
• This presentation thus intends to contribute to the theoretical
knowledge of entrepreneurship within the business discipline.
4

Disputes
• Imperialism:
• M > A = Management is greater than Administration
• A > M = Administration is greater than Management
• Annexation:
• E ∈ M = Entrepreneurship is an element of Management
• E ∈ A = Entrepreneurship is an element of Administration
• Equality:
• M = A = Management is the same as Administration
• Which one is appropriate?
• Non of them subject to uniqueness , co-existence, and evolutionary
• A new paradigm  Complementary
6

Business System
BUSINESS
PROCESS
ORGANIZATIONAL
STRUCTURE
MANAGERIAL
PROCESS
RESOURCES
SERVICES
AND GOODS
BUSINESS
FUNCTIONS
CUSTOMERSVENDORS
Regulation,
Competition, Trading,
Social, Culture
GOVERNANCE
KNOWLEDGE AND
TECHNOLOGY
Scope of
Business
Business
Ecosytem
ORGANIZATIONAL
FORMATION
STRATEGY
BUSINESS
COMMUNICATION
8

Legal Aspect of Business as Applied Science
• Higher Education Act Number 12 on 10 August 2012
• Clause 10 about Cluster of Science and Technology:
• Applied Science
• Explanation Clause 10
• Letter f: The cluster of applied science constitutes of the branch of science
and technology which studies and examines the application of sciences for
human life including agriculture, architecture and planning, business,
education, engineering, forestry and environment, family and consumer,
health, sport, journalism, mass media and communication, law, library and
museum, military, public administration, social work, and transportation.
9

Business Discipline
A set of research, practice, education, and the
scientific community about business
10
Body of Knowledge:
Provides the core of
subject
Skills:
training as a "disciple"
Practitioners
Scholars
The nature of
Business
Business Science

Business Science
ECONOMICS
HUMAN SCIENCE ENGINEERING
Business
Science
Business
Process
Organizational
Behavior
Productivity
TechnologyPsychology
Business
Economics
Sociology Ergonomy
11
Business science is concerned with
investigation, design, and
improvement of a business system
using technical and scientific
business knowledge and human
science for understanding,
intervention, development, and
evaluation of the business.

Business Skills
Note:
• Technical skill is a skill to perform each single detailed tasks by applying specialized knowledge or expertise.
• Human skill a skill to work with, understand and motivate other people (both individually and a group) to accomplish the
company’s goals.
• Conceptual skill is a skill to understand the business need and set directions for the company. This is an ability to critically
analyze, diagnose a situation and forward a feasible solution. It requires creative thinking, generating options and choosing
the best available option. 12

Cluster of Business Discipline
13
Discipline: An academic category for
business.
Field: An area of study within business
discipline.

Research Approach
14
Real Life of
Business
Philosophy:
Critical Realism
Key
dimensions
of Business
Frameworks for
understanding
Reflection over
totality of meaning
of business
Focused
abstraction

Clustering Business Discipline
• Offering a framework for generating scientific research and its
application in the area of business studies, not only to optimize the
performance of the enterprise at a given time but also overall
performance of its life cycle activities.
• Identifying the types of business fields (business discipline cluster
framework)
• Two underlying dimensions of Business Discipline
• Interpreting Types of Business Fields
15

Two Underlying Dimensions of Business
Discipline
• Dimension 1: Concern for Purpose
Nature of mission orientation that represents mission achievement of an enterprise either to
attain enterprise performance or lifecycle performance
1.1. Continuum stage (Enterprise Performance)
1.2. Lifecycle stage (Lifecycle Performance)
• Dimension 2: Concern for Specification
Structural specification represents the degree to which an enterprise formulating and
structuring the tasks and goals that enable and constraint an organization
2.1. Liberation
2.2. Regulation
16

Dimension 1: Concern for Purpose
Lifecycle Enterprise
System
Ongoing Enterprise
System
Responsibility for
an organization
Value Added (better
profit) to the economy
New venture (new
enterprise) to the economy
Continuum Stage
of Performance
Responsibility
Lifecycle Stage
of Performance
Responsibility
17

1.1. Lifecycle stage of Performance Responsibility
18
TIME
PERFORMANCE
Rejuvenate?
Responsibility for
Lifecycle Performance
Ideas Start-up Growth Maturity Decline
Divest?

1.2. continuum stage of Performance Responsibility
19
TIME
PERFORMANCE
Responsibility for
Enterprise Performance
Planning Implementation Evaluation

Dimension 2: Concern for Specification
Deliberated
Structure
Regulated
Structured
Concern for
Structural
Specification
Thomas Hobbes: Leviathan
Max Weber: Bureaucratic model
(rational-legal model)
The Theory of Social and Economic
Organizations (1947)
Adam Smith:
The Wealth of Nations
20
ORDER FLEXIBILITY
LEGAL CONCENSUS
REGULATION LIBERATION
Formality
Formation
Formulation

Business Discipline Clustering Framework:
the Quadruple Fields of Business
Management Entrepreneurship
Administration Stewardship
RegulateDeliberate
Continuum Stage Lifecycle Stage
Concern for Purpose
StructuralSpecification
21

Different Emphasis...
• Management:
• A focus on enterprise performance and
deliberation for capability
• Starts from an existing concept and strategic
planning
• Ensures change and performance achievement
• Provides answers and solutions to managerial
problems
• Administration:
• A focus on enterprise performance and
regulation for accountability
• Dedication to apply good corporate governance
and credibility
• Ensures consistency and stability
• Provides answers and solutions to administrative
problems
• Entrepreneurship:
• A focus on lifecycle performance and
deliberation for viability
• Starts from a unique idea and orientation for the
future
• Ensures development and performance
adaptability
• Provides answers and solutions to
developmental problems
• Stewardship:
• A focus on lifecycle performance and regulation
for sustainability
• Willingness and dedication to help people and
the environment
• Ensures inclusive growth
• Provides answers and solutions to sustainable
problems
22

The meaning of administration
• The administration is a systematic process of administering the
management of a business organization, an educational institution
like school or college, government office or any nonprofit
organization. The main function of administration is the formation of
plans, policies, and procedures, setting up of goals and objectives,
enforcing rules and regulations, etc.
• Administration lays down the fundamental framework of an
organization, within which the management of the organization
functions.
23

Comparison Chart
BASIS FOR
COMPARISON
MANAGEMENT ADMINISTRATION
Meaning An organized way of managing people and things of a
business organization is called the Management.
The process of administering an organization by a group of
people is known as the Administration.
Authority Middle and Lower Level Top level
Role Executive Decisive
Concerned with Policy Implementation Policy Formulation
Area of operation It works under administration. It has full control over the activities of the organization.
Applicable to Profit making organizations, i.e. business organizations. Government offices, military, clubs, business enterprises,
hospitals, religious and educational organizations.
Decides Who will do the work? And How will it be done? What should be done? And When is should be done?
Work Putting plans and policies into actions. Formulation of plans, framing policies and setting
objectives
Focus on Managing work Making best possible allocation of limited resources.
Key person Manager Administrator
Represents Employees, who work for remuneration Owners, who get a return on the capital invested by them.
Function Executive and Governing Legislative and Determinative
Source: "Difference Between Management and Administration" at https://keydifferences.com/difference-between-management-and-administration.html 24

Administration and Management
• Oliver Sheldon.
• Administration is the function in industry concerned with the determination of the corporate policy, the co-
ordination of finance, production and distribution, the settlement of the compass (structure) of the
organisation under the ultimate control of the executive.
• Management, according to him, "'is the function in industry concerned with the execution of policy within the
limits set by the administration and the employment of the organisation for the particular objects set before
it."
• William R. Spriegel.
• "Administration is that phase of business enterprise that concerns itself with the overall determination of
institutional objectives and the policies necessary to be followed in achieving those objectives. Administration
predetermines the specific goals and lays down the broad areas within which those goals are to be attained.
• Administration is a determinative function; management, on the other hand, is an executive function which is
primarily concerned with the carrying out of the broad policies laid down by the administration."
• G.E. Milward.
• "Administration is primarily the process and the agency used to establish the object or purpose which an
undertaking and its staff are to achieve; secondarily, administration has to plan and stabilize the broad lines or
principles which will govern action. These broad lines are in their turn usually called policies.
• Management is the process and the agency through which the execution of policy is planned and supervised."
25

Administrative Management and Operative
Management
E.F.L. Brech:
• Management as a comprehensive generic function, embracing
the entire process of planning, policy-making, co-ordination of
activities, maintaining of moral and discipline as well as
controlling the operations so as to attain the best possible
results.
• Administration, according to him, signifies certain aspects of
management functions (viz., planning and control) and it is
interpreted as a branch of management.
• The management function has been divided into two categories:
1. administrative management and
2. operative management.
• The upper level of management is usually called administrative
management and the lower level is known as operative
management.
26

ART, CRAFT, OR SCIENCE:
HOW WE THINK ABOUT MANAGEMENT
27
Source: Henry Mintzberg (2011) in Managing, suggests that the practice and styles of management can be visualized as a
triangle whose three corners represent management as an art, as a craft, and as informed by science.
• Management as an art is related to the need for
managers to be visionary and creative. They need to
have ideas and be able to synthesize and integrate
diverse interests and viewpoints.
• Management as a craft is related to the practical
acquisition and use of knowledge in its relevant
context.
• The scientific contribution to management practices
is the provision of order and meaning through
systematic analysis of practice, experience, and
assumed knowledge.
Disconnected
Design =
Learning design based on
art with science is creative
and systematic, but without
the experience of craft can
produce, impersonal and
disconnected learning.
Disorganized
Design =
Art and craft together
without the systematic
analysis of science can
lead to disorganized
learning designs.
Dispirited Design =
Craft and science without the creative vision of
art can lead to dispirited design, careful and
connected but lacking flare.

Strategies for decision making
29

What is Management?
• ‘To manage is to forecast and plan, to organise, to command, to co-ordinate and to control.’ Fayol
(1916)
• ‘Management is a social process... the process consists of ... planning, control, coordination and
motivation.’ Brech (1957)
• ‘Managing is an operational process initially best dissected by analysing the managerial functions ...
The five essential managerial functions (are): planning, organising, staffing, directing and leading, and
controlling.’ Koontz and O'Donnell (1984)
• ‘Management’ is a process enabling organisations to set and achieve their objectives by planning,
organising and controlling their resources, including gaining the commitment of their employees
(motivation). Cole and Kelly (2011)
• Management involves the coordination and control of people, materiel, and processes to achieve
specific organizational objectives as eﬃciently and eﬀectively as possible. Steers, Nardon, and Sanchez-
Runde (2016)
• The pursuit of organisational goals efficiently and effectively by integrating the work of people through
planning, organising, leading and controlling the organisation’s resources.
30

31
Why is there a productivity gap?
• Technology
• The role of management

Why is there a productivity gap?
Is management also a cause of productivity gap?
• Problem is not just “hard” technologies. Also problems with the
way firms are managed.
• Technologies available globally - why do some countries/firms use
& manage them more effectively?
• But how to measure, quantify and compare management practices
across firms and countries?
32

DOES management MATTER?
Management as a critical factor in restoring prosperity
33
Nicholas Bloom
siepr.stanford.edu
An interesting question really: does the ability and training of management matter
to the firm's results?
“A long-standing question in social science is to what extent differences in
management cause differences in firm performance. To investigate this we ran a
management field experiment on large Indian textile firms.
We provided free consulting on modern management practices to a randomly
chosen set of treatment plants and compared their performance to the control
plants. We find that adopting these management practices had three main effects.
• First, it raised average productivity by 11% through improved quality and
efficiency and reduced inventory.
• Second, it increased decentralization of decision making, as better information
flow enabled owners to delegate more decisions to middle managers.
• Third, it increased the use of computers, necessitated by the data collection and
analysis involved in modern management.“
Source:
Bloom, N., Eifert, B., Mahajan,
A., McKenzie, D. and Roberts,
J. (2013) – “Does
Management Matter?
Evidence from India”
Quarterly Journal of
Economics, 128, 1-51.

34
Measuring
Management
Scorecard for 18 monitoring and incentives
practices in ≈45 minute phone interview of
manufacturing plant managers.
An interview-based methodology defines 18
key management practices and scores them
from worst practice (1) to best practice (5).
The focus is on such practices as:
1. monitoring,
2. target-setting, and
3. incentives/people management.

Monitoring and Incentives Practices
• Example monitoring question, scored based on a number of questions starting
with “How is performance tracked?” Score
 (1): Measures tracked do not indicate directly if overall business objectives are being met. Certain
processes aren’t tracked at all
 (3): Most key performance indicators are tracked formally. Tracking is overseen by senior management
 (5): Performance is continuously tracked and communicated, both formally and informally, to all staff
using a range of visual management tools
• Example incentives question, scored based on questions starting with “How does
the promotion system work?” Score
 (1) People are promoted primarily upon the basis of tenure, irrespective of performance (ability &
effort)
 (3) People are promoted primarily upon the basis of performance
 (5) We actively identify, develop and promote our top performers
35

36
https://worldmanagementsurvey.org/

From Management by Objectives to the
Balanced Scorecard
38
Source: “Fostering Autonomous Acting Talent” at
https://www.gs-yuasa.com/en/csr/working_env.php

Management
The five fundamental functions of management -
planning, organizing, directing, coordinating, and
controlling - constitute the Management Process.
39
The St. Gallen Management Model (SGMM)

An engineered
system life cycle
and the
development of
goods (products)
and services
Source: Henshaw, M., D. Kemp, P. Lister, A. Daw, A. Harding, A. Farncombe, and M. Touchin. 2011.
"Capability Engineering - An Analysis of Perspectives." Presented at International Council on Systems
Engineering (INCOSE) 21st International Symposium, June 20-23, 2011, Denver, CO, USA.
41

Management System
A management system is a set of policies, processes and
procedures used by an organization to ensure that it can fulfill
the tasks required to achieve its objectives. [Wikipedia]
A management system is the way in which an organization
manages the inter-related parts of its business in order to
achieve its objectives. [https://www.iso.org/management-
system-standards.html]
Examples of management system standards include:
• ISO 9000: standards for quality management systems (QMS)
• ISO 14000 standards for environmental management systems
• ILO-OSH: occupational safety & health management systems
• ISO/IEC 20000: standards for service management systems (SMS)
• FitSM: standards for lightweight IT service management
• ISO/IEC 27000: information security management systems (ISMS)
• ISO 45001: standard for occupational health and safety management
systems
• ISO 50001: standard for energy management systems
• ISO 55000: standards for asset management systems
• SA8000: social accountability.
• IAEA management system safety standards
• Organizational Project Management Maturity Model (OPM3) 42

Management Philosophy
43
Source: “Assessing the Field of Media Management and Economics Research” by Alan B. Albarran (2014)
at http://www.scielo.org.co/scielo.php?script=sci_arttext&pid=S0122-82852014000400002
• Management philosophy is that set of rational principle which form the basis for guiding or controlling the
operation or performance of a business activity.
• Set of beliefs as used by an individual in a management position to guide the decision making process.
• Management philosophy is a brief statement about what consider to be best management practices.

Management Philosophy
of Toyo Seikan Group
Source: "Corporate Philosophy Structure" at https://ssl.tskg-
hd.com/en/company/policy.html 44
Filosofi Manajemen

Philosophy of Management
• Three types of criticism commonly addressed to business schools:
1. an inadequate intra-system logic,
2. an insufficient toolbox, and
3. unfitting educational environments and methods, corresponding to a macro-, meso-, and
micro- level design of management education.
• C. Bachmann, C.R. Loza Adaui, A. Habisch, Why the question of practical wisdom should be
asked in business schools: Towards a holistic approach to a renewal of management
education. Humanistic Management Network, Research Paper No. 2460665, 2014.
• In order to find an answer to these critics Bachmann et al. introduce the concept
of ‘practical wisdom’ and, basing on an extensive, cross-disciplinary analysis of
the concept - considering on philosophical, theological, psychological, and
managerial perspectives.
• Philosophy of management is defined as a body of related knowledge that
supplies a logic for effective thinking in seeking solutions to business problems
• Ralph C. Davis (1958)
45
Filsafat Manajemen

Contributor of Entrepreneurship
• JEAN BAPTISTE SAY (1800)
• Entrepreneurship refers to the shifting of economic resources out of an area of lower and into higher productivity and greater yield.
• CARL MENGER (1871)
• Entrepreneurship involves obtaining information, calculations, an act of will and supervision.
• JOSEPH SCHUMPETER (1910)
• Entrepreneurship is, in its essence, the finding and promoting new combinations of productive factors.
• HARVEY LEIBENSTEIN (1970)
• Entrepreneurship is the reduction of organizational inefficiency.
• ISRAEL KIRZNER (1975)
• Entrepreneurship is identification of market arbitrage opportunity.
• ALBERT SHAPIRO (1975)
• Entrepreneurship involves a kind of behavior that includes initiative taking, organizing and recognizing social mechanism to turn
resources and situations so practical account, and the acceptance of risk and failures.
46

Contributor of Entrepreneurship
• KARL VESPER (1980)
• Entrepreneurship is the dynamic process of creating incremental wealth.
• W. ED MC MULLAN AND WAYNE A. LONG (1990)
• Entrepreneurship is the building of new growth organization.
• HOWARD STEVENSON (1992)
• Entrepreneurship is the pursuit of opportunity beyond the resources currently under one’s control.
• JEFFRY TIMMONS (1994)
• Entrepreneurship is the ability to create and build a vision from practically nothing.
• PETER DRUCKER (1998)
• Entrepreneurship is the process of starting one’s own new and small business. It is also the process of innovation and new venture
creation through four major dimensions – individual, organizational, environmental, process – aided by collaborative networks in
government, education and institutions.
• ROBERT HISRICH (2001)
• Entrepreneurship involves the creation process, requires the devotion of the necessary time and effort, assumes the accompanying
financial, psychic and social risks, and receives the resulting rewards of monetary and personal satisfaction and independence.
47

Features of Entrepreneurship
• Approach
• The entrepreneur considers the opportunity to solve the problem rather than solving the problem itself.
• Process
• Entrepreneurship is a dynamic process of innovation and new – venture creation through the five major dimensions: individuals,
organizations, environment, process and intuitions.
• Benefits
• Promotes self-help and employment; Mobilize capital; Provides taxes to economy; Empowers individual; Enhances national identity
and pride; Enhances competitive consciousness; Improves quality of life; Enhances equitable distribution of income and wealth.
• Cyber space or information highway
• The resurgence and constantly improving information technology sector is a development to watch and its benefit for entrepreneurs
to grab and exploit.
• By exploiting the benefits of information technology, and the various software available in the market, one can easily network with
the foreign markets.
• The proliferation of computers both in offices and households has revolutionized business operations and system, allowing every
place practically a base for business operations.
48

Examples of Entrepreneurship Education
49
The Society for Entrepreneurship Education needs to come into the arena of further
promoting entrepreneurship education both in formal and non-formal sectors and a number
of entrepreneurs themselves who continually talked it and unwillingly share their
experiences and expertise, hoping that doers and believers of entrepreneurship will multiply
in number (Philippine Case).

Examples of Stewardship
http://ucsdbioadvising.wordpress.com/2011/1
2/09/the-master-of-sustainable-forest-
management-program-at-the-university-of-
british-columbia/
Master of Environmental
Management (MEM)
Master's of Natural
Resources Stewardship
The MBA in Environmental
Stewardship
http://www.wilmu.edu/business/mba_conc
entration_environmental.aspx
International Master in
Sustainable Development
& Corporate
Responsibility
50

BOK of Management
52
Business
Strategy
Process Functions
Capability
Managerial Activity:
POAC

BOK of Administration
53
Business
Policy
Procedures Governance
Accountability
Administrative Activity:
PDCA

BOK of Entrepreneurship
54
Business
Innovation
Business
Models and
Risks
Ecosystem
Viability
Entrepreneurial Activity:
Ideation, Initiation, Growing, and Maturity
Entrepreneurship ◦ The ability of the individual
to determine and come up with the proper
combination of the resources available in his
environment and transform this into an output
of either goods or services, and obtain a fair
profit at the price the entrepreneur sets.

BOK of Stewardship
55
Eco-Socio
innovation
policy
Standarization
and certification
Sustainable
Governance
Sustainability
Stewarding Activity:
Social, comercial, and environmental development

58
Source: 8 Strategic Building Blocks to enable Digital Transformation by David Terrar on February 27, 2015 at
https://www.enterpriseirregulars.com/84641/8-strategic-building-blocks-enable-digital-transformation/
Future?

The Journey to Digital Business
59

How to Build a Digital Business Model
63

Three steps to digital business models | Philips
Innovation Services
64

Concluding Remarks
• The task of this research was to further define the entrepreneurship field of
business.
• The exposition of the claster of business is based on the epistemological
foundations of critical realism that assumes knowledge of business as a social and
historical product.
• The quadruple field model of business, with its emphasis on management,
administration, entrepreneurship, and stewarship, represents a radical view to
promote entrepreneurship as an independent business field.
• This also sets a challenge for future research of the quadruple fields of business
including the present of digital technologies.
67

Reading Assignment
Reading Material
1. “What is Management? An
Outline of a Metatheory”, British
Journal of Management, Vol. 5,
pp. 289-301.
• Haridimos Tsoukas (1994)
2. “Why Do Management Practices
Differ across Firms and
Countries?”, Journal of Economic
Perspectives, Vol. 24, No. 1, pp.
203-224.
• Nicholas Bloom and John Van Reenen
(2010)
Questions
1. What is 'statement of the problem'?
• A problem statement is the description of
an issue currently existing which needs to
be addressed.
2. What is the research approach to
address the problem statement?
3. What are key findings in this
research?
4. Why is this research important?
5. What is the implication of this
research to management thought?
69

Philosophy of Management

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