The Oxford Handbook of Management Theorists 9780199585762, 0199585768

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t h e ox f o r d h a n d b o o k o f

M A NAGE M E N T T H EOR ISTS

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the oxford handbook of

MANAGEMENT THEORISTS

Edited by

MORGEN W ITZEL and

M ALCOLM WARNER

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Great Clarendon Street, Oxford, ox2 6dp, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2013 The moral rights of the author have been asserted First Edition published in 2013 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Data available ISBN 978–0–19–958576–2 Printed in Great Britain by MPG Books Group, Bodmin and King’s Lynn

Contents List of Figures and Tables Notes on Contributors Abbreviations

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ix xi xvii

Introduction

1

Morgen Witzel and Malcolm Warner

PA RT I PION E E R S 2

Frederick Winslow Taylor

11

Robert F. Conti

3

Mind, Method, and Motion: Frank and Lillian Gilbreth

32

Bernard Mees

4

Henri Fayol

49

Jean-Louis Peaucelle and Cameron Guthrie

5

Mary Parker Follett

74

John Child

6 George Elton Mayo

94

Kyle Bruce

7

Lyndall Urwick

113

Andrew Thomson and John Wilson

8

Chester Barnard and the Systems Approach to Nurturing Organizations Andrea Gabor and Joseph T. Mahoney

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contents

PA RT I I POST-WA R T H E OR IST S 9

The Tavistock Group

155

Frances Abraham

10

Deeply Engaged, Intuitively Analytical and Determinedly Applied: Tom Burns and Joan Woodward in Context but not in Concert

174

Sandra Dawson

11

W. Edwards Deming

196

Milan Zeleny

12

The Life and Diverse Contributions of Dr J. M. Juran

219

Mohamed Zairi

13

Edith Penrose’s Contribution to Economics and Management Scholarship

244

Christos N. Pitelis

14

Peter F. Drucker

271

Peter Starbuck

15

Herbert Alexander Simon: Philosopher of the Organizational Life-World

297

J.-C. Spender

PA RT I I I BUSI N E S S SCHOOL T H E OR IST S 16

Alfred Chandler’s Managerial Revolution: Developing and Utilizing Productive Resources

361

William Lazonick

17

The Aston Studies: A Journey Towards a Science of Administration?

385

Ray Loveridge

18

James March, Richard Cyert, and the Evolving Field of Organizations

407

Mie Augier

19

Geert Hofstede Monir Tayeb

427

contents

20 John Paul Kotter

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448

Karl Moore and Alexandra Klein

21

Henry Mintzberg

462

Morgen Witzel

22

The Competitive Advantage of Michael Porter

480

John Mathews

23

Ikujiro Nonaka

511

Robert Pitkethly

24

Sumantra Ghoshal

527

Susan Segal-Horn

25

C. K. Prahalad

546

Peter J. Williamson and Keeley Wilson

Index

569

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Figures

1.1 A three-dimensional model of management 4.1 Management tools by management element 4.2 Handwritten introduction to the fourth part of Fayol’s book ‘Lessons from the War’ 7.1 The elements of administration 7.2 Management as a basic intellectual discipline 11.1 Basic scheme: product, process, external networks 12.1 Juran’s trilogy diagram 12.2 The quality planning road map 12.3 The feedback loop 22.1 The McKinsey ‘business system’ presentation of the firm from a strategic perspective, circa 1980 22.2 The Porter value chain 24.1 Global strategy: an organizing framework 24.2 New roles and tasks of management 25.1 The Integration-Responsiveness Grid

4 56 64 122 126 209 228 229 230 488 488 530 537 550

Tables 4.1

The six abilities for the eight standard levels in a company

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Notes on Contributors

Frances Abraham is a Principal Consultant and Researcher at The Tavistock Institute of Human Relations, undertaking organizational and inter-organizational assignments and consultancy education. Following a first degree in History, specializing in political thought, she first joined the Institute in 1976 as an apprentice action researcher with a team developing shipboard communities in a bulk carrier merchant fleet, followed by consultancy assignments using organizational and work design and systems psychodynamics approaches. Mie Augier is an Associate Professor at the Naval Postgraduate School, and Research Associate at Stanford. She works on research on organizational behaviour, culture, economics and security, strategy, and net assessment. She has published more than fifty articles in journals and books and co-edited several special issues of journals and books. Her most recent book is The Roots, Rituals and Rhetorics of Change (with James March, Stanford University Press, 2011). Her current research interests include the history and future of net assessment and organization theory, strategic management, the links between economics and security, the development of an interdisciplinary framework for strategic thinking, and new security economics. Kyle Bruce is a Senior Lecturer in the Graduate School of Management, Macquarie University, Australia. He has published papers on the historiography of Scientific Management and Human Relations, institutional theory in economics, organization studies and international business, US interwar business history, the history of US economic and management thought, and evolutionary economics, strategy, and the theory of the firm. John Child is Emeritus Professor of Commerce at the University of Birmingham. He is a Fellow of the Academy of Management, the Academy of International Business, and the British Academy of Management. In 2006, he was elected a Fellow of the British Academy [FBA]. He has published 20 books and approximately 150 articles and book chapters. He has been editor-in-chief of Organization Studies and senior editor of Management and Organization Review. His current interests are in problems of hierarchy and how smaller firms internationalize. Robert F. Conti is Emeritus Professor at Bryant University, USA. He received BS and MS Degrees in Engineering from Cornell; MBA, MA (Econ), and PhD degrees from Lehigh University; and undertook post-doctoral research at Cambridge. He has been a

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frequent Visiting Professor at the Cambridge Institute for Manufacturing. He was a corecipient of the 2005 Shingo Prize for Excellence in Manufacturing Research, for a large-scale study of the effects of lean production on job stress. Dame Sandra Dawson is KPMG Professor of Management at the Judge Business School, University of Cambridge, a Non-Executive Director of the Financial Services Authority, Oxfam, and DRS plc, and a member of the Prime Minister’s Council on Science and Technology, the UK India Round Table, and an Advisory Group for the Aga Khan University on building a business school to meet the needs of emerging economies. Andrea Gabor is the Bloomberg Chair of Business Journalism at Baruch College at the City University of New York. She is the author of three books: The Capitalist Philosophers; The Man Who Discovered Quality: How W. Edwards Deming Brought the Quality Revolution to America; and Einstein’s Wife: Work and Marriage in the Lives of Five Great Twentieth Century Women. A former writer and editor at U.S. News & World Report and Business Week, Professor Gabor has written for The New York Times, The Atlantic, Smithsonian Magazine, The Harvard Business Review, Fortune, and Strategy + Business among other publications. Cameron Guthrie is an Associate Professor in Management at the Université de Toulouse—Toulouse Business School. He holds a PhD in Management Science from Panthéon-Sorbonne University. His research interests are in the areas of management and economic history, creativity and invention, and management education. He has recently published in such journals as the History of Economic Ideas and the Journal of Management History. Alexandra Klein is a juriste of French legal tradition, holds an LL.M. degree from McGill University, a Master’s and a Licence degree in Law and Political Science from Nice, France. Her specialization lies in the field of international commercial arbitration and cross-border jurisdictional competence. She has been a Research Assistant at McGill University’s Faculties of Law and Management. Alexandra practises as a legal adviser in a Montréal law firm. William Lazonick is Professor and Director of the UMass Lowell Center for Industrial Competitiveness and President of the Academic-Industry Research Network. His book, Sustainable Prosperity in the New Economy? Business Organization and High-tech Employment in the United States (Upjohn Institute 2009), won the 2010 Schumpeter Prize. His most recent book, co-edited with David Teece, is Management Innovation: Essays in the Spirit of Alfred D. Chandler, Jr. (Oxford University Press, 2012). Ray Loveridge is an Associate Fellow at the Said Business School, University of Oxford, Professor Emeritus at Aston University, and Visiting Professor at Doshisha Business School, Kyoto, Japan, and at the Beijing Institute of Technology. He holds a LittD and MA (Cantab), MSc (LSE), and DipPolEcon (Oxon). He has published widely, most

notes on contributors

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recently ‘The Multinational Firm as a Locus of Learning along Networks’, in S. Collison and G. Morgan (eds.), Images of the Multinational Firm, Wiley, 2009; ‘Developmentalism’, le Libellio d’, Paris, Ecole Polytechnique, 2010; ‘Politics and Power in the Multinational Corporation’, Review, Organization Studies, 33(2), 2012. He has been associated with a number of journals and learned societies, most notably as senior editor of Human Relations between 1989 and 2000. His current research focuses on comparative strategies of industrialization and development within a global context using the concept of national configurational archetype. In his most recent empirical work (op cit) he has focused on sources of contention in the cross-national ‘transportation’ of management practice. John Mathews is Eni Chair of Competitive Dynamics and Global Strategy at LUISS Guido Carli University in Rome, and concurrently Chair of Strategy at MGSM, Macquarie University, Sydney. He has been active in developing fresh approaches to strategizing through focus on strategic resources, routines, and activities, as elaborated in his 2006 text Strategizing, Disequilibrium and Profit, published by Stanford University Press. Joseph T. Mahoney earned his PhD from the University of Pennsylvania, with a doctorate in Business Economics from the Wharton School of Business. He joined the College of Business of the University of Illinois at Urbana-Champaign in 1988, and is currently Caterpillar Chair of Business in the Department of Business Administration. He has published sixty research journal articles and a 2005 Sage book, Economic Foundations of Strategy. He is an associate editor of the Strategic Management Journal. For the academic year 2008–2009, he served as Chair of the Business Policy and Strategy (BPS) Division of the Academy of Management. Bernard Mees holds a PhD in the History of Ideas from the University of Melbourne and is a Senior Lecturer in the School of Management and at the Centre for Sustainable Organisations and Work at RMIT University. His books include Terror, War, Tradition (edited with Samuel P. Koehne); The Science of the Swastika; and Celtic Curses; and he researches German intellectual history, business and management history, and historical linguistics. Karl Moore is an Associate Professor, Desautels Faculty of Management; Associate Professor, Department of Neurology and Neurosurgery, Faculty of Medicine, McGill University; and Associate Fellow, Green Templeton College, Oxford University. He has taught on change and leadership on MBA and executive programmes at Oxford, Cambridge, LBS, INSEAD, Duke, Darden, IIM Bangalore, and Skolkovo in Moscow. He has written twenty-seven referred journal articles in leading journals, including SMJ, Mir, and Business History, and ten books. He has worked as a consultant with leading firms, including IBM, Nokia, HP, Air Canada, IATA, Motorola, and Wipro. Jean-Louis Peaucelle is a Professor in Management at the Universit of Reunion Island. He is a qualified civil engineer and holds PhDs in Sociology and in Computer Science.

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His publications are in the areas of management and economic history, information systems, and work organization. His articles have appeared in such journals as The European Journal of the History of Economic Thought, History of Economic Ideas, and the Journal of Management History. He has written numerous textbooks and chapters, including one about Henri Fayol’s management tools and another about Adam Smith’s pin-making example. Christos N. Pitelis is Director of the Centre for International Business and Management (CIBAM) and Reader in International Business and Competitiveness at the Judge Business School, as well as Fellow in Economics at Queens’ College, University of Cambridge. Christos has published extensively in scholarly journals such as Organization Science, Journal of International Business Studies, Organization Studies, and Industrial and Corporate Change. He is editor of the Cambridge Journal of Economics, the Collected Papers of Edith Penrose, and on the editorial boards of, among other publications, Organization Science, Organization Studies, and Management International Review. He is also a guest editor for leading journals on the theory of the firm, globalization, international business, regulation, global governance, and global finance. Christos has researched, consulted, and co-ordinated projects for governments, the European Commission, the United Nations, USAID, the Commonwealth Secretariat, and the private sector. He has been Visiting Professor in Europe, Russia, China, Latin America, and the United States. Dr. Robert Pitkethly is an Official Fellow and Tutor in Management at St Peter’s College, Oxford University, a committee member of the Oxford Intellectual Property Research Centre and a member of Oxford University’s Faculty of Management. He holds degrees in chemistry, business administration, and Japanese studies and has qualified and worked as a UK and European patent attorney. He has been a Research Fellow at the Judge Institute in Cambridge University, and a Visiting Research Fellow at both the Institute of Intellectual Property and the National Institute of Science and Technology Policy in Tokyo. Susan Segal-Horn is Professor Emeritus of International Strategy at the Open University Business School, UK. Her research focus is the globalization of industries and firms, particularly global strategies in service industries and within multinational service firms. Susan has published five books and over ninety academic papers and articles. Her latest book is an MBA textbook, Understanding Global Strategy, published in 2010. Her next book focuses on the globalization of professional service firms. J.-C. Spender holds a PhD in Corporate Strategy from Manchester Business School. He retired from the Deanship of the School of Business and Technology at SUNY/FIT in New York in 2003 and has since been researching the theory of the firm and the history of business education. He holds Visiting Professorships at ESADE, Lund University, and University Campus, Suffolk. His books include Locke, Robert R., and Spender, J.-C. (2011), Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance, London: Zed Books; and Burton-Jones, Alan, and Spender, J.-C. (eds.) (2011), The Oxford Handbook of Human Capital, Oxford: Oxford University Press.

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Peter Starbuck was born in Birmingham in 1936. He trained and qualified as a construction industry professional, either side of a two-year interruption for National Service (1959–61) in the Royal Engineers in West Germany. His commercial career has also included work with education and training, the Health Service, social housing, and charities. His involvement with Peter F. Drucker began in 1975, when he applied his ideas commercially. For the last twenty years he has studied Drucker and related influences, and is the only person to have deposited a PhD thesis on him with The British Library. He continues to work from his home office on the English/Welsh Borders. Monir Tayeb has been conducting research into the impact of national culture on organizations and their management styles, and the management of multinational companies since 1976. She has a BA in Business Studies from the University of Tehran, an M. Litt in organizational behaviour from the University of Oxford, and a PhD from Aston University in Birmingham. After the completion of her doctoral research in 1984, she worked for two years as a post-doctoral Research Fellow at the University of Sussex, where she was involved in an international project on national culture and leadership styles. From 1986 until her early retirement in 2005 she taught at Heriot-Watt University; her last position was Reader. She still participates in the university’s undergraduate distance learning programme as a course author. Since 1989 to date she has been involved in the postgraduate distance learning programme at Edinburgh Business School as faculty-author. She has published several books and articles and contributed to a large number of edited books and international conferences. Andrew Thomson is an Emeritus Professor at the Open University, having been the founding Dean of its Business School. Before that, he had spent twenty years at Glasgow University, latterly as Professor of Business Policy. He is a graduate of Oxford and Cornell Universities, and also spent time working in Unilever as a brand manager. His research interests began in industrial relations, but then migrated to management development, and more recently to management history. In this latter area he has coauthored The Making of Modern Management and a biography of Lyndall Urwick. Malcolm Warner is currently Professor and Fellow Emeritus, Wolfson College, Cambridge, and the Judge Business School, University of Cambridge. He is the author and editor of over fifty books on management, many of which have been translated, as well as of numerous articles, essays, and reviews on the subject. He has been the Editorin-chief of the International Encyclopedia of Business and Management, vols. 1–8, London: Thomson Learning, 2nd edition, 2002. He is also Co-Editor of the Asia Pacific Business Review. He has, in addition, been a frequent Visiting Academic at many campuses and business schools across the world. Peter J. Williamson is Professor of International Management at Judge Business School, and Fellow of Jesus College, University of Cambridge. He has a PhD in Business Economics from Harvard and has held professorships at London Business School, Harvard Business School, and INSEAD. Peter is co-author of a number of books,

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including Dragons at Your Door: How Chinese Cost Innovation is Disrupting Global Competition. He serves as non-executive director of several companies spanning financial services through to green energy. John Wilson is Professor of Strategy at the University of Liverpool Management School. He has published widely in business and management history, including a biography of Lyndall Urwick, and a textbook on British management (both with Andrew Thomson). As well as playing a leading role in the Association of Business Historians and the European Business Historians Association, he has also run the Management History Research Group workshops for ten years. Keeley Wilson is a Senior Research Fellow at INSEAD, specializing in innovation and strategy. Prior to this, her background was in consulting and banking. She has worked closely with companies around the world on various aspects of global innovation, including innovation footprints, integrating innovation activities in India and China, and managing global projects. She is co-author of Managing Global Innovation, HBRP, 2012. Morgen Witzel is a Fellow of the Centre for Leadership Studies at the University of Exeter Business School. He is a writer, lecturer, and consultant on management, and is particularly well known as a writer on the history of management theory and practice. He is the author of twenty books, including Management History: Text and Cases and A History of Management Thought. He also edited the Biographical Dictionary of Management, and is a member of the editorial board of the Journal of Management History. Mohamed Zairi is the JURAN Chair in TQM and Executive Chairman for European Centre for Best Practice Management, and previously the SABIC Chair in Best Practice Management. Professor Zairi is also Assistant Chancellor for Strategy and Growth at Hamdan Bin Mohammed eUniversity in Dubai. He has been involved in guiding, mentoring, and advising on the implementation of excellence in both the government and private sectors. Professor Zairi has been awarded the Ishikawa/Harrington Medal (2005) by the Asian Pacific Quality Organisation (APQO), and also the Certified Six Sigma Grand Master (2005) by Harrington Institute Inc. In 2006 he was awarded the E. Jack Lancaster Medal by the American Society for Quality (ASQ). In 2009, he was presented with the ASQ Grant Medal. The Yoshio Kondo Academic Prize (2010) was bestowed upon him by the International Academy of Quality. Milan Zeleny is Professor of Management Systems, Fordham University, New York City. He was previously at Columbia University. Currently he is also at Tomas Bata University. He has been editor-in-chief of Human Systems Management for thirty years. His books include Human Systems Management, Multiple Criteria Decision Making, and Autopoiesis. He is preparing The Biocycle of Business and The Emerging Economy. He has over 500 publications, and is ranked first among Czech economists, according to the Hirsch citation index. His current interests are transformation, re-localization, glocalization, and community restoration.

Abbreviations

AI AMA APSA ASQ ASQ BOP BPA BPR BR CC CEMA CFI CIOS CIP CNOF CoP CosPUP CQE CSR DC DCP DMNC DRAM DSIR EGOS EOQ ESRC FDI FME FTC GE GLOBE GM GPS GS GSIA HBR HBS

Artificial intelligence American Management Association American Political Science Association American Society for Quality Administrative Science Quarterly Bottom-of-the pyramid Bureau of Personnel Administration Business process re-engineering Bounded rationality Core competencies Chinese Enterprise Management Association Colorado Fuel and Iron Company Comité International De l’Organisation Scientifique Customer intervention point Comité National de l’Organisation Française Communities of practice Committee on Science and Public Policy Certified Quality Engineer Corporate social responsibility Dynamic capabilities Dynamic Competitiveness Paradigm’ Diversified multinational corporation Dynamic random access memory Department of Scientific and Industrial Research European Group on Organization Studies European Organization for Quality Economic and Social Research Council Foreign direct investment The Foundation for Management Education Federal Trade Commission General Electric Global Leadership and Organizational Behavior Effectiveness project General Motors General Problem Solver Global sourcing Graduate School of Industrial Administration Harvard Business Review Harvard Business School

xviii HEP HRM HRS IAE IB ICC ICS IFG IIT ILO IMD IMI IO IOC IP IPM IR IRC IRIC ISB ISO ITC JAIST JFI JIT JUSE LBS LT M&A MbO MESS MIT MNC MNE MoI MPT MRG NIST NGO NJBT OR OT PAF PDCA PERT PIMS POCCC

abbreviations Human error probability Human resource management Human relations school (of management) Instituts d’Administration des Entreprises International business Interstate Commerce Commission International corporate strategy Institut Français de Gestion Illinois Institute of Technology International Labour Organization International Institute for Management Development International Management Institute Industrial organization Indian Oil Corporation Intellectual property Integrate process management Integration responsiveness Industrial relations counselors Institute for Research on Intercultural Cooperation Indian School of Business International Organization for Standardization Information technology and communications Japan Advanced Institute of Science and Technology Juran Foundation Inc. Just-In-Time systems Union of Japanese Scientists and Engineers London Business School Logic Theorist Mergers and acquisitions Management by Objectives and Self- Control Micro-Electronics in the Service Sector Massachusetts Institute of Technology Multinational companies/corporations Multinational enterprise Model of the individual Modern portfolio theory Management Research Group National Institute of Standards and Technology Non-governmental organization New Jersey Bell Telephone Operational research Organization theory Prevention, appraisal, and failure costs Plan-do-check-act Project evaluation and review technique Profit impact of marketing strategy Prévoir, Organiser, Commander, Coordonner et Contrôler

abbreviations POSDCORB PSAC QPR RBV RLM RM SARFT SBU SCP SOGI SM SQC SHRM SSRC STS TCE TIHR TNC TPS TQM UNCTAD USO WEF WORC

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Planning, Organizing, Staffing, Directing, Co-ordinating, Reporting and Budgeting President’s Science Advisory Committee Quality–price ratio Resource-based view Reverse logistics management Rational man Structural adaptation to regain fit Strategic business units Structure-conduct-performance Society–organization–group–individual approach Scientific management Statistical quality control Human resource management Social Science Research Council Socio-technical systems Transaction cost economics Tavistock Institute of Human Relations Transnational corporations Toyota Production System Total quality management United Nations Conference on Trade and Development United Services Organization World Economic Forum Work Organization Research Centre

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chapter 1

i n troduction morgen w itzel and m alcolm warner

The purpose of The Oxford Handbook of Management Theorists is to produce an up-to-date evaluation—or in some cases, re-evaluation—of the contributions of the most significant management theorists to the field of management. It builds on a great deal of existing, previous work done by those interested in the history of the subject and we will adumbrate how far earlier work has shed light on the underlying narrative (see Barley and Kunda 1992; Warner 1998a; Witzel 2012). We have attempted to cover a considerable number of management writers who have made, in our opinion, major contributions to the field. This new work is probably the largest one-volume work on management thought available in the English language and we are indebted to Oxford University Press for recruiting us as editors and commissioning this work. We hope it will be of significant use to both students and teachers of management, as well as interested practitioners. Bringing together this collection serves several ends. First, of course, there is the need to recognize the contributions that certain seminal figures, past and present, have made to the theory of management. These contributions have taken many forms and range from what we might call ‘progressive orthodox’ such as Chester Barnard and Sumantra Ghoshal, to the ‘revolutionaries’ such as Frederick Taylor and Herbert Simon, to the openly heterodox such as Henry Mintzberg. Nor were their views developed in isolation from each other (Sibbet 1997). Surveys of management ideas such as Mol and Birkinshaw’s (2008) and Hope and Player’s (2012) demonstrate how management ideas evolve and cross-fertilize over time. In part, at least, this happens through the actions, interactions, and re-actions of key management theorists to events around them, and sometimes to each other. The contributions in this volume help to contextualize the theorists and make clear what ideas influenced them and, in turn, what influence they have had on others. Second, there is the need to keep ideas alive. This is especially true in the case of some of the older management thinkers. As Witzel (2012) shows, it is not uncommon for good, valid theories of management to become ‘lost’, no longer studied save by a few. Even for familiar figures such as Taylor, time has a way of shrouding them in myths. The study of

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the modern-day reception of Taylor’s work by Payne et al. (2006) shows how even the academic perception of Taylor is often at odds with reality. It is important, in our view, to understand what these seminal figures believed and why, what they offered to the world then, and what they offer now. Diversity in management thought is essential, if we are not to become too narrow in our worldview and fall into the trap described by Ghoshal (2005) of becoming too narrow and too focused, and thus at risk of the kind of disconnection from the real world described so cogently by Mintzberg. And finally, there is the need to avoid the re-invention of the wheel, or as Mol and Birkinshaw (2008) put it, the putting of old wine into new bottles. With the world of management seemingly growing ever more complex, there is a real need to look back and remember the pioneering work that has been done in this field, and then to advance from those foundations, rather than to keep reinventing management for each new generation. Having established the need for this book, we then proceeded to its design and structure. Putting together a project like this one requires answering a number of questions from the outset. First, what is management theory? Second, who are the management theorists? Third, what criteria do we use for including some people in a work such as this, while excluding others? The selection process for any biographical compendium is bound to engender warm debate, and this project was no exception. Some theorists, such as Frederick Winslow Taylor or W. Edwards Deming, claimed an immediate place, thanks to the durability and impact of their ideas. Other seemingly marginal figures assumed greater importance the more we looked at them. We would certainly include C. K. Prahalad in this category, as the importance of his work has grown, and will continue to grow with the passage of time. As to the question of what management theory is, we have deliberately taken what some might see as a narrow view. Certainly other views are possible. Lyndall Urwick (1933) believed that many of the management ideas of his day could be traced back to the seventeenth century, and modern management historians such as Daniel Wren (1994) and Morgen Witzel (2012) have shown that some management concepts have their origins in the Middle Ages or even the classical world. But while the ideas of some of these thinkers (Sun Tzu and Machiavelli, for example) became enormously influential, as Witzel (2012) points out, they do not constitute coherent bodies of theory. By the end of the nineteenth century, there was a large but largely inchoate body of ideas about management which needed to be brought together in systematic form. The ‘paradigm shift’, from thinking about management to management theory and management systems, began with Taylor, and fittingly he is the first subject to be considered in this volume. As Robert Conti’s chapter shows, Taylor was not single-handedly responsible for scientific management: others, notably the Gilbreths, played highly important roles. But he was the figure around which the first true management theory coalesced (Merkle 1980). And as shown too, the impact of scientific management spread across the world and persists to this day. Some later management theorists worked in Taylor’s shadow, others like Mary Parker Follett reacted against him. But we would argue that all were influenced by Taylor to some extent, even if sub-consciously, or even if only to reject his ideas in favour of other, more progressive views of management.

introduction

3

Indeed, the cycle of acceptance and rejection is one of the features of the development of management theory over the course of the twentieth century. Paul Adler (2003) has shown the existence of a kind of ‘wave theory’ of thinking about management, in particular about organizations, moving from the scientific and mechanistic approach pioneered by Taylor and the Gilbreths to the more humanistic model of the human relations school of Follett and Mayo, then back to the more rigorous approach of management science. Herbert Simon was a key figure here, and Deming and Juran’s work on quality management also fits into this model. We then move again to a more humanistic approach in the 1960s and 1970s. Peter Drucker, with his insistence that management was the last of the liberal arts, is emblematic of this trend, and Deming’s later work also fits into this trend. The 1990s saw a swing back towards more mechanistic approaches, but the first decade of the twenty-first century, says Adler, saw a resumption of the trend towards humanistic theories. Following on from Adler we can see this trend manifest in the works of theorists such as Sumantra Ghoshal and C. K. Prahalad. The tricky process of determining who should be included in this work became our next priority. The first principle was that our theorists should have produced major bodies of work on management, and made management one of their main priorities, even their sole priority. All must have believed in the importance of management and emphasized its positive role in organizations, in business, in society. Even so, the list of people who fit this category is quite long, as Warner (1998a) and Witzel and his colleagues (2002) clearly demonstrate. Given that in this present work we intended to treat each subject in depth and analyse them thoroughly—in some cases, more thoroughly than has been attempted in print so far—we could only include a limited number of subjects. It became important to identify the most significant figures, and for this we needed a set of criteria. Our response was to develop a three-dimensional model, the three dimensions being length, breadth, and depth. Figure 1.1 presents these three dimensions diagrammatically in the form of a cube. With respect to length, we may conceptualize an axis which takes in the history of the field, particularly in terms of thinking about theory. At one end, we find the earliest origins of the subject, and at the other end those ideas and theories that are the most recent. It was clear that it was important to include the earliest theorists as well as some of the more recent, so as to illustrate how management theory has changed and evolved over time. The issue of where to begin then preoccupied us. Notwithstanding the important influence and ideas of earlier thinkers such as Machiavelli, Adam Smith, and Charles Babbage (see Warner 1998a), we decided to start with the paradigm shift mentioned earlier, the emergence in the 1890s and 1900s of complete and coherent ideas about management. This in no way downplays the importance of these earlier thinkers, but although they are key figures in terms of the dimension of length, it was difficult—in the end, impossible—to find any who matched our other criteria for breadth and depth. Along the timeline, we chose to group our theorists into three clusters. The first of these consists of the early pioneers spanning the period from the 1890s to the 1930s. This was a critical phase in the development of management theory and we will try to unravel the complex inter-relationship and interactions between the theories—as well as

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LENGTH BREADTH

DEPTH figure 1.1 A three-dimensional model of management

theorists. Some were involved with scientific management and others with the human relations school, but others like Henri Fayol developed their ideas independently and still others, such as Lyndall Urwick, tried to synthesize the ideas of other schools. The final figure in this group is Chester Barnard, who represents a kind of transition from the pioneers to the next evolutionary phase of management thinking. The pioneers were usually industrialists or consultants, and few had any academic background. This began to change after the Second World War. Some post-war theorists were associated with research institutes or foundations. Herbert Simon came from this background before becoming a founding faculty member at the Carnegie Institute. What is interesting about some of this group, such as Simon and Edith Penrose, is that they came from disciplines not associated with management. Rather like the pioneers, they saw the problems of management and felt that their own disciplines could be brought to bear on solving those problems; hence the uniqueness of their contributions. On the other hand, Peter Drucker’s institutional associations were fairly tenuous and only gained an academic home late in the day when he went to a chair at Claremont College in California. Deming and Juran, too, were best known as consultants. As a further note, much pioneering work in this period was done by collectivities such as the Tavistock Institute, and we decided to include ‘group’ entries to encompass the whole work of these bodies, rather than just individuals within them. The Carnegie Institute, as Augier and March (2011) have shown, became the standard bearer—or in their term, ‘poster boy’—for a revolution in business schools. Among other things, business schools increasingly became the key incubators of new research and new theory in business. Our third cluster of thinkers included nearly all stem from business school teaching and research backgrounds. Their theory and contribution is for the most part much more rigorous than that which went before, and sometimes, as in

introduction

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the case of Alfred Chandler or John Kotter or Henry Mintzberg, it launches a direct challenge at previously held certainties. Other modern figures, such as Ghoshal and Prahalad, looked at the changing face of the world as globalization began to emerge as an ever more powerful force, and speculated on ways that management theory could go forward. This is not to imply that such a notion was entirely absent from earlier work, but their contribution did highlight its importance. Unlike with our first and second clusters, there is no clean break between the second and third, and no transitional figure of the stature of Barnard (although we have assigned Herbert Simon that role, perhaps tendentiously). There is considerable overlap in terms of both time and ideas. Alfred Chandler was not much younger than Herbert Simon. Yet Simon was a product of the postwar revolution, while Chandler was very definitely grounded in the ‘modern’ notion of a business school. This may seem a trivial point, but it is our observation after reading the chapters in this book that institutional roots and environment often played a very great role in the forming and shaping of ideas. Whilst we have looked at many theorists as individuals, it is clear that their contribution took place in both an institutional and societal context. Breadth refers here to the measure of how specialist or how generalist a contribution is, the degree to which the work of a particular author is relatively narrow or wide in scope. This also may coincide with how far it is less or more technical, even complex, in its nature. A good number of contributions have clearly made their mark on the history of ‘general management’, some more and some less. It would be true to say that many of the management thinkers we have selected have been able to generalize to a degree. Similarly, some specialists who have made a very large mark on their own discipline but whose general impact on management as a whole was more limited were eliminated. Philip Kotler, despite his great impact on marketing theory and practice was omitted for this reason. This judgement may seem perverse, but again, we are concerned with theories of management, not just particular aspects of management. A further aim of this book was to treat each subject discussed as broadly as possible as well. There is more, much more, to Deming than just quality theory, or to Mintzberg than emergent strategy, or to Ghoshal than international strategy. Our purpose was to capture the thought of each of these individuals in the round. With respect to depth, here we were concerned with the degree to which each theorist helped to alter the paradigm in the field, a much rarer quality, with minimal contribution at one end and maximal at the other. The notion of the ‘paradigm’ is taken from the field of the history and philosophy of science and associated with the work of T. S. Kuhn (1962). While it is fairly straightforward in science to identify those who have changed the paradigm, such as Newton, it is more difficult in social science and perhaps even more problematic in management (see Clarke and Clegg 2000). Some even talk in the plural, of paradigms, many of these sharing an anti-management quality (see Donaldson 1995). A strong candidate here would be Taylor (see Merkle 1980; Warner 1998b; Link 2011). We can further argue that Simon and his colleagues at Carnegie helped change the paradigm by introducing more rigorous social scientific methods, and John Kotter helped to reconceptualize leadership. To some extent, each of the figures or schools described here

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helped to change the way we think about management and added significantly to the further development of management theory. Of course none of these figures worked singlehandedly or in isolation; each had their colleagues, their forerunners, and their followers, and they need be considered as both revolutionary and evolutionary figures. Some writers may be categorized as making a more theoretical contribution, whilst others a practical one. There might be a case for perceiving the former as having more depth than the latter. It is quite clear that a number of the seminal authors chosen contributed more to theory than others. The weight of the balance between these two considerations is brought out in the specific chapters concerned. It is said that there is more often than not an implicit theoretical dimension to practice, if there is no visible explicit one. Theory and practice are closely linked in a good number of the theorists in this volume. Much depends on the epistemology employed, as to whether the deductive or inductive approach characterizes the theorists’ work. When we chose the seminal authors to be written about in this collection, we made a somewhat implicit intuitive choice rather than a wholly rational one, and made a judgement on the basis of ‘reputation’. Given that we are making ex post facto decisions about our inclusion, there is clearly a bias in that respect to established authors. We were able to consult with a wide range of advisors in order to make our final choice, notwithstanding our in-house academic editor. There is a rough consensus as to the centrality of many management theorists in the history of the subject, but there will be varying opinions as to the emphasis placed on the work of this one or another. There was also an explicit criterion relating to whether they have already made their marks and whether they were ‘dead or alive’, and as will be seen, we chose a preponderance of the former. Such a view was inevitable given that we were presenting a historical narrative of the contribution of management theorists. But we also tried to balance our choice as between established Western authors and those who lived/live in other parts of the world. As well as North American and European management thinkers, we also included several from Asia; it was our intent to include still more. There was also an attempt to overcome different kinds of bias, not only relating to geographical origins, academic disciplines and so on, but also with respect to gender. In theory, this is the methodology we used for selecting the management theorists we discuss in this volume. In practice, there have been some omissions of notable figures who could have been included under the criteria for length, breadth, and depth, for example Chris Argyris and Kenichi Ohmae. Unfortunately, authors could not be commissioned to write these chapters at the time, which we, the editors, deeply regret. It is clear from the work of the editors of this volume that they are well aware that there have been contributions to management theory from a wide range of national and societal backgrounds and origins (see Warner, 1998b; Witzel 2012). In sum, we did our best to present a selection of management thinkers that would do credit to current reputations in the present decade, as well as in the longue duree. Not everyone, however, may necessarily agree with our selection, but we hope they will be patient in reading the chapters and coming to a more considered conclusion.

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References Adler, P. S. (2003) ‘Toward Collaborative Interdependence: A Century of Change in the Organization of Work’, in Bruce E. Kaufman, Richard A. Beaumont, and Roy B. Helfgott (eds), Industrial Relations to Human Resources and Beyond: The Evolving Process of Employee Relations Management, Armonk, NY: M.E. Sharpe. Augier, M. and March, J. G. (2011) The Roots, Rituals and Rhetorics of Change: North American Business Schools after the Second World War, Stanford: Stanford University Press. Barley, S. R. and Kunda, G. (1992) ‘Design and Devotion: The Ebb and Flow of Rational and Normative Ideologies of Control in Managerial Discourse’, Administrative Science Quarterly, 37: 1–30. Clarke, T. and Clegg, S. (2000) ‘Management Paradigms for the New Millennium’, International Journal of Management Reviews, 2(1): 45–64. Donaldson, L. (1995) American Anti-Management Theories of. Organization: A Critique of Paradigm Proliferation, Cambridge: Cambridge University Press. Ghoshal, S. (2005) ‘Bad Management Theories are Destroying Good Management Practices’, Academy of Management Learning and Education 4(1): 75–81. Hope, J. and Player, S. (2012) Beyond Performance Management, Boston: Harvard Business School Press. Kuhn, T. (1962) The Structure of Scientific Revolutions, Chicago: University of Chicago Press. Link, S. J. (2011) ‘From Taylorism to Human Relations: American, German, and Soviet Trajectories’. Paper Presented to the Business History Conference 2011, in St. Louis. Merkle, J. (1980) Management and Ideology: The Legacy of the International Scientific Management Movement, Berkeley: University of California Press. Mol, M. J. and Birkinshaw, J. (2008) Giant Steps in Management: Creating Innovations That Change the Way We Work, London: FT-Prentice Hall. Payne, S. C., Youngcourt, S. S., and Watrous, K. M. (2006) ‘Portrayals of F.W. Taylor Across Textbooks’, Journal of Management History 12(4): 385–407. Sibbet, D. (1997) ‘75 Years of Management Theory and Practice’, Harvard Business Review, Supplement, September–October. Urwick, L. (1933) Management of Tomorrow, London: Nisbet. Warner, M. (1998a) ‘Taylor, Frederick Winslow (1856–1915)’, in Warner, M. (ed.), International Encyclopedia of Business and Management, London: International Thomson Business Press. —— (1998b) The IEBM Handbook of Management Thinking, London: International Thomson Business Press. Witzel, M. (ed.) (2002) Biographical Dictionary of Management, Bristol: Thoemmes Press. —— (2012) A History of Management Thought, London: Routledge. Wren, D. (1994) The Evolution of Management Thought (4th edn.), New York: John Wiley.

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chapter 2

fr eder ick w i nsl ow tay l or robert f. c onti

Introduction Frederick Winslow Taylor, the father of scientific management, evokes the most emotional and polarized responses of any management theorist. He is both revered and reviled. Peter Drucker described scientific management as ‘all but a systematic philosophy of worker and work. Altogether it may well be the most powerful as well as the most lasting contribution that America has made to Western thought since the Federalist Papers’ (Drucker 1954: 280). In contrast, Jeremy Rifkin laments that ‘in the new scientifically managed factory, the worker’s mind was severed from his body and handed over to management. The worker became an automaton. . . . his humanity left outside the factory gate’ (Rifkin 1987: 109). There may be disagreement about Taylor’s effect on work and workers, but there is little doubt about his enduring influence. A 2000 survey of the American Academy of Management ranked Taylor first among the twenty-five most influential management thinkers of the twentieth century. This chapter will examine his career, contributions, and influence on management practice.

The early years Frederick Winslow Taylor was born in 1856 to Franklin and Emily Winslow Taylor, wealthy Philadelphia Quakers. His father was a lawyer who did not practise law, and his brother Edward was a non-practising physician. Verblen observed that ‘Abstention from labour was the convenient evidence of wealth, and therefore the conventional mark of

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social standing’ (2005: 31). However, this ‘career path’ was incompatible with Taylor’s fierce drive for achievement. He had a privileged upbringing. When he was 12, his family travelled in Europe for three years, and his father’s behaviour toward service providers made a lasting impression on Taylor. Services in the 1870s seldom met the family’s expectations, and his father compensated by tipping generously to improve service. Taylor became convinced that money was effective for changing working-class behaviour. In 1872 Taylor enrolled in Exeter Academy. It was a feeder school for Harvard University, where he was expected to attend and pursue the law. Taylor’s intelligence and competitiveness led him to excel in his studies at Exeter, but at a price. He developed frequent headaches and impaired vision, and his parents feared for his health. This concern may have tempered their disappointment over Taylor’s decision to pass up Harvard and pursue his love of mathematics and efficiency by becoming an engineer. Rather than attend engineering school he chose the more traditional training of a factory apprenticeship. Taylor later regretted his lack of formal education and managed to earn an engineering degree at Stevens Institute, without interrupting his career.

The journeyman journey Apprenticeships were scarce after the panic of 1873 but a family friend was co-founder of Ferrell & Jones, a Philadelphia pump manufacturer, and in 1874 Taylor began a patternmaker apprenticeship at the firm. He developed considerable design and woodworking skills and was eager to further expand his knowledge. After two years, he requested and was granted permission to begin a second apprenticeship as a machinist. In the process he developed a lifelong love affair with machine shops, but the affair had a rocky start. Taylor had been trained by veteran patternmakers but the machinists offered no such training. Apprentices gained skills slowly, by observing machinists and by trial and error experiments, and Taylor responded by deducing general principles from his observations and experiments. He completed his apprenticeships with increased confidence and a feeling that he understood both his trade and his new working-men friends. For Taylor, ‘his apprenticeship was the ultimate credential, one he would invoke all his life’ (Kanigel 1997: 142). Armed with his journeyman papers, Taylor set out on his career.

Midvale: from obsession to insight Jobs were hard to find during the continuing depression, but once again a friend intervened—a major investor in the Midvale Steel Company, a large Philadelphia manufacturer of steel train car wheels. Taylor began as a labourer but was soon assigned to a clerical job he despised. His request for a transfer to the machine shop was granted and

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he was assigned as a lathe operator. Taylor’s aptitude and energy led to his promotion as gang boss of the lathe operators. His cordial relationships with his co-workers dramatically changed when he chose to attack the widespread problem of ‘soldiering’— the intentional restriction of output by workers, enforced by peer pressure. Taylor was obsessed with soldiering. He called it ‘the greatest evil with which the working-people of both England and America are now afflicted’ (1947: 14). Taylor loathed the practice but understood its reasons. Workers feared increased output would lead to job losses. This could be overcome by incentive pay schemes, but managers were notorious for ‘rate cutting’—reducing the pay per piece whenever higher output increased worker wages. As a result, workers restricted their output, and their deep mistrust thwarted Taylor’s efforts to overcome soldiering through incentive pay. He changed tactics and trained promising labourers to operate machines at faster speeds. When assigned to work, however, peer pressure forced them to reduce their output. Taylor took a harder line, imposing fines. The men responded by sabotaging their machines and blaming Taylor for overworking them and their machines. Taylor viewed his fellow machinists as ‘friends’, and was deeply disturbed by their resistance. He was also frustrated, firmly believing that workers and managers shared a common interest, one that could be satisfied by the mutual gains of higher wages and lower unit labour costs. Taylor came to recognize that there were two obstacles to instituting a mutual gains system: ‘The ignorance of management as to what constitutes a proper day’s work for the workmen’ (Taylor 1947: 53), and the reality that ‘Men will not work at their best unless assured a good liberal increase (in pay), which must be permanent’ (Taylor 1947: 26). Taylor attacked both obstacles. William Sellers, President of Midvale, approved his request to conduct a ‘series of careful scientific experiments to find out how quickly various types of work ought to be done’ (Taylor 1947: 86). For monetary incentives, Taylor assigned his assistant, William Fannon, to devise a differential piece rate plan, with much higher piece rates for machinists who met a daily target—an incentive to work hard all day. The success of the plan depended on setting challenging, yet attainable targets, requiring that a fair day’s output be defined. To do so, Taylor instituted stopwatch time studies of machining, to measure how long it should take for an operation, such as machining an axle, and how many operations should be completed each day. This was the ‘scientifically’ based information Taylor needed for his incentive plan, and he organized a ‘rate-fixing’ department to time study operations and set daily targets. He was realistic about the remaining hurdle: ‘It is one thing to know how much can be done in a day, and an entirely different matter to get even the best men to work at their fastest speed’ (Taylor 1919: 62). Taylor attacked this final hurdle by using the machining of axles for a trial. Lathe operators were machining three to five axles a day, but based on time studies Taylor set a target of ten per day, with a 40 per cent attainment bonus. He began a two-week trial, but the selected machinist called Taylor’s target ‘impossible’, and refused to machine more than six axles a day. Taylor fired the machinist and found one willing to cooperate. The machinist followed Taylor’s instruction card and finished ten axles each day. The Gordian knot of soldiering was untangled and the number of cooperating workers steadily grew. A pleased President Sellers cooperated by maintaining rates, even when worker pay doubled.

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By the time Taylor left Midvale in 1890, Scientific Management had been successfully installed—achieved by his steely determination and William Sellers’ cooperation.

Scientific management principles Taylor’s instinct was to generalize by organizing experiences and events into coherent principles. Most notably, he distilled his efforts to increase efficiency into four Principles of Scientific Management (Taylor 1947: 36): 1. Each element of a man’s work should be scientifically developed. 2. The workman for each type of work should be scientifically selected and trained. 3. Management should heartily cooperate with the men, to ensure that the scientific methods are being followed. 4. Management should take over all the work for which they are better suited than the workmen, leading to an almost equal division of work and responsibility between the management and the workmen. Taylor developed his practices before his principles, emphasizing that ‘Scientific Management at every step has been an evolution not a theory’ (1947: 88). Therefore his principles can serve as a framework for evaluating the major practices linked to each.

Principle One: the scientific development of work Work measurement The First Principle encompasses Taylor’s most influential and controversial practices— his pioneering studies of the nature and measurement of work, and his breakthrough fragmentation of shop tasks into elements. The latter was more effective in identifying unnecessary elements, a form of motion study. Taylor did not use the techniques developed by Gilbreath, but he established the principle that motion studies must precede time studies, to make times apply to improved methods (Gilbreath, 1911). The times also had to apply to all machinists, so tasks were standardized, and the motion study results codified on instruction cards. To conduct a time study, a skilled machinist was stopwatch timed while following instructions for several cycles. The average element times were totalled to determine the task time. Taylor recognized that a machinist could not maintain a time study work pace for a full day, so he developed an allowance to compensate for operator fatigue. The allowance increased the measured time by 20 to 27 per cent, for a more realistic ‘fair day’s work’. Taylor once testified that allowance values were

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based on ‘long experience’ (Taylor 1947: 106). However, he gave no scientific justification because there was none. There still isn’t. Lehto and Buck describe contemporary time study practices, and conclude that ‘allowance values tend to be traditional rather than arrived at through scientific means’ (2008: 307). In 1914, Taylor’s elemental times proved vital for Henry Ford’s revolutionary manufacturing process. Newly available electric motors freed machines from the constraints of overhead power shafts, and Ford arranged the machines in the sequence of required processes. Parts moved from machine to machine, and when complete were transferred to the assembly line. The mass production era had begun (Hounshell 1984: 218). The efficiency of an assembly line depends on how well the task times at the sequential work stations are equalized, or balanced. Shorter elemental times can be more evenly allocated to the stations, increasing the line efficiency.

Metal-cutting research Taylor’s systematic research on cutting metals was his most validly scientific contribution. In 1880 he began experiments to answer the machinists’ questions: At what speed should a machine be run, and how fast should the cutting tool be fed? Machinists based these decisions on experience and ‘rules of thumb’, leading to wide variations in costs and quality, and Taylor believed that metal cutting laws would yield major improvements. He identified twelve independent variables influencing speeds and feeds, and over twenty-six years conducted thousands of experiments. Mathematically proficient assistants transformed the data into feed and speed formulas. However, the formulas were too complex for machinists, and a Taylor assistant, Carl Barth, converted them to a set of ingenious slide rules. Taylor claimed a slide rule allowed a machinist to determine his settings ‘in less than a half-minute’. His success was consistent with his First Principle, since ‘useful results hinged mainly upon the substitution of science for the individual judgement of the workman’ (Taylor, 1947: 114).

The ‘Schmidt’ case In 1899 Taylor studied the loading of pig iron bars into rail cars at Bethlehem Steel—the celebrated ‘Schmidt’ case. Labourers were loading twelve tons per day per man, and earning $1.15 a day. Taylor improved methods, issued detailed instructions, and instituted a piece work plan. Using the new methods, Schmidt (né Noll) and two fellow workers loaded a daily average of fifty tons per man, exceeding Taylor’s target of forty-seven tons. Taylor claimed that a key to their impressive performance was having the men regularly ‘sit down and rest’, to conserve energy. But the loaders never actually sat down to rest. Wrege and Grenwood point out: ‘Instead, their return walk, empty-handed, was considered a rest’ (1991: 116). Taylor’s zeal led him to enhance his already significant job design success.

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Principle Four: new management roles Planning vs. doing The premise of Principle Four is that ‘Management should take over all the work for which they are better suited than the workmen.’ Taylor favoured separating the planning and execution of tasks, with planning done by management. He wrote that ‘All possible brain work should be removed from the shop and centred in the planning or laying-out department’ where thinking was done by management (1947: 98). Taylor’s new roles for management included the planning and coordination formerly done by workers. This supported his view that ‘Perhaps the most prominent single element in modern scientific management is the task idea’, with the work of every man planned in detail as to what to do, how to do it, and how long to take (1947: 39).

Functional Foremen The new management responsibilities required more ‘non-productive’ support from staff specialists. Taylor, however, rejected a line and staff organization, preferring ‘functional management’. The latter featured an extreme division of duties, with eight Functional Foremen directly supervising workers in eight functions—ranging from machine set-ups to maintaining discipline (Taylor 1947: 104). With few exceptions, even Taylorist managers rejected the complexity and confusion of functional foremanship, preferring the simpler line and staff organization.

Management decision support Taylor believed that managers needed more timely, accurate, and relevant information to fulfil their new responsibilities. Characteristically he successfully addressed this need. Accounting reports only provided managers with a ‘scorecard’ for past decisions. Managerial accounting was needed, to provide managers with information for making better current decisions, and Taylor studied cost accounting at the Investment Company in New York, in order to develop such systems. He also instituted ‘exception principle’ reporting, so managers could focus on major deviations (1947: 129). Taylor realized that all relevant costs should influence decisions. He applied this insight at Midvale, where buyers were purchasing the lowest priced power transmission belts. However, the relevant costs included the expense of replacing failed belts and the value of production lost by idled machines. A switch to more expensive, but more durable belts reduced total costs (Kanigel 1997: 201). Several successful practices are linked to the First and Fourth Principles. In contrast, Taylor had mixed results with Second and Third Principle practices.

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Principle Two: scientific selection of workers The Second Principle calls for matching workers’ capabilities to job requirements, but Taylor’s ‘scientific’ methods at times deviated from his Principle. He lauded scientific selection’s potential for worker advancement, citing the promotion of former dirt diggers to higher paying jobs at Bethlehem Steel. Selection of the replacement diggers, however, was by ethnic stereotyping. Taylor’s rule was to assign ‘Italians or Hungarians’ as diggers. (Taylor 1947: 47) At a bearings company, Taylor studied women inspecting ball bearings for surface defects. He decided that a fast reaction time was essential for inspectors and tested their reactions to visual stimuli as a ‘scientific’ means of identifying inspectors to be retained. Taylor made no attempt to correlate test scores with performance, and expressed regret over the lay-offs: ‘unfortunately this involved laying off many of the most intelligent, hardest working, and most trustworthy girls merely because they did not possess the quality of quick perception followed by quick action’ (1947: 90). Taylor did increase productivity by moving inspectors far enough apart to eliminate their incessant talking, and instituting hourly output checks and incentive pay. Inspectors were reduced from 120 women to 35, and wages doubled.

Principle Three: managerial cooperation Taylor’s Third Principle calls for management to heartily cooperate with the workers, to support mutual gains. Taylor appears to put the burden on management for fostering cooperation, writing that ‘managers assume new burdens and responsibilities never dreamed of in the past’ (1947: 36). However, he states that the objective of this cooperation is ‘to ensure that all of the work is being done in accordance with the principles of science’, clearly emphasizing management control. This attitude is consistent with his endorsement of ‘enforced cooperation’, if needed to ‘assure faster work’, with ‘the duty of enforcing this cooperation resting with management alone’ (1947: 83, text italics). Taylor’s pro-management bias may have resulted from his ‘not being of the working class’, a status he referred to with pride. His bias led him to consider uncooperative management rate-cutting a moral failure, instead of the more likely self-interested profit-seeking. As a result, he optimistically called for ‘a mental revolution in attitudes for managers’ (1947: 27). Taylor also called for a mental revolution by working men, but he expected primarily physical responses on the shop floor.

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Scientific management diffusion in the US Spreading the Word Taylor left Midvale in 1890 to join the Manufacturing Investment Company, investing his savings in stock options. He supervised operations at a pulp mill being converted to a new process. Technical problems and excessive transition costs led to bankruptcy during the panic of 1893—wiping out Taylor’s investment. He ruefully concluded that ‘a systematiser must not have managerial responsibility’, and became a consultant to spread the gospel of Scientific Management with evangelical zeal (Merkle 1980: 54). In 1893 Taylor was hired to improve operations at the huge Bethlehem Steel machine shops. He recognized the need for more efficient metal cutting and began a series of experiments to improve the tools. Working with a metallurgist, Taylor perfected a heat-treating process for making tool steel that operated at twice the speed, with a 40 per cent deeper cut than existing tools. He patented the tool steel and it created a sensation when demonstrated in the Bethlehem Steel exhibit at the Paris Exposition of 1900, along with machining slide rules. The exhibit triggered a wave of interest in the steel and in Scientific Management. Between 1901 and 1910 there were eighteen recorded adopters of Scientific management (Chandler 1977: 277). Among them were three early ‘showcase’ implementers: Tabor Manufacturing, Link-Belt Engineering and Yale & Towne. They helped convert other firms to Taylorism, and Harry Towne, President of Yale and Towne, was responsible for Taylor’s election as President of the American Society of Mechanical Engineers—a prestigious post offering a platform for his ideas. A major endorsement came at an Interstate Commerce Commission (ICC) hearing in 1911. The Eastern Railroad Company applied for a rate increase, based on higher costs. A Taylor supporter, Harrington Emerson, took the stand and confidently testified that a rate increase was unmerited, since Scientific Management could save Eastern ‘a million dollars a day’. Widespread favourable press accounts created a public relations bonanza for Taylor. There were, however, bumps in the road, notably the highly publicized 1911 Watertown Arsenal strike, where union workers refused to be time studied. The strike led to a 1912 House of Representatives investigation of Taylor’s system and increased political resistance to public-sector installations of Scientific Management. In the private sector, top managers were often sceptical of the high costs of implementation and perceived threats to their authority. Taylor transferred knowledge and control from the workers—but to a cadre of professional specialists, not to top management. However, Taylorism continued to expand, ‘emerging from the 1920s, as a general philosophical doctrine of management’ (Merkle 1980: 243).

The 1930s and beyond In the 1930s, the Depression swept Franklin D. Roosevelt into office. His ambitious ‘New Deal’ recovery policy created several new government agencies and programmes.

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Scientific Management had a direct impact in this rapid expansion of the federal bureaucracy. Urwick noted that ‘for the first time, the philosophy developed by F.W. Taylor and other pioneers has been applied practically to the government of a great nation’ (1949, 1: 154). The World War II industrial mobilization of 1940–5 employed extensive Taylorist activities to improve efficiency and output in factories heavily manned by women. The standardized, repetitive tasks helped ‘Rosie the Riveter’, and her counterparts, adapt quickly to production. After the war, Fordist mass production dominated American industry in converting to consumer goods. Workers tolerated the fastpaced, repetitive jobs as a result of favourable labour–management agreements. These agreements set a pattern for recognizing management’s right to organize and control production, and the countervailing power of unions to negotiate high wages, job security, grievance procedures, and work rules. This truce began to unravel during the upheaval of the 1960s, with younger workers increasingly rejecting monotonous jobs and speed-ups. The resistance peaked in 1972, with strikes and sabotage at the General Motors Lordstown assembly plant. Workers protested a production line speed 40 per cent higher than any other auto plant (Waring 1991: 142). Lordstown symbolized an industrial crisis, lending impetus to several movements to reform Taylorist organizations and job designs. These are discussed in the ‘Taylorism Reform Efforts’ section. In the 1980s Japanese transplants showed that lean production could be effectively operated with American workers. The use of lean production accelerated, and with it, the growth of its imbedded Taylorist practices.

International diffusion of scientific management At the turn of the twentieth century, international interest in Scientific Management was generated by translations of Taylor’s writings and the Paris steel-cutting demonstrations. There were marked differences, however, in the patterns of adopting Scientific Management in various countries. Guillén identifies seven explanatory factors: structural changes in industry, international pressures or opportunities, industrial relations systems and labour unrest, business-elite mentalities, status of the engineering profession, the role of the state, and the reactions of the workers (1994: 268). The impact of these factors in six countries will be reviewed.

Russia Vladimir Lenin read Taylor’s writings in 1916. He was impressed with the results claimed for scientific management and attracted to its routine job designs. The latter could shorten the training of unskilled peasants for factory work, as part of Bolshevik

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industrialization. The plan was disrupted by the October 1917 Revolution that brought the Bolsheviks to power. The conflict decimated Russian industry, and in 1918 Lenin decreed that scientific management be employed to rebuild the economy. He appointed Leon Trotsky, who had reorganized the army, to do the same with Soviet industry. Trotsky instituted a drastic ‘militarization’ of industry, and justified it as a form of Taylorism (Merkle 1980: 119). Workers were conscripted and transferred to work sites, and escapees arrested. Strong protests from disenfranchized workers and powerless unions ultimately led Lenin to abandon the Trotsky policies. High levels of American efficiency during the 1920s sparked renewed interest in scientific management, and Stalin incorporated Taylorism into his first Five Year Plan in 1928. He employed American experts, including Russian-born Walter Polakov, a former Gantt associate, who prepared Gantt charts to coordinate and track Five Year Plan activities (Wren 1980). Stalin abolished the unions as part of his industrial plan, allowing widespread exploitation of workers. Central planners set unrealistic production quotas, causing pervasive speed-ups in vain attempts to meet quotas. The Stakhanovism programme employed Stakhovites, elite workers awarded bonuses for very high output. Their role was to serve as work pace examples and to stimulate task improvements by workers. Stakhanovism employed Taylorist objectives of division of labour, individual achievement, and elimination of unnecessary work elements. However, the work improvement programmes were poorly organized. Workers received little training, and were forced to work harder, not smarter, under the threat of gulag labour camps for missing quotas. Witzel describes the lesson of Russian Taylorism: ‘just how dangerous the system could be when the power of the company was transferred into the hands of a tyrannical state was demonstrated in the Soviet Union’ (2005).

France High-speed cutting steel demonstrations at the Paris Exposition of 1900 stimulated great interest in scientific management, and Taylor’s use of classical experiments impressed the French—including the noted chemist and metallurgist, Henri Le Chatelier. He founded the leading metallurgical industry publication, Revue de Métallurgie, and translated and publicized Taylor’s writings. The reception of scientific management among the technical elite was not universal. Supporters of management theorist Henry Fayol viewed Taylorism as flawed by its violation of Fayol’s unity of command principle. Taylor supporters counter-charged that Fayolism was unscientific. The conflict raged untiI 1925, when Fayol announced that his work and Taylor’s were the same, both focusing on management. It was a qualified truce, however, since Fayol claimed that ‘Taylor dealt with the lower technical elements of management, while his own system with the higher administrative elements’ (Merkle 1980: 165). French employers were leery of the high cost of implementing scientific management and concerned that organizational changes would undercut their authority. Strong class differences generated further resistance. The upper class, including business owners, identified with crafted luxury items, not

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with low-cost uniform products. The French elite considered efficiency a ‘sin against taste’ (Merkle 1980: 152). There was a notable exception to the prejudices of the owners. In 1913, Edouard Michelin read about Taylor in the Revue de Métallurgie and invited him to Paris. The charismatic Taylor impressed Edouard and his brother André, and they adapted his methods in their plants. The endorsement of the prestigious Michelin firm was a powerful boost for Taylorism, but was countered by strikes at Taylorist plants. Workers protested unrealistic work quotas and deskilled jobs. The outbreak of World War I reversed the French opposition to scientific management. The urgent need for high quality armaments, built to close tolerances, in large quantities, was incompatible with the inherent variability of prevailing craft-based, ‘rule of thumb’ production. Taylorism was widely implemented, and standardized tasks allowed skilled workmen, called to war, to be replaced by unskilled retirees and women. The contributions of Taylorism to the French victory were recognized in 1918 by Prime Minister Georges Clemenceau, who called for its study in all plants. In the interwar years, from 1918 to 1939, the pre-WWI opposition re-emerged and Taylorism was largely present on shop floors in name only. France entered World War II in September 1939, surrendering only nine months later. The rapid end of the war effort eliminated any impetus for a Taylorist revival. After the war, however, there was a re-emergence of scientific management, spurred by Marshall Plan reconstruction programmes. Progress was slow, however, and Servan-Schreiver warned France of the competitive dangers of a Taylorist America: In America today, the government official, the industrial manager, the economics professor, the engineer, and the scientist have joined forces to develop coordinated techniques for integrating factors of production. These techniques have stimulated what amounts to a permanent industrial revolution. (1969: 53)

Germany In the early twentieth century, engineering exchanges with the US introduced German firms to Taylorism. The exchanges were interrupted by World War I but resumed after the war, making Taylor’s writings widely available to engineers and managers. This exposure was enhanced by the 1910 Paris Exposition. German engineers were impressed by the effectiveness of Taylor’s high-speed steel, as well as his organizational and work design innovations. After World War I, Germany instituted a programme to rationalize and rebuild industry. The movement incorporated Taylorist elements of industrial planning, standardization, and efficiency. The programme was suspended during the post-war economic crisis, and resumed in 1924, prompting the spread of scientific management until the 1929 depression. Adolf Hitler and the Nazi Party came to power in July 1930, and he denounced industrial rationalization for causing unemployment. Despite his implied criticism of scientific management, Third Reich production planning under Albert Speer had strong Taylorist elements. Speer used armament production planning groups and initiated the division of labour and task standardization. Regrettably there was also widespread exploitation of workers. Speed-ups occurred, ‘in classical Scientific Management

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fashion, by manipulation of differential piece work rates’ (Speer 1970: 371). Simplified, repetitive job designs made possible the use of unskilled slave labour on production lines (Kanigel 1997: 329). German workers, however, resisted speed-ups and the deskilling of jobs, and the lack of valid time standards created conflicts over piece rates. A review of German scientific management raises the question of the extent of Taylorism in the barbaric processes of the death camps. There are cited examples in some camps. For example, Rudolf Hoess sought to ‘run Auschwitz as a labour camp, dedicated to production and run according to enlightened principles of scientific management’ (Campbell 1989: 347). Allen cites a Buchenwald survivor’s description of experiments to determine the minimum number of prisoners needed to carry long, heavy iron beams. Allen terms the experiments ‘an evil parody of Frederick Taylor’s classic tale of Schmidt’ (1995: 81). However, Allen’s extensive research indicates that, in general, the death camps were badly mismanaged, and were not the reported ‘well-oiled machines of extermination’, with apparently little evidence of effective Taylorist practices (Allen 1995: 255).

Great Britain Scientific management received a chilly reception from British industry—a surprising reaction in the nation that pioneered the Industrial Revolution and was the first to study the efficient management of labour. Adam Smith publicized the benefits of the division of labour and Babbage the benefits of varying the skills and pay of workers to match their tasks. In the 1920s, industry faced increasing American and German competition, while coping with the legacy of having ceded control of the shop floor to the workers during the Victorian era, and growing trade union challenges. However, both management and the unions rejected Taylorism as a solution. Engineers opposed scientific management as deskilling for workers and too expensive to implement, and they traditionally preferred ‘commonsense approaches to management’ (Guillén 1994: 214). British intellectual and business leaders were culturally conservative. Most shared an elite education at ‘public’ (private) schools and Oxbridge, where classics were emphasized, and technical and commercial subjects ignored. Historian Herbert Sussman described the prevailing interwar climate: The opposition to mechanized production, the celebration of hand labour, the aesthetic distaste for the machine are but expressions of the deeper conflict between rationalism and intuitionism, between scientific and organic modes of thought. (1968: 233)

The performance of British industry during World War II showed little evidence of effective management—scientific or otherwise. Military historian Corelli Barnett cited official statistics and scathing examples to reveal widespread mismanagement and opportunistic union behaviour on shop floors and shipyards throughout the conflict (Barnett 1986). Scientific management was more widely adopted after the war—aided by the British Productivity Centre, and associated Marshall Plan agencies. A major factor was a change in the trades

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union policy toward Taylorism. In 1950, the Trades Union Congress recommended that unions cooperate in the application of scientific management, to increase productivity and economic growth. During the Thatcher years there was a marked increase in Taylorist practices as Japanese transplants and progressive British firms implemented lean production. The movement was aided by the industrial relations reforms of the 1980s and Prime Minister Thatcher’s successful initiative to convince Japanese firms such as Nissan, Honda, Toyota, and Sony to manufacture in Britain. That trend has continued and lean production is the prevailing method of organizing production in many British factories.

Japan Japanese industry was introduced to Taylorism by a 1912 translation of Taylor’s Principles of Scientific Management. Subsequent Japanese books communicated Taylorism to industrial executives and managers, and they, in turn, distributed thousands of copies to their workers. Interest evolved into action and between 1913 and 1915 the National Railways and leading textile firms adopted Taylorist techniques, Yasukawa Electric introduced a worker bonus scheme, Toyobo initiated motion study, and the Port Arthur School of Technology became the first school to teach Taylorism courses. Scientific management was a major factor in the modernization of Japanese manufacturing, and in 1925 a Japanese chapter of the Taylor Society was formed. In the same year Ford started assembling cars in Yokohama, and General Motors set up an assembly plant in Osaka the following year. The auto manufacturers brought the technology of the moving assembly line to Japan, setting the stage for the post-war development of the Toyota Production System. The Toyoda Company pioneered automatic looms in 1902 and diversified into automobiles in the 1930s, under the Toyota brand. Kiichiro Toyoda assumed control in 1945, and accepted Henry Ford’s invitation to study the massive Rouge River plant. Toyoda was impressed by the continuous flow but recognized that Toyota could not copy Ford’s high volume, single model system, requiring large parts inventories to maintain flow. Toyota’s annual volume was about one week’s output at Rouge, they produced a wide variety of trucks and cars, and could not afford large inventories. Toyota engineer Taiichi Ohno and consultant Shigeo Shingo overcame these constraints by developing an innovative adaptation of Ford mass production—the Toyota Production System (TPS) (Ohno 1988 and Shingo 1989). The TPS used flexible ‘mixed model scheduling’ to simultaneously build several different models, in small quantities, on the same line. Machine set-up reductions reduced parts inventories by eliminating the need to make large quantities. And ‘just-intime’ supplier component deliveries to the assembly line eliminated the large line-side inventories of mass production. Despite its innovations, many Taylorist practices are imbedded in the TPS. Work tasks are broken down into elements for time study and balancing of assembly lines. Motion studies are performed by engineers, and workers in kaizen improvement programmes. Scientific worker selection is widespread. Work tasks are standardized and codified in Standard Operating Procedures, and updated after each improvement to foster learning. Production schedules are prepared by a planning

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department and ‘exception principle’ graphic charts are posted in work areas. The TPS propelled Japan’s industries to world-class status, and in the process greatly expanded the scope and scale of Japanese Taylorist practices.

China The emergence of China as a major manufacturing power has triggered a cascade of Chinese books on management theories and practice. These are linked to an introduction of scientific management in 1915 by the essay ‘Personal Efficiency’ by Yang Xingfo, who studied scientific management at Cornell. More influential was Mu Xiangyu’s translation of Taylor’s Principles of Scientific Management. The economic slump and increased foreign competition of the 1920s spurred interest in scientific management, and Chinese firms in diverse industries, such as cotton, silk, electrical equipment, and commercial presses, experimented with Taylorism. Scientific management continues to be a competitive priority in China. In March 1979 the Chinese Enterprise Management Association (CEMA) was organized, to coordinate management training at the national level and sponsor research on management theories and systems. The association takes a very Taylorist position: ‘Management, a branch of science, is governed by its own law. Only by strictly following this law and running the enterprise in a scientific way will it be possible to bring into full play the potentialities of the manpower and material resources, and to gain greater economic results’ (Warner 1986).

Opposition to Taylorism The term ‘Taylorist’ is a pejorative descriptor, used by critics of scientific management. They object to practices such as fragmented, repetitive, short-cycle tasks, the intensification of work, deskilled job designs devoid of discretion, and work speed-ups. Each will be evaluated.

Task fragmentation Taylor fragmented work tasks into finer elements for more effective analysis, not for designing production jobs. His call for confining work ‘to the performance of a single leading function’ applied not to workers but to ‘each man in management’, to justify functional foremanship (1947: 99). For batch production of items such as wiring harness sub-assemblies, Attewell points out that an excessive division of labour is sub-optimal, since ‘the extra time spent shifting objects from one person to the other and the problems of coordinating the production speeds of numerous workers begin to increase’ (1987). In these cases, cost minimization results when each worker assembles an entire

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harness—counter to the contention of Braverman that profit maximization inevitably leads to ever finer divisions of labour (Braverman 1974). For sequential flow production, work station times are determined by the required output, not by job designs. For example, to produce thirty units per hour, one unit must exit the final work station, and all prior stations, every two minutes, so the cycle time for completing tasks at each station must be two minutes. A finer division of labour on the line would lead to lower cycle times and costly excess production.

Work intensification Work intensity is the proportion of work time spent actually performing production tasks. Littler (1978) describes what he views as the deskilling effect of divorcing ‘direct’ and ‘indirect’ labour in order to increase work intensity: ‘all preparation and servicing tasks are stripped away to be performed by unskilled, and cheaper, workers as far as possible’. For example, machinists would no longer do their own materials handling. This would be done by lower paid workers. Attewell views this change differently. He considers it to be upgrading for both the machinists and the helpers: ‘It leaves craft workers with more complex work and removes the least sophisticated of their tasks’, and it ‘modestly upgrades the work of non-craft workers: They have now taken on some previously craft tasks’ (Attewell 1987). For example, floor sweepers can become higher paid materials handlers. The intensification of the machinist’s work eliminates the opportunity costs of a skilled, experienced machinist spending time searching through inventories to find the correct alloy and size of steel bar stock, while his expensive machine tool stands idle.

Deskilling jobs The proper degree of worker judgement and discretion is determined by products and customer preferences. At companies such as Steuben Glass, Waterford Crystal, and Royal Doulton China, high levels of judgement and discretion exercised by their workers are necessary for products prized for craft-built uniqueness and variability. This variability, however, would not appeal to Toyota or Ford customers, who value reliable operation. A car, with over 10,000 parts, requires high levels of consistency for high reliability. This requires non-discretionary work tasks, because of the limits of human accuracy and the statistics of sequential production. The probability of a trained worker making an error in performing a discretionary task is the Human Error Probability, or HEP (Ayres 1988). Studies show that under ideal conditions the HEP is approximately 0.001, or one error per thousand tasks. Therefore the probability of a single successful task is 0.999. This appears adequate until the sequential nature of car assembly is considered. The probability of an error-free process for N sequential tasks is 0.999 raised to the Nth power. For a product with a sequence of 1,000 tasks, far fewer than a car, the probability of an error-free completion of all tasks is 0.999 raised to the one-thousandth

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power, or 0.368. Therefore, over 60 per cent of the products being assembled will encounter errors, despite the best efforts of conscientious workers. High reliability requires product designs that minimize the number of parts, and hence the number of tasks, and the use of non-discretionary job designs. Viewing non-discretionary job designs as strictly profit maximizing behaviour ignores reality. The improved assembly quality minimizes the frustrations of workers coping with misaligned and ill-fitting parts, and the Porsche experience shows how lean production and non-discretionary tasks can save a company. In the early 1990s Porsche was losing money, caused by high costs and poor quality, and the firm risked bankruptcy. Workers exercised high levels of discretion, and the resulting variability led to quality problems, and costly reworking in the rectification area at the end of the line. Workers performed their own materials handling, often experiencing long, production-interrupting searches for parts in the line-choking inventories. Japanese consultants helped Porsche convert to lean production and non-discretionary tasks. After implementation, cars were built in 45 hours instead of 120, inventories were slashed by 90 per cent, and on 27 July 1994, for the first time ever, an error-free Porsche came off the end of the line, requiring no rework—the first of many to follow. Porsche survived and has thrived, and all parties won: workers, managers, shareholders, and customers (Womack and Jones 1996: 189).

Speed-ups A work speed-up, forcing workers to operate at an abnormal pace, results from mismanagement. Regrettably, speed-ups were practised long before Taylor’s time. The Book of Exodus, Chapter 5, describes Pharaoh instructing his slave drivers to stop furnishing straw to the Israelites for making bricks. They will have to go out and find their own straw, but their brick quotas will not be reduced. With less time to make bricks, slaves had to work faster to meet the same quota. While not divinely inspired, Taylorism does increase speed-up opportunities—as a result of shifting the shop-floor power balance from workers to management. Speed-ups also occur in lean production. In some lean plants a percentage of the workers on a smoothly operating process are removed, to ‘motivate’ the remaining workers to devise improvements. To maintain output, these workers are forced to speed up and work faster than normal until improvements take effect. The Conti et al, study of lean production job stress found the practice of resource removal to be linked to increased worker stress levels (2006).

Taylorism reform efforts In addition to the operational objections to Taylorism, there were several concerns about organizational shortcomings of the prevailing bureaucratic model. Waring summarizes them:

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Taylorism helped create conflicts between workers and managers, between departments, between business and the public; it engendered bureaucratic organizations whose specialized operations could not be controlled by time and motion studies, spawned work that could not be easily managed through separation of planning from doing, and bred workers who resented being treated as factors of production, (1991: 7)

These concerns for the quality of work life spawned several reform movements that attempted to overcome the flaws in the Taylor model. One group of reformers attempted to salvage the Taylor bureaucracy through modifications designed to make it more efficient. These included operations research and management science (Ackoff and Rivett 1963), the cybernetics/artificial intelligence theories of Herbert Simon (1981) and the Toyota/lean production system of Taiichi Ohno and Shigeo Shingo (Ohno 1988 and Shingo 1989). Elton Mayo applied his interpretation of the Hawthorne experiments to the human relations movement. He accepted the validity of a bureaucracy but believed that benevolent, friendly managers would influence workers to more readily accept company goals and improve their job performance (Mayo 1933). Other reformers went beyond Mayo. They believed that a Taylor bureaucracy was dysfunctional, with an over-emphasis on monetary rewards, and they sought to achieve workplace harmony through democratic management and motivated workers. Reformers included Abraham Maslow and the self-actualization theory (Maslow 1943), Douglas McGregor and Theories X & Y (McGregor 1960), and Frederick Herzberg and the hygienic-motivation theory (Herzberg et al 1959). Peter Drucker’s management by objectives programme took a middle position (Drucker 1954). It fostered employee participation in setting personal goals congruent with those of the corporation. Arguably, Ohno and Shingo have had the greatest impact. The TPS evolved into lean production, which has become the global competitive standard for manufacturing products assembled from discrete parts. Lean production workers face a Taylorist environment of standardized, repetitive tasks, but they have significantly different roles. Taylor believed ‘It is also clear that in most cases one type of man is needed to plan ahead and an entirely different type to execute the work’ (1949: 38). The TPS rejected the separation of planning and execution, as well as the view of workers as doers, not thinkers. Lean production workers are able to use their experience, judgement and creativity. On the line, they exercise quality control, stopping the line if they encounter a quality problem that cannot be quickly fixed, and they participate in corrective activities to resume production. Off-line, workers can take part in kaizen continuous improvement programmes. Participants are trained in process analysis and the design of ‘poke-yoke’ (foolproof) tasks for preventing errors. While studying lean production in Japan, this writer’s executive host described their training philosophy: ‘We train our workers so they can use their minds to make their jobs more mindless.’ At the firm, non-discretionary, foolproof tasks were devised by workers using their discretion, knowledge, and creativity—a form of mediated-Taylorism. At the Toyota NUMMI plant in California, worker kaizen participation was raised to a new level. Workers were trained to perform time studies of their improved methods (Adler 1993).

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The Conti et al, lean production job stress study found that participation in continuing improvement programmes was associated with reduced worker job stress levels (2006).

Taylor’s legacy in the twenty-first century In the ranks of Taylorism reformers, time has been kindest to the bureaucratic enhancers. Operations research, management science, and computer decision support systems all thrive—as do Taylor’s ideas. Many of his scientific management techniques have survived—at times virtually intact and, more often, in an evolved manner. Stopwatch time study is little changed, but work measurement has been enhanced by a myriad of computer-based standard data systems. Gantt charts have evolved into sophisticated PERT project management and review systems, and motion studies are routinely made, although more likely using Gilbreath’s techniques than Taylor’s (Gilbreath 1911). Barth’s slide rules replaced machinist’s decisions in Taylor’s time, and computer-controlled machining centres do the same by transferring machining decisions to programmers. Lean production has become the dominant mode of contemporary manufacturing and its Taylorist elements ensure an influential position for Taylor’s ideas for the foreseeable future. There will likely be more attempts to design more worker-friendly systems, similar to the experiments at the Volvo auto plants at Kalmar and Uddevalla, Sweden. Teams of ten Volvo workers assembled entire cars, starting with painted bodies. They set their own work pace patterns, while completing four cars a day. The plants were shut down in the early 1990s after four years of operation, apparently unable to compete with lean production in either cost or reliability (Berggren et al, 1994) The Volvo experiment was consistent with the lean concept of continuous improvement, and similar efforts should be encouraged.

Conclusion Two trends could have a significant bearing on Taylor’s influence in the twenty-first century: the application of lean principles to health care and the use of artificial intelligence (AI) adaptive computer programmes for securities trading. The global crisis in healthcare quality and costs has spawned interest in Taylorist and lean systems for hospital care and doctor–patient relations. The Wall Street Journal of 15 July 2010 featured a story about Dr Donald Berwick, newly appointed director of the US Centre for Medicare and Medicaid Services. He addressed the medical community with a ringing endorsement of Taylorism:

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I would place a commitment to excellence—standardization to the best-known method—above clinician autonomy as a rule for care. Health care has taken a century to learn how badly we need the best of Frederick Taylor [the father of scientific management]. If we can’t standardize appropriate parts of our processes to absolute reliability, we cannot approach perfection. Young doctors and nurses should emerge from training understanding the values of standardization and the risks of too great an emphasis on individual autonomy.

Predictably, the editorial page responses from physicians were swift and largely negative, warning of the dangers of ‘cook-book’ medicine. Berwick’s attempts to improve quality and costs by limiting physicians’ autonomy will face stiff resistance. The outcome of this struggle will affect the role of Taylorism in healthcare systems and possibly the future quality and cost of healthcare. A 14 July 2010 Wall Street Journal headline reported ‘New Wave of Investment Firms Look to “Artificial Intelligence” in Trade Decisions’. Herbert Simon saw humans and computers as interchangeable in many instances, claiming that ‘In a visible future, computers would exhibit as much “intuition, insight and learning” as people’ (1977). Artificial intelligence programmes have the ability to rapidly process huge amounts of data, ‘learn’ from the outcomes, and adjust trading strategies and parameters in real time. Traditional non-adaptive computer trading models require programming interventions for such changes. Technically, artificial intelligence systems could be considered to be anti-Taylorist. Pre-computer traders both planned and executed their transactions. AI programs now allow computers to do the same. From a human standpoint, however, AI may lead to deskilling, with traders becoming ‘computer tenders’ much like the CNC machining centre ‘machine tenders’. The spread of artificial intelligence applications among trading firms will depend on whether results can overcome the concerns of investors about the risk of opaque quantitative systems. Regardless of the outcome of the healthcare debate, or the extent of AI use by trading firms, Frederick Taylor’s legacy should remain secure. Merkle explains why: Scientific Management increased productivity, making more low-cost manufactured goods available for consumption, and it generally increased middle class opportunities by redefining the role of the planner, synthesizer and white-collar worker in industrial production. Efficiency in the factory was a measureable commodity, with a scientific basis and real benefits. (1980: 244)

Taylor’s efficiency has proved to be a measureable, valuable, enduring commodity.

References (* shows annotation) Ackoff, R. and Rivett, P. (1963). A Manager’s Guide to Operations Research. New York: Wiley. Adler, P. (1993). ‘Time and Motion Regained’. Harvard Business Review, 71/1: 97–108. Allen, M. (1995). ‘Engineers and Modern Managers in the SS’. Philadelphia, PA: University of Pennsylvania, Dissertation.

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*Attewell, P. (1987). ‘The Deskilling Controversy’. Work and Occupation, 14/3: 323–46. Balanced study of the theoretical and empirical validity of the Braverman deskilling thesis. Ayres, R. (1988). ‘Complexity, Reliability, and Design: Manufacturing Implications’. Manufacturing Review, 1/1: 26–35. Barnett, C. (1986). The Audit of War.The Illusion and Reality of Britain as a Great Nation. London: Macmillan. Berggren, C., Adler, P. and Cole, R. (1994). ‘Nummi vs. Uddevalla’. Sloan Management Review, 35/2: 37–49. *Braverman, H. (1974). Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century. New York: Monthly Review Press. Influential Marxist critique of scientific management, setting forth the thesis that Taylorist job designs are inherently deskilling. Chandler, A. (1977). The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Harvard University Press. Conti, R., Angelis, J., Cooper, C., Faragher, B., and Gill, C. (2006). ‘The Effects of Lean Production on Worker Job Stress’. International Journal of Operations and Production Management, 26/9: 1013–38. Drucker, P. (1954). The Practice of Management. New York: Harper. Gilbreath, F. (1911). Motion Study: A Method for Increasing the Efficiency of the Workman. New York: Van Nostrand. *Guillén, M. (1994). Models of Management. Work, Authority, and Organization in a Comparative Perspective. Chicago, IL: University of Chicago Press. Readable comparison of the patterns of scientific management adoption in the US, Germany, Spain and Britain. Herzbeg, F., Mausner, B. and Snyderman, B. (1959). The Motivation to Work. New York: Wiley. Hounshell, D. (1984). From the American System to Mass Production 1800–1932: The Development of Manufacturing Technology in the US. Baltimore, MD: Johns Hopkins University Press. *Kanigel, R. (1997). The One Best Way. Frederick Taylor and the Enigma of Efficiency. New York: Viking Penguin. Exhaustive 675 page assessment of Taylor’s considerable achievements as well as his tendency to ‘window dress’ intuition and hunches as ‘science’. Lehto, M. and Buch, J. (2008). Introduction to Human Factors and Ergonomics for Engineers. New York: Taylor and Francis Group. Littler, C. (1978). ‘Understanding Taylorism’. The British Journal of Sociology, 29/2: 185–202. McGregor, D. (1960). The Human Side of Enterprise. New York: McGraw Hill. Maslow, A. (1943). ‘A Theory of Human Motivation’. Psychological Review, 50: 370–96. *Merkle, J. (1980). Management and Ideology. Berkeley, CA: University of California Press. Analysis of scientific management as a ‘mental revolution’, and an international ‘crusade’. Historical coverage of diffusion in the US, Russia, France, Germany and the UK. *Ohno, T. (1988). Beyond Large-Scale Production. Cambridge, MA: Productivity Press.The evolution and operation of the Toyota Production System, by the individual most responsible for it success. Rifkin, J. (1987). Time Wars The Primary Conflict in Human History. New York: Henry Holt. Servan-Schreiver, J. (1969). The American Challenge. New York: Avon Library. Shingo, S. (1989). A Study of the Toyota Production System from an Industrial Engineering Viewpoint. Cambridge, MA: Productivity Press. Simon, H. (1981). The Sciences of the Artificial (2nd edn). Cambridge, MA: MIT Press. Speer, A. (1970). Inside the Third Reich. New York: Macmillan.

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Sussman, H. (1968). The Victorians and the Machine: The Literary Response to Technology. Cambridge, MA: Harvard University Press. *Taylor, F.W. (1947). Scientific Management: Comprising Shop Management, The Principles of Scientific Management, Testimony before the Special House Committee. New York: Harper. A convenient reissue of three Taylor classics. A careful cover-to-cover reading is essential to understand scientific management and its founder. Urwick, L. (1949). The Making of Scientific Management, Volume 3. London: Management Publications Trust. Verblen, T. (2005). The Theory of the Leisure Class: An Economic Study of Institutions. (Indian edn). New Delhi: Aaker Books. *Waring, S. (1991). Taylorism Transformed: Scientific Management Theory since 1945. Chapel Hill, NC: The University of North Carolina Press. Effective review of the post World War II movements that addressed the effects of Taylorist bureaucracies on the quality of work life. Warner, M. (1986). ‘Managing Human Resources in China: an empirical study’. Organizational Studies, 7/4: 253–66. Witzel, M. (2005). ‘Where Scientific Management Went Awry’. European Business Forum, 21: 89–92. Womack, J. and Jones, D. (1996). Lean Thinking: Banish Waste and Create Wealth in Your Corporation. New York: Simon and Shuster. *Wrege, C. and Greenwood, R. (1991). Frederick W. Taylor. The Father of Scientific Management. Myth and Reality. Homewood, IL: Business One Irwin. Excellent book to read after reading the 1947 Taylor reprints, to clarify many of the Taylor narratives. Wren, D. (1980). ‘Scientific Management in the USSR, With Particular Reference to the Contributions of Walter N. Polakov’. Academy of Management Review, 5/1: 1–11.

Bibliography (* shows annotation) *Barnes, R. (1940). Motion and Time Study. New York: John Wiley. The definitive reference for understanding the historical and technical aspects of traditional work improvement and work measurement. Campbell, J. (1989). Joy in Work, German Work, Cambridge, UK: Cambridge University Press. Mayo, E. (1933). The Human Problems of an Industrial Civilization, New York: MacMillan. *Pruijt, H. (1997). Job Design and Technology, Taylorism vs. Anti-Taylorism. London: Routledge. Comparison of neo-Taylorist and anti-Taylorist job design strategies, with case-studies of computer control, job enlargement, job enrichment and participation. Taylor, F. W. (1919). ‘A Piece-Rate System’, in Two Papers on Scientific Management, London: George Routledge and Sons. *Womack, J., Jones, D., and Roos, D. (1990). The Machine That Changed the World. New York: Rawson Associates. The report of the MIT study of the global automotive industry. It first used the term ‘lean production’ to describe an evolved version of the Toyota Production System, and provides data to support the view that lean production has become a competitive necessity for autos and similarly assembled products.

chapter 3

m i n d, m et hod, a n d motion: fr a n k a n d lilli a n gilbr eth bernard m ees

The American industrial engineers Frank (1868–1924) and Lillian (1878–1972) Gilbreth first met in Boston in 1903 while the Oakland-born, Berkeley-educated Victorian (born Lillie Evelyn Moller) was preparing to undertake a chaperoned European tour. Frank Bunker Gilbreth was a Bostonian building engineer and as unlike Lillian Moller in upbringing and character as a former bricklayer could be. Frank Gilbreth was a ball of energy, a self-made man who wanted to live life as energetically and successfully as he possibly could. Lillian fell in love with the man in the big red car who met her at Boston railway station, the cousin of the chaperon who was leading her European tour. The meeting transformed the shy Californian bookworm, the two forming a twenty-year partnership that has proven unique in the history of management thought (Price 1987; Lancaster 2004). Frank Gilbreth had already begun writing his first book before he met his future wife, but all of the writings of the Gilbreths collected by Spriegel and Myers (1953) were either joint compositions or were solely written by Lillian Gilbreth. Holding a Masters degree in Literature from the University of California, Lillian was much better suited to written work, Frank being proud of the fact that he could not even spell accurately. Lillian worked on the drafts of Frank’s first book Field System (1908a) before the two were even formally engaged, and it is not always clear how much of the five books which appeared under Frank Gilbreth’s name were written by Lillian. Such drafts as have survived suggest that most of the works which bear her husband’s name were more or less ghost written by Lillian—hence she is often assumed to have been his intellectual superior and the major contributor to the partnership. Yet it is clear that Lillian had not even thought about industrial management before meeting her future husband in 1903, and that Frank Gilbreth was the dominant intellectual figure in their management partnership.

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The nature of the relationship between the husband and wife team is a major theme in Jane Lancaster’s laudatory biography of Lillian Gilbreth (Lancaster 2004). Lillian always made it quite plain that it was ‘Frank’s work’ that she was principally involved with, not the other way round, but there have been many who have doubted how reliant Lillian was on her rambunctious and exuberant husband, regarding her constant claims to the contrary as a sign of intellectual demureness (cf. Graham 1994). Before meeting Frank, Lillian was a quite shy and reserved figure with no apparent interests in the commercial world; falling in love with Frank transformed her and made her life. Even before coming to Boston, Lillian clearly aspired to make more of her years than that which a Victorian American of her standing and education would be expected to—her Berkeley commencement address made as a graduating student in 1900 already alludes to a wish to live a more engaged and purposeful life than that to which even a university-educated woman of her social standing would usually seem to have been destined (Lancaster 2004: 52–53). Yet, however more educated or studious than her husband, ascribing her repeated statements that their management partnership was essentially a work of Frank’s to old-fashioned wifely reticence seems rather to mask how dependent Lillian so evidently was on Frank during both their lifetimes. Frank Gilbreth was always a blur of activity. Losing his father as a boy, Fairfield, Maine-born Frank took on a bricklayer’s apprenticeship (with Bostonian building contractors Whidden & Co.) as soon as he left school in order to free his mother from having to work to support her family. Frank Gilbreth witnessed his relatives beggar his mother, and rather than take up a college education, he instead vowed to move into a commercial career as soon as he could as a teenager. Working quickly through his apprenticeship, Frank set up his own contracting business in his late twenties, liberating his mother from the boarding house that she had been forced to set up after the death of her husband. The misfortune of his mother spurred Frank into action, and created in him a restlessness that he would later describe as a search for a ‘strenuous life’. Frank wanted to live life to the full and seemed to have little time for the bookishness that characterized the upbringing of the young Lillie Moller. As Lillian often recounted, even on his first day on the job, Frank was looking to find a better way. He would later claim that the different bricklaying techniques followed by master bricklayers depending on whether they were working normally, quickly, or training apprentices inspired him to endlessly search for improvements in bricklaying, aimed at increasing speed and efficiency. Already in 1892 he had patented a scaffold that would avoid the need for bricklayers to stoop when constructing walls, and through close observation and experimentation he developed various other kinds of bricklaying efficiencies (including his invention of patented devices such as new forms of cement mixers) while growing his contracting business. By the time that Lillian first met Frank, Gilbreth & Co. had won dozens of commissions throughout the Boston area. Lillian was clearly amazed and inspired by the conspicuously successful and driven ball of energy she met that fateful Boston day.

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Lillian and Frank Gilbreth both came of age during the belle époque, a time when American industry and ways were first threatening to become internationally predominatnt. Lillie Moller grew up in a California that was still substantially a frontier region, her alma mater the University of California at Berkeley still a rather makeshift affair. Red-headed Lillie (who changed her name to a less girlish-sounding Lillian while she was at Berkeley) was raised very much tasting the silver spoon, and never lost her valuing of genteel, upper-middle class ways, preferring to avoid confrontation, to keep her temper quite under control and to avoid putting her name to product endorsements or engaging in other forms of conspicuous self-flattery (Lancaster 2004). Frank, on the other hand, represented all the values of a respectable middle-class New England family, his father owning a hardware store, but with Frank becoming the man of the family while he was still a child. Frank’s almost unnatural adoration of his mother seems to have been reflected in his unconventional encouragement of the career aspirations of his young wife. But as willing as he was to embolden Lillian in her academic and industrial endeavours, Frank seemed to be ever on the road investigating new business opportunities while Lillian was left to clean up his mess both personally and (increasingly) even in the business contracts he left behind closer to home. Part of Frank Gilbreth’s rambunctious approach to business could be seen in his endless visits to court. Gilbreth & Co. proudly did most things differently, and it seemed that Frank was always in disputes with his clients. He had a well-earned reputation as a salesman and a huckster, someone who sought to exploit every opportunity to the fullest, someone who would try almost anything in order to get ahead. Indeed his first publications clearly represented part of this pattern of constant self-promotion, of advertising the uniqueness and excellence of his management of his contracting firm. Frank Gilbreth’s books from 1908–9—his Field System, Concrete System, and Bricklaying System—all extol practices that he had developed since first going into business by himself in 1895, and that he saw as unique to his firm. He developed his ‘field system’ in response to having to manage several contracts at once, each in a different location. Rather than advocating decentralized decision-making, however, Gilbreth’s system was largely one of control. All foremen were required to carry a copy of a manual which detailed his field system, and report and act according to its rules. Matters of initiative were largely to be referred to Frank at head office; everything else was to fit a standard pattern. This included some practices which would be reflected in his later writings, however, such as having a preference for hiring union members (he had been a unionist while working at Whidden’s himself), and trying to manage and engage his employees positively. Gilbreth recognized that a large commercial enterprise necessarily meant a reduction in the number and manner of personal relationships between the owner or general manager and his workmen. He proposed to overcome the distance between front-line staff and senior management concomitant with running a large business (or at least one that was quite geographically dispersed) by having staff send written suggestions for improvement to him (with cash prizes offered for the best suggestions), and the issuing of what he styled ‘white list cards’ to good quality workers who Gilbreth & Co. could not afford to retain between contracts. Gilbreth’s ‘white card’ was envisaged

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in opposition to the ‘black lists’ of the day that were used to discriminate against industrial workers who had developed reputations as troublemakers. Gilbreth’s Concrete System is a more technical work (cf. Morley 1990), and his mooted Cost Reducing System (frequently referred to in Lillian Gilbreth’s first book from 1914) never appeared. But his Bricklaying System is another matter entirely. Here he lays out for the first time what was later to be recognized as his most essential contribution to modern management thought: motion study. The book outlines the refinements he had developed in the training of apprentice bricklayers, his two patented scaffold designs (both developed to speed up bricklaying) and his principle that the first thing for an apprentice to learn is speed work, and only later quality. He advocates putting workers in teams and pitting them against each other in contests reminiscent of the worker games of Nazi Germany or even the later Stalinist practice of ‘socialist emulation’ (Deutscher 1952; Hau 2008). But Frank Gilbreth’s most important contribution in Bricklaying System is his explanation (and tabling) of how he had reduced the amount of motions required in laying bricks from eighteen to four and a half. All this he had learned and developed before he first met Frederick W. Taylor in 1907. Gilbreth’s meeting with Taylor (while attending an annual meeting of the American Society of Mechanical Engineers) transformed his life (Price 1987: 41–4). Gilbreth soon became such an ardent admirer of Taylor and his system of shop management (Taylor 1903) that Taylor’s influence on Gilbreth has often been described as if it were akin to that typical of a devotee of a cult. Frank and Lillian Gilbreth quickly became the most eloquent of the new preachers of Taylorism, the gospel of industrial efficiency, their subsequent works becoming full of wonder and praise for the contribution of the master. Scientific management (as Taylorism would come to be known from 1910) represented an influence on both of the Gilbreths that seems quite akin to that of an ideology (cf. Taksa 1992): it drove them, inspired them, and often even rendered them unable to respond reasonably to criticism which arose from outside the movement. The urgent and driving need for efficiency that the Gilbreths were to extol for the rest of their lives seems to represent much more than merely an extension of the inherited Protestant tradition of pragmatism and thrift. To audiences today, the life and work of the Gilbreths seems to epitomize not only rationalization, but also a veritable efficiency craze. Yet the Gilbreths obviously saw their work as one of personal (if not national) salvation as Victorian modes and values waned in the face of a growing modernism. Although products of the nineteenth century, Frank and Lillian can both be seen as very much intellectually in tune with the movement of social and political reform known in their day as progressivism. This mixture of political liberalism and social concern often associated progress with a form of technological positivism that seems to transcend present-day political notions of left and right. Its characteristic feature was modernism— a rejection of traditional explanations for entrenched inequality as well as notions of class struggle or the efficacy of traditional sources of authority. As such, the Gilbreths were staunch democrats who believed in social betterment, but rejected all forms of social radicalism. Instead they believed in a future that was democratic, capitalistic, efficient, and overwhelmingly middle class—and most of all supremely useful and modern.

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The most striking image of the Gilbreths today stems from their usage of film and photography (Kaiper 1981; Mandel 1989; Lalvani 1996: 152–68; Lindstrom 2000; Brown 2005; Sammond 2006). Frank had already dabbled with photographic reproduction of work methods before his conversion to Taylorism, but his love affair with scientific management transformed his approach to photographic reproduction. Some of the uses to which he put film seem to have the air of chicanery about them today, appearing to represent as they no doubt did a reflection of his relentless boosterism and selfpromotion (Price 1989). And clearly the Gilbreths celebrated their use of film and photography in motion study as a sign of how very modern (and superior) their approach to management was. As they were to claim in Applied Motion Study (1917), the problem with the use of stopwatches in orthodox Taylorist work study was that the method was less reliable and precise than actually filming workers. In this sense the Gilbreths took the rationalist grist of Taylorism and developed it to its most logical apogee—no longer reliant on the reflexes and personal observations of the more orthodox Taylorists, photographic motion study represented an invocation of true modernity, with workers’ movements captured perfectly (and moreover permanently) in black and white for any industrial engineer to analyse and see. Gilbreth’s motion study had evolved from the mere observation and experimentation that he had employed as a bricklayer to an advanced state which he called micro-motion study. Much as photography was already being used to explain the motions employed by leading sportsmen, photographic reproduction would be used to improve work design. Frank even developed new photographic technology to aid in his supremely modernist motion study. His basic method was to film workers—that is, to use a hand-cranked motion-picture camera with the worker sitting in front of a white grid on a black background (to aid precise measurement) along with a microchronometer (with Gilbreth proudly emblazoned on it) to indicate elapsed time. Later he would add a light globe to the worker’s hand in order better to track their motion using time-lapse photography. Later still he would add a regular interrupter to the current in order to break the photographic traces up into broken lines—and a more developed form of this ‘chronocyclograph’ (as he styled the micro-motion images) would even include the use of lightglobes with thick filaments whose delayed luminescence would convert the dashes into tapers that would better indicate the direction of the worker’s actions. The experimentation and invention associated with Gilbreth’s motion study represented a specialization and development on the chronographic work design advocated by Taylor, and it seems very much to represent the most iconic of the images to be associated with the efficiency movement of the day. Micro-motion study—or motion economy as it would later be called—also led to the use of film in worker education and training (Gilbreth 1928a). Indeed when the United States entered World War I, Frank Gilbreth enlisted, his role being to produce training films for budding US servicemen. It was during this time that the somewhat obese Major Gilbreth would catch rheumatic fever. His heart weakened by the attack, he would die suddenly of heart failure while talking to his wife on the telephone in 1924.

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Other idiosyncrasies in the Gilbreths’ development of micro-motion study included their proposal that standard movement icons called ‘Therbligs’ should be used in work study. These simplified movements such as ‘find’, ‘grasp’, and ‘use’ were named by a term which represented little more than ‘Gilbreth’ spelt backwards and although used by later authors (e.g. Fairchild 1930), do not feature in any of the key works of the Gilbreths (although cf. Gilbreth and Gilbreth 1917: 137–9 and Gilbreth and Gilbreth 1920a: 29–33 for adumbrations of the concept). The Gilbreths also developed motion models—wire simulacrums painted with dashes that workers could use to help them learn the new techniques established by the use of chrono-cyclegraphs. Frank furthermore developed a fascination with making workers ‘champions’ (as he put it) at their jobs, a nomenclature which rarely made it past Lillian’s editorial pen into any of their final works, but that seems likely to have provided some impetus to the use of motion study in 1930s’ German sport science (cf. Hau 2008). Yet it was not his wife’s ethnic background (her maternal grandparents were German and she was a fluent German speaker) that was to make Frank Gilbreth one of the leading Taylorists to actively pursue the evangelization of scientific management in Europe. Gilbreth saw himself principally as a devotee of the Taylor movement. Indeed he was so taken by Taylor that he proved the figure most instrumental in the establishment of the Taylor Society (which was originally styled the Society for the Promotion of Management as Taylor had objected to an eponymous name for the Society). As the Taylor Society’s secretary Robert Kent (1932) reflected some twenty years later in its Bulletin, Frank regarded Taylor as a man of such greatness that he deemed it necessary to establish a formal grouping in which Taylor’s many disciples could discuss, publicize and develop the master’s ideas. Taylorism did not seem to be accepted by the mainstream of the American Society of Mechanical Engineers at the time, so at Gilbreth’s urging most of the major names in the industrial efficiency movement began to have regular monthly meetings where papers concerning scientific management would be discussed around dinner. Gilbreth was so ardently Taylorist he wanted to celebrate the work of the master and formalize his movement by the establishment of a gentlemen’s scientific club. However, in 1912, Frank Gilbreth decided to get out of the building industry and go into management consulting himself. The main spur seems to have been the publicization of Taylorism which occurred with the Eastern Rates shipping case of 1910. The Eastern Rates case, argued before the Interstate Commerce Commission, saw Louis Brandeis, the later US Supreme Court judge, acting for small-business shippers and arguing that the introduction of the Taylor system to railway companies would see such efficiencies achieved that wages could be increased without the need for changes to be applied to the rates charged to clients (Oakes and Miranti 1996). Taylor’s system was popularized by Brandeis’s promotion of it so thoroughly that Gilbreth (who even appeared as a witness in the proceedings) saw an opportunity to go into consulting by himself. Indeed Taylor was so overwhelmed with inquiries after his system was popularized by Brandeis, that he asked Frank Gilbreth to respond to the many inquiries he was receiving by means of a question-and-answer book. Frank had been instrumental in

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persuading Taylor to publish his Principles of Scientific Management in 1911, and Gilbreth’s own Primer of Scientific Management from 1912 is avowedly orthodox, faithfully representing Taylor’s mental revolution, patiently explaining the division of labour epitomized in Taylor’s functional foreman, even taking the time to explain Gilbreth’s own contribution of motion study merely as an adjunct to the greater man’s work (Price 1987: 104; Dean 1997). The book is full of quotes attributed to Horace King Hathaway and the other leading Taylorists of the time (as well as the seemingly obligatory references to bricklaying which fill all of the Gilbreths’ works). Indeed, Frank Gilbreth had been one of the Taylorists who had come up with the description ‘scientific’ for the Taylor system as it was to be promoted by Brandeis (as Taylor, characteristically, did not want his management system to be named after himself). The description ‘scientific’ seemed particularly appropriate to a relentless modernizer like Gilbreth. Indeed the characterization of the Taylor system as ‘scientific’ also seemed particularly suited to Gilbreth’s remodelling of the Taylorist notion of ‘setting standards’ upon more strictly accurate, technically modern, and observable grounds. Gilbreth had been busy bringing Taylorist methods to bear in his construction business, becoming ever more enthralled by the new management system at each attempt. Indeed his parcel system for bringing bricks to a work site in an ordered manner was clearly inspired by Taylor’s famous pig-iron experiments at Bethlehem Steel (Price 1987: 51–3). Gilbreth’s book Motion Study from 1911 was consequently written as an extolling of the need for the nationwide acceptance of the principles of scientific management, using the case of bricklaying (the one he of course new best) as an example of best practice in the field. But Gilbreth Inc’s very first consultancy—at braiding-machines manufacturer, the New England Butt Company—led to frictions between the Gilbreths and the other Taylorists that would become particularly prominent after Taylor’s death in 1915. The Gilbreths threw themselves into the New England Butt contract with all of Frank’s typically boisterous energy, accompanied by Lillian’s more patient support (Price 1987: 153–225; Lancaster 2004: 133–42). Frank was a quintessential doer and ideas man, and although Lillian loved his energy, she seems to have spent much of their time together both inspired and mortified—not to mention pregnant. As they were to demonstrate so clearly during the time of their contract at New England Butt, Frank was a hive of ideas, Lillian his more cautious sounding board. But Lillian’s unique intellectual contribution to the partnership had already proved to be of particular use some time before Frank gave the building industry away and they had consequently arrived as managementconsulting neophytes in 1912 at New England Butt. Lillian had first come to New York in 1902 to pursue doctoral studies in psychology under Edward Thorndike at the University of Columbia, but had returned to California homesick a few months later (Lancaster 2004: 55–6). A background in psychology would clearly have made a useful contribution to Lillian’s résumé at the time which seemed ideal for a career in secondary-school teaching—she excelled at literature and modern European languages, the topic of her master’s thesis being a study of English Renaissance dramatist Ben Jonson’s Bartholemew Fair (Moller 1902). After their marriage, however, Frank encouraged Lillian to use her background in psychology to

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enhance their proposed future work in management consulting, and from 1910 Lillian began to prepare a doctoral thesis on the use of the new science of psychology and how it might be used in management. The University of California would not, however, agree to confer a doctorate on Lillian (which Frank thought would look good on the company letterhead) unless she completed a year’s worth of graduate subjects in residence at Berkeley, so her unexamined dissertation was published instead in 1914 as the Psychology of Management. Written while raising their very large family, the book would make Lillian a very famous woman—a pioneer in all sorts of endeavours and fields that had previously been regarded as unsuited to members of her sex. Part of Frank’s embracing of the ‘strenuous life’ was his acceptance of eugenics— particularly the fear that the relative infertility of middle-class families threatened to reduce America to a nation of drunkards and imbeciles (Merkle 1980: 203–4, n. 58; cf. Bedeian and Taylor 2009). As a result the Gilbreths decided that they would do their bit for the racial good by having as many children as they could: the Gilbreths had twelve children, Lillian only having a hysterectomy for health reasons shortly before Frank’s death in 1924. The yet-to-be Dr Gilbreth brought her new focus on psychology to the consulting contract at New England Butt. It was largely Lillian’s reputation as a homemaker that would lead to her later fame, but Frank agreed that there were better ways to go about introducing scientific management to a machine plant other than in the manner proposed by Taylor and his most orthodox followers. The Gilbreths were advocates of industrial betterment, including improving ventilation and lighting, and providing rest rooms and reading materials for workers. They also used Lillian’s understanding of psychology to promote acceptance of their industrial reforms, beginning, for example, with a motion study of the Butt Company offices rather than with the shop floor. Frank also engaged New England Butt staff in trying to come up with more efficient ways to do their jobs, using their motion-study films to help educate workers in the new methods devised. As such, the Gilbreths were pioneers in drawing on the findings of psychology to help manage change, discovering that involving staff in developing new processes could help implement the uptake of new practices. Indeed Lancaster (2004: 156–7) even credits Lillian Gilbreth with discovering the Hawthorne Effect. Taylor’s other disciples, Carl Barth and Hathaway, were not impressed by the wilful management innovations of the Gilbreths, however, and Taylor also let his displeasure with what the Gilbreths were trying to do at the Butt Company be known. The hucksterism of Frank Gilbreth and his unorthodox management methods led to the development of a rift between the Gilbreths and Taylor’s closest followers (Nadworthy 1957). Although the Gilbreths tried to effect a reconciliation later with Taylor, they increasingly came to regard him as a prima donna, and saw themselves (along with their good friend Henry Gantt) as the ‘good exception’ to the condescendingly anti-union and patronizing Taylor, Hathaway, and Barth (Lancaster 2004: 143–51). Taylor and the Norwegian Barth were both widely known as tetchy and gruff characters, and Taylor’s longstanding antipathy to organized labour seemed increasingly only to be matched by his constant public flagellation of what he saw as debased forms of scientific management. Taylor’s ghost writer Morris Cook would delve further into attempting to reconcile

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workplace democracy with Taylorism as the Taylor Society began to investigate a more collaborative approach to organized labour in the 1920s (Trobley 1954; Nyland 1998). But another bout of antagonism would soon break out between the Gilbreths and the other Taylorists that would never be resolved. Hathaway seemed especially disdainful of the Gilbreths’ work at the Hermann-Aukam handkerchief company in 1914, a criticism which would lead to an accusation by Frank Gilbreth that Hathaway and Barth were wedded to time study mainly because of their interest in selling stopwatches (Price 1992). The Gilbreths went on to develop their motion study techniques in the group of essays published as Applied Motion Study in 1917 as well as in their pioneering Fatigue Study (1916), and would continue to dismiss time study publicly as a substandard practice throughout the 1920s (Gilbreth and Gilbreth 1920b; Gilbreth 1928a). But their movement into fields that seemed to many at the time to transcend classic Taylorism had already begun while they were completing their first management-consulting contract at New England Butt. Part of the reason why Frank Gilbreth subsequently became interested in contracting outside the US seems to have been the blackening of his name by Taylor’s more orthodox followers. The implementation of Taylorist techniques had originally been restricted largely only to firms in New England, and although figures such as chemistry professor Henri Le Chatelier supported scientific management in France (Letté 2001), Frank Gilbreth proved particularly important in terms of the introduction of Taylorism to Central Europe. Gilbreth’s work at the gas- and electric-light manufacturers Auergesellschaft in Berlin and microscope- and camera-makers Carl Zeiss in Jena not only put him into contact with budding German Taylorists, however, but also introduced him to an understanding of issues which arose with the growing number of incapacitated veterans that were a particularly challenging and very public social feature after the First World War. A large number of wounded and permanently disabled veterans became a fact of everyday life in all Western countries after the war. The Gilbreths’ response was their 1920 collection of papers Motion Study for the Handicapped and the development of a growing desire to see motion study employed in hospitals (Gilbreth 1914; Gotscher 1992; Baumgart and Neuhauser 2009). The Gilbreths’ involvement with the disabled would continue for the rest of both of their respective lives. Frank’s frustrations with surgeons who would not let him film them, however, led to perhaps the crassest of all his plans and actions when he organized for his children to have a mass tonsillectomy which he had filmed in order to further his work in surgery (Lancaster 2004: 168–70). The German Taylorist Irene Witte, whom Gilbreth met in Berlin (and who would act as the Gilbreths’ translator in Germany), became (with Le Chatelier) one of the few international members of the Taylor Society (Pokorny 2003). Lillian Gilbreth also set up a private scientific management training school whose students were to include Yoichi Ueno, the main figure involved in introducing scientific management to Japan (Tsutsui 1998, 2001). Frank Gilbreth’s European contacts would also see him lead the efforts to host the first international conference on scientific management in Prague in 1924, while Ueno would host Lillian in Tokyo in 1930 during the first International Engineering Congress to be held in Asia. Frank’s death in 1924 just weeks before the Prague conference

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was due to begin saw Lillian travel there in his stead, but this time her involvement served more to celebrate her late husband’s work than it was to hustle for more clientele. Much of the work of the Gilbreths has a hucksterist or evangelical quality to it. Lillian Gilbreth’s Psychology of Management, for instance, has very little to say about psychology per se, but rather more about how wonderful, progressive, and imperative the adoption of Taylorism was. Every chapter compares traditional approaches to management with that which obtains under the Taylor system, with a few psychological insights thrown in occasionally for good cause. The book (which like Fatigue Study is written as a formal argument) spends at least as much time citing Taylor or Frank Gilbreth as it does key works of psychology. Indeed, it even cites Harvard’s Hugo Münsterberg several times, which rather puts the lie to claims that the serialization of the Psychology of Management in Industrial Engineering and The Engineering Digest in 1912–13 before its monographic publication means that it precedes Münsterberg’s 1913 publication on Psychology and Industrial Efficiency (which was a revised English edition of his Psychologie und Wirtschaftsleben from 1912). Münsterberg was clearly involved in industrial psychology well before this time (Landy 1992). Indeed Lillian Gilbreth’s claim that the focus of (behavioural) psychology on individuals validated Taylor’s focus on individual incentives seems rather less well founded than the behavouralist tradition she ascribed to would seem necessarily to require, while her connection of psychological experiment and observation with the methods of scientific management seems rather self-serving—more a criticism of time study than a validation of Taylor’s other claims. Many of the psychological insights of her Psychology and Management focus on habit formation and how best to train workers in the new methods brought to the workplace by industrial consultants (i.e. the book is largely concerned with educational psychology). And despite their later claim that the Gilbreths represented a ‘good exception’, there is a decided lack of recognition of the merits of trade unions or industrial democracy in her 1914 work. Perhaps the most original of the Gilbreths’ books, though, remains 1916’s Fatigue Study. Here the Benthamite notion of ‘happiness moments’ is linked into an argument for industrial betterment that revolves around the need to reduce injuries and the other ill effects of fatigue. What would now be considered genuflections to occupational health and safety are woven into a (sometimes tendentious) argument that fatigue was one of the great ills of contemporary industrial life, causing both a greater number of mistakes by workers to occur as well as adversely affecting their general (moral) character. Ergonomic chairs are advocated in Fatigue Study as are designated rest breaks (e.g. for morning and afternoon tea), along with the notion that industrial betterment through, for example, better ventilation or through well-planned fire evacuation procedures, makes better workers and hence leads to greater profits. The Gilbreths’ support for uniforms (to replace fatigue-inducing Victorian-style clothes) and calls for a consumer boycott of firms that did not allow their workers to rest properly seem to place the Gilbreths at both ends of the reformist social spectrum. But Fatigue Study remains their most adventurous and novel book, drawing as it does most clearly on the application of motion study and psychology to the many problems of early-twentieth-century industrial engineering.

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After Frank’s death in 1924, Lillian Gilbreth would continue their work to promote the gospel of efficiency in an increasing number of walks of American life. Her contracts as the roaring twenties waned seemed largely to become restricted to offers from other women in industry, however, and her role as a mother of eleven as well as an industrial engineer promoted in the popular press by her many admirers seemed evermore to restrict her ability to make a difference in the masculine world (Graham 1998, 1999; Miller and Lemons 1998). Lillian moved away increasingly from management proper and stopped producing innovative theory. Her Quest for the One Best Way from 1925 was originally penned as a gift for her husband, her works on home economics (e.g. 1927’s The Homemaker and her Job) a result of her increasing identification in the public mind with traditional women’s roles (an identification she herself encouraged; see Gilbreth 1928b). The model kitchens she designed in the 1930s even seemed to represent a repudiation of Frank Gilbreth’s tenet (which Lillian was still promoting at the time) that managers could only succeed if they had a thorough grounding in the industry in which they worked, as Lillian had always hated cooking. Her raising of eleven children (a twelfth died as an infant) is somewhat easier to understand when taken in light of the scale of her household help, which by 1914 even included two secretaries. She did finally receive her doctorate in 1915 from Brown University after completing a new dissertation (Gilbreth 1915)—on reducing waste in teaching (e.g. by having students dispense books to other pupils, rather than the teacher)—an achievement that (in a long line of such accomplishments) made her the first American (male or female) to be awarded a doctoral qualification in industrial psychology. But much of Lillian Gilbreth’s most influential work would come to lie outside business management after the death of her husband Frank in 1924. Some of her contracts have produced some interest among management historians. Her contract performing market research on the use of sanitary napkins or tampons for Johnson & Johnson, and in reforming both clerical and sales work at Macy’s Department Store in New York in the 1920s brought new insights and methods to bear, but not in terms of publications (Bullough 1985; Graham 2000). Lillian Gilbreth’s involvement with women’s betterment groups saw her hired by Herbert Hoover in 1932 to head the women’s section of his ill-fated President’s Emergency Committee for Employment (1930–31), a new path in her career which would see Lillian involved in pioneering (although ultimately unproductive) studies of why American women were lower paid, and in attempts to lessen discrimination against women and older workers in hiring and firing during the Depression (Lancaster 2004: 273–91). Her reputation was further enhanced after the publication of two of her children’s childhood memoires as Cheaper by the Dozen (1948) and its rather-less successful sequel Belles on their Toes (1950). Although Cheaper by the Dozen (a reference to a quip of Frank’s about why he and his wife had had twelve children) made Frank and Lillian seem rather comical, it saw the two American management pioneers immortalized in not one, but three films (not to mention a musical)—although the recent remakes starring Steve Martin of the 1958 film version of Cheaper by the Dozen are only very broadly based on (one might say only inspired by) the original book (Lang 1950; Rogers, Bucci, and Sergel 1959; Lewy 2003;

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Shankman 2005). Lillian Gilbreth kept up her consulting work after World War II, though. She had taken up a full professorship at Purdue University in 1935 (which also hired, in an attempt to feminize the faculty, aviatrix Amelia Earhart at the same time) until her mandatory retirement at age 70. Gilbreth kept working in various roles—from involvement with the Girl Scouts of America to further work with handicapped persons (cf. Yost and Gilbreth 1944)—until her second retirement upon her ninetieth birthday in 1968. Her publications from this time range from continued advocations of more understanding of psychology by managers (Gilbreth and Cook 1949) to renewed promotions of the many efficiencies that could still be made in modern housekeeping (Gilbreth, Thomas, and Clymer 1959). Regularly attending thirty or more conferences each year and undertaking world-wide speaking tours well into her eighties, Gilbreth died a legend of American management in 1972, a grandmother to both modern industrial psychology and work study. Lillian Gilbreth was a pioneer whose work in management was largely enabled by her husband. A life-long Republican, she makes a strange candidate as a feminist. The subject of three doctoral dissertations (only one has been written on Frank Gilbreth), and even some attempts at post-modern inquiry, Gilbreth was adamant that if she deserved praise, it was largely because of the pioneering work and support of her husband (Price 1987; Graham 1992, 1994, 1997; Lancaster 1998; Englander 2000). The biography of her written by her friend Edna Yost in 1949 and her own autobiography (written, ever so properly, in the third person) which did not appear in print until as late as 1990 suggest that her reinterpretation by many subsequent authors as greater intellectually than her husband confuses her level of education with the nature of her contribution. Although the author is literally (as well as literarily) dead (cf. Barthes 1967), it seems a strange kind of wisdom to suggest that she should not be taken at her word. Lillian was certainly a remarkable woman who trail-blazed possibilities which long remained closed to her many successors (often even well after her death), and was widely hailed during her lifetime for her pioneering work as a humanitarian as well as an industrial engineer. But her contributions to management theory were mostly achieved as a demure, wifely, if not inconsiderable foil to her husband’s intellectual and commercial audacity. Inundated by accolades later in her lifetime—from honorary doctorates to industry awards—her status as a feminist is unorthodox and marginal. It is quite clear that she saw herself largely as a promoter and continuer of her husband Frank’s work, no matter what later admirers may have made of her. The Gilbreths’ contribution to work study continued on well into the 1930s and after the Second World War, works like Ralph Barnes’s Motion and Time Study (a reworking of his 1933 Cornell dissertation on micro-motion study) going through seven editions between 1937 and 1980, and Benjamin Niebel’s similar Motion and Time Study passing through as many as eight from 1955–88. At a centennial celebration of the life of Frank Gilbreth organized by the American Society of Mechanical Engineers in 1968, motion study was even credited as essential to the US space programme while oddities such as Gilbrethian Therbligs still appear in works on industrial engineering (even as ‘thought therbligs’) today (cf. Ryker 1969; Aft 2000: 109–17; Lehto and Buck 2008: 248–49).

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Indeed one recent study of the legacy of the Gilbreths on contemporary process management has even suggested that their seminal work in the field—and particularly the emphasis on psychology stressed by Lillian—still holds lessons for quality systems which obtain today (Mousa and Lemak 2009). A collection of their films made in 1944 under the sponsorship of the Chicago branch of the Society for the Advancement of Management (as the Taylor Society had been renamed in 1936) is now available on the Internet (Perkins, Gilbreth, and Barnes 1944), and (time and) motion study software can be purchased today, advertisers promoting its suitability for use both in industrial management and in sport science. Many of the psychological aspects of the work of the Gilbreths were to be developed further (and often in more or less ignorance of their contributions) in the wake of the emergence of the human relations school of Kurt Lewin and Elton Mayo. Indeed according to some schools of thought, personnel management in its psychologically influenced form represents a fundamental, indeed paradigmatic (in the sense of Kuhn 1962) break with scientific management. From this perspective the Gilbreths can be seen (like Mary Follett) to represent a bridge between (orthodox) Taylorism and the human relations movement that was to dominate much American academic management discourse after the Second World War (cf. Price 1987: 5–6; Wren and Bedeian 2009: 331). Above all, though, the work of the Gilbreths represents a very modernist form of rationalization, of the measuring, categorization, recording, and governing of work, work methods, employees, and processes. If Michel Foucault (cf. esp. Foucault 1991) was right to claim that the essential feature of modernity is an increasing rise in social governance through the relentless expansion of knowledge, then the motion studies and uses of psychology stressed by the Gilbreths would seem to represent one of the most pronounced forms of governance of production in the history of management thought (cf. Price 1987: 12). Taylor’s mental revolution entailed recourse to a ‘science’ of management as the ultimate arbiter of work processes, of deciding who would direct production and how it would be performed. The committing of processes (and indeed the governance of bodies) to writing and film would be Taylorized even more completely under Frank Gilbreth’s motion study, while workers would be enrolled more fully into the new labour process by the equally coercive and ideologized Taylorization of their minds in Lillian Gilbreth’s much more obviously teacherly psychology of management.

Bibliographical note Spriegel and Myers (1953) collects their key works. A somewhat odd attempt at a bibliography of writings by and on the Gilbreths is available in Cowan (2003); Price (1987) provides a fuller survey to 1987, supplemented by Lancaster (2004). Their unpublished papers are held in the Frank and Lillian Gilbreth Library of Management in the Archives and Special Collections of Purdue University.

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References Aft, L. S. (2000). Work Measurement and Methods Improvement (Wiley Series in Engineering Design and Automation). New York: Wiley. Barnes, R. M. (1933). ‘Practical and Theorical Aspects of Micromotion Study’. Doctoral dissertation, Cornell University. —— (1937). Motion and Time Study. New York: Wiley (7th ed., 1980). Barthes, R. (1967). ‘The Death of the Author’. Aspen, 5–6: n.p. Reprinted in R. Barthes (1977). Image, Music, Text. ed. S. Heath. London: Fontana. Baumgart, A., and D. Neuhauser. (2009). ‘Frank and Lillian Gilbreth: Scientific Management in the Operating Room’. Quality and Safety in Health Care, 18/5: 413–15. Bedeian, A. G. and S. G. Taylor. (2009). ‘The Übermensch Meets the “One Best Way”: Barbara S. Burks, the Gilbreth Family, and the Eugenics Movement’. Journal of Management History, 15/2: 216–21. Brown, E. H. (2005). The Corporate Eye: Photography and the Rationalization of American Commercial Culture, 1884–1929 (Studies in Industry and Society). Baltimore: Johns Hopkins University Press. Bullough, V. (1985). ‘Merchandising the Sanitary Napkin: Lillian Gilbreth’s 1927 Survey’. Signs, 10/3: 615–27. Reprinted in Wood and Wood (2003: I.258–69). Cowan, R. A. (2003). ‘Annotated Bibliography: Frank Bunker Gilbreth (1868–1924) and Lillian Evelyn Moller Gilbreth (1878–1972)’. In M. C. Wood and J. C. Wood (eds.), Frank and Lillian Gilbreth: Critical Evaluations in Business and Management (Critical Evaluations in Business and Management). 2 vols. London: Routledge, I.9–45. Dean, C. C. (1997). ‘Primer of Scientific Management by Frank B. Gilbreth: A Response to Publication of Taylor’s Principles in The American Magazine’. Journal of Management History, 3/1: 31–41. Reprinted in Wood and Wood (2003: I.106–20). Deutscher, I. (1952). ‘ “Socialist Competition” ’. Foreign Affairs, 30/3: 376–90. Englander, S. L. (2000). ‘Rational Womanhood: Lillian Gilbreth and the Use of Psychology in Scientific Management, 1914–1935’. Doctoral dissertation, University of California, Los Angeles. Fairchild, M. (1930). ‘Skill and Specialization: A Study in the Metal Trades. Part I. The Nature and Measurement of Skill’. Personnel Journal 9/1: 28–71. Reprinted in Wood and Wood (2003: II.54–101). Foucault, M. (1991). ‘Governmentality’. In G. Burchell, C. Gordon, and P. Miller (eds.), The Foucault Effect: Studies in Governmentality. Chicago: University of Chicago Press, 87–104. Gilbreth, F. B. (1908a). Field System. New York: M.C. Clark. Reprinted in Spriegel and Myers (1953: 1–18). —— (1908b). Concrete System. New York: Engineering News. Reprinted in Spriegel and Myers (1953: 19–34). —— (1909). Bricklaying System. New York: M.C. Clarke. Reprinted in Spriegel and Myers (1953: 35–66). —— (1911). Motion Study: A Method for Increasing the Efficiency of the Workman. New York: Van Nostrand. Reprinted in Spriegel and Myers (1953: 139–206). —— (1912). Primer of Scientific Management. New York: Van Nostrand. Reprinted in Spriegel and Myers (1953). —— (1914). ‘Scientific Management in the Hospital’. Modern Hospital 3: 321–4.

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Gilbreth, F. B. and L. M. Gilbreth (1916). Fatigue Study: The Elimination of Humanity’s Greatest Unnecessary Waste; A First Step in Motion Study. New York: Sturgis & Walton. Reprinted in Spriegel and Myers (1953: 303–40). —— (1917). Applied Motion Study: A Collection of Papers on the Efficient Method to Industrial Preparedness. New York: Sturgis & Walton. Reprinted in Spriegel and Myers (1953: 207–74). —— (1920a). Motion Study for the Handicapped. New York: Macmillan. Reprinted in Spriegel and Myers (1953: 275–302). —— (1920b). ‘An Indictment of Stop-watch Time Study’. Bulletin of the Taylor Society 6(3): 99–108. Gilbreth, F. B., Jr and E. G. Carey (1948). Cheaper by the Dozen. New York: Crowell. —— —— (1950). Belles on their Toes. New York: Crowell. Gilbreth, L. M. (1914). The Psychology of Management: The Function of the Mind in Determining, Teaching and Installing Methods of Least Waste. New York: Sturgis & Walton. Reprinted in Spriegel and Myers (1953: 341–500). —— (1915). ‘Some Aspects of Eliminating Waste in Teaching’. Doctoral dissertation, Brown University. —— (1925). The Quest of the One Best Way: A Sketch of the Life of Frank Bunker Gilbreth. Chicago: Society of Industrial Engineers. —— (1927). The Homemaker and Her Job. New York: Appleton. —— (1928a). ‘The Relations of Time Study to Motion Study’. Bulletin of the Taylor Society 13: 126–8. —— (1928b). Living With Our Children. New York: W.W. Norton. —— (1998). As I Remember: An Autobiography. Norcross, GA: Engineering & Management Press. —— and A. R. Cook. (1947). The Foreman in Manpower Management (McGraw-Hill Industrial Organization and Management Series). New York: McGraw-Hill. —— O. M. Thomas, and E. L. Clymer. (1959). Management in the Home: Happier Living through Saving Time and Energy. New York: Dodd, Mead. Gotcher, J. M. (1992). ‘Assisting the Handicapped: The Pioneering Efforts of Frank and Lillian Gilbreth’. Journal of Management, 18/1: 5–13. Reprinted in Wood and Wood (2003: II.393–402). Graham, L. D. (1992). ‘Lillian Moller Gilbreth’s Extension of Scientific Management into Women’s Work, 1924–1935’. Doctoral dissertation, University of Illinois at UrbanaChampaign. —— (1994). ‘Critical Biography Without Subjects and Objects: An Encounter with Dr Lillian Moller Gilbreth’. Sociological Quarterly, 35/4: 621–43. Reprinted in Wood and Wood (2003: I.141–68). —— (1997). ‘Beyond Manipulation: Lillian Gilbreth’s Industrial Psychology and the Governmentality of Women Consumers’. Sociological Quarterly, 38/4: 539–65. —— (1998). Managing on Her Own: Dr. Lillian Gilbreth and Women’s Work in the Interwar Era. Norcross, GA: Engineering & Management Press. —— (1999). ‘Domesticating Efficiency: Lillian Gilbreth’s Scientific Management of Homemakers, 1924–1930’. Signs, 24/3: 633–75. —— (2000). ‘Lillian Gilbreth and the Mental Revolution at Macy’s, 1925–1928’. Journal of Management History, 6/7: 285–305. Reprinted in Wood and Wood (2003: I.270–91). Hau, M. (2008). ‘Sports in the Human Economy: “Leibesübungen”, Medicine, Psychology, and Performance Enhancement in the Weimar Republic’. Central European History, 41/3: 381–412.

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Kaiper, B. (1981). ‘The Cyclograph and Work Motion Model’. In L. Thomas and P. D’Agostino (eds.), Still Photography: The Problematic Model. San Francisco, Calif.: NFS Press, 57–63. Reprinted in Wood and Wood (2003: I.318–31). Kent, R. T. (1932). ‘The Taylor Society Twenty Years Ago’. Bulletin of the Taylor Society, 17: 31–41. Kuhn, T. S. (1962). The Structure of Scientific Revolutions (International Encyclopedia of Unified Science, 2/2). Chicago: University of Chicago Press. Lalvani, S. (1996). Photography, Vision, and the Production of Modern Bodies (SUNY Series, Interruptions—Border Testimony(ies) and Critical Discourse/s). Albany, NY: State University of New York Press. Lancaster, J. (1998). ‘ “Wasn’t She the Mother in Cheaper by the Dozen?” A Life of Lillian Moller Gilbreth, 1878–1972’. Doctoral dissertation, Brown University. —— (2004). Making Time: Lillian Moller Gilbreth—A Life Beyond ‘Cheaper by the Dozen’. Boston: Northeastern University Press. Landy, F. J. (1992). ‘Hugo Münsterberg: Victim or Visionary’. Journal of Applied Psychology, 77: 787–802. Lang, W. (dir.) (1950). Cheaper by the Dozen. United States: Twentieth Century Fox. Lehto, M. R. and J. R. Buck (2008). Introduction to Human Factors and Ergonomics for Engineers (Human Factors and Ergonomics). New York: Lawrence Erlbaum. Letté, M. (2001). Science et industrie: les débuts du taylorisme en France (CTHS format, 46). Paris: Comité des travaux historiques et scientifiques. Lewy, S. (dir.) (2003). Cheaper by the Dozen. United States: Twentieth Century Fox. Lindstrom, R. (2000). ‘ “They All Believe They Are Undiscovered Mary Pickfords”: Workers, Photography, and Scientific Management’. Technology and Culture, 41/4: 725–51. Reprinted in Wood and Wood (2003: I.332–56). Mandel, M. (1989). Making Good Time: Scientific Management, the Gilbreths’ Photography and Motion Futurism. Santa Cruz, Calif.: M. Mandel. Merkle, J. A. (1980). Management and Ideology: The Legacy of the International Scientific Management Movement. University of California Press: Berkeley. Miller, T. R. and M. A. Lemons (1998). ‘Breaking the Glass Ceiling: Lessons from a Management Pioneer’. SAM Advanced Management Journal, 63/1: 4–9. Moller, L. E. (1902). ‘Ben Jonson’s Comedy of Bartholomew Fair; A Study’. Thesis (Master of Letters), University of California. Morley, J. (1990). ‘Frank Bunker Gilbreth’s Concrete System’. Concrete International, November 57–62. Reprinted in Wood and Wood (2003: I.94–105). Mousa, F.-T. and D. J. Lemak. (2009). ‘The Gilbreths’ Quality System Stands the Test of Time’. Journal of Management History, 15/2: 198–215. Münsterberg, H. (1912). Psychologie und Wirtschaftsleben: Ein Beitrag zur angewandten Experimental-Psychologie. Leipzig: Barth. —— (1913). Psychology and Industrial Efficiency. Boston: Mifflin. Nadworthy, M. J. (1957). ‘Frederick Taylor and Frank Gilbreth: Competition in Scientific Management’. Business History Review, 31/1: 23–34. Reprinted in Wood and Wood (2003: II.445–53). Niebel, B. W. (1955). Motion and Time Study: An Introduction to Methods, Time Study, and Wage Payment. Homewood, Ill.: Irwin (8th ed., 1988). Nyland, C. (1998). ‘Taylorism and the Mutual Gains Strategy’. Industrial Relations, 37/4: 519–42. Oakes, L. S., and P. J. Miranti. (1996). ‘Louis D. Brandeis and Standard Cost Accounting: A Study of the Construction of Historical Agency’. Accounting, Organizations and Society, 21/6: 569–86.

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Perkins, J. S., L. M. Gilbreth, and R. M. Barnes (1944). The Original Films of Frank B. Gilbreth: The Quest for the One Best Way. Chicago: Society for the Advancement of Management. Released as a film in 1968 (Washington, DC: Perkins Productions), on VHS (Savannah, GA: Perkins Associates) in 1993, and in DVD format in 2006 (Asheville, N.C.: Quality Information Publishers). Pokorny, R. (2003). ‘Die Rationalisierungexpertin Irene M. Witte (1894–1976): Biografie einer Granzgängerin’. Doctoral dissertation, Technical University of Berlin. Price, B. (1987). ‘One Best Way: Frank and Lillian Gilbreth’s Transformation of Scientific Management, 1885–1940’. Doctoral dissertation, Purdue University. —— (1989). ‘Frank and Lillian Gilbreth and the Manufacture and Marketing of Motion Study, 1908–1924’. Business and Economic History, 18: 88–98. —— (1992). ‘Frank and Lillian Gilbreth and the Motion Study Controversy, 1907–1930’. In D. Nelson (ed.), A Mental Revolution: Scientific Management since Taylor (Historical Perspectives on Business Enterprise Series). Columbus: Ohio State University Press, 58–76. Reprinted in Wood and Wood (2003: II.455–70). Rogers, D., M. Bucci, and C. Sergel (1959). Cheaper by the Dozen: A Musical Comedy in Two Acts. Chicago: Dramatic Publishing Company. Ryker, N. J. (1969). ‘Man-Equipment Task System for Apollo’. In American Society of Mechanical Engineers, Management Division (ed.), The Frank Gilbreth Centennial. New York: American Society of Mechanical Engineers, 4–36. Reprinted in Wood and Wood (2003: II.347–78). Sammond, N. (2006). ‘Picture This: Lillian Gilbreth’s Industrial Cinema for the Home’. Camera Obscura 63.21/3: 102–33. Shankman, A. (dir.) (2005). Cheaper by the Dozen 2. United States: Twentieth Century Fox. Spriegel, W. R. and C. E. Myers (eds.) (1953). The Writings of the Gilbreths (The Irwin Series in Industrial Management). Homewood, Ill.: Irwin. Taksa, L. (1992). ‘Scientific Management: Technique or Cultural Ideology?’. Journal of Industrial Relations, 34/3: 365–95. Taylor, F. W. (1903). Shop Management: A Paper Read before the American Society of Mechanical Engineers. New York: American Society of Mechanical Engineers. —— (1911). The Principles of Scientific Management. New York: Harper & Bros. Trobley, K. E. (1954). The Life and Times of a Happy Liberal: A Biography of Morris Llewellyn Cooke, New York: Harpers. Tsutsui, W. M. (1998). Manufacturing Ideology: Scientific Management in Twentieth-Century Japan. Princeton, N.J.: Princeton University Press. —— (2001). ‘The Way of Efficiency: Ueno Yoichi and Scientific Management in TwentiethCentury Japan’. Modern Asian Studies, 35/2: 441–67. Wood, M. C. and J. C. Wood (eds.) (2003). Frank and Lillian Gilbreth: Critical Evaluations in Business and Management (Critical Evaluations in Business and Management). 2 vols. London: Routledge. Wren, D. A. and A. G. Bedeian (2009). The Evolution of Management Thought (6th ed.). Hoboken: Wiley. Yost, E. (1949). Frank and Lillian Gilbreth: Partners for Life. New Brunswick, N.J.: Rutgers University Press. Yost, E. and L. M. Gilbreth. (1944). Normal Lives for the Disabled. New York: Macmillan.

chapter 4

h en r i fayol j ean-l ouis p eaucelle and c ameron g uthrie

The life of Henri Fayol Henri Fayol1 was born on 29 July 1841, in Istanbul. His father worked as a foreman in a steel plant at La Voulte, a town 130 km south of Lyon. Henri was the first of three children. He was a good pupil in La Voulte, then later in Valence and Lyon. He studied to be a mining engineer at the École Nationale Supérieure des Mines de Saint Etienne where he specialized in mining, rather than metallurgy. After graduating in 1861 he remained loyal to his school, later hiring or seeking the counsel of alumni, such as Alexandre Pourcel who advised Fayol on metallurgical issues in 1892. He became a member of the school’s alumni board. Fayol spent his entire career in the same company. He married in 1875 and had three children: two girls and one boy. He died on 19 November 1925 in Paris. Fayol began working in central France in the Commentry coal mines as an intern in 1860. In 1865 he became director and by 1888 he was managing director of the Commentry-Fourchambault company. He was appointed to sell off the company which was losing money, but managed to trade it back into profit. He built its growth on a ‘scrap and build’ strategy, closing old and exhausted mines and acquiring or building new ones. He bought the Brassac coal mine in 1891 and the Decazeville mine and steel plant in 1892. The company became Commentry-Fourchambault et Decazeville with about 10,000 workers in 1914. Fayol was a good manager, both for the shareholders and for the workers, each year visiting the plants and meeting the managers and a number of workers. During his directorship he built an iron mine in the north-east of France near Metz at Joudreville and a steel plant in the north of France near Lens at Pont-à-Vendin. Both were destroyed in 1914 during the German invasion. Fayol retired in 1918.

1

The name Fayol is derived from the Latin word ‘fagus’, meaning beech tree.

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Fayol had the spirit of an experimental scientist. He developed experiments which led to a theory explaining the formation of coal layers in lakes. This theory is today called the ‘Gilbert deltas’, named after the American geologist who formulated it a little later. Fayol sent the fossils he discovered in his mine to the Museum of Paris. He also supported Charles Edouard Guillaume’s research into Invar, a steel alloy with 36 per cent nickel content and a very low coefficient of thermal expansion. Fayol published twelve articles from his scientific and technical research into coal mining. He was an expert in coal mine fires, and invented techniques to both prevent and extinguish them. These techniques were used in all French mines and on colliers shipping coal from New South Wales, Australia. After the success of his book on the science of management in 1916 (Fayol 1916) he evangelized his theory until his death. He gave numerous conferences and pressed for the creation of management training for both the public and private sectors. He sat on two government commissions investigating the French national postal, telephone and telegraph service (PTT) and later the state-owned cigarette and cigar manufacturers (‘Manufacture des tabacs’). These two state monopolies were considered for privatization, both for financial reasons that Fayol chose to ignore and for sound management reasons that he highlighted. He drew a number of conclusions about the management of public sector organizations, although they were never adopted in France.

Henri Fayol’s thought: Fayolism Fayol first spoke publicly of his theory of management in 1900 (Fayol 1900) and later in 1908 (Fayol 1908), based on his experience managing a successful business. His speeches, however, went relatively unheard. In 1916 he published his major work Administration Industrielle et Générale which was widely acclaimed both in France and abroad. It was re-edited several times in French and translated into thirteen languages, including English as Industrial and General Administration in 1930 (Fayol 1930) and as General and Industrial Management in 1949 (Fayol 1949). This success was somewhat ambiguous, however. Fayol’s theory of management applied to both private companies (‘industrial’) and public bodies such as the Army (‘general’). During the First World War, many believed that war operations were poorly run. Government censure did not allow such opinions to be expressed. Fayol’s theoretical rules of management appeared to point out the errors committed by Army commanders. Before the end of the war, Fayol arranged for two publications written by wounded officers that criticized the way the war was conducted to be published. Fayol’s 1916 work is widely considered his unique written theoretical contribution, yet during his lifetime he wrote fifteen works on management. He also left many handwritten manuscripts which were given by his family to the Fonds Fayol at the Fondation des Sciences Politiques in Paris. We will use these multiple sources to present Fayol’s thought and to explain how it evolved.

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Administrative abilities When Fayol was hired by the Commentry coal mine, the director was Stéphane Mony, a former Saint-Simonian. Henri de Saint-Simon (1760–1825)2 strongly influenced French engineers in the nineteenth century. The future, he argued, belonged to the ‘industrial class’ made up of plant owners, managers, and workers. The ‘industrial class’ had proven that it had a special ‘administrative ability’, which can be roughly understood as rational collective economic behaviour. Fayol amplified this idea in the first two chapters of his book. Fayol identified six abilities he considered essential in any firm: administrative abilities, technical abilities, marketing abilities, financial abilities, safety abilities, and accounting abilities. Each person in an enterprise has these abilities in different quantities. Saint-Simon believed that the worker, for example, has few administrative abilities (5 per cent), great technical abilities (85 per cent), some safety abilities (5 per cent), and weak accounting abilities (5 per cent). According to Saint Simon, all members of the ‘industrial class’ have ‘administrative abilities’. The administrative ability level of managers is high, and of workers is low. No one type of activity is performed exclusively by any one level in a company. Accountants, for example, are not the only ones to work on the accounts and salesmen do not only work on marketing. All employees take part in administrative activities. Abilities are quantified according to the amount of work time spent using each ability. In 1900, Fayol explained Of 100 hours spent working in a large industrial firm, a laborer spends few on administrative tasks: information passed on to the foreman, discussions over salaries, the timing and organization of work activities, time spent in relief fund and union meetings, etc. […] The time spent on administrative activities increases with an employee’s level in the industrial hierarchy. (Fayol 1901: 762)

Fayol’s notion of ‘ability’ underlies a typology of use of time on the different activities within a company as shown in Table 4.1. Based on Fayol’s experience, a company’s performance deteriorates as people’s use of time moves away from such typical values. Fayol’s word ‘administration’ comes from the Saint-Simonian concept of ‘administrative abilities’, and in particular from the adjective ‘administrative’. Fayol employed the nounal form in the same way we may derive the noun ‘rationality’ from ‘rational’. However, in French the word ‘administration’ has two meanings. First, it refers to the public service, a ministry for example such as the ‘Finance Ministry’ (‘l’administration des finances’). Second, it is used in the private sphere to clearly identify what is being 2 Henri de Saint-Simon helped the Thirteen Colonies in the American Revolution along with La Fayette and Rochambeau in 1777. He served as captain of artillery at Yorktown in 1781, and was imprisoned by the British for one year until the treaty of Paris in 1783. He was the first to come up with the idea of a canal between the Atlantic and Pacific Oceans. At the end of his military career he worked as a speculator in Paris, went bankrupt, and became a Utopian.

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Table 4.1: The six abilities for the eight standard levels in a company (Fayol 1916, 1925: 20 bis; 1949: 8; 1999: 123)

Shareholder Board Managing director and executive management Technical department manager Department manager Workshop manager Foreman Worker

Administrative abilities

Technical abilities

Marketing abilities

Financial abilities

Safety abilities

Accounting abilities

15% 60% 40%

5% 15%

5% 15%

80% 15% 10%

5% 10%

5% 10% 10%

35%

30%

10%

10%

5%

10%

30%

30%

5%

5%

10%

20%

25%

45%

5%

5%

10%

10%

15% 5%

60% 85%

5%

10% 5%

10% 5%

managed: ‘managing a company’ (‘l’administration d’une entreprise’), ‘managing someone’s assets’ (‘l’administration des biens de quelqu’un’). The faculties of business in French state universities are called ‘Instituts d’Administration des Entreprises’ (IAE). Unlike the word ‘management’, the word ‘administration’ does not exist in French as Fayol used it, as it requires a complement to specify what is being administered. Fayol wanted to give new meaning to the word ‘administration’: one of a general science of all management activities. This meaning is awkward, even in French. It is contrary to its use in the military. Administrative activities are those that take place in the office, as opposed to those on the battlefield. Fayol was trying to define what was already understood by the word ‘command’. Military officers may have agreed with Fayol’s basic ideas, but they could not accept the words he used. In English, such a new meaning for the word ‘administration’ is unnecessary as the word ‘management’ already exists. Coubrough used the term ‘administration’ in his 1930 translation of Fayol’s work (Fayol 1930), whereas Constance Storrs more correctly used the word ‘management’ in 1949 (Fayol 1949). Reading the 1913 translation of Taylor’s book Shop Management, Fayol noted: Taylor writes about ‘management’ (‘direction’) without defining it. He no doubt means ‘administration’ and he insists on studying it as a science, just as I do. (Fonds Fayol, HF5 bis, file Taylor, underlined by Fayol).

For Fayol, ‘management’, ‘direction’, and ‘administration’ all mean the same thing. There is no cause for debate. The Académie Française officially adopted the word ‘management’ as part of the French language in the 1960s. We will hereupon use the term ‘management’ to translate Fayol’s use of the French word ‘administration’.

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The five ‘elements of management’ Fayol defined his concept of management with a list: To manage is to forecast and plan, to organize, to command, to co-ordinate and to verify. (Fayol 1916, 1925: 13; 1949: 6; 1999: 8)

This definition of management dates back to a handwritten note from 27 May 1911 (Fonds Fayol HF4 DR5). The first reference to planning was much earlier however, dating back to 1898. ‘Verifying’ was referred to in 1888 along with a description of the different functions in the Commentry coal mine. This definition of management is fundamental for Henri Fayol. His thought was abbreviated by the French acronym POCCC (‘Prévoir, Organiser, Commander, Coordonner et Contrôler’). Fayol’s definition of management gradates according to the temporal distance a management element lies from operations. ‘Planning’ is a long-term activity. ‘Organizing’ involves the setting up of productive capacity in the medium term. ‘Coordinating’ harmonizes all the productive resources in the short term. These are three preparatory steps before action. ‘Commanding’ triggers productive operations, and ‘verifying’ takes place after an operation has occurred, as a form of management control. We have inverted the order of the third and fourth management elements to highlight this temporal progression. We suggest the following translation of Fayol’s definition: ‘To manage is to plan, to install the productive resources (to organize), to coordinate, to command, and to verify (to control)’. Fayol’s definitions for each of these management elements are presented below: • To plan is ‘to reckon and to prepare the future; to plan is to act ahead’; ‘to manage is to plan’ (‘gouverner c’est prévoir’) (Fayol 1916, 1925: 59; 1949: 43; 1999: 48). It is the modern concept of strategy. Fayol stressed the practice of forecasting and planning. Fayol had drawn up operating plans for the Commentry mine. He was told to increase production each year. When he declared that the mine’s reserves were running out, the company’s executive management disputed his claims. External experts, however, confirmed Fayol’s analysis. Fayol then planned how to extract all the remaining coal before closing the mine. Mining rights to new deposits were acquired and the company’s activity was transferred to the new mine. In 1914 he sold off the assets at the exhausted Commentry mine. • To install the productive resources (‘organiser’) is to ‘provide the company with all that it requires in order to operate: supplies, tooling, financing, personnel’ (Fayol 1916, 1925: 78; 1949: 53; 1999: 61). Fayol used the word ‘organizing’, quite a broad term but no other word adequately captures Fayol’s meaning. As a manager he mainly developed human resource management. He worked on the formal structuring of the firm, with its hierarchy and job descriptions, recruitment, and training. Supplies management would be the equivalent of today’s manufacturing resource planning. Tooling would be the same as technology intelligence and

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jean-louis peaucelle and cameron guthrie manufacturing process management. Fayol’s ideas for financing were the equivalent of today’s financial management. Fayol only detailed human resource management. • To coordinate (‘coordonner’) is ‘to harmonize a company’s different actions to correctly proportion things or acts, and to adapt the means to the goals’ (Fayol 1916, 1925: 149; 1949: 103; 1999: 115). The nature of the goals is of little importance. Fayol’s doctrine applies to not-for-profit and public sector organizations, as well as to private enterprise: He believed that ‘in a well co-ordinated company [. . .] each department walks in time with the others; the purchasing department knows what it must provide and when, and the production department knows what is expected of it; the maintenance department keeps the material and the equipment in working order; the finance department secures the necesssary capital; the security department protects assets and people (Fayol 1916, 1925: 149–50; 1949: 103–4; 1999: 115). Fayol was referring to the management of material flows, production scheduling and runs, cash management, inventory management, and so on. The daily management of operations was ‘constantly harmonzied with the circumstances’. • To command (‘commander’) (Fayol 1916, 1925: 140; 1949: 97; 1999: 108) is to lead operational activity. It is a leader’s main day-to-day role. The importance of this activity is lessened by the three previous preparatory management elements. It is nonetheless necessary to ‘get an activity underway’, and it is the leader’s role to trigger action. • To verify (‘contrôler’) is ‘to check that everything occurs in conformity with the defined plans, the established rules and the given orders, and the accepted principles’ (Fayol 1916, 1925: 155, 1949: 107, 1999: 119). We should note that the hierarchy already performs some verification.

These management elements occupy nearly 60 per cent of Fayol’s 1916 book. The emphasis is placed on the second element, ‘organizing’ (to install the productive resources).3 Fayol writes at length of human resource management as workers were a company’s main productive resource at the beginning of the twentieth century.

The management tools These five management elements are abstract. They are put into practice through management tools (‘outillage administratif ’). Fayol discovered this idea when he took over the Decazeville coal mines: When I took charge of turning around Decazeville, I did not count on my superior skills or those of my collaborators. I laid faith in my organizing and people leading abilities. I knew that my collaborators would give a great deal if I applied my rules and principles. Within a few years, the 3000 laborers at Decazeville, previously 3 Fayol (1916) wrote 47 pages on this second element, and only 14, 4, 7, and 3 pages on the first, third, fourth and fifth elements respectively.

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considered undisciplined and poorly skilled, showed sufficient talent to make these establishments (the mines and others) as profitable as the most successful. A remarkable achievement that the same men, in such a short space of time, could be the main actors of both decadence and renovation. (Fonds Fayol 1898, HF4 DR3)

Fayol spent twenty-five years looking for a word to describe these good management practices. He called them ‘principles, rules, procedures’ in 1898, ‘management machines’ and ‘set-up of the management apparatus’ (‘dispositions adoptées pour l’appareil administratif ’) in 1900, ‘management procedures’ (‘procédés administratifs’) in 1908, ‘management cogs’ (‘rouages administratifs’), ‘methods’, ‘procedures’, ‘instruments’ in 1916. These terms are repeated up until 1923 when Fayol definitively adopted the term ‘management tools’: Management tools: they are a collection of documents that provide the manager with information and help him make knowledgeable decisions in all situations. (Fayol, 1923: 315)

Fayol’s invention of the term ‘management tools’ was based on an engineering metaphor. These tools were of course already known by others prior to Fayol. A five-page document classifying the different ‘management operations’ by management element was found in Fayol’s archives. It is reproduced below. It is similar to the plan of Fayol’s 1916 book, although it often goes into greater detail. This document was written around 1920. It resembles an auditor’s questionnaire, used to measure the quality of a company’s management according to the use of management tools. In 1925, in his last article, Fayol called all of these items ‘management tools’ (Fayol 1925: 10). Management tools were Fayol’s last subject before his death. See Figure 4.1. These management tools are today well known. The meeting of department heads is a very simple yet effective coordination tool. Every week or every month the head of the company instructs participants according to the business plan. Each participant receives his orders and comments on their feasibility. He also notes the orders given to his colleagues. This facilitates horizontal coordination. The participants also report on the execution of previous instructions. In this meeting, a manager exercises command, coordination, and verification. Such meetings are neither unidirectional, nor a discussion between peers. The management tools are one of the fundaments of Fayol’s management theory: The features of good management are: a good leader, good headquarters staff, good management tools, (Fayol 1923: 315)

The manager’s qualities For Fayol, the directors, the managers, play critical roles in ensuring that a company functions correctly. A leader must possess strong qualities to remain at the summit of the organizational hierarchy. According to Fayol, these qualities are:

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I—MANAGEMENT OPERATIONS where the CONCEPT of PLANNING1 predominates BUSINESS INTELLIGENCE2— General documentation, perusal and dispatching of the reviews, transferring to departments of all relevant information, keeping manual records and documentation. Organization of documentation. INTERNAL DOCUMENTATION— Critical documents pertaining to management tools—general study, business plan,3 reports4 or accounts, minutes5 of meetings of department heads,6 organizational charts7 (see the corresponding item of the nomenclature). Graph of customer orders, stock, sales Cash forecasts, relationship between purchases and sales Record filing method Office tooling8

CORPORATE ACTION PLAN— a) ‘General study’ and long term plan Duration of the action plan, date created, contents, and procedure followed to construct the plan, priorities, topics, persons involved. Decision of the board, results. b) Annual plan. Weekly and daily MANUFACTURING or OPERATING PLAN Production forms, write-up guide, content, use. OPENING CREDIT FACILITIES for EXPENSES— (Procedure for new works projects, justifying committed expenses, credit duration, operating plan, taxonomy of key validation points, and verification of completed works). RULES FOLLOWED for PURCHASING and SALES— General rules for sales or purchasing contracts, terms, specifications.9 Provisional sales estimates, procedure, approval. LINKS with TECHNICAL LABORATORIES, SCIENTIFIC ASSOCIATIONS10 etc. CONTINUING EDUCATION DEPARTMENT— Organization, responsibilities, roles. II—MANAGEMENT OPERATIONS where the CONCEPT OF INSTALLING PRODUCTIVE RESOURCES11 predominates ORGANIZATIONAL CHARTS— Organizational charts for each plant and top management—date created, authoring body, controlling body. Verify organizational charts for unity of command, for the organization of deputies, for unoccupied positions, for the number of subordinates per manager, etc. ROLE of HEADQUARTERS STAFF and the TECHNICAL STUDIES and WORK PREPARATION DEPARTMENTS Managing director’s headquarters staff (and in some cases the local directors’ headquarters staff). Are these individuals different from those involved in day-to-day business activities? In this case, what is their role? Are they specialized? Measures taken to avoid them holding direct management responsibilities. In the workshops, work dispatch and work preparation.

figure 4.1 Continued

henri fayol RECRUITMENT— Hiring methods, required profile (physical, intellectual and ethical) Organization of the Recruitment Department APPRENTICESHIP—MANAGERS’ TRAINING— Pre apprenticeship—schools Apprentice training Training of managers and of office workers, support given to employees for continuing education and career advancement—Training programmes to prepare replacement people for management positions in the office, on worksites, in workshops or in other services. PROMOTION—STATUS OF THE EMPLOYEES—RETIRING INCAPABLES12 Selection method for personnel (test, grades) Personnel verifying (absenteeism, record keeping) Who recommends promotion?—Who gives an opinion?—Who decides? (According to the category of personnel) Personnel services—well being services, pensions Retiring incapable managers REMUNERATION— a) of employees and managers Bases for calculation of remuneration profit or results sharing b) of workers Kinds of usual wages13 (per day, per piece, via bonuses) profit sharing. c) Family allowances, fringe benefits. III—MANAGEMENT OPERATIONS where the CONCEPT of COMMAND14 predominates CORPORATE CHARTER— Are there several company heads15 or only one? His title, his powers. Relationship with the board or with the executive committee. Frequency of board or executive committee meetings. Employees who report directly to the board independent from the managing director. Stability. Appointment method of the company head. Does he have a contract? POWERS DELEGATED to various AGENTS to commit the company with third parties, and actual decision-making powers Actual powers of local directors: from a technical point of view,—sales, etc…— Do some local departments directly report to department heads at headquarters? Initiative and centralization MAIL and ORDER DISPATCH— Hierarchical order taking and method of transmission (respective roles of the head or heads, the management committee, the board) IV—MANAGEMENT OPERATIONS where the CONCEPT of COORDINATION predominates Meetings of department heads (in the plants and at central headquarters) Existing meetings Frequency Chairmanship Agenda setting Minutes and reports DOCUMENT DISPATCH16—USE of the BRIDGE17—OTHER MEASURES to avoid the WATERTIGHT BULKHEADS18—

figure 4.1 Continued

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jean-louis peaucelle and cameron guthrie DEPARTMENTS COMMON to several plants—For example: Sales department, if the sales department is not centralized at headquarters, how salesmen work with local directors (sales and purchases). Organization of studies. Is there a central studies office? If it exists, what is its role and relationship with the local departments which use it? Otherwise, how do the establishments undertake studies concerning several departments, or retooling studies concerning one department but beyond its usual means? Relationship between the user departments and the specialized departments COORDINATION between ESTABLISHMENTS—Director’s meetings. Shared and mutual documentation V—MANAGEMENT OPERATIONS where the CONCEPT of VERIFYING19 predominates ANNUAL REPORTS—MONTHLY—WEEKLY Contents—mandatory information provided Signing and approbation of the different reports (local manager’s comments concerning subordinate’s reports, etc.) Date dispatched to central headquarters—Reports submitted to the board. Use of accounting, statistics, and product cost control. INSPECTIONS—SPECIAL AUDITS20— Purchasing audits in the establishments21 Inventory audit in the establishments Productivity audit in the establishments Quality control of finished goods in the establishments Scrap control in the establishments Accounting audit (in the establishments and at headquarters) Visits to establishments, by the managing director, by department heads, by the headquarters staff INVENTORY— Continual inventory control by bookkeeping (frequency of updating: weekly, monthly etc.) Physical stocktaking (dates, methods) EXPENDITURES and PROFIT CONTROL— Cross-checking actual works expenditures with budget—Budget overruns Cross-checking actual results with budget (consolidated results and results for new plants). 1 ‘Prévoyance’. 2 ‘Documentation extérieure’ 3 ‘Programme d’action’. 4 ‘Comptes rendus’. 5 ‘Procès-verbaux’ 6 ‘Conférences des chefs de services’. 7 ‘Tableaux d’organisation’. 8 ‘Outillage bureaucratique’, ex. phone, typewriter. 9 ‘Cahier des charges’. 10 ‘Corps savants’. 11 ‘Organisation’. 12 ‘Elimination des incapables’. 13 Fayol followed the traditions for remuneration and

in particular for miner’s wages which were calculated according to

quantities extracted by the mining team. 14 ‘Commandement’. 15 ‘Grands chefs’. 16 ‘Transmission des documents’. 17 ‘Passerelle’. 18 ‘Cloisons étanches’. 19 ‘Contrôle’. 20 ‘Contrôles spéciaux’. 21 ‘Les établissements’

figure 4.1 Management tools by management element (document from archives)(Fonds Fayol, HF5 bis DR 1)

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1. Health and physical strength; 2. Cleverness and intellectual strength; 3. Moral qualities: strength of will, perseverance, determination, active, energetic, and where necessary, daring, courage, commitment, concern for the greater good 4. Strong general knowledge (culture); 5. High management ability; 6. Elementary knowledge about other functions; 7. The highest skill possible in the core competency of the managed company. Fayol most probably based his list on that written up by Taylor to describe a good foreman:

Brains Education Special or technical knowledge Manual dexterity or strength Tact Energy Grit Honesty Judgement or common sense And good health (Taylor 1911, 2008: 49) How can such men with so many qualities be found? Both Fayol and Taylor agree that they need to be trained. Even then, such men are hard to find: Plenty of men who possess only three of the above qualities can be hired at any time for laborers’ wages. Add four of these qualities together and you get a higher priced man. The man combining five of these qualities begins to be hard to find, and those with six, seven, and eight are almost impossible to get. (Taylor 1911, 2008: 49)

Taylor’s solution was to divide the foreman’s role into eight functions. This solution was well known to functional management. A foreman was then only required to possess one specific quality. This made recruitment much easier. Fayol solved the same problem differently. He rejected the idea of dismantling the role of the different managers. Instead, he introduced two concepts: ‘headquarters staff ’ and ‘management tools’. The ‘headquarters staff ’ is a military term used to describe the internal and external consultants who aide management in private companies. He may be the highest level director or a middle manager. For example, Fayol was a very good mining engineer but Commentry-Fourchambault also operated steel smelters, and he believed that his lack of knowledge about smelting was his weakness as managing director. He consulted metallurgical specialists to advise him and help overcome this weakness. In return, Fayol was a consultant for a large number of mines and was so throughout his career.

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Management tools are another means to palliate managers with poor abilities. A good manager knows how to manage without his tools. He knows which activities are loss makers without looking at the accounts. He can see which products are losing money before calculating their cost price. When he reads a report he says ‘I already knew’. This is particularly the case in small businesses. Managers who are less able should make fewer mistakes if they use management tools such as detailed financial documents. Fayol brought what he had observed from the technical trades to the application of management tools. A skilled worker can produce at a high quality, while an average worker needs a machine to help produce the same result. A skilled draftsman can trace an almost perfect line or draw a perfect circle. An unskilled drawer needs a ruler and compass to draw correctly.

The experimental method of a science of management Fayol believed managers needed a science to guide their actions in the same way that the physical sciences guide engineers. Such a science should emerge from the collective experiences of many. In 1900 he invited his engineering colleagues to share their management observations, experiences, and studies in the same way they already did in the technical realm, and so collectively construct this new science. He said: In management, we don’t have such an enormous force that comes from the experience of others. (Fayol 1901: 766) We must strive [. . .] to discover and apply the rules that will make the organization and functioning of the management machine as perfect as possible. Why don’t we bring together our observations, our experiences and our studies for the benefit of all? (Fayol 1901: 763–64)

He repeated his call in 1916: The method involves: observing, collecting and recording events, interpreting them, conducting experiments if necessary, and then inferring rules which, under management’s impetus, may be introduced into business practice. (Fayol, 1916, 1925: 92; 1949: 64; 1999: 74)

In 1917 he added: I am pleased to have intuitively followed a method known as the positive method as recommended by Auguste Comte, as well as Claude Bernard’s experimental method, both of which I believed to be scientific based on Descartes’ principles.4 (Fayol 1917: 146) 4 Auguste Comte (1798–1857) was a French philosopher, the founder of sociology and positivism. Claude Bernard (1813–78) was a French physiologist, one of the first to suggest the use of blind experiments to ensure the objectivity of scientific observations. René Descartes (1596–1650) was a French philosopher, mathematician, and physicist. In his Discourse on the Method, he presents a methodological scepticism in sciences. These three intellectuals are considered the French founders of experimental science.

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The experimental nature of Fayol’s work was quickly forgotten. One explanation may be that Fayol placed more emphasis on the results, that is the theory, rather than on the experimental method. Another more probable explanation may be because his main 1916 work was truncated. His initial plan was made up of four parts: 1 2 3 4

Need and possibility for management training Management principles and elements Observations and personal experience Lessons from the War.

Only the first two parts of his book were published. The third typed-up part was discovered later (Peaucelle 2003: 89–148). It is a professional autobiography that recounts the main events in his career and in particular those that led him to formulate his ‘management doctrine’. There were negative events that the doctrine must prevent, and positive ones that the doctrine should encourage. Here is an example of one such negative event and a management principle that was drawn from it. As a young, freshly employed engineer he was visiting the bottom of the shaft from where the coal was brought to the surface in horse-drawn trolleys. He wrote: May 1861. The horse on the 6th level of the St Edmond mine shaft broke its leg this morning. I wrote a voucher to have it replaced. The stable master refused the voucher as it was not signed by the director. The director was absent. No-one had been named to replace him. Despite my position, the stable master refused outright; his instructions he said, were clear. The injured horse was not replaced and the work on the 6th level was lost. I believe that when the director is ‘absent’ someone should be named as his replacement. I wrote some months later, after similar incidents: ‘A replacement should always be named in advance to fill-in for the director when he is absent or delayed. Authority should always be represented.’ (Fayol 1908, cited in Peaucelle 2003: 90–1)

An oft-cited positive experience is the economic turnaround of Fayol’s company: In 1888, the Company was just about to accept its dissolution by closing its factories and exhausting its mine, when its top management was replaced. Thenceforth the company returned to profit, and the recovery was as uninterrupted and as strong as had been its fall. The company’s story will attest that its decline and its recovery can only be attributed to the management processes employed. It is with the same factories, the same financial resources, the same commercial situation, the same board of directors, and the same personnel . . . that the Company was heading to collapse before 1888, and that it recovered from this point in time. And so, some management procedures drove the Company to ruin; others brought it back to profit. The work, experience, knowledge and will of several thousand men had been sterilized by defective management processes, while other management processes valorized these resources. (Fayol 1908, cited in Peaucelle 2003: 179–80)

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Fayol’s work at the head of the company was successful. The dividends paid to shareholders grew, coal and iron ore production increased, and few days were lost to strikes. These results attest to the quality of his management methods. Fayol believed they should become part of the doctrine. This was the aim of his 1916 work. It remains a mystery as to why this third part of his book was never published. This text is partly based on his 1908 conference presentation. At the time the published text was only a summary. The complete text was discovered and published in 2002 (Wren 2002). One possible explanation is that Fayol’s text may have been criticized in 1908 and he didn’t want it to be criticized again. What criticisms could have been levelled at a text relating experiences in the field? First, the story of the horse with a broken leg could be interpreted as hazing. The young inexperienced and authoritarian engineer may not have been well accepted at the mine. The workmen and foremen may have been keen to ‘show him’ how things are done. Hazing involves making new arrivals suffer to better incorporate them into the group. It is a strong tradition in social groups. The miners would later have had complete confidence in Fayol when he extinguished the mine fires. The many whose lives he saved would no doubt have been forever grateful. Second, good management was most likely not the only reason for CommentryFourchambault’s 1888 turnaround. The company also benefited from a price boom on the iron ore market: Fayol’s experience appears to show the superiority of his methods over Taylor’s. His followers often affirm it. The truth is, it wasn’t Fayol’s management of the CommentryFourchambault Company that brought it back to profit. It was the increase in the price of iron from 57 francs in 1888 to 70 francs in 1890, and wage rates that were at their lowest levels for the last twenty years of the century. [. . .] Iron only fleetingly returned to its lowly 1886 level of 55 francs in 1895, before climbing back to 82 francs in 1900. (Chevalier 1946: 64)

Chevalier had previously worked at Le Creusot, one of Fayol’s competitors. He personally favoured Taylor. It is quite possible that this criticism was advanced as early as 1908. And so, in its canonical work, Fayolism was deprived of its inductive approach to theory development. Another source of experience, and most probably the most important for Fayol in 1916 was the French army’s activities during the War. It was the subject of the fourth part of Fayol’s book. On 1 August 1914 Germany declared war on Russia; on 3 August Germany declared war on France and Belgium and immediately invaded the latter. German forces broke through French lines in the north and the east. They advanced to within fifty kilometres of Paris, taking Senlis on 31 August and Chantilly on 3 September. The French government left Paris for Bordeaux. This debacle was stopped on 9 September by the ‘battle of the Marne’, and the front line was stabilized several hundred kilometres within French territory. Such an inglorious entry into the War stupefied the French who had expected a short and victorious conflict. They had come close to a defeat of the same magnitude as in the

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1870 Franco-Prussian war that saw Paris besieged for four months. At the end of this conflict, the Treaty of Frankfurt gave the French territory of Strasbourg and Metz to Prussia, and France paid a 5 billion gold francs war indemnity for the Prussian army to leave France. There was an initial outcry to find those ‘responsible’, but the war continued and everyone was needed to help. Government censors ensured that no one publicly criticized the military. It was a forbidden topic. Fayol could not publish the fourth part of his work, ‘Lessons from the War’. He showed audacity by simply announcing his intention. Was this text even written? A handwritten introduction was found in the archives (Figure 4.2). It was written during the ten-month long 1916 battle of Verdun which left over 300,000 dead and 500,000 wounded. Fayol possibly continued his text in the same virulent tone. He may have believed it was too dangerous to keep because of censorship. One could imagine that Fayol, a farsighted man, may have given instructions to hide it until a specific date. And why not a publication in 2016, for the book’s hundred years’ anniversary? In his 1916 text, some aspects of the war remain a source of Fayolism, such as his criticism of mathematics. Mathematics was used to improve the accuracy of the artillery. Its first use in all fields of combat goes back to ‘Operational Research’ during the Second World War. Fayol considered the teaching of mathematics at a high level useless both for business leaders and for generals. This idea targeted Joffre, the French general-in-chief, who had been trained at Ecole Polytechnique, well known for the high level of its teachings in mathematics. In 1916 Joffre was heavily criticized by the other officers trained at the less well known Saint-Cyr military school. He was replaced towards the end of 1916. Joffre did, however, invent a management tool: retiring incapable officers. At the end of August 1914, he visited the numerous local headquarters that had been successively defeated during the first months of war. He replaced 25 per cent of the generals who had become unable to command. They were sent to Limoges, in the centre of France, where they were assigned to positions outside the perimeter of military operations. Fayol inferred a comprehensive principle that he incorporated into his management doctrine: the retiring of incapable managers (‘l’élimination des incapables’).5 These managers, previously useful to the company, had to be given positions outside the chain of command, where their loss of ability would not interfere with operations. This action involved replacing ageing managers by withdrawing them from active service while continuing to pay them a salary. There were no retirement pensions for managers at this time. Fayol also used a common military term of the time, ‘the headquarters staff ’, for those who assist top managers but have no hierarchical authority. These traces of the war are reminders of the era when Fayol wrote his seminal work in 1916: war was raging and it could not be openly discussed.

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The French word is ‘elimination’ but it doesn’t mean to fire or kill-off someone.

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jean-louis peaucelle and cameron guthrie 6 April 1916 Lessons from the War French soldiers showed remarkable stamina, a surprising energy, an unequaled courage. The entire nation gave with absolute loyalty. [. . .] We were taken by surprise as nothing had been prepared. Everything was organized hastily, at a cost of many a large sacrifice. There was no plan. Why? Organizations, plans. . . are the making of leaders and of leaders alone. Was there a lack of capable leaders? No doubt. I did not say ‘intelligent’ or ‘instructed’, I said ‘capable’. Why no man at the head of this country was capable of governing, far sighted, an organizer, informed, knowing how to command loyalty, inspire confidence …? It is because the nation does not know what qualities it should require of its leaders. It believes that eloquence, mathematical knowledge, being elected, . . . endow one with an ability to manage. Big mistake.

figure 4.2 Handwritten introduction to the fourth part of Fayol’s book ‘Lessons from the War’ (Fonds Fayol, HF 5bis DR1)

The fourteen management principles Fayol wanted to create a normative science of management. Principles play a dual role: as axioms of theory from which practical applications flow, and as precepts to guide corporate action. The fourteen principles developed in his 1916 work are listed below. 1. Division of labour: ‘While its advantages are universally recognized . . . the division of labour has its limits that experience and a sense of measure teaches one not to cross.’ (Fayol, 1916, 1925: 29; 1949: 20; 1999: 24) 2. Authority: ‘Authority cannot be conceived without responsibility, without the sanction—reward or penalty—that accompanies the exercise of power.’ (Fayol, 1916, 1925: 30; 1949: 21; 1999: 25) 3. Discipline: ‘Resulting from different and variable conventions, discipline naturally presents itself quite differently.’ (Fayol, 1916, 1925: 31; 1949: 22; 1999: 26) 4. Unity of command: ‘For any action whatsoever, an employee should receive orders from one superior only.’ (Fayol, 1916, 1925: 33; 1949: 24; 1999: 28) 5. Unity of direction: ‘One head and one plan for a group of activities having the same objective’ (Fayol, 1916, 1925: 35; 1949: 25; 1999: 29); the orders are consistent. The dissimilarity with the preceding principle is the presence of a plan and an objective. 6. Subordination of individual interests to the common interest. 7. Remuneration: The wages ‘should be equitable and as far as possible, satisfy both personnel and company, the employer and the employees.’ (Fayol, 1916, 1925: 37; 1949: 26; 1999: 30) 8. Centralization: depending on the respective managers’ abilities in each level. 9. Hierarchy with a scalar chain: The line of authority from top to bottom of the organization in which each employee is aware of his or her place and duties.

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10. Orderliness (‘ordre’): material order and social order, ‘the right man at the right place’.6 (Fayol, 1916, 1925: 52; 1949: 37; 1999: 42) 11. Equity: ‘Justice results from established conventions.’ (Fayol, 1916, 1925: 53; 1949: 38; 1999: 43) 12. Low employee turnover (‘stabilité du personnel’): ‘An agent needs time to learn and master a new function.’ (Fayol, 1916, 1925: 53, 1949: 38, 1999: 43) 13. Initiative: ‘At all levels of the social ladder, an agent’s zeal and activity grows with the taking of initiative.’ (Fayol, 1916, 1925: 55; 1949: 39; 1999: 44) 14. Mutual support (‘union du personnel’, ‘esprit de corps’): ‘unity is strength’. (Fayol, 1916, 1925: 55; 1949: 40; 1999: 44) Urwick later attempted to extract the fundamentals of a management science from these fourteen principles and Fayol’s five elements of management (Urwick 1944).

Fayol versus Taylor Henri Fayol and Frederik Taylor (1856–1915) were contemporaries. They had both been trained as engineers and had business experience. They both wanted to establish a science of management and their ideas often converged. Taylor spent several years in France when he was young. They could have met in 1900 in Paris at the World Fair. Fayol made his first speech about the need for a management science to alumni from his engineering school. Taylor was awarded a gold medal for an American made high-speed steel mill he presented on behalf of William Seller. However, they did not meet. Taylor, the younger of the two passed away in 1915 without ever hearing of Fayol. Taylor’s contact in France since the 1890s was Henri Le Châtelier (1850–1936), a metallurgist and member of the ‘Académie des Sciences’. Le Châtelier had invented two devices for measuring the high temperatures of metal fusion baths: the thermo-electrical pyrometer (in 1886) and the optical pyrometer (in 1892). These two machines were widely used in metallurgical research centres. Maunsel White and Taylor used these machines when they developed the steel for high-speed mills. Taylor was in contact with Le Châtelier and sent him several of his texts, including those concerning the organization of work. Le Châtelier appreciated his writings and had Shop Management translated in 1907 and with a preface he wrote himself in 1913. He wrote another preface for Principles of Management in 1912. In 1915 he wrote an obituary for Taylor. While he clearly supported Taylor’s ideas, evidenced by his 1928 work Le Taylorisme, he never criticized those of Fayol. Fayol was more aggressively against the idea of functional management. In 1916 he wrote, 6

In English in the original text.

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jean-louis peaucelle and cameron guthrie According to Taylor himself, some advocates for a unity of command refused to accept this principle despite his insistence. As for me, I don’t believe a workshop can correctly function if this principle is violated. And yet Taylor had successfully managed large companies. How can this contradiction be explained? I suppose that in practice Taylor was able to reconcile the functioning of the headquarters staff with the principle of unity of command. It is only an assumption that I am not in a position to verify. (Fayol 1916, 1925: 100; 1949: 69; 1999: 79)

Fayol strongly contested Taylor’s idea that a worker could receive orders from nine functional managers. But it was 1916, and France was at war. His criticism was levelled at functional heads in the military who could give a soldier contradictory orders. Fayol was most likely thinking about the artillery that was assigned high up in the chain of command. Communication with the infantry was slow and limited. Yet the most classic attack from the trenches along the front line was to combine these forces. The artillery pounded enemy trenches for one hour or so and then stopped. The infantry could then charge as enemy defences were supposedly destroyed. In reality, this strategy worked poorly. The artillery often fired too close to the trenches and killed its own foot soldiers. If the shots fired were too long, enemy defences were not destroyed. In both cases the attack failed. The proximity and interconnection of enemy trenches also stymied this approach. The artillery could not fire with sufficient precision to avoid hitting friendly troops when the enemy was too close. Numerous incidents on the battlefield convinced Fayol of the importance of unity of command for artillery and foot soldiers in the same sector. He steadfastly opposed Taylor’s idea of functional heads. In 1913 when Fayol read of eight functional foremen in the French translation of Shop Management, he noted: No agent can receive orders from two managers for the same action on the same object. (Fonds Fayol HF 5bis file Taylor)

However, Fayol believed that if each manager worked in a different area then they could coexist, in the same way that high school students have a different teacher for each subject and each teacher only gives instructions for his own class. A functional hierarchy is risky but not impossible. In the end Fayol showed some acceptance for Taylor’s position. Let’s put Taylor’s idea into a reasonable perspective. He was right to divide the foreman’s role and have him supported by specialists acting under his orders: the instruction card clerk, the time and cost clerk, the shop disciplinarian who readjusts the wages, the order of work and route clerk, and the repair boss . . . The aides a foreman has at his disposal are comparable to the aides of the general manager. This process is based on the same idea: the manager needs to be helped as he cannot do everything himself. Taylor was right to strongly voice this idea albeit in an exaggerated way. He believed he had found another management system—the opposite to that used by the military. He simply observed that aides, outside the hierarchy, were also useful for lower level managers. (Fonds Fayol HF5bis file Taylor Text highlighted by Fayol)).

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While Fayol was astounded by Taylor’s idea of functional management, he conceded that it might be possible in peace time. His friends reassured him that functional foremen had no authority and that only the hierarchical foreman could impose his will in the workshop. He was finally convinced and made an agreement with French Taylorians in 1925. He merged his own Centre for Management Studies (‘Centre d’Etudes Administratives’) with the Conferences of French Organization (‘Conférences de l’Organisation Française’) founded by Taylor’s followers, such as Charles de Fréminville, Jean Chevalier, and Clarence Bertrand Thompson. The National Committee of the French Organization (‘Comité National de l’Organisation Française’, CNOF) was born. It regrouped all French professionals working in the area of management and organization. The activities of the CNOF tapered off in the 1970s, and it was merged with the IFG (Institut Français de Gestion), a continuous education organization in 1997. This intellectual debate between Fayol and the Taylorians was settled by a compromise. But how did Fayol himself organize the work of labourers? One publication shows how Fayol operated (Fayol 1882). Once the coal was extracted from the mine, it was replaced by pebbles to avoid landslides and cave-ins. Backfilling typically took place at night and the coal was mined during the day. Fayol, however had the coal miners themselves backfill the mine during the day. The same workers replaced the coal they mined with pebbles. This was the least costly solution as the same trolleys were used to carry the coal and bring the pebbles. The trolleys were always full, even on the return trip, thus eliminating the time lost manoeuvring empty trolleys. Fayol differed from Taylor by considering the global nature of work. Organizational improvements were achieved through the elimination of empty returning wagons rather than an accelerated rhythm of task execution. The main criterion used to evaluate efficiency was the lowest cost price, not the quickest execution time. Fayol’s solution in this case, less expensive and more flexible than alternatives, was later adopted by all mines across the centre of France. Taylorism met with great success in France. Fayol’s son, also named Henri, adhered to these new ideas as early as 1918. By doing so he opposed his father. At 21 he married without his father’s consent and left the family home. Henri Fayol junior (1899–1982) worked for the French industrialist Marcel Boussac in 1943 and was director of his subsidiary, the Dior fashion house, from 1946 to 1962. Towards the end of his life he expressed great pride in his father’s achievements, yet he never read nor understood his father’s work. This ambiguity obviously did not help Fayolism in France.

The lost opportunities When we retrace Henri Fayol’s thought it is surprising to note how modern some of his forgotten ideas were. It would seem that we have not explored all the new paths this innovative thinker laid out. These lost opportunities have no doubt contributed to the eclipse of his ideas over time.

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An inappropriate vocabulary In striving to create a management science, Fayol was confronted with the need to define his new concepts. First, he named his science of management, ‘administration’. This choice of word was confusing. He had the same difficulty with the others terms. The vocabulary in the management sciences is modern, adapted from that used by companies, and rapidly evolving. The domination of the English language in business and in management research also creates difficulties for the expression of ideas in other languages. We have translated a number of terms in this text using their current English equivalent and have noted the French words used by Fayol when this proved difficult. The original terms used are often ambiguous in today’s French, and some were already unclear a century ago. The vocabulary used by Fayol was often modern for his time, but has since become outdated. He spoke of the communication breakdowns between different functions within the same company. He called them ‘watertight compartments’ to highlight their lack of interrelations. This concept was in fashion at the time: the Titanic had been built with five watertight compartments. Despite this design, the Titanic sank in 1912: the upper parts of the compartments were not watertight. These vocabulary issues hindered the understanding and the spread of Fayolism. Even Fayol’s followers did not always understand him. In 1944 Palewski detailed ten of Fayol’s ‘processes of the art of management’ (‘procédés de l’art administratif ’) and added an eleventh named ‘management tools.’ He defined this concept as ‘all objects that serve the material pursuit of the art of management from calculators, dictating machines, typewriters, binders and bookkeeping machines to file folders, order forms, models of meeting minutes, diary, notebook, recruitment forms, work orders, etc.’ (Palewski 1944: 66–75) Palewski’s text shows a complete misunderstanding of Fayol’s innovative ideas: tools used for office work are not management tools in their own right.

The study of work practices Fayol’s theory, his ‘management doctrine’, was based on his experience as a manager. This science should have developed as others continued his observations. Fayol’s Centre for Management Studies intended to classify and interpret real world cases submitted by distant observers. For example, at Company X’s laboratory, the [Managing Director’s] secretary used to breeze in every day at the same time. He was an arrogant upstart. The boss used familiar terms with him (let’s not get political though). He added to his collection of titles that of Laboratory Inspector. He carelessly opened a drawer, tore out a large sheet of filter paper, crumpled it, put it in his pocket and headed towards a special place7

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with as much crashing as when he came in. Five minutes later, one of the testers took great pleasure imitating him, much to the expense of the stock of filter paper. Moral: you shouldn’t do in front of inferiors what you forbid them to do. (Vanuxem 1917: 222).

Very few cases were collected. Nothing, apart from speeches, was ever published. We know of one case that Fayol rejected. It was the case of a director solving a problem. Instead of resolving the problem as soon as it was detected, he waited for the workers’ union to demand a solution. The resulting social pressure meant that those disadvantaged by the reform would not protest (Peaucelle 2001). Fayolism had trouble interpreting this case. It is more readily understood through the lens of Michel Crozier’s vicious circles in his bureaucracy theory (Crozier 1964). Fayol did not accept this case, submitted by a close follower. This was no doubt discouraging for its author. The experimental basis of Fayolism was gagged as it questioned the initial expression of the theory. Such questioning exists in all the sciences. There was a contrast between the declared experimental basis of Fayol’s theory of management and the real world selection of cases. Such truncated Fayolism could not dialogue with serious academic research. The use of time field studies of managers’ activities undertaken by Henry Mintzberg (Mintzberg 1973) and John Kotter (Kotter 1999) follow Fayol’s ideas. These researchers would however no doubt challenge Fayol’s intellectual antecedence.

Consulting and research in strategy, planning, human resource management, coordination, etc. Taylor’s success can be largely attributed to the fact that his ideas were applied in the field by a vast number of management consultants. These professionals had a vested interest in promoting Taylor’s ideas. They all became advocates. Fayol lacked such collective support. Fayol’s ideas could have been used for a large number of consulting activities, such as the construction of organizational charts, improving personnel management, devising of plans and strategies, training managers to lead, holding meetings, and evaluating subordinates. Such indifference for a ‘father’ has not affected management’s intellectual and professional development. While the science and practice of management has ignored Fayol’s paternity for these directions of research and action, the field has progressed in the same way, both through necessity and efficacy.

Conclusion Taylor emphasized the productive work in the plants. Fayol placed the emphasis on managerial tasks. Which is more important for success? When improved production methods appear, they are taken up by good managers. Their objective is generally to reduce production costs. For Fayol, good management is more important.

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Fayol’s fourteen principles as published in their 1949 English translation are still relevant today and coherent with current models and theories of strategic leadership and management (Golden Pryor and Taneja 2010). Fayolism has lived on through modern writings and can be seen today in three key areas: management tools, consulting, and research methodology. The concept of ‘management tool’ was a wellspring of ideas to improve existing tools, test their effectiveness, improve them, find others, implement them, and train managers in their use. A large part of research in management today involves Fayol’s concepts, although their initiator is often unknown. The development of HRM tools by Fayol opened consulting opportunities. Many consultants put these tools into profitable use even though they never know or refer to their precursor. Management consulting has greatly increased in importance since Fayol’s time. Further research is needed to understand how managers can best control and improve the efficiency of internal consultancy assignments. Fayol’s management research methodology is better known today as ‘action-research’. All managers can contribute to improving the management knowledge base. A manager can consult data, interpret it, deduce best practices, and even theorize. Dialogue with the academic world in the science of management should be more frequent. Parallel careers in both industry and universities must be possible. The participation of managers in the advancement of knowledge is valuable as it makes them reflect upon their own actions and their relationship with accepted theories and best practices. The ‘Ecole de Paris de Management’ is such a place where management academics and practitioners discuss current affairs and the realities of industrial life. It publishes the review Gérer et Comprendre (Manage and Understand) which has both an academic and a practical goal. The School’s founders didn’t think they were following Fayol’s methodology, but they were engineers just as he was.

References Chevalier, J. (1946). L’organisation du travail, Paris: Flammarion. A Taylorian book on the organization of work that refers negatively to Fayol. Crozier, M. (1964). The Bureaucratic Phenomenon. London: Tavistock Publications. A classical work on French bureaucraties. Fonds Fayol, Archives du Centre d’Histoire de l’Europe du XXe siècle, Fondation des Sciences Politiques in Paris. Henri Fayol’s personal archives that were donated by his family. Fayol, H. (1882). ‘Note sur la suppression du poste de nuit dans le remblayage des grandes couches’, Comptes rendus mensuels de la Société de l’Industrie Minérale, October. A work study by Fayol. —— (1901). ‘Séance solennelle de clôture du congrès de la Société de l’Industrie Minérale à Paris’, samedi 23 juin 1900, Bulletin de la Société de l’Industrie Minérale, N° 15, 759–68. The first text on the new science of management.

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—— (1908). ‘Le cinquantenaire de la société Commentry-Fourchambault et Decazeville’, Congrès de Saint Étienne de la Société de l’Industrie Minérale, 16 juin 1908, edited by Peaucelle 2003, 179–89. The second text on the new science of management with real case studies. —— (1916). ‘Administration industrielle et générale’, Bulletin de la Société de l’Industrie Minérale, 10, 5–164. Published as a book in 1917, 1925, 1999. Paris: Dunod. The original major work of Henri Fayol in French. —— (1917). ‘Préface à l’Eveil de l’esprit public’. Bulletin de la Société de l’Industrie Minérale, 12: 145–52. Reiteration of Fayol’s doctrine taking into account the criticism of his 1916 work. —— (1923). ‘La réforme administrative des PTT, in Semaine des Postes, Télégraphes, Téléphones, Association Nationale d’Expansion Economique, mai, 313–21. Fayol’s personal view of the reform of the French postal system. —— (1925). ‘Un entretien avec M. Fayol, la gestion des entreprises et l’outillage administratif ’, signé L. M. du Crouzet, La Chronique Sociale de France, janvier, 10–26. Fayol’s final publication that reflects his last thinking on management. —— (1930). Industrial and General Administration, translation by J. A. Coubrough, International Management Institute, Geneva and London: Pitman & Sons. The first English translation of Fayol’s book. —— (1949). General and Industrial Management, translation by Constance Storrs, foreword by L. Urwick, London: Pitman, Revised translation by Irwin Gray, 1988. The second English translation of Fayol’s book. Golden Pryor, M. and Taneja, S. (2010). ‘Henri Fayol, Practitioner and Theoretician—Revered and Reviled’, Journal of Management History, 16/4, 489–503. The relevance of Fayolism to modern management practices and the alignment of Fayol’s theories with the 5Ps Strategic Leadership Model. Kotter, J. (1999). On What Leaders Really Do, Boston: Harvard Business School Press. A use of time study of general manager’s work. Mintzberg, H. (1973). The Nature of the Managerial Work, New York: Harper & Row. A use of time study of manager’s work. Palewski, J-P. (1944). L’organisation scientifique du travail, Collection Que sais-je ? N° 125, PUF. A classical French view of Fayol’s work. Peaucelle, J-L (2001). ‘ “Laisser du temps au temps”, par Paul Vanuxem’, Gérer & Comprendre, N° 63, 56–63. A real case study which was rejected by Fayol. —— (ed.) (2003). Henri Fayol, inventeur des outils de gestion, Paris: Économica. Collective work focusing on the lost parts of ‘Administration Industrielle et Générale’, new handwritten note on management tools, Fayol’s influence in Great Britain, in Spain, and in Japan. A geologist’s study of Fayol’s work. Fayol’s report on the tobacco industry. Taylor, F. (1911). Shop Management, New York, London, Harper & Brothers. 2008. Bellingham, WA: Enna. Taylor’s book which was read by Fayol. Urwick, L. (1944). The elements of Administration, New York: Harper and Row. A synthesis of broad management principles inspired by Fayol. Vanuxem, P. (1917). ‘Introduction théorique et pratique à l’étude de l’administration expérimentale’, Bulletin de la Société de l’Industrie Minérale, 186–91, p. 222. A synthesis of broad management principles inspired by Fayol.

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Wren, D. A., Bedeian, A. G., and Breeze, J. D. (2002). ‘The Foundations of Henri Fayol’s Administrative Theory’, Management Decision, 40/9: 906–18. Fayol’s unpublished 1908 communication.

Bibliography Breeze, J. D. (1981). ‘Henri Fayol’s Basic Tools of Administration’, Proceedings of the Academy of Management, August: 101–5. The first in depth study of Fayol’s management tools. —— (1985). ‘Harvest from the Archives: The Search for Fayol and Carlioz’, Journal of Management, 11/1: 43–54. First exploitation of Fayol’s private archives. —— (1995). ‘Henri Fayol’s Centre for Administrative Studies’, Journal of Management History, 1/3: 37–62. An historical account of the founding of Fayol’s Centre of Management Studies and its unproductive collecting of business case studies at the time. Brodie, M. B. (1967). Fayol on Administration, London: Lyon, Grant and Green. Commentaries about the Fayol’s 1916 book and an emphasis on the experimental basis of his theory. Brunsson, K. H. (2008). ‘Some Effects of Fayolism.’ International Studies of Management & Organization 38(1): 30–47. Some criticism against the use of Fayol’s ideas. Campbell, A. (1998). ‘Fayol, Henri’, in Warner M. The IEBM Handbook of Management Thinking, London, Boston (MA): International Thomson Business Press, 184–9. A short and essential biography about Henri Fayol. Fells, M. J. (2000). ‘Fayol Stands the Test of Time’, Journal of Management History, 6/8: 345–60. A comparison of Fayol’s work with more recent management research. Gulick, L. and Urwick, L. (1937). Papers on the Science of Administration, New York: Institute of Public Administration. The first comprehensive commentaries in English on Fayol’s 1916 book. Parker, L. D. and Ritson, P.A. (2005). ‘Re-Visiting Fayol: Anticipating Contemporary Management’, British Journal of Management, 16/3, September: 175–94. A text examining the modernity of Fayol’s ideas. Peaucelle, J-L. (ed.) (2003). Entreprise et Histoire, N° 34, Special issue on Henri Fayol. The impossible reform of the French administration. Fayol’s influence on management education in the USA. Reid, D. (1985). The Miners of Decazeville: A Genealogy of Deindustrialization, Cambridge: Harvard University Press. An indepth account of Fayol’s concrete actions at a plant. Smith, I. and Boyns, T. (2005). ‘British Management Theory and Practice: The Impact of Fayol’, Management Decision, 43/10: 1317–34. The impact of Fayol’s theory in Great Britain. Urwick, L. (1929). Rational Organisation, Den Haag: International Industrial Relations Association. The first reference to Fayol in an English text.

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Wood, J. C. and Wood, M. C. (eds) (2002). Henri Fayol: Pioneers of Business and Management Studies, London: Routledge. The re edition of all the more significant texts about Fayol. Wren, D. A. (ed.) (1995). Journal of Management History, 1/3, Special issue on Henri Fayol. An account of Fayol’s actions as manager. Yoo, J. W., Lemak, D. J., and Choin, Y. (2006). ‘Principles of Management and Competitive Strategies: using Fayol to Implement Porter’, Journal of Management History 12(4): 352–68. A presentation of how Fayol’s principles are applied in management today.

chapter 5

m a ry pa r k er fol l et t john c hild ∗

Introduction Mary Parker Follett (1868–1933) was an American pioneer of thinking about management, whose contributions remain more relevant than most to the challenges of the present day. As Joan Tonn (2003: 1), her biographer, comments ‘Without the benefit of modern research methods, Follett developed such original, penetrating analyses of leadership, power and authority, conflict, and group behaviour that her ideas form the basis of much of our modern discourse about organizations and management.’ Although Follett was educated in political science and spent much of her career in community and social work, she came to be in considerable demand as a speaker to business audiences in both America and Britain during the last eight years of her life. Her lectures and papers on management were subsequently edited by two leading figures in the management movement of the day (Metcalf and Urwick 1941; Urwick 1949).1 Yet despite the attention they gained during her lifetime, Follett’s contributions soon fell into obscurity. Peter Drucker, who more recently came to call Follett ‘the prophet of management’, recalled that she was in the early 1950s unknown to him and to others active in American management consultancy and education (Drucker 1995). Even today, Follett’s work remains relatively little known and probably even less read. This is despite her enthusiastic endorsement by prominent management thinkers such as Rosabeth Moss Kanter, Paul Lawrence, and Henry Mintzberg, as well as Peter Drucker (all in Graham 1995a), the establishment of a Mary Parker Follett Foundation [MPFF] and the re-issue of her key books and lectures (Follett 1918/1998; Follett 1924/MPFF 2010; Graham 1995a).

∗ I am grateful for the helpful advice offered by the editors and reviewers of this Handbook. Also for the valuable suggestions made by Dr Kyle Bruce and my colleague, Dr Svetla Marinova. 1 Follett destroyed most of her personal papers before moving to London in 1928 and ordered the rest to be destroyed after her death. Fortunately for posterity, that wish was only partially carried out and Urwick was allowed to search for papers that might be suitable for publication.

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This neglect is all the more regrettable because Follett provides a telling example of how timeless insights of general value can be drawn from the specifics of a rich experience. As Urwick observed (1949: xi), ‘Mary Follett’s work is likely to “date” less than that of almost any other writer on Business Administration.’ The reason he gave was that Follett’s interest was focused on ‘the ageless question of the relations of human beings to each other in the institutions which they develop’ (p. xi). While Follett’s main contributions to management thinking derived from lectures and are expressed in a direct, sometimes ‘folksy’, style, they do nevertheless clearly articulate a set of principles which add up to a coherent theory of collective activity and its management. It is arguable that the practical implications of this theory speak to one of the fundamental challenges of our times, namely that of restoring cohesion in societies that have become divisive, and whose regimes are felt to be unrepresentative. For Follett, in effect, lays out a vision of organizing for the ‘Big Society’ and practical ways of achieving it. In what follows, I first provide an overview of Mary Parker Follett’s life, noting the principal events and activities that were formative for her thinking. I then address the key themes in her thinking that are relevant to management. These are concerned both with the process of managing and the role of management in society. The themes can be grouped into (1) the centrality of relationship, (2) constructive conflict, (3) core processes of management, and (4) business and society. It will become apparent that there is a systemic theoretical perspective underlying Follett’s thinking on these issues, a perspective centred on the proposition that a recognition of the situation in which people find themselves can provide the basis for them to work together constructively and without being subject to coercive power. While this part of the chapter summarizes Follett’s thinking in an uncritical manner, the final section offers an evaluation and addresses the contemporary relevance of Follett’s contribution.

Life2 Mary Parker Follett was born in Quincy Massachusetts, near Boston, in 1868 of a longestablished family. She inherited an independent income in 1885 which helped to pay for her education and afforded her freedom of action later in life. In 1898 she graduated summa cum laude in economics, government, law, and philosophy from Radcliffe College, having spent a year at Newnham College, Cambridge. In 1896, while still a college student, she published a study on The Speaker of the House of Representatives which explored the methods used by effective speakers of the House to exert their influence. In preparing this book Follett not only used documentary sources but also relied on a method that characterized her later work, namely engaging personally with the people involved so as to capture firsthand their thoughts and experiences. The book was 2 This section draws upon Metcalf and Urwick (1941, Introduction), Urwick (1949, Introduction), Crawford (1990), Graham (1987, 1995b), and Tonn (2003).

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declared indispensable reading for any study of Congress by no less than future US President Theodore Roosevelt when reviewing it for the American Historical Review. Follett became part of an elite Bostonian circle of writers, academics, lawyers, and politicians. Her entrance into this circle was facilitated by her long-standing friend, Isobel Briggs, with whom she shared a home for some thirty years. This social capital, together with her fluency in French and German, enabled Follett to keep abreast of developments in both America and Europe in the physical and social sciences. She is said also to have had the ability to interact sensitively with others which enabled her to empathize and learn from their experiences. Her lectures on business and management are replete with stories of people’s experiences which she uses to illustrate the arguments she is developing. In 1900, Follett began her public work by founding the Roxbury Debating Club for Boys in Boston, which in 1902 expanded into the Highland Union and the Roxbury League. The latter was a social, educational, and athletic club for young men in a poor area where boys and girls went out to factory and shop work early on, and sorely needed the kind of facilities that the club offered. The club was the first community organization of its kind to be housed in a Boston public school. It successfully demonstrated the practicability of using school premises after hours for community purposes. In 1908 the newly founded Women’s Municipal League of Boston made the development of such school community centres one of its principal objectives and Follett became chair of its committee until 1920. Her committee participated in the development of vocational guidance for Boston schoolchildren and she personally helped to finance this activity. Follett was also instrumental in the formation of many other social centres across Boston. She later served as a member of the Massachusetts Minimum Wage Board. Follett’s community work led her to the belief that neighbourhood groups were the key to constructive social reorganization. She turned her attention to writing for a wider public on the lessons of the social centres for democracy. This led to her second book, The New State (1918), in which she criticized conventional views of democracy as simply a matter of majority rule and ballot boxes. She argued instead that political parties should be abandoned and that people should organize themselves into neighbourhood groups. These groups, articulating the needs felt by local communities, would become the basic political units. In effect, ‘Follett was advocating the replacement of bureaucratic institutions by group networks in which the people themselves analysed their problems and then produced and implemented their own solutions’ (Graham 1995b: 17). Transferred across to business organizations, the equivalent argument speaks for a significant devolution of voice and initiative to local work groups or teams within the broader framework of the company. The New State went through several editions and was widely reviewed in learned journals. It brought Follett national and international recognition. It led to her friendships with distinguished philosophers and political scientists, including Lord Richard Haldane who both held high political office and was elected a Fellow of the British Academy for his writings on philosophy. As Metcalfe and Urwick commented (1941: 13–14): The higher the intellectual calibre of the men who came into contact with her thought, the more impressed were they by her intellectual originality. Her aim was

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quite simple: she wanted a better ordered society in which the individual could live a fuller and more satisfactory life, and she endeavoured by her own pioneering to contribute to all the social experiments which were being made in an attempt to find the real avenue to this fuller life.

It is not surprising therefore that Seebohm Rowntree, the British Quaker industrialist notable for his pioneering studies of poverty and for fostering enlightened business management (Briggs 1961), wrote the Foreward to Metcalfe and Urwick’s collection of Follett’s papers, commenting that ‘Mary Follett devoted a lifetime to searching for the true principles of organization which would ensure a stable foundation for the steady, ordered progress of human well-being’ (Metcalfe and Urwick 1941: 7). Follett’s third book was Creative Experience (1924), which adopted a social psychological perspective. In this book, she built further on her experience of neighbourhood groups to argue that the creative interaction of individuals in small groups could give rise to a constructive integration that transcended mere compromise. Her thesis was that there is reciprocity in the relationships between people, leading to a continuous process of action and reaction. She called this process ‘circular response’. The inherence of reciprocity means that human relationships are at their best when differences are resolved through discussion and co-operation, when the parties concerned bring out each other’s underlying ideas, come to understand the other’s point of view, and then integrate these viewpoints to pursue a common goal. Many of the illustrations Follett used in Creative Experience came from business situations, and the book drew a keen response from business people. In the year following the book’s publication, Follett made her first public contribution to the field of business management. The Bureau of Personnel Administration in New York held annual conferences for business executives. Its director, Henry C. Metcalfe, invited her to lecture on ‘The Psychological Foundations of Business Administration’ at the BPA’s 1925 conference. As Graham comments (1995b: 18), ‘this invitation set the seal of approval on Follett as a front-rank management thinker’. She became a regular contributor to BPA conferences for the next four years, and also spoke at conferences on her visits to England. Follett lived in England between 1928 and 1933 and was active in studying British industrial conditions. Her last contribution was the set of lectures she gave in January and February 1933 to the newly formed Department of Business Administration at the London School of Economics. Mary Parker Follett died of cancer in December 1933, having returned to Boston. As others have commented, it is a tribute to the originality of Follett’s thinking and her ability to enrich it from an unceasing intellectual curiosity and interaction with others, that coming from an education in political science and a practical career in community work, she could make such a significant contribution to thinking on business management and organization. Although the seeds of this contribution are to be found in her previous books, her legacy to management theory is actually contained in just the limited number of public lectures and presentations given during the last short span of her life. Her attraction to the field of business management (as she called it) came from two considerations, both expressed in a presentation of 1926 (quoted in Metcalfe and

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Urwick 1941: 17–18). The first was the importance of industry to modern society and a recognition that the collective activity on which it depends ‘will always have to be managed’. She believed that management therefore makes an invaluable contribution to the creation of value, and that managerial ‘control’ would always be a necessary feature of organization. The second consideration was that ‘it is among business men (not all, but a few) that I find the greatest vitality of thinking to-day’. At many points in her lectures, Follett related what she was advocating to changes that she claimed were already entering contemporary thinking on business management, though this may have been her subtle way of getting her audience onside. Follett’s insights on business management attracted the attention of several pioneers of the management movement who played a significant role in bringing her contributions to a wider audience. It was Seebohm Rowntree who invited her in 1926 and then in later years to address the annual conferences on management that he organized at Balliol College, Oxford. There Follett met Lyndall Urwick who was to become her greatest admirer and propagator of her work (Graham 1998). In addition to editing two collections of Follett’s lectures (Metcalf and Urwick 1941; Urwick 1949), Urwick and Gulick included Follett’s final LSE lecture on ‘The Process of Control’ in the seminal Papers in the Science of Administration which they compiled (Gulick and Urwick 1937). Urwick also contributed essays on Follett and her work in several of the books he edited, which were central contributions to the development of management thinking in the AngloSaxon world (e.g. Urwick 1956; Urwick and Brech 1945). As already mentioned, Follett belonged to the circle of Boston’s social and intellectual leaders. This circle included pioneers of enlightened business practice such as Henry Sturge Dennison and the Filene brothers, Edward and Lincoln. Follett became particularly close to Dennison and his family. Dennison was an industrialist noted for his progressive practices and writings on management (e.g. Dennison 1931; 1932). He has been described as ‘a leading corporate liberal of the interwar period’ (Bruce 2006: 1113) whose thinking had considerable influence through his academic connections and public service. The friendship between Follett and Dennison began when both were appointed to the Board of Directors of the Boston Placement Bureau in November 1913. Dennison provided a conduit for the practical application of Follett’s ideas. As Tonn (2003: 390–391) notes, ‘Follett became Dennison’s mentor: not only was he enthusiastic about her ideas, but he also welcomed her backing and was grateful for her responsiveness to his desires to improve the company’. Like Follett, he was deeply concerned with the psychological and power relations between the actors within firms and, while keen to encourage worker participation, he held the firm belief that management is a vital factor in the creation of value and wealth. Dennison and Follett also worked together in the public propagation of new ideas about business and management. For instance, they both presented to a Bureau of Personnel Administration conference in Boston in November 1925 and they also both attended the 1927 Balliol Conference organized by Seebohm Rowntree (Brech 2002). Follett was an active member of the Taylor Society of which Dennison served as President between 1919 and 1921.

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Key themes3 The centrality of relationship4 Follett’s analysis was built on the individual’s relationship to others within a social group. She wrote that ‘The vital relation of the individual to the world is through groups’ (Follett 1918/1998: Chapter 1). For her, the firmest and most appropriate foundation for democracy was the expression of human needs and interests through local community groups. Similarly, she concluded that the fundamental organizational challenge in any collective enterprise—business, educational, governmental, or religious—lay in ‘the building and maintenance of dynamic, yet harmonious, human relations for joint effort in the most effective conduct of that enterprise’ (Dynamic Administration 1941: 21). Her key concepts—coordination, constructive conflict, integration, and power with—are all centred on human relationships and they are all concerned with ways of promoting a creative dynamic in those relationships that is based on consensus. Follett saw the dynamic aspect of relationship as deriving from the process of ‘circular response’, which she maintained is ‘the basic truth for all social sciences’. ‘Circular response’ foreshadowed the concept of ‘structuration’ which Giddens (1984) later developed. Follett explained circular response in the following way: ‘My response is not to a crystallized product of the past, static for the moment of meeting; while I am behaving, the environment is changing because of my behaving, and my behaviour is a response to the new situation which I, in part, have created.’ (Follett 1924, quoted in Graham 1995a: 42). This dynamic property of relationships lies at their core and provides the understanding on which a mutually accepted integration between people may be achieved. ‘The heart of the truth about integration is the connection between the relating of two activities, their interactive influence, and the values thereby created’ (Follett 1924, quoted in Graham 1995a: 35). The circular response perspective led Follett to eschew pure subjectivity and pure objectivity in social analysis. She saw both factors at play as people reacted to, yet also fashioned, the situation in which they found themselves. For Follett, relationships within social groups have two prominent features. First, they are continuous and second they are integrative. Her view was very much a social interactionalist one, that human relations were grounded on the process of response and reaction between two or more parties to each other. The process of circular response was therefore an evolving one—a continuous dynamic process. In the second place, the process was a unifying one. In fact, Follett believed that ‘continued unintegrated difference is pathological’ (Dynamic Administration 1941: 35). The process of social relationship consisted of three aspects which taken together described what Follett called a ‘total 3

This part of the chapter quotes frequently from the two collections of Follett’s lectures edited by Metcalfe and Urwick (1941) and Urwick (1949), and I shall refer to these by their titles: Dynamic Administration and Freedom and Co-osrdination respectively. 4 See especially Follett (1924).

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situation’. These aspects were ‘the interacting, the unifying, and the emerging . . . There is one simultaneous process, and these three are aspects of that process’ (Dynamic Administration 1941: 198). When Follett applied this analysis to the business enterprise, the following criterion emerged: It seems to me that the first test of business administration, of industrial organization, should be whether you have a business with all its parts so co-ordinated, so moving together in their closely knit and adjusting activities, so linking, so interlocking, interrelating, that they make a working unit – that is, not a congeries of separate pieces, but what I have called a functional whole or integrative unity. (Dynamic Administration 1941: 71)

Follett said that she drew these phrases from Kempf, the psychobiologist, and they are redolent of the notion of organic unity. In that case, how did Follett address the question of conflict, which she had clearly encountered in her study of Congressional politics and in her practical work for the Massachusetts Minimum Wage Board?

Constructive conflict5 Follett regarded conflict as inevitable and intrinsic to ‘personnel relations in industry’. However, she had a particular view of conflict. This derived from her picture of relationships involving continuous interaction, integration, and emergence, together with her view that a lack of integration is dysfunctional. She defined conflict as difference: ‘I should like you to agree for the moment to think of conflict as neither good nor bad . . . but as the appearance of difference, difference of opinions, of interests’ (Dynamic Administration 1941: 30). For Follett, it was not the presence of difference that was dysfunctional but rather its persistence. She insisted that conflict had to be used and resolved ‘constructively’. In fact, she compared conflict to friction, which was sometimes a worry to the engineer, but once understood it was seldom an insuperable problem and was often a help. Conflict should therefore be resolved through the integration of what is desirable and valuable in various hitherto different viewpoints. Conflict used in this way would not only serve to attract attention to where it was urgently required, but the integration of previously differing views could provide a valuable organizational dynamic. An example of this constructive dynamic would be a process of reconciling different objectives through the setting of new and higher goals and/or the search for new solutions—what today would be called ‘innovative problem-solving’. It is interesting to note how Follett’s argument was closely aligned to the view that Dennison advanced at the time, namely that conflict could be resolved constructively by critically examining and discarding preconceptions and then moving the problem onto a higher plane for resolution (Dennison 1925 cited in Bruce 2006: 1119). 5

See Follett’s lecture of this title in Metcalfe and Urwick (1941: Chapter 3).

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Follett rejected the two methods of dealing with conflict that were alternatives to integration—through the domination of one party or argument, or through compromise. A settlement based on domination she saw as unsatisfactory in that it is a onesided process, ignoring other views on the situation and likely to leave the dominated parties feeling resentment and waiting for an opportunity to reverse the outcome. Domination therefore solves nothing. Compromise, Follett argued, is equally unsatisfactory, although it is the most frequently used way of ending a conflict. Compromise actually fails to satisfy anyone because it means that each side has to give up something. It is also likely to lead to a sub-optimum solution. Moreover, compromise often confuses the issues at stake in a conflict by tempting the parties involved to overstate their case in the hope that the eventual compromise will be what they desired all along. This in turn has the effect of making the sides seem further apart than they really are. In short, Follett maintained that conflict should be met by an attempt at integration. The first step would be the bringing of all differences out into the open. These differences can then be analysed and compared, and this comparison would enable a re-evaluation in the light of the situation which had now been made manifest. She maintained that jointly working towards an understanding of the situation provides the best grounds for the achievement of a new and constructive integration of viewpoints. Although Follett’s pioneering contribution is rarely acknowledged, this ‘collaborative’ mode of constructive conflict resolution is today widely accepted as the ideal to aim for, so long as obstacles such as divergent interests can be overcome (Thomas 1992). Follett argued that making manifest the situation in which conflicting persons or groups are placed can be facilitated by examining the symbols they use and what they really mean. In this respect, she appreciated the role of symbolic interactionism. This is a perspective recognizing that people act towards other people and towards things based on the meaning those phenomena have for them, and that these meanings are derived from social interaction and modified through interpretation (Blumer 1969). In order to get to the underlying situation as a basis for conflict resolution, Follett advocated asking what latent aims, wishes, and interpretations people’s statements symbolized (Dynamic Administration 1941: 41). She warned that many statements are symbols for what people really want and that ‘every day we use many more not-understood symbols, many more whole-word, unanalysed words, than we ought to’ (ibid., p. 42). The notion of ‘the situation’ was central to Follett’s thinking. She coined the term ‘law of the situation’, a concept that is essential to her views, not just on conflict resolution, but also on coordination and the exercise of authority. The ‘law of the situation’ was the course of action that became manifest when all the facts relating to a particular situation or issue were established. Follett argued that the attempt to find the law of the situation is the essential element in a scientific approach to management. In this respect, she anticipated the contingency perspective on organization which was developed much later (Donaldson 2001). Moreover, though, systematic investigation and reflection, authority and the ‘giving of orders’ could be depersonalized and hence become more acceptable. One has to keep in mind that Follett always believed that ‘order’ is essential to effectively organized activity, whether this be in business or in the wider society. The need in her

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eyes was, not to undermine this order, but rather to find a basis on which order and the managerial authority which maintained it would be acceptable to those subject to that authority. If the requirements of the situation can be formulated in a way that meets the interests of all concerned, Follett believed that authority would become acceptable. What Follett offered here was a means of making Weber’s ‘legal-rational’ authority subjectively more legitimate in its mode of implementation. This brings us to Follett’s contributions on the core processes of management.

Core processes of management6 Follett’s 1933 lectures to the London School of Economics dealt with authority, giving orders, leadership, co-ordination, and control. These are all core processes in management but, with the exception of leadership, they have been given surprisingly little attention in recent years. The questions of authority and the sharing of responsibility were fundamental to the way Follett analysed these processes. Follett argued that authority in organizations should not derive from either formal status or from ownership. Rather, authority should come from function. Managers’ decisions should be based on the integration of the knowledge relevant to meeting the requirements of a given situation—reference again to the ‘law of the situation’. This point has considerable relevance for the giving of orders, a process which Follett realized could often lose the commitment of the people being directed and also give rise to personal conflict between them and their manager. In her words, ‘even if instructions are properly framed, are not given in an overbearing manner, there are many people who react violently against anything that they feel is a command’ (Freedom and Co-ordination 1949: 20). The way she saw to resolve the problem lay in the ‘depersonalization of orders’. This meant that orders should not be based on personal dispositions, but instead action should derive from the joint search of the parties concerned for the requirements of the situation: An order then should not be given as a personal matter, not because the man giving it wants the thing done, but because it is the demand of the situation. An order of this kind carries weight because it is the demand of the situation. (Freedom and Co-ordination 1949: 23)

The same approach is also found in Follett’s argument that in organizations there should be a rejection of ‘power over’ members (i.e. domination), in favour of ‘power with’. Power with means that ‘you have to get people within the situation, within the same picture, not issue commands to them from outside. They must somehow be made to feel that you and they are on the same job, are co-workers, even if your part is that of explaining the work, informing them of standards, and theirs is the carrying out, two equally important 6 See especially, Follett’s lectures to the London School of Economics in 1933, printed in Urwick (1949), Freedom and Co-ordination.

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parts of the same thing’ (Freedom and Co-ordination 1949: 28). In a paper on ‘Power’ (Dynamic Administration 1941: Chapter IV), Follett was clear that ‘power with’ did not equate to a ‘balance of power’. The crucial difference was that a balance of power did not necessarily connote any unity of understanding and effort between the parties, whereas ‘power with’ did.7 Follett’s emphasis on ‘situation’ also had implications for the process of leadership. She regarded the association of leadership with personality as a ‘mistake’. Rather ‘the executive leader is not a leader of men only, but of something we are learning to call the total situation. This includes facts, present and potential, aims and purposes and men’ (Freedom and Co-ordination 1949: 51). Moreover, leadership had to be seen in relation to the group of people being led. An effective leader ‘can organize the experience of the group and thus get the full power of the group. The leader makes the team . . . Men with this ability create a group power rather than express a personal power’ (ibid: 52). This observation led onto the ‘part of the followers in the leadership situation’. Rather than thinking of leaders as keeping their followers in line, Follett insisted that many initiatives and suggestions for improvement could come up from below, and that what was important was that people at all levels gave their consent to this way of proceeding. It is interesting to note the similarity here with Henry Mintzberg’s recent conclusion that too much emphasis is placed on leadership at the expense of appreciating the contribution of followers (e.g. Mintzberg 2009). Consistent with her advocacy of depersonalizing orders through reference to the law of the situation, Follett preferred to envisage leadership as a process in which ‘Leader and followers are both following the invisible leader—the common purpose’ (Freedom and Co-ordination 1949: 55). Follett associated this with the idea of ‘multiple leadership’, which would encourage a shared sense of responsibility throughout an organization. To use some of her vivid terminology, a ‘collective creativeness’ or ‘invisible leadership’ would in this way replace what she called the ‘illusion of final authority’.8 She summed up her analysis by saying that ‘we have three kinds of leadership: the leadership of position, the leadership of personality and the leadership of function. My claim for modern industry is that in the best managed plants the leadership of function is tending to have more weight and the leadership of mere position or of mere personality less’ (Freedom and Co-ordination 1949: 58). As Tonn (2003: 397) has noted, Follett was deeply concerned with the question ‘by what means could one move from an individual, functionalized responsibility for business management to a joint, interpenetrating responsibility?’ This question reflected the importance she attributed to working as a group and the attention, unusual at the time, that she gave to co-ordination. She began her 1933 lecture on the subject as follows: 7

The adoption by some feminist writers of the ‘power with’ concept with scant acknowledgement of its genesis in Follett’s work provides a further illustration of how her contribution has been undervalued. See, for example, Allen (2005, 2009). 8 The title of a lecture to the Taylor Society in December 1926, published in Urwick (1949: Chapter I).

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john child I have said that we find responsibility for management shot all through a business, that we find some degree of authority all along the line, that leadership can be exercised by many people besides the top executive. All this is now being increasingly recognized, and the crux of business organization is how to join these varied responsibilities, these scattered authorities, these different types of leadership . . . The fair test of business administration, of industrial organization, is whether you have a business with its parts so co-ordinated . . . that they make a working unit, not a congerie of separate pieces. (Freedom and Co-ordination 1949: 61)

Co-ordination requires the reciprocal relating of all the factors in a situation and of all the people involved. In other words, it is a process of integrative unity. Follett spoke approvingly of ‘cross-functioning between different departments’—‘a horizontal rather than a vertical authority’. This is common today having been strongly advocated among others by Galbraith (1994), but it was a relative novelty at the time. Follett set out four principles of effective co-ordination. They were that (1) co-ordination should take place as early as possible, (2) it should be achieved through the direct contact of the persons involved, (3) it is the reciprocal relating of all the features in a situation, and (4) it should be treated as a continuous process in line with the evolution of the ‘situation’. She recognized that these principles would assist faster and more effective adaption through a process of ‘reciprocal modification’. Where there are differences of view between the persons who have to co-ordinate their activities or viewpoints, Follett again recommended the method of integration as a means of promoting co-ordination—to search for an innovative solution that accommodates the differences and is also compatible with the needs of the situation. Such differences, she recognized, can arise in an organization between the members of different functional departments, between people at different levels, and between executives and non-executive experts. She also believed that ‘group responsibility’, which today we would call teamwork, can importantly assist co-ordination, as can a sense of collective responsibility towards the whole enterprise. Follett regarded control as an essential requirement in order to avoid what she called chaos. She saw it as the basis of achieving organized unity, and hence as a process that runs through the other fundamentals of the managerial function—authority, leadership, and co-ordination. In keeping with her views on these other fundamentals, she did not think it appropriate for control to be imposed externally (‘power over’) but rather that one should strive to achieve ‘collective self-control’ (‘power with’). So long as people participated in a collective responsibility, they had a chance of achieving a new measure of freedom by taking charge of their affairs: If then you accept my definition of control as a self-generating process, as the interweaving experience of all those who are performing a functional part of the activity under consideration, does that not constitute an imperative? Are we not every one of us bound to take part consciously in this process? Today we are slaves to the chaos in which we are living. To get our affairs in hand, to feel a grip on them, to become free, we must learn, and practise, I am sure, the methods of collective control. (Freedom and Co-ordination 1949: 89)

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Follett made this statement in the conclusion to a lecture delivered in the middle of the Great Depression, at the beginning of 1933. It is interesting to ponder on its relevance to the current ‘chaos in which we are living’.

Business and society I have already noted that Follett was enthused by the quality of thinking and practice that she found among some business leaders. In their case, she perceived that ‘the ideal and the practical have joined hands. That is why I am working at business management, because, while I care for the ideal, it is only because I want to help bring it into our everyday affairs’ (Dynamic Administration 1941: 18). Management in her view is central to progressive business and the enlightened managers she met were ‘taking the mysticism out of business’ and were willing to ‘blaze new trails’. Their ‘pioneering work in the organized relations of human beings’ offered hope because ‘the solution of world problems must eventually be built up from all the little bits of experience wherever people are consciously trying to solve problems of relations. And this attempt is being made more consciously and deliberately in industry than anywhere else’ (Dynamic Administration 1941: 18–19). If business and the practice of management within it could offer much towards a resolution of world problems, this raised the question of whether and under what conditions business management would be capable of developing an ethic of service to the community consonant with this possibility. Follett discussed this issue in two papers on business management as a profession presented under the auspices of the Bureau of Personnel Administration in 1925 (printed in Dynamic Administration 1941: Chapters V and VI). She was confident that management was developing a body of systematic knowledge appropriate to professionalism, and that managers could be trained in this. She was also well aware of the need of a professional association both to foster the development and dissemination of such knowledge and to maintain the performance and ethical standards by which it was applied in practice. What she discussed with seemingly less conviction was the willingness of the general run of business leaders to maintain those standards, especially if they conflicted with the making of profits. Her argument here was twofold. First, that ‘I see no reason why business men should have lower ideals than artists or professional men . . . I think we may feel that business men can make as large a contribution to professional ideals as the so-called learned professions’ (Dynamic Administration 1941: 143). Second that, in reality, matters were more complex than just positing a tension between making money and working for service. She rightly pointed out that professional people have not given up the money motive and ‘are eager enough for large incomes’. What they do is to combine motives. They work for profit and for service, and Follett claimed that there was no reason why business people should not do the same. Follett certainly wished to see business management become a profession. For this would be entirely consistent with her broader theme that business had become a truly

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major force in modern society and that its practices at their best could provide the means towards achieving a constructive collective unity among people. However, if we return to the more expansive analyses contained in The New State and Creative Experience, we begin to discern the outlines of a more fundamental agenda for the organization both of business and of the society in which it is lodged. The final section of this chapter now places Follett’s thinking into this wider perspective: first, by evaluating her ideas from a more critical angle and then by discussing their contemporary relevance.

Follett and her contemporary relevance One of the reasons why Follett is little read nowadays is because her work does not conform to the accepted canons of scientific research. A similar reason lies behind the disdain in which Peter Drucker’s far-sighted work has been held in many academic circles, and it turns out to be equally misguided. Like Drucker, Follett engaged closely with the world of practice without ever undertaking conventional research, and also like Drucker she felt an obligation to promote good practice. Her lectures to managers, therefore, mixed normative prescriptions with accounts drawn from her experience in a way that was personal and idiosyncratic rather than demonstrably reliable. On the other hand, we have seen that her approach to the different processes of management was internally consistent because it derived from a set of theoretical concepts and propositions which were clearly informed by an underlying rationale. Her theory drew upon two principal sources. The first was contemporary writings in philosophy and psychology. The second was inductive reasoning based on some twenty-five years of active engagement in community work and other public service, complemented in her later years by frequent interaction with business people and their companies. Although Follett often gives the impression of being an armchair theorist, she actually had considerably more direct empirical experience than can be claimed by most academics. Taking these considerations into account, one has to conclude that her work was neither unsystematic nor illinformed. Follett’s basic premises derived from a social psychological view of how people relate together. In her books on The New State and Creative Experience, she argued that social psychology, in contrast to ‘the old individual psychology’, is uncovering ‘the laws of association’. She interpreted these as indicating that it is natural for people in a social group to achieve a resolution of their differences through a process of constructive integration. This process offers the prospect of synergy because the members of a group are different, while the synergy itself gives rise to creative outcomes which enable different values and interests to be satisfied. The synergy offers much more than the sum of individual contributions. Moreover, Follett believed that the group process based on what she called the ‘interpenetration’ of people’s views and needs, could give rise to a genuinely collective

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will that is more valid and constructively articulated than that expressed simply through numbers alone—for example, through votes cast in an election. Follett’s thinking is certainly not immune from challenge and criticism. One can question her fundamental assumptions about how people associate in groups and small communities. Although at some points she recognized that factors such as envy could generate disharmony in a neighbourhood group, she tended to minimize this as an issue. Nonetheless, there is plenty of evidence indicating that groups cannot necessarily find it easy to progress from conflict to consensus—from ‘storming’ to ‘norming’ in Tuckman’s (1965) terms. The phenomenon of ‘groupthink’ (Janis 1972) also casts doubt on the assumption implicit in Follett’s writings that group integration will necessarily lead to constructive outcomes based on a democratic consensus. Rather, groups can, on the contrary, become internally coercive, and suppress opinions that deviate from those of the majority. Students of social power are likely to conclude that Follett’s analysis is naïve with regard to structurally embedded interests in society and in organizations, and the temptation of those with power to exercise it to further those interests (Clegg, Courpasson, and Phillips 2006). In other words, while ‘power with’ might be attainable in small groups or community associations where the members may not have basically divergent interests, ‘power over’ is likely to prevail in larger social systems such as in employment relations and in the governance of societies as a whole. Even at the level of smaller communities and groups, the exercise of power by some people over others would render very precarious the prospect of arriving at the ‘law of the situation’ through a democratic consensus. Follett did not appear to appreciate some of the subtleties of how certain individuals may come to exercise power over others, even within small communities and groups; for example through a superior facility with language and an ability to manipulate other people’s thoughts (Lukes 2005, Haugaard 2009). In other words, mutual agreement does not necessarily denote power with. One might conjecture that Follett’s growing interest in social psychology, stimulated by her closeness to community associations, came over the years to supplant the earlier training in political science that had drawn her attention to the exercise of influence in her study of the Speaker of the House of Representatives. However, she in effect provided a riposte to this supposition in The New State. In that book, she concluded that the model of the democratic political process contained in traditional Western political science was leading nowhere because formal parties and elections failed in two major respects to provide the means for the wishes of ordinary people in the community to be adequately expressed. First, conventional democratic arrangements do not permit local views to be expressed in a coherent and synthesized form. Voting, for instance, is essentially fragmented and individualistic. Second, conventional arrangements do not allow for the bottom-up articulation of opinion to proceed in a way that guarantees it has any continuing impact between elections (Follett 1918). In other words, only the product of a ‘power with’ process at the grassroots can mobilize the views of ordinary people sufficiently to have a significant influence within the political system. This process should in turn help to ensure that representation up to higher levels in the system reflects, and is

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held accountable to, local views that are both coherent and of substance. Social psychology, in Follett’s opinion, therefore contributes to a more valid political science by explaining how a collective grassroots view can be generated through group dynamics. In her analysis of politics in society, Follett recognized the tension between a need to appoint expert administrators and the need to hold them accountable. However, when she turned her attention to business managers, she seemed to modify her view. She regarded managerial authority as justified in terms of functionality. Managers were necessary and could contribute importantly to collective well-being. The criterion was that they had to perform that necessary role well and with regard to the interest of other parties to business. As noted, Follett placed considerable faith in a growing professionalism of management to ensure that this criterion was satisfied. By contrast, our confidence in the ability of senior executives to avoid making serious mistakes, let alone refrain from exploiting their positions of authority for personal gain, has been seriously shaken by prominent cases of corporate failure and managerial irresponsibility in the first decade of this century. Follett’s confidence in the good intentions of managers may have been informed by the enlightened employers and idealistic management pioneers with whom she came into contact, but it clearly needs to be qualified. While admitting that Follett’s thinking is subject to significant limitations, it nevertheless remains highly relevant, both to the process of management and to fundamental issues concerning contemporary business and social organization. As Follett herself recognized, the basic challenge for managers is how to reconcile the need for control and co-ordination with encouraging a creative dynamic in organizations. In contemporary language, this might be expressed in terms of how best to organize so as to combine efficiency with innovation. Although Follett did not anticipate current discussions of ambidexterity as a means of achieving this combination (Raisch et al. 2009), her general approach could be said to prefigure it. She identified the constructive role of conflict as a dynamic force with the potential for engendering innovative outcomes at a time when most management theorists regarded conflict as simply dysfunctional. Moreover, later research-based investigations into the core processes of management have tended to confirm the validity of her early insights. Not least, Follett has to be given credit for recognizing the centrality of these processes, some of which (such as control) have been unduly neglected in more recent writing. It is also instructive to note that Follett has also been regarded as a source of fundamental concepts in socio-technical systems analysis. According to Mumford (1996), Follett’s work offers a number of general principles for socio-technical analysis, namely participation, representation, joint problem solving, open face-to-face communication, gaining autonomy through joint work, integration, and group cohesion. Many of the specific practical lessons that a contemporary manager can draw from Follett’s work approximate to the so-called ‘high-road’ approach to human resource management. This is characterized by the encouragement of employee commitment, devolved discretion, teamworking, and an investment in employee skills (Bacon and Blyton 2000). Follett stressed the importance of working in groups, both as a means of individual fulfilment and of harnessing people’s contributions and opinions for the

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social good. Her concept of ‘circular response’ pointed to how team-working can enhance innovation, particularly through its capacity to integrate a diversity of member contributions and viewpoints. It is, therefore, part of management’s leadership role to harness the constructive potential of conflict by directing it towards the discovery of new solutions. Follett’s realization that for constructive social relations to emerge there has to be a breaking down of pre-existing stereotypes is the insight on which later approaches to organizational development, such as the ‘confrontation meeting’ technique (Beckhard 1967), have been based. Follett’s insights into the constructive use of conflict and the need to inform this process by reference to the ‘law of the situation’ are also very germane to meeting the challenge of constructively managing cultural differences, which has today assumed major proportions as international organizations have proliferated. We have seen that Follett was convinced that management can make a valuable contribution to society. She recognized that for this to occur, an acceptable basis had to be found for managerial authority. Her belief that the professionalization of business management could help legitimate its authority has not turned out to be very efficacious, especially in view of the widespread contemporary unease concerning the motives of business leaders. However, her recommendations for the ‘democratization’ of management are more promising. This is because they represent a tangible change of approach in the way people are managed, and because they are also in tune with the growing inversion of the traditional hierarchical organizational ‘pyramid’ in the possession of knowledge relevant to problem-solving. The concepts of ‘power with’ and ‘the law of the situation’, when combined, speak for an approach to managing which encourages discussion, listens to what is said, and is genuinely responsive to the views of organizational members at all levels. While managers are likely to remain in a favourable position to articulate what the needs of the ‘situation’ are, ‘power with’ indicates that their role is not to dictate solutions, but rather to encourage their emergence from group discussion. This more democratic approach to management is likely to be more effective than its traditional alternative, both in the quality of innovation it provides and in the level of employee commitment it generates. If a greater equality in voice is accompanied by a corresponding reduction of inequalities in reward, it may even begin to restore the social legitimacy of management. Unfortunately, rather few practitioners appear to be listening to this message. Turning to the broader canvas of contemporary social organization, Follett’s thinking suggests a route towards substantially reducing the challenges this presents. Here we can find a remarkable similarity between British Prime Minister David Cameron’s vision of the ‘Big Society’ and the socio-political agenda that Follett developed, especially in The New State. The case for the Big Society starts from the observation that top-down government ‘just doesn’t work’ (Cameron 2010), while Follett’s analysis began similarly with the observation that ‘all thinking men are demanding a new state’. The Big Society concept envisages the empowerment of communities so that local groups should run local services such as libraries, post offices, and transport, and also shape housing projects. As Cameron stated in a major policy speech, ‘The Big Society is about a huge culture change where people, in their everyday lives, in their homes, in their neighbourhoods, in their

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workplace don’t always turn to officials, local authorities or central government for answers to the problems they face but instead feel both free and powerful enough to help themselves and their own communities’ (Cameron 2010). Cameron claims that by releasing local communities from the dead hand of government bureaucracy, this initiative will enhance ‘people power’ and galvanize local energies. This is very similar to Follett’s belief that local neighbourhood groups would provide the most appropriate and soundly based foundation for democratic expression. Cameron’s proposal has been met with questions about how it will work in practice and who will pay for it. Follett’s specific recommendations on how to organize local community activities so as to make better use of existing facilities, such as the use of school premises out of hours, and her views on how community activism can provide greater substance to the democratic process, are very germane to addressing these questions. There is a related and equally deep-seated challenge for which Follett’s thinking also suggests a line of remedial action. That is the challenge of hierarchy. As I have argued elsewhere (Child 2009), evidence on the negative effects of organizational hierarchy is incontrovertible and overwhelming. Hierarchy is dysfunctional as a principle of organizing because it readily suppresses open communication and other requirements for successful innovation and adaptation to change. It has serious negative social consequences because, as a basis for a markedly unequal distribution of income and power in society, it is socially divisive and destructive of trust in leadership. At the same time, we have to recognize that hierarchy is a persistent phenomenon. Although some of this persistence has to be attributed to the self-interested reproduction of differentiation in power and privilege, the regularity with which the number of hierarchical levels is associated with organizational size suggests that there may be inherent drivers towards hierarchy in the mega-organizations to be found today in both business and government. Moreover, apologists for hierarchy claim that it is a necessary basis for order. Realistically therefore, the question we have to ask is, not what can be done to abolish hierarchy, let alone substitute anarchy for order, but rather what can be done to find ways of mitigating its negative effects. Any responses we can provide to this question should usefully inform those in organizations who seek to participate meaningfully and effectively in debate on the subject. This is where Follett’s thinking becomes relevant. As we have seen, Follett placed great faith in the ability of locally organized groups and communities to integrate people and to engage them constructively in the democratic process. This suggests the parallel possibility of strengthening governance mechanisms that provide for voice and countervailing powers to those vested in organizational hierarchies. In firms, such mechanisms include employee ownership, rights of representation accorded to employees (and possibly other stakeholders), and provisions for upward monitoring (see inter alia: Child and Rodrigues 2004; Heller, Pusić, Strauss, and Wilpert 1998; Wilkinson, Gollan, Marchington, and Lewin 2010). Top managers and their spokespersons frequently claim that such reforms would undermine sound management and jeopardize organizational performance (defined in their terms). Actually, and very importantly, the available evidence indicates that their overall effect on organizational performance is positive rather than negative, especially when

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complemented by appropriate managerial practices, including motivational supports and carefully designed employee training, such as in reading financial accounts (Heller et al 1998, Michie 2007, Wood 2010). Just as Follett argued that representation in the wider polity would benefit from a strong community base, so representation in work organizations might benefit from being based on working groups, and teams being permitted to have an active involvement and voice both in the organization of their work and in the policies of the larger organization in which they are members. Here we return to the combination of power with and the law of the situation as a practical way forward for management. Follett sensed that democratic processes were failing within the polity and she believed that this could threaten both good order and social well-being. Today, there is widespread disillusionment with national and business governance, and a feeling that their systems are not meeting people’s aspirations. The crass irresponsibility of many leaders in recent years, and the difficulties of holding them to account, define the need to find better solutions to the way we are organized and governed. It would be a grave mistake to label Follett’s thinking as being merely of esoteric historical interest, when in reality it offers profound insights for our times.

References Allen, A. (2005). ‘Feminist Perspectives on Power’. Stanford Encylopedia of Philosophy. Available at , Accessed 24 June 2012. —— (2009). ‘Gender and Power’. In S. Clegg and M. Haugaard (eds.), The Sage Handbook of Power. London: Sage: 293–309. Bacon, N. and P. Blyton (2000). ‘High Road and Low Road Teamworking: Perceptions of Management Rationales and Organizational and Human Resource Outcomes’. Human Relations 53(11): 1425–58. Beckhard, R. (1967). ‘The Confrontation Meeting’. Harvard Business Review, 45(2) (March– April): 149–55. Blumer, H. (1969). Symbolic Interactionism: Perspective and Method. Berkeley: University of California Press. Brech, E. F. L. (2002). The Evolution of Modern Management, Volume 5: Education, Training and Development for and in Management. Bristol: Thoemmes Press. Briggs, A. (1961). Social Thought and Social Action: A Study of the Work of Seebohm Rowntree: 1871–1954. London: Longmans. Bruce, K. (2006). ‘Activist Management: Henry S. Dennison’s Institutional Economics’. Journal of Economic Issues, XL: 1113–36. Cameron, D. (2010). Speech on the Big Society, Liverpool, 19 July 2010. Available at . Accessed 24 November 2010. Child, J. (2009). ‘Challenging Hierarchy’. In M. Alvesson, H. Willmott and T. Bridgman (eds.), Oxford Handbook of Critical Management Studies. Oxford: Oxford University Press: 501–14. —— and S. B. Rodrigues (2004). ‘Repairing the Breach of Trust in Corporate Governance’. Corporate Governance: An International Review, 12(2): 143–51.

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Clegg, S. R., D. Courpasson, and N. Phillips (2006). Power and Organizations. Thousand Oaks: Sage. Crawford, D. C. (1990). ‘Mary Parker Follett’. In E. T. James, J. W. James and P. S. Boyer (eds.) (1990), Notable American Women: A Biographical Dictionary: 1607–1950. Cambridge, MA: Harvard University Press: 639–41. Dennison, H. S. (1925). ‘Business Management and the Professions’. The Annals of the American Academy of Political and Social Science, 119: 143–7. —— (1931). Organization Engineering. New York: McGraw-Hill. —— (1932). Ethics and Modern Business. New York: Houghton Mifflin. Donaldson, L. (2001). The Contingency Theory of Organizations. Thousand Oaks, CA: Sage. Drucker, P. F. (1995). ‘Introduction. Mary Parker Follett: Prophet of Management’. In P. Graham (ed.), Mary Parker Follett: Prophet of Management. Boston, MA: Harvard Business School Press: 1–9. Follett, M. P. (1896). The Speaker of the House of Representatives. New York: Longmans, Green. —— (1918/1998). The New State: Group Organization, the Solution of Popular Government. New York: Longmans, Green. Re-published by Pennsylvania State University Press in 1998. Also available online at . Accessed 25 November 2010. —— (1924). Creative Experience. New York: Longmans Green. In process of being made available online by the Mary Parker Follett Foundation [MPFF 2010] at . Galbraith, J. (1994). Competing with Flexible Lateral Organizations. Reading, MA: AddisonWesley, 2nd edition. Giddens, A. (1984). The Constitution of Society. Cambridge: Polity Press. Graham, P. (1987). Dynamic Managing: The Follett Way. London: Professional Publishing and British Institute of Management. —— (ed.) (1995a). Mary Parker Follett: Prophet of Management. Boston, MA: Harvard Business School Press. —— (1995b). ‘Mary Parker Follett (1868–1933): A Pioneering Life’. In P. Graham (ed.), Mary Parker Follett: Prophet of Management. Boston, MA: Harvard Business School Press: 11–32. —— (1998). ‘Follett, Mary Parker (1868–1933)’. In M. Warner (ed.), The IEBM Handbook of Management Thinking. London: International Thomson Business Press: 201–5. Gulick, L. H. and Urwick, L. F. (eds.) (1937). Papers in the Science of Administration. New York: Institute of Public Administration. Haugaard, M. (2009). ‘Power and Hegemony’. In S. Clegg and M. Haugaard (eds.), The Sage Handbook of Power. London: Sage: 239–55. Heller, F., E. Pusić, G. Strauss and B. Wilpert (1998). Organizational Participation: Myth and Reality. Oxford: Oxford University Press. Janis, I. L. (1972). Victims of Groupthink. Boston: Houghton Mifflin. Lukes, S. (2005). Power: A Radical View, Basingstoke: Palgrave Macmillan, 2nd edition. Metcalf, H. C. and L. Urwick (eds.) (1941). Dynamic Administration: The Collected Papers of Mary Parker Follett. London: Pitman. Mintzberg, H. (2009). Managing. San Francisco: Berrett-Koehler. Michie, J. (2007). ‘The Economic Case for HM Treasury to Support the Employee Owned Business Sector through Tax Breaks and the Reform of the Treatment of Employee Trusts’. Report for the Employee Ownership Association, November.

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Mumford, E. (1996). ‘Designing for Freedom in a Technical World’. In W. Orlowkowski, G. Walsham, M. R. Jones, and J. I. DeGross (eds.), Information Technology and Changes in Organizational Work: Images and Reflections. London: Chapman and Hall: 425–41. Raisch, S., J. Birkinshaw, G. Probst, and M. L. Tushman (2009). ‘Organizational Ambidexterity: Balancing Exploitation and Exploration for Sustained Performance’. Organization Science, 20(4): 685–95. Thomas, K. W. (1992). ‘Conflict and Conflict Management: Reflections and Update’. Journal of Organizational Behavior, 13(3): 265–74. Tonn, J. C. (2003). Mary P. Follett: Creating Democracy, Transforming Management. New Haven: Yale University Press. Tuckman, B. (1965). ‘Developmental Sequence in Small Groups’. Psychological Bulletin, 63(6): 384–99. Urwick, L. (ed.) (1949). Freedom and Co-ordination: Lectures in Business Organization by Mary Parker Follett. London: Management Publications Trust. —— (1956). The Golden Book of Management. London: Newman Neame. —— and Brech, E. F. L. (1945). The Making of Scientific Management. London: Pitman, Volume I: Thirteen Pioneers. Wilkinson, A., P. J. Gollan, M. Marchington, and D. Lewin (eds.) (2010). The Oxford Handbook of Participation in Organizations. Oxford: Oxford University Press. Wood, S. (2010). ‘High Involvement Management and Performance’. In A. Wilkinson, P. J. Gollan, M. Marchington, and D. Lewin (eds.), The Oxford Handbook of Participation in Organizations. Oxford: Oxford University Press: 407–26.

chapter 6

george elton m ayo k yle bruce

Mayo, the man and his work 1 George Elton Mayo was born in Adelaide, a free settlement and the capital of South Australia on 26 December 1880, into one of the city’s most prominent families at a time when society was based on families, and respectability was of critical importance to one’s social standing. Despite his siblings’ academic and professional achievements in medicine and in law, the pale, anomic Elton failed to complete medical school three times and only found his niche as a mature-age student studying philosophy at the University of Adelaide, graduating with a Bachelor’s degree in 1911.2 Thereafter, and until his arrival in the US in 1922, he lectured in philosophy (broadly conceived, and so including economics, ethics, psychology, and politics) at the fledgling University of Queensland in Brisbane. During that time he also married Dorothea McConnel, educated in Europe and emanating from one of Queensland’s most respected and prominent families (Trahair 1984). Chafing under the working-class provincialism of Brisbane and from a sense of failure owing to his wife and her family’s conviction she had married beneath her station, Mayo sought an academic career in England and set sail in July 1922 via the west coast of the US, where he had hoped to earn the remainder of his fare to the UK. This was not to be, and following some rather desperate networking with leading social scientists and grant and philanthropy officials, Mayo landed himself a research fellowship at the Wharton School in Philadelphia in 1923, where he remained until his Harvard appointment in 1926 (Trahair 1984; Hoopes 2003). As I will demonstrate below, these

1

Readers are urged to consult the definitive biography of Mayo, Richard Trahair’s (1984) The Humanist Temper: the Life and Work of Elton Mayo. New Brunswick, NJ: Transaction Books. 2 A hastily arranged MA was later granted in 1926 as Mayo needed a postgraduate qualification in order to take up his position at Harvard Business School (Trahair 1984).

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formative years were propitious inasmuch as they connected Mayo and John D. Rockefeller Jr (JDR Jr, hereafter) and thereby laid the path for Mayo’s ‘empirical’ investigation into organizational behaviour—initially called ‘human relations’—which propagated his reputation as the ‘founding father’ of the human relations ‘school’ (HRS, hereafter) of management. Mayo’s position at Wharton was financed by JDR Jr from his own personal funds following difficulties convincing the trustees of the Foundation established in his mother’s memory of the importance of Mayo’s work. Mayo’s ability to engage in his first serious applied work in industrial psychology in Philadelphia factories in no small measure owed much to Rockefeller connections (Bulmer and Bulmer 1981). Mayo’s ‘fieldwork’ whilst at Wharton, particularly that at Continental Mills, laid the foundations for his approach to interpreting the Hawthorne results in his 1933 Human Problems. Believing that the scientific study of individuals and human relationships at work must precede scientific management (SM, hereafter), he wanted to study workers and gauge how their past experiences, domestic life, and work conditions might precipitate pessimistic or ‘obsessional reveries’. In this respect, he applied the new medical psychoanalysis to factory problems and, after extensive interviews concerning unproductive fatigue and reveries, he likened factory workers to ‘shell shocked’ soldiers in need of serious psychological/psychiatric attention. Mayo postulated that poor conditions and long hours resulted in fatigue and mild psychiatric disturbances which, he believed, might result in high labour turnover, low productivity, and industrial unrest. He dismissed workers’ calls for improved wages and conditions, and a ‘voice’ over same, as ‘socialistic radicalism’ and as symptomatic of some deeper psychosocial maladjustment. His major recommendation was for increased rest pauses or breaks and, as a consequence, labour turnover dropped and output rose (Trahair 1984). The way forward, he concluded, was not improved wages and conditions and industrial democracy, but instead, the type of industrial psychological research he was presently engaged in (Mayo 1923a, 1923b, 1924a, 1924b, 1926). ‘Discovering’ a correlation between workers’ productivity and their mental health won Mayo the enthusiasm of key Rockefeller foundation heads, particularly psychologist Beardsley Ruml, and it coalesced with JDR Jr’s concern with improving industrial relations. JDR Jr’s willingness to support social and industrial research evolved from the infamy that befell his family’s name as a consequence of the 1914 Ludlow massacre in which six striking miners, two women, and eleven children were killed at the Rockefellerowned Colorado Fuel and Iron (CFI, hereafter) company (Gitelman 1988; Rees 2010). In the aftermath of this tragedy, JDR Jr engaged the public relations’ services of Clarence Hicks, a former YMCA official concerned with workers’ welfare, and the industrial relations’ expertise of W. L. Mackenzie King, a future prime minister of Canada. Both urged JDR Jr to fund social science researchers whose work would help resolve ‘the labor question’ in a fashion amenable to Rockefeller interests, and they helped him establish the CFI Employee Representation (or Rockefeller) Plan that would both provide a venue in which management and employees could discuss issues of common concern, and present the Rockefellers in a positive light (Fisher 1983). The Plan was a union-avoidance

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strategy, though one achieved through union substitution, rather than union suppression. Although more progressive than those similiarly established at other companies, the Plan nevertheless remained designed to exclude independent unionism by improving communication and coordination within the firm and by developing what today would be called a ‘high-involvement’ or ‘high-performance’ Human Resource Management regime (Rees 2010; Taras 2000; Kaufman 2000). At the urging of Hicks and King, JDR Jr bankrolled a massive corpus of industrial relations’ research in industry and in universities, and so, has been labelled (alongside Sidney and Beatrice Webb, and John Commons) as a co-founder of the field of industrial relations (Kaufman 2004). He became Mayo’s financial and professional benefactor; either through his family’s various philanthropic foundations or through his own personal wealth, JDR Jr and his philanthropic network funded Mayo’s salary initially at Wharton and then again at Harvard; he either personally or via corporate contacts arranged access to firms for Mayo’s industrial research (including Hawthorne); and again, either personally or through contacts, JDR Jr continually assured Mayo a receptive audience for his evolving HR ideas (Bulmer and Bulmer 1981; Fisher 1983; Trahair 1984; Harvey 1982; Gillespie 1991; Magat 1999; O’Connor 1999a). Armed with Rockefeller funding and the support of Harvard Business School Dean, Wallace Donham, Mayo arrived at Harvard in 1926 and remained there until his retirement in 1947. Mayo used Rockefeller lucre to hire gifted young acolytes who became collectively famous as the ‘Harvard human relations group’ and raised the reputation of the Business School from its initial ‘low status as a trainer of money grabbers into a highprestige educator of socially conscientious administrators’ (Hoopes 2003, 141; O’Connor 1999a). Following his work in Continental Mills, perhaps in a bid to gain recognition and employment, Mayo began proselytizing on the benefits of industrial psychology. Crucial for his ability to reach a receptive audience, first, were his roles with Rockefellerowned big businesses, as well as their professional think-tanks, particularly the clandestine Special Conference Committee, and also Industrial Relations Counselors (IRC, hereafter). Particularly important in the context of the latter was his friendship with IRC head, Arthur H. Young. In October 1927, Young arranged for Mayo to address a group of industrialists concerning what psychology could offer industry. This talk had two important consequences. First, the personnel director of Western Electric invited Mayo to become involved in the ongoing Hawthorne studies, thus precipitating the most public and enduring aspect of the diffusion of his knowledge claims concerning human motivation, worker irrationality, and the need for a managerial elite. Less well known, but perhaps of equal consequence, Mayo was invited to a private meeting with JDR Jr, out of which came a commission to research ‘possible causes of improper functioning of the [CFI] Industrial Plan and the possible use of forces to bring about a more cooperative relationship between management and employees’. Two months after Mayo’s ‘investigation’ into the limited success of the Rockefeller Plan, he received a retainer from IRC and, as a something of a quid pro quo, Young was invited to lecture at the Harvard Business School. Thereafter, Mayo and Young became close friends and

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Mayo benefited greatly from the connections made through Young. Mayo accompanied Young to Geneva as an ‘expert industrial relations advisor’ when IRC established a branch at the International Labour Organization (ILO). Young, in fact, was a crucial bridge and broker between Mayo and JDR Jr in that he drew Mayo into the inner circle of industrial relations executives of major corporations, fostered his involvement in the Hawthorne studies, and ensured Western Electric and AT&T executives understood the importance of Mayo’s research (Trahair 1984; Smith 1976). Mayo’s involvement with the Hawthorne studies was attractive to JDR Jr and other philanthropy officers because this research promised ‘a technology of social control that could confront problems of industrial unrest and individual maladjustments among workers’ (Gillespie 1991: 112–13). The second means of securing an audience for his latent HRS knowledge-claims was his pivotal role in the fledgling Harvard executive education programme, the so-called ‘Cabot Weekends’. Regardless of Mayo’s motives, ‘what mattered was that were was an audience of social scientists, foundation officials, corporate executives, and managers ready to listen to and support Mayo’s approach’. His mild criticism of them was ‘the prelude to a program offering them more efficient techniques of control’ (Gillespie 1991: 110). Held for one weekend a month, beginning in January 1935 and ending in December 1941, young executives—the future captains of industry and finance—were invited to these workshops from America’s largest corporations, including Western Electric, AT&T, Standard Oil, Nabisco, J.P. Morgan, American Tobacco, Du Pont, IBM, and US Steel (Cabot Papers, c. 5, f. 169. Baker Library, Harvard Business School). In practice, the Cabot Weekends were just one part of a particular model of leadership training emphasized by Dean Donham, focusing on business managers as elites or statesmen presiding over a rapidly deteriorating society (Cruickshank 1987). This view received particular impetus from Donham’s involvement in the Harvard Pareto Circle who, as an epistemic community, felt the need to defend capitalism against socialistic threats and who invoked Pareto specifically to counter Marx (O’Connor 2008a). Given the subject matter of the Cabot Weekends were about clarifying social and human problems in industry, Cabot shaped many of these meetings around talks by Mayo and Roethlisberger, and subsequently other HRS figures such as T. N. Whitehead and George Lombard, particularly as ‘ . . . the enthusiastic response by businessmen toward the Hawthorne findings suggested that the School might pursue new directions in executive education’ (Cruickshank 1987: 190; Trahair 1984). As Roethlisberger (1977: 86–7) notes, ‘Cabot at this time must have felt that Mayo’s diagnosis of the ills of modern industrial civilization wanted an audience of responsible businessmen. He bought together some the outstanding business leaders of the time and bought them Mayo in person’. Mayo himself notes, in a letter to Donham in 1937: Cabot’s original idea was that very considerable social changes are in process; the capacity of society to adjust itself to such changes without serious damage, without loss of order, will be determined by the adequacy and courage of our leaders . . . developed only by experience, knowledge of fact and situation, and intelligent understanding.

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[Accordingly,] Cabot has been driven to make even more use of the services of my immediate colleagues and of the ideas which the group is developing as a result of its investigations. (Mayo Papers, c. 2, f. 2; parentheses added. Baker Library, Harvard Business School)

This is an important point, because the Hawthorne researchers and HRS took for granted the necessity of complete managerial hegemony in the workplace. As Gillespie (1991: 268) notes, ‘Human Relations became an attractive ideology for a technocractic and managerial class trying to reconcile its expanded power with the principles of liberal democracy’. In this way, Mayo made a strong case that his ideas and methods would develop the requisite managerial elite needed to save civilization by training these leaders at Harvard (O’Connor 1999b). As he asserted, ‘Human Relations, in the form of skills taught to business leaders and administrators, could ensure social collaboration in the factory and in society at large and win the war against Communism’ (1949, cited in Gillespie 1991: 246). The 1940s were not kind to Mayo and he became increasingly alienated from his Harvard colleagues, a situation no doubt exacerbated by the retirement in 1942 of his oldest ally, HBS Dean Wallace Donham. Even his principal and most loyal acolyte, Roethlisberger, increasingly sought to distance himself from Mayo. Other members of the ‘Human Relations Group’ had also left the fold: Philip Cabot died in December 1941, Lawrence Henderson who had led the ‘Pareto Circle’ died in February 1942, Lloyd Warner had left for the University of Chicago, and T. M. Whitehead had left to serve in the US Army during WWII. Mayo doggedly hung on at Harvard despite the new Dean, Donald David’s wish that he leave. Mayo retired in 1947 and sailed to England to join his family and attempt to reinvent himself as a consultant. No longer armed with Rockefeller funding, Mayo never managed to secure a full-time academic or consultant position in the UK and could only supplement his dwindling Harvard pension with visiting lectures. Mayo died an isolated and frail man on 1 September 1949 (Trahair 1984).

Hawthorne and human relations Mayo first visited the Hawthorne plant (one of Western Electric’s largest manufacturing sites in Chicago) for two days in April 1928, then for four days in 1929, and then he began a deeper involvement in the ongoing experiments in 1930. The experiments had commenced in 1924 and the results were so inconclusive and confusing to management at Western Electric, that Mayo’s interpretation of the data to ‘prove’ his preconceived ideas furnished a shared account amongst different parties to the investigations, namely managers at Hawthorne; Harvard researchers; top Harvard Business School administrators; Rockefeller philanthropies underwriting Mayo’s interpretations; and conservative big business interested in control over their companies. The key findings were widely

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construed as demonstrating that once the irrationalities of workers are removed, or ameliorated, they will respond positively to non-economic incentives and be motivated to increase their productivity. Though there were five sets of independent ‘experiments’, the key findings were actually based on the study of only six women (two of whom were replaced) at a workbench—the Relay Assembly studies—over some five years! In November 1928 Mayo reported his interpretation of the findings of the relay assembly studies to members of the Special Conference Committee. They were very impressed, especially now that his theories were cloaked in facts and figures and emphasized that changes in supervision solved worker maladjustment and improved productivity (Trahair 1984; Gillespie 1991). The poorly designed study of six unrepresentative staff was sufficient for big business to accept Mayo’s theory and be ‘enrolled’ in his research programme (Bruce and Nyland 2010): such was the need for acceptance of Mayo’s knowledge-claims as an explanation of worker behaviour and as a way to control society. Accordingly, the conventional wisdom in management theory holds that the scientific study of organizational behaviour—initially called ‘human relations’—was the intellectual progeny of Mayo and his associates in and around the Hawthorne investigations, and that their concern with the ‘human factor in industry’ was a reaction against, and solution for, the inhumane, techno-economism of the rival research programme of the time, SM or Taylorism. The latter’s allegedly single-minded focus on measurable productivity outcomes and (‘low-level’) pecuniary methods of motivation, coupled with its bifurcation of conception and execution of productive tasks (or deskilling), resulted in widespread opposition amongst ‘alienated’ individual and organized labour. Mayo is ritualistically presented as the counterpoint to Taylorist ‘exploitation’, and to him, his associates, and his new ‘school’ of management theory are attributed the ‘discovery’ of the social person and his/her centrality in the workplace: humans are not merely the egoistic, utilitarian economic animal of mainstream economics and SM, but they have other (‘high-level’) psychosocial needs, and their social relationships at work play an important role in their productivity. They are at once individuals with diverse needs, desires, and goals and, at the same time, members of social groups (fellow workers, wider society, etc.) where such association modifies their individualistic impulses (Wren 2005; Duncan 1999; Wren and Greenwood 1998). This recognition that individuals are different and possess idiosyncratic motives and that managers must recognize the uniqueness of individuals and somehow temper their goals and aspirations so that they are closely congruent with those of the organization (Duncan 1999), is one of the central contributions of Mayo and the HRS to management theory. They brought people’s social needs into the limelight and thereby increased their capacity for ‘spontaneous collaboration’ at work. Employees obtained identity, stability, and satisfaction, making them more willing to cooperate and contribute their efforts toward accomplishing organizational goals (Wren 2005; Wren and Greenwood 1998; Kaufman 2000, 2004, 2008). However, it must be noted that many thinkers preceded Mayo et al in discussing the ‘human problems of industry’, and not all exponents or writers on SM ignored the human element—facts well understood in the history of management theory, but not in management theory texts (Bruce 2006). To be sure,

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‘human relations’ was a term used frequently well before the Hawthorne investigations and in this context, Wren (2005) devotes an entire chapter of his management history text to the contributions of Taylorists such as Ordway Tead, Mary Parker Follett, Mary Van Kleeck, Whiting Williams, and others, in laying the path for the human relations rubric. Indeed, both Boddewyn (1961) and Locke (1982) have argued that much of the Hawthorne conclusions regarding informal norms and output restriction were identified by Taylor several decades before the Hawthorne studies. In a similar vein, Duncan (1970) has noted that many of the early scientific management engineers appreciated human and social elements in industry. This would make sense, for as Wren and Greenwood (1998) have argued, Taylor himself did not provide solely for economic incentives, but made important contributions to modern thinking about human motivation and inspired Hugo Munsterberg to found the discipline of industrial psychology. Further, it must also be noted that Mayo’s place in the evolution of human relations thought is, in itself, the subject of significant debate. His precise role in the Hawthorne investigations has been variously conceived, with substantial contention both as to his function and his scientific credibility. There is some doubt, for instance, as to whether Mayo’s interpretation of the Hawthorne experiments was more reflective of his preconceived personal views, than of the actual empirical results, and this may have shaded Roethlisberger and Dickson’s ‘official’ 1939 account (Carey 1967; Gillespie 1991; Smith 1985; Smith 1998; Wren and Greenwood 1998). In this context, Mayo’s personal contribution to the Hawthorne studies has been conceived as little more than as a scientific popularizer in a public relations role for Western Electric, particularly given the main series of experiments were well under way when he arrived on the scene in 1928 (Smith 1998). Indeed, Trahair (2001) maintains that ‘Mayo was never responsible for doing any research as such at the Western Electric works, all he did was make the magic run, others did the work.’ Sofer (1973) has maintained that Mayo’s main contribution was handling the relationships between the research team and the company and assisting with the design of research projects, whilst O’Connor (1999a) has argued that his major function in the investigations was that of legitimizing both the academic rigour as well as the practical industry relevance of the Harvard Business School. Above all else, Mayo’s theory of human relations was based almost entirely on his personal political interpretation of worker motivation. This shaped the results of the investigations, and his career can be seen as the rise of causal knowledge above statistical fact and the emergence of high theory masquerading as factual evidence (Gillespie 1991). Finally, the real motivation behind Mayo’s theory was arguably that of psychological control over workers. While Taylor was supportive of improvements in workers’ pay and conditions, Mayo and HRS promised to eliminate such calls entirely. Mayo’s conceptualization of managers as a natural elite, possessing the ability, and so the right, to rule workplaces (and the nation) is especially problematic. Second, Mayo and HRS accorded this managerial elite with vastly greater potential for authoritarianism than any Taylorist ideas or measures. While Taylorism (notwithstanding Taylor’s own exhortations for a great ‘Mental Revolution’) presented managers with the potential to exert power physically over the human body spatially and temporally, Mayoism offered a more a subtle and

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efficient means of exercising this power mentally, via workers’ cognition and emotions. It was a new way to control workers to accept less while claiming that workers needed psychological counselling about their relations at work that only management could administer. I will return to this point towards the end of the chapter when I discuss the legacy of Mayo and the HRS for the contemporary study of organizational behaviour and HRM.

Mayo’s management theory One must appreciate that JDR Jr wielded enormous influence over Mayo, particularly since the latter was never a salaried faculty member at Harvard. The immense pressure to achieve demonstrable results to please his patron would play a significant role in the development of Mayo’s ideas (Fisher 1983; Gillespie 1991); namely, it would very much shape his rhetorical strategy to one that would preclude bargaining or dialogue with workers or in any way jeopardize management hegemony. From the outset and through much of his published work, Mayo’s rhetoric was unquestionably geared to what his patron might want to ‘hear’, that is he consistently paints a picture of workers as irrational, agitation-prone masses susceptible to ‘socialistic’ radicalism and so, unfit for ‘voice’ in the workplace. This argument pervades much, if not all, of his Wharton writings. He argues repeatedly that ‘factors of unreason play a part in every industrial dispute’ (Mayo 1923b) and further, in the popular Harper’s Magazine, that the ‘unreason which shows itself in industry and in political movements is closely akin to the unreason which showed itself in shell-shock hospitals’ (Mayo 1924a: 529). In an unpublished memo to Beardsley Ruml, Mayo notes that ‘wars and strikes (are) never the product of a sudden and unexpected irrationality. Always (like a nervous breakdown) the product of a long “education” in irrationality—that is to say, always the product of imperfect understanding and organized opposition (so-called “democratic method”). This is clearly evident in Australia as here’ (Mayo 1924d: 6–7). This ‘unreason’ or ‘irrationality’ he widely associates with ‘pessimistic or dissociated reveries’ induced by work conditions which he believes can only ‘culminate in disorder and unrest (absenteeism, high labor turnover, strikes)’ (Mayo 1924c: 256), or worse, that ‘Socialism, Syndicalism, and Bolshevism—irrational dreams of anger and destruction—are the inevitable outcome’ (Mayo 1924a: 123). Further, in an unpublished letter in 1923, he conveyed his belief that ‘(s)ocialism is a disassociated reverie in that workers have failed to achieve self-expression and control over their destiny and have substituted for such development a reverie, an imagined social situation, in which the individual worker is free to direct his life work’ (Mayo to Willits 1923, Mayo Papers: Box 1c, f. 75. Baker Library, Harvard Business School). As for the way forward, Mayo sums up his arguments thus: In every individual there are incompletely developed capacities—fears and hatreds— which go undetected . . . To these irrational preoccupations in the supposedly normal may be attributed the great mass of industrial maladjustment and both organized and

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kyle bruce unorganized industrial discontent. ‘Radicalism’ in all its forms is primarily a problem for psychiatry; its economic aspect is of secondary importance. . . . (T)he psychiatrist is the only person who knows how to assess the organic and mental symptoms in such situations. And the study is so important from a merely industrial point of view that any other contemporary economic activity pales into insignificance. It is here or nowhere that the problems of industrial peace will be solved. (Mayo 1926)

The key point, as Gillespie (1991: 105) observes, is that Mayo must have found it enormously problematic to remain impartial, and balance a theoretical commitment to criticize both workers and employers as being ‘irrational’ with the fact that he was dependent on employers for access to their factories. So it was, therefore, that he painted ‘[s]trikes and the political disturbances of mass democracy . . . not [as] the rational attempts to gain an increase in wages, [but] as expressions of underlying reveries, and it was these reveries that had to be addressed, not the political demands or “symptoms” ’ (Gillespie 1991: 105; parentheses added). Mayo cleverly simply reinterpreted the political stances of aggrieved workers as merely symptomatic manifestations of some underlying personal maladjustments (Gillespie 1991). In his 1933 Human Problems of Industrial Civilization, which was actually a collection of earlier lectures, Mayo provided a very partial account of the Hawthorne studies or rather his interpretation of the same in Chapter Three. Not surprisingly, given his contentious role in the studies, his emphasis was on fatigue and on his interview programme. Summarizing the results of the Relay Assembly Room studies, he reported a continued upward trend in output independent of changes in rest pauses, an increase in contentment, and a decrease in absences amongst workers under test-room conditions. He also concluded that output was more directly related to type of working day rather than the number of working days in a week (Mayo 1933). In terms of his interview programme, he noted that operatives had no idea as to why their productivity increased, but that their replies indicated ‘distinctly pleasanter, freer, and happier working conditions’ are a factor, that is, changes in worker productivity have less to do with incentive payments than with changes in mental attitude.3 For Mayo, this was indicative of a new industrial milieu, in which worker self-determination and social well-being ranked first and work was incidental (ibid.). As he noted: The individuals who make up a working department are not merely individuals; they constitute a group within which individuals have developed routines of relationship to each other, to their superiors, to their work, and to the policies of the company. A high incidence of so-called ‘social maladjustment’ in a given group may refer to something in these routine relationships to the work and to each other rather than some primary irrationality in the individual. (ibid. 111)

This nexus between worker supervision, morale, and productivity provided the bedrock upon which human relations and organizational behaviour was founded. 3 Some analysts believe that this is not completely accurate, as it may have been financial incentives (pay for performance) which had contributed to the increase in productivity (see Wren and Greenwood 1998, 176).

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In this context, Mayo believed that the incentive pay schemes emphasized by the scientific managers were largely misunderstood and resulted perversely in the very thing they were designed to ameliorate: output restriction. For Mayo, output restriction revealed a sense of personal futility, ‘a conflict of loyalties—to the company, to the supervisor, to the working group—and no possibility of solution, except by improved understanding’ (ibid. 115). As he saw it, there was a conflict between the social code bonding the working group and the purely pecuniary logic of incentive pay: Human collaboration in work, in primitive and developed societies, has always depended for its perpetuation upon the evolution of a nonlogical social code which regulates the relations between persons and their attitudes to one another. Insistence upon a merely economic logic of production . . . interferes with the development of such a code and consequently gives rise in the group to a sense of human defeat. (ibid. 116)

This was a well-founded sociological phenomenon, Mayo concluded, extensively citing Durkheim and the latter’s notion of anomie where, because of disorganization and chaos in industrial society, social groups develop wherein the interests of individuals are subordinate to the interests of the group to which they belong in order to promote solidarity (ibid. 124–5). Mayo devoted the remainder of the volume to his lifelong preoccupation: getting managers and public officers to be cognizant of the ‘human problems of industry’. Citing the Hoover National Committee on Social Changes, he argued cogently that social invention had not kept pace with technical invention, that ‘rule of thumb’ had been replaced in technical areas but still applied in managing humans (ibid. 132). ‘The chief difficulty of our time’ he noted, ‘is the breakdown of the social codes that formerly disciplined us to effective working together. . . . We have too few administrators alert to the fact that it is a human and social, not economic problem which they face’ (ibid. 180). Anomie had transformed the essential nature of every administration problem, so problems of ‘human equilibrium’ and effort were not adequately covered by factory organization and executive policy. We have seen much scientific research and training of scientists to the detriment of training administrators—managers of people. Effective and wholehearted collaboration between administrative and working groups within industry, he continued, was withered away by the Industrial Revolution and mechanization, and problems had been ill-defined by economics and pecuniary logic in that ‘social and human factors have been disregarded’, thereby reducing people’s capacity for collaboration at work. Managerial emphasis solely on efficiency thwarted the individual’s desire for group approval, social satisfaction, and social purpose that had previously been gained through communal life. For Mayo, this represented the most serious industrial problem of the day (ibid. 165–80; Wren and Greenwood 1998). Finally, we must consider Mayo’s second major work, his The Social Problems of an Industrial Civilization written in 1945. Herein, he provided a sustained critique of mainstream economic theory’s handling of human nature, and provided further elaboration on the Hawthorne interview programme. Above all else, and this would make sense

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as Mayo throughout his career attempted to apply the scientific method of the detached clinician to human problems, his overriding critique centred on the apparent divide between mainstream economic theory and industrial reality. He believed that neoclassical economics was overly deductive in its method—‘remote from the active world of affairs’— and its assumptions regarding human motivation were clearly outdated: ‘(e)conomic theory in its human aspect is woefully insufficient; indeed it is absurd’ (Mayo 1975: 51). Tracing the blame through a lineage stretching from the Physiocrats, through Smith and Ricardo, to the neoclassical school dominant at his time of writing, Mayo focused in particular on the ‘rabble hypothesis’ of David Ricardo, the latter’s interpretation of laissez-faire: that society is nothing more than a horde of atomistic individuals each of whom acts rationally in pursuit above all else of their own self-interest (ibid. 37). For Mayo, nothing could have been further from the truth, for the Hawthorne investigations suggested to him that collaboration rather than competition was important; that individuals placed the interest of the group over their own; and that their thinking in this regard was guided more by cultural sentiment than rational logic (Wren 2005). As Mayo put it: It is at least evident that the economists’ presupposition of individual selfpreservation as motive and logic as instrument is not characteristic of the industrial facts ordinarily encountered. The desire to stand well with one’s fellows, the so-called human instinct of association, easily outweighs the merely individual interest and the logical reasoning upon which so many spurious principles of management are based (Mayo 1975: 39).

And further, Humanity is not adequately described as a horde of individuals, each actuated by self-interest, each fighting his neighbour for the scarce material of survival. . . . For all of us the feeling of security and certainty derives from membership of a group. If this is lost, no monetary gain, no job guarantee, can be sufficient compensation. (ibid. 51: 67).

And finally, In industry and in other human situations the administrator is dealing with well-knit human groups and not with a horde of individuals. . . . Man’s desire to be continuously associated with his fellows is a strong, if not the strongest, human characteristic. (lbid. 99).

Mayo’s legacy: organizational behaviour and human resource management As is well known, it was Mayo’s closest disciple, Fritz Roethlisberger (with Western Electric’s William Dickson) in the 1939 Management and the Worker, who provided a more accurate and encyclopaedic outline of the Hawthorne experiments, particularly in

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relation to the later Bank Wiring Room studies that began in December 1931. Between 1932 and 1935 Mayo had little to do with Hawthorne as his time was consumed with travel and popularizing the earlier experiments. Mayo used Rockefeller funding to get the book published with Harvard University Press and in it Roethlisberger and Dickson gave more formal expression to Mayo’s insights concerning the individual-working group dynamic: they employed the terms formal and informal organization to capture this inter-human relations phenomenon. For them, the Bank Wiring Room studies suggested that the group of workers studied ‘possessed an intricate social organization in terms of which much of their conduct was determined’. It was this social code rather than individual malady that resulted in output restriction, as it served as a ‘protective mechanism’ insulating the group from outside changes in work conditions and personal relations (Roethlisberger and Dickson 1939, 525). In sum, in a much cited stanza, (t)he study of the bank wiremen showed that their behavior at work could not be understood without considering the informal organization of the group and the relation of this informal organization to the total social organization of the company. The work activities of this group, together with their satisfactions and dissatisfactions, had to be viewed as manifestations of a complex pattern of interrelations. In short, the work situation of the bank wiring group had to be treated as a social system; moreover, the industrial organization of which this group was a part also had to be treated a social system (Ibid., 551; emphasis added).

So it was, therefore, that organizations came to be viewed as social systems wherein we find a number of individuals working towards common goals but each bringing to the work situation a number of different, personally and socially conditioned goals or aspirations (Ibid., 553–4). The aim of the organization, or more realistically its management, is to somehow temper these individual goals so as they are congruent with those of the organization. These notions, along with an embryonic discussion of organizational or corporate culture, can be found in Management and the Worker and they infuse any meaningful contemporary discussion of organisational behaviour, motivation, and human resource management (HRM). After Mayo’s death, Roethlisberger carried the HRS torch in Harvard’s burgeoning MBA programme, ensuring that human relations was taught to all first-year MBA students in the 1950s in the guise of his ‘administrative practices’ course. He also created a new subject in the Business School’s doctoral programme, ‘organizational behaviour’, such that ‘(a)s the Harvard OB program graduated doctoral students who became professors elsewhere, tough-minded psychological realism became part of the businessschool ethos’ (Hoopes 2003: 159). This is an important point for it marks the beginning of the virtual domination of organizational or occupational psychology—and the concomitant marginalization of sociology—in the discipline of organizational behaviour and HRM which would have deleterious consequences for workplace democracy. By rendering the inter-subjective space of the factory more ‘governable’ and by redefining the identity of the worker, Mayo and HRS helped create a mode of workplace governance that could be deemed legitimate in the political culture of the 1930s and beyond: HRS established a nexus between the government of production and the

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government of the social field. Mayo, the master publicist, problematized production at the junction of the concern with the regulation of ‘the social’ and a concern with the government of ‘the self ’. As noted above, he established a correlation between poor work performance and all manner of social ills/pathologies construed as a threat to good order and social tranquillity. Work was accorded a crucial role in responsible selfhood upon which free society depends: if an elite of socially skilled managers gave due regard to workers’ psychological state and their relations with others in the workplace, then anomie and social disintegration might be averted (Rose 1978; Miller and Rose 1995). In this way, the evolution of HRS signifies what Foucault (1980) describes as a move from ‘sovereign’ to ‘disciplinary’ power in terms of more persuasive and subtle procedures of power and sites of deployment. As Deetz (2003: 29) notes, in modern corporations, control and influence are dispersed into norms and standard practices as products of moral, medical, sexual and psychological regulation.

And further, HRM [provides] a knowledge-based system of managing to replace an authoritybased one. And HRM [provides] orderly scientific knowledge to replace common sense. Thus power passes from based on position to knowledge, and the knowledge to be preferred comes from professionals. HRM thus became a system standing alongside managers and other employees and disciplining both. And the content of HRM knowledge increasingly focused on the management of the employees’ insides—their values, commitment and motivation—and less on the supervision of their behaviour. (ibid. 35)

In this context, HRS represented a new alliance between political thought and the government of the workplace, utilizing the same political issue as the Taylorists in the first three decades after 1900: the corporation. Into the 1930s and beyond, the large corporation continued to be problematized in relation to the concentrated and unchecked power of firms and their ruling elite, and the potential for class cleavage this posed. However, Mayo justified managerial authority in corporations as the natural order of things, reconciling it with democratic ideals by asserting that the individual was the fundamental unit on which all legitimate cooperative organization was founded. The same social contract melding citizens in the polity provided the model for the bond between the individual and the business firm. The corporation, together with the managerial authority it necessitated, could be thus represented as the perfect embodiment of the democratic ideals of the complex individuality that constituted the distinctly American way of life. Managerial authority did not hold society down; rather, it held it together: the agitation-prone masses were deemed unfit for cooperation and had to be acted on by an elite leadership nurturing vital non-logical impulses amongst work-groups in order to stabilize their emotions for accepting responsibility (Rose 1978; Miller and O’Leary 1989; Miller and Rose 1995; O’Connor 1999a, 1999b). In espousing a theory of democracy privileging a ‘scientifically trained’ minority elite leadership and precluding the need for mass participation in political, economic, or management decisions beyond those at the ballot box, Mayo was simply leveraging one

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strand of two very different politico-cultural approaches to American scientific thought and practice: elitist and populist. Mayo and HRS rode the wave that saw the professionalization and appropriation of science by experts and specialists (read academics and management executives) away from grassroots civil society (O’Connor 2008b). Regarding this privileged position, two important points should be made. First, as Deetz (2003) has highlighted, there is nothing ‘natural’ about the privileged place of capitalist ownership and attendant management authority. Rather, it is produced and reproduced via discursive practices ranging from lexical choice producing and distinguishing people and events in specific ways, to telling stories and giving instructions and orders. Second, Mayo and HRS accorded this managerial elite with vastly greater potential for authoritarianism—‘corporate fascism with a human face’ (Rose 1978: 121)—than any Taylorist ideas or measures, a point seemingly lost on many critics of SM, past and present. While Taylorism (notwithstanding Taylor’s own exhortations for a great ‘Mental Revolution’) presented managers with the potential to exert power physically over the human body spatially and temporally, ‘Mayoism’ offered a more a subtle and efficient means of exercising this power mentally, via workers’ cognition and emotions. As Townley (1993: 538) has observed: Traditionally, the concept of personnel has been viewed as stressing the rights of labor and the importance of the human side of the organisation. But the discourse of welfare and the human relations’ school clouds HRM’s role in providing a nexus of disciplinary practices aimed at making employees’ behaviour and performance predictable and calculable—in a word, manageable.

HRM, with its foundations in the ‘science’ of organizational psychology and psychiatry, presented the potential for greatly restricted workplace democracy and participation. As Rose (1998) has noted, the ‘psy’ sciences have played a pivotal role in providing the lexicon, information, and the regulatory techniques for the ‘government’ (‘the conduct of conduct’) of individuals and populations in the Foucauldian sense. Steffy and Grimes (1992) highlight the subtle coercion of organizational psychology; for instance, rewards in the workplace go to those whose motions, energies, and thought processes are congruent with task requirements. In other words, workers are required to adjust bodily, cognitively, and emotionally to work. Further, from a Habermasian perspective, because organizational processes have become increasingly governed by objectifying technical rationality at the expense of inter-subjective, communicative action, consensus in the workplace has also been diluted. Deetz (2003) makes a similar point, highlighting that the same controllers of discourse in Foucault’s conception of disciplinary power—psychiatrists, doctors, wardens, teachers, etc.—who arbitrarily deem certain ways of life ‘normal’ and others pathological, provide the same privileged knowledge/power of HRM. As he says: In the modern corporation, disciplinary power exists largely in the new ‘social technologies of control’. HRM experts and specialists operate to create ‘normalized’ knowledge, operating procedures, and methods of inquiry, and to suppress competitive practices. (Deetz 2003, 36)

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In this way, he argues further, the discourse of HRS and HRM has diluted the potential for the corporation to be a complex site for political conflict. Via a process of what he calls ‘discursive closure’, HRM subtly disables potentially meaningful conflicts, conflicts which could lead to broader assessment of the organizational system itself, greater creativity and innovation in fulfilling social and economic values in decision-making, greater representation of diverse organizational stakeholders, more employee choice in definitions of success, and greater productive tensions among identities acquired from competing institutions. (ibid. 39)

In sum then, freedom, both in society and in the workplace, is enacted only at the price of relying upon the opinions of ‘experts of the soul’; though we might be free from arbitrary prescriptions of political authorities, we are bound into new relationships with new authorities that are more profoundly subjectifying, as they appear to emanate from our individual desires for self-fulfilment (Rose 1998). And further, (t)he legitimacy and neutrality of management were to depend not only on its basis in practical experience, but also on a scientific knowledge that would cast this experience within the framework of technical rationality. And to manage rationally, one now required a knowledge of the individual and social psychology of the worker. The language and techniques of human relations allowed management to reconcile the apparently opposing realities of the bosses’ imperative of efficiency with the intelligibility of the workers’ resistance to it, and to claim the capacity to transform the subjectivity of the worker from an obstacle to an ally in the quest for productivity and profit. (ibid. 140; emphasis added)

The above-mentioned desire for self-fulfilment is critical for disciplinary power in the workplace, that is for organizational psychology and HRM to play on the insecurity about the value of the ‘self ’, and so, exercise the requisite self-regulation that systematically restricts workplace democracy and participation. Inspired by the seminal work of behavioural psychologist, G. H. Mead (1934), the next generation of HRS researchers in the US, such as Abraham Maslow, Carl Rogers, Victor Frankl, Eric Fromm, Frederick Herzberg, Kurt Lewin, Victor Vroom, and others, painted a new psychological picture of workers as self-actualizing egos whose personal strivings to make something of themselves through work could be steered towards pursuit of organizational goals. Work was constructed not as deferred gratification, but as the means of producing, discovering, and experiencing our ‘selves’ (Rose 1990). Branded as ‘behaviouralist’ management theorists, in the 1950s and 60s this new incarnation of HRS theory argued that human motivation operates via our personal craving to fix and secure the very sense we have of ourselves as mirrored in the attitudes and opinions (significant) others—for instance, managers or bosses—have towards us. We are constantly striving for this sense of self; it is never ‘actualized’ or realized (contra Maslow), so we have a strong innate desire to know, fix, and secure the ‘self ’. Our sense of ‘who we are’ is always vulnerable to the responses of others: a mirror in which we see ourselves. This vulnerability of the ‘self ’ means we constantly compare ourselves to others and are alert

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to how they see us—in the ‘mirror’ of others’ responses, we look both for confirmation/ recognition, and feel ourselves exposed to possible rejection or attack. In this way, managers are able to shape the very ideals which we use to judge our own and others’ actions (Roberts 2007). Accordingly, the central architecture and techniques of HRS, and the behavioural approach founded on same which focused on the human need for belonging, for love, for status, for recognition, etc., became a powerful lever on conduct. Indeed, the relationship between manager and employee echoes earlier (infantile) relationships, such that workers strive for recognition from their bosses. Hierarchy serves as a mirror of the value of the ‘self ’, and promotion in organizations is construed as ‘making something of myself ’. Further, performance appraisals and other auditing techniques make workers ‘visible’, and so, susceptible to praise and criticism, as well as shaping their success or failure. Above all else, desired recognition and/or feared blame makes workers selfgoverning; as a worker, I strive to acutalize/recognize the real/best me (Roberts 2007). As Rose (1990: 117–18) notes: In the psychologies of human relations, work itself could become the privileged place for the satisfaction of the social needs of indviduals. In the pyschologies of self-actualization, work is no longer necessarily a constraint upon the freedom of the individual to fulfill his or her potential. . . . Work is an essential element in the path to self-fulfillment. There is no longer any barrier between the economic, the psychological, and the social. . . . The government of work now passes through the pychological strivings of each and every one of us for what we want.

The HRS project was also revitalized in the UK in the 1960s in the guise of the Tavistock Institute of Human Relations and its key researchers, Fred Emory and Eric Trist, who emphasized that workers were in search of meaning, responsibility, achievement, and ‘quality of life’ through work. Workers should not be emancipated from work, but rather fulfilled in work (Rose 1990). This line of management theory spawned notions of job enrichment, job rotation, autonomous work groups, participation, and self-management: Finding meaning and dignity in work, workers would identify with the product, assume responsibility for production, and find their own self-worth embedded, reflected and enhanced in the quality of work as a product and an experience. (Ibid. 105–6)

Trist went as far to propose that people are resources to be developed, regulating themselves, because they were committed and involved, and so arguably set in motion notions inextricably linked to contemporary HRM strategies. On the latter note, Costea et al (2008) speak of HRM exhorting us to expand and intensify our contribution as ‘selves’ (human resources) in order to enhance production and achieve organizational success. Notions of ‘commitment’, shared ‘culture’, etc., are a key discursive currency used to (re)enlist subjects in a united mode of work representing a new politics of attachment linking increased personal engagement with work and organizational success, reinforced with performance appraisals and expanded mechanisms of financial audit. Echoing Mayo and the HRS, workplace governance is

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now a ‘quasi-therapeutic encounter’: we are obliged to self-express and self-explore while being monitored/appraised and audited. By urging ‘self-actualization’, employers now provide some sort of totalized care for workers’ wellness—transcending the boundaries of organized work. In this way, the discourse of HRM implies not just serving organizational interests, but providing a meaningful working life for its members. Work is just another stage for self-expression alongside consumption and leisure: the logic of work is presented as a process of releasing the full potentialities of the self, as a locus in which self-exploration and expression are encouraged, as a place where traditional restrictive controls recede into the background. (Costea et al. 2008: 673)

So, disciplinary control is now situated in self-examination, evaluation, and reflection: control now acts on inner attributes of subjects urged to self-manage. And this process is ‘therapeutic’ because HRM ‘experts’ help us realize our full potential/unknown potential, which is said to be ‘liberating’. ‘The positioning of work as a subject-centred therapeutic process of continuous development makes possible new forms of self-governance’ (ibid. 675). Such is the legacy of Mayo, the HRS, and the behaviouralist approach currently informing the contemporary study of organizational behaviour and HRM.

References Boddewyn, J. (1961), ‘Frederick Winslow Taylor Revisited’, Journal of the Academy of Management 4, 100–7. Bruce, K. (2006), ‘Henry S. Dennison, Elton Mayo and Human Relations Historiography’, Management and Organisational History 1(2), 177–99. —— and C. Nyland (2011), ‘Elton Mayo and the Deification of Human Relations’, Organization Studies, 32(3): 383–405. Bulmer, M. and J. Bulmer (1981), ‘Philanthropy and Social Science in the 1920s: Beardsley Ruml and the Laura Spelman Rockefeller Memorial, 1922–1929’, Minerva 19(3), 347–407. Carey, A. (1967), ‘The Hawthorne Studies: A Radical Criticism’, American Sociological Review 32, 403–16. Costea, B., N. Crump, and K. Amiridis (2008), ‘Managerialism, the Therapeutic Habitus and the Self in Contemporary Organizing’, Human Relations 61(5), 661–85. Cruickshank, J. (1987), A Delicate Experiment: The Harvard Business School, 1908–1945. Boston: Harvard Business School Press. Deetz, S. (2003), ‘Disciplinary Power, Conflict Suppression and HRM’ in M. Alvesson and H. Willmott (eds), Studying Management Critically. London: SAGE. Duncan, W. J. (1970), ‘Engineers and Psychologists of the Scientific Management Period: An Overdue Exercise in the Notion of Similarities’, Southern Journal of Business 5, 30–40. —— (1999), Management: Ideas and Actions. Oxford University Press, New York. Fisher, D. (1983), ‘The Role of Philanthropic Foundations in the Reproduction of and Production of Hegemony: Rockefeller Foundations and the Social Sciences’, Sociology 17(2), 206–33. Foucault, M. (1980), Power/Knowledge: Selected Interviews and Other Writings 1972–1977. Brighton: Harvester Press.

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Gillespie, R. (1991), Manufacturing Knowledge: A History of the Hawthorne Experiments. Cambridge, Cambridge University Press. Gitelman, H. (1988), Legacy of the Ludlow Massacre: A Chapter in American Industrial Relations. Philadelphia: University of Pennsylvania Press. Harvey, C. E. (1982), ‘John D. Rockefeller, Jr, and the Social Sciences: An Introduction’, Journal of the History of Sociology 4, 1–31. Hoopes, J. (2003), False Prophets: The Gurus Who Created Modern Management and Why Their Ideas are Bad for Business Today. Cambridge MA: Perseus. Kaufman, B. (2000), ‘The Case for the Company Union’, Labor History 413: 321–50. —— (2004), The Global Evolution of Industrial Relations. Geneva: ILO. —— (2008), Managing the Human Factor: The Early Years of HRM in American Industry. Ithaca: ILR Press. Locke, E. (1982), ‘The Ideas of Frederick Winslow Taylor: An Evaluation’, Academy of Management Review 7(1): 14–24. Magat, R. (1999), Unlikely Partners: Philanthropic Foundations and the Labor Movement. Ithaca: ILR Press. Mayo, E. (1919), Democracy and Freedom. Melbourne: Macmillan. —— (1923a), ‘The Irrational Factor in Human Behavior: The “Night-Mind” in Industry’. The Annals of the American Academy of Political and Social Science 110, 117–30. —— (1923b), ‘The Irrational Factor in Society’, Journal of Personnel Research 1(10), 419–26. —— (1924a), ‘Civilized Unreason’, Harper’s Magazine March, 527–35. —— (1924b), ‘Reverie and Industrial Fatigue’, Journal of Personnel Research 3(8), 273–81. —— (1924c), ‘The Basis of Industrial Psychology’. Bulletin of the Taylor Society 9, 249–59. —— (1924d), ‘A New Way of Statecraft’, Laura Spelman Rockefeller Memorial papers, Box #53, Folder 572, Rockefeller Archive Center. —— (1926), ‘The Psychiatrist in Industry’, unpublished paper, Mayo Papers, Box #5b, Baker Library, Harvard Business School. —— (1933), The Human Problems of an Industrial Civilization. New York: Macmillan. —— [1949] (1975), The Social Problems of an Industrial Civilization. London: Routledge. Mead, G. H. (1934), Mind, Self, and Society. Chicago: University of Chicago Press. Miller, P. and T. O’Leary (1989), ‘Hierarchies and American Ideals, 1900–1940’, Academy of Management Review 14(2), 250–65. —— (1995), ‘Production, Identity, and Democracy’, Theory and Society 24(3), 427–67. O’Connor, E. S. (1999a), ‘The Politics of Management Thought: A Case Study of the Harvard Business School and the Human Relations School’, Academy of Management Review 24(1), 117–31. —— (1999b), ‘Minding the Workers: the Meaning of “Human” and “Human Relations” in Elton Mayo’, Organization 6(2), 223–46. —— (2008a), Personal communication with author, email dated 14 May. —— (2008b), Personal communication with author, email dated 15 May. Rees, J. (2010), Representation and Rebellion: The Rockefeller Plan at the Colorado Fuel and Iron Company 1914–1942. Colorado: University of Colorado Press. Roberts, J. (2007), ‘Motivation and the Self ’ in D. Knights and H. Willmott (eds), Introducing Organizational Behaviour and Management, London: Thomson. Roethlisberger, F. J. (1977), The Elusive Phenomena. Cambridge, Mass.: HBS Press. —— and Dickson, William (1939), Management and the Worker. Cambridge, MA: Harvard University Press.

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Rose, M. (1978), Industrial Behaviour: Theoretical Developments since Taylor. Harmondsworth: Penguin. —— (1990), Governing the Soul: The Shaping of the Private Self. London: Routledge. —— (1998), Inventing Ourselves: Psychology, Power, and Personhood. Cambridge: Cambridge University Press. Smith, J. H. (1976), ‘The Significance of Elton Mayo’, foreword in Elton Mayo, The Social Problems of an Industrial Civilization. London: Routledge. —— (1985), ‘Elton Mayo and the Hidden Hawthorne’, Work, Employment, and Society 1(1), 107–20. —— (1998), ‘The Enduring Legacy of Elton Mayo’, Human Relations, 51, 221–49. Sofer, Cyril (1973), Organizations in Theory and Practice. London: Heinemann. Steffy, B. D. and A. J. Grimes (1992), ‘Personnel/Organization Psychology: A Critique of the Discipline’ in M. Alvesson and H. Willmott (eds) Critical Management Studies. London: SAGE Publications. Taras, D. (2000), ‘Voice in the North American Workplace: From Employee Representation to Employee Involvement’ in B. E. Kaufman and D. G. Taras (eds) Nonunion Employee Representation: History, Contemporary Practice, and Policy. Armonk: M. E. Sharpe. Townley, Barbara (1993), ‘Foucault, Power/Knowledge, and its Relevance for Human Resource Management’, Academy of Management Review, 183, 518–45. Trahair, R. (1984), The Humanist Temper: The Life and Work of Elton Mayo. Transaction Publishers, New Brunswick. —— (2001), Personal conversation with author. Wren, D. (2005), The Evolution of Management Thought (5th ed.). New Jersey: John Wiley. —— and R. G. Greenwood (1998), Management Innovators: The People Who Have Shaped Modern Business. New York: Oxford University Press.

chapter 7

ly n da l l u rw ick a ndrew t homson and john w ilson

Life and career Lyndall Fownes Urwick (1891–1983) has been called ‘the single most important figure in the development of modern management practices and thought’ (Witzel 2003: 299). Urwick did many things in his life, but central to it was a passion for spreading the gospel of systematic and ‘scientific’ management through his activities as a management consultant, through his efforts in developing management institutions, and perhaps most of all through what he later called his ‘mission at large’ in taking ‘modern’ management to managers and the wider public. In all he wrote some 280 books, pamphlets, and articles on an eclectic range of management topics, and gave talks running into the thousands aimed at a wide range of audiences. He was born on 3 March 1891 at Northwood, Worcestershire, the only child of Sir Henry Urwick (1859–1931) and his wife, Annis (1862–1948). His father was a partner in the glove-making firm of Fownes Brothers, which had been founded by an ancestor in 1777; his mother also came from a glove-making family. After local and preparatory schooling, Urwick went to Repton School, from where he gained an open history exhibition to New College, Oxford, in 1910. After graduating, he joined Fownes Brothers in 1913 and became a partner in 1916. Having volunteered for military service in 1914, he fought in many key battles such as Mons before becoming an administrative staff officer, reaching the rank of major in 1918, when he received the MC and was appointed an OBE. His wartime experience was a key influence on his later life, not only in feeling that he had survived the trenches for a purpose, but also because having read Taylor’s Shop Management (1903) in the trenches, this influenced much of what he did for the rest of his career. Although after the War he went back to the family business, a disagreement between the two families involved saw his side bought out and Lyndall unemployed. In that short period at Fownes, however, he had begun to carry his ‘advanced’ management ideas into practice and into some early writing and talks. He was also made employers’ secretary of

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the joint industrial council of the glove-making industry (1919–20). It was through a talk at the Rowntree Foremen’s Conference at Balliol College, Oxford, that he came to the attention of the chairman of Rowntree’s, Seebohm Rowntree, who recruited him in 1922 to work in Rowntree’s confectionery business in York. As Rowntree’s was at that time the leading exponent of ‘modern’ management, Urwick learned much from Seebohm and managerial colleagues such as Oliver Sheldon and C. H. Northcott. He became the assistant editor of the Staff Journal, in which role he read and wrote widely about management. He then reviewed clerical procedures in the sales office, and later became deputy manager of sales and distribution. With Seebohm as his mentor, he lectured at the management conferences sponsored by Rowntree at Oxford, and became the first secretary (1926–8) of the council of the Management Research Groups (MRGs) initiated by Rowntree to be a national forum for business managers to discuss their work with their peers, while on the international front, he was a British delegate at the 1926 International Economic Conference on Rationalization. These experiences led to an invitation to become Director of the International Management Institute (IMI) in Geneva in 1928. The IMI put him onto the world stage in a unique role as the key figure for the international exchange of ideas and practices. The IMI was created by two organizations, the International Labour Office and the Twentieth Century Fund. Established to promote the principles of scientific management, this institute was the first international management body, involving Urwick in innumerable meetings in Europe and the US. After the Institute’s funding collapsed, in 1934 he founded the management consultancy Urwick, Orr, & Partners, one of the first consultancies in Britain, of which he was chairman (1934–61), managing director (1945–51), and president (1963–83). Urwick tempered consultancy to British susceptibilities, adjusting advice to the needs of individual client companies. As a result Urwick Orr commanded a worldwide reputation and for many years was a leading influence on British consultancy. During his Urwick Orr period, Urwick spent as much if not more time on his external management interests as he did on consultancy. He was involved with the ‘management movement’ in developing management institutions such as a staff college for industry (at Henley), the British Institute of Management, and the British Management Council, and he became a key member of the Institute of Industrial Administration. He was also chairman of both the Departmental Committee on Education for Management (1945) and of the Anglo-American productivity team on management education (1951). More generally, through his forceful and articulate speeches and fluent, lucid writings, he was a passionate advocate of systematic management and management development and education. However, as most businessmen at that time doubted that management could be taught as a subject, Urwick endured widespread suspicion amongst practitioners. The extent of his external activities also became the source of an ongoing dispute with his partner, John Leslie Orr, leading the board in 1945 to vote in favour of one senior partner or the other. Urwick won by three votes to two and Orr left the firm. During 1940–42 Urwick advised the Treasury on the application of organization and methods. Often abrasive when he felt he was being frustrated, he clashed with Sir Horace

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Wilson, head of the civil service, over civil service reforms and was forced to resign. Nevertheless some of his ideas on improving governmental efficiency by management specialization were later implemented by Sir Derek Rayner after 1979. Following the Treasury debacle, Urwick became deputy director of the petroleum warfare department (1942–4), having been promoted to lieutenant-colonel, a title he retained in civilian life. After the War he continued his ‘mission’, increasing the pace in the 1950s after he had resigned as managing director of Urwick Orr. He published prolifically during this period until the early 1970s, frequently in American journals. It was during these later years that he was honoured with professional medals, notably with the Gantt Medal and the Taylor Key in the United States, where he became the best-recognized foreigner in the management field and almost an honorary American. In addition he received the Comite International De L’Organisation Scientifique (CIOS) Gold Medal from this leading international body. Universities in Canada, the US, and Australia invited him as a visiting professor in business administration. He was a regular contributor to American Management Association (AMA) programmes and was made a life member of that Association. Regrettably, his recognition in Britain was relatively poor; the only British university to give him an honorary degree was Aston, while the British Government failed to acknowledge his status as the key figure in British management in the twentieth century On 31 March 1923 Urwick married a medical student, Joan Wilhelmina Bedford (1901–84); from this marriage, which was dissolved in 1938, there was a daughter and a son. On 27 September 1941, Urwick married Beatrice Helen Fitzhardinge (1908–96), with whom he adopted a son and a daughter. As Beatrice Urwick had Australian connections, after Urwick relinquished the chairmanship of his consultancy they emigrated to Sydney, where Urwick died on 5 December 1983.

Contribution to organizational theory As an all-round management man, Urwick’s writing covered a wide range of topics; as Pugh et al (1971: 107) note, ‘there can be few topics in administration on which Urwick has not something to say’. Nevertheless, organization theory was his particular concern and provides his main standing in history. Wren and Bedian (2009: 362) note that he ‘worked tirelessly to develop a general theory of organization and management’, while the citation for his award of the Gantt Medal (jointly awarded by the American Management Association and the American Society of Mechanical Engineers) in 1961 read: ‘Colonel Urwick is probably best known to most of us as the world’s foremost authority in the field of organization: a distinction not easily won.’ He has also been called ‘the doyen of classical theorists’ (Subramaniam 1966: 436). Classical theory can be divided into three main categories: scientific management, in which Taylor was the leading light; bureaucracy, where Max Weber was the main figure; and organization theory, where Fayol was the initial writer, followed by Urwick and

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others such as Luther Gulick and James D. Mooney. We will focus on Urwick within this last group, recognizing also that the group had its critics in the following generation of writers, led primarily by Herbert Simon. Much of Urwick’s work lay in synthesizing the writings of others. He was strongly influenced by the work of Taylor, Follett, and, in this area especially, Fayol, whom he read long before most of the English-speaking world thanks to his fluency in French; indeed Urwick was the main figure responsible for bringing Fayol to the attention of the Anglo-Saxon world. Nevertheless, Urwick did also make original contributions of his own. While Urwick was strongly in favour of the need for theory in management as a framework for scientific and systematic decision-making, when he started to consider organizational issues in the early 1920s there was relatively little existing theory in Britain or America, even if his colleague Sheldon was at that time writing one of the early masterpieces, The Philosophy of Management (1923). Taylor had gained his interest at the production level, but in his successive roles at Rowntree’s Urwick now wanted to look at the organizational level. In fact, Urwick was more interested in a systematic approach to decision-making, rather than the scientific management associated with Taylor and production systems; what he most wanted was to escape from the rule-of-thumb management all too often found in Britain (Litterer 1986: 20–1). One can appreciate his interest, therefore, in finding in Fayol someone who had recognized the need for management theory at the organizational level, which he defined as ‘a collection of principles, rules, methods, and procedures tried and checked by general experience’ (quoted in Wren 1994; 182), using Fayol as a start towards a theory of management structure and process. There are significant works on this approach from four decades. Urwick’s first and in some ways most original contribution came in his 1928 article, ‘The Principles of Direction and Control’ in Lee’s Dictionary of Industrial Administration. The Dictionary was itself undoubtedly a landmark publication for the management movement, a point Child (1969: 87) stressed some four decades later. For Urwick, the Dictionary provided an ideal opportunity to consolidate his own philosophies relating to the practice of systematic management. As Child (1969: 86) notes: ‘The major step towards the construction of a priori “principles of management” came from Urwick’s “remarkable” essay of 1928 on “Principles of Direction and Control”.’ In addition to Fayol, Urwick acknowledged guidance from Harrington Emerson’s Twelve Principles of Efficiency (1913), demonstrating his grasp of the American management literature. The two fundamentals of his systematic approach were clearly knowing what was to be done, namely, direction; and knowing how performance was progressing in the context of those intentions, namely, control. He structured his presentation within six sectional headings and twenty-six sub-principles (for which only the headings are shown for reasons of space): I The Principles of Investigation. Prior to any decision-making, the facts must be made available, leading to five sub-principles: a) Determinism b) Relation

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c) Analysis d) Definition e) Measurement The Principle of the Objective. It is a necessary preliminary to all activity to have a complete and clear statement of the object of such activity in the form of a policy or of instructions. The Principles of Organization. In any enterprise it is necessary to establish a structure, using five sub-principles: a) Functionalization b) Correspondence c) Initiative d) Co-ordination e) Continuity The Principles of Direction. Once a structure is established it must be made operational based on eight sub-principles: a) Publicity b) Incentive c) Planning d) Simplification e) Standardization f) Balance g) Equity h) Mobility The Principles of Experiment, based on improving the organization through making changes if necessary, following three sub-principles: a) Selection b) Controlled factors c) Decision The Principles of Control, involving five sub-principles: a) Responsibility b) Evidence c) Uniformity d) Comparison e) Utility

Urwick went on to argue that, while this outline of principles must of necessity be extremely tentative, and subject to constant revision as the science of management progressed in scope and definition, it would be found to include almost all of the various propositions put forward by previous writers. At the same time, while their application in practice must necessarily vary with each enterprise and problem, they represented an attempt to formulate the theoretical background which must lie behind practical action. In the complex task of conducting a business enterprise, Urwick argued, not one of them can be ignored with safety. Although clearly based on Fayol’s principles, Urwick went well beyond the latter’s framework.

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The principles were based broadly on managerial tasks, together with some general organizational precepts such as the correspondence of authority with responsibility. Furthermore, while Urwick accepted the ‘insuperable difficulties’ in proving the validity of these principles, he nevertheless claimed that certain principles to action are valid in all cases. This was to be an issue which was to be held against him and the management movement more generally in the debate about the status of management as either a science or an art. However, he forestalled misunderstanding and possible criticism by explaining that in the management context ‘scientific’ meant methodical, systematic, and analytical in approach and application. Without becoming specifically embroiled in the question—it was hardly a debate at that time—of whether managing was an art or a science, he argued for it being ‘an art or craft’, though management as a function had a scientific framework in the sense of being methodical and systematic. His approach was more formal than would be appreciated in present-day writing, but it must be remembered that identifying the dimensions of management was a stage through which the nascent discipline had to go. While he was also to refine these principles over time, they remain the first attempt at outlining universal principles of organization and his own unique and ambitious contribution to the theory of organization. In many respects, Urwick’s most important, and certainly his most comprehensive book was Management of Tomorrow, published in 1933 when he was still at the International Management Institute. The book was divided into four parts, which he felt represented the most important issues in management at the time: the scientific approach to business management; organization; distribution; and training for management. The section on organization contains two quite different chapters. The first was entitled ‘The Pure Theory of Organisation’ and was based on his 1930 address to the British Association. Essentially, it consolidated his ideas on organizational structure and the delegation of managerial responsibility and authority. He seems to have intended to write one or perhaps even two books on the topic and left chapter headings on what might be contained in them, but the chapter in Management of Tomorrow was what actually emerged, a much shorter version of his thinking, bringing out the distinct advantages in modern, large-scale business of delegation, with its implicit interrelationships of responsibility and authority. This issue was a particular interest of his, taking him back to his own military experiences where he had been impressed by the simplicity of the military command structure. A second key requirement and area where industry could learn from their military counterparts was in the relationship between operational command (‘line’) and the essential support services (‘staff ’). The second chapter, entitled ‘The Organization of Complex Business Enterprises’ was based on the research project in some twenty large amalgamated enterprises conducted under his leadership in the IMI, and satisfied his predilection for inductive, ‘scientific’ research. The report had noted that ‘there was an almost rhythmical movement of policy between centralization and decentralization’. Frequently, new combinations centralized the functions previously exercised by the independent parts, only to find that this was destructive of local initiative and flexibility. But the converse of

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decentralization was found to suffer from a lack of common policy and action. Urwick argued that, while the economics of amalgamation was well understood, little attention had been given to the administrative difficulties accompanying combination. The majority of the undertakings examined in the IMI research project had arrived at no clear view of principles on such issues as the composition of the board, the extent of centralization of authority, and the degree to which initiative was delegated to subordinate managers. As he put it, combination is not rationalization, although it provides an opportunity for the latter, leading him to argue that his contemporaries must overcome their unwillingness to pool experience and learn more about the basic principles of administering combines. Urwick’s next significant contribution was in Papers in the Science of Administration (1937), one of the most important management books of the 1930s, in that it identified the state of play as far as organization theory was concerned, going to several imprints and becoming one of the classics in the field of management, featuring distinguished authors such as Gulick, Mooney, Fayol, Follett, Lee, Dennison, Henderson, Whitehead, Mayo, and Graicunas. It was also in this book that Gulick produced his famous POSDCORB (Planning; Organizing; Staffing; Directing; Co-ordinating; Reporting; Budgeting), to illustrate the functions of the manager, giving the book a status that has been widely acknowledged. Whilst at the IMI, Urwick had met and formed a high regard for Luther Gulick, Director of the American Institute of Public Administration. They had similar interests in organizational structure, delegation of responsibility, and functional managerial interaction. As Gulick was preparing a selection of papers on these subjects, he invited Urwick both to share the editorial responsibilities and contribute two chapters. Another important dimension to the 1937 book was Fayol’s inclusion, given that American audiences had barely heard of him. We have already noted that Urwick had been pivotal in having Fayol’s main work published in English, while Urwick would also have been responsible for having the paper by Lee included, and probably that by Follett as well, because although the latter was American by background, she had spent her later years in Britain. Indeed, her paper was taken from a lecture at the LSE. For that matter, the paper by Henderson, Whitehead, and Mayo was also derived from a British source, a lecture by Whitehead to the British Association in 1935, indicating that Urwick probably had a good deal of influence on the selection of papers. Urwick’s two contributions were also taken from lectures: ‘Organization as a Technical Problem’ was based on a 1933 talk to the British Association, while the paper on Fayol was a 1934 lecture to the Institution of Industrial Administration. ‘Organization as a Technical Problem’ was a substantial paper of some forty-two pages, with twenty-four sections and eleven extremely detailed diagrams (which may explain why the book was published in coffee-table size). It started with an important statement: It is the general thesis of this paper that there are principles which can be arrived at inductively from the study of human experience of organization, which should

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andrew thomson and john wilson govern arrangements for human association of any kind. These principles can be studied as a technical question, irrespective of the purpose of the enterprise, the personnel composing it, or any constitutional, political or social theory underlying its creation. They are concerned with the method of subdividing and allocating to individuals all the various activities, duties and responsibilities essential to the purpose contemplated, the correlation of those activities and the continuous control of the work of individuals so as to secure the most economical and the most effective realization of the purpose.

In describing organization as a technical problem, Urwick was referring to formal issues abstracted from any human dimension, which of course he fully recognized as part of reality. Much of his paper was predicated on military analogies and the need for armies to be organized, but more generally he quoted Herbert Spencer to the effect that ‘socially as well as individually, organization is indispensable to growth: beyond a certain point there cannot be further growth without further organization’. He also went on to note that ‘rapid growth in scientific knowledge has placed an unprecedented strain on man’s powers of organization’. Many of the sections took up issues in which dimensions of this strain showed—coordination; specialization; the scalar process; line and staff; the span of control; supply; and functionalization—which were illustrated by diagrams derived from military manuals. Indeed, only one of the diagrams came from manufacturing industry, and that from General Motors Export Company, the organization of which James Mooney was President and which Urwick describes as ‘a very advanced form of business organization which has been developed with exceptional insight’. The next major contribution to organizational theory and Urwick’s main work of synthesis and consolidation came in The Elements of Administration which was based on a series of five lectures given to the London Branch of the Institute of Industrial Administration in May and June 1942. It proved to be extremely popular, running to a second edition and in all seven reprints, given that it was a culmination of Urwick’s views on administration, starting from Fayol’s framework but also taking principles from a range of other writers. Indeed, it is generally regarded (Subramaniam 1966) as one of the standard works on classical management theory and the leading exercise in synthesis. The intention behind the lectures had been to design an ideal model of organization through a technique of administration, on the grounds that if this could be achieved, then the rest would follow. His principles of good organization were founded on the conviction that a logical structure is better for efficiency and morale than one allowed to develop around personalities. Nevertheless, as he acknowledged in the preface: ‘At the moment there is, admittedly, an insufficient basis in the physical sciences for an exact science of administration’. The main chapters are based on Fayol’s six main aspects of administration, which fall into two main groups related to process and effect: Forecasting leads to a Plan, Organizing has as its object Co-ordination, while Command issues in Control.

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To these six aspects of process and effect, Urwick added three principles, ‘investigation’, ‘appropriateness’, and ‘order’, which Fayol does not provide, since his analysis deals only with actions. ‘Investigation’ is necessary because all scientific procedure is based on an investigation of the facts; ‘appropriateness’ involves seeing that the human and material organization are suitable for the objects, resources, and needs of the undertaking; while ‘order’ ensures material and human order. The second main dimension of the book is Mooney and Reiley’s logical scheme (adapted from a German author, Louis Anderson) in which every principle has its process and effect. Thus, ‘leadership’ has as a process ‘delegation’, and an effect, which is known as the ‘definition of functions’. Moreover, if these have been correctly identified, the process and effect will in their turn have a principle, a process, and an effect. The outcome of incorporating all three of these dimensions is a series of interacting triangles, as depicted in Figure 7.1. This figure, which illustrates Urwick’s predilection for complex diagrams, is a summary of the material discussed in the previous chapters, incorporating twenty-nine principles and (by coincidence) the same number of sub-principles, drawn from the descriptions of a range of writers, including Fayol, Taylor, Graicunas, Mooney and Reiley, and Follett, as well as his own article in 1928. They were: HFP . . . Henri Fayol’s list of Administrative Principles—15 examples HFAD ‥ Henri Fayol’s list of Administrative Duties—20 examples HFAA ‥ Henri Fayol’s Aspects of Administration—7 examples MR . . . Mooney and Reiley’s Principles of Organisation—26 examples FWT . . . Frederick Winslow Taylor’s Principles—8 examples GR . . . Graicunas’ Principle MPF . . . Mary Parker Follett’s Principles—7 examples LUDC ‥ Principles of Direction and Control listed by Urwick—17 examples

As can be appreciated, comparing the terminology and intentions of different writers in relation to the principles is a complex and difficult operation; to bring all of the twentynine principles from different writers together into a single diagram is consequently a considerable feat. This highlights once again Urwick’s great skill as a synthesizer of the various strands of management thought, a facility for which he had a wide reputation. The chapters follow a somewhat similar pattern, so we will only examine the first, ‘Forecasting’. It starts by saying that as research underlies the process of forecasting, it must be conducted within certain intellectual principles, taken from his 1928 paper, namely determinism, relation, analysis, definition, and measurement. He notes how, although it is vital for business to form a judgement about the probable course of events, the means of achieving this by using the available scientific data was badly underdeveloped. While a number of large organizations had recently been making a conscious effort to forecast, Urwick was highly critical of the methods employed, suggesting that a much more systematic method would help to dampen down the cyclical effects experienced at that time. The book brought together most of Urwick’s views on management. George’s (1972: xvii) path-breaking book The History of Management Thought noted that it provides a

Notes: 1. The Apex of each triangle is a Principle, the corresponding Process and effect being the right and left hand angles of the base respectively. 2. Subsidiary Principles are shown in small letters - a, b, etc. 3. Arabic figures in brackets refer to the accompanying table of principles quoted from various authorities.

(9)

ORDER (7)

PLANNING a. Objective (3)

(2)

b. Simplify c. Standardize d. Flexibility e. Balance f . Use existing resources

FORECASTING

a. Recognize the Necessity of Forecasting b. Investigate c. Figures must correspond with realities

Methods

a. Uniformity b. Comparison c. Utility d. The Exception Principle Psychological Bases i. Direct Contact ii. Early Stages iii. Reciprocal relating of all Factors iv. Continuing Process

a. Determinism b. Relation c. Analysis d. Definition e. Measurement (1) INVESTIGATION

(8) COMMAND

CONTROL

(6) CO-ORDINATION

i. Doctrine ii. Training iii. Publication iv. Returns Records & Reports v . Committees vi. Individuals in “Staff” capacity

EQUITY (27)

APPROPRIATE STAFFING (22) SELEC -TION & PLACEMENT (24)

(28) DISCIPLINE

INITIATIVE (26)

a. Continuity

(5) ORGANIZATION

ASSIGNMENT & CORRELATION (17) OF FUNCTIONS DETER(13) Relations MINATIVE

THE ELEMENTS OF ADMINISTRATION

(21) CENTRALIZATION (29) STABILITY

Concepts i. Duties ii. Responsibility iii. Power iv. Authority a. Formal b. Technical c. Personal

THE CO-ORDINATIVE PRINCIPLE (10)

THE GENERAL INTEREST (20) ESPRIT DE CORPS (23)

APPROPRIATENESS (4)

(25) REWARDS AND SANCTIONS

Methods i. UNITARY a. By Persons b. By Objects c. By Areas d. Numerical ii. SERIAL a. By Process b. Specialized Equipment iii. SUBJECTIVAL

(19) INTERPRETATIVE

i. Line ii. Lateral iii. Subjectival iv. Staff

THE SCALAR PROCESS (12)

(14) LEADERSHIP

Levels

i. Criticism & Review ii. Governing Authority iii. Lieison between Policy & Operation iv. Operating Authority v. Supervision of Operation vi. Operation vii. Jurisdiction a. Direct Contact

a. Fair Play b. Responsibility is absolute c. Example

c.Correspond -ence AUTHOa. Specialization RITY FUNCTIONAL (11)

(18) APPLICATIVE

DEFINITION (16)

a. The Exception Principle b. The Special Control

(15) DELEGATION

figure 7.1 The elements of administration Source: Brech, E., Thomson, A., and Wilson, J. F. (2010) Lyndall Urwick Management Pioneer: A Biography. Oxford. Oxford University Press.

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major contribution because of its ‘collection, consolidation and correlation’ of the principles of management. On the other hand, because Urwick’s framework was regarded as extremely rigid—the ‘one best way’—it has been criticized for being overstructured. Indeed, it was perhaps understandable that many managers found it daunting, although Urwick did make it clear in his conclusion that ‘the raw material in which administration works is human beings’, even quoting, a little surprisingly, given their disagreements over the IMI, Edward Filene, to the effect that labour could not and did not act like a commodity. Urwick’s last major contribution came in Notes on the Theory of Organization, derived in large part from the notes which Urwick used to lecture on the AMA management course and published by the AMA in 1952 in response to numerous requests from other teachers and students. As Urwick’s foreword says, the Notes represent an attempt to construct a theory of the subject divorced from immediate applications. The foreword finishes by saying that he ‘hopes to embody these Notes in a definitive study of organization at a later date’, an aim he never fulfilled. The Notes start by saying that it is possible to have a theory of organization on one condition, namely, that there is a distinction made between the mechanics of management, disregarding people as individuals, and the dynamics, that is, those management issues which deal with people as individuals. To go back to Fayol’s six dimensions of management, forecasting, planning, and organizing can be primarily seen as the mechanics, while coordinating, commanding, and controlling are the dynamics. While dealing mainly with Fayol’s six dimensions of management, Urwick added a seventh, communicating, which links all the others together, and is pure dynamics. Central to his case was putting ‘organization’ into the mechanics category, on the grounds that it is necessary to begin by making a technically correct structure without reference to individuals. By organization, he meant ‘dividing up all the activities which are necessary to any purpose and arranging them in groups which may be assigned to individuals’, the achievement of which was based on an analysis of the situation according to certain principles: • • • • • • • •

The principle of the objective—the purpose of the undertaking The principle of specialization—the performance of specific functions The principle of coordination—to facilitate unity of effort The principle of authority—the need for a clear line of authority to every individual in the group (also known as the scalar principle by Mooney and Reiley) The principle of responsibility—by the superior for the acts of his subordinate The principle of correspondence—in every position the responsibility and the authority should correspond The span of control—no person should supervise more than five direct subordinates whose work interlocks The principle of balance—that the various units in an organization should be kept in balance

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• The principle of continuity—reorganization is a continuous process and provision should be made for it • The principle of definition—all the above should be clearly defined in writing By the 1950s, as Child (1969: 144) has noted, Urwick had adopted a more flexible view of administration, or management as it was increasingly being called. Rather than having essentially static principles based on mechanics, he recognized the importance of the dynamics of behaviour at all levels in the organization. As a result, the ‘one best way’ became less plausible. Moreover, his interest in the application of the principles as a main guide to action diminished, even if the basic principles of Fayol continued to be recognized as central to management. Urwick continued to have an interest in organization theory, defending the classical perspective as still having relevance in spite of new approaches, and in particular retaining an involvement in the semantic debates about the meaning of the term ‘organization’. Indeed, he went so far as to putting his views in verse in the journal Omega as late as 1973, when he was 82.

Sub-topics within the theory of organization Urwick was not only concerned with the overall theoretical framework of the organization: he was also concerned with more practical issues within that framework. One such was the importance of the span of control that a manager could supervise; an issue he took from the military writing of Sir Ian Hamilton. When he discovered the work of Vytautas Graicunas, an American of Lithuanian descent who had similar interests, Urwick supported him, as we will report later. But Urwick was interested in the topic in its own right, and returned to it in the mid-1950s, preparing a lecture for various institutional audiences with a view to writing a feature article for the Harvard Business Review. This was published in 1956, and argues the need for the principle, as well as accepting that it will often be broken, and counter-attacking its main critic, Simon. His views on line and staff were based on the conviction that senior managers were overworked and required support, an idea he had derived from the military practice of having line and staff officers, a topic to which he returned in the 1950s when writing an article and then a book, Staff in Organization, in conjunction with Ernest Dale. This book was based on substantial empirical research into the extent to which staff assistants used their time across various dimensions of the leadership role, leading to a set of prerequisites for the success of the function. A third topic was the use of committees in the application of managerial responsibilities. From his early consulting experience, and perhaps going back to Rowntree’s and the IMI, Urwick was aware of the pitfalls that committees could create, and overall took a negative view of them in comparison to the role of the individual. He therefore wrote a

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long, 48-page article for the newly launched quarterly journal The British Management Review (Spring 1937 issue), under the title ‘Committees in Organisation’. This was so well received that the publishers produced an offprint version as a self-standing pamphlet, which became quite popular in British industry. A further issue in this category is the nature of management as a discipline. Urwick argued that management is dependent not on a single science, but rather the four groups of sciences shown in Figure 7.2, all of which are building blocks in the study of organizations. A first division is between knowledge about things and knowledge about people. A second division is that people behave differently as isolated individuals, that is, the psychology of the individual, and as members of social groups, that is, the sciences bearing on group behaviour. Thus there is the task done by the individual—the lathe operator. Then there is the relating of tasks done by individuals in a group, which is organization. These tasks must be related otherwise there is no communication, and no organization can be operated without communication. Thus management is an integrating discipline. These simple ideas can be translated into another of his wonderfully complex diagrams provided in Figure 7.2.

Recognizing others Urwick also deserves credit as a theorist for publicizing the works of other theorists. As his personal assistant said of him in an affectionate pen-portrait, ‘his favourite claim is to have originated no new thinking but merely to have drawn the public’s attention to the great thinking of others’. This does not do justice to his record as an innovator, but it is certainly true that he paid more homage to others than any other writer on management, both as a historian of the pioneers of management and in enabling others to be recognized. Urwick made the IMI a clearing house for the work of many writers yet to be recognized on the international stage. Moreover, key figures such as Henri Fayol, Vytautas Graicunas, and Mary Parker Follett would all have had less recognition had Urwick not done much to help their cause. A publication with which Urwick was closely associated was Fayol’s General and Industrial Management, first published in France in 1916. During the 1920s, thanks to his command of the French language, Urwick became aware of Fayol’s work, coming to the conclusion that he was equivalent to Taylor in importance and indeed over his career he promoted the Fayol principles as vigorously as he did those of Taylor. Fayol was a wellrecognized writer in France, having by 1925 sold 15,000 copies of his book, while an organization to popularize ‘Fayolisme’ had been formed. Surprisingly, though, Fayol was almost unknown in the English-speaking world, apart from a few such as Urwick who could read French. It says something for Urwick’s vision of the field that when he moved to the IMI, one of his first acts was to organize a translation. The bulk of translating was done by J. A. Coubrough, a member of the MRG Council, with Urwick offering advice on the more technical vocabulary, as well as writing a foreword. This version was

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ANTHROPOLOGY

SOCIOLOGY POLITICAL SCIENCE

PUBLIC ADMINISTRATION MATHEMATICS

PHYSICS

ENGINEERING

CHEMISTRY

I N D U S T R I A L

O R P R O D U C T I O N

E N G I N E E R I N G

A n a l y z i n g a n d M e a s u r i n g

Motivating and Integrating Groups, i.e. Leadership, Communication, Morale, Consultation, Industrial Reiations, t Public Relations etc. h e T a s k i. e. M e t h o d s

M o t i o n

GROUPS MANAGEMENT is concerned with : MECHANICS D Y N A M I C S

& T i m e S t u d y

MECHANICS

INDIVIDUALS Adjusting the individual to the task, i. e. Selection,Rec-

A r r a n g i n g

STATISTICS

C o r r e l a t i n g

ruitment, Induction, Posting, Training, Remuneration, Welfare, Health, Transfer, Promotion, Retirement & Pension.

METALLURGY

i. e. M e t h o d o l o g i e s

O r g a n i z a a T t n a i d s o n k s a n d

C O S T

O R G A N I Z A T I O N

A C C O U N T I N G

A C C O U N T I N G

ECONOMICS

a n d M E T H O D S

L A W

GEOGRAPHY

INDUSTRIAL PSYCHOLOGY & PERSONNEL MANAGEMENT

PHYSIOLOGY

PSYCHOLOGY

BIOLOGY

PSYCHOPATHOLOGY

MEDECINE

figure 7.2 Management as a basic intellectual discipline Source: Brech, E., Thomson, A., and Wilson, J. F. (2010) Lyndall Urwick Management Pioneer: A Biography. Oxford. Oxford University Press.

published in 1930 by the IMI, but only in mimeograph-typescript format in semi-stiff covers, with no copies sent to the United States. This was partially remedied by Urwick including two articles on Fayol in the Papers, although it was not until 1949 that Fayol’s book was translated for the American market, with Urwick again writing the foreword. Urwick performed the same function for Graicunas, a Lithuanian engineer who he met at the 1929 CIOS Congress in Paris. Graicunas had developed a special interest in the ‘senior v subordinate’ relationship, within the framework of a delegated hierarchy, having intensively studied the patterns of internal relationships in large organizations. He had coined the phrase ‘span of control’ to designate the pattern, arguing that it became ineffectively more complex as each subordinate was added. From their mutual

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discussions, Graicunas offered to put his findings and views into an article for the Bulletin, if Urwick could arrange for linguistic amendments where Graicunas’ own limited command of English had failed. The article was published in the March 1933 issue under the title ‘Relationship in Organisation’, but was given much more prominence when Urwick arranged for it to be included in the Papers. Mary Parker Follett was one of the key figures in the history of management and as eminent in her field as were Taylor and Fayol in theirs. While the latter two were concerned with the structural working of organizations, she was concerned with their human dynamics, and particularly the reconciliation of individuals and groups. The key for Follett was to give groups a community objective, making co-ordination the central process and goal. Urwick had been a personal friend of Follett from the time when Rowntree had invited her to one of his Oxford conferences and on her death, wanted to make her papers available to the management world, but H. C. Metcalf, the Director of the American Bureau of Personnel Administration, also had some claim to the publication of her papers. A compromise was finally reached in 1939, involving both protagonists acting as editors, but with Urwick alone writing the Introduction. However the onset of war put a stop to the work, until in 1940 Urwick asked his personal assistant, Edward Brech, to convert his boss’s notes into a cohesive introduction. The end result was a valuable book which filled a gap in our knowledge of Follett’s contribution to management thinking, given that she had only published books on political science, rather than management. As a historian of management and through his commitment to the people who pioneered its development Urwick made an important indirect contribution to management theory. At the 1938 CIOS Conference Urwick realized from the discussions that very little was known about the men who had contributed to the development of scientific management, so on his return to Britain he proposed to the editor of Industry Illustrated the idea of a dozen articles, each devoted to an individual. This led to Thirteen Pioneers, the first volume of the three-volume The Making of Scientific Management. Six of the pieces were about Americans (Taylor, Follett, Gantt, Dennison, Gilbreth, and the President’s Committee on Administrative Management of 1937), three each from Britain (Babbage, Rowntree, and Elbourne) and France (Fayol, Le Chatelier, and De Freminville), and one German (Rathenau). This was the start of Urwick’s considerable contribution as a historian of management, with the initial chapter, on ‘Scientific Management and Society’, serving as an introduction to all three books. In it, he explained that as his subjects had ‘recognised that the antiquated scheme of business principles . . . bore no logical relation to the intellectual standards, the mode of thinking customary in the exact sciences, they had therefore attempted to apply the methods of science to the problems of direction and control’. At the same time, he also accepted that the work of the individuals needed to be set against a background of the larger developments in industry, providing the objective of the second book. The third dealt with the Hawthorne experiments, which ‘constitute the most complete piece of controlled sociological research at present carried out in connection with the management of industry anywhere in the world’. In the conclusion, he noted that ‘no student of scientific management can comprehend his subject unless he sees behind the textbook technique, the

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reflection of the individual human beings who have lived and laboured to add to our store of exact knowledge’. The second and third books were mainly written by Brech from the work done for the CIOS Conference, although all three books carried both names. The foreword for the third volume was written by Elton Mayo, stating that ‘Lyndall Urwick was the first person to take public notice of the successive studies of human relations in industry undertaken by the Western Electric Company. He was at that time Director of the International Institute of Management at Geneva; and somewhere in the early 1930s he published a monograph on the Hawthorne experiments’. The Golden Book of Management was a somewhat strangely named book developed on behalf of the CIOS after a committee member had suggested an extension of the Thirteen Pioneers work following Urwick’s presentation with the International Gold Medal in 1951. The fuller version was an attractive task for Urwick, especially as he still had the services of a personal assistant and a secretary courtesy of Urwick, Orr and Partners. Published early in 1956, The Golden Book was an honour-roll of the great management figures of the past, written with a generous attitude to subjects, many of whom had been Urwick’s friends. Indeed, some would not have been widely recognized had Urwick not provided these portraits, which made him what he still remains, the leading historian of the pioneers of management. As a reflection of the book’s international value and significance, some twenty years after its publication the AMA commissioned a second volume of thirty-eight additional pioneers who had died since The Golden Book was published. With Urwick’s permission and active assistance, the second book was edited by William Wolf, although just as the book was about to go to press the publishers heard of the originator’s death. The decision of the AMA to publish the book was a further recognition of the status in which both the original book and Urwick himself were held, while in his preface to the second volume, Wolf was fulsome in his praise of Urwick, noting, I wish to express my appreciation for the inspiration and help given by Lt. Col. Lyndall F. Urwick. He himself is one of the true pioneers of the management movement. He, more than any other person, has been responsible for bringing to the fore the significant contributions to management. The world of management is indebted to him for his own books and for his efforts in bringing to universal attention the work of Follett, Fayol, Graicunas, Mooney and others—and for the Golden Book in both its first and this, its second, appearance.

Other facets in the development of management Apart from his work on organizational theory and the nature of management, it is also clear that in several other respects—marketing, leadership, management education and development—Urwick was both ahead of his time and had fresh things to say, providing a solid framework for logical thinking on these issues.

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His first books were about his activities rather than his views on theory or structure. Organising a Sales Office (1928) was derived from his re-organization of the Rowntree’s sales office, written in 1925–26 with the approval of the Rowntree directors, with a foreword by Seebohm Rowntree. It was Urwick’s first chance to lay out some principles in practice, although it was inevitably less about the philosophy of management than the practicalities of an internal consultancy. In restating what he saw as Taylor’s true approach, he put particular emphasis on the ‘systematic’ aspect of management. Moreover, he stressed that the review of methods undertaken within the firm was conducted as a faithful replication of Taylor’s principles, and in particular through consultation with those employees who were going to be affected, thereby obtaining their cooperation as a prelude to successful implementation of the new methods. It is worth noting that the book was a sufficient success to be considered worth republishing by Pitman & Sons in 1938. In The Meaning of Rationalisation (1929), Urwick advocated the industrial rationalization movement as a means of applying scientific method to economic life and thus of raising human productive efficiency. This was meant to be an explanation of the proceedings and recommendations of the World Economic Conference by one of the official British representatives, rather than to reflect Urwick’s own views, but there was a great deal in the book which went well beyond what was said at that event and took up what Urwick felt should be done in Britain. Marketing was very underdeveloped in Britain in the interwar period, especially in comparison to developments in the United States, where work linking marketing to scientific management had begun in the 1920s (Wren 1994: 209). It is not known whether Urwick had read this American material, but he was certainly aware of the need for new marketing thinking. He had in fact had a considerable amount of experience in marketing, or distribution as it tended to be then called. This derived from his role as deputy manager of sales and distribution in Rowntree’s, his chapter for Northcott’s book ‘Factory Organisation’, and the focus on distribution which had been given in the IMI as a result of Edward Filene’s interests. At the same time he was also aware of its wider role in the organization, and devoted a quarter of Management of Tomorrow to discussing it. The first of two chapters on the topic was entitled ‘The Marketing Point of View’, providing for British readers a pioneering text. Urwick recommended that a separate division should be set up to determine several key issues: what the business should make and sell, including how many lines, sizes, or patterns; the price at which the business should sell them; the market to which they should be sold, which would involve market research; when lines should be added or withdrawn; quality standards; and competitor analysis. At a time when industry was still at the stage of producing and only then looking to sell goods, or possibly the stage of using new techniques of salesmanship, to give such powers as these to a new department was indeed revolutionary. Another path-breaking dimension of Urwick’s views on marketing involved his social perspectives, namely, that the role of marketing was linking the community’s industrial operations to their objective of service to the community by reflecting the citizen-consumers’ needs and wishes. This again was challenging

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tradition. On a more practical aspect, Urwick was also anxious that Urwick Orr should include a marketing service, leading to its introduction in 1937–8. Leadership was another subject very dear to Lyndall Urwick’s heart, stemming from his early involvement with the military. His own record of the severe 1914–15 fighting demonstrated deep thinking devoted to ensuring high morale and co-operation from the men under his command, whatever the tasks to be performed and difficulties encountered. Indeed, the detailed study of military command systems gave him a sound foundation on which to generate his own thinking, leading him to argue consistently that industrial management could benefit considerably from the application of these ideas. Building on these ideas, his two main contributions to leadership studies were, first, five unpublished lectures given to the IIA in 1943, and, second, Leadership in the Twentieth Century (1957), in which his military background is revealed. Urwick’s views can best be understood by examining the 1943 lectures, which broke the issue down into five questions: • Why should we be interested in leadership? Urwick saw management and leadership as two halves of the same subject. • Why do we need leaders? We need leadership to make group coordination possible, because humanity craves for leadership. • How are leaders chosen? ‘The leader who is removable and accountable, is likely to be a better leader.’ • What should be expected of our leaders? The functions of leadership are: representation of the organization and the cause for which it stands; initiation, administration, interpretation, and modifying policies to bring them into line with changing circumstances. • What are the qualities required in a leader? This is no easy task. A fundamental quality is integrity, meaning not just honesty but its derivative sense of unity; a man who would lead others must be ‘at one with himself ’. A later piece of writing was the booklet Is Management a Profession? (1954), an important issue in the 1950s. Urwick argued that this was not ‘wholly academic or a matter of words’, but ‘has a considerable influence on whether we [Britain] shall be able to pay our debts’. In it he attacked ‘a large array of British prejudices and patterns of thought’ that resisted the professionalism which he saw as being critically needed. While he did not become involved in the problematic issues of what constitutes a profession in terms of ethics and institutional rules of behaviour, he argued that the most important need in the development of professionalism was to put management in Britain on the same level of social approval as in the United States. We could continue to discuss other topics on which he wrote, but it will suffice to say that he has been recognized to have made contributions to disciplines outside the traditional scope of management. Parker and Ritson’s (2008) article ‘Lyndall Urwick: Lifetime Champion of Scientific Management and Accounting’ argues that this included accounting, while Young’s (1990) ‘Lyndall Urwick (1891–1983): British Management Authority and his Engineering Management Connection’ demonstrated his contribution to engineering.

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Evaluation When assessing Urwick’s contribution to management, it must be stressed that he was above all interested in theory and its importance, although his view of theory was pragmatic rather than academic. As he argued in Notes on the Theory of Organization: we cannot do without theory. It will always defeat practice in the end and for a quite simple reason. Practice is static…it has no principles with what it doesn’t know. . . . Theory, on the other hand is light-footed. It can adapt itself to changed circumstances, think out fresh combinations and possibilities, peer into the future. That, after all, is its business.

Moreover, Urwick reasoned that to build up a theory of a subject requires analysis, by identifying the different elements of an idea or activity and examining them separately. According to Urwick, this was how the theory of management started, with Taylor empirically analysing the detailed movements involved in metal-cutting operations. However, he never quite made the effort to write his definitive theoretical work, even though twice, in 1932 with his two sets of chapter outlines preceding Management of Tomorrow, and then in 1952 with intentions beyond Notes on the Theory of Organization, he considered this aim. Even his most comprehensive book of synthesis, Elements of Administration, arose from a series of lectures, rather than an intention to write a definitive book. He was not really convinced of his own significance as a theorist; rather, he was always generous to other authors, never claiming credit for their work, and even tending to underestimate his own contribution. His favourite claim was that that he had written nothing new, but only drawn the public’s attention to the great writing of others. Indeed, he was the greatest synthesizer in the field as a result of his interest in others and his ability to recognize their talents. He probably saw himself as a propagandist, rather than an original and theoretical writer; he was such a busy man in so many other ways that the definitive theory that he had in him was never written Nevertheless, as Witzel (2003: 299) argues, he was an original thinker, even if influenced by a wide variety of others; his importance was also boosted by the elegance and clarity of his writing. He is the icon of classical management in Britain and a key figure, worldwide, in a school which must be recognized as an indispensable stage in the development of management thought. Urwick argued in favour of a rationalistic systematism that would produce the same results from the same starting point, even if circumstances differed. While this led to criticism, he rejected the narrow implications of this aspect of scientific management, noting (1957: 1): Much confusion has been caused by the fact that the phrase scientific management has been misunderstood. It has been interpreted as a claim that managing a business can be an exact science in the sense that mathematics or physics are exact sciences. Such a claim is, of course, nonsense and was never intended by those who developed the phrase. Managing a business is an art. It is an art which is concerned all the time with human beings.

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Finally, in trying to assess Urwick’s contribution to management through his writing, we cannot do better than to quote George (1972: 135): Lyndall Urwick is not an innovator in the field of management in the sense that Fayol or Sheldon were. He has made a contribution, however, by his timely consolidation of the managerial principles developed by others. . . . This is how Urwick has served the management continuum. His work crystallized the similar concepts that had been independently developed, thereby giving them more credence and serving to mould them into a system of managerial thought.

Bibliography of Lyndall Urwick’s works (1928) Organising a Sales Office. London. Gollancz. Urwick’s first book, an excellent piece of internal consultancy. (1928) ‘Principles of Direction and Control’ in Lee, J. (ed.) Dictionary of Industrial Administration. London. Pitman. An extension of the Fayol principles, and Urwick’s most original contribution to organisation theory. (1929) The Meaning of Rationalisation. London. Nisbet and Co. The outcome of the 1926 International Economic Conference, oriented to Urwick’s view of Britain’s needs. (1933) Management of Tomorrow. London. Nisbet and Co. Urwick’s most comprehensive book on management. (1937) With Gulick, L. (eds) Papers on the Science of Administration. New York. Institute of Public Administration. The main consolidation of thought on organizations before WWII (1941) With Metcalf, H. C. (eds) Dynamic Administration: The Collected Works of Mary Parker Follett. Bath. Management Publications Trust. The work of Follett. (1944) Elements of Administration. London. Pitman. Urwick’s most important work of synthesis and consolidation. (1949) With Brech, E. The Making of Scientific Management (3 vols. Thirteen Pioneers(I), Management in British Industry(II) and The Hawthorne Investigations(III)). Bath. Management Publications Trust). Urwick’s most popular works, although Vols. 2 and 3 largely written by Brech. (1952) Notes on the Theory of Organization. New York. American Management Association. A prelude to a major work on organization which was never written. (1954) Is Management a Profession? London. Urwick Orr and Partners. Urwick’s answer to a topical question. (1956) ‘The Manager’s Span of Control’. Harvard Business Review, May–June 39–47. Urwick’s major statement on the span of control. (1956) The Golden Book of Management, London. Newman Neame. Mini-biographies of seventy key people in the history of management. (1960) With Dale, E. Staff in Organizations. New York. McGraw-Hill. Draws on military analogies and has empirical research from specially conducted surveys.

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References Brech, E., Thomson, A., and Wilson, J. F. (2010) Lyndall Urwick Management Pioneer: A Biography. Oxford. Oxford University Press. Child, J. (1969) British Management Thought. London. George Allen and Unwin. Emerson, H. (1913) Twelve Principles of Efficiency. New York. Engineering Magazine Co. George, C. (1972) The History of Management Thought. 2nd ed. Englewood Cliffs, NJ. PrenticeHall. Litterer, J. (1986) The Emergence of Systematic Management as Shown by the Literature of Management from 1870 to 1900. New York. Garland Publishing. Parker, L. and Ritson, P. (2008) ‘Lyndall Urwick: Lifetime Champion of Scientific Management and Accounting’, American Accounting Association Annual meeting, Anaheim CA, August. Pugh, D. S., Hickson, D. and Hinings, C. (1971) Writers on Organizations. Harmondsworth, England. Penguin Books. Sheldon, O. (1923) The Philosophy of Management. London. Sir Isaac Pitman & Sons. Subramaniam, V. (1966) ‘The Classical Organization Theory and its Critics’. Public Administration, Winter, 44(4): 435–46. Witzel, M. (2003) Fifty Key Figures in Management. London. Routledge. Wren, D. (1994) The Evolution of Management Thought. Fourth Edition. New York. John Wiley & Sons. —— and Bedian, A. (2009) The Evolution of Management Thought. Fifth Edition. New York. John Wiley & Sons. Young, E. (1990) ‘Lyndall Urwick (1891–1983) British Management Authority and his Engineering Management Connections’. Engineering Management Journal. Vol. 2/1 March.

chapter 8

ch ester ba r na r d a n d the systems a pproach to n u rt u r i ng orga n iz ations a ndrea g abor and joseph t. m ahoney

Chester Barnard (1886–1961) was best known as the author of The Functions of the Executive, perhaps the twentieth century’s most influential book on management and leadership.1 The book emphasizes competence, moral integrity, rational stewardship, professionalism, and a systems approach, and was written for posterity. For generations, The Functions of the Executive proved to be an inspiration to the leading thinkers in a host of disciplines. Perrow writes that: ‘This . . . remarkable book contains within it the seeds of three distinct trends of organizational theory that were to dominate the field for the next three decades. One was the institutional theory as represented by Philip Selznick [1957]; another was the decision-making school as represented by Herbert Simon [1947]; the third was the human relations school [Mayo 1933; Roethlisberger and Dickson 1939]’ (1986: 63).2 Barnard’s work also influenced sociology’s Parsons and Gouldner and informed the institutional economics of Williamson (1975, 2005). Indeed, Andrews states that: ‘The Functions of the Executive remains today, as it has been since its publication, the most thought-provoking book on organization and management ever written 1

As of 25 July 2010, Barnard’ss (1938) Functions of the Executive had been cited over 8,000 times (Google Scholar). See Bedeian and Wren (2001) for their ranking of the top 25 most influential management books of the twentieth century with Taylor (1911) and Barnard (1938) occupying the top two positions. 2 Classic works influenced by Barnard’s The Function of the Executive include: Boulding (1956), Coser (1956), Cyert & March (1963), Dalton (1959), Downs (1967), Gouldner (1954), Homans (1950), Katz and Kahn (1966), Likert (1961), March and Simon (1958), Mayo (1945), McGregor (1960), Merton (1949), Mintzberg (1973), Selznick (1957), Simon (1947), Thompson (1967), and Williamson (1975). Of particular note is the Barnard-Simon connection (Simon 1991, 1994; Wolf 1995a). It is worth noting, however, that although Barnard knew both Roethlisberger and Mayo, he later claimed to have known little about the Hawthorne studies, which were completed before he wrote Functions of the Executive. Barnard did serve as a major influence on Likert (1961) and McGregor (1960).

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by a practicing executive’ (1968: xxi). Barnard combined the capacity for abstract thought with the ability to apply reason to professional experiences toward developing a ‘science of organization’ (1938: 290).3 Barnard (1938) emphasized the role of the manager as both a professional and as a steward of the corporation. Barnard’s (1938) teachings drew on personal insights as a senior executive of AT&T, which saw good governance as the primary means of winning public acceptance of its telecommunications monopoly. Barnard’s thinking also reflected a growing interest in social systems and a concern about how society, in the 1930s, would cope with the growing technological complexity of industrial life and the emergence of ever larger-scale institutions. Barnard’s (1938) book, which was compiled from a series of lectures delivered in Boston during the 1930s, also sought to provide answers to the concerns of management practitioners, as well as the intellectuals who were transforming the Harvard Business School into a ‘West Point of Capitalism’. Further, the scientific and industrial boom of the early twentieth century was fomenting a political, economic, and spiritual crisis, and Barnard’s (1938) vision of professional, managerial stewardship promised to serve as a stabilizing influence on a corporatist American democracy. Barnard (1938) articulated the principal defence of managerial capitalism, and maintained that management possessed the ‘moral authority’ to both run and modernize the nation and to harness the forces of technological change for the public good. Barnard (1938) provides the Progressive case for the consistency of the American dream with managerial order (Scott 1992).4 Moreover, Barnard (1938) maintains that professional managers needed to be as dedicated, energetic, and committed to reform as their administrative counterparts in government in order to reassert their rightful leadership.5 3 In addition to developing the science of organization, Barnard also wanted to convey the art of organizing and the aesthetics of management, although he felt his shortcomings here: ‘Still more do I regret the failure to convey the sense of organization, the dramatic, and aesthetic feeling that surpasses the possibilities of exposition, which derives chiefly from the intimate, habitual interested experience. It is evident that many lack an interest in the science of organization because they are oblivious to the arts of organizing, not perceiving the significant elements. They miss the structure of the symphony, the art of the composition, and the skill of its execution, because they cannot hear the tones’ (1938: xxxiv). 4 Mahoney (2002, 2005) rejects, however, the thesis of Perrow (1986) and Scott (1992, 1994) that Barnard’s (1938) thinking was elitist. Indeed, Barnard’s (1948) own account of ‘the riot of the unemployed at Trenton, N.J. 1935’ shows an ability to connect with workers and a sensitivity to maintaining the reciprocal acknowledgement of personal integrity. For convincing critiques of Scott (1992), see Pauchant (1994) and Wolf (1995b). 5 Barnard’s thinking was influenced by classic Greek philosophy such as that of Plato (Godfrey, 1994) and Aristotle (Heyl, 1968), as well as by Adams (1913), Bentley (1935), Bridgeman (1938), Brinton (1938), Brown (1934), Cardozo (1921), Commons (1934), Dewey (1938), Durkheim (1933), Ehrlich (1912), Follett (1924), Henderson (1935), Herring (1936), Homans and Curtis (1934), Humphrey (1933); Koffka (1935), Korzybski (1933), Lewin (1938), Mayo (1933), Merz (1904), Ogden and Richards (1936), Pareto (1935), Parsons (1937), Rivers (1924), Schumpeter (1934), Smith (1776), Weber (1930), and Whitehead (1929). Barnard also acknowledged his friendships and correspondences with such influential thinkers as Philip Cabot, Lawrence Henderson, George Homans, Elton Mayo, and Talcott Parsons (Wolf 1994). In addition to Barnard (1948), other collected works of Barnard can be found in Wolf (1974) and Wolf and Iino (1986).

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In almost every respect, The Functions of the Executive was decades ahead of its time. For one thing, in sharp contrast to the mechanistic conceptions of earlier management thinkers, such as Frederick Winslow Taylor, Barnard (1938) viewed the organization as a complex social system. Barnard (1938) showed a unique ability to traverse back and forth between the empirical and theoretical realms and to weave together the latest developments in psychology, sociology, and human relations. Barnard (1938) focused on the complexities of the human element in organization, on the psychological forces of human behaviour, and on developing ways to manage the complexities of human behaviour and to cope with its limitations (Gabor 2000). Barnard emphasizes that formal organizations are ‘organic and evolving social systems’ (1945: 178), and that management’s main challenge is achieving cooperation among the groups and individuals within this social system, in the interests of achieving organizational goals. The magnitude of the cooperative challenge is such that ‘successful cooperation in or by formal organizations is the abnormal, not the normal condition. What are observed from day to day are the successful survivors among innumerable failures . . . Failure to cooperate, failure of cooperation, failure of organization, disorganization, disintegration, destruction of organization—and reorganization—are characteristic facts of human history’ (1938: 5). Barnard also recognized the link between authority and legitimacy. As a systems thinker, Barnard’s ideas drew on his own eclectic intellectual interests, his years at AT&T, and his exposure to the so-called Harvard Circle, which reinforced his interests in the psychological and sociological aspects of management. Although Barnard was educated at Harvard, he was not a Brahmin. He was born poor, the son of a mechanic; his mother died giving birth to his third sibling when he was just 5 years old. Yet the Barnards were not a typical working-class family. ‘I was raised into a family who were all poor people, but they were also quite intellectual. They used to argue, endless arguments for hours, on Herbert Spencer and other philosophers,’ Barnard recalled (Wolf 1961: 168).6 Upon graduating from grammar school in Cliftondale, Massachusetts, at the age of 15, Barnard worked in a piano factory, and learned the trade of piano tuning. He eventually earned enough to enrol at Mount Hermon school, a prep school in Northfield, Mass., and later at Harvard. Barnard continued to work odd jobs throughout his college career and

6 Chester Irving Barnard was born on 7 November 1886 in Malden, Massachusetts. His father was a mechanic with grammar school education. His mother died when he was 5 years old and he spent a considerable amount of his childhood in the home of his grandfather who was a blacksmith (Wolf 1961: 168). Family life for Barnard was filled with music and with discussions on philosophy and social views. Gabor writes that: ‘[Barnard’s] personality reflected the contradictions of a poor boy who had grown up in a working-class household where “endless hours of arguments” centered not on the perpetual lack of money but on books and philosophy’ (2000:7). In fact, Barnard’s interest in philosophy was a lifelong hobby for him. He read widely in philosophy and he was a member of the American Philosophical Society (Wolf 1973: 58). Barnard was also active in numerous scientific and educational organizations, and he was Director of the National Bureau of Economic Research (Wolf 1961: 171). Barnard’s other life-long interests included music and the arts, and he was active in the founding of the Bach Society of New Jersey and the Newark Art Theater. His repertory in music ranged from Bach to boogie woogie. While at the piano, upon request, Barnard would play from memory any classical composition named (Biles and Bolton 1994).

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finished most of the requirements for a Bachelor’s degree in Economics in just three years. But a lack of funds forced him to drop out of Harvard before he completed a final science requirement in physics or chemistry (Wolf 1961: 170). Thus, Barnard had the number-one pedigree for joining the new managerial class, which held professional expertise and merit as its principal membership requirement. He went to work at AT&T, in 1909, as a statistician, right after leaving Harvard. Barnard analysed foreign telephone rate systems for a salary of $11.50 a week (Wolf 1973: 5). His chief mentor at AT&T was Walter S. Gifford, who ran the statistics department where Barnard worked and who would eventually become AT&T’s longest-serving president. When Barnard joined the company, it was still run by the legendary Theodore Vail, who had undertaken a massive campaign to acquire numerous independent telephone companies and to consolidate them under the AT&T umbrella. At the same time, Vail was fighting efforts by the US Post Office to nationalize the telephone system. The statistics department, one of the first of its kind in a US corporation, was set up as a sort of propaganda department to collect data that would demonstrate the superiority of AT&T’s performance. Barnard, at age 41, was appointed President of New Jersey Bell Telephone (NJBT) in 1927, just two years after Gifford became president of the parent company. NJBT was formed during the boom years of the late 1920s out of the merger of two regional operating companies, and Barnard’s first job involved the integration of the two companies and expansion of telephone service in the rapidly growing state.7 Barnard’s second major

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Barnard’s jobs before joining AT&T until then included tuning pianos while at Harvard University, conducting a small dance orchestra, typesetting theses for students, and offering a translation service (as he had learned Italian, French, and German) (Biles and Bolton 1994; Wolf 1961). After departing Harvard in 1909 without completing all necessary requirements, Barnard spent his entire business career in the telephone industry, beginning in 1909 as a statistician. In 1915, he became a commercial engineer, and in 1922 he was promoted to Assistant Vice President of the Bell Telephone Company of Pennsylvania. Four years later he became General Manager of the Bell Telephone Company of New Jersey, and in 1927 Barnard was appointed to New Jersey Bell’s presidency. That same year he was also appointed a director of New Jersey Bell and a director of the Fidelity Union Trust Company. He became a director of the American Insurance Company in 1928 and of the Prudential Insurance Company of America in 1929. Barnard was also active in civic organizations. In 1928 he became a member of the New York State Chamber of Commerce. In 1931 he organized and directed for eighteen months New Jersey’s Emergency Relief Administration. Barnard became active in the Newark Community Chest in the mid-1930s. At that time he also served on committees appointed by the Secretary of Labor to study the problems of older workers in industry. He was also director of the Regional Planning Association, and was a member of the board of managers of New Jersey Reformatory at Rahway (Wolf 1961: 171). From 1931 to 1934, Barnard represented New Jersey, New York, Pennsylvania, and Delaware as a director of the United States Chamber of Commerce. In 1935, he served for the second time as State Director of the New Jersey Relief Administration. At the outbreak of World War II, he was a trustee of the Rockefeller Foundation, the National Boys’ Club Movement, and Air Youth of America, as well as Honorary Chairman of the Red Cross. In 1942, Barnard succeeded Thomas E. Dewey to become the second President of the United Services Organization (USO), a morale-enhancing volunteer organization for the Allies’ servicemen and -women during World War II, serving without monetary compensation (Biles and Bolton 1994).

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challenge was to convert NJBT to dial service. In this he was less successful. A conservative-leaning executive, he put the brakes on dial conversion during the Depression. Thus, while NJBT nearly quadrupled its conversion rate to 32 per cent in 1933, up from just 8 per cent in 1928, it lagged behind the rest of the Bell System average for years to come. NJBT’s slow conversion rate proved to be a problem during World War II, when the company struggled to provide adequate telephone service, both for wartime production in the state and for business and private use. While Barnard might have lacked technological vision, he excelled at organizationbuilding—and a commitment to corporate welfare policies. His tenure at NJBT was marked by a sense of public service and personal integrity (Gabor 2000: 73). For example, at the height of the Depression in 1933, he announced a no-layoff policy—a major accomplishment even within the Bell System—choosing to reduce employees’ working hours instead. Combined with his penchant for personally negotiating labour disputes, such policies inspired employee loyalty. Though never an ardent opponent of unions, Barnard believed that they were useful only in competitive businesses where ‘bad treatment’ of employees is forced on companies by ‘chiselling’ competitors. By contrast, he believed that AT&T was in a position to persuade employees to prefer cooperation to confrontation (Gabor 2000). Barnard believed that a central challenge for management was balancing both the technological and human dimensions of organization. Moreover, he understood that this was a dynamic process, in need of constant attention and fine-tuning. Yet there is a curious discrepancy in Barnard’s career at AT&T. While Gifford was almost certainly behind Barnard’s promotion to the presidency of NJBT, Gifford also kept Barnard away from the ‘Valhalla’ of AT&T corporate headquarters in New York. There is probably some truth to Peter Drucker’s contention that Gifford considered Barnard’s strength as a philosopher-king superior to his performance as a hands-on executive (Gabor 2000). Indeed from his earliest days at AT&T, Barnard also spent a good bit of his time at Harvard, becoming involved with several leading intellectuals in the social sciences, including Wallace B. Donham (Dean of the Harvard Business School [HBS]), pioneers of human relations, Elton Mayo and Fritz Roethlisberger, and Lawrence J. Henderson. The Harvard man who influenced Barnard the most was Henderson, a biologist who became intrigued with the sociological-physiological analogies in the work of Vilfredo Pareto, the Italian sociologist who emphasized both the dynamic nature of organizations and the impact of emotions on human behaviour. Pareto (1935) emphasized the

After World War II, Barnard was a consultant to the United States representative on the United Nations Atomic Energy Committee, and he co-authored the State Department report on International Control of Atomic Energy. In 1946, he was appointed to the Presidential Special Commission on Integration of Medical Services in the government. In 1948, Barnard left the Bell System to become President of the Rockefeller Foundation, and in 1952 he retired from that post. Barnard then became chairman of the National Science Foundation. In 1957, he was appointed to the Board of Health of the City of New York, and he served as a member of the advisory committee studying hospital administration under a programme set up by the Sloan Foundation (Wolf 1961: 171). Barnard died on 7 June 1961, at French Hospital in Manhattan, in New York City (Wolf 1973).

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concept of mutual dependence of variables, and maintained that social systems, like their biological counterparts, have regulatory processes that tend to stabilize them. Henderson (1935) shared Pareto’s (1935) belief in the non-logical nature of most human behaviour, and also in the human need for such sentiments as duty, honour, and loyalty (Gabor 2000). Barnard had already read Pareto on his own in French, but he also served as a ‘sounding board’ for Henderson subsequent to their meeting in January 1937.8 In the early 1930s, Barnard participated in a series of Henderson-led seminars on Pareto that attracted an interdisciplinary group of Harvard intellectuals. They shared a conservative outlook and a desire to better understand social and organizational systems and to develop a counterweight to the growing appeal of socialism. The participants included anthropologist Clyde Kluckhohn, Harvard economist Joseph Schumpeter, historians Crane Brinton and Bernard DeVoto, Boston lawyer Charles Curtis, mathematician and philosopher, Alfred North Whitehead, psychologist Henry Murray, sociologists Talcott Parsons and Robert Merton, as well as George Homans, Elton Mayo, Wallace Donham, and Lawrence Lowell, the president of Harvard (Heyl 1968; Keller 1984; Novicevic, Hench, and Wren 2002). Within this circle, Barnard was a great admirer of Parsons (1902–79), and he and Parsons corresponded often from the late 1930s until Barnard’s death in 1961. They exchanged manuscripts for commentary to each other and wrote long letters containing much theoretical discussion (Heyl 1968). Another important influence on Barnard’s thinking was the work of Kurt Lewin, a Jewish refugee who emigrated to the US from Germany in the 1930s, and a founder of the field of social psychology. As part of his work on group dynamics, Lewin (1938) studied how disparate leadership styles—autocratic, democratic, or laissez faire—influenced employee behaviour. The onset of facism in Europe and the Depression created fresh challenges for the ‘new managing class’ that was represented by HBS, and of which Barnard was a model exponent. Donham encouraged Barnard to publish The Functions of the Executive, in part to answer the escalating anti-big-business rhetoric, which was brought on by the economic crisis and a wave of business closures. In 1932, Adolf Berle and Gardiner Means published The Modern Corporation and Private Property, which maintained that the interests of managers were divorced from those of owners, and concluded that the nation would best be served if business were guided by public policy. They called for government to impose more effective regulation of industry to safeguard public interests.

8 Novicevic, Hench, and Wren note that: ‘Pareto’s influence on social thought in the 1930s was especially strong—not only for Barnard, but also for those involved in Harvard’s “Pareto Circle” who invited Barnard to participate in their meetings and who, ultimately, figured so prominently in the ultimate publication of The Functions of the Executive’ (2002: 994). Further, Barnard’s (1938) appendix on ‘Mind in Everyday Affairs’ incorporated Pareto’s notion of non-logical mental processes as an explanation of human behaviour. Although Mayo and Roethlisberger completed their work on the famous Hawthorne studies before he published The Functions of the Executive, Barnard said it was Pareto’s teachings, via Henderson, that influenced his thinking on the pivotal role of the ‘informal organization’—the round-the-water-cooler conversations and relationships that often determine how the real work of the corporation gets done.

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Although Barnard never held a faculty position at Harvard, his book grew out of a series of lectures at Boston’s Lowell Institute, which had been founded by Lawrence Lowell, who served as president of Harvard until 1933. The Functions of the Executive is an abstract and theoretical book that would frustrate contemporary readers in many respects. To give his ideas greater precision, Barnard (1938) invented terminology that, rather than clarifying matters, made the book an especially difficult read. The seriousness of purpose that Barnard brought to the project is indicated by the fact that he rewrote the book ‘about eighteen or twenty times’ (Wolf 1973: 15), and his work schedule while writing the book involved eighteen-hour days between business and other obligations, writing the book, and maintaining critical thinking (Wolf 1973: 48). Yet the hands-on experience of the working executive emerges between the lines. The impact of Barnard (1938) on strategic management and organization theory is well documented (McMahon and Carr 1999; Scott 1987; Williamson 1995). At a broad level, Barnard (1938) reflects his wide reading in psychology, sociology, economics, anthropology, law, political theory, and philosophy of science. Importantly, Barnard presents a systems approach to the study of organization, which contains a psychological theory of motivation and behaviour, a sociological theory of cooperation and complex interdependencies, and an ideology based on a meritocracy.9 Scott submits that: ‘The uniqueness of Barnard’s contribution stemmed from placing the concepts of behavior, motivation, and group processes into systems frameworks’ (1992: 116). Barnard (1938) provides a conceptual scheme of the theory of organization based on the following structural concepts: The Individual and Bounded Rationality; Cooperation; Formal Organization; and Informal Organization. The principal dynamic concepts include Communication; Consent Theory of Authority; Free Will; The Decision Process; Dynamic Equilibrium and the Inducement-Contributions Balance; and Leadership, Executive Responsibility and Moral Codes. We discuss each of these concepts in turn. The Individual and Bounded Rationality. The individual is posited to be involved in activities that are the result of psychological factors. Every person has the power of choice, the capacity of determination, and the possession of free will (Pye, 1994). Individual judgements come from the heart or from the deepest depths of our experience (Barnard 1948; Gehani 2002).10 However, the individual is limited in terms of biological faculties or capacities (Barnard 1938: 23). The organization as a cooperative system is seen as overcoming an individual’s physical and cognitive limitations (bounded rationality). 9 Barnard was highly influenced by the systems approach. In a talk to students at Johns Hopkins University in 1953 he noted that: ‘I have read [Ross Ashby’s Design for a Brain] five times and I am certainly going to read it five more times (Andrews 1968: xiii). To Barnard, a system is characterized by the fact that the components to a system are interdependent variables (1938: 77–8). 10 That Barnard placed great importance on experience there can be no doubt. Barnard states that: ‘The subtle effect of the education process, which is necessarily logical in its form, I think obviously leads to a false sense of intellectual superiority which closes the mind of many to the powers and the merits of others, either of inferior formal education or of education in other fields. This produces a kind of conceit. It leads to serious misjudgment of the importance of personal experience and of deliberately acquiring it’ (1938: 321).

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The Cooperative System. Barnard states that: ‘Cooperation . . . means genuine restraint of self in many directions, it means actual service for no reward, it means courage to fight for principles rather than for things; it means genuine subjection of destructive personal interest to social interests’ (Scott 1992: 119). Barnard comments on the risks of standing up for principles: ‘The people who haven’t got guts enough to face [personal risks], just finally don’t have guts enough to do anything’ (Wolf 1963: 93). When the purpose of a system of cooperation is attained, then the cooperation is said to be effective (1938: 43). Cooperative effort is greatly limited if there is a lack of confidence in the sincerity and integrity of management. Such a lack of confidence in the sincerity and integrity of management insidiously thwarts cooperation.11 Barnard submits that: ‘When a condition of honesty and sincerity is recognized to exist, errors of judgment, defects of ability, are sympathetically endured. They are expected. Employees don’t ascribe infallibility to leaders or management. What does disturb them is insincerity and the appearance of insincerity when the facts are not in their possession’ (1948: 11).12 Formal Organization. Barnard provides a rational systems view of formal organization as ‘the concrete social process by which social action is largely accomplished . . . [and] that kind of cooperation among men that is conscious, deliberate, purposeful’ (1938: 3–4). Barnard views the formal organization as ‘a system of consciously coordinated activities or forces of two or more persons’ (Barnard 1938: 73). Noting the fragility of many formal organizations, Barnard also observes that: ‘The creative side of organization is coordination . . . [and] under some circumstances . . . the quality of coordination is the crucial factor in the survival of organization’ (1938: 256). Scott submits that while Barnard’s views contain many ideas that are consistent with a ‘rational system conception of organizations; what sets them apart is his insistence on the non-material, informal, interpersonal, and, indeed, moral basis of cooperation’ (1987: 63). Informal Organization. Barnard maintains that: ‘ “Learning the organization ropes” in most organizations is chiefly learning who’s who, what’s what, why’s why, of its informal society’ (1938: 121). Barnard’s informal organization is closely connected to the concept of organizational character (Wright 1994), and would likely be termed by many managers today as organization culture. Informal organization can be seen in ‘mores, customs, commonly held aversions, persistent beliefs, conventions, codes of morals, institutions, [and] language’ (Barnard 1948: 145). 11 Barnard affirms cooperative effort, stating that: ‘I have myself seen large groups of employees voluntarily and wholeheartedly cooperate to increase individual and collective efficiency and production in order to reduce expenses when it was recognized that the immediate effect was to the pecuniary disadvantage of the employees themselves. The importance of such collaboration to all involved is incalculable. It is neither justified, nor can it be obtained, except on the basis of a confidence inspired by experience’ (1948: 12). 12 Barnard further notes that: ‘I know of nothing more difficult to check in a management organization of tried, experienced men of integrity and of fine purpose in personal relations than this sporadic propensity to be smart, to avoid an issue, to withhold an unpleasant truth, to decline to admit an error, when honesty, sincerity, and even good sense clearly condemn such lapses’ (Barnard, 1948: 11–12).

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Barnard saw the role of the informal organization as complementary to the formal organization, and conceived of the informal organization as a far more positive force in the life of an organization than it was in Roethlisberger and Dickson’s (1939) view. For Barnard, the informal organization improves communication, enhances cohesiveness within the formal organization, and protects the integrity of the individual (Gabor, 2000). Informal organization ‘is to be regarded as a means of maintaining the personality of the individual against certain effects of formal organizations which tend to disintegrate the personality’ (1938: 122). To Barnard it is the responsibility of management to strike a balance between maintaining the individual and improving organizational effectiveness. Barnard submits that the element of the individual is of central consideration in the management of personnel and must be genuine rather than a high-sounding fiction for stimulating production. Hypocrisy, Barnard warns, is fatal in all personnel work (1948: 9). Communication. Barnard points out that a common purpose in an organization can only be achieved if it is commonly known, and to be known it must be communicated effectively in language, oral and written (Barnard 1938: 89). Tacit understandings are also often essential (Barnard 1938: 301–22). Consent Theory of Authority. Swimming against the stream of the dominant floodtide of scientific management (e.g. Taylor 1911), management’s authority, Barnard realized, rests in its ability to persuade, rather than to command (Golembiewski and Kuhnert 1994; Rabin 1994).13 Further, Barnard emphasized that legitimate management authority is based on functional skills and not hierarchical position (Gabor, 2000). A person in an organization accepts a communication as authoritative when: he can understand the communication; he believes that it is not inconsistent with the purpose of the organization; he believes it to be compatible with his self-interest as a whole; he is able mentally and physically to comply with it; and there exists a zone of indifference in each individual within which orders are acceptable without conscious questioning of their authority (1938: 165–7). Barnard notes that: ‘Either as a superior officer or as a subordinate, however, I know nothing that I actually regard as more “real” than “authority” ’ (1938: 170).14 Free Will. The concept of free will is central to Barnard’s theory of behaviour and is derived from those moral and legal doctrines that stress personal responsibility for actions. Endorsement of the free will doctrine underpins all his arguments concerning management’s moral obligations. To Barnard, ‘the idea of free will is inculcated in doctrines of personal responsibility, of moral responsibility, and of legal responsibility. 13

Wolf notes that: ‘It should be pointed out that Barnard’s thinking about authority was stimulated by Eugene Ehrlich’s Fundamental Principles of the Sociology of Law . . . The theme of this work is that the sources of law lie in the people and not in the legislatures, courts, or formally designated rulers’ (1974: 83). 14 Barnard writes that: ‘In healthy organizations, a superior will override the judgment of a group of subordinates at his peril and only in a crisis or emergency or where a decision must be made in some new field outside their competence. The problem is not one of potential insurrection. It is rather one of maintenance of free communication between superior and subordinate men and of a workable distribution of responsibility. This is seriously injured if authority is overridden arbitrarily’ (Barnard, 1948: 163).

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This seems necessary to preserve a sense of personal integrity’ (1938: 13). Barnard’s experience during World War II, when he served with the USO, which he called ‘the most difficult single organization and management task in [his] experience’ (1948: vi–vii), helped confirm his philosophy of management—especially the link between free will and acceptance of authority. At the USO, getting an organization that, at any given moment, relied on literally hundreds of thousands of volunteers to work required the voluntary consent of the governed. Authority had to be accepted; it could not be dictated. Nearly everything depended upon the moral commitment as opposed to a formal requirement (Gabor 2000; Smith 1994). Decision-making and the Decision Process. Although the organization theory literature on decision-making from Simon (1947) to the present is expansive, Barnard provides us with his unique perspectives: ‘The making of decisions, as everyone knows from personal experience is a burdensome task. Offsetting the exhilaration that may result from correct and successful decision and the relief that follows the terminating of a struggle to determine issues is the depression that comes from failure or error of decision and the frustration that ensues from uncertainty’ (1938: 194). Barnard warns of a tendency for personnel to avoid responsibility (due in part to fear of criticism) and that an executive must distribute responsibility, or otherwise run the risk of being overwhelmed with the burdens of decision. Barnard writes that: ‘The fine art of executive decision consists in not deciding questions that are not pertinent, in not deciding prematurely, in not making decisions that cannot be made effective, and in not making decisions that others should make’ (1938: 194). Barnard returns to this theme in an interview granted in 1961 stating that: ‘You put a man in charge of an organization and your worst difficulty is that he thinks he has to tell everybody what to do; and that’s almost fatal if it’s carried far enough’ (Wolf 1973: 30). Barnard also makes clear that while there is a need in developing a ‘science of organization’ (1938: 290), such an effort will not typically be sufficient for success. An appreciation of the art of organizing is also necessary. Barnard pushes the boundaries of exposition to join the ‘two cultures’ of the science and the art of organizing in conveying the aesthetic element in the decision-making process, which is derived from the ‘intimate habitual, interested experience’ (1938: 235) (Levitt and March 1995; Mahoney 2002). Barnard writes that the decision-making process ‘transcends the capacity of merely intellectual methods and techniques of discriminating the factors of the situation. The terms pertinent to it are “feeling,” “judgment,” “sense,” “proportion,” “balance,” [and] “appropriateness.” It is a matter of art rather than science, and [it] is aesthetic rather than logical’ (1938: 235). Dynamic Equilibrium and the Inducement-Contributions Balance. To Barnard the efficiency and effectiveness of an organization depends upon what the organization secures and the personnel produce (the contributions) and how the organization distributes its resources (the inducements). The contributions and inducements are always dynamic (1938: 57–9). Inducements include material inducements, personal non-material opportunities, desirable physical conditions, ideal benefactions, association attractiveness, adaptation of conditions to habitual methods and attitudes, the

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opportunity of enlarged participation, and the condition of communion (1938: 142). Barnard emphasized non-economic motives. A passage contained in a volume of his collected papers explains: ‘Prestige, competitive reputation, social philosophy, social standing, philanthropic interests, combativeness, love of intrigue, dislike of friction, technical interest, Napoleonic dreams, love of accomplishing useful things, desire for regard of employees, love of publicity, fear of publicity—a long catalogue of non-economic motives actually condition the management of business, and nothing but the balance sheet keeps these non-economic motives from running wild. Yet without all these incentives, I think most business would be a lifeless failure’ (Barnard 1948: 15).15 Significantly, Barnard understood better than most executives—then or now—the importance and difficulties of conventional ‘incentive’ schemes. Barnard (1938) anticipated the sophisticated psychological reasoning of Maslow’s (1954) hierarchy of needs and of Herzberg (1959) who referred to money as a hygiene factor and noted that not enough of it will cause dissatisfaction, but money alone does not serve as a motivator. Indeed, Barnard (1938) perceived that the logic of conventional incentive schemes was, in essence, a self-fulfilling prophecy, and maintained that beyond a certain level of equitable compensation, employees are not necessarily driven by financial incentives. Rather, elaborate rituals of bonuses and incentives devised by management create a culture of avarice in which money becomes the prevailing symbol of success. Barnard understood the magnitude of the challenge involved in balancing organizational and individual needs: ‘To establish conditions under which individual pride of craft and of accomplishment can be secured without destroying the material economy of standardized production in cooperative operation is a problem in real efficiency. To maintain a character of personnel that is an attractive condition of employment involves a delicate art and much insight in the selection (and rejection) of personal services 15 Barnard goes on to note that: ‘If you will stop taking the business man at his word and quietly watch him when he is off guard, you will find he is taking care of poor old John who couldn’t be placed anywhere else, that he is risking both profit and failure rather than cut wages, that he continues an unprofitable venture on nothing but hope rather than throw his men out of work. Much of this is unsound. It would be better if economic motives did operate more effectively, but the point is that is impossible to get to the root of personnel relations or understand labor troubles or successes on the unrealistic assumption that economic motives exclusively govern. They merely limit and guide. They control more in some cases or some businesses than others’ (1948: 15). Barnard also emphasizes the desire to build personal integrity, prestige, and status, and states that: ‘At the present time it appears to me that a large part of social discord and friction is due to the illusion that economic interests govern behavior almost exclusively in business, industrial, and political situations’ (1948: 78). Viewed from the perspective of the early twenty-first century, Barnard’s ideas about the importance of personal integrity and the danger of over-emphasizing economic interests, seems almost prophetic. Many of the most recent catastrophes, including the financial meltdown—in so far as it was produced by perverse economic incentives that led to the proliferation of collateralized debt obligations—or the slap-dash corner-cutting (including ignoring maintenance protocols) that led to the BP-TransoceanDeepwater-Horizon oil-rig explosion off the coast of Louisiana, appear to be the direct result of putting economic incentives ahead of the long-term health of the organizations—and systems—involved. In particular, the finger pointing among the three companies involved in the Louisiana explosion shows a stunning lack of awareness of the rig—and the entire drilling enterprise—as an exceptionally complex, interconnected system.

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offered . . . To have an organization that lends prestige and secures the loyalty of desirable persons is a complex and difficult task in efficiency—in all-round efficiency, not onesided efficiency’ (1938: 94). A corollary point, Barnard (1938) recognized, was that the efficacy of an individual’s effort can be no greater than the capability of the system, or environment, in which employees work.16 And the development and training of employees are, according to Barnard (1938), of paramount importance (Gabor 2000). Leadership, Executive Responsibility and Moral Codes. For Barnard much is given to leaders and much is expected. Leadership is the factor of chief significance in human cooperation (Novicevic et al. 2009). While cooperation is the creative process, leadership is the ‘indispensable fulminator of its forces’ (Barnard 1938: 259). The fundamental function of a leader is to create meaning for followers that will facilitate their commitment and identification. Barnard writes that: ‘The inculcation of belief in the real existence of a common purpose is an essential executive function’ (1938: 87). Leadership, to Barnard, seems ‘connected with knowing whom to believe, with accepting the right suggestions, with selecting appropriate occasions and times … an understanding that leads to distinguishing effectively between the important and the unimportant in the particular concrete situation, between what can and what cannot be done, between what will probably succeed and what will probably not, between what will weaken cooperation and what will increase it’ (Barnard 1948: 86–7). Leadership then must go beyond deciding what the right thing to do is, and to move onto the job of getting it done (Barnard 1952). Barnard states that: ‘An executive is a teacher; most people don’t think of him that way, but that’s what he is. He can’t do very much unless he can teach people. . . . You can’t just pick out people and stick them in a job and say go ahead and do it. You’ve got to give them a philosophy to work against, you’ve got to state the goals, you’ve got to indicate the limitations and the methods’ (Wolf 1973: 7–8). Leadership then involves the guidance of conduct of others and it requires ‘wide imaginations and understanding’ (Barnard 1945: 176). Indeed, leaders need to be more effective than others, both in conveying meanings and intentions and in receiving them with sympathetic understanding (1948: 97–9). Barnard (1948: 109–10) describes the nature of leadership, stating that: It is in the nature of a leader’s work that he should be a realist and should recognize the need for action, even when the outcome cannot be foreseen, but also that he should be an idealist and in the broadest sense pursue goals some of which can only be attained in a succeeding generation of leaders. Many leaders when they reach the 16

In recognizing that the individual employee can have only limited impact on the system, Barnard also anticipated the quality management work of W. Edwards Deming (1986, 1994) who himself was influenced by the statistical theories of Walter Shewhart. Shewhart worked at AT&T during the 1920s—though it is unclear whether Barnard was aware of Shewhart’s work, which focused on quality improvement at the Western Electric plant in Chicago. Deming observed that a system can only be improved if it is ‘in control,’ i.e., when the variation inherent to every system is predictable. Deming’s observation provided an important statistical foundation for the systems view of organizational improvement. Deming maintained that an individual’s performance could not be evaluated independently of the system within which he or she worked.

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In the expression, ‘old men [and old women] plant trees’ Barnard indicates that the moral factor is real and articulates the theme of Durkheim (1933) that organic solidarity may be based on the flimsiest of grounds and yet continue to exist.17 Within the cooperative system, the moral factor finds its concrete expression and suggests the necessity of leadership and ‘the power of individuals to inspire cooperative personal decision by creating faith (emphasis added): faith in common understanding, faith in the probability of success, faith in the ultimate satisfaction of personal motives, faith in the integrity of objective authority, faith in the superiority of common purpose as a personal aim of those who partake in it’ (Barnard 1938: 259). For Barnard, the part of leadership that determines the quality and morality of action is responsibility. Responsibility is the ‘quality which gives dependability and determination to human conduct, and foresight and ideality to purpose’ (1938: 260). Responsibility is the most important function of the executive.18 Responsibility means honour and faithfulness in the manner that managers carry out their duties. Barnard defines responsibility as an ‘emotional condition that gives an individual a sense of acute dissatisfaction because of failure to do what he feels he is morally bound to do or because of doing what he thinks he is morally bound not to do, in particular concrete situations’ (1948: 95). Carrying out this function also helps build the character of the executive who must practise deciding and acting under the burden of responsibility. Barnard in 1961, looking backward on his classic, states that: ‘In my opinion, the great weakness of my book is that it doesn’t deal adequately with the question of responsibility and its delegation. The emphasis is too much on authority, which is the subordinate subject. . . . The emphasis is put on authority which, to me now, is a secondary, derivative setup’ (Wolf 1973: 15). 17

These timeless themes can be found in economics (Arrow 1974), law (Macneil 1980), organization theory (Ouchi 1980), philosophy (Rorty 1989), political science (Mansbridge 1990), and sociology (Etzioni 1988). 18 The sense of responsibility was one that Barnard emphasized in an interview one month before his death in 1961 (see Wolf 1973) and was inculcated at a young age. In his letter of application to prep school at Mount Hermon School to his headmaster, Barnard wrote: ‘this dormant thirst for a larger education was awakened by my conversion to the Lord Jesus Christ, when I felt that I had capabilities which needed developing for his use. And that is now my ultimate aim—to be used of Him and to make the most of my life for Him’ (Scott 1992: 62). Indeed, Chester Barnard’s writings may be interpreted as an attempt to connect ethical and practical teachings (Mahoney 2002). Barnard states that: ‘responsibility is the property of an individual by which whatever morality exists in him becomes effective in conduct’ (1938: 267).

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Ultimately, Barnard maintains that: ‘nearly everything depends upon the moral commitment. I’m perfectly confident that, with occasional lapses, if I make a date with you, whom I have never met, you’ll keep it and you’ll feel confident that I’ll keep it; and there’s absolutely nothing binding that makes us do it. And yet the world runs on that— you just couldn’t run a college, you couldn’t run a business, you couldn’t run a church, couldn’t do anything except on the basis of the moral commitments that are involved in what we call responsibility. You can’t operate a large organization unless you can delegate responsibility, not authority but responsibility’ (Wolf 1973: 35). Ethical practice determines management’s moral authority and the capability of managers to pass their power on to the next generation. For Barnard (1938) to a large extent management decisions are concerned with moral issues, and the survival of the organization as a going concern depends on moral commitment.19 Barnard writes that: ‘Organizations endure, however, in proportion to the breadth of morality by which they are governed. This is only to say that foresight, long purposes, high ideals are the basis for the persistence of cooperation’ (1938: 282). Organizations that can build a culture that inspires members to transcend short-term interest will have a distinct advantage (Mahoney, Huff, and Huff 1994a, b; Miller 1992). Finally, we emphasize here that Chester Barnard as a participant observer was at home in both the real world of business and in the theoretical realm of academia; he had the unique ability to make connections between the latest developments in psychology, sociology, and the emerging discipline of organizational behaviour. Barnard strived to combine the two cultures of management—its science and its art—and called for ‘a social anthropology, a sociology, a social psychology, an institutional economics, a treatise on management’ (1938: 293) in developing the ‘science of organization’ (1938: 290). However, Barnard warns that we should not deceive ourselves by thinking that a science of organization will be enough: ‘Inspiration is necessary to inculcate the sense of unity, and to create common ideals. Emotional rather than intellectual acceptance is required’ (1938: 293). Barnard concludes his classic work with this observation: ‘I believe that the expansion of cooperation and the development of the individual are mutually dependent realities, and that a due proportion or balance between them is a necessary condition of human welfare’ (Barnard 1938: 296).20

References Adams, B. (1913). The Theory of Social Revolution. New York, NY: Macmillan. Andrews, K. R. (1968). Introduction to the Thirtieth Anniversary edition of The Functions of the Executive. Cambridge, MA: Harvard University Press. 19 Barnard writes that: ‘I mean by moral behavior that which is governed by beliefs or feelings of what is right or wrong regardless of self-interest or immediate consequences of a decision to do or not do specific things under particular conditions’ (1958: 4). 20 O’Connor (2012) emphasizes Barnard’s search for balance between individual growth and maintaining collective cooperation.

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Merton, R. K. (1949). Social Theory and Social Structure. New York, NY: The Free Press. Merz, J. T. (1904). A History of European Thought in the Nineteenth Century. Edinburgh, UK: William Blackwood and Sons. Miller, G. J. (1992). Managerial Dilemmas: The Political Economy of Hierarchy. Cambridge, MA: Cambridge University Press. Mintzberg, H. (1973). The Nature of Managerial Work. New York, NY: Harper & Row. Novicevic, M. M., J. T. Heames, J. G. P. Paolillo, and M. R. Buckley (2009). ‘Executive Development: History Lessons Learned from Barnard’. The Leadership Quarterly, 20(2): 155–61. Novicevic, M. M., T. J. Hench and D. A. Wren (2002). ‘ “Playing by Ear . . . in an Incessant Din of Reasons”: Chester Barnard and the History of Intuition in Management Thought’. Management Decision, 40(10): 992–1002. O’Connor, E. S. (2012). Creating New Knowledge in Management: Appropriating the Field’s Lost Foundations. Stanford, CA: Stanford University Press. Ogden, C. K. and I. A. Richards (1936). The Meaning of Meaning. New York, NY: Routledge. Ouchi, W. G. (1980). ‘Markets, Bureaucracies, and Clans’. Administrative Science Quarterly, 25(1): 129–41. Pareto, V. (1935). Mind and Society. New York, NY: Harcourt Brace. Parsons, T. (1937). The Structure of Social Action. New York, NY: McGraw-Hill. Pauchant, T. C. (1994). ‘Chester I. Barnard and the Guardians of the Managerial State by W. G. Scott’. Book review. Academy of Management Review, 19(4): 823–9. Perrow, C. (1986). Complex Organizations: A Critical Essay. New York, NY: Random House. Pye, A. (1994). ‘Walking and Talking Chester I. Barnard. International Journal of Public Administration, 17(6): 1125–56. Rabin, J. (1994). ‘Barnard and Morality in Organizations’. International Journal of Public Administration, 17(6): 1239–97. Rivers, W. H. (1924). Instinct and the Unconscious. Cambridge, UK: Cambridge University Press. Roethlisberger, F. J. and W. J. Dickson (1939). Management and the Worker. Cambridge, MA: Harvard University Press. Rorty, R. (1989). Contingency, Irony, and Solidarity. New York, NY: Cambridge University Press. Schumpeter, Joseph A. (1934). The Theory of Economic Development. Cambridge, MA: Harvard University Press. Scott, W. G. (1992). Chester Barnard and the Guardians of the Managerial State. Lawrence, KS: University of Kansas Press. —— (1994). ‘Who Protects us from the Protectors?’ Journal of Management Inquiry, 3(2): 169–72. —— (1987). Organizations: Rational, Natural and Open Systems. Englewood Cliffs, NJ: Prentice-Hall. Selznick, P. (1957). Leadership in Administration: A Sociological Interpretation. Berkeley, CA: University of California Press. Simon, H. A. (1947). Administrative Behavior. New York, NY: The Free Press. —— (1991). Models of My Life. New York, NY: Basic Books. —— (1994). ‘Foreword: Papers in Honor of Chester I. Barnard’. International Journal of Public Administration, 17(6): 1021–31. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations, E. Cannan (1904 edition). London, UK: Methuen & Co. Smith, E. B. (1994). ‘Chester Barnard’s Concept of Responsibility’. International Journal of Public Administration, 17(6): 1157–74.

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Taylor, F. W. (1911). The Principles of Scientific Management. New York, NY: W. W. Norton. Thompson, J. D. (1967). Organizations in Action. New York, NY: McGraw Hill. Weber, M. (1930). The Protestant Ethic and the Spirit of Capitalism. Translation of the 1904 edition by Talcott Parsons. New York, NY: Charles Scribner’s Sons. Whitehead, A. N. (1929). Process and Reality, New York, NY: Macmillan. Williamson, O. E. (1975). Markets and Hierarchies: Analysis and Antitrust Implications. New York, NY: The Free Press. —— (1995). ‘Chester Barnard and the Incipient Science of Organization’. In O. E. Williamson (eds.), Organization Theory: From Chester Barnard to the Present and Beyond, pp. 172–206. New York, NY: Oxford University Press. —— (2005). ‘Transaction Cost Economics and Business Administration’. Scandinavian Journal of Management, 21(1): 19–40. Wolf, W. B. (1961). ‘Chester I. Barnard (1886–1961)’. Academy of Management Journal, 4(3): 167–73. —— (1963). ‘Precepts for Managers: Interviews with Chester I. Barnard’. California Management Review, 6(1): 89–94. —— (1973). Conversations with Chester I. Barnard. Ithaca, NY: School of Industrial and Labor Relations, Cornell University, ILR Paperback Number Twelve. —— (1974). The Basic Barnard: An Introduction to Chester I. Barnard and His Theories of Organization and Management. Ithaca, NY: Cornell University Press, ILR Press. —— (1994). ‘Understanding Chester I. Barnard’. International Journal of Public Administration, 17(6): 1035–69. —— (1995a). ‘The Barnard-Simon Connection’. Journal of Management History, 1(4): 88–99. —— (1995b). ‘Facts and Fictions Regarding Chester I. Barnard: A Review of William G. Scott’s Chester I. Barnard and the Guardians of the Managerial State. International Journal of Public Administration, 18(12): 1859–904. —— and H. Iino (eds.) (1986). Philosophy for Managers: Selected Papers of Chester I. Barnard. Tokyo, Japan: Bunshindo. Wright, R. G. (1994). ‘Organization Character—Construct of Barnardian Scholars’. International Journal of Public Administration, 17(6): 1175–93.

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chapter 9

the tav istock grou p f rances a braham

Introduction: who were the Tavistock Group and why do they matter? The Tavistock Group: their collaboration in enquiry and theory The ‘Tavistock Group’ was a term coined by Eric Trist (Trist and Murray 1993) which included the ‘first generation’ of staff at the Tavistock Institute of Human Relations (TIHR) during the late 1940s–50s and members of the ‘second generation’ most associated with their work in the 1960s. This group made key contributions to developing new ways of designing job and organizational structures and processes and to understanding the role of organizational culture as a critical factor in organizational development which have been influential in management theory ever since. TIHR, set up as an independent organization with charitable status in 1947, was the setting for an interdisciplinary group who were to contribute significantly to shaping the theory of management emerging over the post-war period. In Trist’s terms, the ‘group’ includes both founder members, such as Trist himself, Elliot Jacques, and Isobel Menzies, but also those who are most identified with them in their efforts, such as Ken (A. K.) Rice, who moved from a role on Council to that of staff member in the first year and later comers, particularly, Fred (F. E.) Emery and Eric Miller. This chapter on management theorists thus adopts a narrower definition of the Group than Trist: those contributing to organization and management, rather than TIHR staff who explored broader societal fields, such as education, marriage, and the family. Members of the Group did not work in isolation from one another or the wider field but collaborated with a broad network of individuals and organizations among their contemporaries in the field in the UK, Europe, and the US. In particular, the group drew on the action research and systems approach of Kurt Lewin and, a distinctive quality, an

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understanding of groups and organizations from a psychoanalytic viewpoint shared by all the founders, having developed initially as the ‘Social Department’ within the Tavistock Clinic. In its early years, all staff members committed to a personal psychoanalysis, which they believed would counter any tendency to project their own issues and agendas into those of the systems they researched or consulted to. The action orientation derived both from their own urgent desire to engage with and contribute to society and from the powerful influence of action research—even when these studies did not employ action research methodologies—gave their theories an emergent quality. This reflected a sense that organizational and management theory was wide open for development, and that there were discoveries to be made which would open up new lines of enquiry, beyond the Taylorist/Weberian notions of efficiencies. The action orientation also gave a very practical flavour to their collaborations with managers and workers in the different organizational settings they worked in. The stimulation of the group’s collective life, encountering diverse theoretical frameworks and methodologies and challenging themselves and each other through initial psychoanalytic enquiries into their individual and group life together, provided for rigour in developing theory, and attracted a range of intellectually able, strongminded and charismatic members eager to take action to improve society and the experience of everyman. They acted as a group in that the theory they developed came out of a series of enquiries into organizational life in which they collaborated, and which produced findings which built on each other’s work and thinking. Although one stream of work identified and elaborated organizational culture while another developed job-, work-, and organization design, their preoccupations in these evolutions significantly overlapped. Like any group, especially one committing to methods which took them into surprising and novel places, the Tavistock Group experienced intense affections and loyalties, resentments and difficulties, which often persisted over many years, in some instances for decades. Although the first chairman of the staff group, Tommy Wilson, played a crucial role in securing early funding and inspired enormous affection and respect, Eric Trist was the intellectual powerhouse and driver, initially as his deputy and later as his successor, a man of charismatic enthusiasm and warmth, who attracted similar affection to Wilson, though also rivalry which could make it difficult for some to find their own place in the Institute. Most notably, Trist collaborated with a range of other group members to develop socio-technical systems design in manufacturing and heavy plant which became hugely influential over the following decades, a project also involving Fred Emery, Ken Rice, and Eric Miller among others at the Institute and beyond. First though, Elliot Jacques, a psychoanalyst by training, led a broad action research study in Glacier Metal Company which led him to identify organizational culture as a key paradigm for understanding organizations. Jacques went on to explicate his understanding of how our unconscious defences are institutionalized in organizational life to create barriers to change and improvement. This understanding was applied by Isobel Menzies (later Menzies Lyth) in a study which analysed how

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these institutionalized defences operate in the field of nursing, which continues in use. Ken Rice, who collaborated with Jacques in Glacier Metal Company, having built on the work of Wilfred Bion to provide an account of culture at the factory, went on to apply the emergent ideas about socio-technical systems design in the Calico textile mills in Ahmademad, with the subsequent collaboration of Miller, first as an internal consultant to the company and later as a TIHR member. Finally, the brilliant theorist Fred Emery joined Trist in taking socio-technical systems design into new settings and identifying varied, sometimes ‘turbulent’ environments requiring organizational strategies. Although other members of TIHR, and beyond, were important in developing complementary and alternative models and enriching the intellectual and group life of the Institute, these thinkers constitute the core of this chapter, as they worked to refine the scope and focus of the emergent Institute’s theory of management and organization. An important role in the first phase of Tommy Wilson’s leadership was played by Industrial Fellows, former workers sponsored through higher education often by their unions, who were recruited for training in field studies, but who also gave credibility and insider knowledge and contacts to research in different industries, especially Ken Bamforth, a former miner. Bamforth had a key role in initiating socio-technical systems design through his initial collaboration with Trist in the coal-mining studies. The Tavistock Group was generally outward facing and broad in its wider affiliations and networks, collaborating over many years with a wide range of other actors across the world. The original texts of the Tavistock Groups, many appearing in the journal Human Relations, have been worked over by many writers over the ensuing years; this chapter uses the re-working of members of the original Tavistock Group themselves, rather than the broader set of authors who have written about their work (Miller 1999, Trist and Murray 1993).

Theoretical roots: the shared reference points of the Tavistock Group While each member of the Tavistock Group had a different theoretical background and training, they also wove three common theoretical roots into their professional practice and development of new theory: systems thinking derived from gestalt and an action research orientation influenced by Kurt Lewin, the systems theory considerably enriched later by thinkers such as von Bertalanffy, and the psychoanalytic perspectives of Melanie Klein and Wilfred Bion, with the additional element of working in the here and now derived from Kurt Lewin.

The role of psychoanalytic theory All group members except Fred Emery owned the influence of Melanie Klein’s object relations theory on their emerging thinking and work. Klein’s theory paid attention to

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the defensive processes people adopt from infanthood, splitting off parts of themselves that do not fit their self-image and projecting these into another individual or group, or introjecting aspects of the environment and internalizing them. In group behaviour this often appears as scapegoating or idealization. Klein’s theory was important to the Group, both in terms of analysing what was happening in groups and organizations, but also in terms of the data available to the action researcher through processes of transference and counter-transference. Building on Klein’s understandings but developing a distinctive approach from observations of hundreds of groups through the war-related activities of the Clinic, Bion drew attention to the way groups work in two ways: first, on the overt task; and, second, in the way they collude in defensive behaviour to avoid the anxiety of learning and working together on that task through variants of three types of behaviour. These were: dependency on a leader of the group to take things forward; fight or flight behaviour—either fighting between themselves or distracting themselves from the task; or ‘pairing’ behaviour, where the group passively relinquishes the work of the group to a pair, as if these two will produce a Messiah or messianic solution to their problems. Members of the Tavistock Group, such as Wilson and Trist, had worked with Bion in the war-related activities such as officer selection and civil resettlement of prisoners of war, where therapeutic communities were developed, and Bion consulted to the first management group of the emergent independent Institute as the Clinic was taken into the new National Health Service in 1947. All members of the Tavistock Group except Emery participated in such groups, which enabled them to learn this approach experientially even before they began to be reported in Human Relations from 1946 onwards. This was eventually collected in book form (Bion 1961). This group work underwent an organizationally oriented redesign by members of the Tavistock Group such as Harold Bridger and Ken Rice, who, in collaboration with Pierre Turquet and Isobel Menzies and later with Eric Miller, developed an application of a temporary organization for experiential learning about group processes and, in Rice’s phrase, ‘learning for leadership’, termed Group Relations Conferences. While only two of the founder members of TIHR were psychoanalysts by training, for most of the group, understanding an organization in terms of its underlying unconscious dynamics was or became a habitual application in the client systems which were to pay the Institute as an independent organization. Psychoanalytic practice by a number of Institute staff, either in one-to-one settings or in group settings, such as the annual group relations conferences, also supported work as process consultants, initially termed ‘social therapy’ or ‘social psychiatry’ to organizations. This was directed to helping them in ‘working through’ perennial problems they might be facing, through interpreting their behaviour at the level of the group. It was this role of ‘social therapist’ which Jacques took into Glacier Metal Company, which enabled him to identify and work with the aspects of organizational culture which impeded resolution of technical as well as industrial relations problems. Subsequently, Tavistock Group members were to bring together these different streams of psychoanalytic

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thinking to the study of organizational life, but they were also taken up in the socio-technical systems design work which Trist and others, notably Emery but also Rice and Miller, were to develop.

Kurt Lewin’s influence: the ‘here and now’, action research, and systems theory Kurt Lewin, possibly best known for saying the best way to understand a system is to try to change it, was an important early contributor to the Tavistock Group’s practice of group work, action research aspirations, and adoption of a systems perspective. In terms of group work, Lewin’s influence can be seen in The Tavistock Group’s use of working in the ‘here and now’, most visible in this account in Jacques’ work in Glacier Metal Company, and in Rice and others’ application of Bion’s work group to an organizational setting of group relations training, which continues today. In other respects, their group work diverged from his. A stronger influence lay in the Tavistock Group’s adoption of action research, although in this also there was a departure from his practice, which they saw as over-rigid in its adherence to control groups and in giving primacy to the social scientist’s or theory’s requirements over those of the client system. In fact, Lewin and the Tavistock Group were only just beginning to work out the theoretical and practical implications of action research at the stage when Lewin suddenly died following his article on the subject in the first issue of Human Relations (1947). The importance of action research as an orientation strongly pervaded the Group and their shared practice, Jacques first constructing for the group at Glacier Metal Company an action research methodology which they would all largely adopt and adapt. Trist wrote that ‘interdisciplinary collaboration was achieved in an action frame of reference . . . A common set of understandings developed, based on a shared core value. . . . commitment to the social engagement of social science’ (Trist 1973: 104). The initial studies, most reported in the journal Human Relations, initially a joint venture with Lewin’s Research Centre for Group Dynamics at MIT (later University of Michigan), are narrow in focus, the novelty of their findings assumed for readers at the time, and providing a strong sense of the emergent nature of their theory. Kurt Lewin’s ‘field theory’ was based on the gestalt understanding of systems: that the whole is more than the sum of its parts, and that each part needs to be understood in relation to the whole, drawing attention to ‘the dynamics of such interdependencies’ (Miller 1999: xv). This can be seen in the Tavistock Group’s emphasis for managers on what goes on at the boundaries of teams or work groups and their departments, between departments, and between the organization and its environment. After Emery’s arrival in 1957 brought the Tavistock Group’s attention to the work of von Bertalanffy (1950), systems thinking about organizations as organic and mechanical systems—with inputs, transformative capability, and outputs—supported them in analysing work organization and work processes to effective good job and work design.

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Organizational culture and the psychoanalytic perspective of organizations Elliot Jacques’ role in the Tavistock Group Jacques’ particular role in the Tavistock Group’s contribution to the wider field was to identify and demonstrate to employers and employees the role of organizational culture in undermining good relationships in the workplace (Jacques 1951). Within the group itself, Jacques’ importance went beyond this: he pioneered the first full action research project in its history at Glacier Metal Company; outlined how psychoanalytic theory applied to organizations through ‘the dynamics of social structure’ (Jacques 1953); and described his psychoanalytic method of ‘working through’ (Jacques 1951), adapted to the organizational setting, all of which were building blocks in the Tavistock Group’s theory and practice. A Canadian with a background in clinical psychology and psychiatry, Jacques joined the Tavistock Clinic’s ‘Social Department’ from the Royal Canadian Army Medical Corps. Jacques was to leave the Institute after gaining his PhD from Harvard for his book on Glacier Metal Company, having had no response to the book’s offer to managers to engage in culture change (Trist and Murray 1993: 9). While other members of the Tavistock Group were to go on to develop more participative ideas around socio-technical systems design, Jacques’ efforts after his departure elaborated his theories of ‘span of responsibility’—the length of time the individual worker has autonomy for decision-making in their role—and on the usefulness of hierarchy, at a time when some of his erstwhile colleagues in the Tavistock Group were committing to industrial democracy. Later he withdrew from his earlier positions about the role of the unconscious in working life, finishing his career as Professor of Social Science and Director of the Institute of Social and Organizational Studies at Brunel University. His early departure from the Institute was resented by some of the Tavistock Group, who perceived it as personal and professional disloyalty to their collective enterprise. Eric Miller (1999) perceived a suppression of Jacques’ early contributions to the Tavistock Group. Jacques may himself have experienced a similar ambivalence to his former colleagues, and it is notable how accounts of his work and Trist’s in management theory are often described in isolation from each other, despite their strong overlapping shared theory and practice (e.g. Pugh and Hickson, 1989, Ramage and Shipp 2009).

Organizational culture: the case of Glacier Metal Company Conducting action research From 1947 Jacques led a large team of researchers in an action research project at Glacier Metal Works, which adopted the new action research methodology espoused at the

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Institute. Almost the whole of the first three years of their time there was dedicated to establishing and maintaining their independent identity as a research team, only working on problems when they were invited in to do so by the internal structures involving managers and employees together. This allowed them to take up a role which would support the company’s staff in addressing their own specific practical problems through addressing underlying issues which dogged their own attempts to create a positive climate between departments and hierarchical levels.

Identifying the organizational culture underlying difficulties at Glacier Metal What the ‘researchers’ discovered at Glacier Metal Company in their initial study of the factory, substantiated by the findings of an industrial psychologist who had worked with the company previously, was something of a paradox: a high morale but also disputes which were both ‘specific complaints’ and also opposition to ‘attempts to introduce a relatively new system of human relationships’ (Jacques 1951: 36). Management saw themselves as ‘democratic’ in style and intent, with holiday dates for factory closure ostensibly decided by ballot for example, though this could be revised by Government pressure. As a result, employees’ responses to management initiatives tended to be ‘What’s being put over us?’ (Jacques 1951: 37). Over time it emerged, through a long series of engagements with different departments and units within the factory, that the culture at Glacier Metal Factory was dogged by a sense that management was not being entirely honest in its portrayal of itself as ‘democratic’, numerous examples of inconsistency with democracy being at hand. Clarifying management’s role involved both being more explicit about the power and authority vested in the ‘executive’ and also changes in management behaviour to be less prone to ‘leadership avoidance’. The lead the managing director gave was to avoid direct instruction, adopting a form of consultative behaviour which detached itself from his executive role. Consultative procedures in the factory became mechanisms for ‘by-passing’ middle tiers of management, obscuring the differences between decisionmaking and consultation. Team working between senior managers was inhibited by the convention of private communication between the managing director or general manager, which preserved the appearance of friendliness without surfacing or resolving differences.

Working through cultural difficulties at Glacier Metal Company These differences were clarified through a series of initially unreported meetings with the protagonists, giving them the ‘segregated’ space in subgroups to reflect and withdraw from their initial positions. This provided a container for repeated revisiting and reconstructing of these assumptions, the ‘working through’ technique which Jacques and the Tavistock Group more generally adopted from psychoanalytic practice and which Jacques elaborated in his book (Jacques 1951: 90–104). The goal was ‘a factory not so much free from problems, as one capable of tackling in a realistic way whatever technical, economic and social problems it might encounter’ (Jacques 1951: 312).

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Working through ‘the irrational and less obvious factors influencing its behaviour . . . required periodic identification and working-through in order to protect it against piling up a slag heap of unresolved issues’ which obscured the action needed. This also enjoined the researchers in a strict discipline of only adopting Lewin’s injunction to work in ‘the here and now’, so that what was an ‘adaptive segregated’ (Jacques 1951: 302) process could continue, though taking care not to indulge a ‘maladaptive segmenting’ (Jacques 1951: 304), a social defence against the stress of working through issues which ran through the system as a whole.

Departmental cultures While Elliot Jacques was indisputably the leader in the action research efforts at Glacier Metal Company, other members of the Tavistock Group were also involved, such as Eric Trist, John Hill and others, including some of the Industrial Fellows such as Ken Bamforth. Two of these made important contributions to the Tavistock Group’s understanding of culture and how they worked with it: John Hill’s study of survival curves in labour turnover contrasted the performance of different departments at Glacier Metal which related to the culture of the department (Hill et al. 1950) and Rice’s analysis of culture using Wilfred Bion’s theory of how groups defend themselves as a theoretical framework (Rice 1951). The explorations of the differences between departments as sub-systems would be continued in Rice’s work with the Calico Textile Mills, recounted in the next section. Rice’s work (1951) on Glacier Metal Company describes the culture there through Bion’s terminology of Task Group. This addresses the unconsciously collusive relations among groups of managers seeking change and the fight or flight response and dependency in the workers as a group which demands ‘omnipotent leadership and neither expects nor wishes to be consulted by leaders to whom omnipotence has been attributed’ (Rice 1951: 413). The way these different groups behaved and its reflection of underlying beliefs about how managers should lead the organization undermined the collective discharge of their ‘task’. This idea of a ‘primary task’ of a work group or organization, which was to be realized in the work of Rice and Miller, was already present in its incipient form here.

Organizational culture and the Tavistock Group: next steps Taken together, Jacques and Rice, but especially Jacques, contributed to the way the rest of the Tavistock Group, as well as many other management theorists and practitioners, understood organizations as having distinctive cultures which might support or impede their work. This was later reflected in a major collaboration with Shell Refining (later Shell UK Ltd) in developing a new management philosophy from 1965, initially involving Trist and Emery (Cooper and Foster 1971). In addition, the theorists contributed to a practice of how to work with organizational culture, which other group members, and a much wider group of practitioners among managers and their consultants, learnt to pay attention to and in many cases adopt or adapt. Jacques’ account, however, is the more cogent in detailing the specific ways in which culture was being operationalized and the problems which arose, even in a company where there was considerable goodwill across traditional hierarchical levels.

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The psychoanalytic perspective of organizations Social defences against anxiety in organizations Jacques provided a more generalized account of how unconscious processes shape organizational life in a key Human Relations journal article (1953). While Jacques had by this time left the Institute, he drew on his experience at Glacier Metal Company to apply Paula Heimann’s concepts of social defences (1952). These built on Melanie Klein’s (1952) ideas about the way defences against paranoid anxiety, mobilized at infancy, continue to act as default unconscious settings when we encounter difficulties in our adult lives. These phenomena appear sometimes as projection—for example, deflecting or extruding an unbearable feeling, positive or negative, onto others, as in scapegoating or idealization—or, absorbing them through introjection, when others’ attributes, good or bad, are internalized as our own. The application of these ideas to the organizational setting draws attention to the way in which ‘socially structured defence mechanisms’ operate through ‘manic denial of destructive impulses and destroyed good objects’. This process provides group and organization members with temporary alleviation from the intolerability of their own negative feelings by participating in group idealization, a splitting off of their own bad feelings which are then projected into others, sometimes disguising these bad objects by dressing them up as in idealization. As a result, ‘fantasy social systems’ are established which provide for the survival of the group, a social gain which enables participants to further their own internal mourning for what they have lost through projection. In Glacier Metal Works, Jacques saw the positive attitude of managers to workers as both an idealization of the workers and the placation of their hostile representatives. This protected the managers from their guilt for their own status, an authority felt unconsciously to be uncontrolled and omnipotent, carrying the threat of retaliation.

Isobel Menzies Lyth: social defences against anxiety in the nursing profession Isobel Menzies’s famous study of nursing (Menzies Lyth 1960) provides an account of how socially constructed defences are mobilized across a profession, and also of how such institutional elements pervade individual organizational responses. Originally an economist, Menzies was initially recruited to the Clinic’s social department from Aberdeen by Trist who had made this move earlier, joining the work on the civil resettlement units. Isobel Menzies (Lyth, after her marriage) was the only woman among the founder members of the Institute and went on to become a psychoanalyst continuing as a member of the Tavistock Clinic for her clinical practice and as a member of the Council (trustee board) of the Institute well into her retirement. Perhaps her continuing support enabled her contribution to social defences against anxiety to be more readily celebrated than that of Jacques, who had left the Institute by the time of this publication. Menzies spoke to the inherent challenge in nursing, where the usual social etiquette is continually breached by the requirement to respond to the physical needs of the sick,

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mobilizing a range of defensive techniques which become institutionalized. As Menzies put it ‘the potential anxieties in the nursing situation were felt to be too deep and dangerous for full confrontation. They threatened personal disruption and social chaos’ (Menzies 1960: 109). The result was that psychic defence mechanisms built into socially structured defence systems across the nursing profession as a whole, were ‘in the main, those by which evasion gives protection from the full experience of anxiety’. (Menzies 1960: 109) The consequence of this was that ‘true mastery of anxiety by deep workingthrough and modification was seriously inhibited’ (Menzies 1960: 110), which in Menzies terms would be involved through student nurses testing out their unconscious ‘phantasy’ (as opposed to conscious ‘fantasy’) anxieties from real anxieties rooted in the specific interactions between patients and nurses. This effectively interrupted their capacity for concern and compassion and from experiencing themselves as good, and capable of making the right decisions. The result was a higher degree of anxiety was being experienced by nurses than was entirely warranted. Menzies gives a detailed analysis of the many ways in which these defences are expressed, through breaking down nursing tasks into meaningless routines, the wearing of uniforms, and the enforcement of petty hierarchies, among other devices. The detail of Menzies’ account is suggestive of the ways in which habitual practices may conceal social defences in other settings, drawing on Kleinian concepts of splitting, projection and introjection, and projective identification, and has been applied in many other organizational settings (eg Miller and Gwynne 1972).

Systems psychodynamics: Psychoanalytic and systems perspectives of organization Important developments to the way the Tavistock Group and others understood the organizations they analysed and worked with were made by Rice, later Miller and Rice (1967). Rice articulated what can perhaps be seen as implicit in the theory and practice of the Tavistock Group which brought together two separate theories: on the one hand, following the lead of Wilfred Bion, that group members each have a differentiated (as well as undifferentiated) part to play in group life and, on the other hand, Kurt Lewin’s gestalt ideas about subsystems being part of the whole system. Systems psychodynamics expresses the idea that the psycho-dynamics of a subsystem will manifest the psychodynamics of the larger system and, indeed, may only be understood in that broader context. The differentiation of organizational tasks and of different subsystems across organizations is a key aspect of the socio-technical theories described in the second section of this chapter. They also provided the focus for application of the psychodynamic approach, highlighting the unconscious aspects of interactions between different groups and systems. As anthropologists, Rice and Miller also drew attention to the role of the informal or ‘sentient’ organization, which is always present where people come together in and around systems of any kind, and the role which it can have in the systems psychodynamics of a particular organizational context (Miller and Rice 1967).

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Experiential learning in group relations A further major contribution by Rice to the Tavistock Group’s work with culture, involving a long stream of other members of the Group, was an application of this approach in laboratory mode for experiential learning about group dynamics, termed ‘group relations’, in the setting of a temporary organizational setting, which he termed ‘Learning for Leadership’ (Rice 1963). This is still practised today at the Institute’s annual ‘Leicester Conference’ as well as by others, most notably by the A. K. Rice Institute in the US, which celebrates Rice’s contribution to this methodology, following his early death. Rice also made a distinctive contribution to the development of socio-technical systems design which is discussed later in the chapter.

Job, work and organizational design Job-and work-design: socio-technical systems design theory Until post World War II, job and work design had been dominated by the needs of technology in the rational approach proposed by Frederick Taylor, which subordinated the human and social needs in organization to those of the machine. Partly this reflected the relative capital intensiveness of plant and the cheap cost of labour over the first part of the twentieth century. Changes in social relationships, reinforced by experience of the war, highlighted a desire among social scientists to overcome the conflicts between workers and management inherent in this approach. A new response was developed by members of the Tavistock Group, which moved beyond Jacques’ approach to the organization as a predominantly social system, over time coming to be known as sociotechnical systems (STS), which opened up new choice in job- and organization design. A large number of people in different institutions came to be associated with STS over many years, including most remaining and incoming members of the Tavistock Group. However, socio-technical systems design is most identified with the work of Eric Trist, a member of the Tavistock Group involved in war-time officer selection boards and civil resettlement units, and first Deputy Chairman of the Tavistock Institute under Tommy Wilson in the newly formed Institute, taking over as Chairman on Wilson’s departure to Unilever. Eric Trist was a social psychologist who had broad disciplinary interests and a strong capacity for fostering intellectual enquiry and engagement. On a two-year fellowship to the United States in the early 1930s, he was influenced by the cultural anthropologist, Edward Sapir, who was linking ideas across anthropology, social psychology, and psychoanalysis at Yale, and met Kurt Lewin at Yale. Trist had been deeply affected by the living conditions of the unemployed in the US Depression and those of Dundee on his return to the UK to lecture at St Andrews, resulting in a strong concern for working conditions. Joining Bion at the Tavistock Clinic’s social department during the war years gave him the opportunity to explore his intellectual and political

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interests and to bring in new people, such as Isobel Menzies, his student in his previous appointment at Aberdeen University. At the same time as the work in Glacier Metal Company was being undertaken, Eric Trist and Ken Bamforth, an Industrial Fellow who was a former coalminer, began a stream of studies in the English coalmines. This would begin the identification of semiautonomous team-working and, eventually a stream of thinking about job- and organizational-design. Through reporting on these studies, Trist conceptualized systems as socio-technical in the sense of having both technical and social aspects which needed to be ‘optimized’. This emergent theory was also applied and developed by Ken Rice in the Calico Textile Mills in Ahmadebad in India, where he was joined in a follow-up study by Eric Miller, initially as an internal management consultant to the company, later joining the Institute staff for the rest of his career A number of others made further important contributions to socio-technical systems design, including Phil Herbst (the principle of minimum critical specification, Herbst 1974), Harold Ashby (principle of requisite variety). Most importantly, Trist’s collaboration with Fred Emery, who joined, then led the collaboration with Einar Thorsrud in Norway, led to the spread of STS design in Europe, as well as formalizing and extending its theory for managers.

The coal-mining studies: choice for managers in job and work design The initial study in coal-mining was conducted in the mine where Bamforth had worked as a miner and where his brother-in-law still took up the role of union secretary, facilitating access to the work. The striking characteristic of the ‘short-wall’ mining organization which had developed there drew on the pre-mechanized forms of informal work organization within semi-autonomous teams. Trist and Bamforth set out the effects of technical advances in the coal-mining industry, which had enabled ‘long-wall’ mining to be mechanized, initially in terms of their social and psychological consequences for the miners (Trist and Bamforth 1951) which contrasted so much with those working ‘short-wall’ at Elsecar. There, miners and their supervisors were responding to different conditions from long-wall mining through small-group working, more like conditions pre-mechanization, which engaged and motivated the miners. Mechanization had had the effect of introducing larger-scale working units with supervisors to a task which had previously often been undertaken by small groups, perhaps of one skilled worker with two or three unskilled workers, with highly specialized tasks which limited job variety as well as social interaction. Social integration was disrupted by this new technology and a number of common problems were associated with it: defensive reporting of time at work; competition for work allocation; mutual scapegoating of whichever shift was absent. In subsequent coal-mining studies, Trist and others discovered that different kinds of work organization had different social and psychological effects, and there was effectively a choice for managers in how they went about organizing the work, which could have different consequences. A third form of organization in coal-mining, the ‘composite longwall method’ allowed some of the characteristics of the earlier traditional

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‘shortwall methods’, through holding groups of men responsible for the whole task. These ‘semi-autonomous’ groups allocated tasks themselves and were paid on a group basis, and some of the elements in the mechanized situation, which undermined social cohesion, were reduced, increasing productivity, reducing costs and resulting in less absenteeism and fewer accidents plus greater work satisfaction. The key elements from the workers’ perspective seemed to be having elements of autonomy in their work life and providing for social needs through interaction and belonging. However, neither the Coal Board nor the Unions supported rolling out such changes.

The importance of internal and external boundaries and their implications for management in organization design While the coal-mining studies provided the initial impetus for socio-technical design developments, these were to be developed in a more lasting way at the Calico Textile Mills at Ahmadebad in India, in a consultancy lasting a number of years led by Ken Rice. Ken Rice had read mathematics and then anthropology before joining the Colonial Service in Kenya, from which he resigned in disagreement with government policy towards the local population. After various management posts in the UK he became Deputy Director of the Industrial Welfare Society and a member of the Tavistock Institute of Human Relations Council, or board of trustees, at its inception, but left that role to join the Institute within its first year, initially working with Jacques at Glacier Metal Company. Rice joined two of Bion’s groups at the Institute and, after working with Jacques in Glacier Metal Company, Rice’s colonial experience led to him being selected to respond to a request to the Institute by the Chair of the Board of Calico Mills in India in 1953. Initially his work there, as a consultant rather than an action researcher, focused on job and work design, involving thorough analysis of the technical and human aspects involved. A second phase of work began in 1957 on the whole organization. Rice’s role in socio-technical systems is important for extending job- and work-design to whole organizational systems, identifying the ‘primary task’ of an organization as the overarching design principle and, with Eric Miller, highlighting the requirements for boundary definition of systems and subsystems. While previous research and exploration into socio-technical applications focused on job- and work-design, Rice’s work at Ahmadebad, with a level of support from senior management and the Chair of the Board never forthcoming from the nationalized Coal Board in the UK, was able to move beyond design of jobs and work to design of the organization as a whole, and especially the way in which it organized to support the innovations his first visit prompted in the weaving loom sheds (Rice, 1953, 1955). These encompassed, not just the automatic and non-automatic loom sheds where the initial innovation was undertaken, often spontaneously, but the broader organization, which also manufactured the chemicals used in the processing of textiles. Rice’s book on his first activities at Calico Mills Productivity and Social Organization (Rice, 1958) reports on the need to go beyond the requirements of the workgroup in finding Trist’s ‘joint optimization’ between the social and technical aspects of an

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organization to look at its performance in relation to the broader economic environment. In doing so, Rice identifies the ‘primary task’ of the organization, what it has to do to survive in that broader environment, as the main design principle. He also uses von Bertalanffy’s open systems approach, introduced to the Group by Emery, to distinguish between operating systems and managing systems, constructing management as providing boundary regulation between the subsystem and the whole system and between the whole system and its wider environment. These ideas were more fully elaborated by Rice and Miller subsequently (Miller and Rice 1967). In this work, Rice and Miller detail the way individuals and small groups and larger groups can all be seen as requiring similar kinds of boundary management in relation to their unconscious processes. In organizational life, managers may discover that the ‘basic assumption behaviour’, to use Bion’s term, of the group they are managing may work against the primary task of the group at that time, for example. The needs of the group at this unconscious level—what Rice and Miller identified as the ‘sentient group’ as opposed to the ‘work group’—may require more or less attention from management, depending on the extent to which the motivation of the work group is mobilized.

Management challenges in different organizational designs: time, task, and territory During the first phase of his work at Calico Mills, Rice was visited by Eric Miller, who was subsequently employed by Calico Mills to work alongside Rice as an internal consultant from 1956 to 1958, joining the Institute as a full member in 1958, where he remained until his death. Miller had taken his first degree and doctorate in social anthropology at Cambridge, with fieldwork in India and Thailand, and further developed aspects of socio-technical systems design for managers. Like Rice, Miller embraced the psychoanalytic orientation of the Tavistock Group and went on to support the further development of the group relations activities of the Institute and the understanding of ‘the hidden, sometimes unconscious’ dynamics of a range of different work settings, notably caring for the disabled, and to developing professional development in consultancy at the Institute until his death in 2002. Building on the experience of whole organization-design at Calico Mills and advances made by other members of the Tavistock Group, especially Fred Emery, Miller examined and detailed different design requirements for management, including issues of accountability for performance and design of subsystems in a production line. Specifically he identified the key factors of technology, territory, and time as they define the main boundary conditions for subsystems with the whole enterprise (Miller 1959). The management requirements Miller spoke to included both psychological issues arising from a chosen design principle, such as the consequences for competition of a design along territorial or technology-led lines, and also those consequent on time, such as shift work, and the interrelatedness of different subsystems which arise. In relation to differentiation by time, for example, the psychological and social well-being of workers

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perpetually on night shifts could be an issue which required management attention. Alternatively, where the pattern is for rotating shifts, the task of supervision and supervisors on the morning shift may be muddled with those of central office and support functions. Miller recommends that whichever design principle is adopted should reflect the natural boundaries arising around a task which can be completed within the subsystem—a ‘whole’ task—in order to create the conditions for holding managers accountable for performance, though if rotational shifts are employed this accountability is additionally shared with the supervisors for each shift. Miller sets out the issues for management in moving from a simple production system, where tasks are sequential, to a complex system, with its greater requirement for co-ordination and management. Miller further elaborated and applied the principles of time, task, and territory to the group relations for experiential learning by managers in group relations conferences he led for over forty years.

From job- and work-design to organizational design Fred Emery (1925–97), was a scientist turned psychologist, who first visited the Tavistock Group on a UNESCO Fellowship in 1951–2 before returning to Melbourne to complete his PhD in psychology in 1953. He went back to the Tavistock Institute as a full member in 1958, working mainly on the contribution of socio-technical systems to industrial democracy until his return to Australia in 1969. Emery, a drover’s son from Western Australia, had a continuing and passionate commitment to realizing democracy in the workplace and in the community, his colourful, frank, style making him enemies as well as friends. Emery was the only one of this Tavistock Group who would not commit to psychoanalysis and who consistently challenged its use alongside the neglect of sociology in the thinking of his colleagues. Emery positioned himself squarely in relation to systems theory and the use of action research methodologies, collaborating closely with Trist, who was increasingly influenced by him, with Trist and Einar Thorsrud at the Work Research Unit in Oslo on the Norwegian industrial democracy project which was the next stage in the dissemination of the socio-technical systems design paradigm, with Trist and Hill in the Shell Philosophy Project, and later with Russ Ackoff (Ackoff and Emery 1972). Emery’s first contributions to the work of the Tavistock Group was to undertake a study (Emery 1959) which would formalize the emergent socio-technical systems theory in the light of von Bertalanffy’s concept of open systems, those which required openness in boundaries to the external environment in order to achieve a ‘steady state’. This study was highly influential among other members of the Tavistock Group, initially published only as an internal document. Emery saw the technological component in organizations playing the main mediating role in relation to boundary conditions. Up until this point, they had followed Trist in conceiving of a social systems and a technical system operating in organizations, with design focusing on joint optimization between them, rather than a single system which Emery argued it should be. Emery went on to link the individual and work group to the organization level through his nine-step process, moving

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from role analysis, through work group analysis to organizational analysis (Emery 1967), widely adopted by colleagues. Emery introduced a specific insight on work design, away from designing for redundancy of parts, where each part fulfils a specific function, with additional parts for control and back-up, which tends to produce layers of hierarchy and bureaucracy. Instead, Emery suggested designing for redundancy of functions: in which additional functions are added to each role, enabling members of a team or workgroup to substitute for one another and adapt flexibly to changing circumstances, in a self-organizing group. Emery saw this as requisite to subsystems having an adaptive capacity in relation to their environment rather than merely producing fixed responses. Emery went further in this paper in applying socio-technical concepts originating in job- and work-design to the design of the whole organization. Thus, ‘the primary task of the supervisor is to manage the immediate boundary conditions of the worker-task relation, and thus effectively relate them to the larger organizational structures’ (Emery 1959: 356), which Emery saw as the business of other levels of management to address. Emery was soon able to test out these principles in the collaboration with the Norwegian Industrial Relations Project with Trist and Thorsrud, where further refinements of socio-technical principles were identified. The developments in this project began promisingly, with support—unlike the coal-mining studies—at the strategic levels amongst employers and unions, but foundered as they became ‘encapsulated’ pilots without being rolled out. However, based on this work, Thorsrud was subsequently invited to work in Sweden, where a more promising climate resulted in large numbers of projects in self-managing, semi-autonomous work groups. Over time, the Industrial Democracy movement in Europe came to be restricted to worker membership of organization boards, rather than work design for participation. In North America the industrial democracy movement was re-named by Louis Davis as the Quality of Working Life, a less contentious label in those societies, where it was taken up in a range of different settings in the United States and Canada. Nonetheless, there are some lasting results, with a law passed in Norway giving workers the right to jobs with Emery’s six principles of job design, identified in the Norwegian Industrial Democracy Project, namely: variety, learning opportunity, own decision power, organizational support, societal recognition, a desirable future.

The role of the environment in organizational design and strategy In 1965 Emery and Trist introduced a new area for exploration in relation to organizational design: the environment, and especially the ‘turbulent’ environment, environment being seen as a social field, following Lewin, requiring an organizational strategy in response. The idea of a ‘turbulent environment’ has been taken up as a metaphor for describing the environment by organization behaviour theorists, and remains in use today, despite the fact that Emery was concerned that it should not be used as a metaphor but applied in specified situations. Emery and Trist (1965) drew attention to how analysis of the environment—they defined four types—demanded different organizational responses, the role of the matrix

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organization being linked to useful institutionalization. In particular they identified ‘turbulent fields’ in which ‘dynamic field forces’ were being generated, creating ‘a gross increase in their area of relevant uncertainty’ (Emery and Trist 1965: 26). Emery and Trist note how working on ‘values of over-riding significance for all members of the field’ (Emery and Trist 1965: 29), both internally and with other organizations, is a strategy which can reduce uncertainty. Institutionalizing values creates strategic biases which allow convergence with the interests of other organizations and parties. Emery and Trist elaborated this strategic perspective in their book (Emery and Trist 1973), suggesting the utility of ‘referent organizations’—joint ventures and collaborations between groups of organizations. They saw these as key features in combating maladaptive responses, which they defined as superficiality, segmentation, and dissociation. In the book (1973), Emery goes further in outlining the future, building on Lewin and Ashby, anticipating complexity theory in his discussions of the role of the environment in systems and especially in emergent processes in which he sees changes in the state of symbolic systems as useful in detecting trends. Emery and Trist began working with groups of organizations in collaborative planning exercises, later termed Future Search Conferences (Emery 1993). On his return to his native Australia, Emery continued to apply socio-technical systems design in industrial settings at the prestigious Research School of Social Science at the Australian National University, and then at the Centre for Continuing Education at ANU, and was increasingly involved in collaborative planning in communities, often applying the technology of search conferences to increase participation in decisionmaking by ordinary citizens.

Conclusions The Tavistock Group were between them responsible for initiating a range of different types of enquiry into organizations: identifying organizational culture; work and organizational design; and organizational strategy in different environments, which are all reflected in management theory today. In work and organization design they created choice for managers, informed by a range of concerns including the psychological and social welfare of staff as well as technical and productivity considerations, developing a whole range of insights into how managers can enhance organizational goals. The elaboration of the issues for managers of how work is divided between different work groups and departments, and the psychological and social consequences of these boundaries and their management continues to be used to design and manage in organizations. In addition, members of the Tavistock Group developed ways of analysing and working with the unconscious processes of organizations which supported or impeded their objectives. Tavistock Group members also developed different kinds of collaboration with managers and organizations: from full action research engagement at all levels in the organization to advising managers on how to support and engage with their employees.

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The different management theories of the Tavistock Group built on one another’s insights so that the whole Group was more than the sum of their parts, and each stream of work tended to reflect those of the others. Following the dispersal of the original members, their work was taken into new settings by their successors, and their ideas can be seen in many new ways of looking at organizations and management, such as complexity theory, Business process re-engineering (BPR), and lean methodologies.

References Ackoff, R. L. and Emery, F. E. (1972). On Purposeful Systems. Chicago: Aldine-Atherton. Bion, W. R. (1961). Experiences in Groups. London: Tavistock Publications. Cooper, R. and Foster, M. (1971). ‘Socio-Technical Systems’, American Psychologist, 26: 467–74. Emery, F. E. (1959). ‘Characteristics of Socio-Technical Systems’, Tavistock Institute of Human Relations Doc. No. 527. Excerpts reprinted in L. E. Davis and J. C. Taylor (eds), Design of Jobs (1972), Harmondsworth: Penguin Books 177–98. Reproduced in Miller, E.J., (1999) The Tavistock Institute Contribution to Job and Organizational Design Vol. 1. London: The Tavistock Institute of Human Relations, 343–6. —— (1967). ‘The Nine-Step Model’ in E. L. Trist and H. Murray (eds) (1993). The Social Engagement of Social Science: Volume 11 The Socio-Technical Perspective: 369–79. —— and Trist, E. L. (1965). ‘The Causal Texture of Organizational Environments’, Human Relations 18(1): 21–32. —— —— ——, Emery, M. F., and Trist, E. L. (1973). Towards a Social Ecology. London and New York: Plenum Press. Emery, M. (1993). ‘The Search Conference: Design and Management of Learning with a Solution to the “Pairing Puzzle” ’ in E. L. Trist, F. E. Emery, H. Murray, and B. Trist (eds). The Social Engagement of Social Science: A Tavistock Anthology: The Socio-Ecological Perspective. Philadelphia: University of Pennsylvania. Heimann, P. (1952). ‘Preliminary Notes on some Defence Mechanisms in Paranoid States.’ International Journal of Psycho-Analysis, 33, 208–13. Herbst, P. G. (1974). Socio-Technical Design: Strategies in Multi-Disciplinary Research. London, Tavistock Publications. —— (1993). ‘Designing with Minimal Critical Specification’ in E. L. Trist and H. Murray (eds) (1993) The Social Engagement of Social Science: A Tavistock Anthology 2: The Socio-Technical Perspective, 294–302. Jacques, E. (1951). The Changing Culture of a Factory, London: Tavistock Publications. —— (1953). ‘On the Dynamics of Social Structure: A Contribution to the Psycho-Analytical Study of Social Phenomena’, Human Relations, 6, 3–23. Lewin, K. (1947). ‘Frontiers in Group Dynamics: Concept, Method and Reality in Social Science; Social Equilibrium and Social Change’, Human Relations, 1947, 1: 5–41. Klein, M. (1952). ‘Mourning and its Relation to Manic-Depressive States’ in Contributions to Psycho-Analysis. London: Hogarth Press. Menzies, I. E. P. (1960). ‘A Case-Study in the Functioning of Social Systems as a Defence Against Anxiety: A Report on a Study of the Nursing Service of a General Hospital’, Human Relations, 13, 95–121.

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Miller, E. J. (1959). ‘Technology, Territory and Time: The Internal Differentiation of Complex Industrial Production Systems’, Human Relations, 12: 243–72. —— (ed.) (1999). The Tavistock Institute Contribution to Job and Organizational Design, Vol. 1 and 11, Aldershot and Brookfield, VE: Dartmouth and Ashgate Publishing Companies. —— and Rice, A. K. (1967). ‘Task and Sentient Systems and their Boundary Controls’, Systems of Organization, Part V1. Reproduced in E. L. Trist and H. Murray (eds) (1993) The Social Engagement of Social Science: A Tavistock Anthology, Vol. 1: The Socio-Psychological Perspective. Philadelphia: Pennsylvania University Press, 259–71. Miller, E. M. and Gwynne, G. E. (1972). A Life Apart: A Pilot Study of Residential Institutions for the Physically Handicapped and Young Chronic Sick. London: Tavistock Publications. Pugh, D. S. and Hickson, D. J. (1989). Writers on Organizations. London: Penguin. Ramage, M. and Shipp, K. (2009). Systems Thinkers. London: Springer. Rice, A. K., Hill, J. M. M., and Trist, E. L. (1950). ‘Representation of Labour Turnover as a Social Process: Studies in the Social Development of an Industrial Community (The Glacier Project—11). Human Relations, 3: pp. 349–72. —— (1951). ‘The Use of Unrecognized Cultural Mechanisms in an Expanding Machine-Shop’, Human Relations, 4, 143–60. —— (1953). ‘Productivity and Social Organization in an Indian Weaving Shed: An Examination of Some Aspects of the Socio-Technical System of an Experimental Automatic Loom Shed’, Human Relations, 6, 297–329. —— (1955). ‘Productivity and Social Organization in an Indian Weaving Mill. 11: A Follow-up Study of the Experimental Reorganization of Automatic Weaving’, Human Relations, 8, 399–428. —— (1958). ‘Productivity and Social Organization: The Ahmedabad Emperiment: Technical Innovation, Work Organization and Management, London: Tavistock Publications. —— (1963). Learning for Leadership. London: Tavistock Publications. Trist, E. L. (1973). ‘Collaborative Social and Technical Innovation’, Chapter 9 in F. E. Emery and E. L. Trist (1973). Towards a Social Ecology. London: Plenum Press. —— and Bamforth, K. W. (1951). ‘Some Social and Psychological Consequences of the Longwall Method of Coal-Getting’. Human Relations, 4, 64–83. Reproduced in E. J. Miller (1999) The Tavistock Contribution to Job and Organizational Design Vol. 1, 125–60. —— Higgin, G. W., Murray, H. and Pollock, A. B. (1963). Organizational Choice: Capabilities of Groups at the Coal Face Under Changing Technologies: The Loss, Re-Discovery and Transformation of a Work Tradition. London: Tavistock Publications. —— and Murray, H. (1993). The Social Engagement of Social Science: A Tavistock Anthology, Vol II: The Socio-Technical Perspective. Philadelphia: University of Pennsylvania Press. von Bertalanffy, L. (1950). ‘An Outline of General System Theory’, British Journal for the Philosophy of Science 1, pp. 139–64.

chapter 10

deeply engaged, i n t u iti v ely a na ly tica l a n d deter m i n edly a pplied: tom bu r ns a n d joa n woodwa r d i n con te xt bu t not i n concert s andra dawson

The setting for this chapter rests with two pioneering independent scholars working in the UK in the mid twentieth century at the intersection of two largely separate worlds: one of post-war industrial development and the other of emerging academic social science. The experiences of Tom Burns, born in 1913, and Joan Woodward, born in 1916, are at first sight uncannily parallel. Each was greatly influenced by the 1939–45 war and the powerful need for industrial reconstruction in the fast-changing, highly competitive international economy of the 1950s; each had industrial or policy experience before their appointments to positions in cognate fields in leading UK universities and, until Woodward’s untimely death in 1971, each worked on similar subjects. They both built careers as leading academics, being awarded internal promotion to Professor (Burns in 1965 in Edinburgh and Woodward in 1969 in Imperial College) in an era where such an accolade was reserved for a tiny minority of peers. They both were held in the highest regard by senior practitioners and policy-makers and were welcomed into firms and the corridors of government power with open arms. Their separate studies revealed underlying commonalities about effective industrial organization. They were each regarded as deep vessels of practical wisdom and yet were drawn to contemplate a grounded if not grander theory of human behaviour, organization, and performance. It seems they

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probably never met, nor discussed their work before their respective path-breaking findings were first published. Their lives were largely spent in parallel, not in interaction. This scenario of parallel working would not now seem so surprising if one were talking about scholars working before the invention of the printing press, the rail network, or the telephone, but from a perspective which looks back just half a century, it prompts reflection on how much the nature of our academic discourse has changed since 1961 when Tom Burns, in association with G. M. Stalker, published The Management of Innovation. With the benefit of a longer life (Burns died in 2001, thirty years after Woodward), and the opportunity in 1994 to write a reflective preface to the third edition of the 1961 book, Burns placed his contribution to our understanding of work and organization as part of a trio of distinct but harmonizing voices: his own (1961), and those of Michel Crozier (1964) and Woodward (1958, 1965): ‘There were striking similarities about the conclusions of all three of them, but it was obvious that they had been arrived at independently; none of us knew of the existence of the others, let alone of what they were up to’ (1994: vii). He identified differences in ‘subject matter, scope and detailed findings’, but noted the three shared a motivation to challenge ‘generally accepted notions of the nature, structure, and processes of industrial organization. And this came from our common experience, along with all our contemporaries, of the economic, political, and social conditions prevailing in Europe (and America)’ (p. viii, Burns’s brackets). This chapter deals with the substance and impact of their unplanned convergence on the power of technology, innovation, and its management to influence outcomes at the firm level. But our comparison of their texts does not stop there, it will also reveal lesser known but crucial differences between these two pioneers and their driving preoccupations.

Joan Woodward Joan Woodward graduated from Oxford University with a degree in Medieval History and began her working life in personnel management, moving into an academic career with an appointment in 1948 as a lecturer in the Department of Social Science in the University of Liverpool where she worked until 1953 on employment relationships in hospitals1 and docks.2 Her early work reveals a concern to secure effective production of goods and service, to liberate employees from the polar extremes of what she uneasily

1 Employment Relations in a Group of Hospitals: A Report of a Survey by Joan Woodward. London: Institute of Hospital Administrators, 1950. 2 University of Liverpool Department of Social Science, The Dock Worker: An Analysis of Conditions of Employment in the Port of Manchester. Liverpool: University of Liverpool Press, 1954 (Woodward was a major contributor to this volume).

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recognized as exploitation by capital on the one hand and the organized (yet often unofficial) forces of labour of the other. She was a champion of what we could call the complementary contributions of an optimistic post-war form of enlightened managerial prerogative, or even imperative, with deep respect for the essential activities and engagement of those on the front line of the creation and production of goods or services. Her insights from close encounters with managers and front-line workers in hospitals and docks framed her subsequent work in the retail industry3 and found perfect resolution when she joined Allan Flanders (1910–1973), one of the leading members of the highly influential ‘Oxford School’4 of industrial relations, in co-authoring with Pomerantz a study of the John Lewis Partnership.5 In this (now very long-lived) Experiment in Industrial Democracy she found reassuring evidence that boundaries between manager and worker, between labour and capital, and between ownership and control did not need to be fixed in some particular aspic brewed in the 1950s’ political economy. In 1953 she moved to the Human Relations Research Unit in the South East Essex Technical College, where she remained until 1957. The agenda in Britain was still postwar reconstruction and Woodward’s unit was established with funds managed by the Department of Scientific and Industrial Research6 (DSIR) which came in part from the Marshall Plan for post-war reconstruction ‘to enhance the performance of industry and commerce through the application of social science’ (Sewell and Phillips 2010: 6). Coincident with her appointment in South East Essex, Woodward was lecturing in Oxford for the Delegacy for Social Administration, itself a way of Oxford experimenting with the pursuit of ‘new subjects’ based in the emerging social sciences, without precipitating incorporation into the main stream.7 In South East Essex Woodward set about understanding better the role and place of management and organization in securing premium industrial performance. Woodward had witnessed great diversity of attitudes, behaviour, employment relations, structure, and performance within and between organizations in hospitals, docks, and retail and observed, at one remove, the vicissitudes of industries in which her husband Leslie 3 The Saleswoman: A Study of Attitudes and Behaviour in Retail Distribution. London: Isaac Pitman & Sons. 4 Allen Flanders, Hugh Clegg, Alan Fox, and Otto Kahn-Freund are credited with developing the Oxford institutional approach to industrial relations. See The System of Industrial Relations in Great Britain, eds Flanders and Clegg, Oxford: Blackwell. 1954. 5 A. Flanders, R. Pomerantz and J. Woodward, Experiments in Industrial Democracy: A Study of the John Lewis Partnership. London: Faber, 1968. 6 The DSIR had the pioneering role of funding research in the social sciences through its tripartite (academic, industrial, and trade union) committees. Until the early 1950s, DSIR had been concerned only with funding research in the physical and engineering sciences and no one centrally had the responsibility for the social sciences, though there was a hint of their importance in the 1947 creation of the Committee on Industrial Productivity, Woodward’s was one of the first projects to be so funded. 7 In passing we can note that Imperial did not give the name ‘Management School’ to the seedling she planted as the Industrial Sociology Unit in 1969 until the late 80s, and only a decade later did it take the name ‘Business School’. Similarly it was the 1990s before Oxford also embraced the institutional name of a Business School.

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Blakeman8 practised his trade of managing industrial relations. Various early management consultants had their theories and recipes. But really, she wondered what could she tell her patrons in Whitehall or corporate boardrooms about an optimum form or forms of work organization for securing consistently high performance? Taking her particular location in South East Essex with its concentration of production facilities of different sizes and sectors, she led her research group in the design and execution of what became a landmark empirical study: a survey of 100 firms in the region designed ‘to test the validity of some of the principles enunciated in classical management theory, by relating such factors as the degree of functional specialisation, the number of levels in the hierarchy, the size of span of control at each level and staff-worker ratios to business success’ (p. 117 Inaugural lecture 1970). The survey was followed by studies of twenty firms in greater depth and three more detailed case studies. In 1958, she published a small pamphlet entitled Management and Technology, issued by the DSIR9 as No 3 in a series entitled ‘Problems of Progress in Industry’. These were designed to bring the findings of research to ‘responsible officials on both sides of industry’ who ‘have not the time to browse through full length volumes’ (DSIR preface to the pamphlet). In keeping with this rubric, the pamphlet is light on references containing no mention of any work other than that of the legacy of scientific management of Frederick Taylor (1910) and the concerns for Human Relations found in Walker and Guest (1952). Woodward could see the merits and on occasion, the applicability of such work, but her close encounters in the workplace encouraged scepticism about their domination in the landscape of management advice and teaching. Woodward now marked in history for her discovery of performance-related relationships between aspects of social systems and technical systems, was candid about its birth, relating that it emerged from frustration that the findings from her study of 100 firms in South East Essex, however grouped, for example by size, industrial sector, or business success, proved recalcitrant in revealing any pattern relating to performance. When however she and her colleagues began to cut the data in ways which reflected production techniques and their underlying complexity, they could see strong patterns emerging. They categorized production systems on a scale of production continuity from least to most complex in terms of ten categories which were then collapsed into three somewhat overlapping groups: from unit and small batch through large batch and mass to the third group of process production (Figure 1 Woodward 1958: 11). When the firms so grouped were analysed for three aspects of social organization (number of hierarchical levels; span of control of first line supervisors, and ratio of managers and staff to other personnel), and the groupings examined for relative business performance within each group, strong relationships were found, suggesting an apparent fit between social 8 Leslie Blakeman was Industrial Relations Director of Fords in Dagenham in a car industry experiencing considerable industrial unrest in the era associated with the origins and reception of the ‘In Place of Strife’ (1969) Cmnd 3888 White Paper’. He was also a full time member of the government established Commission on Industrial Relations. 9 The pamphlet was reprinted in 1968 when the issuer was the Ministry of Technology as the preface relates the DSIR ‘is now dissolved’.

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and technical organization and business performance (Figures 2, 3, and 4, Woodward 1958: 14–21). The message of the pamphlet (1958), told with great economy and impact, was clear: success in manufacturing and process industry may be secured, not by following any of the then current exhortations to particular organizational structures, but by ‘fitting’ the social and technical organization to the nature of the production process. Managers and scholars alike were encouraged to look not to, or for, any universal structure to secure enhanced performance, but to follow a path which Woodward had begun when she fitted structural elements of production systems to a scale of production continuity from least to most complex. With these findings, Woodward’s place in the history of management thought and practice was secured. The 1958 Pamphlet was followed in 1965 by a highly acclaimed monograph in which Woodward dwelt on the underlying dimensions of the production system classification in terms of the inherent sources and manifestation of complexity and uncertainty. This sparked excitement amongst reviewers (Stinchcombe 1965 in Journal of Business; Hopkins 1965 in Administrative Science Quarterly; and Perrow 1967b in American Sociological Review), was translated into seven languages and has been revisited and retold on many occasions, see for example Dawson and Wedderburn (1980), Klein (2006), Sewell and Phillips (2010). Woodward moved fully to Imperial College in 1962;10 she was attracted by the opportunity to work alongside production engineers who were designing the technical systems which her work was now placing centre stage. She had not, however, moved to a position where she saw organizations as narrowly technologically determined systems. She had experienced and observed many layers of meaning and causation within the workplace. She knew that any technological production process was itself a product of technological ingenuity, scientific creativity, managerial insight, and analysis about operability and marketability of process and product, and that each of these separately and in interaction reflected human endeavour and motivation. Through her close advisory ties with policy-makers and leading industrialists, and in her domestic interactions with her industrialist husband, she was never short or shy of reminders of human agency, for example in the form of the difference good managers could make. But to her it was a capacity to make a difference within a pack of cards the technology designers had dealt. In her 1965 book Woodward had identified the managerial creation of control systems (p. 185) as one of the ways human intervention could stack the cards. Studies of the development and operation of managerial control systems became the focus for subsequent work which was published with colleagues in her collected edition Industrial Organisation: Behaviour and Control (1970b) and amplified in other publications (Reeves 1967, Reeves and Turner 1970, Wedderburn and Crompton 1972). A two-dimensional classification of

10 She was first appointed to Imperial College as a part-time Senior Lecturer in Industrial Sociology whilst still at South East Essex Technical College; she was then appointed to a Senior Lectureship in the Production Engineering Section of Imperial in 1962, working part time for the Ministry of Labour from 1964. Woodward was appointed Professor of Industrial Sociology and Director of the Industrial Sociology Unit in 1969.

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the degree to which control was exercised personally or impersonally through administrative or technical systems, and the degree to which control systems were integrated or fragmented resulted (Woodward 1970b: 44–50). This generated a more complex view of production systems represented in Figure 4 page 53 in Woodward 1970b and reviewed in Dawson and Wedderburn 1980: xx. Thus, for example, unit and process production, in the original classification were at either end of the poles of production complexity, but now they were shown to share unitary systems (one personal the other impersonal); and the division between unit and small batch production was less clear cut as they shared a personal system (one, unit, integrated and the other, small batch, fragmented). Explorations along these lines showed that control systems could be seen as an intervening variable between structure and technology, particularly as together they impacted the extent to which managers faced uncertainties and complexities as they sought to manage their operations and achieve business success. Once she acknowledged that managerial choices, for example of control systems, could influence performance and mediate the relationship between social and technical systems, Woodward, albeit somewhat reluctantly, was drawn to appreciate the relevance of studying beliefs, choices, and interests (Dawson and Wedderburn 1980: xxii–xxiii; Dawson 2010: 32). Woodward died before the fruits of this next phase of research were realized, and perhaps before she realized the full implications of where the opened door of human agency might lead. In an essay, part of a collection published in 2010 in her honour, Sewell and Phillips remind us of the contemporary impact of her work, and through newly commissioned work demonstrate that even half a century after her empirical work, the ‘intersection of technology and organization that Joan first highlighted remains a fruitful and critically important area of study’ (Sewell and Phillips 2010: 17). Woodward’s direct legacy was continued into the 1970s with work from her group at Imperial College (Davies et al. 1973, Abell 1975). She outlined in her inaugural lecture (1970a: 121) her eagerness to continue to discover more about the dynamics underlying success in manufacturing industry and also to see the application of her work in government service, for example in the National Board of Prices and Incomes, the National Economic Development Council, and prison industries (Dawson 1975). Woodward was also influential in another major group of researchers who had moved from Aston University (which gave its name to their ‘Aston School’ of thought) to London Business School. Recalling her contribution, Hinings describes how she bequeathed them an imperative to consider the impact of technology as realized in work flow to reveal the heart of what an organization actually does (Hinings 2010: 42). The Aston analysis led them to elevate the importance of size as an influencing factor in organization design, and restricted the importance of the nature of the production technology to the production side of the organization, suggesting it had little influence on other elements, although internal alignment between the parts would be important (Hickson, Pugh, and Pheysey 1969). Such alignment was crucially dependent on where a firm’s critical function lay. The nature of a firm’s industrial environment variously elevated different functions of design, marketing, or development as the dominant lead for organizational fit (Hickson, Hinings, Lee, Schneck, and Pennings 1971). In a subsequent study, the Aston

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group in part converged with an underlying theme of Woodward when they concluded that looking at both size and technology one was really uncovering sources of complexity which needed to be addressed in securing an appropriate form of organization design (Child and Mansfield 1972; Child 1972). The Aston studies were also to foreground the themes of power and choice, and thus the role of human agency, in organizational analysis (Child 1972), to which this chapter returns in its concluding comparison of Woodward and Burns. Across the Atlantic, Perrow was also looking at the differential impact of the nature of work on different parts of the organization, and concluding that approaching organizations through the definition of their goals was fruitless, and that an examination of their task and technology was much more fruitful. In 2010: 27 he recalled his realization published in 1967a that ‘some schools are run like prisons and some prisons are run like schools’. His classification of organizations in terms of the degree to which their activities could be standardized and the extent to which non-standard activities required a degree of local management discretion and intuition, drew on ideas from Joan Woodward’s brilliant study, Industrial Organisation.11 When Perrow and others in the US discovered Woodward’s 1965 thesis they were excited and magnanimous in recognizing her leadership in what one cannot call a race, for none of the participants was aware that the others were running, but even so ‘Joan was there first two years before with this remarkable breakthrough’ (2010: 27). In contemplative retrospect Perrow (2010: 27) describes the coming together of these various voices which were ‘in the air’. He describes first hearing about Woodward from Robert Dubin, and meeting Paul Lawrence, a leading professor at Harvard Business School, and his student Jay Lorsch in 1965. Lawrence invited Joan and a few others to Boston to share their work in 1965, and in the subsequent year convened a meeting, known in this circle as the ‘Connamasset Conference’ after the place in Cape Cod they met. Papers were delivered by Lawrence and Lorsch, Bell, Perrow, and Woodward. The term ‘contingency theory’ was coined by Lawrence, adopted by those present, entered the lexicon of management studies, and created a major fault line between those who expected to find specific and universal recipes for successful management organization and ‘contingency theorists’ who explained why ‘no one best way’ to organize could be identified, whereas the ‘best way’ was to determine structure after taking account of environment (Lawrence and Lorsch 1967), technology and control systems (Woodward 1958, 1965), interdependencies embedded in the technology (Thompson 1967), and the nature of the work (Perrow 1967a). Apparently the delight in finding this common ground was deep. Leaders of comparatively isolated research groups on both sides of the Atlantic who had laboured towards their own empirically based discoveries during the 50s and 60s suddenly found an ensemble of harmonizing voices resonating across sectors and geographies (Donaldson 2001). They had each found in different ways that an organization’s production systems, nature of the ‘work’, and market environments set parameters or ‘contingencies’ which 11

Quote from footnote 11 of Perrow 1967a: 199.

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wise managers would consider as they created and adapted their management systems of organization. The shape and strength of hierarchy, the direction of accountabilities, the leeway (or requirement) for discretion at certain positions, the extent of preplanned standardization and specialization, the means of coordination and control, and the relationships between knowledge, interest, and power were all placed in a hopper for management practice and organization theory, which would be forever cognisant of technology and environments, notwithstanding that, as so much subsequent work has shown, these very factors are at various levels the outcome, rather than the determinant, of human agency. No doubt several relevant scholars had not yet been drawn into the contingency circle at that spring meeting in Cape Cod in 1966, but one absentee who would certainly have qualified was Tom Burns. This chapter now moves to examine his work which would so easily have qualified him for a slot in the Connamasset speakers’ chair.

Tom Burns Having completed a degree in English Literature at the University of Bristol, Tom Burns became a school teacher and then ‘lektor’ in English at Helsinki University. During the war he served in the Friends Ambulance Unit from 1939 and was a prisoner of war in Germany between 1941 and 1943. In 1945 he became press and information officer for the Bournville Village Trust and joined the West Midland Group on Post-War Reconstruction and Planning as a research assistant. In 1949 moved to a lectureship at the University of Edinburgh which was to be his academic home for the rest of his life. He retired from paid employment in 1981, but continued his intellectual engagement through writing and discussion until his death twenty years later.12 The bibliography of his work reveals an extraordinary breadth of interest. His publications list is a roll call of entries over a forty-year period in the leading sociological journals of the US and UK, liberally peppered with social commentary in the New Statesman, New Society and Prospect, as well as his own new writing and literary criticism which was a strand of work born out of interests shared with his wife, Elizabeth, with whom he edited a book on the Sociology of Literature and Drama in 1973. Whereas Woodward’s interests were firmly rooted in the employment relationship between management and worker, and the form of management organization in industry, Burns came to a study of industry and firms through a profound interest in local community, social relations, and welfare. He had written at the end of the 1939–45 war on Scottish neighbourhoods,13 and in 1956 published a study on the dynamics of local/ 12

The source of much of this paragraph is the obituary written by John Eldridge for The Independent, Monday, 20 August, 2001. 13 ‘Social Development in New Neighbourhoods’, Pilot Papers, vol. 2, pp. 21–31, 1947. ‘Village, Town and Suburb’, Cambridge Journal, vol. 4, pp. 96–105, 1950.

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central power entitled Local Government and Central Control.14 His interest in communities led him to plan a study of a firm as a ‘community of people at work’. His chosen location was a rayon mill in Scotland, but his initial work revealed that the factory as a community could not be studied in isolation from the wider local community. Thus began a series of three empirical studies which were published in a 1961 monograph co-authored with G. M. Stalker under the title ‘Management of Innovation’. Some of the results of the studies were first published in a research report15 in 1958, the same year as Woodward’s pamphlet. They were also much discussed in the same corridors of DSIR which provided funds for Burns as well as Woodward. However, unlike Woodward, Burns’ 1958 written trailer was directed to an essentially academic audience and did not attract the attention of Woodward’s of the same year which was targeted to an audience in industry. Thus the weight of the contribution of The Management of Innovation was not acknowledged more broadly until the publication of the book in 1961. Burns’s eye for the detail of social relationships and his eagerness to extract personal stories of change, conflict, and adaptation were fruitful and formative in developing a detailed sociological analysis of the workplace. He was quick to glimpse that the nature of a firm’s work, embedded as he saw, in its technology and market, would in time take centre stage in explanations of cross-sectional and chronological differences between firms, and even between different parts of the same firm. In seeking to understand performance in his rayon mill, in what he called his ‘preliminary study’ (1961: 1), he was struck by variation between the strong productivity and satisfaction of those who worked in and managed rayon manufacturing, with the lack of productivity and satisfaction in, and with, those who inhabited research and development. In the former, standardized working practices were accepted in the Scottish plant and seemed to fit the bill, even though determined in an English head office, whereas that same approach was associated with repetitive, inconclusive, and low-achieving R&D activities conducted in mutual suspicion between those engaged in R&D in Scotland and the head office in England. Taking his sociological insights and methods into another firm with a large and flourishing R&D department, this time in electronics, Burns found a completely different form of organization from that in R&D in the rayon plant. Here he found a much more flexible, non-standardized set of relationships and intuition-based forms of organization. Those two studies, conducted in the early 1950s, formed the first phase of the work reported in The Management of Innovation (1961). The ‘Scottish study’ (1961: 3) was the next phase. It included eight electronics firms which had entered the Scottish Council’s ‘electronics scheme’ intended to encourage Scottish participation in the emerging electronics industry. This was the study in which G. M. Stalker participated, and thus secured a place in the history of innovation as a co-author of this landmark text. Dramatic change was afoot as the industry was moving 14 Local Government and Central Control (for The West Midland Group), Routledge and Kegan Paul, 1956, which had been presaged in the research report Local Development in Scotland (with A. K. Cairncross), Scottish Council (Development and Industry), 1952. 15 Management in the Electronics Industry: A Study of Eight English Companies, Social Science Research Centre, University of Edinburgh, 1958.

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from a market dominated by central government procurement to one in which commercial considerations were becoming ever more significant. The researchers were particularly interested in how management systems adapted to changes in the technical and commercial characteristics of the firm. This study was supplemented by studies of other types of firms which were confronting fast moving technically driven and global market change. Out of this work came the identity of two ideal types of organization: ‘Neither was fully or consistently applied in any form . . . Neither was openly and consciously employed as an instrument of policy . . .’ (1961: 5), and yet they were described in a way which has entered into the common parlance of management theory and practice. The ‘mechanistic system’ was identified as appropriate to firms in stable conditions, as specialized, within a vertical commanding hierarchy with comparatively easily described flows of information and decisions. An alternative ‘organic system’, found appropriate to unstable conditions, relied more on the flexible skills and knowledge which were distributed around the firm and not concentrated in the apex of the hierarchy. In the organic system there was less standardization and less narrow specialization, and decision-making took longer and was concluded in a variety of ways. When Woodward published her monograph in 1965 she was able to examine her data through Burns and Stalker’s lens of mechanistic and organic structures. She saw great complementarity between this analysis and her own. She discussed how mechanistic structures with rigid breakdown of jobs into functional specialisms, hierarchical management structures, vertical chains of command, and performance improvements achieved through standardizing routines, characterized companies with strong performance in large batch and mass production in stable market environments. In contrast, she described organic structures which were found in strongly performing units or small batch production in fast-changing market conditions. They had flexibly specified job descriptions, delegated decision-making, devolved authority, and performance improvements delivered through meeting customers’ specific needs, and innovating to reflect and anticipate changing conditions. On learning of the Scottish study, senior officials at the English Ministry of Supply encouraged Burns to extend his study to eight firms south of the border and so create ‘the English study’ as the third empirical base for The Management of Innovation (1961: 7). The researchers deliberately chose to concentrate on firms facing both rapid technological change and difficulties in getting R&D groups engaged in research, development, and design to work effectively with other departments, notably production and sales. The firms were typically larger than those studied in Scotland and displayed more internal variation between departments. This enabled Burns to focus on various specialist liaison positions and integrating organizational forms similar to those subsequently recognized by Lawrence and Lorsch (1967) as enabling effective interdepartmental interaction under variously diverse environmental conditions. Burns was, however, not persuaded that the combination of market and technological characteristics he documented accounted for all the variation in structure which he detected in the firms he studied. Having documented the advantages of those who

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secured an organization and management system which ‘fitted’ the demands of their technologies and markets, Burns established firm ground for those who were to follow and who would not be prepared to accept a view of organizational life dominated by simply meeting the requirements of external contingencies. Two areas of discussion illustrate how his work anticipated major movements in organizational analysis. First, he was alive to the difficulties of drawing the boundaries between what was internal and what external to the firm. An opening section of The Management of Innovation is devoted to the role of the user of technology in innovation through interaction with designers and operators as well as marketers in the creation and sale of complex products like radar (pp. 37–43). One can see a clear path from this work to the rich vein of scholarship on the social construction of technology and knowledge (see, for example, Barley 1986 and Orlikowski 2000). Second, he was intrigued by why firms did not adapt their structures in the face of changing circumstances. Why did they keep to the mechanistic when it seemed to him that the organic would be so much more facilitative of productivity and satisfaction? His sociological mind explained that work organizations were not only systems for the production of goods and services, they were also political systems in which information and knowledge were power and thus not to be readily shared or given away; and they were also status systems in which people’s interests and identities were embedded. Whereas a rational analysis may incline to change, familiar and vested interests are powerful forces for inertia, even if, he observed, rarely overtly recognized as such. Burns was fascinated by the different cultures, languages, and world views he encountered when comparing industrial scientists or development engineers with general managers, even before he began to look at vertical differences between management and the shop floor. He noted that a common response to these differences was often clear material separation in different buildings, and socially constructed separation in different pay and promotion systems, even though he observed that a ‘rational analysis’ of ‘optimum’ (given the technology and market) interaction and feedback would reveal that a close integration of work could be fundamental to improving competitive performance. It was recognition of this tension between the ‘rational’ response to create structures which would meet what those in Connamasset, Cape Cod, in 1966 were to call technological and market contingencies, and the force of the observed social response embedded in power and status that explains why Burns deals so explicitly and enthusiastically with the dynamics and difficulties of securing change. The 1961 book is divided into three parts. Part 1, The External Circumstances, describes the firms’ technologies and industrial environments in ways now familiar to contingency theorists. However, once well into the Second Part, Organization and Change, and for the whole of the third part, Direction and the Shaping of Management Conduct, one is invited to look through a lens which highlights the dynamics through which politics, culture, status, and conflict are infused into organizations, and require a more holistic and nuanced account of organizational life than one can achieve through Woodward. His insights into the crucible of micro politics and the coexistence and contagion between the work organization and the co-habiting occupational, political,

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and status systems are profoundly prescient (even though in the detail firmly situated in the 1950s’ workplace of men,16 where their everyday dress gave immediate indicators of their position in the hierarchy and in the vertical division of functional labour). These important analytical themes had found early expression in Burns’s scholarly articles in the 1950s17 and were to become increasingly important in his subsequent work (Burns 1977, 1992, 1995).18 The reader may remember that Burns embarked on this series of studies with an interest in understanding experience in, and of, communities, and indeed late in the 1961 book we find a repetition of the assertion that ‘Every firm is a community, with its own particular flavour, its own social structure, its own style of conduct’ (page 258). Placing these preoccupations alongside his revelations about the antecedents and consequences of macro technological and market change, he develops a commentary on why and how ‘we’ can expect more change in the macro environment, and consequently to experience more organic forms of organization, providing of course we can secure alignment with politics, culture, interest, and these macro contingencies. So far so good, even if not ‘so far so certain’. But even the ‘so far so good’ is tempered by a sense of social realism. Even if ‘lucky’ or ‘skilful’ enough to benefit from developing a capacity to fit with the changing environment, participation in organic structures will bring in their wake a whole raft of associated uncertainties and tensions to communities at work and at the factory gates. He is a ready observer of consequential and often unanticipated costs. For example, he predicts that individual experience will become increasingly drawn into the sphere of work and there will be ‘greater subjection of the intellectual, emotional, and moral content of the individual’s life to the ends presented by the working organizations of the society in which he exists’ (1961: 11). Burns deepened and broadened his work in the three decades in which he survived Woodward. In 1977 he published a landmark analysis of the BBC, in which we see the same passion to get under the skin of the organization as was evident in The Management of Innovation. He personally carried out 300 interviews in two tranches, a decade apart, and having then prepared the manuscript, he determinedly entered and won a lengthy negotiation to secure publication. An account of Erving Goffman was written in 1992, and a collection of Burns’ own writings covering the thirty years from 1944 was eventually published in 1995.19 Furthermore, he left an unpublished manuscript which traced threads from these last three major works to reveal the depth of his passion for an uncompromising pursuit of the gaol to synthesize his various sociological insights. 16

Chapter 10 of the Management of Innovation is called ‘Men at the Top’. ‘The Directions of Activity and Communication in a Departmental Executive Group’, Human Relations, vol. 8, pp. 73–97, 1954. ‘Friends, Enemies and the Polite Fiction’, American Sociological Review, vol. 18, pp. 654–62, 1955. ‘The Reference of Conduct in Small Groups: Cliques and Cabals in Occupational Milieux’, Human Relations vol. 8, pp. 147–67, 1956. 18 The BBC: Public Institution and Private World, Macmillan, 1977; Erving Goffman, Routledge, 1992; Description, Explanation and Understanding. Selected Writings, 1944–1980. Edinburgh University Press, 1995. 19 The BBC: Public Institution and Private World, Macmillan, 1977; Erving Goffman, Routledge, 1992; Description, Explanation and Understanding. Selected Writings, 1944–1980. Edinburgh University Press, 1995. 17

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Each work bears the same hallmark, carefully constructed through empathetic analysis of internal struggles within organizations and the communities which inhabit organizations and are a connecting space beyond them. His later work revolved around explanations and consequences of phenomena we saw clearly articulated in his 1961 book, namely the coincident interaction between technological, political, status, and cultural systems in organizations. But to this was added another dimension which had been evident in his really early work on communities and control, namely his agnosticism about the prior rights of any party in a social system to have the determining influence in outcomes. He was much less interested in enabling the particular and, in a sense, partisan interests of management to prevail, than he was of enabling all, essentially contested viewpoints, to be revealed and subjected to critical analysis.

Links and lines between Woodward and Burns The contributions for which Burns and Woodward are best known arose from their studies separately conducted in the 1950s. Each played a major role in ensuring a place for technology and market characteristics, and their underlying dimensions of uncertainty and complexity in the lexicon of organizational analysis. They were both optimistic creatures in a post-war world where their insights into management, organization, and innovation could contribute to what Prime Minister Wilson in a pre (1964) election speech to the Labour Party conference at Scarborough evangelized as a new fusion of science and industry ‘forged in the white heat of this (technological) revolution’ where there was ‘no place for restrictive practices or for outdated methods on either side of industry’ (2 November 1963). In his preface to the third edition (1994) of The Management of Innovation, Burns recalls the optimism of that time: ‘the horizon of possibilities and expectations in terms of social change and improved economic welfare was much wider than it has become since then’ (page vii). Burns and Woodward were each excited by the bigger pictures they could draw from their study of the particular, and they both appreciated the value they could extract from revealing and understanding the intricate detail of the cases they described. Woodward moved from the more superficial encounter with a 100 organizations to the detail of specific cases; whereas Burns proceeded from the particular to the more general; starting with one rayon mill and then adding eight firms in Scotland and a further eight in England. By the standards of today neither had a sample of such a magnitude, nor a methodology of such a rigour that it would necessarily excite or support general conclusions. They were both unapologetically methodologically eclectic and innovative, combining close observation with semi-structured interviews and comparative data collection through questionnaires. Neither thought it necessary to publish their research instruments or their raw data, or to go into detail on their methods of data analysis and synthesis. They were pioneers. They wanted to reveal and to have impact. Peer review today would require much more detail on sampling, methods, and measurement, not least on their central concepts of performance and complexity. But so long

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as they could each meet the standards of validity they set themselves, in the context of an embryonic and highly fragmented peer group in the emerging field of industrial sociology, they were content that they could confidently describe relationships they believed had general applicability. They each felt it their role to reveal the feel of the shop floor and the design laboratory, the concerns and preoccupations of managers, the morale and productivity of workforces, and the competitive position of companies. The nature and combination of breadth and depth in their work, remarkable in and for their time, were factors which guaranteed their influential positions, both in academia and with those in firms and in regional and national government intent on increasing competitiveness and productivity. We are fortunate that they each delivered a manifesto for their subjects in their inaugural lectures20 which reveal further striking similarities. They each took the occasion to lay out their stall in an academic market place where they recognised many would be sceptical or ignorant of their subject. Each used the foundations of their published work on the relationship between technology, markets, organizational structure and performance as the gateway to their inauguration into the professoriate. Their premises were common: the nature of technologies and markets set context and create opportunities which transcend any diktats derived from Taylor’s scientific management or Weber’s rational bureaucracy. Neither would entertain any ‘vacuous injunctions’21 that all organizations of any one sort, whether hospitals or manufacturing plants should be organized according to a universally established ‘best way’. In a warm retrospective on the work of his friend, Perrow praises Woodward’s pioneering counterclaims that the most successful firms in any industry or sector matched their structures to their technologies. He says this was a massive shock once it filtered out into a world where the search for, and declaration of, ‘the one best way’ was commonplace (Perrow 2010: 25). Perrow saw Woodward standing alone in 1958, but Burns he suggests was not far behind: ‘The closest thing to a[nother] contrary perspective. . . . was an important book by Tom Burns and G. Stalker, “The Management of Innovation” (1961) where they distinguished organic from routine production but did not otherwise address the issue of organizational types. . . . Though preliminary compared to her [Woodward’s] work, it [Burns and Stalker] was a significant break with the century old tradition of looking for the one best way to organize all organisations, public and private’ (Perrow 2010: 26). We cannot know how Woodward would have developed in her analysis or determination had it not been for her premature death in 1971. However on the basis of personal impressions gained from the great privilege of working in her team in the two years immediately preceding her death, the accounts from colleagues of the robust discussions which accompanied the completion of the text for the collected essays in 1970 and her inaugural lecture, I am prepared to hazard a guess that any subsequent work would 20

Woodward in 1971: Behaviour in Organizations, Inaugural Lecture, Imperial College of Science and Technology, pp. 107–22. Burns in 1966: Sociological Explanation, Inaugural Lecture, no. 28, University of Edinburgh, 1966. 21 Perrow in Phillips et al.

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have been set within the parameters we can already clearly discern before her death. Unlike Burns, with whom she undoubtedly shared a sociological imagination, she was primarily concerned to use that imagination to enable more efficient and effective management systems and processes, rather than to enter a space of critical analysis. Comparing an assumed trajectory for Woodward’s work with the evidential trajectory of Burns’s works, some of the more immediately obvious similarities became more nuanced and the distinctions clearer. One way to explore their differences is to recall that the place of technology and its interaction with the market economy in setting a context for social relations in work organization was not a new subject in the 1950s. In a sense it has preoccupied political economists from before Marx and Engels22 and subsequent debates about and within labour process analysis (see for example Braverman (1975) and Knights and Willmott (1989). The material base of technology has long been seen as important, and the workplace seen as the interacting nexus of technological development, capitalist interest, managerial interpretation, and labour exploitation. Depending on one’s inclination to a Marxist material interpretation and false consciousness, or to an emphasis on human agency, so one is drawn to see the development and utilization of technology in particular ways. Does it determine or enable the pursuit of interest? Are its consequences inherent or mediated through human action and agency? Does it provide the base for action if not specific actions, and how do organizational characteristics and consequences sit in its shadow? Are the limits of discretion curtailed by technology in the hands of those who seek control, or are there some immanent laws of rational efficiency in which the language of exploitation and power are irrelevant? Neither Burns nor Woodward were Marxist in their analysis, but whereas it was second nature to Burns to see the importance of these debates and to be sympathetic to the nuanced indeterminate interactions between agency and structure, the material and the human, the centrifugal and the centripetal, such language and discourse presented much more of a challenge to Woodward. She was impatient of such debates and wanted to be able to explain through categorization, and then deliver clarity and external objectification in the advice she was eager to provide to management and government. After 1965 her colleagues persuaded her to supplement the categorization of production systems with a categorization of control systems, and to agree to launch studies of the role of managerial values and beliefs in decision-making. But this she felt could be, and needed to be, carefully managed. She did not want the behavioural sciences, at least within Imperial College to go ‘the way of the natural sciences in Greece; that is becoming the esoteric pursuit of an intellectual minority rather than a dynamic in human affairs’. Whilst fiercely independent in her conclusions, Woodward wanted to use her findings to improve the performance of firms. She concluded her inaugural lecture thus: ‘[T]he ultimate objective as of all behavioural science researchers is to enable those concerned 22 Economic and Philosophical Manuscripts of 1844, 1844. Capital, Volume II [posthumously published by Engels], 1885. Capital, Volume III [posthumously published by Engels], 1894.

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with industrial organisations at whatever level they may be working, to refine their models and to deal in a more sophisticated way with the problems of organisational structure and behaviour they encounter.’ Earlier in her lecture she was content to cite the functionalism of Talcott Parsons as an acceptable outcome of social science. Whilst she took issue with the ‘jargon’ of Parson’s ‘pattern maintenance’, she was attracted to the conveyed sentiment of patterns which serve an implied consensual set of functions (1971: 109).23 Following the banner of Hobhouse for scientific enquiry she sought ‘detachment, continuity and accuracy’ and application in her work, even if this might take her ‘out of line with current trends and ideology in the academic environment of sociology.’ In her inaugural lecture she cast quietly envious eyes at the work of her scientific colleagues, who were in the overwhelming majority in the Imperial College of Science and Technology. She explains that a natural scientific method of controlled experimentation is not available in the laboratory of life, and that she understands that prejudices and biases may creep into scholarship, but her position as a social scientist is one in which the scholar is not automatically the critic, and the ‘manager’ is not automatically ‘the exploiter’. Burns also wanted his work to be useful in securing industrial efficiency and competitiveness, but in contrast to Woodward he was positively energized by the prospect of a critical sociology, and agnostic about alignment with particular interests. He was at ease in the shoes of the robust social critic if that was the destination to which his scholarship led him. He was unhappy with the dominance of functionalism and its imperfect alignment with ‘informal structures whether of bureaucracy or technology’. He did not want sociology to chart consensus; he expected it to excite criticism: The purpose of sociology is to achieve an understanding of social behaviour and social institutions which is different from that current among the people through whose conduct the institutions exist; an understanding which is not simply different but better. The practice of sociology is criticism. It exists to criticise claims about the value of achievement and to question assumptions about the meaning of conduct. It is the business of sociologists to conduct a critical debate with the public about its equipment of social institutions. (Burns inaugural lecture 1965: 12, cited in 1961 preface to 3rd edition)

Burns believed in the contested and distributed nature of knowledge and organization and that the human agency which Woodward wanted to acknowledge, but always within a given managerial frame, could not be so constrained. Sometimes he knew it would fall within accepted and somehow ‘functional’ patterns of authority, but at other times it would be explosive in unconstrained ways. Human choice and human agency can normally be discerned in the foreground of his analysis, often following the muse of politics, interest, or status more frequently than following the muse of rational efficiency. 23 Parsons, Talcott. 1937. The Structure of Social Action; Parsons, Talcott. 1964 (original 1949). Essays in Sociological Theory. Free Press, revised edition; Parsons, Talcott. 1964 (original 1951). The Social System. Free Press; Parsons, Talcott. 1960. Structure and Process in Modern Societies. Free Press. In his structural functionalism Parsons describes pattern-maintenance as the set of structures which maintain stability within the system.

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As one would expect, these differences found notable expression in our subjects’ views on hierarchy, power, and politics. Woodward, a co-author of an analysis of the John Lewis Partnership as an ‘experiment in industrial democracy’,24 concluded that ‘participative techniques rarely lead to any fundamental change in the balance of power in an organisation. . . . Pyramidal structure is a fact of organisational life and if a better environment is provided from a self actualising point of view for those at the lower levels of the pyramid without jeopardizing current performance, these ideas have an important contribution to make to the social life of organisations’ (1970: 116). Her friend and colleague Perrow recounts how he challenged Woodward to give greater acknowledgement to power. Even from an efficiency perspective he noted that favourable or imperfect market conditions could enable powerful self-interested managers to succeed whilst also being inefficient, for example by hoarding information which in terms of efficient rationality would be better shared. Perrow notes that in a personal communication, Woodward agreed: she too had observed ‘significant variations related to power in her own sample, but not enough to destroy the overall findings’ (Perrow 2010: 28). For Burns, ‘the hierarchic order of rank and authority that prevails in them (organisations) is at one and the same time an integral, unitary, control system and a career ladder’. This creates the fundamental interaction between the organisation and ‘its’ goals and the interests and careers of individuals within it. Internal systems create rules and means to the ends, and there are inevitably conflicts between means and ends and regulations and rules. None of these is independent of the political career and status interests he described in The Management of Innovation (1961), developed in a paper in Administrative Science Quarterly on micro politics,25 and which formed a theme of his subsequent work, most notably in his extraordinarily detailed and perceptive study of the BBC (1977).

Conclusion Looking back fifty years we have testimonial from a leading organizational theorist who began his academic life in the Aston School. According to Hinings (2010: 41), Burns and Woodward were the ‘two most influential researchers on organizations in the United Kingdom (at that time)’. They were the pioneers who created contingency theory in the UK. They were both deeply influenced by the industrial and academic contexts in which they worked. They each were eager to find ways to contribute their independent judgements and research-based understandings to building competitiveness and improved performance into British industry. But, for Woodward, the fruits of work if successfully applied to improved practice were, I feel, sufficiently sweet to give comfort for a job well done, whereas Burns was more restless, more eager to prod and poke to reveal conflicting 24

Op. cit. 1968. ‘Micropolitics: Mechanisms of Institutional Change’, Administrative Science Quarterly, vol. 6, no. 3, pp. 257–81, 1961. 25

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interests, and be critically analytical. In terms of a debate contemporary with their work on technology we can turn to the 1966 typology of Alan Fox,26 another Oxford School academic. In his terms it seems to me: Woodward was a unitarist who flirted with pluralism whereas Burns was a pluralist who flirted with radicalism. Burns, the critical sociologist with a passion to evangelize for the specificity of his nascent subject with all the conflict and contradiction that entailed, was as interested in the development of theory and its application in the criminal justice system, or social work, housing, and welfare provision as he was in the operations of SMEs, large corporations and their role in the wider economic base. He was equally interested in efficiency but was broader, more theoretically inclined, and happier with notions of conflict, power, and interest than was Joan who was happiest operating at the level of the firm, where she wished to focus her fiercely independent, yet practical sociological understanding to improve efficiency.

Bibliography of Joan Woodward’s works Sole author 1958 Management and Technology Department of Scientific and Industrial Research: Problems and Progress in Technology 3, London: HMSO. 1960 The Saleswoman: A Study of Attitudes and Behaviour in Retail Distribution, London: Isaac Pitman & Sons. 1965 Industrial Organisation: Theory and Practice Oxford: Oxford University Press. 1970a Behaviour in Organizations Inaugural Lecture, Imperial College of Science and Technology, 3 March, p. 107–22.

Edited work 1970b Industrial Organization: Behaviour and Control, Oxford: Oxford University Press, including chapters co-written by Woodward with research team members: J. Rackham, T. Kynaston-Reeves, and B. A. Turner.

Contributor to: 1950 Employment Relations in a Group of Hospitals: A Report of a Survey by Joan Woodward, London: Institute of Hospital Administrators. 1954 The Dock Worker: An Analysis of Conditions of Employment in the Port of Manchester, University of Liverpool Department of Social Science: University of Liverpool Press. 1964 ‘Industrial Behaviour—is there a Science?’ New Society, 4, 106, 8 October, p. 11. 1966 ‘Right Management’ New Society, 8(208), 441–3. 26 Alan Fox (1966) proposed three managerial frames of reference for viewing employment relations. A unitary frame sees one source of authority, focus of loyalty, and common objectives; conflict is a temporary state reflecting poor communication or temporary transitions. A pluralist frame sees several, sometimes conflicting, sources of leadership and objectives, with resolution through negotiation and change, within a common set of understandings. A radical frame sees irreconcilable interests and objectives manifest in fundamental conflict, with subjugation of the less powerful.

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1968 ‘Resistance to Change’ Management International Review, 8, 137–43. 1968 Experiments in Industrial Democracy: A Study of the John Lewis Partnership, A. Flanders, R. Pomeranz, and J. Woodward, assisted by B. J. Rees, London: Faber. 1969 ‘How the Price Income Board Should Work’ New Society, 13, 331, 30 January, p. 168–9. 1970 Organizational Behavior Models, A. R. Negandhi and J. P. Schwitter (eds) Comparative Administration Research Institute, Kent State University, Ohio: Kent State University Press, Proceedings of a conference held in 1969 at Kent State including J. Woodward, ‘Technology, Material Control and Organizational Behavior’, and E. Burack, ‘Commentary on Woodward and Others’.

Bibliography of Tom Burns’s works The source for this list of published work is the website which was created to share the final, unpublished work Organisation and Social Order written by Burns. The creators of the website comment that the unpublished manuscript ‘is a posthumous work that could be described as the magnum opus of one of Britain’s most innovative organizational sociologists of the postwar period’. The authors of this list note that it excludes short stories, essays, and articles contributed to New Writing, Life and Letters Today, Hårizont (Sweden), and others in the period 1935–40.

Authored major works 1956 Local Government and Central Control (for the West Midland Group), London: Routledge and Kegan Paul. 1961 The Management of Innovation (with G. M. Stalker), London: Tavistock, 1st edition. 1966 Preface to the Second Edition. 1994 Preface to the Third Edition. 1965 Sociological Explanation, Inaugural Lecture, no. 28, University of Edinburgh, available via weblink from . 1977 The BBC: Public Institution and Private World, London: Macmillan. 1992 Erving Goffman, London: Routledge. 1995 Description, Explanation and Understanding. Selected Writings 1944–1980, Edinburgh: Edinburgh University Press.

Edited work 1967 Social Theory and Economic Change, with S. B. Saul, London: Tavistock. 1969 Industrial Man, Middlesex: Penguin. 1973 Sociology of Literature and Drama (ed., with E. Burns), Middlesex: Penguin.

Research reports 1952 Local Development in Scotland (with A. K. Cairncross) Scottish Council (Development and Industry).

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1958 Management in the Electronics Industry: A Study of Eight English Companies, Social Science Research Centre, University of Edinburgh. 1963 The Child Care Service at Work (with S. Sinclair), London: HMSO. 1981 Rediscovering Organisation: Aspects of Collaboration and Managerialism in Hospital Organisation (mimeo), Nuffield Provincial Hospitals Trust.

Journal articles and book chapters 1944 ‘Calamity Bay’, Penguin New Writing, no. 19: 9–21. 1945 ‘Men and Barbed Wire’, The Fortnightly, new series no. 940: 272–7. 1947 ‘Social Development in New Neighbourhoods’, Pilot Papers, 2: 21–31. 1950 ‘Village, Town and Suburb’, Cambridge Journal, 4: 96–105. 1954 ‘The Directions of Activity and Communication in a Departmental Executive Group’, Human Relations, 8: 73–97. 1955 ‘Friends, Enemies and the Polite Fiction’, American Sociological Review, 18: 654–62. 1956 ‘The Reference of Conduct in Small Groups: Cliques and Cabals in Occupational Milieux’, Human Relations, 8: 147–67. 1956 ‘The Social Character of Technology’, Impact, 7: 147–67. 1956 ‘The Cold Class War’, New Statesman and Nation, April: 331–2. 1957 ‘Management in Action’, Operational Research Quarterly, 8: 45–60. 1958 ‘The Idea of Structure in Sociology’, Human Relations, 11: 217–28. 1958 ‘The Forms of Conduct’, American Journal of Sociology, LXIV: 137–228. 1960 ‘The City as Looking-Glass’, Prospect: R1AS Quarterly, 122: 9–11. 1961 ‘R&D and Production: Problems of Conflict and Co-operation’, Institute of Radio Engineers: Transactions on Engineering Management, 8: 15–23. 1961 ‘Social Norms and Social Evolution’, in M. Banton (ed.) Darwinism and the Study of Society, London: Tavistock. 1961 ‘Micropolitics: Mechanisms of Institutional Change’, Administrative Science Quarterly, 6(3): 257–81. 1962 ‘Des fins et des moyens dans la direction des entre-prises’, Sociologie du Travail, 3: 209–29. 1962 ‘The Sociology of Industry’, in A. T. Welford, M. Argyle, D. V. Glass, and J. N. Morris (eds) Society: Problems and Methods of Study, London: Routledge and Kegan Paul. 1963 ‘Industry in a New Age’, New Society, 1: 17–20. 1964 ‘Non-Verbal Communication’, Discovery, 25: 30–7. 1964 ‘What Managers Do’, New Society, vol. 4(116): 8–9. 1965 ‘Technology’ and ‘Social Change’, in J. Gould and W. L. Kolb (eds) Dictionary of the Social Sciences, Tavistock (for UNESCO). 1966 ‘On the Plurality of Social Systems’ and ‘Report of Discussion, and Commentary on Final Session’, in J. R. Lawrence (ed.) Operational Research and the Social Sciences (Cambridge International Conference, 1964), London: Tavistock. 1967 ‘The Comparative Study of Organizations’, in V. Vroom (ed.) The Study of Organizations, Pittsburgh: University of Pittsburgh Press, pp. 113–70. 1967 ‘Introduction to ‘Consumer Behaviour: A Sociological View’, European Journal of Sociology, 7: 313–29. 1967 ‘A Meaning in Everyday Life’, New Society, 9: 760–2. 1968 ‘Models, Myths and Images’, in W. H. Gruber and D. Marquis (eds) Human Factors in the Transfer of Technology, Cambridge: MIT Press, pp. 11–23.

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1969 ‘The Revolt of the Privileged’, Social Science Information, vol. 7(4): 137–49. 1969 ‘Public Service and Private World’, in P. Halmos (ed.) ‘The Sociology of Mass Communications’, Sociological Review Monograph, 13: 53–73. 1969 ‘Comment on Peter M. Blau’s “Objectives of Sociology” ’, in R. Bierstedt (ed.) A Design for Sociology: Scope, Objectives and Methods, Monograph 9, American Academy of Political and Social Science, pp. 72–9. 1969 ‘Possible Industrial Futures’, Education and Culture, Council for Cultural Cooperation of the Council of Europe, pp. 20–4. 1971 ‘Television and the Public Good’, in J. D. Halloran and M. Gurevitch (eds) Broadcaster/ Researcher Cooperation in Mass Communication Research (Report on an International Seminar, 1970), Centre for Mass Communication Research, University of Leicester. 1972 ‘Commitment and Career in the BBC’, in D. McQuail (ed.) The Sociology of Mass Communication, Harmondsworth: Penguin. 1973 ‘The Rationale of the Corporate System’, in R. Marris (ed.) The Corporate Society, London: Macmillan, pp. 121–77. 1974 ‘Leisure, Work and the Social Structure’, in M. A. Smith, S. R. Parker, and C. S. Smith (eds) Leisure and Society in Britain, London: Allen Lane. 1980 ‘Sovereignty, Interests and Bureaucracy in the Modern State’, British Journal of Sociology, 31(4): 491–506. 1987 ‘The BBC and Government Control’, Harvard International Review, 9: 18–20.

References Abell, P. (1975) (ed.) Organisations as Bargaining and Influence Systems, London: Heinemann. Barley, S. (1986) ‘Technology as an Occasion for Structuring: Evidence from Observations of CT Scanners and the Social Order of Radiology Departments’, Administrative Science Quarterly 31: 78–101. Braverman, H. (1975) Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century, New York: Monthly Review Press. Child, J. (1972) ‘Organisation Structure Environment and Performance: The Role of Strategic Choice’, Sociology, 6(1): 1–22. ——and Mansfield, R. (1972) ‘Technology Size And Organisation Structure’, Sociology 6(3): 369–93. Crozier, M. (1964) The Bureaucratic Phenomenon, Chicago: University of Chicago Press. Davies, C., Dawson, S., and Francis, A. (1973) ‘Technology and Other Variables’, in M. Warner (ed.) Sociology of the Workplace, London: Allen and Unwin. Dawson, S. (1975) ‘Power and Influence in Prison Workshops’, in P. Abell (ed.) Organisations as Bargaining and Influence Systems, London: Heinemann. —— (2010) ‘Joan Woodward: A Style Fit for the Task’, in N. Phillips, G. Sewell, and D. Griffiths (eds) Technology and Organization: Essays in Honour of Joan Woodward, Research in the Sociology or Organizations, Volume 29: 29–34. —— and Wedderburn, D. (1980) ‘Joan Woodward and the Development of Organisation Theory’. An Introduction to a new edition of Joan Woodward (1965) Industrial Organization: Theory and Practice, Oxford, New York: Oxford University Press. Donaldson, L. (2001) The Contingency Theory of Organisations, Thousand Oaks: Sage Publications. Flanders, A. and Clegg, H. (1954) The System of Industrial Relations in Great Britain, Oxford: Blackwell.

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Fox, A. (1966) Industrial Sociology and Industrial Relations, Royal Commission on Trade Unions and Employers’ Associations, Research Papers 3, London: HMSO. Hickson, D. J., Hinings, C. R., Lee, C. A., Schneck, R. E., and Pennings, J. M. (1971) ‘A Strategic Contingencies Theory Of Intra-Organisational Power’, Administrative Science Quarterly, 16: 216–29. —— Pugh, D. S. and Pheysey, C. D. (1969) ‘Operations Technology and Organisation Structure: An Empirical Appraisal’, Administrative Science Quarterly, 14: 378–97. Hinings, C. R. (2010) ‘The Contribution of Joan Woodward: A Personal Reflection’ in N. Phillips, D. Griffiths, and G. Sewell (eds) Technology and Organization: Essays in Honour of Joan Woodward, Research in the Sociology of Organizations, 29: 41–5. Hopkins, T. K. (1965) ‘Review of Industrial Organisation: Theory and Practice by Joan Woodward, 1965’. Administrative Science Quarterly, 11: 284–9. Klein, L. (2006) ‘Joan Woodward Memorial Lecture: Applied Social Science: Is it just Common Sense?’ Human Relations, 59(8): 1155–72. Knights, D. and Willmott, H. (eds) (1989) Labour Process Theory (Studies in the Labour Process), Basingstoke: Palgrave MacMillan. Lawrence, P. R. and Lorsch, J. (1967). Organization and Environment, Boston: Harvard University. Orlikowski, W. (2000) ‘Using Technology and Constituting Structure: A Practice Lens for Studying Technology in Organizations’, Organisation Science, 12: 404–28. Perrow, C. (1967a) ‘A Framework for the Comparative Analysis of Organizations’, American Sociological Review, 32: 194–208. —— (1967b) ‘Review of Industrial Organisation: Theory and Practice by Joan Woodward, 1965’, American Sociological Review, 32: 313–15. —— (2010) ‘From Medieval History to Smashing the Medieval Account of Organization’, in N. Phillips, G. Sewell, and D. Griffiths (eds) Technology and Organization: Essays in Honour of Joan Woodward, Research in the Sociology or Organizations, Volume 29: 25–8. Phillips, N., Sewell, G., and Griffiths, D. (eds) (2010) Technology and Organization: Essays in Honour of Joan Woodward, Research in the Sociology of Organizations, 29. Reeves, T. K. (1967) ‘Constrained and Facilitated Behaviour: A Typology of Behaviour in Economic Organisations’, British Journal of Industrial Relations, 5 (2). —— and Turner, B. A. (1970) ‘A Theory of Organization and Behaviour in Batch Production Factories’, Administrative Science Quarterly, March. —— and Woodward, J. (1970) ‘The Study of Managerial Control’, in J. Woodward (ed.) (1970) Industrial Organisation: Behaviour and Control, Oxford: Oxford University Press. Sewell, G. and Phillips, N. (2010) ‘Introduction: Joan Woodward and the Study of Organisations’, in N. Phillips, G. Sewell, and D. Griffiths (eds) (2010) Technology and Organization: Essays in Honour of Joan Woodward, Research in the Sociology of Organizations, 29: 3–20. Stinchcombe, A. L. (1965) ‘Review of Industrial Organisation: Theory and Practice by Joan Woodward, 1965’, Journal of Business, 40: 92–3. Taylor, F. W. (1910) Shop Management, New York-London: Harper Bros. Thompson, J. D. (1967) Organizations in Action, New York: McGraw Hill. Charles R. Walker and Robert H. Guest (1952) The Man of the Assembly Line, Cambridge, Mass: Harvard University Press. Wedderburn, D. and Crompton, R. (1972) Workers Attitudes and Technology, Cambridge: Cambridge University Press.

chapter 11

w. edwa r ds dem i ng m ilan z eleny

Wisdom sounds foolish to fools. Euripides

In memoriam W. Edward Deming died on 20 December 1993. During the course of his lengthy career, Deming uncovered American executives’ fatal weaknesses: their lack of relevant education, lack of relevant theory, and lack of relevant knowledge. He found that their world was naively experiential, reduced to perpetuation or lukewarm pseudo-improvement of the status quo. He made them pay for his expertise, charging fees of as much as $100,000 a year to a single client; not because he needed the money but because, as he once said, ‘How else could these people judge they were getting something of importance?’ His contempt was as profound as his knowledge. His engagement with American business came late in the day. Although Deming was American at heart, his first official consulting encounter with a bona fide US company (Ford at Dearborn, MI) came in February 1981. Until then, quality, Japan, and most of all Deming were not acknowledged or taken seriously in the US. (‘We were not quite sure what to make of him’, admitted James F. Bakken from Ford Motor Co.) Deming refused to have anything to do with companies not willing to make top executives available to him (this was a sizeable majority in the US). Deming never built a formal organization, consulting group, or other money-making venture (unlike Juran, Crosby, Peters, and similar gurus). He more closely resembled that other lone, original, and influential personality of US management, Peter F. Drucker. He was formally associated with New York University (from 1946), where Ernest Kurnow later pushed through the faculty a non-mathematical course based on Deming’s Fourteen Points of management; he also regularly lectured at Columbia University.

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At Fordham University, Deming presented many lectures, advised on the business school curriculum, received an honorary doctorate, and left a sizeable number of devoted disciples.

Formative years W. Edwards Deming was born on 14 October 1900, in Sioux City, Iowa, into an old, pre-Revolutionary War family of the Norwegian stock. His father was a part-time lawyer and land developer in Powell, Wyoming. His father’s name was also William, so Deming went by his middle name Edwards (the maiden name of his mother). Deming’s studies included engineering at the University of Wyoming in Laramie, mathematics and physics at the University of Colorado, and a Doctorate in Physics from Yale University in 1928. Deming described his student years at Wyoming University at Laramie as ‘Those Lean Years’. There lies the beginning of his ‘lean management’, his embodied experiences from 1917. Moving from Powell to Laramie was a ‘step into the big world’ experience for the 17-year-old.1 He immediately started looking for a job—at the top—by calling on the President of the University, Dr Aven Nelson. That got him to help the head janitor, in five different odd jobs during the week. As was the work, so was the education: too much time was spent on so-called practical work. His field was electrical engineering, but Deming complains: ‘We spent too much time in manipulating tools of one kind or another—chipping, fi ling, hacking, sawing, gluing, and learning various arts and trades such as mechanical drawing and descriptive geometry. What we should have been doing was to spend more time on electrodynamics, thermodynamics, mathematics, English, French, German and basic subjects like economics, which I had to fill in later.’ Deming was also a musician: he played flute and drums and composed music throughout his life, including sacred choral compositions and an arrangement for The Star Spangled Banner. Deming married Agnes Bell in 1922, but she died in 1930, after they had adopted a daughter, Dorothy (died in 1984). Deming married Lola Elizabeth Shupe in 1932 (with her he co-authored several papers), had two more children, Diana and Linda. Lola died in 1986. During his employment at AT&T’s Hawthorne manufacturing plant in Chicago, Deming was crucially influenced by Dr Walter Shewhart of Bell Labs, a pioneer in the use of statistics to control manufacturing processes. Shewhart’s teachings and books formed the main base of Deming’s philosophy. During the mid-1930s, Deming studied statistics (on a one-year leave of absence from the Agriculture Department) with Sir Ronald Fisher of the University of London.

1 See Deming, W. Edwards, “Those Lean Years at Wyoming U.” First published by the University of Wyoming, 1965; website for W. Edwards Deming Institute. Accessed 27 May 2012 at .

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This must have been one of his proudest moments. In the 1930s, Deming designed the sampling techniques for the US Census Bureau. During World War II Deming applied statistics to the production of supplies for the US military. While working under Gen. Douglas MacArthur as a census consultant to the Japanese government, he famously taught statistical process control methods to Japanese business leaders, returning to Japan for many years to consult and to witness economic growth that he had predicted would come as a result of applying techniques learned from Walter Shewhart. Later, he became a professor at New York University while engaged as an independent consultant in Washington, DC. There, in 1993, he founded the W. Edwards Deming Institute, where the Deming Collection at the US Library of Congress includes an extensive audiotape and videotape archives. The aim of the Institute is to foster understanding of the Deming System of Profound Knowledge to advance commerce, prosperity, and peace. What is at the core of Deming’s teaching? Certainly not statistical charts or so-called quality control techniques, even though he had taught about their misuse and misapplication. He rarely mentioned computers, technology, or telecommunications. He had very little to say about organizations, ownership, corporate governance, or management hierarchies. His main message was simple and quintessentially American: restore joy and satisfaction to work. Abolish annual ratings, merit systems, and performance appraisals—all foreign stuff to the American spirit of self-reliance, self-help, and neighbourly cooperation. Firms must rely on employees working cooperatively with management for quality improvement. No other dependable resource is available for such purpose. In July 1950, the Union of Japanese Scientists and Engineers (JUSE) invited him to present a series of lectures at the Eight-Day Course on Quality Control seminar, organized by JUSE. His lecture notes were assembled in a book, Elementary Principles of the Statistical Control of Quality. Among his other books are Out of the Crisis and Quality, Productivity, and Competitive Position. The Deming Prize was instituted in 1951 by a formal resolution of the JUSE Board of Directors in grateful recognition of Dr Deming’s friendship and his achievements in the cause of industrial Quality control, as proposed by the late Mr Kenichi Koyanagi, a board member and one of the founders of JUSE. Funding of the Deming Prize began with the donation by Deming of the royalties received from the sale of the Japanese edition of his Theory of Sampling. There has never been any Deming Prize in the US. Instead, we have a Malcolm Baldrige National Quality Award. (Malcolm Baldrige was Secretary of Commerce from 1981 until his death in a rodeo accident in July 1987. He took a personal interest in the Quality Improvement Act.) In 1956 Deming received the Shewhart Medal from the American Society for Quality Control, and in 1960 Japan’s Order of the Sacred Treasure, Second Class, from Emperor Hirohito. The citation on the medal recognizes Deming’s contributions to Japan’s industrial rebirth and its worldwide success. Later, from his home in Washington, DC, Deming continued running his own consultancy business in the United States, still unknown and largely unrecognized in his country. In 1980, he was featured in an NBC documentary titled If Japan can . . . Why can’t we? As a result of

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this broadcast, demand for his services increased dramatically. He continued consulting until his death at the age of 93. In 1990 Deming wrote: ‘What I took to Japan was not export of American practice. I took to Japan profound knowledge of a system. I taught management and engineers in Japan manufacturing as a system. The Western world still does not understand a system and optimization thereof.’ This was Deming’s great insight: Americans do not understand systems and they do not understand optimization. For some reason, which I had the privilege of discussing with Deming, by systems they came to understand rigid classification structures (and charts), not the circularly concatenated processes in their dynamic interdependence. By optimization, for some reasons, they have come to understand maximization or minimization of a single function (like profits, costs, or utility). Yet, by definition, any optimization must involve balancing multiple independent and interdependent functions. As Deming said, optimization does not, and cannot, mean purchasing everything at its lowest price. Deming’s final and crucial concept is that of profound knowledge. Americans are often afraid even of the word ‘profound’. Their knowledge can be useful, pragmatic, sufficient, conventional, or carnal, but profound? How many courses teaching knowledge are there? How many professors teach knowledge (action itself) rather than simply re-packaging information (description of action)? How many people still confuse knowledge with information? Americans, even during Deming’s heydays, still believed that there exists a trade-off between cost and quality, that better quality meant higher cost, and that consumers did not want to pay for higher quality products. This attitude survived well into the eighties, although it appears to be rapidly disappearing now. Deming is all about systems, optimization, and profound knowledge. On the contrary, his disciples and interpreters are often about statistical charts, slogans, advocacy consulting, and quantitative measurements. One cannot optimize a given system; one has to design a system which is (by its very function) optimal. There is no point in inspecting and correcting for defects within a given, inferior system: the system processes have to be redesigned so that they produce better quality without inspecting and correcting. ‘How simple!’ Deming would say. One cannot improve product quality by improving the inspectors. The fact is that management cannot learn from experience on the job. Nor can they learn at school. In fact, anyone could pass with high marks all the regular courses offered in colleges and universities in business, statistics, and engineering, yet come off with not the faintest idea about how to improve quality, productivity, and competitive position. Measurements of productivity, like assorted measurements of quality, do nothing about productivity as they do nothing about quality. Measurements simply measure. Like accident statistics, they can do little about accidents. ‘The consumer is the most important part of the production line’. The consumer is a part of the production line, Deming implies, not just an external target of slogans (about being a ‘king’).

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Fourteen points for management Quality focus brings forth natural consequences for management practice. Once we put quality into our strategic focus, the entire business/management model has to be adjusted to support the new orientation. Deming’s fourteen key principles were presented in 1986, in his Out of the Crisis (pp. 23–4). Of course, one can find the fourteen points much earlier, especially in his 1982 book Quality, Productivity, and Competitive Position (MIT, Center for Advanced Engineering Study, pp. 16–17). The following are Deming’s fourteen points, annotated for today’s conditions, where useful: 1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and stay in business, and to provide jobs. Creation of jobs is stated here as one of the purposes of business. This provision is becoming harder and harder to sustain in an automated, productivity oriented, mature economy. Today we would say that a company’s embedded and embodied innovation is the key to sustainable business. 2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change. Originally, Deming insisted that we can no longer live with commonly accepted levels of delays, mistakes, defective materials, and defective workmanship. Well, we still do: just look at Toyota and its monster recalls in recent years. Western management has not responded to the challenge and has not welcomed the new economic age. Instead of embracing the change, it has become more conservative, passive, and defensive of the traditional ways: even responsibilities for job creation are being delegated to the government. 3. Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place. Mass inspection should cease, but it did not. Statistical evidence that quality is built in remains meagre and unreliable. Quality cannot be ‘inspected in’. More precisely, rather than building quality into the product, it should be built into the process itself. Quality of the process ensures quality of the product, not vice versa. 4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move towards a single supplier for any one item, on a long-term relationship of loyalty and trust. A meaningful measure of product quality should include its price. The one-dimensional business practices—based on singular objectives (like price, cost, profit, utility, etc.) must be replaced by proper multidimensional thinking: multiple criteria decisionmaking, not single-minded ‘measurement and search’, are at the core of good business.

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How can we teach a single supplier (the prerequisite of loyalty and trust) to deliver a multidimensional, product or service free of trade-offs, remains the challenge even today. 5. Improve constantly and for ever the system of production and service, to improve quality and productivity, and thus constantly decrease costs. Management’s job is to work continually on improving the system, not just work within the system. Constant improvement of the system can be interpreted as improvement or change of the business model: not only to improve its efficiency, but to continually upgrade its effectiveness. Recall the differences between efficiency, effectiveness, explicability, and productivity. Improving quality leads to lower costs if and only if the costs are seen as a dimension of quality. 6. Institute training on the job. Training ‘off the job’ is clearly insufficient. Training on the job engages people in action and generates knowledge. Training off the job (especially case studies) engages people in description of action only, that is, generating information only. One cannot run business by managing information: one has to manage human knowledge. 7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers. The responsibility of supervisors must change from sheer numbers to quality. Leadership is to replace traditional supervision. Supervision, like inspection, comes too late. Quality embedded in the process does not have to be inspected in, and knowledge embodied in humans does not have to be supervised over. We are still far from the ‘overhaul’ recommended and called for by Deming. 8. Drive out fear, so that everyone may work effectively for the company. Traditional management is based on and thrives on fear. Employees are afraid of losing their jobs, position, and income—and so they conform to threats and pressures. No trust or loyalty is created that way, only their illusions. If you are after efficiency only, fear could be an effective servant; if you are also after effectiveness, fear could be an ineffective master. A self-sustainable company cannot be based on fear. 9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use, that may be encountered with the product or service. With the emergence of teamwork, process management, demand chains, and crossdisciplinary communication for action, some of the most oppressive intracorporate walls have started to come down. That allows us to foresee rather than forecast, bringing strategic foresight into the centre of corporate grasp of the environment.

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10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. This is a ‘non-brainer’. Constancy of purpose cannot and does not mean setting of quantitative goals. Quantitative goals are the only things which are not and should not be constant. Targets and goals have little to do with optimization as balancing of multiple objectives. Bad systems need exhortations and slogans (Enron’s walls were covered with such props), while good systems have their values embodied in action and do not need to display their descriptions on corporate walls. It does not matter what you say: the only thing that matters is what you do. 11. a. Eliminate work standards (quotas) on the factory floor. Substitute leadership. b. Eliminate management by objectives. Eliminate management by numbers, numerical goals. Substitute leadership. As long as work standards are quantitative exhortations, they remain ineffective. Either the system allows and motivates setting of higher levels of achievements, or it does not. In the first case, standards and norms are naturally and continually surpassed; in the second case, no level of sloganeering will change the system. Substituting leadership means working on the system (towards continuous change) and not in the system, that is, accepting its limitations and doing one’s best under the worst conditions. 12. a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objectives. The pride of workmanship has to be instilled in people and enhanced by the system. When such pride is destroyed and replaced by externally supervised goal setting, then you have a mindless machine, rather than a self-managing corporate organism. Excessive specialization is at the root of knowledge atomization; dispersion and destruction of knowledge is directly related to the loss of pride, professionalism, and self-confidence. 13. Institute a vigorous programme of education and self-improvement. Education and self-improvement must be aimed at restoring the lost pride, sense of profession, and human autonomy. Overly dependent and narrow specialists cannot manage and motivate others. They are driven by the system instead of driving the system themselves. Corporate entrepreneurial university, devoted to knowledge enhancement and action, should replace the reliance on traditional acquisition of information.

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14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job. Corporate transformation cannot take place just at the top. That is of course necessary, but certainly not a sufficient condition. Transformation concerns the whole system and all of its components. Transformation is a matter of systemic adaptation, not of social engineering. It should be obvious that Deming’s fourteen points are not being taken as an unchanging dogma, but as a living, never ending and always evolving experiment. Massive corporate re-education and training is required to instil the courage to break with traditional habits. Each company has to achieve this on its own; each company has to create its own business model and its own system of management. Every activity and every job is a useful part of such process. No bureaucrat or auditor of norms can replace such a process. Dr Deming was clearly a vocal critic of performance appraisals, as evidenced in his point 11. He even called annual ratings a disease, annihilating long-term planning, demobilizing teamwork, nourishing rivalry and politics, leaving people bitter, crushed, bruised, battered, desolate, despondent, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior, and so on. His answer to what could possibly replace performance appraisals was one word: leadership. Myron Tribus echoed Deming’s sentiments in his ‘Perversity Principle’: If you try to improve the performance of a system of people, machines, and procedures, by setting numerical goals for the improvement of individual parts of the system, the system will defeat your efforts and you will pay a price where you least expect it.2

Other versions of Deming’s points Joseph M. Juran In personal meetings and discussions, Joseph Juran always stressed the role of management and insisted that quality is not about satisfying ‘standards’, but exceeding them to satisfy customers. Like Deming and others, he opposed the bureaucratization through total quality management (TQM), the International Organization for Standardization (ISO), and other ‘killers’ of quality. Juran is known mostly for his Quality Control Handbook. His research has shown that over 80 per cent of quality defects are controllable by management. Management is the one that must change, not employees. His solution to persistent quality problems is via managerial breakthrough: 2

Myron Tribus, Quality First, Washington, DC: National Society of Professional Engineers (#1459), 1992.

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1. 2. 3. 4. 5.

Convince others that a managerial breakthrough is needed. Identify the vital key elements using breakthrough methods. Organize for a breakthrough in knowledge. Conduct an analysis to learn causes of problems. Determine the effect of all proposed changes on all parts of the system and ways to overcome resistance to change. 6. Take action to start change; train all involved. 7. Institute appropriate controls that would maintain quality without limiting it. Juran defines quality management as consisting of quality planning, quality control, and quality improvement. Planning deficiencies can result in chronic waste, and it is up to the control process to limit it. Proper quality planning: results. Quality control consists of measuring actual quality performance and comparing it with standards. Quality improvement is finding ways to do it better than standard and reach higher levels of performance, with the end result being quality levels that are higher than originally planned.

Myron T. Tribus Tribus’s ‘eleven points’ are more systems oriented and more actionable, but their roots still come from Deming. After learning about the Bata System (see below), Tribus corrected himself on slogans in point 9 and the overreach of point 4. He also changed most of his interpretations towards integrating rather than separating quality from other management issues. His point 6 is brilliant. 1. Workers work in the system while managers work on the system to improve it with their help. 2. Top management must be involved for programme success, not merely in agreement with it. 3. To increase productivity, increase quality of the process. 4. Statistical analysis of systems allows proper identification of real causes and problems. 5. Inspection of process can best be carried out by workers closest to it. 6. The product in the hands of the customer is still a part of the production cycle. 7. The production system should be treated as a whole, not as separate parts. They are all interrelated and interconnected into an integrated system. 8. All managers should prepare goals and objectives for the organization which provide genuine guidance for the day-to-day operations of the system. 9. Get rid of work standards, quotas, and slogans. 10. Quality problems lie with the system, not workers, 85 per cent of the time. 11. Improve quality and lower prices by not forcing vendors to compete for your business.

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IPM (Integrated process management) IPM was evolved at Fordham Graduate School of Business Administration to avoid the dogma of name label and thus open continuous improvement and change in quality concepts. IPM is a new management system compatible with the increasing role of knowledge in society. Not the linear input-to-output mechanistic transformation (which leaves customers ‘out there’, separated from business), but converting the transformation into a closed action loop which integrates all processes with customers—seeing the customer as the primary source of information, knowledge, and action. Major principles of IPM are: 1. Human knowledge as the most productive form of capital. Knowledge must be enhanced and integrated in people themselves. 2. Employees are empowered and responsible for coordination of their actions. 3. Reintegration of task, labour and knowledge via an integrated technology and continuous education. 4. Customers are primary stockholders, the purpose and driving force of enterprise. 5. All employees are autonomous agents and act as customers to each other. 6. The gap between owners and employees must be reduced at the same time as the gap between management and workers. Hierarchical coordination is replaced by self-coordination of the system of mutual adaptation. 7. Continuous support and improvement of employee total quality of life is their own responsibility, through their own enterprise. 8. Continuous broadening and expansion of flexibility, adaptability, and responsiveness is the major form of strategic planning. Optimum design and continuous improvement of systems take precedence over effective running of given systems. 9. Continuous knowledge expansion via education, training, job rotation, and creative experimentation of all employees. 10. All management principles are rooted in and derived from treating others via mutual consensus how we ourselves should wish to be treated by others.

Roots of the Bata System One of the most remarkable papers on Deming is Lessons from Tomas Bata for the Modern Day Manager by Myron T. Tribus.3 Professor Tribus (born 30 October 1921) was a devoted follower and capable interpreter of Deming and his teaching. He is known as 3

Available at . Accessed 25 November 2011.

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former director of the Center for Advanced Engineering Study at MIT, where he published Deming’s book, Out of the Crisis. After learning important details about the Bata Management System, Tribus endeavoured to summarize his reflections in a comparative study of Bata and Deming, resulting in his ‘Lessons’. Tribes concluded that the record shows that Tomas Bata did indeed precede modern ‘quality management’ practices by at least half a century. Bata was the first to use quality as a way to lower cost at the same time as he created customer delight. It is possible to analyse Batas work as an example of what W. Edwards Deming has called his ‘System of Profound Knowledge’, except that Bata was a global entrepreneur and his management system was profound knowledge in action. Tribus prepared a list of ‘eleven critical actions’ which characterize transforming an enterprise to make ‘quality first’ a way of life. He called them the ‘links’ in a chain of transformation.4 Essential Link

Consequences if the Link is Absent

1. Leadership 2. Agreed upon Aim 3. Articulated Vision 4. Accepted Values 5. Visible Strategy 6. Goals, Long and Short Range 7. Appropriate Rewards 8. Adequate Training 9. Internal Promotion of Quality 10. Organization and Communication 11. Supportive Constituency

Nothing happens, status quo Crossed purposes become probable People are not moved to change People have no guide to behaviour False starts No sense of immediate purpose Bitterness Anxiety, fear Loss of enthusiasm No coordination of effort Naysayers take over

Bata fulfilled the requirements in all areas, with the possible exception of statistical methods. He died in 1932. Shewhart’s pioneering work, Economic Control of Quality in Manufactured Product, was first published in 1931. Tribus recalls how Dr Deming used to say, scornfully, that you cannot just ‘install’ quality management. Anyone who studies the Bata Management System in depth would discover that you cannot ‘install’ or ‘copy’ Bata System without first transforming yourself into the kind of man that Bata was. He believed in his principles. He stuck with them. He had the courage to persevere, even when times were most difficult. Most of all, he believed that the sole purpose of his company was to enhance the welfare of his community and of society everywhere.

4 M. Tribus, ‘Eleven Links in the Transformation of An Enterprise To Make Quality the Strategy for Success’ (1984). Available on the Internet at . Accessed 25 November 2011.

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In the end, Tribus concludes that, out of all this, some lessons are to be learned by today’s entrepreneurs. According to Tribus, the most formidable barrier to using Bata’s methods is the belief that the company exists only to enhance shareholder values. Tribus advises: Therefore, despite the attractiveness of ‘going public’ and raising money through the sale of shares, I would urge the person who desires to create a great company to build it from within. Figure out how you intend to serve the public. Then figure out how your employees are going to prosper by working with you. Then put your efforts into understanding the customer, on elimination of waste and on production with quality. Do not try to buy your way into the market. Find a way to make profit from your ideas, even if it is not initially the big profit of which you might dream. Use the profit to fund your way forward. When you have a proven business plan, borrow the money; do not sell your company. Do not succumb to the attractiveness of ‘going public’. You may be able to make some money that way, perhaps quite a bit. But you will never be able to create a great company.

Another example of Tribus’s ‘conversion’ is related to Deming’s point 10. Contrary to Deming, Bata used slogans quite often, and company associates (employees) identified with them and embodied them as their own values. Tribus relates this as follows: Contrary to advice that I have given when wearing my quality consultant hat, Bata made frequent use of slogans. Here are some: ‘Our customer—our master’ ‘The Customer’s order is sacred for us’ ‘A genuine service to the customer’ The difference between these slogans and the ones I have often seen on the walls of modern enterprises is that Bata actually believed in them and expected the same of all his employees.

Bata established the following principles at the core of his business: a) Profit calculations must be completed as soon as possible, that is, weekly. b) Every employee can calculate his profit share by himself. c) Profit sharing applies to autonomous workshops so that every employee is capable of influencing workshop results. There are only three companies which continue running similar systems. During World War II, the Lincoln Electric Company devised a work system which allowed workers to profit from devising better systems and methods. In Japan, the Kyocera Corporation employs the ‘Amoeba System’ in which individual work units, called amoebas, are engaged in buying and selling to other amoebas through intracompany markets. At Kyocera the entire workforce participates in this profit-sharing scheme. Also Semco, in Brazil, uses a scheme which is similar to amoebas and the Bata method. Tribus concludes: W. Edwards Deming and Joseph Juran deserve the major credit for awakening American managers, having done the same thing for managers in Japan. As we now know, the true pioneer in this subject in Japan was Homer Sarasohn, whose paper

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for this conference provides many details of how it happened. Homer’s work paved the way for Deming, Juran and others who followed. Given the seminal role of Homer M. Sarasohn, it is appropriate to introduce a few quotations from his pioneering 1948 book with Charles Protzman, CCS: Industrial Management; also the 6 February 1989 article in Forbes, pp. 70–78. The influence on Deming’s thought is inescapable: Managers should look at every aspect of a manufacturing operation as a piece of an integrated system, and should think through the consequences for the entire system of fiddling with any of its parts. Every company needs a concise, complete statement of the purpose of the company’s existence, one that provides a well-defined target for the idealistic efforts of the employees. Companies must put quality ahead of profit, pursuing it rigorously with techniques such as statistical quality control. Every employee deserves the same kind of respect fellow managers receive, and good management is ‘democratic management’. Lower-level employees need to be listened to by their bosses. ‘We shall build good ships here: at a profit if we can, at a loss if we must, but always good ships’ Motto of Newport News Shipbuilding. Every business enterprise should have as its very basic policy to aim the entire resources and efforts of the company toward a well-defined target, a target that would benefit society. This present-day fad of aping the Japanese style of management is absolutely destructive of our own future. We’ve got to recapture the enthusiasm, the pioneering spirit that made America a world leader.

Process quality revolution: historical embedding The name of Deming and his quality revolution is forever embedded in the evolution of business models and their requisite management systems. It is therefore fitting to review the evolutionary stages before, and more importantly, after Deming, in order to appreciate the lasting and continued impact of his revolutionary change of phase. In Figure 11.1 we display the basic scheme of the traditional linear input-process-output system. This system has been fixed and unchanging for centuries. The only change has been in terms of changing the emphasis and focus on individual components of the system. The initial phase BD (Before Deming) was the traditional emphasis on the attributes of the final product: 1. Final product. The final product is a primary focus, the production process is considered secondary. Its operations and their sequences are technologically fixed or ‘given’. Product quality is ‘inspected in’, mostly at the end of the process. Statistical quality control, inventory control, cost minimization, mass production, assembly

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Operations

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Customer Network

Output Products Internal Process

figure 11.1 Basic scheme: product, process, external networks

lines, work specialization, hierarchies of command, mass consumption, statistical mass markets, and forecasting are among the defining characteristics of this stage.

The first AD (After Deming) phase shifted the focus from the product to the process leading to it (taken as given in the previous phase). 2. Partitioned process. It is the high-quality process that assures the high-quality product. The main focus was on improving of process operations. Quality of the process was understood as the quality of its operations. Powerful new concepts of Total Quality Management, Continuous Improvement (Kaizen) and Just-In-Time (JIT) systems have characterized this stage. Although the operations were being improved, the process architecture and structural sequencing were kept unchanged and remained technologically ‘given’.

After the revolutionary ‘Deming phase’, the focus on the process has become embedded in the next four revolutions: 3. Integrated process. The focus of attention shifted from operations (circles) to linkages (arrows)—thus changing the process architecture itself. The re-engineering of the process, re-integrating individual components into effective, more autonomous, and even self-managed wholes, has characterized this stage. The production process became a business process and therefore subject to qualitative redesign and re-engineering (BPR). Discontinuous improvement and process innovation replaced the piecemeal continuous improvement. Traditional vertical hierarchies of command have flattened out into more horizontal, process-oriented networks. Mass customization, disintermediation, knowledge management, and autonomous teams have started emerging.

In all three of the above stages, the corporate focus was rooted in developing the internal sources of competitive advantage, knowledge, innovation, and productivity. Only in the next paradigmatic shifts were the internal processes expanded into the extended process—including supplier networks and alliances as well as customer self-

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service, mass customization, and disintermediation—as the main, increasingly external sources of competitive advantage. 4. Extended process. In this recently peaked stage, networks of suppliers and communities of customers have extended the internal process into a functional and competitive whole. Both internal and external sources of knowledge and competitiveness have formed new core competencies. Supply and demand chains management have emerged, in dependence on shifting CIP (Customer Intervention Point). Intranets and extranets have provided a communication medium for B2B and B2C exchanges. Quality has become bundled together with cost, speed, and reliability.

Today, powerful processes of global sourcing bring forth and foster a new set of relationships with customers and suppliers. The firm starts disaggregating its production processes, transferring, leasing, or selling selected pieces off to a higher-added value operator or provider. Any firm can be only as good as is the network of which it is a part. Consequently, the firm has disaggregated and became a network. No firm is an island. 5. Distributed process. This stage represents the most radical business refocusing so far. Through the global sourcing, sections and components of the internal process are being outsourced to external providers and contractors in search of the highest added value contribution. Long-term alliances are formed and companies are transforming themselves into networks. Network cooperation is replacing corporate competition: ‘coopetition’ emerges. Globally distributed process ushers in new forms of organization, coordination, and modular integration.

Different parts of the extended process are geographically distributed and often spatially remote. It is useful to note that the incessant and accelerating paradigm shifts are carried out mostly by the leading global players. The majority of companies (and educational and training institutions) could still be in the first, that is, immediately post-war BD phase of the final product; even the early process-orientation shift might have eluded them. Radically distributed supply and especially demand chains of phase 5 will clearly have to be coordinated and reintegrated on a global scale. Reintegration processes are proceeding under increasing environmental pressures. The search for added value, after exploring traditional global resources, is now turning towards reuse, recycling, recovery, and remanufacturing as new sources of maximizing added value. Innovation in business models will become a norm. So we observe the asset-recovery (Dell, IBM, Xerox) practices expanding quickly to a majority of products and services. New products are being designed for extended life spans and multiple profit cycles. Reverse logistics and reverse logistics management (RLM) are adding new loops to the traditionally unidirectional processes of supply chains. Concepts of easy disassembly, durability, reuse, and recycling are being built in.

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The new loops are not just traditional information feedback loops, but real business processes of collection, disassembly, reprocessing, and reassembly activities (operations). The conventional open-ended linear processes are being redesigned towards closure: 6. Recycled process. New loops of recycled products and materials, energy recovery and knowledge renewal are being created within global-sourcing (GS) networks. Product reuse/remanufacture relies on a high residual value which gives a good head start for added value maximization. The system becomes organizationally closed and potentially long-term sustainable or even trans-generation self-sustainable. The ‘openness’ and customization of the product design, upgradeable products, flexible product platforms, mutability, and waste-free strategies are being implemented. Of course, new employee skills and managerial knowledge, as well as essential mass customization mindset have to be produced, maintained, and renewed. Eliminating non-value added resources and activities as well as integrating production system elements and work functions are also necessary.

Deming’s concept of profound knowledge Who is this that darkeneth counsel by words without knowledge? Job 38:2

There is clearly a fundamental difference between what people say (or describe) and what people do. Deming was keenly aware of the difference and his warnings about statistical descriptions are well known: ‘Analysis of variance, t-test, and other statistical techniques taught in the books would be not only useless but misleading. Such methods are inefficient: they bury important information in the data.’ All such approaches of aggregation (from averages and indexes to macroeconomic measures) bury information in the data. Aggregates destroy information. That is why management by aggregates is so wasteful and inefficient, especially in macroeconomics. Reduction of variety kills information. One single average hides the myriads of data combinations that could have led to the same outcome. Any scatter diagram is a thousand times more informative than a single number: Plot the points, don’t just compute the averages, teaches Deming. What is ‘profound knowledge’ according to Deming? He arrives at the concept as follows: The prevailing style of management must undergo transformation. A system cannot understand itself. The transformation requires a view from outside. The aim of this chapter is to provide an outside view—a lens—that I call a ‘System of Profound Knowledge.’ It provides a map of theory by which to understand the organizations that we work in.

Profound knowledge thus applies to a system observer, not to its inner components. In order to understand the system (like a company), one has to understand its organiza-

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tion, not just its structure. Organization refers to hidden, invisible, underlying and interrelated processes that lead to visible outcomes (like products). The distinction between process and product is as profound as the distinction between organization and structure, or knowledge and information. That distinction is profound knowledge, admittedly only a ‘map of theory’, according to Deming. The realization of the importance of profound knowledge came to Deming in his later years and its theory was not sufficiently elaborated, either by him, or by his followers. This most important part of Deming’s teaching, remains undeveloped, unfinished and misinterpreted. Yet, it is the richest part in terms of its potential. Consider the following: The first step is transformation of the individual. This transformation is discontinuous. It comes from understanding of the system of profound knowledge. The individual, transformed, will perceive new meaning to his life, to events, to numbers, to interactions between people.

This is an echo of Tomas Bata: Should you ever want to build a big enterprise, build up yourselves first. Only a great person is capable of creating a great enterprise. Each (real) entrepreneur produces three things: him or herself, the enterprise, and the product—in that sequence of importance. First come values, convictions, a vision, character, persistency, knowledge, and capabilities. The next is the enterprise: its ability to produce and provide service, the knowledge of how to do things right, but more importantly how to do the right things. And then, in the end, there is the product and the service that should satisfy the customer better and provide more value than any other does. Note also Deming’s statement that transformation is discontinuous. So called continuous improvement cannot lead to transformation, even though it is transformation, not just improvement, which continues to be sorely needed. Let us continue with Deming’s thought: Once the individual understands the system of profound knowledge, he will apply its principles in every kind of relationship with other people. He will have a basis for judgment of his own decisions and for transformation of the organizations that he belongs to. The individual, once transformed, will: • Set an example; • Be a good listener, but do not compromise; • Continually teach other people; and • Help people to pull away from their current practices and beliefs and move into the new philosophy without a feeling of guilt about the past.

So, what do we have to learn in order to grasp and develop the System of Profound Knowledge? Mostly things that are generally not taught at schools of business, management or economics: 1. Appreciation of a system: understanding the overall processes involving suppliers, producers, and customers (or recipients) of goods and services; 2. Knowledge of variation: the range and causes of variation in quality, and use of statistical sampling in measurements;

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3. Theory of knowledge: the concepts explaining knowledge and the limits of what can be known; 4. Knowledge of psychology: concepts of human nature. Deming explained: One need not be eminent in any part nor in all four parts in order to understand it and to apply it. The 14 points for management in industry, education, and government follow naturally as application of this outside knowledge, for transformation from the present style of Western management to one of optimization.

Yet, a system of optimization, understood as balancing multiple (and non-aggregated) criteria, objectives, and purposes, is not a part of Deming’s heritage, nor it is a part of (still untransformed) Western management. We still view social systems, companies and economies as machines (which they are not), rather than autonomous and adaptive social organisms (which they are).

In Deming’s own words… My favourite quotations come from Deming’s earlier works and especially from his lectures and presentations, still ‘in progress’, unpolished, and full of contradictions. He liked to repeat them often, even in private discussions, and so many have become ‘burnt in’, embodied, and thus used and repeated in my own lectures and presentations. Over time, they have become simplified and most importantly: understood. It is remarkable how long it takes for a simple truth to sink in, while a tautological platitude is so readily embraced and propagated by the masses. Here are some of his more memorable quotations: • Measures of productivity do not lead to improvement of productivity. Any measurement is a mere description of action (information), not the action itself (knowledge). Accident statistics tell you that there is a problem, but they do not do anything about the accidents. Figures on productivity in the US do not help to improve productivity in the US. • There is no substitute for knowledge. Deming repeated this statement even in private conversations. Knowledge is the ability to act: a purposeful coordination of action. All knowing is doing, and all doing is knowing. All the rest is just information. Information is not knowledge. Indeed, there is no substitute. • Knowledge is theory. We should be thankful if action of management is based on theory. Knowledge has temporal spread. Information is not knowledge. The world is drowning in information but is slow in acquisition of knowledge. There is no substitute for knowledge. A small correction is needed: knowledge is action based on theory, not the theory itself. But his use of Einstein’s insight (information is not

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milan zeleny knowledge) is certainly a step in the right direction: towards theory of knowledge and knowledge management. Experience by itself teaches nothing. Experience has to be evaluated and interpreted. Without a proper theoretical framework and context we cannot learn from our experience. All animals ‘learn’ from their own experience, but humans learn from the experience of others. Sharing (teaching) of knowledge requires theory, a bridge for taking the experience from one context to another. I think that people here expect miracles. American management thinks that they can just copy from Japan—but they don’t know what to copy! You cannot copy without a theory and understanding. Only surface manifestations are accessible to our senses, not the underlying causes. We can see the structure, but not the organization that produced it. A famous executive went to Toyota to learn about the justin-time system. He did not invest in understanding the system and so he did not see it at Toyota. He saw some cards and cords and a lot of people with white helmets. Upon his return, all his workers had to wear white helmets. He has ‘copied’ Toyota. Why it that productivity increases as quality is improved? There are no trade-offs here: as quality goes up, productivity goes up at the same time. And when productivity goes up, profits, wages, and standard of living go up. Increased quality implies less rework, mistakes, and waste. Trade-offs are the sign of badly designed, suboptimal systems. As we improve the processes of the system and get closer to optimal allocation of resources, trade-offs are reduced and ultimately eliminated. Low quality means high cost. Defects are not free. Current economic practice implies the opposite: one has to pay extra for higher quality because quality is not understood as better process, but as more expensive inputs, materials and labour in the same suboptimal and wasteful process. Quality has not yet been grasped because it does not include cost (and price) as its key dimension. Price has no meaning without a measure of the quality being purchased. Eventually, quality improvement will reach not only production of goods and food (the birthplace of modern statistical theory was agriculture), but the service industry as well. This has now actually happened in the US. Productivity of services has increased; a smaller percentage of workforce is needed in the service sector. Because humans can only produce food, goods, and services—and nothing else, protracted, transformational unemployment emerges in most developed, mature economies. Only the governmental ‘sector’ can add new jobs, contributing to deficits, waste, and social unrest. Short-term profits are not a reliable indicator of good management. Anybody can pay dividends by deferring maintenance, cutting out research, or by acquiring another company. Paper profits do not make bread. Only speculators and gamblers are comfortable with short-term profits, but they do not create value—like quality and productivity do. Gambling is not investment.

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• The consumer is the most important part of the production line. Making the wrong product or offering the wrong service, even if everybody in the company does his best and performs with devotion, and employs all the statistical methods, takes the company downhill nevertheless. It is the old difference between efficiency and effectiveness, not to mention explicability and ethics. • Materials and components may all be excellent, each by itself, yet not work well together in production or in the finished product. System quality is more important than the quality of each part. Creation of quality is not the same as elimination of non-quality. Toyota works with perfect parts, but their interaction fails because they do not know a system quality concept. Their products mix mechanical with electronic parts even though the two domains are ultimately incompatible. You should not push pedals and levers to work your integrated, solid-state laptop. There is nothing wrong with the glass, nothing wrong with the steel: both meet the specifications. Yet, glass windows do fall from the steel frames to the ground below … • Barriers against realization of pride in workmanship may in fact be one of the most important obstacles to competitive reduction of cost and improvement of quality in the United States. What can we expect from a culture which refers to company employees as ‘headcount’? No wonder that people in management are paralysed by this problem. They talk about involving the employees (like in politics), forming quality circles, improving communication, and building up motivation. A better way: just get the management involved. • Students learn inefficient methods such as analysis of variance, tests of the null hypothesis, and probability levels of significance. Unfortunately, these mathematical exercises provide no basis for action. These are the words to contemplate, as they come from a pre-eminent statistician.

New World of Quality Today, notions of quality have shifted from producer/provider defined to customer/ consumer defined. Producers have an outdated view of ‘conformance to requirements’, contradicting Deming’s heritage. The customer does not care about ‘quality’ based on a mere removal of non-quality (defects). Customers care about value. value = Quality/Price (determined by individual customers)

The notion of quality separated from costs (price) is meaningless to the customer. Either we maximize the value, or we extend quality definition to include the price: either way we maximize value for the customer. In the end, we have to measure quality and so need its operational definition. Conformance to requirements, norms, standards, or anything else set by bureaucratic auditors directly contradicts the customer’s quest for value. The intermediary of bureaucracy mostly adds to the costs and subtracts from the value.

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A good example of good value management is the wine trade and it’s QPR (Quality– Price Ratio). How does the satisfaction you receive score against the price you have to pay? Do you feel that the benefit you gained was worth the price you paid? Those are the right questions to ask. In other words, customer designed quality has no correlation with price, and price is a key dimension of quality (value). QPR increases steadily from lowest to highest as follows: 1. 2. 3. 4.

Low quality, high cost: customer’s ‘world of pain’. Low quality, low cost: ‘paid little, got little’. Good quality, high cost: difficult trade-off, ‘you get what you pay for’. Good quality, low cost: The highest QPR (value), trade-offs-free ‘ideal situation’.

Customers want #4, providers would prefer to deliver #1, and often they settle on a compromise of #3, unless . . . Unless customer satisfaction becomes the driving force and purpose of business, and trade-offs-free alternatives become the new norm. So, when people and organizations focus primarily on quality, defined by Deming’s ratio: Quality = Results of work efforts/Total costs, then quality tends to increase and costs fall over time (trade-offs-free). However, when people and organizations focus primarily on costs, costs tend to rise and quality declines over time (trade-offs-based). The New World of Quality relies on new technology, knowledge, and customer sovereignty to move from a trade-offs-based to a trade-offs-free world. In 1990, Marshall Industries CEO, Robert Rodin, trained with the then 90-year-old Deming and achieved a dramatic transformation and growth from $400 million to $1.8 billion. This is chronicled in Deming’s very last book The New Economics, and Rodin’s excellent foresight of trade-offs-free economics in his Free, Perfect, and Now. What is the new definition of quality? Quality of the product or service cannot be satisfactory whenever the customer has to consider and accept trade-offs between four key product dimensions: how designed (fitness), how made (process), how delivered (timing) and how priced (price). So, quality is the process of reducing and removing the trade-offs between fitness, process, timing, and price. The very existence of trade-offs is incompatible with high value. Trade-offs-based quality is only habitual acceptance in a temporary given context. Trade-offs-free quality is the undisputed preference of all consumers. It was W. Edwards Deming who ushered us into the New World of Quality, especially through his last book. He could not experience it with us and witness its continuing unfolding. But it is on his shoulders that we stand today.

appendix Personal Recollections I enjoyed personal acquaintance with Dr Deming on many occasions, including some well-remembered dinners and lunches in Greenwich Village with him and my Fordham colleagues. Even in private, Deming remained challenging and cantankerous, nursing

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his pre-dinner glass of straight Bombay gin. He could be positively intimidating, even to his friends and admirers. He did not hear very well, so one had to shout challenges at him (it is difficult to shout accolades or approvals). Many a voice broke or choked before finishing … Deming directed me towards the philosophy of C. I. Lewis and his early works, on which I designed a knowledge course at Fordham’s GBA. In my opinions and research, C. I. Lewis has remained and continues to be a most fruitful source and force. Deming had some difficulties walking: we had to support him and prop him up when walking the streets of Greenwich Village. Always wearing a non-descript three-piece suit, considerably frayed and rumpled, we walked and talked about food, cultures, and government. As all curmudgeons, he loved to tell stories. One of them concerned Dr E. E. Nishibori of JUSE, whom I also had a privilege of meeting during my IPM lectures in Tokyo and Osaka. Nishibori listened to some 1950s’ Bell Labs men talking about how statistical methods had improved the accuracy of American weaponry. ‘Yes, I know something about that’, Nishibori said. ‘Six fire bombs landed on my house property during the war, and they were all duds.’ Although Deming accepted physical contact and support, he abhorred plain and unprincipled adoration. In fact, many of his most ardent protégés and hangers-on did not seek or enjoy the intensity of personal encounters with him. They preferred to go on with their Master’s voice, often missing that Deming himself was so often changing his views, growing and learning all the time, continually improving himself. Deming’s four-day seminars were famous. He would manage to shock, entertain, and instruct hundreds of bewildered subjects by simply stating the obvious: ‘Make it right the first time around’. ‘There is no substitute for knowledge.’ ‘How can you know what your business is? There is no way of knowing. Only the employees can know—if you let them.’ ‘Slogans, goals, targets and yardsticks—get rid of them. Just do it better, always.’ ‘Your workers are not at fault: they do their best, as you do; it is your system which prevents you from performing.’

Select Bibliography Aguayo, Rafael (1991), Dr. Deming: The American Who Taught the Japanese about Quality. New York: Fireside. Bendell, Tom (1991), The Quality Gurus. London: Department of Trade and Industry. Deming, W. Edwards (1938), Least Squares, Washington, DC: The Graduate School, Department of Agriculture. ——(1943), Statistical Adjustment of Data, New York: John Wiley and Sons. (Dover 1964). ——(1950), Some Theory of Sampling, New York: John Wiley and Sons. ——(1960), Sample Design in Business Research, New York: John Wiley and Sons. ——(1986), Out of the Crisis, Cambridge, Mass: MIT Press. ——(2000), The New Economics for Industry, Government, Education, Cambridge, Mass: MIT Press.

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Gabor, Andrea (1992), The Man Who Discovered Quality: How W. Edwards Deming Brought the Quality Revolution to America. New York: Penguin. Gitlow, Howard S. and Shelly J. Gitlow (1987), The Deming Guide to Quality and Competitive Position, Englewood Cliffs, NJ: Prentice Hall Trade. Latzko, William J. and David M. Saunders (1995), Four Days with Dr. Deming: A Strategy for Modern Methods of Management, Englewood Cliffs, NJ: Prentice Hall. Lewis, C. I. (1929), Mind and the World-Order: Outline of a Theory of Knowledge, New York: Charles Scribner’s Sons. Rodin, Robert (1999), Free, Perfect, and Now: Connecting to the Three Insatiable Customer Demands, New York: Simon and Schuster. Salsburg, D. (2002), The Lady Tasting Tea: How Statistics Revolutionized Science in the Twentieth Century, New York: W.H. Freeman/Owl Book. Scherkenbach, William W. (1991), Deming’s Road to Continual Improvement. Knoxville: SPC Press. Shewhart, Walter A. (1930), Economic Control of Quality of Manufactured Product/50th Anniversary Commemorative Issue, American Society for Quality, December 1980. ——(1931), The Economic Control of Quality of Manufactured Product, New York: Van Nostrand. ——(1939), Statistical Method from the Viewpoint of Quality Control. New York: Dover Publications, 1986. Tribus, Myron (1992), Quality First: Selected Papers on Quality and Productivity Improvement 4th Edition, Alexandria, Va: National Society of Professional Engineers. Walton, Mary (1986), The Deming Management Method, New York, NY: The Putnam Publishing Group. Wood, John C. and Wood, Michael C. (eds) (2005), W. Edwards Deming (Critical Evaluations in Business and Management,. London: Routledge. Zeleny, Milan, (1994), W. Edwards Deming (1900–1993), Human Systems Management, 13(1): 75–8.

chapter 12

the life a n d di v erse con tr ibu tions of dr j. m. j u r a n mohamed z airi

Every successful quality revolution has included the participation of upper management. We know of no exceptions. My job of contributing to the welfare of my fellow man is the great unfinished business. Intrinsic is the belief that quality does not happen by accident, it must be planned! Without a standard there is no logical basis for making a decision or taking action. Joseph Juran

Juran’s early years Joseph Moses Juran was born in Braila, Romania, on 24 December 1904. His father was born in Gura Humora (Austria) in 1874, and his mother in Braila in either 1877 or 1880. His family moved to Gura Humora in 1907. His father Jakob left Romania for the US as an immigrant in 1909. The entire family joined Juran’s father in Minnesota on 20 May 1912. Full of dreams for a better life, the Jurans were not so fortunate when they landed in America. Juran recalls (Juran 2004):

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We were not greeted by the Statue of Liberty; our ship did not land at Ellis Island . . . our new home was a tarpaper shack set in a wooded area. The shack was a rectangle of about 360 square feet. It was partitioned into three areas without doors. In the rear was the kitchen, which included a cast-iron stove that was the sole source of heat for the entire shack. The middle area provided sleeping quarters. On one side the three boys slept crosswise in one bed; the girls slept on the other side. The front area held the curtained bed for the parents.

The US—a land of opportunity To make ends meet, various members of the family had to take on labouring jobs. At school, however, Joe Juran was found to be extremely bright. He did very well, being three years ahead of his age group. He was particularly good at maths and physics. In 1918, the family circumstances improved and they moved from the shack to a more conventional house (Juran 2004): We welcomed the conveniences of the house. The kitchen stove was heated by gas, and the living room had a ‘self-heater’ stove—it burned coal briquettes. Suddenly we were rid of woodcutting. Gas also provided the brilliant incandescent lighting from the Welsbach mantles. A welcome luxury was indoor plumbing and its array of services; hot water from the gas-fired boiler; hot baths in the second floor bathtub; and waste disposal from the indoor toilet—two of them.

Joe Juran enrolled at the University of Minnesota in 1920, the first member of his family to register at a college, ever. After graduating in 1924 with a BSc in Electrical Engineering, he found a job at Western Electric, working in the inspection department of Hawthorne Works, which at the time employed over 40,000 people. Juran’s brilliance in absorbing detail, his analytical skills, and his overall knowledge of the workplace was soon noticed and he moved up the ranks. By mid-1926 and after two years of troubleshooting, Juran understood how the Hawthorne Works was linked to the holding mother company (AT&T). He realized how quality was defined at the strategic level and how it was driven by each of the subsidiary companies. In order to deal with the problem of defects and rework, the control chart was introduced by the inspection engineering department. The charts were used to track quality performance with the control limits so that effective decisions could be made by supervisors and managers. Dr Walter A. Shewhart was a member of the Bell Laboratories’ inspection engineering staff at the time. Juran argues during that period, the use of control charts was not really effective (Juran 2004: 109): The control chart was a brilliant invention; today many such charts are in use world-wide. Nevertheless, the inspection branch managers made virtually no use of the control chart. At the time it was one of my responsibilities to ‘sell’ the chart to inspection supervisors. I rarely made a sale, and I was puzzled by their reasons

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for rejection; they seemed illogical and even irrelevant. Today the reasons for rejection seem clear. The inspection supervisors saw no way in which control charts could help solve their chief problems. Shop foremen’s top priorities were to meet schedules and maintain piecework earnings. Quality was no higher than third on their priority list.

Being involved in the Bell Labs’ initiative had a significant impact on Juran’s career. He was selected to attend various courses on probability theory and then he joined the inspection statistical department to train senior managers. As he says, ‘Such fortuitous events lifted me out of obscurity and placed me on a fast track’. In 1928 Juran wrote a pamphlet called ‘Statistical Methods Applied to Manufacturing Problems’, which looked at the use of sampling and analysing techniques for the control of manufacturing quality. This contribution was used in an AT&T Quality Control Handbook. In 1937 he moved to the headquarters in New York as an internal consultant to the various subsidiaries, and started to develop external interests and networking through professional associations and large consultancy houses. In 1941, Juran was seconded to the Lend-Lease Administration as an administation assistant. On 20 December 1941, Western Electric President, C. G. Stoll, received a telegram which read: Very anxious to secure services of J. M. Juran . . . on loan basis for six weeks to make very important analysis of Statistics Division of Lend-Lease Administration and assist in reorganizing it. (signed by E. R. Stettinius, Jr—Lend-Lease Administrator) (Juran, 2004)

Juran was in charge of re-organizing the shipment of goods and materials to friendly nations that were supporting the war effort. He simplified processes, re-engineered them and, using an able and competent team to assist him, he eliminated bureaucracy and waste, and helped build efficient storage and delivery processes.

The canoe journey By the age of 40, at the end of 1944, Juran decided that he wanted to embark on a new career, calling it at the time, disembarking from ‘the ocean liner’ (corporate comfort of Western Electric) and jumping into ‘the canoe’ as an independent: ‘By the end of 1944, my mind was made up—my goal was to be a freelancer in the field of management’. Juran’s career took off and the seaworthiness of his canoe was confidently proven. He published Quality Control Handbook in 1951. The book was the key to Juran’s success, establishing his reputation worldwide. As he puts it (Juran 2004): The Handbook became the ‘bible’ of managing for quality and has increasingly served as the international reference book for professionals and managers in the field. It has retained that position. Publication of the Handbook was also a milestone on my journey through life. Over the years it attracted many followers, opened

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The book is now in its fifth edition and has been renamed Juran’s Quality Handbook. The handbook became the launch pad for Juran’s career. Subsequent books were written and each helped to move managing for quality closer towards a complete science. In 1964, Juran published Managerial Breakthrough, which established the know-how in terms of capitalizing on the benefits of quality. Some people refer to it as the start of the six sigma movement. The book was organized in two parts: 1. Breakthrough—creation of beneficial change. 2. Control—prevention of adverse change. Quality Planning and Analysis (QPA) was written jointly with Professor Frank Gryna and was published in 1970. It was meant to be a textbook for the quality professionals, particularly quality engineers seeking certification. The American Society for Quality (ASQ) used it for its Certified Quality Engineer (CQE) examinations. Juran on Planning for Quality (JPQ) was published in 1988. It discusses in detail the planning process as the third key component of Juran’s famous trilogy. The other two components were covered in Managerial Breakthrough. Juran’s training and consulting services grew at a phenomenal rate. Alongside his research and writing interests, he thrived on consulting activities and meeting senior executives to disseminate his ideas. As he says in his memoirs (Juran 2004: 275) he was so overwhelmed with demand that he started to use the tactic of raising his fee: A measure of my selectivity in accepting invitations was my rising consulting fee structure. By the early 1960s, my usual fee was $300 per diem. By the mid-1960s it was $500; by the early 1970s it had reached $1,000 per diem. In a sense I was using the fee structure to price myself out of the excess invitations. I felt no shame in accepting those fees. No one but me knew how much time I was devoting to pro bono engagements, reading articles, attending conferences, maintaining my database, writing books and training manuals, preparing lecture notes, keeping up with correspondences, and so on.

Interest in Juran and his ideas continued even when he decided to terminate his professional engagements in 1991. He goes on to say: I was still receiving numerous overtures to provide consulting services or to hold in-house courses. Increasingly I declined to make the journeys, but the requests persisted. I then resorted to the tactic of pricing myself out of the market – I raised my per diem rate to $10,000. Most of my would-be clients balked at that rate, but some did not. I then gave the wheel another turn—I raised the rate to $25,000. That did it. Only one client needed me badly—and bought two days of my time. That income was a far cry from what I earned at my early morning job in 1912, when I sold copies of the Minneapolis Tribune for one cent each (p. 336).

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Juran Center for Leadership in Quality Juran has always felt the need to repay his debt to the US, the country that had welcomed him and his family and given him the opportunity to achieve and be very successful, recognized all over the world. Realizing that his needs were more or less fulfilled and that he had no financial worries, Juran started to focus more on spending his time in providing service to society as pro bono publico. In 1983, he created the Juran Foundation Inc. (JFI) with the following mission statement: ‘ . . . to identify the quality-related problems of society and develop remedies for their solution’. Although JFI did not manage to accomplish its various ambitious goals, nevertheless it did provide a lot of useful support by giving grants to schools to buy books and training materials, and to research scholars, supporting some conferences and making a donation to the Malcolm Baldrige National Quality Award to the sum of $100,000. A book on the history of quality was published with contributions from authors from all over the world. The royalties were to be kept for the benefit of JFI. A proposal was made by Minnesota University’s Carlson School of Management to create the Juran Center for Leadership in Quality and to transfer the JFI papers there. The agreement was signed in April 1998, and the vision and work of Dr Juran were set to continue through a centre that had the knowledge and expertise to establish itself as a benchmark in the world for leading management of quality.

Juran’s influence on Japan Juran admits that the invitation to go and lecture in Japan came as a result of the publication of Quality Control Handbook. The Japanese Union of Scientists and Engineers’ (JUSE) first Managing Director, Ken-ichi Koyanagi, invited Juran because he tackled other issues than just statistics in his book, including economics of quality, specifications, organization for quality, the role of inspection, quality assurance, and supplier relationships. Koyanagi thought that there was sufficient knowledge and competence with SQC but that there was an urgent need to look at ways and means for managing quality at all levels. Although the invitation to have Juran visit Japan was issued in December 1952, it was not until 1954 that Juran was ready and could spare the time to go there and give lectures and conduct consultancy projects. He visited several Japanese organizations and conducted several seminars. In Tokyo, the courses he ran for senior managers (two days) had 62 attendees, and the courses for middle managers were attended by 160 delegates; in Osaka, he had 106 enrolments from middle managers and 62 enrolments from senior managers. Juran also conducted several courses at prestigious universities and professional associations including Waseda University, Chamber of Commerce in Osaka. He was asked by JUSE to present a report

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at the end of his visit, with useful observations and recommendations. The following are extracts from the report he produced (Juran 2004): • A strong wave of interest in the statistical tools for quality control. • Some over-enthusiasm and over-extension of the use of statistical tools, with under-emphasis on other essential tools. • A search for a broader base for the solution of quality problems through use of additional essential tools. (This is the present stage.) • Japanese industry appears to have compressed these steps into fewer years than have some Western countries. In this way, though starting later, Japanese industry has reduced the extent to which it was lagging behind Western development. • The present trend toward broadening the approach to managing for quality (by setting quality goals, quality planning, organization changes, and economic analysis) is wholly constructive. • It is my conviction that notwithstanding the grave obstacles facing the Japanese economy as a whole, the outlook for improved quality and improved quality reputation for Japanese goods is bright. Juran’s visit created the right impact, so much so that he accepted invitations to visit Japan several times over the coming years to conduct seminars and speak at conferences, and to offer consultancy advice to a large number of prestigious and well-known corporations.

Japan’s recognition of Juran’s contribution There are millions of people who have, over the years, kept asking the question: was Deming better recognized than Juran in Japan? Is this the reason why a prize was created in Deming’s name, to signify the importance of his contribution? Why didn’t the Japanese create an award in Juran’s name? Juran tackles the question in his memoirs (Juran 2004). He said that during 1966 while at a seminar, Professor Kondo (from Kyoto University), who had just finished his presentation, gave the cue for Dr Juran’s presentation, being the speaker who followed him. Professor Kondo commented: ‘We have a Deming Prize; why don’t we have a Juran prize?’ It appears that the Japanese had discussed the idea of creating a quality prize to be awarded to companies that had managed to win the Deming Prize for a second time. They had in mind the idea of the Juran Prize as the new quality award. Since Juran did not explicitly express an interest, the Japanese took it that he had decided that he was not interested and instead named the new award ‘The Japan Prize’. Juran writes: In retrospect, I realize now that Kondo’s query was actually in accordance with the Japanese custom of avoiding bluntness. Nevertheless it confused me, and today

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I regret the outcome. I would have been delighted to lend my name to something so symbolic of excellence in quality.

Juran was, however, rewarded for his efforts in supporting the quality movement in Japan. In 1981, he received a high honour—the emperor’s award of the Order of the Sacred Treasure, Second Class (the Second Class is the highest award that is given to a non-Japanese). It was presented to him by the then Minister of Science and Technology, Ichiro Nakagawa, with the following citation: ‘ . . . for the development of Quality Control in Japan and the facilitation of U.S. and Japanese friendship’. Dr Juran remained modest about the influence he had on Japanese management thinking. He argues that it is better to leave the final analysis and judgement to others. He goes on to say (Juran 2004, p. 300): While some of the Japanese comments include biases and embellishments, their actions do not. The following list of those actions provides a useful basis for appraising the Japanese view of my contribution:

∘ JUSE invited me to make nine visits to Japan and to participate actively in the planned events. ∘ While my correspondence was chiefly through JUSE, I had many invitations to visit Japanese companies, including Toyota, Matsushita, and Bridgestone. ∘ JUSE translated several of my books into Japanese, along with many of my papers. ∘ They published Japanese translations of my lecturers. ∘ They incorporated much of my text material into their array of training courses (for professionals, foremen, middle managers, and senior executive). ∘ They succeeded in having me decorated with the Order of the Sacred Treasure. ∘ They planned to name an important prize after me, but because of miscommunication, it ended up as the ‘Japan Prize’.

Juran’s legacy Juran is so different from Deming in so many respects and yet their philosophies are inter-twined and compatible. Perhaps the main differences, as some authors put it, are in emphasis and scope rather than fundamentals. While Deming genuinely believed that managers must change the entire system (in his own description and definition, using the four tenets of profound knowledge), Juran was of the view that the system can be improved project by project with a long-term perspective of creating a world-class status. Furthermore, Juran has always acknowledged that the use of statistics is not a panacea to all the organizational problems. On the other hand, Deming spent his life lamenting the fact that senior executives are not interested in statistics. Juran has brought freshness with his approach by arguing that in order for TQM to replace Taylorism, it has to be implemented as an integrated system, with senior

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managers assuming overall responsibility. He stresses that effective implementation can only be done through proper planning and execution, and suggests that this could be done through delegation of some of the planning to supervisors and non-supervisory staff, and re-designing jobs to enable workers to become more involved. According to Juran (1991) the quality revolution in Japan has been successful because of the close involvement of CEOs, chairmen of companies, and employees. In the US, on the other hand, CEOs tended to concentrate their efforts on financial reports instead (Juran, 1993). Juran was always humble in acknowledging that the Japanese miracle was not due to his and Dr Deming’s teachings as claimed, but rather to Japanese commitment and dedication at all levels, to make quality work: • The Japanese do not leave quality responsibility to individual functional managers. • They concentrate on planning and execution (in Japan time spent on planning is approximately 67 per cent and 33 per cent on execution. In the US about 40 per cent of time is spent on planning whilst 60 per cent on execution). • Japanese senior managers take personal responsibility for quality, unlike their US counterparts. During a recent speech Juran gave in Minneapolis he made a statement that leadership in quality can be attained. He said that there are hundreds of organizations around the world that have demonstrated that TQM pays off and can lead to sustainable competitive advantage, but that it takes on average ten years of firm commitment and perseverance for that position to be achieved. Most of the time spent is finding out how to avoid making mistakes, Juran says, not doing the wrong things. Juran’s own research indicates that the critical factors that have assisted world-class organizations achieve their superior positions are leadership related: • • • • • • • •

The chief executives personally led the quality initiative. They trained the entire managerial hierarchy in managing for quality. They enlarged the business plan to include strategic quality goals. The goals included improving quality at a revolutionary rate, year after year. They set up means to measure progress against the quality goals. The senior managers reviewed progress regularly. They provided for participation by the workforce. They enlarged the system of recognition for superior performance in quality.

The Juran trilogy Juran’s trilogy is a universal methodology which is used to assist companies all over the world with the implementation of TQM. It has been developed over the years and tested with hundreds of Juran Institute clients who have managed to achieve world -class status. Commenting on the similarities between organizations and the problems they face, Juran says:

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Many of my early consulting engagements involved improving quality by improving the yields of manufacturing processes. Each company confided to me at the outset that ‘Our business is different.’ From their perspective they were right; each did exhibit differences as to products, markets, technology, culture, and so on. Yet their quality problem exhibited commonality. To diagnose those problems I employed common diagnostic tools. To provide remedies I employed common remedial concepts and tools. To hold the gains I employed common control concepts and tools. As I moved from one ‘different’ company to another, I was going through the same cycle of events, over and over. The concepts, methods, and tools I used turned out to be applicable to any company. I was intrigued by the existence of those commonalities, and I gradually identified the elements of that common cycle of events. In 1964 I devoted half of my book Managerial Breakthrough to the universal process for improving quality (or improving anything else). I then continued to refine that process, which became an integral part of my training manuals on managing for quality. By the year 1964 I had unbounded confidence in the validity of that universal approach. I had field-tested it in many client companies; it had repeatedly produced stunning results. I had witnessed the miracles and had thereby acquired the faith of the true believer.

The Juran trilogy is perhaps the best known, universal and well-tried methodology that can guarantee results. It has been validated in different organizational contexts, used in different cultural settings, and applied in different industry sectors. It could perhaps be proven as a scientific method for total quality implementation and management with more rigorous research and further scientific validation. The Juran methodology is based on three processes (see Figure 12.1): 1. Quality planning 2. Quality control 3. Quality improvement. Figure 12.1 reflects an intersection of cost and time axis. The logic is that the planning function kicks off the process by identifying customer needs and translating them into proper functional requirements. These functional requirements result in the design and development of products and services, engineering processes which are expected to satisfy customer requirements. This will then mark the end of the planning process and will signal the start of the involvement of operations—who will have the task to run the existing process in order to produce the expected products with their design, engineering, and aesthetic features, and which hopefully will be able to fulfil the needs of the external customers. As operations proceed, and as indicated in Figure 12.1, it soon emerges that the processes are unable to have 100 per cent quality output, (hence the chronic and sporadic spikes). The Juran trilogy demonstrates that over 20 per cent of the work is scrap and must, therefore, be re-done. Juran calls the waste chronic because it goes on and on, and this happens because the operating processes were planned with limitations (variability). In the normal conventional way, chronic waste is tackled by using statistical quality control (SQC), putting teams together so that they can use the plan-do-check-act (PDCA) cycle, identify root causes, and stabilize the process. Juran refers to this as quality control, which is a reactive, fire-fighting approach through corrective action.

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QUALITY PLANNING

QUALITY CONTROL (DURING OPERATIONS)

SPORADIC SPIKE

40

ORIGINAL ZONE OF QUALITY CONTROL

BEGIN

20 OPERATIONS

COST OF POOR QUALITY

QUALITY IMPROVEMENT

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NEW ZONE OF QUALITY CONTROL

CHRONIC WASTE (An opportunity for improvement)

0

TIME

0 LESSONS LEARNED

figure 12.1 Juran’s trilogy diagram Source: Juran and Godfrey (1999).

To illustrate the difference between common causes of variation and special causes, Juran uses a sporadic spike to show that the process is way out of control, and the cost of poor quality has all of a sudden shot up to 40 per cent. This could have been due to power failure, process breakdown, or human error. Using SQC, this is easily restored, and the chronic waste continues at the level which is satisfactory. Figure 12.1 also shows the area of quality improvement, where the chronic waste has been reduced significantly. This is due to the fact that chronic waste was seen as a challenge and an opportunity for improvement rather than the previous approach, which looked at process control as the end goal. Similarly to the previous discussion on the improvement of the system (Deming 1967), in the Juran trilogy, senior managers can be expected to spend most of their time in planning and improvement activities, while employees and process owners will have the task of controlling the quality of the output and the consistency of the performance of their processes.

The quality planning process Figure 12.2 is a simplified input–output diagram showing the universal quality planning process as it progresses step by step. The quality planning process is a structured, systematic process which guides every organization through the various stages of establishing customer needs and requirements and translating them through the supply

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OUTPUTS

Apply Measurement Throughout

Establish quality goals List of quality goals Identify those impacted— the customers List of customers Determine customers’ needs List of customers’ needs Develop product features Develop process features Establish process controls, transfer to operations

Product designs Process designs Process ready to produce

figure 12.2 The quality planning road map Source: Juran and Godfrey (1999).

chain into tangible products and services that are capable of satisfying their expectation. Figure 12.2 illustrates the various stages of the quality planning process. Various tools and techniques can be used to bridge the gap between customer expectations and customer perceptions of quality of service and delivery. Juran insists that planning has to be conducted with a long-term view rather than on a project-by-project basis, although the improvement of quality has to be done by taking projects one by one: He (the manager) undertakes to slay alligators, one by one—a reptilian version of project by project improvement. But there will never be an end to it, because more and more alligators keep emerging from the swamp. The ultimate answer is to drain the swamp.

The quality control process The quality control process exists to prevent adverse change. It is based on the universal feedback loop (Figure 12.3). The whole purpose of quality control is to provide stability and ensure consistency in processes and operations. This is done by identifying and reducing variation, and preventing change from taking place. The evolution of quality control took place in the era of mass inspection (after the effect) to prevention-based QC. Figure 12.3 depicts the feedback loop which is the approach used for controlling quality through the following stages: 1. A sensor is used to evaluate the actual quality of either the process or product or both. In the case of the process, its performance is identified by examining its features (directly) or through the product features (indirectly). The product ‘tells’ on the process. 2. The sensor reports the performance to an umpire.

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PROCESS

1

SENSOR

2

5

ACTUATOR

GOAL

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3

UMPIRE

figure 12.3 The feedback loop Source: Juran and Godfrey (1999).

3. The umpire also receives information on the expected quality goal or standard. 4. The umpire compares the actual performance against the desired standard. If there is a big difference, the umpire energizes an actuator. 5. The actuator stimulates the process (human or technological) to rectify the performance so that there is conformance to the required quality level. 6. The process will now restore the performance to the desired standard. The feedback loop is used as a universal methodology and forms the basis for an integrated quality control process (based on a PDCA principle). It uses the following distinctive steps: 1. 2. 3. 4. 5. 6.

Choose control subject. Establish measurement. Establish standards of performance. Measure actual performance. Compare standards. Take action on the difference (use feedback loop for learning).

The quality improvement process Improvement means creating a breakthrough situation where unprecedented gains can be expected through the attainment of new performance levels, higher than those achieved previously. Quality improvement can result from improvements to the products with a measurable impact on customer satisfaction, or through process improvement so that deficiencies and disruptions are minimized and/or eliminated. Quality improvement that impacts on profitability and competitiveness can result from innovations through product or process development, or through radical changes to the organization and its operations using concepts such as business process re-engineering, for instance.

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The quality improvement process requires a major departure from status quo and will need new sets of behaviours and attitudes from senior managers. The ‘don’t rock the boat’ mentality will impede any chance of achieving breakthrough gains. The concepts described in the following paragraphs must be observed in the context of quality improvement. Improvement has to be distinguished from control. There has to be a clear standard achieved which reduces, for instance, chronic waste by an unprecedented level (see Figure 12.1). All improvement takes place project by project. Improvement, as Juran argues, should not be used without clear definition. Improvement can only be gained by tackling quality challenges project by project. Quality improvement is applicable universally. This has been demonstrated through the Juran Institute’s experience in supporting thousands of businesses. Quality improvement extends to all parameters. The benefits from improvement activity will affect several areas of the business including, for instance, cycle time, productivity, human safety, the environment, etc. The backlog of improvement projects is huge. Juran argues that the backlog is due to the planning process (Juran and Godfrey 1999): ‘The backlog of improvement projects exists in part because the planning of new products and processes has long been deficient. In effect, the planning process has been a dual hatchery. It hatched out new plans. It also hatched out new chronic wastes, and these accumulated year after year. Each such chronic waste then became a potential improvement project.’

Reduction in chronic waste is not capital intensive. Projects that tackle chronic waste reduction very rarely require additional financial results. Teams who work on these projects will find ways within the existing resources and knowledge to improve and further optimize the processes. This is a good way of ensuring good return on investment, as opposed to new product development projects which require a lot of capital outlay to support all the operations involved in identifying and establishing customer needs, designing, developing, planning, producing, delivering. The ROI in this context can be expected to be lower. The return on investment is among the highest. The National Institute of Standards and Technology (NIST) has, since 1988, been publishing studies which demonstrate that companies that have attained quality leadership are performing among the very best of the 500 S&P list. Other studies in Japan and in Europe have come to similar conclusions. The major gains come from the vital few projects. The most significant gains that can be expected from improvement activity, come from the ‘vial few’, strategic projects which tend to be multi-functional. Small improvements in these will have drastic reductions in waste and cost, and show significant performance improvement. The ‘useful many’ projects are those which are operational in nature and tend to address local and departmental issues. The improvements in these areas are ultimately not going to be as significant as the vital few projects. Juran does, however, argue that by sponsoring ‘useful many’ projects, senior managers can ensure that the lower hierarchy people are involved, feel valued and will commit further to their organizations.

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In his address at Minneapolis, Juran added the following comments in relation to quality improvement: • Annual quality improvement is one of the essential success factors; without it there can be no quality leadership. • It is a big advantage for companies to have available a field-tested, proven managerial process as an aid to annual quality improvement. • Training is needed to enable company personnel to attain mastery of the quality improvement process. • The training should include participating in actual improvement projects. Juran asks why it is that senior managers do not apply the concepts of quality improvement, since these are existing, sound methodologies which are well tried, credible, and universal and where the benefits are demonstrated beyond any doubt and present at all levels. He suggests the following as some of the prevalent reasons: • They are sceptical; many have tried and failed. • They have learned not to trust the advocates, internal as well as external. They do not know who to trust; there are many advocates and agendas. • They cling to the mistaken belief that ‘Our business is different’. • They believe that getting certified to ISO 9000 will solve their quality problems. • They are aware that mediocre quality is still saleable. • There is confusion in language—the belief that ‘higher quality costs more’. • The CEO believes that he can lead the company to quality leadership without personally becoming deeply involved. He suggests that further research should be undertaken to identify the reasons why improvement activities are not evident in all organizations, and to understand better the obstacles which stop senior managers from not committing to quality improvement initiatives.

Juran’s contributions Juran’s contributions are far too many to recall in this section. Perhaps in a summarized fashion, the essential aspects of Juran’s main thrust can be briefly described.

Quality definition Juran argues that quality has two main perspectives to it. The first is the aim of satisfying customer needs and requirements, and the second is the elimination of internal waste and key obstacles that interfere with quality. This has led Juran to describe quality as ‘fitness for use’, meaning that in order for organizations to provide ‘conformance to requirements’

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they have to focus on the improvement of the vital few areas which tend to have high leverage potential and impact on customer satisfaction more significantly. Juran suggests that there are five main aspects to his definition of quality as ‘fitness for use’: 1. Quality of design, meaning design concept and specifications of the product should be flawless. 2. Quality of conformance: product engineering and design should match the intended use. 3. Availability, meaning the product should be reliable and easy to maintain. 4. Safety, assessed by risk of injury and hazards. 5. Field use: when in the hands of the customer the product should work as intended. For improving quality with fitness for use in mind, Juran suggests the following ten steps: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Build awareness of the need and opportunity to improve. Set goals for that improvement. Create plans to reach the goals. Provide training. Conduct projects to solve problems. Report on progress. Give recognition for success. Communicate results. Keep score. Maintain momentum.

In a sense, this is his interpretation of the PDCA cycle, and in his trilogy Juran argues that chronic and sporadic variation can be tackled through quality control and quality improvement (two stages of Juran’s trilogy).

Cost of quality In his trilogy, Juran shows the cost of poor quality as a function of time. Emphasis on quality control to tackle chronic variation will only stabilize the cost of non-quality. SQC techniques can also help deal with sporadic variation by bringing back the cost of nonquality to its previous level. Quality improvement will only be brought about by focusing on the entire value chain, upstream by examining raw materials, supplier issues through operations, all the way to customer delivery and satisfaction. By using statistical tools and techniques Juran suggests that there are three types of costs that can be tackled: 1. Internal failure costs (the costs of making products that could not be sold). 2. External failure costs (the costs of replacing defective products that were shipped); appraisal costs (the costs of evaluating products and processes for failure). 3. Prevention costs (the amount of money it takes to produce defect-free products).

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This model became known as the PAF model (prevention, appraisal, and failure costs). The model helps establish the percentage of costs which are not necessary and, therefore, provides a great impetus for improvement activity. Costs of non-quality are typically at the level of 20–30 per cent, and in some industries the figures are even higher. Juran has always argued that there is an optimum level at which costs of quality can be accepted. For instance, when the costs associated with defects are equal to the costs of ensuring quality, perhaps this level will signal that quality management has achieved its desired effect and that further refinement may not be necessary because the cost of this may not be justifiable. Juran, like Deming, does not believe in zero defect or ‘quality is free’ concepts which were developed by Philip Crosby. Juran argues that the pursuit of quality can be done through project-by-project improvement using SQC techniques. He does however warn that SQC should not become the obsession or ‘the tool-oriented approach’.

The Pareto principle The Pareto principle represents a phenomenon whereby in any population which contributes to a common effect, a relative few of the contributors account for the bulk of the effect (Juran 1992). The Pareto principle is a state of nature (the way things happen) as well as a process (a way of thinking about problems). The Pareto principle argues that there is a mal-distribution of quality losses. It suggests that most effects come from relatively few causes. It is one of the most powerful tools of quality improvement since it helps people focus on areas with big impact. It can be used on a regular basis for identifying causes of problems and attempting to eliminate or greatly reduce those with the biggest impact. Concerned by comments that the Pareto principle is attributable to Vilfredo Pareto, Juran (1992) writes: Years ago I gave the name ‘Pareto’ to this principle of the vital few and trivial many. On subsequent challenge, I was forced to confess that I had mistakenly applied the wrong name to the principle . . . The Pareto principle as a universal was not original with Pareto. Where then did the universal originate? To my knowledge, the first expression was by myself. Had I been structured along different lines, assuredly I would have called it the Juran principle. However, I was not structured that way. Yet I did need a shorthand designation, and I had no qualm about Pareto’s name. Hence the Pareto principle.

Internal customer An important contribution from Juran is the argument that we should not just focus on the external customer. Alongside the value chain, he argues, are several internal customers who also become suppliers and the cycle propels itself forward. There are three role models which represent opportunities for improvement by looking at the full cycle of adding value to the end customer. The spiral of progress that Juran suggests shows that the cycle of managing and improving quality in all aspects of the value chain goes through supplier–customer

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relationships, feedback on performance, learning and innovation, optimization and integration and so on, until the ultimate impact on the customer is achieved.

Management-controllable and operator-controllable errors Juran argues that defects are ‘operator-controllable’ if workers have working arrangements that enable them to meet quality standards. In other words, training has to come first and then proper empowerment and involvement in improvement activity. In the event that these errors continue to accumulate, it will demonstrate that management has not done its job properly, so the emphasis is shifted on to management controlling these errors (i.e. management-controllable errors). Using his famous Pareto approach, Juran argues that 80 per cent of the problems are management related and only 20 per cent are under employee control. The 80 per cent category means that the types of errors and problems need proper investigation of the entire system, processes, methods, policies, technology, and materials. These are, of course, all under the jurisdiction of managers and not the employees. Deming (1986: 315), similarly to Juran, says: I should estimate that in my experience most troubles and most possibilities for improvement add up to proportions something like this: 94 per cent belong to the system (responsibility of management), 6 per cent special.

Subsequently he re-adjusted these figures to 98 per cent and 2 per cent. In so far as those errors which fall under the remit of employees, Juran argues that ‘if the managers have met the criteria, then the means for doing good work are clearly within the hands of the operators’. Juran refers to three types of operator-controllable errors: 1. Inadvertent errors. These are due to poor attention, very often unexpected and unpredictable. They are certainly unwitting and unintentional. These errors exhibit randomness and the best way to tackle them is to foolproof the system. 2. Technique errors. These are due to lack of training and knowledge. They are not deliberate or intentional. They tend to be specific, of course consistent, and ultimately unavoidable. Remedies require studying the system, process, and methods, and ensuring that employees are competent to operate the processes, or changing the system and processes so that employees can operate with foolproofing. 3. Wilful errors. These are witting, intentional, and persistent errors. They are due to anti-social elements whose actions cannot be defended. Juran says that the fault very often lies with managers who foster a climate of fear, blame, and suspicion by constantly moving the goal post, focusing on cost rather than quality, and using scrap figures to apportion blame. Even for these types of errors, Juran argues that ultimately it is the responsibility of managers to work on foolproofing the system and creating a positive work climate where there is high concentration, high commitment, and high competence, to produce quality that can satisfy the customer and bring competitive benefits to the organization.

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Juran’s influence on ISO 9000 Juran has been very critical of the earlier version of ISO 9000 because, in his view, it encouraged mediocrity rather than real improvement. Furthermore, it did not emphasize the importance of leadership and senior management commitment. During an interview, Juran gave a lot of praise to the ISO 9000 movement for bringing quality to the fore and encouraging its uptake. His point of contention is that those who are responsible for certification need to certify excellence, and not encourage mediocrity by insisting on compliance to poorly written procedures that are fundamentally wrong in the first place because they do not focus on doing the right things: I have a lot of quarrels with the criteria in the ISO 9000 series, the original criteria. . . . They ask for a level of quality which I would label as mediocrity level. They did not publish criteria which would lead to quality leadership. I think the standards should be at an excellence level and if there’s an assessment, the assessor will indicate the extent to which the criteria are met and which criteria are not met.

John Davies, Chairman of Subcommittee 2 of the International Organization for Standardization (ISO) Technical Committee 176 (TC 176), did admit that the 1994 version of the standard did not go far enough. In response to Juran’s comments, he said: ‘I am sympathetic towards the opinion and we’ll see what we can do about it.’ The result, of course, was the launch in 2000 of a much better, much improved version of the standard. Some of the testimonies in recognition of Juran’s role and contributions over the years include: Juran is the greatest authority on quality control in the entire world. (Jungi Noguchi, Executive Director of JUSE). Whatever advances American manufacturing has made in the last thirty to forty years, we owe to Joe Juran and to his untiring, steady, patient, self effacing work. (Peter Drucker) Joe is like a river. He just flows on and on. You don’t know where it starts; you don’t know where it ends. You just know it’s rich and there’s always water in it and it’s always for good use. (Lawrence Appley, Chairman Emeritus of the American Management Association)

Quality leadership Famously, Juran, calling for the need to have strong leadership has said: ‘What we need are leaders, not cheerleaders.’ Together with Deming, he was against exhortations and hype which might do managers’ ego a lot of good, but would not solve the problem of identifying the key priorities for improvement, carefully selecting key projects, and working on creating an effective organization that can deliver high value to its end customer. Juran’s suggested recipe is for leaders to have clear goals to focus on, clear plans to help them deliver, proper involvement of people at all levels, effective performance measurement and monitoring systems, and good reward and recognition schemes that are linked to quality improvement contributions only.

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Quality leadership for Juran is to learn, not to manage the sporadic spikes, but to be aware and conscious of what chronic waste can do in impeding progress and the achievement of superior performance. Good practice is to work beyond stabilizing the process by injecting real improvement activity that can reduce costs of non-quality very significantly. Doing so will require the project-by-project approach, following Juran’s universal sequence for breakthrough. Juran describes breakthrough as: ‘the organized creation of beneficial change’. The steps of breakthrough include proof of the need; project identification; organization to guide each project; organization for diagnosis/analysis of projects; diagnosis; breakthrough in knowledge; remedial action on the findings; breakthrough in cultural resistance to change; and control at the new level. Juran emphasizes the importance of having senior executives lead the improvement activity. Very often quality councils are established in order to select the vital few projects, appoint improvement teams, authorize the activity to take place, and allocate resource. Juran suggests the following steps and roles: • Quality council: with the overall responsibility for: ∘ establishing processes for nominating projects, assigning teams and making improvements; ∘ providing resources; ∘ establishing processes for review of progress, dissemination of results and recognition; and ∘ revising the merit rating and business planning systems to include quality improvement. • Role of upper management: ∘ serve on the quality council; ∘ approve strategic quality goals; ∘ allocate the needed resources; ∘ review progress; ∘ give recognition to teams; ∘ serve on some project teams; and ∘ revise the merit rating and business planning systems.

appendix Juran the person Juran is described as being an astute observer, attentive listener, brilliant synthesizer, and prescient prognosticator. He has been called the father of quality, a quality guru, and the man who taught quality to the Japanese (he always refuted this claim). Juran has added the human dimension to quality, thus broadening it from its SQC origins.

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His philosophy, which is based on two tenets: higher quality means a greater number of features that meet customer expectations; and freedom from trouble, has been preached and practised all over the world by thousands of organizations. At the celebration of his 100th birthday, hundreds of testimonies have been made by great admirers, appreciative CEOs, influential thinkers, consultants, and eminent academics among others. The following are some of the main testimonies: Joseph Juran is and will continue to be a fundamental leadership force in the constantly growing economic, social and educational service of quality to America as well as to the world community. His combination of consistently innovative and intensely practical contributions has created much of what the quality field is today and is one of the foundations for its continued development. The breadth of his abilities—from highly sought after guidance to leaders of business and government to hands-on help for individual quality practitioners—has provided a unique legacy spanning a remarkably large number of generations. And, throughout it all, he has always marched to the drumbeat of his own convictions and provided a model of what a quality leader and engineer should be. (Armand V. Feigenbaum, President and CEO, General Systems Co. Inc., ASQ past president and honorary member) The links between Europe and Dr Juran are deeply rooted. He was a fundamental reference for the development of the quality culture in Europe. Many Europeans felt a deep cultural affinity with Dr Juran because of his rational, rigorous way of thinking. He was a symbol for those who did not appreciate over-statements, fads, distortions or oversimplifications in quality thinking. In 1993, as president of the European Organization for Quality (EOQ), I had the honour of expressing the gratitude of the European quality community to Dr Juran by granting him the EOQ Gold Honorary Medal. Now I wish to join the multitude of people around the world who greet Dr Juran as both a great ‘architect of quality’ and an admirable man. (Tito Conti, author, consultant and assistant editor of A History of Managing for Quality, past president, European Organization for Quality) Joe Juran’s contribution to society equals the most valuable contribution by anyone in the recent century. His inspiration and instruction, which in a practical way have been applied by countless institutions, improved the quality and efficiency of all institutions that serve others, be they commercial or even in the public sector. He did this in a most appealing personal way. My guess is many who took their lead from Joe did so as admiring friends. I consider myself one of those, and then all of us translated what he taught us into employable means for the betterment of those we served. Joe has ably served more people in our society than any other man I have known. (Bob Galvin, chair, Motorola Executive Committee) Joe Juran’s stellar contribution: the Juran trilogy of the three quality processes. The processes show us how to manage quality during operations. The six steps of quality planning help us develop new products or processes; the six steps of quality control explain how to track performance; the nine steps of quality improvement guide us to make breakthroughs to superior levels of performance. This framework integrates the managerial, technological and statistical concepts of quality. As new concepts evolve, they will easily splice into the trilogy. A structured approach always wins the day over trial and error. (Frank Gryna, Professor Emeritus, ASQ honorary member)

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Since his first visit in 1954, Dr Juran has come to Japan many times during the last half-century. We learned a lot from him. Dr Juran summarized the following three features of quality control (QC) activities in Japan that created the revolution in quality: a massive quality-related education and training program; an annual program of quality improvement; and upper management leadership of the quality function. In 1954, he was invited by the Japanese Union of Scientists and Engineers and started the QC courses for top and middle managers. These courses had an immeasurably large impact on Japanese QC and positioned quality as the important management tool. Hoshin kanri (policy management) is the company-wide activity to rotate the plan-do-check-act cycle every year. An internal QC audit by top managers is included. Without the leadership of top managers of this kind, it is impossible to continue to promote total quality management of the company. (Yoshio Kondo, Professor Emeritus, Kyoto University, Japan) The world owes Dr Juran much for his unique contributions as a premier scholar and historian in the quality sciences. He has worked tirelessly and effectively to elevate quality’s technical foundations and enable its beneficial applications in all sectors—in the United States and abroad. In his 100th year, he continues to lead, inspire and build, with the conviction the best days for quality lie ahead. Those of us in the Baldrige National Quality Program will always treasure Dr Juran. His support, guidance and friendship convinced us it was possible to create an award and continuously improve the resulting framework for cooperation and sharing to strengthen performance in businesses, healthcare, schools and non-profit organizations. (Curt Reimann, past director, Harry Hertz, director, Baldrige National Quality Program)

Some famous quotations from juran At the age of 91, Juran was asked about retirement and he said that he did not agree with the word ‘retirement’. He says (about dying): When I go, please let me go at my word processor.

In 2004 (age 100), he wrote (Juran 2004): When I am gone, let no one weep for me. I have lived a wonderful life. My job of contributing to the welfare of my fellow man is the great unfinished business.

Brief biographical synopsis of Dr Joseph M. Juran and honours awarded to him The following is a brief synopsis of the life of Dr Joseph M. Juran, highlighting important data and facts in his fruitful life of longevity and service to the quality profession.

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• Born 24 December 1904, Braila, Romania. • Emigrated to US, 1912. • Naturalized US citizen, 1917. Education: • B.Sc., Electrical Engineering, University of Minnesota, 1924. • J.D., Law, Loyola University, 1936. Employment: • 1924–1941 engineer, manager, Western Electric Company. • 1941–1945 assistant administrator, Lend-Lease Administration, Foreign Economic Administration, US Government. • 1945–1951 Professor and chairman, industrial engineering, New York University. • 1951–1979 self-employed consultant. • 1979 founder, chairman, Juran Institute (Emeritus 1987). • 1986 founder, chairman, Juran Foundation. Honorary doctorates: • • • •

Doctor of Engineering, Stevens Institute of Technology, 1988. Doctor of Science, University of Minnesota, 1992. Doctor of Science, Rochester Institute of Technology, 1992. Doctor of Laws, University of New Haven, 1992.

Honorary memberships, US: • • • • • • • •

American Society for Quality Control (ASQC), Honorary 1981. American Society of Mechanical Engineers (ASME), 1993. International Academy of Management. National Academy of Engineering, 1988. The Academy of the Association for Quality and Participation. Alpha Pi Mu. Sigma Xi, 1946. Tau Beta Pi.

Honorary memberships, international: • • • • • • •

Australian Organization for Quality Control, 1974. Argentine Organization for Quality Control, 1977. British Institute of Quality Assurance, 1976. European Organization for Quality Control. Philippine Society for Quality Control, 1974. Spanish Association for Quality Control. Romanian Academy, 1992.

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Society affiliations, US: • • • • • •

American Association for the Advancement of Science, 1967. American Institute of Industrial Engineers, 1967. American Management Association, 1941. Malcolm Baldrige National Quality Award, Board of Overseers, 1988 to 1991. Member Illinois Bar, 1936. Professional Engineer, New York, New Jersey.

Medals, US: • • • • • • • • • • • • • •

Alumni Medal, University of Minnesota, 1954. American Management Association, Hall of Fame, 1983. Brumbaugh Award, ASQC, 1958. Chairman’s Award, American Association of Engineering Societies, 1988. Edwards Medal, ASQC, 1961. Eugene L. Grant Medal, ASQC, 1967. Gilbreth Award, American Institute of Industrial Engineers, 1981. Managing Automation, Hall of Fame, 1995. National Medal of Technology, 1992. Soichiro Honda Medal, ASME, 1995. Stevens Medal, Stevens Institute of Technology, 1984. Wallace Clark Medal, ASME, AMA, 1967. Worcester Reed Warner Medal, ASME, 1945. Xerox Quality Award.

Medals, international: • • • • •

250th Anniversary Medal, Czechoslovakian Higher Institute of Technology, 1965. Medal of Technikhaza, Esztergom, Hungary, 1968. Medal of Honor, Camera Official de la Industria, Madrid, 1970. Order of Sacred Treasure (Emperor of Japan), 1981. Medal of European Organization for Quality, 1993.

Placques, scrolls of appreciation, US: • • • • • •

American Management Association, Wall of Fame, 1983. Department of the Army. Department of Commerce. Department of Defense. Department of the Navy. Malcolm Baldrige National Quality Award.

Placques, scrolls of appreciation, international: • Scroll of Appreciation, JUSE, 1961. • Taiwan Productivity Center, 1974. • Plaque of Appreciation, Republic of Korea, 1978.

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Nomination letter sent to The White House by ASQ October 1, 2002 Hon. George Bush Presidential Medal of Freedom The White House Washington, DC 20500 Mr President: It is my honor to place into nomination for the Presidential Medal of Freedom the names of three individuals whose lives and teachings have already had a giant impact on our economy, our society, and our way of life—and whose influence will only grow stronger in the decades to come. I nominate the three individuals most responsible for the creation and development of the discipline of quality today: William Edwards Deming Joseph Moses Juran Armand Vallin Feigenbaum This nomination is unusual in two ways. First, the nomination is for three individuals, instead of one. Second, the nominations are of statisticians—not soldiers or statesmen or artists; statistics is not a profession people intuitively associate with the theme of freedom. Honoring these men does more than acknowledge their unusual careers. It sends a signal to Americans everywhere that quality matters, that the United States of America stands behind businesses that try to do better, and that every action every individual takes to improve quality strengthens our country and our society for the competitive years that lie ahead. In this letter and attached supporting statement, I hope to make clear that the award must be shared three ways, that each of the three is equally deserving of this highest recognition. I also hope to show that, while each man began his career as a statistician, each came over time to address issues of far greater breadth and significance to our society than abstract industrial statistics. Sincerely, Michael Finley (American Society for Quality)

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Bibliography Deming, W. E. (1967), ‘What happened in Japan’, Industrial Quality Control, Vol. 24: 89–93. Juran, J. M. (1991), ‘The Evolution of Japanese Leadership in quality’, Journal of Quality and Participation, Vol. 14(4): 72–7. —— (1993), ‘Why Quality Initiatives Fail’, Journal of Business Strategy, Vol. 14(4): 35–8. —— (2004), Architect of Quality, New York: McGraw-Hill, NY. —— and Godfrey, B. A. (1999), Juran’s Quality Handbook, 5th ed., New York: McGraw Hill, NY.

chapter 13

edith pen rose’s con tr ibu tion to econom ic s a n d m a nagem en t schol a r ship c hristos n. p itelis ∗

Introduction At a time of a near mortal crisis in economics, it is opportune to revisit the seminal contribution of Edith Penrose, whose work, we submit, could serve as a solid basis for rejuvenating the field. The year 2009 marked the fiftieth anniversary of Edith Penrose’s The Theory of the Growth of the Firm (TGF thereafter) and saw the third edition of her now classic book. In a review of the book in the Economic Journal, Robin Marris (1961) predicted that TGF would prove one of the most influential of the decade. In his 1987 entry to the New Palgrave he added that ‘this proved an understatement’ (p. 831). Marris’ statements were referring to the economic theory of the firm, especially the literature on ‘managerial theories’, which were popular in the 1960s, and in which he himself was a major contributor (Marris 1964). Neither Marris nor Penrose herself could foresee what appears to be the case fifty years on: a situation where the influence of TGF in mainstream economics has been rather limited (also Marris 1987 and below). The managerial theories of the firm turned out to be no more than a footnote in the history of the neoclassical theory of firm, while Penrose receives no mention in leading microeconomics, Industrial Organisation (IO) and economics of regulation textbooks (for example, Kreps 1990; Tirole 1988; and Viscusi et al. 2001, respectively) ∗ This chapter draws and builds upon earlier work by Penrose and Pitelis (1999) and Pitelis (2004, 2005, 2007a, 2007b, 2009a, 2011). I am grateful to Edith Penrose for discussion and comments on earlier drafts, as well as to numerous colleagues, especially Mie Augier, the late John Dunning, Joe Mahoney, Robin Marris, Perran Penrose, David Teece, and Alain Verbeke. Errors are mine.

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and even in leading economics, organization and management textbooks, such as Milgrom and Roberts (1992). TGF ’s influence outside mainstream economics, on the other hand, gradually exceeded even Marris’ apparently optimistic assessment. Over the past twenty-five years or so, TGF has become a canonical reference to the currently dominant resource, knowledge, and (dynamic) capabilities-based approaches to business strategy, and to a lesser extent to the theory of the multinational enterprise (MNE), international business (IB) and development scholarship. TGF is also seen as seminal in (strategic) human resource management (SHRM) and is currently being used as the basis of integrating and extending the now flourishing literature on (strategic) entrepreneurship. TGF is also employed in order to explain the nature of the firm and its ability to create and capture value, which are at the heart of the theory of the firm, business strategy, and organization scholarship. Today TGF is one of the leading books on economics and management, with more than 14,757 citations in Google Scholar. This compares with, for example, around 11,217 for Chandler’s (1962) Strategy and Structure and 15,959 for Cyert and March’s (1963) A Behavioral Theory of the Firm.1 Although we will attempt some speculative predictions towards the end of this chapter, its main focus will be to present TGF ’s ideas and assess them critically. In so doing, we will aim to understand the book’s phenomenal success, while celebrating the book’s and Penrose’s lasting influence. In particular, the aim of this chapter is to briefly discuss Penrose’s early contributions to economics; subsequent ideas in economics which are related to, but do not appear to have drawn on her book; the book’s contribution to organizational economics, (international) business strategy, SHRM, strategic entrepreneurship, and recent debates on value creation and capture and the political economy of globalization and development. We will also touch upon Penrose’s epistemology. Following on from the above, we outline possible ways in which TGF can be generalized, critiqued, and integrated with other theories, extant and emergent. Clearly the above is a rather tall order, both imperfect by its nature and reliant on earlier work by the present author, including joint work with colleagues. These are all recognized in the text.

Penrose’s early contribution to economics Penrose’s contribution to economics was wide ranging: from ‘food control’ through the patent system, to the theory of the (growth of the) firm, the multinational enterprise, the theory of industry organization, the international oil industry, the economics of Arab 1 Chandler’s sum total for his three classic books, Strategy and Structure, The Visible Hand and Scale and Scope (Chandler 1962, 1977, 1990) is around 13,000. Nelson and Winter’s (1982) classic An Evolutionary Theory of Economic Change leads with around 18,500 citations; a remarkable record, partly attributable to the more general scope of the book, as a potent alternative to neoclassical economics, as a whole.

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countries, international economic relations, economic development, and more. Within this context, she proposed theories of competition, innovation, mergers and acquisitions, small firms and networking, and anti-trust and industrial policy. In her early work, for example, on the economics of the International Patent System (1951),2 Penrose questioned the alleged positive benefits of the international extension of the patent system to social welfare, in particular of the developing countries. Penrose’s early work helps expose some of her early interests in ‘monopoly’ and ‘innovation’ and social welfare, which were to later assume a dominant position in her thinking. Penrose’s major claim to be remembered as an economist is undoubtedly TGF, first published in 1959. The result of her work with the Hercules Powder Company, ‘The Growth of the Firm, A Case Study: The Hercules Powder Company’ was completed in 1956, and published in 1960. It ‘was originally intended for inclusion in [the] Theory of the Growth of the Firm, but omitted to keep down the size of the book’ (1960a: 1). Given this, it is safe to consider the two pieces as part of an integrated whole and consider its main arguments. On various occasions, Penrose (1959a/1995, 1985) describes her experiences in seeking guidance from existing economic theory to address the issue of her concern, the growth of a real-life firm. She found little. In brief, economic theory of the firm had no firms in it. For mainstream economic theorists ‘the “firm” was primarily a set of supply and demand functions’ (Penrose 1985: 6).3 She went on to suggest that the adequacy of traditional explanations of limits to growth (limitations to management, the market and/or uncertainty) do not stand up to scrutiny, and concluded that such a theory of the firm cannot be easily adapted to ‘the analysis of the expansion of the innovating, multi-product, “flesh and blood” organisation that businessmen call firms’ (Penrose 1959a: 13).

The Penrosean firm and the market The firm in Penrose is a collection of productive resources (human and non-human) under administrative coordination and authoritative communication that produces goods and services for sale in the market for a profit (Penrose 1959a/1995, 1985). Administrative coordination and ‘authoritative communication’ define the boundaries of the firm. Very much like Coase (1937), but without having at the time been influenced by his classic article, Penrose maintained the distinction between the firm and the market. The essential difference between economic activity inside the firm and economic activity in the ‘market’ is that the former is carried on within an administrative organization, while the later is not. (1959: 15)4 2

See also Machlup and Penrose (1950) and Penrose (1973a). Despite her devastating critique, Penrose chose not to quarrel with the extant theory of the ‘firm’ as part of the theory of price and production, ‘so long as it cultivates its own garden and we cultivate ours’ (1959a: 10). 4 Penrose goes on to point out the ‘central managerial direction’ within firms which she calls a ‘court of last resort’, much in line with subsequent arguments by Masten (1996) and Williamson (1996). 3

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From the resources within the firm, human resources, and in particular managerial resources, are most important. A reason is that any expansion requires ‘planning’, which can be done by the firm’s own management, which itself is firm-specific and not available in the open market. There are two major categories of ‘causes’ of growth: those external to the firm and those internal. Penrose suggests that external causes, for example raising capital, demand condition, etc., while of interest ‘cannot be fully understood without an examination of the nature of the firm itself ’ (1955: 532). The problem as she saw it was ‘the internal incentives to and limits on growth—a theory of the growth of the firm that does not relate to fortuitous externals events’ (1955: 532). There are two basic reasons why there are endogenous to the firm incentives for growth which moreover are self-reinforcing, leading to opportunities for further expansion. First is that the execution of any plan requires resources which are in excess of those strictly necessary for this execution. Second, upon completion of a plan, managerial resources will be released. Crucially, moreover, ‘the services that the firm’s management is capable of rendering will tend to increase between the time when the plan is made and the time when the execution is completed’ (1955: 533). Penrose attributed the ubiquitous presence of unused resources to arguments by Charles Babbage, Austin Robinson and, Sargent Florence, such as the ‘balance of processes’ or ‘the principle of multiples’, which imply that ‘a firm would have to produce on a vast scale if it were to use fully the services of all the resources required for much smaller levels of output’ (1955: 533). In addition, most productive services . . . are capable of being used in many different ways and for many different purposes. Hence a firm in acquiring resources for particular purposes—to render particular services, also acquires a range of potential productive services, most of which will remain unused. (1955: 534)

Managerial services are of particular importance in this context, also because they are available to the firm only in limited amounts: ‘executives with experience within any given firm can only be found within that firm . . . The production of these services requires time and this limits the scope of a firm’s expansion plans at any given time, but permits continuous extension of these plans through time’ (1955: 534–5). However, the completion of expansion plans creates and releases resources. It creates resources because ‘all personnel in the firm will gain additional experience as time passes’ (1955: 538). It releases resources because ‘not only is there likely to be a generalized improvement in skill and efficiency but also the development of new and specialized services’ (1955: 538).5 This increase in knowledge contributes to the ‘uniqueness’ of such individual firms (1959a: 53). This is particularly true given that not all knowledge is ‘objective’ (transmittable): some takes the form of ‘experience’, which is hard to transmit. 5 Importantly, ‘the unused services thus created, do not ordinarily exist in the visible form of idle man-hours but in the concealed form of unused abilities’ (1955: 538).

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For Penrose, unused productive services are, for the enterprising firm, at the same time a challenge to innovate, an incentive to expand, and a source of competitive advantage. They facilitate the introduction of combination of resources—innovation—within the firm (1959a: 85). In addition, they are ‘a selective force in determining the direction of expansion’ (1959a: 85). Once it is recognized that firms are not to be defined in terms of products, but instead by resources, and given the potential versatility of the latter, demand conditions cannot limit a firm’s expansion. In this sense, and in the absence of traditional managerial diseconomies, which existence Penrose questions,6 there is no limit to the size of the firm, but only to its rate of growth. Whilst focusing on the internal environment, Penrose does not ignore the external one. In her introduction (abstract) to The Hercules Powder Company case, she claimed that ‘growth is governed by a creative and dynamic interaction between a firm’s productive resources and its market opportunities’ (1960a: 1), which she famously defined as the firm’s ‘productive opportunity’.

Industry organization and anti-trust policy The above account is by and large well known by now, and much of it can be found in other contributions, see Penrose and Pitelis (1999), Kor and Mahoney (2000), Pitelis (2002). Less known is Penrose’s use of these ideas in explaining vertical integration, mergers and acquisitions, industrial concentration, the scope for small firms, and competition policy. Penrose’s ideas on all these are nuanced and harder to summarize in a short space, but some elements are presented here and elaborated upon in the next subsection (see also Slater 1980a). First, vertical integration. For Penrose firms integrate vertically in part because they may be able to produce more cheaply for their own requirements (Penrose 1956, 1959a). However, they have to set this against the diversion of resources from potentially more profitable activities. Mergers and acquisitions can be motivated in part by the need to acquire productive services. Targets are likely to complement or supplement the acquiring firm’s existing activities. Concentration in a growing economy emerges when the larger firms as a group grow faster than the smaller firms and (therefore) the economy as whole (Penrose 1956, 1959a). Larger and older firms have a ‘competitive advantage’ over smaller firms in terms both of non-monopolistic advantages (size, experience, access to funds, etc.) and also because of ‘monopolistic power’ (1956: 64). In a growing economy, however, and given limits to firm growth, it is unlikely that large firms can take advantage of all opportunities open to them, allowing potentially profitable opportunities for smaller firms. These relatively unprofitable activities for larger firms are the ‘interstices’ of the economy. Limits to the

6

See also Demsetz (1995).

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rate of growth of large firms, and big business competition will tend to lead to a decline in concentration, albeit not to absolute size of large firms. On competition, Penrose observed that a strong case can be made for the big firm and for ‘big business competition’ especially ‘with respect to the rate of development of new technology and new and improved products …’ (1959a: 160). The ‘basic dilemma’ is that competition induces innovation but ‘competition is at once the god and the devil’ (p. 265), in that the growth of firms may be efficient but the consequent size may lead to industry structures which impede growth. The above provide a broad picture of what Penrose covered in her early work on the growth of the firm. Penrose’s subsequent work has also been important, particularly her work on the theory of the multinational firm, the international oil industry, the political economy of international relations and development, and the economics of the Arab world.

The MNE and the political economy of globalization and development The MNE Penrose’s flirtation with the multinational enterprise (MNE) and foreign direct investment (FDI) has been long and enduring. Many of her major publications are on this topic. This includes an Economic Journal article in 1956, and interestingly the homonymous entry in the New Palgrave (1987). In all her later writings, notably her Uppsala (1985) lecture on the twenty-five years since TGF, in her 1995 introduction to the book’s third edition, and in her entry to the International Encyclopedia of Management (1996), Penrose includes a section on multinationals. Throughout her writings on this topic, Penrose considers the multinational to be the natural outcome of the very pressures for growth: The processes of growth, the role of learning, the theory of expansion based on internal human and other resources, the role of administration, the diversification of production, the role of mergers and acquisitions are all relevant. . . . It is only necessary to make some subsidiary ‘empirical’ assumptions to analyze the kind of opportunities for the profitable opportunities of foreign firms that are not available to firms confining their activities to one country, as well as some of the special obstacles. (1995: xv)

The same point is emphasized in her 1987 entry to the New Palgrave. The emphasis changes a little in her 1996 paper: ‘International borders make enough difference to justify separate treatment of international firms. The differences arise from the additional obstacles (or advantages) relating to culture, language and similar considerations’ (1996: 1720).7 7 In the entry to the New Palgrave, Penrose also comments on Coase (1937) and Hymer (1976) to the effect that their theories do not distinguish the multinational from domestic firms.

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Penrose’s initial reluctance to acknowledge any fundamental difference in the nature of multinationals could partly explain the fact that her work on this topic has been less noticed and not linked to TGF. One reason for this is that Penrose did not address the question ‘why MNEs’ vis-à-vis, let’s say, licensing or exports, therefore, she did not deal with the ‘nature of the MNE’. This is not very surprising—TGF did not address the issue why (national) firms either. Rather more surprising is the fact that Penrose did not explore in any detail the implications of her TGF contribution for the growth of the MNE either. This is partly because in her early work she chose to treat subsidiaries as independent entities (Penrose 1956). However, the TGF and Penrose’s other insights have important implications on the theory of the MNE. In particular, Penrose’s knowledge/learning perspective can add cognitive and entrepreneurial elements, missing from extant theory (Pitelis 2007a; Pitelis and Teece 2010; Teece 2011).

The state-MNE nexus, globalization and development Penrose’s lasting interest was in the relationship between MNEs and nation states, in particular in developing countries. She was, and remained, one of very few figures that could command respect, as well as fear, from developing countries, MNEs, and international organizations alike, and be asked to advise all three. She spent a significant part of her life in the Middle East, advising numerous governments and MNEs, published extensively on the international oil industry and companies (e.g. Penrose 1968b), and provided expert advice on the topic in a United Nations Conference on Trade and Development (UNCTAD) panel, among others, with Stephen Hymer and John Dunning (Penrose and Pitelis 1999). Inevitably, her uncompromising, objective account of the advantages and disadvantages of MNE activities in developing countries attracted criticism by leading academics, such as Kindleberger (1969), her friends among the Middle East economists (Penrose 1960b: 626), and MNE officials; see, for example, her exchange with H. W. Page of the Standard Oil Company (New Jersey), in Penrose 1959b, Page 1960. Penrose’s feelings about the advantages and disadvantages of MNE activities were closely related to her beliefs about the way in which large firms acquired their dominant position to start with, namely the history of the acquisition of advantages. She emphasized efficiency, but also power and context. The following is a characteristic paragraph: the story of the rise of the great companies deals as much with financial power, commercial and political negotiations and intrigue, with cartel agreements, marketing alliances, price maintenance arrangements, price wars and armistices, mergers and combination, actions to avoid taxes, and the national and international political interests of governments, as it does with the economics of production and distribution. (1964/1971: 182)

In sum, efficiency is critical, but it goes hand in hand with power (both market and political), and is shaped by the overall environmental conditions and the way things are done at a given time and place.

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Clearly her less than rosy picture of MNE advantages and activities has direct implications for the costs and benefits of their operations in host, especially developing countries. While she recognized that there is a lot to be gained from FDI, she also felt that the objectives and needs of developing countries, states, and peoples were quite different from those of private MNEs, and that was a reason why appropriate government policies and institutions (as well as requisite negotiation strategies and tactics), were essential for the governments of developing countries to receive the maximum possible net benefits from FDI. Such negotiations should involve clear objectives and understanding. They should be firm, but also amicable (Penrose 1968b). For Penrose, moreover, the need for an ‘efficient forum for cooperation and for the formulation of common objectives’ (Penrose 1976: 53) led to the establishment of the Organization of the Petroleum Exporting Countries (OPEC), which in turn she considered to be one of the contributing factors to the oil crisis of 1973 (Vernon 1976). Already in 1971 Penrose also considered the issue of ‘economic integration’ (in today’s terms also ‘globalization’), as well as its impact on the nation state, especially the view that its role and power would tend to be reduced. This position was made known by Vernon’s (1971) classic book Sovereignty at Bay, restated and criticized since very extensively (Pitelis 1990, 1991). Penrose’s view on this topic was more nuanced, and very interesting and modern. First, she posed the issue as follows: On all this type of thing is hung the general label ‘integration’—which, as the opposite of disintegration, is supposed to be a very good thing indeed. It is easy to see in broad terms that a similar process may take place internationally—in fact, that it already is taking place in some degree. (1970/1971: 123)

She went on to observe that: It has been persuasively argued that continual innovation in technology, and in methods of stimulating and sustaining consumers’ demand with new products, new designs, new method of marketing are necessary to maintain the momentum of the great industrial economies. Even if this is true, however, innovation and change of the kind that is characteristic of the United States economy, for example, is not the need, nor the popular demand, of the poor world. . . . Moreover, much of the nascent industry of many countries has been established with the help of the great international corporations, which have provided technical advice, granted licences and help under their own patents, given managerial assistance and even made training facilities of various kinds available for local technical people. If attention were focused on this kind of thing instead of on the more sweeping and spectacular generalizations about the ‘integration of the world’ through the multinational enterprise and the economic absorption of the ‘nation-state’, I wonder which function would really turn out to be generally the most important in the developing countries? (1970/1971: 132)

Furthermore, in her talk to the UN Group of Eminent Persons, Penrose (1973b) questioned the ability of the MNEs to undermine the sovereignty of nations (and also their

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ability to promote economic development). She placed great emphasis on ‘knowledge’, by observing that ‘there is a great deal of power in knowledge . . . and . . . much of the fear is based upon a generalised feeling about knowledge’ (p. 38). Furthermore, she went on to observe that some of the costs of MNEs to developing countries ‘are due fundamentally to the policies of the government themselves in giving excessive protection to multinational corporations’ (p. 39). Penrose’s statements point both to a complementarity between the private and public domains, and provide reasons for this complementarity. Importantly, her views point towards and predate recent work by Pitelis and Teece (2010), concerning market co-creation, namely that both firms and governments help co-create markets. Such market co-creation simultaneously justifies the complementarity of the private–public nexus (Mahoney et al. 2009), and explains why the state is both necessary and unlikely to disappear. Penrose’s critical thoughts about the activities of MNEs and her views on the role of the state are, so far, in line with those of Stephen Hymer’s (1960/1976) early emphasis on monopoly. However, while Hymer chose to advocate ‘central planning’ as a solution to the perils of MNEs (Dunning and Pitelis 2008), Penrose was much more nuanced, and indeed prophetic in her views. In discussing developing planning and the role of enterprise Penrose (1968c) observed that: An economy where the activities of enterprise are governed entirely in accordance with ‘targets’ determined in advance by a central plan will not itself be characterized by an endogenous or organic process of growth in the sense that movement from one position to another is a result of an interaction between the producing enterprises and their environment. (1968c/1971: 304)

In addition, I do think that centralized control of enterprises by higher governmental authorities is inimical to the development of a dynamic industrial economy, and the experience of socialist countries, especially the smaller ones for whom exports are important, seems to support this onclusion. (1968c/1971: 315)

In the above context, the issue of development is discussed by Penrose in another paper on ‘Economics and the Aspirations of Le Tiers Monde’ (Penrose 1965). Her observations are also pertinent here, in highlighting the complexity of the developmental process. In her words, it is not the machines in themselves, or even the saving-cum-investment, that are responsible for the high living standards now attained by the developed countries—it is the ability, skills, and economic behaviour of the people that have made possible the development and efficient use of these machines. (1965/1971: 322)

Statements such as the above led Eckaus (1987) to attribute to Penrose the invention of the term ‘absorptive capacity’ (now well known from the writings of Cohen and

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Levinthal 1990).8 Penrose applied this idea first to the firm and then to the nation.9 She concluded by pointing out that: In the best of circumstances the task of raising the standard of living of the people of the tiers monde will require sustained effort over a long period of time, and obviously the policies adopted should be such that every available resource makes its contribution. Some of the problems of the poor countries can be seen as a series of vicious circles, and certainly one of these is the relation between the state of backwardness and the supply, or the use, of the qualified leaders and officials that are required for economic development. (1965/1971: 333)

In this little gem, Penrose highlights the role of institutions and policies, now a critical element of modern theory of development (Sen 1999, Stiglitz 2002, North 2005, Rodrik 2009, Acemoglu et al. 2001). Second, it focuses on unleashing the potential of all resources, much like recent Nobel Prize laureate Ostrom (1990). Last, but not least, it points to the role and importance of ‘political leadership’, and dare we say political entrepreneurship (Klein et al. 2010). Concerning specific government policies, especially towards ‘international trade’, Penrose’s analyses of transfer pricing, ‘dumping’, and protectionism were anathema to mainstream neoclassical views, yet very modern in the context of ‘new international trade’ and related theories, see for example Krugman (1986, 1990), and Pitelis (2009b) for a recent critical account. To mention just a few points, in Penrose (1962) she suggested that ‘restriction on the repatriation of profits under some circumstances may be a useful means of ensuring, for a while, continued foreign investment…’ (p. 138). In addition, Penrose (1973b) suggested that ‘infant firms’, not just infant industries-type arguments be ‘accepted as an exception to the doctrine of “free investment” ’ (p. 8). Last but not least, in Penrose (1990) she suggested that ‘dumping is endemic in the system, an integral part of the competition among large, diversified, research-based, integrated companies’ (p. 185). Importantly, Penrose (1968a, 1969) was as early advocate of ‘joint ventures’—without, however, being oblivious to their limitations. In Penrose (1968a), it is noted that ‘partnerships, or “joint ventures”, are nevertheless often useful means of reducing local antagonisms and thus of facilitating the growth of the international firm’ (1968a/1971: 89). Penrose concluded on a truly internationalist note, the relative freedom of action of large international firms does have many economic and political advantages. It may be, however, that the only way of maintaining these advantages will lie in international arrangements which permit the firms to become truly independent of any one country, more internationally oriented in their policies, and more international in their personnel and capital structure, and thus more 8

We are grateful to Joe Mahoney for bringing this to our attention. Penrose uses the term explicitly for the case of nations in an unpublished 1980 manuscript entitled ‘OPEC, Absorptive Capacity and Developing Countries’ (Penrose Archives, Queens’ College, Cambridge). There she talks about ‘the absorptive capacity of the oil-exporting countries’ (starting sentence, unpaged). 9

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In modern parlance this would suggest MNEs becoming really global, not just multinational companies through the development of a global institutional structure that permits, or even fosters this. To summarize this section, Penrose’s writings on the political economy of globalization and development are less well known. It is arguable, however, that they are both prescient and ahead of her time. Much of what is ‘state of the art’ today in the theory of MNE-state relationship, globalization, and economic development, and IB scholarship were recognized and subjected to her rigorous critical analysis (Pitelis 2011).

Epistemology Penrose did not deal extensively with the issue of methodology-epistemology. Yet her ‘endogenous growth’ approach to organizations and institutions, her insistence that in order to appreciate the external, one has to start from the internal (‘nature’) of the object under investigation, the dynamic interaction between the ‘nature’ and the external, her own experience with research, both at the Hercules Powder Company, and later in the Arab world, her views of mainstream theory, and, lastly, her approach to the link between ‘theory’ and evidence, can all provide scope for discussion of methodology in social science. She appears to have based her work on the belief of a dynamic interaction between induction and deduction, however, in the context of history-based, path-dependent evolutionary change, shaped by conscious actions by economic actors. She critiqued biology-based theories of the firm, for failing to account for human motivation (Penrose 1952). In her view, ‘there would seem to be a genuine complementarity between theory and history’ (1989: 11). Indeed, in her view, ‘theory is needed precisely because reality is so complicated’ (p. 11).

Penrose’s last years Edith’s main interest in her time at Waterbeach following her retirement was the issue of collaboration, ‘networking’, firm boundaries, and thus the possible ‘metamorphosis’ of the firm (see Penrose 2008). She was impressed by the work of G. B. Richardson, his emphasis on the dense network of cooperation and affiliation, his attempt to distinguish market from integration and from non-collusive forms of cooperation, in terms of complementarity and similarity of activities. Building on her earlier work she viewed corporate alliances or cooperative arrangements, as driven ‘not necessarily by monopolistic intent but as a means of gaining mutual access to resources such as technology, regional markets and information services’ (1996: 1722).

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Penrose toyed with the idea whether such networks, clusters, webs, etc., require a different (to hers) theory of the firm, pointing in particular (in private discussions) to the single person, single computer terminal ‘firm’ in IT industries. Her conclusion was that The individual companies do not lose their ‘independent’ identity; but the administrative boundaries in each of the linked firms may become increasingly amorphous and the effective extent to which any individual firm exercises control is often not at all clear. (1996: 1722)

Influence Penrose’s ideas on the theory of the firm have been undoubtedly influential. However, it is arguable that this influence has fallen well short of a recognition of her overall contribution as described above, let alone of the realization and application of the full potential of her ideas for mainstream economic theory. There can be various reasons for this and some speculative thoughts are presented below.

Penrose and neoclassical theory An important focus of managerial theories of the firm was on the extent to which managerially run firms could pursue objectives different from short-term profit maximization like, for example, the maximization of sales revenue (Baumol 1959, 1962), discretionary expenditures (Williamson 1964) of growth maximization (Marris 1964), and what the implications of such behaviour are for ‘managerial capitalism’. Penrose’s own role in this context was seen in terms of her providing justification for the motivation for growth and the ‘Penrose effect’. Concerning the former, and following a critique by Marris (1961) that her treatment of profits and growth was ‘woolly’, as well as Slater’s (1980a) work, Penrose (1985) admitted that profits and growth could not be treated as ‘equivalent criteria for the selection of investment programmes’ (Penrose 1985: 8). Nevertheless, she maintained that she found the assumption that managers of firms try in general to make as much money as seems practical to be not only the most useful, but in fact the only general assumption from which reasonably general conclusions can be drawn. (p. 12)

In that paper, Penrose also conceded the limitations of her theory on the issue of capital markets, and the relation between diversification of consumers’ demand and that of new products, and she praised Marris’s theoretical contributions on this front. She also pointed out that the remarkably similar and independent work of Chandler (1962) provided support for her theory of growth, while Williamson’s (1981) analysis of the M-form organization provided support for her view that grow-

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ing firms ‘expand their ability to manage growth efficiently, with minimum interference with on-going operation’ (1985: 11). Penrose (1985) quotes, not disapprovingly, various applications of the ‘Penrose effect’, which ‘has been applied in a number of contexts, and even to my surprise to agricultural products’ (1985: 9). As already shown, in the (evolutionary) context and way developed, the ‘Penrose effect’ is of importance. It simultaneously describes and determines firms’ limits to endogenous growth and the receding boundaries of the firm. Out of context, the ‘Penrose effect’ could be seen as just another reason why there can be constraints to ‘optimal growth’. Arguably, Penrose’s name in mainstream economics is synonymous to the concept of managerial limits to growth, see Malmgren (1960), Shen (1970). Stripped from its context, that was also the one contribution that was not too hard to formalize in models of firm growth, optimal investment, and ‘optimal growth’. Besides Marris’ (1964) seminal contribution, notable examples are Slater (1980b) and Gander (1991), for the theory of the firm, Buckley and Casson (2007) for the multinational firm and Uzawa (1969) for the theory of macroeconomic (endogenous) growth which predated the subsequent and very influential endogenous growth theory, see Pitelis (2009a) and below. A problem with such literature, however, was that it allowed the mainstream to consider that ‘the Penrose effect was just a minor detail in the neoclassical analysis of optimal investment’ and that ‘Penrose’s critique of equilibrium economics should not really be taken seriously, as her ideas were fully compatible with extended notions of equilibrium’ (Foss 1999: 94). A conclusion from the above is that while Penrose’s work has been noted, used, and influenced mainstream thinking, that was done in a way which downplayed, even ignored her major insights. One can come up with various reasons why that has happened, some discussed by Loasby (1999), Richardson (1999), and Pitelis (2009a). It is also arguable that attempts to integrate Penrose with the neoclassical theory could prove problematic. Importantly, this is due to the issue of knowledge. The neoclassical perspective focuses on the efficient allocation of scarce resources given the assumption of perfect (even if asymmetric) information. In Penrose’s theory, knowledge, in the form of experience, is not just ‘tacit’ and hard to transmit, but it can simply not be known in advance, both because of uncertainty and also because knowledge is being created in the context of an evolutionary process and through the very purposeful actions of economic agents, not least firms. Additionally, knowledge is not really scarce in the conventional sense. Its use by someone need not necessarily and always exclude somebody else from using it, and the exchange of knowledge can actually help to enhance it. A theory that starts by assuming full, pre-existing knowledge is clearly unsuitable to deal with these issues. But these, as Hayek (1945) has shown, are the issues. In addition to the above, as already noted, and in contrast to the neoclassical theory, Penrose does not have conventional, rational optimizing agents, does not focus on efficient allocation of scarce resources alone, does not look for an equilibrium. In all, and while we do not doubt the significance of, and need to bring together, coordination and

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growth, we claim that neoclassical theory could simply not fathom Edith’s ideas and remain neoclassical. In this context the apparent failure of her work to make significant inroads to neoclassical economics is less hard to appreciate.

Penrose and the resource/knowledge/(dynamic) capabilitiesbased perspective In stark contrast to neoclassical economics, the past twenty-five years or so, have experienced a major resurrection of Penrose’s work in other fields, notably organizational economics, strategic management, international business, (strategic) entrepreneurship, and even (strategic) human resource management. In these fields the resource-based, competence-based, or knowledge-based theory of the firm, with or without explicit acknowledgement of her work, has revisited all of her main points. Already in 1985 Edith became aware of these emerging developments. Some of the rapidly growing literature and research on strategy and strategic management . . . tend, by their very nature, to merge what I have called the ‘resources approach’ with the ‘environment approach’ and are likely to produce empirical results useful in testing a theory of the growth of firm. (p. 15)

Penrose here refers not just to the ‘industry attractiveness’ and ‘positioning’, Portertype approach to strategy (Porter 1980, 1985), but also the then emerging resourcebased, competence-based, (dynamic) capabilities-based and/or knowledge-based approach to strategy. All these were building consciously or unconsciously on her work, as well as that of Chandler (1962), Demsetz (1973) and others, including founding figures of economics, such as Adam Smith and Alfred Marshall. Being in a business school at the time, Penrose had come across some of the early literature already then, notably Teece’s (1982) now classic article which combined Penroseinspired resource-based and transaction costs ideas in order to explain the multiproduct firm. Since, the literature has expanded by leaps and bounds. The resource, knowledge and more recently (dynamic) capabilities-based perspective is now arguably the dominant one in strategic management and organization science. The major journals in the area are editing special issues on the topic (Strategic Management Journal, 1996, Winter Special Issue; Organization Science, September–October 1996), and it is now hard to find a new issue in any major journal in this field without reference to these issues and Penrose. Every aspect of the firm, including the multinational, is currently influenced by this work, see Pitelis (2007). Special issues of journals such as Contributions to Political Economy (1999), Journal of Management Studies (2004), Managerial and Decision Economics (2005), Management International Review (2007), and Organization Studies (2008) have been devoted to Penrose’s ideas—the last mentioned published her last article on the ‘Metamorphosis of the Firm’ (Penrose 2008).

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More recently the emergent literature on (strategic) human resource management (SHRM) and (strategic) entrepreneurship use TGF and the RBV as one of their main pillars. So does the dynamic capabilities (DCs) perspective that is currently very popular in strategy thinking; see Pitelis and Pseiridis (1999) and Foss et al. (2008) for entrepreneurship, Georgiadis and Pitelis (2012) and Teece (2011) for SHRM, and Teece and Pisano (1994), Teece et al. (1997), Teece (2007), Helfat et al. (2007) and Augier and Teece (2008) for the DC perspective. Even more recently, Pitelis and Teece (2009) build on Penrosean ideas and re-visit the nature and essence of the firm (see also Kay and Pitelis 2009, for inter-firm cooperation, Pitelis and Teece 2010 for the MNE, and Pitelis 2011 on globalization and development). The (strategic) marketing literature, also drew on resource-based view (RBV ideas) (Hunt 2000). Resource and capability-based arguments are now central in the explanation of firm-level sustainable competitive advantage, Teece (2007), Pitelis (2009c). At the more macro level, endogenous growth and capabilities-related ideas are dominant in macroeconomic theories of endogenous growth (Lucas 1988; Romer 1986, 1990; Aghion and Durlaf 2005) in economic development (Sen 1999), and the sustainable competitive advantage of firms and nations (Pitelis 2009b). Syntheses of Penrose’s ideas with those of the behavioural school have been produced by among others Pitelis (2007a), see also Organization Science (2007) special issue on Cyert and March’s work.10 There is no obvious limit to the growth of such literature, if anything it seems to be branching out at an alarming rate in increasingly novel and unpredictable directions. Edith was fortunate to see and enjoy the first signs of this new wave of recognition. While in Waterbeach, she was approached by contributors in the field asking for her comments and contribution. Sure enough she returned to the issue. Her 1996 paper on ‘growth of the firm and networking’ revisits the issues she raised and comments on the current state of play. She recognized the importance of transactions costs issues, which she considered as one of the ‘two major types of explanation for the growth of firms in a market economy’ (p. 1717). The second was the resource-based view she helped originate. Interestingly, she felt that ‘the two approaches are not mutually exclusive’ (p. 1717), a view shared by Coase (Pitelis 2002). Coase’s recognition of the need to go back to production, to ‘running a business’, represents an important vindication of Penrose’s ideas. All the same, there is an important sense in which the transaction costs perspective of Coase, as developed by Williamson (1975, 1981) is easier to assimilate in neoclasssical thinking. It assumes optimizing agents and focuses on static equilibria. While there is scope for rendering transaction costs theorizing dynamic, and for integrating transaction costs with Penrosean ideas, (see for example, Pitelis 1991; Langlois and Robertson 1995; Pitelis and Teece 2009), it is arguable that this cannot be done without either stripping Penrose from her fundamental insights or stripping neoclassical theory from its very neoclassicism. 10 Even two book reviews of TGF more recently appeared, almost fifty years on (Volpe and Biferali 2008; Nair, Trendowski, and Judge 2008).

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An Overall Assessment The argument and some recent critiques and debates Penrose’s major contribution and lasting influence pertain to both her argument and her method-epistemology. The argument, first, is not simply about the theory of the growth of the firm; it is an argument about the theory of (growth of) knowledge. For anything and everything new to even be conceived, perceived, let alone implemented, one needs prior knowledge, including the very capacity to obtain knowledge, that is, to learn. There exists a variety of institutions that help achieve this: families, schools, norms, customs and traditions, human interaction in society at large. Hayek’s (1945) view was that this knowledge is dispersed and that there is, at least in capitalist economies, an institution par excellence, the market, that facilitates its transmission and (thus) the co-ordination of individual plans and in the society at large. This is a fundamental insight. For Penrose it is firms which help create knowledge; indeed firms are seen by her as better at doing so than markets. If so, Penrose both critiques Hayek, since firms involve planning, and complements him, since private firms and markets together—the market system—both create new and transmit (dispersed) knowledge. Penrose’s contribution, however, goes deeper. If knowledge in general, or even a type of knowledge most suitable for production-related activities, is engendered more efficiently within firms than without firms, and to the extent that this knowledge is of relevance or use to society as a whole, everything and anything we conceive or perceive and the lens through which we do so, is predicated upon the existence and functioning of firms. As we saw, Penrose’s method/epistemology involved a dynamic interplay between induction and deduction, structure and agency, in the context of a history-informed path-dependent evolutionary dynamic, shaped by actors’ conscious, yet path-dependent and structure-moulded actions, in the context of a purposive organization, the firm, operating under conditions of uncertainty. Both the argument and the method of Penrose are more suited for the concerns of non-neoclassical economics and for strategy scholars. Concerning economics, one can identify two major camps; one focusing on efficient allocation of (scarce) resources, the other on resource and wealth creation.11 Most classical economists, notably Adam Smith and Karl Marx, but also Joseph Schumpeter (1942), have paid attention to the issue of resource and wealth creation. To varying degrees, these economists also dealt with the related issue of resource allocation. Adam Smith, for example, arguably owes his place as the father figure of modern (neoclassical) economics to his very analysis of the allocative and co-ordination role of the ‘invisible hand’, or the market. Yet, he believed in the labour theory of value, and attributed wealth creation to labour productivity engendered within firms, for example, his famous pin factory, from where his The Wealth of Nations, starts. 11 Resource allocation and creation are related. For example, a change in resource-allocation can lead to resource-creation. Yet, there is a difference in focus between the two perspectives (see below).

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In the pin factory, labour productivity is achieved through specialization, the division of labour and teamwork, which leads, among others, to new inventions. For Smith, the realization of these benefits is limited by the size of the market. In Allyn Young’s (1928) powerful insight, the size of the market itself is determined by specialization and the division of labour, the latter leading to further, more elaborate sub-division of labour and extending the size of the market. The other major (and related) difference between the classical and the neoclassical tradition concerns growth versus co-ordination. As Loasby (1999) and Richardson (1999) explain, the neoclassical focus is on co-ordination, while the classical is on growth. In Penrose’s ‘garden’ metaphor, neoclassical price theory does not deal with firm growth, which is Penrose’s ‘garden’. For Loasby (1999), Penrose’s work reinvented the classical resource-creation tradition. In addition, Richardson (1999) claimed that, in contrast to Penrose, one needs to deal with both co-ordination and growth, and that Penrose’s contribution arguably provides a tool that can help this come about. Indeed. Penrose’s endogenous knowledge perspective goes beyond Allyn Young in explaining why and how the size of the market is itself determined by specialization and the division of labour (as well as vice versa). It provides the requisite perspective and knowledge to approach the synthesis between dynamic innovation (equals) knowledge and (thus) productivity-growth perspective and dynamic co-ordination through the knowledge provided by firms’ own operations and the perceived equivalence (in part achieved through firms’ own conscious efforts) of supplies and demands. It helps bring together resource-creation and efficient allocation as explained above, in that it is the internally generated knowledge within firms that is required to supply firms with the very tools to achieve (rather than assume they know how) efficient resource allocation and innovation-growth. In this sense Penrose’s contribution is seminal. However, her inadvertent association with the ‘wrong camp’ and (thus) the ‘wrong issues’, alongside the difficulties we mentioned under the ‘Influence’ section, help explain why, in the currently dominant neo-classical resource-allocation perspective, hew views may be seen as peripheral or non-relevant. This is not the case for organization and management scholars, whose focus instead is on resources, and firm growth, strategy, and entrepreneurship. Penrose’s ideas can arguably make a significant contribution on the issue of the ‘nature of the firm’, too, namely the question why firms exist (Coase 1937). Penrose took for granted that firms exist. Coase (1937) equated the ‘nature’ of the firm with the ‘employment relation’ and attributed this to the efficiency benefits derived from reductions in market transaction costs. Penrose’s approach has complementary implications on Coase’s ‘nature argument’. The ‘employment relation’ can be explained in terms of efficiency gains, effected through productivity enhancements, through endogenous innovation (equals) knowledge-growth; see Pitelis and Wahl (1998). To the extent that dynamic transaction costs can also be of relevance, it will be the overall dynamic transaction costs reductions cum knowledge-induced productivity benefits that could explain the Coasean firm. Importantly, the very perception of when and how to reduce transaction costs can only be afforded through intra-firm knowledge generation; see,

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among others Fransman (1994), Pitelis and Pseiridis (1999), Pitelis and Teece (2009). Following the emergence and rise of the resource-capabilities/knowledge theory of the firm and the resource-based perspective in (business) strategy, Penrose’s work has now become a canonical reference—indeed she is arguably seen by some as the mother figure of this perspective (much like Michael Porter had become for the ‘positioning’/industry-centred view and Ronald Coase (1937) on transaction costs); see Kor and Mahoney (2000) and Pitelis (2009a).

Further Limitations and Generalizations It is arguable that Penrose’s contribution fails to fully address a number of important issues. The first has to do with the issue of knowledge-related intra-firm advantages. These are always taken by Penrose to lead to growth. This is not self-evident. The question is why not sell your (intangible) assets in the open market? One has to return to some sort of ‘market failure’ argument to address this, either natural (transaction costs or tacit knowledge related) or structural (fear of creating a competitor). Clearly, the argument can also be phrased in terms of differential capabilities, that is, firms are better in making use of their own assets than other firms (i.e. the market!). One can read arguments by Buckley and Casson (1976), Teece (1977), and Kogut and Zander (1993), plus the importance of oligopolistic interaction in this context. Penrose did not discuss transaction costs’ arguments in the book. While oligopolistic interaction is part and parcel of her story, it is not explicitly discussed in the context of ‘why not sell’. Another limitation has to do with a broad category of issues related to what is now called ‘agency’, ‘moral hazard’, ‘monitoring’, and the like. The literature on these issues is huge, notable contributions being Alchian and Demsetz (1972), Jensen and Meckling (1976) and Grossman and Hart (1986) and Hart (1988; 1995) and Hart and Moore (1990). In brief, the issue here is that whenever there exists a ‘principal–agent’ relationship, like for example employer–employee, or shareholder–manager, and when the interests of the two parties are not ex-ante fully aligned, agents may have discretion to pursue their own interests. When this is the case, it becomes important for principals to devise means for aligning the incentives of employees to their own. Besides Alchian and Demsetz, Jensen and Meckling and the Grossman, Hart and Moore (GHM) approach of incomplete contracting, managerial, and behavioural theories of the firm are based on similar concerns, see Pitelis and Teece (2009). There is little of that in Penrose. Indeed there is no conflict of any kind within the production process. We believe her analysis could be usefully enhanced by allowing conflict to enter it (see Pitelis 2007a). Besides the aforementioned ‘limitations’, and building on (some of) them, we can propose some generalizations of Penrose. The first concerns excess resources. Building at the time on important insights by Charles Babbage, Sargent Florence, and others, Penrose considered it normal to expect excess resources to be present in all but very large scales of output, for reasons related to ‘balance of processes’, indivisibilities of

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resources, etc. All these are relevant but not strictly required. Penrose can be generalized even by starting from a hypothetical situation of no excess resources and just observing knowledge generation within firms. This suffices. Indeed the very observation that human beings (and some machines) have ever-present unrealized (brain) potential will do. In effect, organization aids potential, which (activates brainpower and) releases resources. All other arguments are sufficient but not necessary conditions for the Penrosean story to follow. The second issue we wish to explore by way of generalizing Penrose is that of intrafirm conflict. The conflict par-excellence is that between employer and employee (Marx, Alchian, and Demsetz, GHM). Recognizing this may help Penrose’s story in various ways. First, it provides an extra reason for thinking by entrepreneurs-management of how to address this—which is innovation-knowledge generation. Second, it helps explain/predict, at least partly, the direction of this thinking. Last, but not least, conflict can lead to creative tension, and thus be a source of new information, knowledge, and innovation, but can also be destructive (Pitelis 2007). The recognition of intra-firm conflict questions efficiency-only based explanations of organizational change, including that of TGF. As, for example argued by Hymer (1970) and Marglin (1974), conflict may lead to a choice of technology that favours sectional interests, not necessarily societal ones, for example labour-saving technology may serve as a labour control device. Such choices by management may in turn help intensify conflict. This may render crucial the role of non-economic factors that help establish shared morals and vision through, for example, leadership, ideology, legitimization, shared views, culture, and enablement (Simon 1995, Boddewyn 2003). There is little of that in Penrose. In TGF, interest alignment appears to be in part always present, perhaps effected through managerial leadership and its ability to implant its vision to other groups within the organization. Whilst this may well be possible, it is neither self-evident nor cost-free. For example, Cyert and March (1963) asserts the opposite—that conflict is simply always there, and that firms can use ‘organizational slack’ (such as Penrose’s ‘excess resources’) to alleviate conflict. This, points to the need to discuss in more detail leadership, ideology, legitimization, and the effecting of shared values, beliefs, and common moralities in organizations. Crafting organizational, sociological, cognitive, and psychological elements on TGF may help explain why and how management, when seen as a legitimate authority, can effect conflict alleviation and leverage human resources to enhance firm performance. This in turn will tend to engender excess resources and slack, which can be used in part to alleviate conflict, in part to motivate and enable them to put it to profitable use through endogenous innovation and growth. An integration of behavioural and Penrose-inspired RBV would suggest that intrafirm knowledge generation can engender endogenous innovation and growth through the generation and leverage of ‘excess resources’ and ‘slack’. ‘Slack’ may serve as a means of conflict alleviation alongside monitoring, incentives, and rewards, but also motivational and psychological reasons for obedient behaviour. Besides motivating endogenous growth and innovation, slack may also enable it, given resource availability.

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Intra-firm knowledge generation moreover can inform management as to why, whether, and how to leverage excess resources so as to alleviate conflict, breed success, and engender a virtuous cycle of endogenous growth and innovation.

Concluding remarks By bringing in issues of endogenous knowledge, innovation and growth, human resources, the role of ‘image’ and ‘productive opportunity’, and the dynamic interaction between internal and external, agency and structure, Penrose went well further than existing economic theories to provide what we consider the first economics-based, yet interdisciplinary, organizational theory of the firm. Penrose’s view of firms as organizations aiding the generation of knowledge, provides a new perspective on firms, but also on organizations and institutions at large. Her theory serves as the glue that binds together, including economic and organizational theories of firms, organizations, institutions, and (business) strategy. Importantly, Penrose’s work has significant implications for managerial practice. Penrose’s work was analytical, not normative or prescriptive, and she advocated no managerial practice of any kind. Having said this, she actually felt that rents, of both the monopoly type and through the building of ‘relatively impregnable bases’, were important for the sustainable competitive advantage of firms. Whilst monopoly power could give rise to short-term success, only the building of ‘relatively impregnable bases’ was important for the long-term successful expansion of firms (Pitelis 2004; 2009c). The building of ‘relatively impregnable bases’, however, is itself predicated upon the successful re-deployment of resources, competences, and other advantages, in a dynamic, changing, uncertain environment. In such an environment, the key to longterm success was to build technology bases through perennial innovations, through knowledge creation and by internalizing the Schumpeterian process of ‘creative destruction’. In her words: The Schumpeterian process of ‘creative destruction’ has not destroyed the large firm; on the contrary it has forced it to become more and more ‘creative’ (1959a: 166).

In more recent years such ‘creativity’ might have involved ‘externalization’ and ‘open innovation’, which could also be leveraged to achieve value capture (Panagopoulos and Pitelis 2009; Dunning and Pitelis 2008; and Pitelis and Teece 2009, 2010). There is a clear message for management practice from that, which is also good for practice, namely a focus on firm and market creation and co-creation through appropriable and perennial innovation (Pitelis and Teece 2009). However, Penrose also felt that good managerial practice might not be by itself adequate. She therefore also advanced suitable anti-trust policies by government, which aimed to marry firm-level sustainable advantage, with nation-wide sustainable advantage. She also saw an important role for government in developing countries, especially

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as concerns their relationship to multinational firms and FDI. While such aspects of Penrose’s work have been less noticed, they are gradually becoming very relevant, especially in the post-Washington consensus global financial crisis context we are currently experiencing. It is arguable that Penrosean concerns and ideas about sustainable economic development, the role of the state and state–MNE interactions (thus development economics), is a more natural milieu through which Penrosean ideas can be appreciated more in economics. We consider sustainable development to be a major area in which Penrosean ideas will gradually become very influential. Related capabilities-based independent work by Sen (1999), but also the endogenous macroeconomic growth literature (see Pitelis 2009c) point to this direction.

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chapter 14

peter f. druck er p eter s tarbuck

Introduction Drucker is known as ‘The Father of Modern Management’. Many would argue that he changed the way we look at management as a field of theory and practice more than anyone before or since. Evidence to support this argument is to be found in his forty-one books, some of which have updated editions while others have been published posthumously. With his entries in compilation management books, essay, papers, articles, and lecture notes, various assessments have been made of his written output. Conservatively they amount to ten million words, which equates to twelve ‘Bibles’ and eleven ‘The Complete Works of Shakespeare’. Not only did Drucker exceed the output of any other management writer, he is also the management writer most written about, and headed the management citation lists for years. His awards and recognition have not been tabulated but include the Presidential Medal of Freedom in 2002, the US’s highest civilian honour.

Background Peter F. Drucker was born on 19 November 1909 in Vienna, and died in Claremont, California on 11 November 2005. As he progressed into old age he wrote that he had lived through all of the major events of the twentieth century. The Viennese records show that Drucker’s parents were Jewish by birth, and converted to Lutheran Christianity before Drucker’s own birth. Drucker’s father was a principal civil servant. His mother attended lectures by Sigmund Freud, but there is no record that she progressed in her medical interest beyond this point. He described how his mother arranged dinners at their home for leading politicians, writers, artists, and economists

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in a Vienna before the First World War. The family lived through the tumult of the First World War, from which Austria emerged a defeated and impoverished nation. Drucker was educated formally at the Vienna Gymnasium, which he described as ‘not stimulating’. He credited his adolescent development to attending ‘salons’ where he had to present his ideas to adults, and then argue them. Upon finishing school he took a job as an apprentice clerk in an export business in Hamburg. His time in Hamburg was a watershed in his intellectual development as he enrolled at Hamburg University as a doctoral student in the law faculty, while in full-time employment. As a non-German national, Drucker was not permitted to practise general law, but was eligible to enrol for international law. He recalled later that he would spend five evenings a week in the library where ‘for fifteen months I read, and read, and read in German, English and French’. Also, as a student, he was allowed one free visit to the Hamburg Opera each week. He tells us that the most consequential and lasting impressions came from performances of Verdi, who wrote his most demanding work Falstaff, at the age of 80. He said that Verdi’s life aim and achievement left a lasting impression on him, as he promised himself, like Verdi, that he would work all his life, continually learning, and striving to make his next work the best. His reaction was to embark on an intellectual journey to attempt to make sense out of life. His primary influences were Kierkegaard’s Fear and Trembling, which taught him that we have to learn to die before we can begin to live, and Dostoevsky’s Grand Inquisitor which advocated Christian responsibility in making all of life’s decisions including the most difficult. Amongst his other influences were Thomas Aquinas, Martin Luther, Jean Calvin, and Max Weber. Having found the purpose for living, Drucker needed to discover a society in which its citizens could live in freedom and with a purpose. What he envisaged was not a utopia, but a workable society. He examined the alternatives and concluded that Marx’s communism lacked a social system, and also was flawed economically. Drucker’s opinion was that in a Marxist society, individual freedom had to be sacrificed to the interest of the collective masses. Consequently, there was no capacity for individual purpose in a collective society. After fifteen months in Hamburg, Drucker transferred his studies to Frankfurt University and also began work for a merchant bank that had been taken over by a Wall Street brokerage business. He wrote an article in September 1929 on why the New York stock market would continue to prosper; two days later the Wall Street crash occurred. He recounts that nothing remains of the publication as it ‘disappeared without trace a few days later, so did my job’ (Drucker 2002: ix). He wrote that after this salutary lesson he vowed never to make financial forecasts again. He eventually joined the editorial staff of the Frankfurter General Anzeiger as an economics and current affairs editor; while at the ‘paper’ he travelled throughout the near East and Europe, attending the Geneva Disarmament Conference and visiting the League of Nations. After four years of study in 1931 he submitted his thesis ‘Die Rechfertigung des Vokerrechts aus dem Staatswillen’ (The Justification of International Law and the Will of the State) (published in 1933). The thesis examined the two theories of international law

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that had developed post-World War I in the hope that they would facilitate world peace. The two recognized theories were the ‘theory of self-imposed obligation’ and the ‘theory of agreement’ which was Drucker’s choice. After the completion of his doctorate he carried out some part-time lecturing at Frankfurt, but rejected an invitation to become a ‘Dozent’ or registered lecturer, which in Germany was a step towards becoming a professor. Having researched his ideas on international law as a foundation for worldwide social justice he returned to his ongoing objective—to find a workable society. In 1933 Drucker’s essay ‘Fr J Stahl; Konservative Staatslehre & Geschichtliche Entwicklung Motrtueringan’ (Fr J Stahl; Conservative Theory of the State and Historical Development) was published. Frederich Julius Stahl (1802–61), who had a considerable influence on Drucker’s ethical and social ideas, was a German politician and university academic who proposed a conservative society. The basis of his argument was for an equitable society led by a Christian monarchy. Drucker stated that he wrote this work to make it clear that he opposed the ideas of the Nazis (Stahl was a Jewish convert to Christianity, but even so, supporting his ideas represented a decisive rejection of Nazi ideology). After the essay was published, having made his point, he prudently left for his native Austria. After a short stay in Austria, Drucker left for England and later recorded that since his early teens he had wanted to leave Austria ‘to leave the old behind’. Arriving in England in the summer of 1933 he first worked as an insurance analyst and then with a Londonbased merchant bank. In all he spent four years in Britain. He continued to write prolifically, including his first publication in English, a contribution to the book ‘Germany: The Last Four Years: An Independent Examination of the Results of National Socialism’ by Germanicus (1937). He also attended the lectures of Maynard Keynes at Cambridge University, and later claimed to be the only person to have heard the lectures of the two greatest economists of the twentieth century, Keynes and Schumpeter. After listening to Keynes, Drucker concluded that economics was not to be the primary subject of his life’s work, as economists were interested in commodities, and he was interested in people. He later wrote on economics, especially on Keynes and Schumpeter. It was also in London that, while sheltering from the rain, he entered an exhibition of Japanese painting. This led to a lifelong interest as a collector and advisor to museums, and also as a professorial lecturer on Zen art. Drucker also married near the end of his stay in London. He later remarked that the two best decisions of his life were not embarking on full-time adult education, and not accepting his wife’s first refusal of marriage. Soon after marriage, the Druckers departed for New York to establish a new home in the US, where they remained permanently. Their marriage produced four children, one son and three daughters. Doris Drucker has an MS in Physics and has had her own career in addition to being a wife and mother. She has remained conspicuous in support of her husband and her family’s work but modestly inconspicuous herself as she contributed to non-profit organizations. In 1996 she founded a company to manufacture a voice volume monitor, which was a mutual invention with a partner. Her book ‘Invent Radium or I’ll Pull Your Hair’ (2004) provides us with details about her background.

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In America, Drucker crystallized his ideas on the third stage of his intellectual journey of discovery, his ethical purpose for living. This evolved out of his ideas on what he perceived as the driving force of society, economics. He argued that economic man was recognized by Adam Smith (1723–1790), and that he himself was of Smith’s past era. He returned to Marx and identified the fault in Marx’s economics: regarding the worker as the economic force and rejecting the idea that it was someone else’s capital that paid for the machines, equipment, and power. Marx also ignored the input of management. He regarded Keynes as an outstanding intellect, but considered his economic ideas as old fashioned and a contributor to, rather than a solver of, economic problems. For Drucker, Keynes’ basic theory was that the economy had to be adjusted to bring it back to his goal of equilibrium, which Drucker described as Keynes making adjustments to his master plan by applying ‘his pedals’. Keynes also did not integrate into his ideas the benefit of productivity or the uncertainty and unpredictability of the customer’s decision. Drucker did support Keynes’s proposal at the Bretton Wood Conference of 1944 to create the Bancor as the new international reserve currency to give monetary stability to the participating countries. Drucker believed that the later international financial crisis could have been averted if the Bancor had been established. Having rejected the totalitarian economics of Marx and the interventionist programmed economics of Keynes, Drucker asserted that the economic ideas of his father’s friend Schumpeter were the correct ones. Schumpeter postulated that when the economy is in a trough, entrepreneurs begin to emerge after perceiving opportunities. They apply innovation and start new combinations (ventures). By their activity the economy recovers; as more entrepreneurs join in, prosperity is created. When the economic recovery reaches the crest of the wave, the entrepreneurs realize that the opportunities have disappeared, so consequently they refrain from promoting new ventures. The result is that the economic activity contracts and the economy then corrects its excessive activity, and slides back down towards the trough. Schumpeter’s belief was that the economy was driven by entrepreneurs, and that new ventures were formed and disbanded in a process of ‘creative destruction’ as the old and unnecessary were replaced by the new and necessary. Productivity was essential to create prosperity for all. It was always customers who decided what constituted value. These ideas resonated throughout Drucker’s later work.

Early works In New York, Drucker re-embarked on a career as a journalist, writing articles and papers for quality magazines and journals. By May 1939 he had published his first major book The End of Economic Man, which was conceived in 1933 when Hitler came to power. He described it as an ‘attempt to analyse the roots of Nazism and the decay of Europe’s liberal and humanist traditions’ (Drucker 1939). The book was an audit of events, ideas,

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and personalities that went back to Ancient Greece, progressed through medieval Christianity, compared the differences in the eighteenth century between the development of the English parliamentary system and the French Revolution and their respective formative thinkers, to arrive at ‘the despair of the masses’ in Germany brought about by economic and ethical collapse. The conclusion was pessimistic as Drucker regarded the prospects of the remainder of democratic Europe falling under totalitarian rule as being high, while also predicting in the long term that totalitarian rule could not survive. America was regarded as exceptionally different, and the only hope, with Henry Ford (1863–1947) mentioned as a free enterprise contributor. Drucker praises Ford, and Walther Rathenau (1867–1922), the German polymath and industrialist, along with the Welshman Robert Owen (1771–1858) who was described as ‘that almost saintly figure of early capitalism’ for his earlier democratic ideas of factory employment. By 1941 Drucker had returned to his teaching career, teaching economics and statistics one day a week at Sarah Lawrence College in Bronxville, New York. Later in 1941 he began teaching at Bennington College, Vermont, on a weekly basis, together with visiting lectureships at other small colleges throughout America. By the time America entered the war in 1941 he had lectured at fifty such colleges. In the summer of 1942 he took up a full-time appointment at Bennington where he taught subjects on demand. He said that he wanted to keep on teaching whatever subject was needed, and so he taught American government, history, literature, religion, economics, political theory, philosophy, and management. Early in his stay at Bennington he became an American citizen, and remained at the college as Professor of Politics and Philosophy. Coincidentally, with an increase in the numbers of quality journals to which he was a contributor, Drucker’s second book The Future of Industrial Man (1942) was published. Its tone was optimistic, as he told his audience that they must plan for their world after Hitler’s defeat. The book embraced his ideas on Christian ethics, and expanded on his ‘free society and free government’, while giving an historical lesson on the evolution of society. He reinforced his ideas that society must provide the individual with freedom, status, and function. He argues that the mercantile society is a society of the past, where output equated to established demands; also that the mass society of the agrarian society had been eclipsed by the industrial society, which had not yet developed its own working society that was imperative for stability. His understanding of the foundation of American society framed by the ‘Founding Fathers’ was now apparent. Whereas these ethical principles were defined, it was also obvious in his continuing work that the details of his workable socio/politic society held a fascination for him, as he revisits and adds to his defined parameters and adjusts them to the changes in society. He identified that organizations were social in nature and that management had now usurped the power of shareholder owners in large corporations. Drucker’s interest in management was now being established as he identified decentralization as a structure and the desirable pattern for ‘big businesses in a free enterprise society’.

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It is clear that Drucker was now having further thoughts on his original intellectual journey. His ethics had their established position. His society as the order that provided the social environment for life has been identified. His economics was now being reconsidered as the third and final part of man’s workable society. Drucker was now realizing that, although economics was an essential part of the total habitat, the right economic theory had to be selected in order for society to fulfil its essential promise of prosperity. The consequence of this choice was the difference between depression and prosperity. His new recognition was that management was the driving force that created economic value, productivity, and prosperity. This was his new personal discovery, which became the fourth part of his intellectual journey of discovery for his purpose for living. In late 1943 Drucker unexpectedly received a call from General Motors (GM), the then world’s largest corporation with 500,000 employees. GM executives had read his latest book and invited him to conduct a study of their operations. This was the opportunity that Drucker was seeking. His object was to study GM as a social organization—the first study of its kind. While undertaking this study Drucker discovered management for himself, as is recorded in his first book on management Concept of the Corporation (1946). This was a comprehensive catalogue of the functions and activities of management, some of which he described in detail. Comparisons with his later works reveal that in this book he was setting out a large part of the basic agenda for his later writing on management. Of the big management idea, he introduced ‘Federal Decentralization’, later termed ‘Decentralization’ to the wider audience. The launch of the book coincided with the US government’s ‘GI Bill of Rights’, which provided advanced education for demobilized soldiers. As the troops returned from the war, many wanted to know about business and how it worked. Drucker’s book was waiting to tell them. It not only helped the GIs, but it also launched Drucker on his career as a popular writer on management. His next book, The New Society (1950), coincided with a move back to New York as Professor of Management at New York University’s Graduate Business School. The book was a tidying-up and expansion of some of the ideas from his earlier books. His society now was neither capitalist nor socialist. While accepting that market forces will serve the consumer’s best interest, he did not see them as the solution for all problems. Among the subjects he examined were workers’ attitude to wages. He agreed that a wage guarantee scheme would be desirable from the workers’ point of view, but concluded that only the large employers could provide such schemes, with only about a one-third income guarantee. Although Procter and Gamble had a much admired guarantee scheme, Drucker argued that unless schemes were protected by insurance against bankruptcy, they could never be fully guaranteed. Drucker also returned to the question of, ‘what business the enterprise is really in’. He made it clear that this was the first question the ‘top team’ needed to ask itself. He concluded that it sounded a simple question, but was often a difficult question to answer (pp. 185–6). Drucker also discussed ‘equal opportunities’ (which did not have today’s meaning of protection against sexual discrimination and the interest of minority groups).

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He noted that university graduates were receiving preference in the recruitment for middle and upper level management positions over people from the shop floor including those who have made foreman grade. Drucker regarded this pattern as not acceptable. ‘The abilities which make for scholastic success are not the abilities the enterprise need. By asking the school master to pick management, the enterprise will deny the very men it needs most: the entrepreneur, the innovator, the risk-taker’ (p. 173).

Mature works Drucker’s maturity into an outstanding management thinker was confirmed in his next book The Practice of Management (1954). The book emerged from the work of a management practice review team commissioned by General Electric of America (GE), of which Drucker was an original member, and eventually its leader. His purpose was to explain what management is and how managers do their jobs. Drucker told his audience that ‘the manager is the dynamic, life giving element in every business’ and that: The emergence of management as an essential, a distinct and a leading institution is a pivotal event in social history. Rarely, if ever, has a new basic institution, a new leading group, emerged as fast as has management since the turn of his century. Rarely, in human history has a new institution proven indispensable so quickly; and even less often has a new institution arrived with so little opposition, so little disturbance, so little controversy. (p. 3)

He stated that there was only one valid definition of business purpose: ‘to create a customer’, to which he later added, ‘and get paid’. The book was rooted in his own experience and used around 110 case studies. Of the cases, IBM, Sears, and GE received the most favourable comments, while Ford was criticized for not having an appropriate structure. IBM scored highest for integration of labour and customer service attitude, Sears for the quality of its succession policies for its CEOs, and GE for the quality and depth of its management in the most complex multi-divisional business. Through The Practice of Management Drucker launched his ‘Management by Objectives and Self-Control’ (MbO) an all encompassing management concept, which he set in context: The word ‘philosophy’ is tossed around with happy abandon these days in management circles [to create effect to mask the lack of substance]. But management by objectives and self-control may legitimately be called a ‘philosophy’ of management. It rests on a concept of human action, human behaviour and human motivation. Finally, it applies to every manager, whatever his level and function, and to any business enterprise whether large or small. It ensures performance by converting objective needs into personal goals. And this is genuine freedom, freedom under the law. (p. 134)

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Later he set out his ‘seven new tasks’ that managers must take on to meet the new demands of tomorrow: 1. 2. 3. 4. 5. 6.

Manage by objectives. Make longer risk assessments—a longer time frame. Be able to make strategic decisions. Be capable of building a continually improving integrated team. Be able to communicate information fast and motivate people. Be able to look beyond their own functions to integrate their efforts with the business as a whole. 7. Lift their vision outside the limits of knowing a few products in one industry. The manager must learn how ‘to take in developments outside his own market and his own country. Increasingly he will have to learn to see economic, political and social developments on a world-wide scale and to integrate world-wide trends into his own decisions.’ (pp. 365–6) Having overturned the traditional idea that the purpose of a business was to make a profit, which Drucker defined as being essential for the business’s survival, he explained the new rationale: It is precisely because the traditional theorem of the maximisation of profits cannot meet any of these tests—let alone all of them—that it has to be discarded. At first sight it might seem that different businesses would have entirely different key areas—so different as to make impossible any general theory. It is indeed true that different key areas require different emphasis in different businesses—and differing emphasis at different stages of the development of each business. But the areas are the same, whatever the business, whatever the economic conditions, whatever the business’s size or stage of growth. There are eight areas in which objectives and performance and results have to be set: Market standing; innovation; productivity; physical and financial resources; profitability; manager performance and development; worker performance and attitude; public responsibility. (p. 60)

When Drucker is writing about ‘differencing emphasis’ at different stages (times) he is underscoring one of his essential messages in organization management—the need to rebalance the functions as they change their relative importance to each other, through internal or external forces. His message is the continual balancing and ‘integration’ of the whole. Drucker continued to write prolifically. His next book was America’s Next Twenty Years (1955), perhaps the first exposition on management to use demographics to forecast future trends for businesses, and Landmarks of Tomorrow (1959), where he advanced the view that the new need was for people with education; these were the most advanced form of capital investment. His interest in Japan continued when he joined the group of American advisors to Japan, who included Edwards Deming and Joseph Juran. Drucker’s advice to the Japanese was that they must westernize to

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survive. So well were Drucker’s ideas received by Japanese business leaders that he became the equivalent of a national treasure. For the first time Drucker discusses ‘gestalt’: These are all concepts of a whole, of a pattern or of a configuration which can be understood as a whole. It is at the ‘centre of our economic life, the business enterprise’. None of those are new concepts . . . namely that the parts exist in contemplation of the whole. (1959: 4 and 5)

Why this is important is that this is the way that Drucker’s mind works. His appeal is that he sees connections that others cannot—the holistic gestalt thought process is ingrained in his psyche to the extent that it was part of his personae. The alternative is silo thought analysis, which does not relate one decision to another. The result is the failure of many government programmes. He wanted to include ‘strategy’ in the title of his next book Managing For Results (1964), but his publishers rejected the idea on the grounds that his audience would not understand what it meant, although it was one of the first books on strategic market analysis. Drucker told his readers that customers buy what they believe to be value, not what the business thinks it is selling: ‘This is only one person who really knows: the customer’. He continued that no business can do everything; it must build on its strengths. This idea was later expressed by other writers as ‘stick to your knitting’ (Peters and Waterman 1982) or ‘core competences’ (Hamel and Prahalad 1990). From this basis he identified five classifications of products: 1. 2. 3. 4. 5.

Today’s breadwinners Tomorrow’s breadwinners Productive specialities Development products Failures

He went on to show managers how to analyse the potential of each, and their dangers. He also produced a programme for performance where he set out the tasks of the manager. He reminded managers that they would have to diligently and energetically continue to measure targets against reality and then make the necessary adjustments. The impression left is that, if managers were made to read this book before embarking on their careers, many would choose another profession. Schumpeter made the point that he could not see why people wanted to be a manager: it took too much effort—as he explains in his Capitalism, Socialism, Democracy (1942–87). Faced by the increasing hostility of the environment and by the legislative, administrative and judicial practice born of that hostility, entrepreneurs and capitalists— will eventually cease to function. Their standard aims are rapidly becoming unattainable, their efforts futile. The most glamorous of these bourgeois aims, the foundation of an industrial dynasty, has in most countries become unattainable already, and even more modest ones are so difficult to attain that they may cease to be thought worth the struggle as the permanence of these conditions is being increasingly realised.

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Success in industry and commerce requires a lot of stamina, yet industrial and commercial activity is essentially unheroic in the knight’s sense—no flourishing of swords about it, not much physical prowess, no chance to gallop the armoured horse into the enemy, preferably a heretic or heathen—and the ideology that glorifies the idea of fighting for fighting’s sake and of victory for victory’s sake understandably withers in the office among all the columns of figures.

Managing for Results (1964) was followed by a calmer book The Effective Executive (1966). Here Drucker coined the phrase knowledge worker, who is the new major resource for companies. When he wrote of how ‘such a man (or woman) must make decisions’, he was identifying women for the first time as executives, and managers, although he had previously discussed Lillian Gilbreth as a management pioneer. Effectiveness, said Drucker, must be learned. It was the manager’s job, and what they were paid for. He claimed that his book was the first word on the subject of effectiveness, which was to ‘get the right things done’, whereas efficiency was doing the right thing. The key task was to build on the strengths of oneself and the organization in order to make them productive, and to eliminate weakness. Effectiveness came from a concentration of efforts by making the best decisions based upon information. Decision-making was a matter of judgement, making a choice between alternatives but rarely between simple right and wrong. Effectiveness relied on teamwork and good human relations, and required the development of people. Having written two books on management, Drucker turned back to his other theme of politics, society, economics, and ethics with The Age of Discontinuity: Guidelines to our Changing Society (1969). He was having doubts about decentralization being the only effective structure, as he extended his ideas to cover team working, where taskforce teams included specialists of diverse disciplines who make their own specialist contribution. Drucker identified that new opportunities were emerging which challenged the manager’s markets as manufactured material which started as a fixed-use product such as Chinese paper, was now having to meet competition from multi-use plastic, as he anticipated what would later be termed ‘substitutes’: It is rarely realized how old our basic materials are. Glass, iron, steel and the nonferrous metals, ceramics, concrete, and timber all existed four or five thousand years ago, that is, before the beginning of the Greek era. Paper was invented by the Chinese at about the time of the birth of Christ. Only rubber and aluminium are ‘modern’— and now, the plastics.

Further advice to managers introduced the idea of the 80–20 rule (credited to Vilfredo Pareto but actually developed by Joseph Juran) where 80 per cent of the results were in 20 per cent of the activities, while 20 per cent of results were in 80 per cent of the activities. Drucker also suggested that the non-performing public organizations should be ‘re-privatized’, an idea later picked up by Margaret Thatcher’s government in Britain and re-labelled ‘privatization’. Speaking on BBC Radio 4 on 19 October 1997, former Conservative cabinet minster Lord Howell commented that

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He [Drucker] wanted to reprivatise the gigantic American corporations who were remote from their shareholders, remote from the public and run as sort of inner cliques of managers and senior executives. He wanted to re-privatise them. And I think we just took that word and applied it in our own context of getting a grip on the high nationalised industries which we thought were not run for the interests of the consumer or the shareholders at all. All that has been predicted for privatisation has come to pass and not just in America and in Britain but in everywhere from Beijing to Patagonia. I mean the whole world has gone that way.

His next book was Drucker on Management (1970a), published by the British Institute of Management, a collection of essays by Drucker published in its house magazine Management Today. In the same year, Technology, Management and Society was published. This work claimed that technological innovation had roots far back in history. Drucker cited the irrigation projects of ancient Mesopotamia, and argued that it was not until the eighteenth-century Industrial Revolution that the same scale of advancement took place. He described the computer as ‘managing the moron’ and warned that if the computer was not making our organizations simpler, then it was being abused. In 1971 Drucker produced two collections of essays, one for the American market and one for the British market. The two works had nine common essays with four unique to the American edition (Men, Ideas and Politics 1971a) and three to the British (The New Markets and Other Essays 1971b). The selection was made to appeal to the different markets. In both books, Kierkegaard and Keynes were included. The mechanics of American society was explained along with the workings of the constitutional system and American philosophical attitudes to pluralism. An education in Japanese management was provided. For Western managers Drucker provided the first of his two essential primers as how Japan and Japanese management worked. These publications coincided with Drucker leaving New York and becoming Professor of Management at Claremont College in California, where he would spend the remainder of his working and family life. This period marked a watershed in his career as a management writer. His next book, Management: Tasks, Responsibilities, Practices (1974a), showed Drucker’s ideas on management reaching their full maturity. The book may be regarded as Drucker’s magnum opus. It collected his previous ideas, made refinements as necessary, and then presented them in a new and stimulating manner. He presented a number of case studies, including ones of international businesses. He worked from the top down, describing how to form an effective board, explaining that structure must be determined by the needs of the business, rather than having some inappropriate structure thrust upon it. He defined the relationship between business and government, and set out the ways that managers should do their jobs. He defined the manager’s new challenge as making the knowledge worker productive. He underscored the ethics of responsibility. He stressed the essentials of good communication: people could perform only if they know what, and why, they were expected to contribute. He coined the term ‘People are our greatest asset’, and warned that the human machine is badly designed

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and that you cannot ‘hire a hand as the man always comes with it’. Later he added a personal message that we must ‘develop our strengths and eliminate our weaknesses’. On education, Drucker believed that talk of a crisis in universities was real. However some places had seized on the opportunities. ‘In Great Britain there is the Open University, which uses television to make education available to anyone who is willing to do the work’ (ibid: 340). The lesson was that every organization needed innovation to convert problems into opportunities. On the recurring topic of top executives’ pay, he believed that the ratio between the blue-collar worker and the top executive should not be too large and that a ratio of 1:12 was about correct. The ‘extremely rich’ were the few heirs of pre-tax days, or owners of small businesses. After completing the book Drucker told a meeting with British managers that after finishing the book ‘one sits down and reflects a little’. He reflected on how the development of management had occurred during his lifetime (Peter Drucker, Effective Management Performance (1974b) London, British Institute of Management, edited by Sally Rousham). He also warned against what he saw as the mistaken idea that in America, young managers should dedicate their lives to their companies. He advised them to work hard and perform well, but also have a life outside the company. Otherwise when the inevitable disappointments of the middle years arrive, there is nothing to fall back on except drink, affairs, or psychoanalysis.

Later works After 1974 Drucker concentrated on refining, extending, and adjusting his earlier work along two distinct themes. One focused on extending and reshaping the ways we think about and apply management. The second theme consisted of a series of reflections on changes in society—as the average Westerner would be looking to retire in their midsixties. Drucker took a different approach and increased his written output. On management, Drucker’s only textbook written for students was, People and Performance—The Best of Peter Drucker on Management, published in 1977. The book took a historical approach to the development of management beginning in the eighteenth and nineteenth centuries with Adam Smith, Jean-Baptiste Say, Robert Owen, and Marx. It then moved on to Schumpeter, Rathenau, Taylor, and Fayol in the early twentieth century, followed by the developers of personnel management, such as Munsterberg, Maslow, Mayo, and McGregor. Drucker also produced a ‘one-only’ book of cases studies, Management Cases in 1978. This series of fifty cases covereded a wide geographical and organizational cross-section, spanning North America, South America, and Europe, and included studies of universities; hospitals; religious diocese; local authorities; local schools; military bases; local national, and international organizations; chemical, electrical, and car industries; meat-packing, coal-mining, banking, and life assurance companies; and research libraries.

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Although, as noted, Drucker’s books can be separated into different themes, some span the boundary between these themes. His book Managing in Turbulent Times (1980), reflected on politics, society, and the economy, but also explained the changing environment to managers. Among other things, he pointed out that, while during the previous ten years Western and Japanese countries had been announcing ‘record profits’, in fact those profits were illusionary. Thanks to inflation, said Drucker, very few companies had made a profit at all. He reminded his audience that the foundation of profit has to be the cost of staying in business. Drucker returned to his messages for managers with his The Changing World of the Executive (1982a). This was a collection of forty of his articles, most of which had previously been published in the Wall Street Journal. Writing on executive pay, he forecast that there would be an inevitable backlash against high pay levels because business was not communicating a sensible compensation structure. However, he argued, truly exceptional people, the ‘stars’ who made the ‘breakthrough’ should be paid proportionately without limit. Those who contribute ‘beyond the call of duty’ should also have exceptional rewards. It was not just executive pay that concerned Drucker. He also examined the much ignored labour–income ratio, which related labour costs to each sales unit. He warned that, while the bulk of American manufacturing had enjoyed substantial prosperity, an ‘American disease’ had developed in the steel and auto industry. The danger of their excessive labour incomes was threatening their survival. GM, for example, was paying 50–100 per cent more than the American industrial average. As the American average was equivalent to their German and Japanese competitors, GM barely had enough income left over to invest in plant modernization and developing fuel-efficient cars. In Innovation and Entrepreneurship (1985), Drucker tells us that ‘entrepreneurship is neither science nor an art. It is a practice’—as with all practices as with engineering or medicine, knowledge was a means to an end. This was followed by The Frontiers of Management: Where Tomorrows Decisions Are Being Shaped Today (1986), a collection of thirty-seven essays which, although previously published, had been written with the intention that they would eventually be published collectively. His essay on Overpaid Executives: The Greed Effect, written in 1983, had an update noting that Chrysler chairman Lee Iacocca had paid himself a multi-million dollar bonus while cutting blue-collar wages by 30 per cent. This was the union’s main reason for refusing to make any further concessions on wages, benefits, and working conditions. The resultant high labour costs led Drucker to forecast that if the American automobile market turned downward for five years, this would likely destroy Chrysler. Managing The Non-Profit Organization (1990) was a new venture for Drucker at eighty-one years of age. After beginning to write about business management in 1946, Drucker had gradually become aware that management in other organizations was different. In non-profit organizations, the measure of achievement was the quality of service and the provision of satisfaction, rather than the bottom line. The publication of the book coincided with the formation of the establishment of the American based Peter F. Drucker Foundation for Non-Profit Managers, founded by one of the contributors to this book, Robert Burford.

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What Drucker highlighted was that half of America’s adult population were volunteers in the non-profit sector, volunteering for three hours a week or more. This contribution, he argued, was American society’s most distinguishing feature. He urged managers to look to this area for a fulfilling management career, or else to act as volunteers to develop new skills and widen their vision as managers. In 1992–3 Drucker had two books published. The first, Managing for the Future, was a collection of thirty-nine essays that were written over a period of five years. The essays were all forward looking and predominantly included previous topics in a new light, amended to provide contemporary advice to managers. An international focus includes his reoccurring topic of Japan, with new considerations of China Central and South America. The second book, The Ecological Vision (1993b), was another collection of essays, many previously published in his earlier books. These books were followed by Managing in a Time of Great Change (1995), where Drucker told his readers that in the ‘post Capitalist’ society, their new challenges were many, including determining what was essential information, and what was data in the publication overload. He also highlighted that the global economic challenges were coming from the stronger economies of China and the Pacific Rim, with a major question mark on the long-term strength of Japan. Again he reminds us that accurate forecasting of productivity trends was unreliable, while predictions based upon events of birth rate or emigration were more accurate. Far more important were the changes that so few predicted. He looked back over the ten years to 1985 and noted that the promoters’ and supporters’ forecast of harmony and explosive growth had failed to materialize as the community was dogged by petty bickering, and collectively the economy was now weaker in the world economy than hitherto. The fundamental changes that were occurring in the world were causing organizations to examine their management, and change to meet the new challenges. They had to re-engineer themselves, resulting in removing unnecessary management layers, which had been acting as redundant relays. These unnecessary layers hindered communications as each excessive layer defuses the message. Having previously pronounced on re-engineering, Drucker now reinforced his message that it must be done. Downsizing he condemned as destructive of workers, and loss for the organization of their tacit, essential knowledge. Some of the same points were made in Peter Drucker on the Profession of Management (1998) which began with a preface entitled ‘The Future Has Already Happened’. Drucker insisted that the collection must be able to answer the reader’s question: Why this book now? The answer was that the selections dealt with important issues of the day. All of the articles had previously been published in Harvard Business Review, where Drucker had in fact published more than thirty articles since 1950 (six of which had won McKinsey Awards). As with all of Drucker’s books it contained sage advice. That the mobile knowledge worker was proving difficult to manage was because people identify themselves with their knowledge, rather than their organizations. Retirement age would rise before 2010 because 75-year-olds were healthy.

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Drucker returned to Taylor, one of his earlier management influences and reassessed his input. He concluded that Taylor had a greater long-term effect than Marx, as Marx was a figure of the past, whereas Taylor’s influences were ongoing. Taylor taught us, not only how to work but how to make the illiterate productive, which lifted people, and backward countries, out of poverty. He also taught us how to learn not only simple jobs, but also complex intellectual ones, by showing how we could learn incrementally to build a complex whole. For Drucker, Taylor had an impact on the outcome of World War II, as his work organization methods enabled American industry to increase production at a rate that was totally inconceivable to the Germans. For Drucker, why Taylor was still relevant, was that his influences were being further brought forward, where they were having greater impact by amalgamating them with what Drucker considered as another production landmark, Quality Management. Drucker also re-examined his earlier treatment of Alfred Sloan. Whereas Taylor’s ideas had been re-assessed to give them a contemporary relevance, Sloan was moved backwards. For Drucker, although Sloan, along with other management pioneers, attempted to find the one correct structure for the enterprise which he determined as control and command decentralization, Drucker’s assessment was that times had moved on. He concluded that, although team work was presently all the rage, what we knew now was that there was no one correct way to manage a business. More collections of articles appeared over the following years, including Management Challenges for the 21st Century (1999), where Drucker argued that many of the basic assumptions that we had been taught as managers were no longer tenable, as they had outlived their usefulness, and were becoming serious obstacles. Examples included the assumption that there was only one correct organization, whereas it is the one that fits the task; that principles alone do not tell us what to do: what managers need to keep their network active is to find out what is really going on; and remembering that data is not information. Again we were reminded of the birth-rate crisis in the maturing economies: that the Japanese miracle was over. ‘It is to be hoped that the new European Bank will be able to maintain the Euro stable as a regional currently. But it is too much to hope that the individual countries within the European Union will then subordinate their domestic polices to the stability of the Euro’ (Drucker 1999: 68). The Essential Drucker (2001) is a good introduction to Drucker’s management work and made an important contribution to understanding Drucker more fully. It reminded us, as he reached 90 years of age, how far he had travelled with his ideas as he challenged some of his earlier assumptions—not because they weren’t relevant at their time but because their environment had changed so much. As ever, there were many messages for the manager as Drucker reminded us that ‘empowerment’ was similar to what he had proposed fifty years previously when he had talked about bringing people into the plan. Another message from his range of advice was that traditional cost accounting measured only the cost of an operation. In contrast, ‘activity based costing’ primarily records the non-productive costs, correcting defects, delayed deliveries, and all of the cost of not doing. It recorded the items that traditional cost accounting could not record, as often

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‘downtime’ could be equal to the cost of doing. What activity based costing did was not only give better cost control, but also give ‘result’ control. Drucker also returned to McGregor’s Theory ‘X’ and Theory ‘Y’, which he reminded us was much the same as he had said in 1954. He recalled that he, and McGregor, asserted that there was one best way to manage people, and that this assumption underlined practically every book or paper on the management of people. Drucker admitted that he and McGregor were ‘dead wrong’ as had been proved by Maslow in his book Eupsychian Management (1962), which by his ‘hierarchy of needs’ showed that people had to be managed differently. He also argued that if people continually failed to perform their job, then the job needed to be re-examined, as it was clearly beyond the capabilities of anyone. He termed this type of job as a ‘widow-maker’, which was maybe the job that was always too difficult, or may have become so through change. Always a futurist, Drucker considered what we all should consider doing in the second half of our life. He re-introduced his ideas again, that for the first time the individual could expect to outlive their business organizations even if those businesses survived beyond what he considered was the equivalent to a biological life of an average of thirty years for a business. As we could not expect the same organization that we were with at 30 years of age still to be in existence when we were 60, then we needed to think beyond work. He continued that being in the same job for forty or fifty years was too much for most people. The consequences were that they ‘retired on the job’, lost all joy of work, and were bored, resulting in being boring, and depressive to themselves, and all around them. Drucker quoted examples of how famous people had managed their lives. Pablo Casals (1876–1973), the famous Spanish cellist continued in his career until he died. Max Planck (1858–1947) had a second career when he was 40; in fact he had two second careers, while Albert Einstein (1879–1955) retired at 40 ‘to become a famous man’. Drucker continued that a manual worker became mentally and physically tired before they retired. When they did, they were happy doing nothing or having a hobby such as fishing. Knowledge workers were more mentally active, and as with all other workers, they may have a second career in the voluntary sector. They may run the career parallel to their normal job. Managing in the Next Society (2002) tried to anticipate the type of society that managers might expect ten years ahead. The book was divided into four sections: ‘Information society’, ‘Business opportunities’, ‘The changing world economy’, and ‘The next society’. Journeying through each section, Drucker described how information was changing the ways we managed. As with so many of his books he ranges far and wide, old and new, discussing Gutenberg press of 1455, which made the knowledge revolution possible, Luther’s Bible, which enabled Protestantism, and Machiavelli’s book The Prince (1513), which described political tactics. Henry Ford is reclassified as an assembler rather than a manufacturer. Tom Watson Jnr is credited with making computer literacy possible. Jack Welch and Warren Buffett are mentioned for their contemporary contributions. Drucker also discussed leadership, and made it clear that leadership and management had to be considered separately for managers to understand what they could contribute. He began with a reference to the Greek general Xenophon’s Cyropaedia, which (Drucker 1954)

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regarded as still the best book on leadership. What Drucker argued was that while there is no substitute for leadership, the supply of leaders is too unpredictable for management to rely on its supply. His answer was to provide sufficient managers to lead by developing management as a discipline, so that it could be learned. Part of the discipline would be that by the correct practices, development could be ‘whatever potential for leadership there is in their management group’. He argued that leadership was based upon leading by example and upon the practice of responsibility, and trust that could be earned, and maintained. Drucker continued that there were many challenges for management in their changing world where the Internet would perhaps eventually become the major source for goods, as people had to learn that nothing changes faster than distribution channels. Even the mass producing car manufacturers were making to order as activity based accounting progressed into the economic chain activity. Drucker drew attention to the problems that all businesses had: not knowing about their non-customers. Although it was not an easy task to find out about them, it was still a problem even for the giants who, if they had 30 per cent of the market, still had 70 per cent who did not trade with them. Drucker was certain that fifteen years hence, governance of corporations would be different. Drucker gave an international round-up, and concluded in the developed world that pensions were under-funded. America was a self-help society with a large non-profit content, which provided many social services, whereas in Europe the services were government provided. He was optimistic about American population balance as it was young in profile; America also had a conditioning to accept immigration. In contrast, Germany and Japan had structural problems of an ageing population with resistance to immigration. For society, the twentieth century had begun with economic issues; the twenty-first century had begun with social issues.

Society and other writings As noted, Drucker also returned to broader economics and social themes. One of his best known later books of this type is The Unseen Revolution: How Pension Fund Socialism Came to America (1976), later reissued as The Pension Fund Revolution. Drucker described how the state had taken over the responsibilities that had used to be those of the family. The population did not perceive that being relieved of what had been the family’s responsibility was a reward, but saw it as a right in what had become the ‘welfare society’. As part of the fundamental social change, what had happened in America since World War II was that there had been an explosion of occupational pension provisions. Drucker forecast that by 1985 employee pension funds would own half of corporate America. He again anticipated correctly that despite the current push to lower retirement age, it would eventually push beyond 65, and a mandatory retirement day might be abolished as people extended their working lives.

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The consequence of the pension fund revolution was what had happened, and what Marx failed to achieve, that the workforce should own their means of production. Contrary to Marx’s prediction it had come about without a violent revolution. Drucker concluded that so fundamental were the changes that it was presenting American politics with the first opportunity for a genuine alignment since the 1930s: the opportunity to produce its own distinct brand of ‘socialism’. Towards The Next Economics (1981) was a collection of previously published papers and articles. A review of the pressures on the environment produced a rational appeal by Drucker for protection, but he called for sympathetic regard to the needs of the population of poor countries. He continued that we should remember the impact of the brain buzzing environmental damages we have caused in developed countries. It was the consequence of success. His remedy was for America to put its own house in order and begin to correct the pollution backlog together, changing the current deteriorations. He stated that it was nonsense to believe that industry could pay for the remedy out of its existing profits. They were not large enough. The cost would have to be met from taxation, or price increases on goods, which was in effect a tax. Drucker marked the year of his eightieth birthday with The New Realities (1989). This was a set of new essays which dealt with the political reality that arms are counterproductive, as all a nation can hope to do is to defend itself; people no longer believed that political policies and charisma could give salvation, yet people need to believe in something—thus the growth of Islam. Drucker continued as he extended his ideas on the power of the ‘knowledge worker’ in what he termed ‘the post-business society’. That he had not given-up on his attention to the re-definition of management is underscored as he describes: Management is thus what tradition used to call a liberal art—‘liberal’ because it deals with the fundamental of knowledge, self-knowledge, wisdom, and leadership; ‘art’ because it is practice and application. Managers draw on all the knowledges and insights of the humanities and the social science—on psychology and philosophy, on economics and history, on the physical sciences and ethics. But they have to focus this knowledge on effectiveness and results—on healing a sick patient, teaching a student, building a bridge, designing and selling a ‘user-friendly’ software program. For these reasons, management will increasingly be the discipline and the practice through which the ‘humanities’ will again acquire recognition, impact, and relevance. (p. 231)

This was followed by Post-Capitalist Society (1993b), which was a penetrating insight into how society has been transformed. Drucker reviewed his position on his early support for Max Weber’s ideas from the beginning of the twentieth century that capitalism sprang from ‘Protestant ethics’. He admitted that now there is insufficient evidence to justify the conclusion. Post-Capitalist Society is a companion to The Unseen Revolution (1976), which established that pension fund ownership by the workers had changed America, the largest capitalist country, also into a ‘socialist’ country. Drucker in Post-Capitalist explained

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that the reason that he termed America ‘socialist’ was by using Marx’s definition of socialism— that of the employees owning their means of production. Drucker continues that ‘capitalism probably peaked by World War I as the likes of Morgan, Rockefeller, Carnegie, Ford, and Rathenau …, have not been matched by later as powerful successors’. The wealthy still existed, but their power had been replaced through the management revolution by the ‘hired hands’ of the ‘professional manager’. Marx’s proletariat had become the knowledge worker. Knowledge work had now become the new capital. This had placed an obligation on the worker of having to learn in order to live. Drucker reminded us that he had anticipated these changes decades before, which he did. Drucker on Asia: A dialogue with Isao Nakauchi (1997) was first published in Japan in 1995. The preface of the book described it as an interchange of ideas between Drucker the theorist and Isao Nakauchi, the business tycoon who had intimate knowledge of the West. He had built and managed Daiei Company, one of the world’s largest and most successful food retailers, and was also recognized and awarded for his contribution to commercial life in Japan as chairman of one of Japan’s leading retail chains. Drucker set the contemporary state of the economic scene in Japan, and recorded that it was sadly lacking in the real growth high-tech industries of genetics, bio-technology, software, information technology, and new finance. He also discussed the challenges in China, the borderless world, the knowledge society, and entrepreneurship and innovation. Then he concluded that to meet these challenges there would have to be major reinventions of the individual, business, society, and government. Drucker’s messages for students were from his own student experiences in Hamburg, where the major influence was Verdi’s lifetime striving for perfection in his work. He then described his other experience of developing his own method of study, which involved critically reviewing once a year what he had done well or badly, and then taking the necessary action. He advised making sure that it was the current job that was being performed not one’s last. Drucker continued that after fifty years as an international consultant, the most frequent problem was the failed promotion caused by people doing their old job. He further advised that when making significant decisions one must write them down, and then record what one expected the outcome to have been within the set time-frame. Drucker said that he had followed this method, and what it had taught him was what he could not do, and what he should not try to do. Of the things he could do it taught him what improvements were needed to be made. This is Drucker’s advice: ‘Play to your strengths and eliminate your weaknesses.’ The seventh experience was that one may be remembered for writing books, giving lectures, or being a consultant, but these were not enough because ‘One does not make a difference unless it is a difference in the lives of people’ (ibid: 98–110). The other issues covered in the book were the new challenges of China, and the reinvention of the individual, business, society, and government. The knowledge society, entrepreneurship and innovation, and the collapse of the Keynesian ‘welfare state’ were all variations on his long ongoing subjects. A Functioning Society (2003) is another selection of previously published works, which concentrated on his interest on community, and society. Drucker explained that,

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although he was best known for his management writing, it had neither been his first nor foremost concern, as he became interested in it only through his work on community and society. In common with many other countries, America had now become the society of new organizations with special-purpose institutions, such as hospitals and universities. Note should also be made of a few non-managerial and economic works. Perhaps the most important of these is his autobiographical work Adventures of a Bystander (1979). This was a collection of essays, not only about his family and his upbringing, but also profiles about the interesting people that he had met in his life in Austria, Germany, England, and America. It was a fascinating collection of characters and experiences that challenged the reader to choose their favourite. His profile of GM’s Alfred Sloan was the most important for managers, while his narrative on ‘The Prophets: Richard Buckminster Fuller and Marshall McLuhan’ was an example of Drucker’s unique skill in reading people and situations. His interest in Japan and Japanese art continued with A View of Japan Through Japanese Art, and in his seventieth year Drucker was appointed Professorial Lecturer of Japanese Art at Pomona, one of the colleges at Claremont University, California. Adding to his virtuosity, he also authored two novels. The first, The Last Of All Possible Worlds (1982b), set in 1906, was a wide-ranging social study that commented on relationships, protocol of rank, blood, and race. It also showed a romantic side to Drucker. Although the book was well reviewed and encouragingly received it is now overlooked. Drucker’s second novel was The Temptation To Do Good (1984). The theme of the book was a relationship between the highly respected Father Heinz Zimmerman, president of a rising American Catholic university, and an incompetent chemistry teacher, who also had a neurotic and vindictive wife who targeted Zimmerman and set out to destroy him. The book was in part a result of Drucker’s long-standing experience of universities. Publishers Weekly described the book as ‘convincing and haunting’, while other reviews described the work as excellent, with the hope expressed that Drucker would continue as a successful novelist. The book also fills a variation in Drucker’s output on management where he had previously promoted the idea that management decisions should always be arrived at by logical analysis. What Drucker is telling us here is that in the real world perfect logical decisions are not always possible, and that sometimes the best decisions have to accommodate influences that we would like to disregard as illogical.

Analysis and discussion Through his writings, Drucker has changed the way we look at management and made it possible to discuss management as an integrated whole. Previously the predominant patterns had been the concentration on its separate functions. There were some exceptions, writers who began to make connections between functions such as Rathenau,

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Fayol, and Urwick, but it needed Drucker to complete their theses and bring about a total integration of all of the functions and activities of the manager and management. Although the work of these three predecessors was important as considerable steps in the development of managing into a learnable discipline, none had the national or global vision that Drucker brought to the subject. Neither did they have the perception that management involved a continual rebalancing of all of its component parts and functions, nor did they have the same interest in management’s external impact. The twenty-three contributions to his Festschrift (Peter Drucker Contributions to Business Enterprise, Bonaparte and Flaherty: 1970) attest to his unique ability. The distinguished contributors included Theodore Levitt, Marshal McLuhan, and Lyndall Urwick, who referred to Drucker as ‘the manager’s professor’. Among Drucker’s many distinctions is the fact that he not only wrote for the Harvard Business Review (HBR) over the longest time span of any contributor, but also provided the most articles. Alan Kantrow, the editor of the HBR, wrote a tribute to Drucker which identified that his ability to see different patterns from his contemporaries was because his mind worked holistically in accord with the gestalt thought philosophy, where the sum of the parts is greater or different than their individual value. Kantrow’s recommendation was to ‘remember the greatest value of reading Drucker consists in a sustained exposure to the disciplined activity of his mind—and not merely to the paraphrasable substance of his ideas’, and advised, ‘In the work of Peter Drucker, grasp hard the discipline of the mind’ (HBR: January/February 1980). Rosabeth Moss Kanter in her Drucker the Unsolved Puzzle saw the classically educated Drucker as giving modern management its place in history. What puzzled Kanter was why, when Drucker’s messages were so clear, did managers ignore them and fail to help to make a world as it should be. She expressed her gratitude that by their inactivity there was still something to do as she signed herself up for Drucker’s legacy to become a master of the central task of managers, that of change (New Management 2 1985). Henry Mintzberg’s tribute to Drucker in his book Managing (FT Prentice Hall: 2009) also confirms his debt to Drucker, quoting frequently from the latter’s works. Amongst the many other management thinkers who have identified Drucker as an influential figure are Warren Bennis, Joseph Juran, Charles Handy, Tom Peters, Michael Porter, C. K. Prahalad, and, from the business world, Bill Gates, Andrew Grove, and Jack Welch.

Critical responses to Drucker To understand Drucker we have to begin with how he saw himself. In his autobiographical book Adventures of a Bystander (1979) he describes himself as a ‘bystander’, defining bystanders as people who enjoy themselves pursuing issues that take their fancy and never have the same achievements as the megalomaniacs whose sole concentration is on one aim.

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One of Drucker’s unidentified critics described his work as lacking intellectual vigour and that he was ‘an armchair philosopher’. Admittedly some of his work is more robust than others, but in a body of work spanning sixty years, variation is inevitable. Drucker saw himself as an intellectual and not an academic. His target audience was ‘the managers’, not academia, and his extensive work as a journalist was intended for a wider general audience. What managers needed, he believed was a ‘lodestar’ that not only told them where they were but what they had to do and where they should look to find where they were going. His academic emphasis was evidence based and consequently focused on the retrospective. Two works offer a comprehensive overview of the reception of Drucker’s work. The first is his festschrift. Most of the contributions to this were highly favourable, but one chapter, William R Dill’s ‘Semper Simplex—Drucker’s Contribution Coefficient’ recorded a friendly critical exchange in which Dill suggested that Drucker’s ideas were essential but needed extending. The second book is Peter F Drucker Critical Evaluation in Business Management (2005). edited by J. C. Wood and M. C. Wood. The contents were drawn from twentyseven contributors and written over a period of time. Of the collection, two were critical of Drucker, and these authors must be credited with rather more empirical research and intellectual vigour than most of Drucker’s other critics. The first of these papers was ‘A Dissenting View of MbO’ by David Halpern and Stephen Osofsky. The paper questioned the core assumptions upon which MbO theory rests. While there certainly can be problems with MbO if not implemented correctly, Halpern and Osofsky mistake problems of implementation for problems with MbO itself. The principles of MbO have been validated by others, especially in Japan, where its principles have been amalgmated with Juran’s ideas on quality management (Starbuck 2005). Even within this same collection, a paper by John William Humble—a successful management consultant who used MbO as the foundation of his advice to his array of international clients in the public and private sectors—argued that MbO was not a fad that had passed away, but had become embedded in the way that we manage to the extent that it is barely even discussed today. There have been other objections to MbO, however, perhaps most famously by one of the doyens of quality management, W. Edwards Deming. He rejected MbO on the grounds that in his ‘philosophy of management’ (1982: 26) all quotas for output were counter productive (1982: 24, 70–77). Again, this is too narrow a view of Drucker’s MbO. Deming spoke of output targets and quotas which were imposed, but Drucker consistently argued that objectives should be defined through negotiation. The second paper in (Wood and Wood 2005) is ‘What is Business Ethics? A Reply to Peter Drucker’ by W. Michael Hoffman and Jennifer Mills Moore. The authors were highly dismissive of Drucker’s treatment of business ethics and accused Drucker of failing to provide a definition of business ethics: ‘Drucker’s criticism of business ethics as singling out business for special treatment is indeed ironic.’ However, it can be argued that Drucker was not ‘singling out business for special treatment’. His own argument

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was that there is no such thing as a separate ‘business ethics’. Instead, ethical standards were the same for the individual and for business (Starbuck 2007, 2009). Joseph Maciariello identified one of the reasons why Drucker was often misunderstood. He wrote: ‘Readers unaware of Drucker’s early work, such as The End of Economic Man (1939) . . . could easily come away with the impression that Drucker’s work fails to address [certain issues] . . . Because Drucker did not explicitly discuss his philosophical and intellectual framework in every one of his books …’ (Joseph Maciariello and Karen E. Linkletter 2011: 137). The problem is not helped by the fact that many of his earlier books did not contain indexes, meaning that it can be hard for researchers to identify and locate key ideas. Drucker himself seldom engaged in public arguments about his work. His style was to state his case and move on, sometimes to later return to privately reflect on the criticism. An exception was Rosabeth Moss Kanter’s review of Drucker’s contribution as ‘Drucker: The Unresolved Puzzle’ New Management, Vol. 2 No: 1’ (Winter 1985). The article was introduced with praise for Drucker’s monumental contribution to the practice of management. Kanter then went on to point out the things she believed he had missed. She felt that Drucker saw no evil in the world, and believed that human frailties could be overcome in dysfunctioning businesses through education. Unusually, Drucker wrote a robust rejoinder which appeared in the same issue: What I have been trying to do is first to develop the norm (that is what ought to be) and then the constitutional principles that enable the well-measuring and virtuous to achieve it, and that will at least slow down and impede the corrupt and vicious. (Drucker 1985a: 32).

As Maciariello and Linkletter point out: This interchange between Kanter and Drucker provides valuable insights not available elsewhere in such concise form. Both are making accurate statements, but Drucker’s rejoinder can only be understood in the light of his entire body of work (from 1954–1985). Kanter levelled her criticisms of Drucker based, apparently, upon a close reading of Drucker’s most important books on management, leaderships and innovation. (2011: 137)

An admitted criticism of Drucker is that he sometimes changes the details of his story although not the context. Sometimes his detailing is adrift, but then considering his output, and the time span of his work this can be expected. An example is in his Striving for Perfection when he records that Phidias’s statues ‘still stood on the roof of the Parthenon in Athens’. Anyone who has visited this site will know that only part of Phidias’s statues remain and that those that do have been removed for safe keeping (Drucker 1997: 104). This detail as noted does not affect the message in his story. Possibly the best summary of how Drucker worked comes from Alan Kantrow in his article ‘Why Read Peter Drucker?’ (Harvard Business Review: January/February 1980). He described Drucker’s Adventures of a Bystander as ‘often better than a novel. “The Age of Continuity is in the same class. If ever there is time enough and the mood of reflection is with you, work your way slowly through The Future of Industrial Man.

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This is Drucker’s vision of the central problems facing industrial society—those of freedom and legitimacy—which do not appear nightly on the television news.” Of potential immediate value to you is Drucker’s best book on management “The Practice of Management”. . . . Remember, however, that the greatest value of reading Drucker consists in a sustained exposure to the disciplined activity of his mind—and not merely to the paraphrasable substance of his ideas. The ideas, of course, are there in abundance and are certainly worth close attention. But as Dr Johnson (that great eighteenth century humanist) well understood, the truly important thing with books is not to pluck their individual blossoms but to “grasp the Trunk hard only, and you will shake all the branches”. In the work of Peter Drucker, grasp hard the discipline of mind.’ As Kantrow says, Drucker’s research was not conducted using the empirical academic method but by the methods used by Schumpeter: looking back to the past, identifying what positive precedents had been set, and then carrying them forward to determine first the contemporary position, and then whether, if any, forward patterns were emerging. His methods were as rigorous as those of the academics. They were dependent upon his encyclopaedic knowledge, including the practical knowledge gained through his management consultancy, and what he acknowledged as essential to his work, his general verbal enquiry and the interplay between himself and his students. The outcome was that by the integration of events and ideas he made the parts at least different and sometimes completely changed as he taught managers to think differently and in so doing equipped them for the future.

Drucker’s contribution to management thought Drucker was not so much a man of his time, as a man for his time. He was born into the old world when Vienna was the capital of the Austro-Hungarian Empire. Before he was 5 years old Austria was at war. On 3 November 1918, sixteen days before his ninth birthday, Austria surrendered. There followed starvation, political turmoil, and state bankruptcy. These by any standards were extreme life-changing events. When he was barely an adult, Drucker set out to discover the pillars on which a new world could be built; to find an ethical purpose for life, a workable society, the replacement for the classic economic theories which were founded on Schumpeter, to which he later added the ideas of more modern economists. From the mid 1940s, when he discovered management at General Motors he initially tutored himself to learn about management—not as most previous students of management had done by concentrating on management in isolation to the society it was operating within, but by setting management within the total of life’s big picture. His work is a unique integration of ethics, economics, society, and management. It is with some justification that he is referred to as ‘The Father of Modern Management’.

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References Bonaparte, T. H. and Flaherty, J. E. (1970) Peter Drucker Contributions to Business Enterprise, New York: New York University Press. Deming, W. E. (1982) Out of the Crisis, Cambridge University Press. Dostoevsky, F. (1880) The Grand Inquisitor New York: A Frederick Ungar Book, Continuum. Drucker, P. F. (1933a) Die Rechfertigungdes Vokerrechts aus dem Staatswillen (The Justification of International Law and the Will of the State), Helf 8 Vienna: Walthar Schücking, Karl Strupp und Hans Wehburg. —— (1933b) Fr J Stahl; Konservative Staatslehre & Geschichtliche Entwinclung Motrtueringan (Fr J Stahl; Conservative Theory of the State and Historical Development), Tübingen: J. C. B. Mohr. —— (1939) The End of Economic Man, London, Toronto: William Heinemann. —— (1942) The Future of Industrial Man, New York: The John Day Company. —— (1946) Concept of the Corporation, New York: The John Day Company. —— (1950) The New Society, London: William Heinemann. —— (1954) The Practice of Management, London: Heron Books. —— (1955) America’s Next Twenty Years, New York: Harper and Brothers. —— (1959) Landmarks of Tomorrow, New York: Harper Brothers. —— (1964) Managing For Results, New York: Harper & Row. —— (1966) The Effective Executive, New York, London: Harper & Row. —— (1969) The Age of Discontinuity: Guidelines to our Changing Society, New York: Harper & Row. —— (1970a) Drucker on Management, New York: Harper and Row. —— (1970b) Technology, Management & Society, London: Heinemann. —— (1971a) Men, Ideas and Politics, New York, London: Harper & Row. —— (1971b) The New Markets . . . and Other Essays, London: Heinemann. —— (1974a) Management: Tasks, Responsibilities and Practices, London: Heinemann. —— (1974b) Peter Drucker Effective Management Performance, Halifax and London: Edward Mortimer Limited. —— (1976) The Unseen Revolution: How Pension Fund Socialism Came To America, London: Heinemann. —— (1977) People and Performance: The Best of Peter Drucker on Management, London: Heinemann. —— (1978) Management Cases, London: Heinemann. —— (1979) Adventures of a Bystander, New York, London: Harper & Row. —— (1980) Managing in Turbulent Times, New York, London: Harper & Row. —— (1981) Towards the Next Economics and other essays, London: William Heinemann. —— (1982a) The Changing World of the Executive, London: Heinemann. —— (1982b) The Last of All Possible Worlds, New York: Harper & Row. —— (1984) The Temptation To Do Good, London: Heinemann. —— (1985) Innovation and Entrepreneurship, London: William Heinemann. —— (1986) The Frontiers of Management: Where Tomorrow’s Decisions are Being Shaped Today, London: Heinemann. —— (1989) The New Realities, London: Heinemann Professional Publishing. —— (1990) Managing the Non-Profit Organisation, Oxford: Butterworth Heinemann. —— (1992) Managing for the Future, Oxford: Butterworth Heinemann. —— (1993a) The Ecological Vision, New Brunswick, London: Transaction Publishing.

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Drucker, P. F. (1993b) Post-Capitalist Society, London: Butterworth Heinemann. —— (1995) Managing in a Time of Great Change, London: Butterworth Heinemann. —— (1997) Drucker on Asia: A Dialogue Between Peter Drucker and Isao Nakauchi, London: Butterworth Heinemann. —— (1998) Peter Drucker on the Profession of Management, Boston: Harvard Business School Publishing. —— (1999) Management Challenges for the 21st Century, Oxford: Butterworth Heinemann. —— (2001) The Essential Drucker, Oxford: Butterworth Heinemann. —— (2002) Managing in the Next Society, Oxford, London, New York: Butterworth Heinemann. —— (2003) A Functioning Society: Selections from Sixty-five Years of Writing on Community, Society and Polity, New Brunswick, London: Transaction Publishers. Germanicus (1937) Germany The Last Four Years: An Independent Examination of the Result of National Socialism, London: Eyre Spottiswood. Hamel, G. and Prahalad, C. K. (1990) The Core Competence of the Corporation, Harvard Business Review. Kanter, R. M. (1985) Drucker: The Unsolved Puzzel, New Management. Kantrow, A. (1980) Why Read Peter Drucker, Boston Massachusetts: Harvard Business Review, Harvard Business School. Kierkegaard, S. (1843) Syrgt og Bievem (Fear and Trembling), London: Penguin Books. Maciariello, J. A. and Linkletter, K. E. (2011) Drucker’s Lost Art of Management, New York: McGraw Hill. Machiavelli (1513) The Prince, London, New York: Penguin Books Maciariello, J. A. and Linkletter, K. E. (2011) Drucker’s Lost Art of Management, New York: McGraw Hill. Maslow, A. (1962) Eupsychian Management, Homewood Illinois: Irwin—The Dorsey Press. Mintzberg, H. (2009) Managing, Harlow, Essex: FT Prentice Hall. Peter, T. J. and Waterman, R. H. (1982) In Search of Excellence, New York: Harper and Row. Rousham, S. (1974) Peter Drucker Effective Management Performance, London: British Institute of Management. Schumpeter, J. A. (1942) Capitalism, Socialism and Democracy, London, Boston, Sydney: Unwin Paperbacks. Starbuck, P. (2005) A View on the Evolution and Outcome of Peter F Drucker’s Management by Objectives and Self Control, London: Management Research Group, Queen Mary University. —— (2007) The Formative European Influences That Shaped the Thinking of Peter Ferdinand Drucker and How They Manifested Themselves in his Later Years, Thesis submitted to the Open University for the Award of a PhD. OU Ref No R 520 1357. —— (2009) Starting Out: Ethics and the Nature of Peter F. Drucker’s Intellectual Journey, Int. J. Management Concepts and Philosophy, Vol 3 No 4. Wood, J. C. and Wood, M. C. (2008) Peter F. Drucker Critical Evaluations In Business and Management, London, New York: Routledge Taylor & Francis Group. Xenophon (circa 450 bc) Cyropaedia (Life of Cyrus) (Two Volumes) (ed.) Walter Miller, London: The McMillan Company (1914), William Heinemann.

chapter 15

h er bert a l ex a n der si mon: phi l osoph er of t h e orga n iz ationa l life-wor ld j.- c. s pender

Philosophy does not begin in an experience of wonder, as ancient tradition contends, but rather, I think, with the indeterminate but palpable sense that something desired has not been fulfilled, that a fantastic effort has failed. Philosophy begins in disappointment. Critchley, 2007: 1 It is going to be easier to simulate professors than bulldozer drivers Simon in Stewart and Clark, 1994: 78

Any analysis of Herbert Simon’s long working life and output has to confront its amazing volume, variety, and complexity—so here are some mileposts to mark my route: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Introduction Chicago Times (Cowles Commission and RAND) Five Aspects of Simon’s Thought Evaluating Administrative Behavior (1947) Assessing Academic Giants Carnegie Times (and Inventing AI) The Battles in AI Legacy Coda

They need little explanation. Beyond this short life-story—given Crowther-Heyck’s biography is unlikely to be bettered—my chapter’s real purpose is evident in my title, to

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think how we might best understand Simon’s work. Many know him as a Nobel Prize winning economist, an adminstrative theorist, a founder of ‘artificial intelligence’ (AI), or as a psychologist—a man of many identities, a polymath working in many disciplines perhaps? I suggest the contrary, that Simon’s life and work were ‘of a piece’, articulating a single world-view and method to engage it. This view was, at bottom, philosophical, and I believe it essential to dig down to this level if we are to make proper sense of his work. Here we can find a platform from which to judge his contribution. I conclude ‘bounded rationality’ was his metaphor for the dynamic and pragmatic humanism he stood up for against the ‘rational man’ that he saw as a metaphor for today’s infertile anti-humanist ‘rational choice’ theorizing. To simplify the text I use acronyms for several multi-cited sources: AB—Administrative Behavior (Simon 1947a, 1958a, 1976, 1997) RHA—Reason in Human Affairs (Simon 1983) SA—Sciences of the Artificial (Simon 1981, 1996) MML—Models of My Life (Simon 1991b) and BRA—for Crowther-Heyck’s biography (Crowther-Heyck 2005)

Introduction By all accounts, Herb Simon (1916–2001) was a good man. Aside from what we find in his huge oeuvre, especially his autobiography, we know a lot about him from CrowtherHeyck’s magisterial biographical works (Crowther-Heyck 2005: 9; 2006), the commentaries about him and his work (e.g. Golembiewski 1988a, 1989; Golembiewski, Welsh, and Crotty, 1969; Leahey, 2003), and the many obituaries and remembrances (Assad 2011; Augier 2000, 2001a, 2001b, 2002; Augier and Feigenbaum 2003; Augier and Frank 2002; Augier and March 2004b; Colquhoun and Wroe 2008; Feigenbaum 1989; Klahr and Kotovsky 2001; Lewis 2001; Rainey 2001; Velupillai 2001; Zelený 2001). He was a good son, brother, husband, and father (Frank 2001, 2004); a good student who won a full scholarship to the local major university (University of Chicago); a good, if sometimes disputatious colleague (MML: 269), and a good and attentive teacher (Augier and Feigenbaum 2003; Augier and March 2004b; Klahr and Kotovsky 2001; McCredie 2001). A man of regular habit, Simon worked at Carnegie from 1949 to 2000, the majority of his life, and kept the same house throughout. His daily one-mile walk to his office, like Immanuel Kant’s, was so regular his neighbours joked they could set their clocks by it. He showed a steadiness he volunteered was a combination of his mid-western Germanic heritage (BRA: 16) and his intellectual ‘monomania’—his lifelong focus on a single topic (Feigenbaum 2001; Heuklom 2006: 4; Simon 1957: viii; 2001). To the end—he taught a course in Fall 2000, and was working from his hospital bed the day before he died in February 2001 (Augier and Frank 2002; Cooper 2004)— he was helping colleagues and students, listening to and respecting their views in spite

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of his intellectual aggression, massive publication record, Nobel Prize, and many other awards (Assad 2004; Augier and March 2004a: 26). Without doubt, Simon’s achievements were vast and exemplary, but they are of particular interest to management theorists. Although Simon was awarded the Nobel Prize in economics, his work stood on a devastating critique of neoclassical economics. Thus the award struck many economists as odd (MML: 325) (Hunt 1980), and his major positive contributions seemed elsewhere (Cyert 1979). His Nobel commendation was written by a management theorist (Sune Carlson—MML: 326), and the main elements of his reputation are as a theorist of organizational decision-making, cognition, and management. As such, Simon possibly remains our discipline’s dominant theorist and certainly our only Nobel winner—even as management has become the most taught and perhaps most studied college subject. Yet the puzzle for us is that while Simon’s legacy is extraordinary, his mark on management thinking is less obvious, smudged, even forgotten. This chapter explores some of how this happened. Because Simon’s work was in so many fields, evaluating his contribution means getting a fix on the disciplinary context in which they are to be judged—and different writers have taken different lines. Along with Crowther-Heyck, I see Simon as ‘a synthetic and empirical positivist philosopher’ (BRA: 137), rather than as an mathematician, economist, political scientist (Bendor 2003), social scientist (Augier and March 2004a), or cyborg (Sent 2000)—largely because I think this best illuminates the many moves, countermoves, and contradictions of his career. From this platform Simon broke new ground towards what some now label ‘computational philosophy’ (Bynum and Moor 1998; Chen 2005; Downes 1990; Floridi 2004; Shaw 2003). But despite the seeming paradox between Simon’s distrust of human computation and his untroubled faith in computers (Patokorpi 2008; Zelený 2001), I argue Simon never abandoned his early humanizing pluralism and philosophical positions.

Chicago times (Cowles Commission and RAND) Simon became a freshman at the University of Chicago in 1933, taking courses in the humanities and the social, physical, and biological sciences. The UC regime was flexible and he was soon auditing upper level courses. He decided to major in economics, discovered this required him to take accounting—which he did not care for—so switched to political theory (MML: 39). His project synthesized a pre-college love of mathematics with its application to the political and social affairs so vigorously discussed at home (Frank 2001, 2004). From his teenage reading, including of the library inherited from an uncle who studied with the institutional and labour economist John R. Commons, he concluded the messy vitality of the democratic political and social process could be bettered by a more scientific approach. Two books were especially formative—Richard Ely’s

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Outlines of Economics (1893) and Henry George’s Progress and Poverty (1882) (MML: 14). Simon reflected the zeitgeist of the time that looked to ‘a new breed’ of professionally trained men who would serve the public interest with objective, data-driven, and scientific skills (Khurana 2007). He resolved to become a mathematical social scientist (MML: 62) (Simon 1978). As a left-leaning student, child of the Depression (Simon 1985c: 18), and ardent debater (Velupillai 2001), he made a connection between empirical social science and practical social reform that would drive his whole career (Frederickson 2001: 8). Simon’s home-shaped weltanschauung was profoundly enriched in the multidisciplinary environment he found at Chicago (Dasgupta 2003; Heaney and Hansen 2006; Simon 1985a). There he gathered up sociology, psychology, politics, and biology, as well as mathematics, philosophy, and scientific research methods (Heuklom 2006; Simon 1982). His academic contributions began early. In 1935 at the age of 19 he wrote an undergraduate term paper on allocating Milwaukee’s municipal funds between playground maintenance—such as planting trees and cutting grass—and leadership activities— planning and running neighbourhood programmes, an allocation decision that—postSimon—we might call ‘messy’ or ‘wicked’ (Kuehn and Hamburger 1970). His paper led to a collaboration with Clarence Ridley and a manual for municipal administrators trying to evaluate public services (MML: 64, BRA: 77) (Ridley and Simon 1936, 1938). Its publication made him a nationally visible expert in the treacherous field of public-sector performance evaluation—at 22, without any managerial experience, public service, or research credentials (MML: 75). By the time the manual appeared he had taken enough politics and economics courses to identify the central puzzle in his undergraduate assignment, which crystallized into the research question that was to define his life-long project: ‘How do human beings reason when the conditions for rationality postulated by neoclassical economics are not met?’ (MML: 370) (Augier and March 2004a: 8; Larkey 2002: 9; Simon 1978: 352; 1991b: 370). The question came to him ‘forcibly’ as he was trying to apply what he had learned in Henry Simons’s intermediate price theory course (Simon 1985c: 17). As a political science student with good insight, he intuited politics and administration, perhaps democratic society itself, would be superfluous were people actually like those the neoclassical economists imagined. The insight was not merely the fruitful germ of a critique of most of economics and sociology; it also implied a different approach to the question: ‘How might real-world decision making and administration be better understood and improved?’ After a period of personal depression (MML: 48) Simon settled into the richness of Chicago college life and soon moved on to graduate studies. He also met Dorothea Pye, a fellow graduate student of political science, whom he married Christmas 1937, a relationship that lasted until his death (MML: 65). The municipal administration manual led to an invitation to UC Berkeley to work on a three-year Rockefeller Foundation funded research project (Assad 2004). After spending the summer of 1938 in California, without Dorothea, he returned there for the summer of 1939, this time with Dorothea, to manage a substantial team of researchers working on an extended series of projects (BRA: 85). He also continued working on his doctorate by special arrangement with the

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Chicago Economics Department (MML: 83). His thesis was on ‘administration as a decision-making process’ and he initially offered a lab-rat maze framework—excised at the suggestion of some of those who read the early drafts (MML: 86). Simon’s thesis offered a ‘logical structure of an administrative science’, following the lines of Carnap’s classes at Chicago (BRA: 73) (Golembiewski 1988a: 262). Towards the end of 1941 his reworking was accepted and his oral was in May 1942. With his degree done and the California projects completed, the family returned to Chicago and Simon joined the Illinois Institute of Technology (IIT). Around 1945, settled into his teaching at IIT, Simon began to think about publishing his PhD thesis and the process of turning it into AB began (BRA: 130, MML: 85). He believed the argument turned on two axioms: (a) human beings were able to achieve only a very bounded rationality, and as one consequence of their cognitive limitations, they were (b) prone to identify with sub-goals (MML: 88). He made about 100 mimeographed copies of a draft and circulated it widely. Crucially, one person who responded at length was Chester Barnard (BRA: 131, MML: 88)—and Simon’s larger story began. As he wrote later: ‘I would not object to having my whole scientific output described as largely as gloss—a rather elaborate gloss to be sure—on the pages of AB where these (two) ideas are set forth’ (MML: 88). In rejecting ‘rational man’ (RM), Simon had set himself to find or construct a theoretically tractable alternative model of the individual (MoI), that is, to pursue his own answer to that most ancient of philosophical questions: ‘What is Man?’ Offering bounded rationality (BR) rather than merely dismissing RM, he said: ‘You can’t beat something with nothing’. We can argue that the puzzle about our own nature is philosophy’s originating question and those who engage it are philosophers whether they care to call themselves so or not. In this sense Simon’s lifelong question was clearly philosophical, overtly so after he began to simulate human decision-making. But he paid no attention to mainstream philosophy as he engaged this project. As an undergraduate he took an interest in various kinds of philosophy, declared himself a ‘logical positivist’ (or ‘empiricist’), studied with Rashevsky, Schultz and Carnap, and enthusiastically debated his fellow students’ philosophies of religion and politics (MML: 44, 50, 51; BRA: 101). At IIT he collaborated with two colleagues to add a ‘little intellectual stimulation’ by offering a seminar on the philosophy of science (MML: 100, BRA: 129). This led to a Philosophical Magazine paper on the axioms of Newtonian mechanics; ‘accepted with almost no revision’ (MML: 101) (Simon 1947b)—no small achievement for someone with neither philosophical nor natural science credentials. For most, the philosophy of science was about the physical universe (nature and ‘objectivity’). There was less interest in the philosophy of the human sciences, human agency, and ‘subjectivity’—a distinction that, for many, began to dissolve with Kuhn’s Structure of Scientific Revolutions and Merton’s Sociology of Science (Kuhn 1970; Merton 1973). It seems Simon had no evident contact with or interest in existentialism, phenomenology, or the philosophies of subjectivity or the Self we now label ‘Continental Philosophy’ (Critchley 2001), even as these led to gestalt psychology and, after World War II, to the ‘cognitive turn’ and ‘sensemaking’ (Fuller, De Mey, Shinn, and Woolgar 1989; Thagard 1996). While Simon was

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sympathetic to gestalt work and made a close friend and important intellectual sparring partner in the psychologist Harold Guetzkow (MML: 46), Simon’s familiarity with nonpositivistic philosophy seemed limited to acquaintance with the pragmatisms of James and Dewey (AB: 93n14). AB was published in 1947 and attracted considerable attention (BRA: 134), plus it helped Simon make full Professor (MML: 110). He also began to find a larger audience through the Cowles Commission (then based in Chicago), for whom he began research projects in 1945 (BRA: 128, MML: 101) (Assad 2004). The Commission brought together the nation’s top social and natural science researchers. All were infused with urgent excitement about the post-war possibilities for applying scientific (positivistic) methods to economic and social policy issues. The Commission also brought Simon towards the centre of the highly influential network that reached as far as RAND in Santa Monica (‘the Sun’—MML: 113) and gave him unmatched insider connections to leverage his rising academic reputation (Hounshell 1997). The RAND and Cowles Commission programmes’ shared positivism—even given the divergence of Simon’s view of mathematics as the ‘language of thought and discovery’ from Tjalling Koopmans’s view of mathematics as ‘the language of proof ’ (MML: 106)—enabled him to move between disciplines with remarkable facility. Simon’s psychology was positivist and extended to Tolman’s behavioural programme rather than Freudian and post-Freudian ideas (AB: 80, n. 3, 86, 205). Likewise, his sociology did not embrace Hegel, Marx, Husserl, or the Frankfurt School: it lay more with the empirical Chicago sociology of Thomas, Wirth, Park, and Lazarsfeld (MML: 55), and with Parsons’s social systems theorizing (AB: 62, n. 3). But, putting Simon’s pragmatic humanism in tension with his positivism, was Dewey, much cited (BRA: 36, 100, 107), sustaining Simon’s empirical and socially oriented disposition. Interestingly, much Chicago sociology at that time focused on the interaction of different social groups that were ‘bounded’ culturally, socio-economically, and geographically (e.g. Wirth’s work on ghettoes). The epistemological and methodological conflicts between positivistic analysis and synthesizing humanism seem sharper today than they were in the 1930s. But given Simon’s interest in process rather than equilibrium he was comfortable with both agendas and let each colour the other (Loasby 2004: 276). He achieved an epistemological duality that would give him somewhere to stand philosophically even as he critiqued microeconomics’ obsessive rationalism. Many have commented on Simon’s dualism without making much of it (e.g. Dosi 2004; Frantz 2005; Goodin 2004: 240; Peng 1992; Pitt 2004: 491; Porac and Shapira 2001; Sarasvathy 2010). But finding ‘middle ground’ meant Simon’s confidence to attack RM (and thereby the entire neoclassical economics edifice) was not mere youthful bravura, but sprang from his comfort with complementing his mathematics and positivism with the pragmatic humanism and subjectivity he learned before he arrived at Chicago—and much reinforced there (BRA: 47). He concluded ‘substantive’ rationality was a Platonic abstraction, an anti-humanism isolated from and irrelevant to the lived world. In contrast, those living in the world aspired to a value-penetrated ‘procedural’ rationality. Each person would have to work out their synthesis differently because all were pursuing their own objectives—thereby generating

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democratic society. In the background was a notion of administrative society based on the procedural interaction of boundedly rational individuals rather than of rationalizing economic men. The procedural rationality Simon proposed had to be bounded contextually to each person’s world, but not quite in the way we think of ‘bounded rationality’ today. Boundaries occupied a special place in his thinking (Augier and March 2003; Barros 2010; Lamont and Molnar 2002). Aside from the Chicago sociologists’ interest in bounded groups, Simon’s 1947 Philosophical Magazine article argued that modern physicists appreciated mass was not a universal but something contingent on the inertial reference system specified (Simon 1947b: 904). This could never be the entirety of space nor, accepting the system’s dynamism, for all time. Especially after Gödel’s work, physics demanded careful attention to the space-time bounding that underpinned the analysis—an echo of Simon’s Chicago interest in Bridgman’s operationalism (BRA: 65). Without a boundary there could be no analysis. Thus Simon found his methodological and philosophical intuitions about the importance of boundary setting reinforced directly by the natural sciences. Bounded rationality was also reflexively subject to its own boundaries, and the selection of the bounding dimensions of human experience became this framing’s way of characterizing the human being—its MoI. The boundary separating bounded and unbounded rationality would also be relative and personal, to be established empirically and agentically by living, rather than abstractly. Thus BR would be irrelevant to most players of tic-tac-toe, who quickly see the game’s options (strategy), but highly relevant to those playing chess, for whom the game lies in a region beyond the bounds of their rationality (Bendor 2003: 436). With a workable concept of knowledge boundary-as-practice in hand, Simon was able to move from the banalities of the boundary-free world of perfect knowledge and towards the bounded space-time contingent humanism of the lived world—whose boundaries were grounded in the experience of ‘bounded rationality’, rather than in any ‘objective’ or scientific determination of the limits to humans’ computing or fact-gathering capacity. Philosophically, Simon stood on the boundaries of his MoI’s practical rationality, unlike those other philosophers who found institutionalized religious, ethical, or historical boundaries more germane.

Five aspects of Simon’s thought Before we get deeper into details, five general aspects of Simon’s question help illuminate his life’s work. First, he threw into question the nature of the human beings whose behaviour was being studied. One of his most cited maxims was: ‘[T]here [is] nothing more fundamental in setting the research agenda and informing our research methods than our view of the nature of the human beings whose behavior we are studying’ (Loasby 2004: 259; Simon 1985b: 303; Williamson 2004: 284). Simon’s ongoing attention to real living people rather than to abstract models like RM was thus very different from those

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who generalized about people’s reasoning with axiomatic models, or those who examined the behaviour of ‘things’ like organizations, social systems, or markets (Stewart and Clark 1994). Presuming there could be no unproblematic model of the human being, Simon’s lifelong—though not sole—intellectual butt was the neoclassical microeconomics profession and its adoption of RM as its axiomatic MoI—without critical reflection on the consequences. Focusing on ordinary people rather than on RM-ascipher also framed human choosing as morally and value loaded, so Simon’s criticism of neoclassical economics had an undercurrent of moral outrage at those who focused on ‘numbers alone’ and thereby denied or ‘forgot’ the humanity of their ‘subjects’. A second aspect of Simon’s project, in spite of his claim that his choice of work was ‘accidental’ (MML: 64), was that it showed there is nothing more fundamental to a seminal academic’s career than early intuition-driven engagement with a problem whose complexity and depth could sustain an entire career, as we find with Einstein, Picasso, Turing, Piaget, and others (Albert 1975: 147; Wallace and Gruber 1989). Raskin’s research indicated the average age of first publication for the most highly regarded ‘men of letters’ was around 22 (cited in Albert 1975: 148)—so Simon was on track to greatness from the beginning. A third aspect was that Simon’s stance was critical rather than imitative or derivative. He was intellectually independent even as he readily acknowledged being influenced by, and working collaboratively with, many other authors. Criticism as a scholarly practice is now almost lost from our discipline in spite of Popper’s stature as our token methodologist and his insistence that ‘criticism is the spur to academic progress’ (Popper 1968, 1969, 1994), so it is useful to note that while Simon’s life-long quarry was not yet visible in his 1944 Public Administration Review (PAR) article ‘Decision-making and Administrative Organization’ 1944 (Simon 1944), an uncritical Barnard-derived thought-piece on the problems of administering an organization’s division of labour, it burst into full view in his 1946 PAR paper ‘The Proverbs of Administration’ (Simon 1946). The 1946 paper contained the seeds of his Nobel; and the intellectual arc from critique to disciplinary innovation was becoming clear. After showing the proverbs’ contradictions led to an ‘impasse’ (AB: 35), Simon wrote: ‘Two persons, given the same skills, the same objectives and values, the same knowledge and information, can rationally decide only upon the same course of action. Hence, administrative theory must be interested in the factors that will determine with what skills, values, and knowledge the organization member undertakes his work. These are the “limits” to rationality with which the principles of administration must deal’ (Simon 1946: 64). He went on to suggest three types of ‘limit’ or ‘bound’ to the organizational member’s or agent’s knowledge and skills; (a) those skills, habits, and reflexes that were no longer in the realm of consciousness—‘frozen into habit’ (Simon 1997: 139), (b) the acquired values and conceptions of the organization’s ‘purpose’, (c) the practical knowledge relevant to the task in hand (AB: 39). Simon’s critique of the proverbs of administration illustrated how new work generally stands on a considered criticism of an established position, in this case the core of classical organization theory as derived from a long line of management practice writers,

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though especially from Gulick’s articulation (Gulick 1977). Given the devastating nature of Simon’s attack it is surprising that organization theorists have cheerfully carried on as if nothing had happened—one exception being Hammond’s punishing counter-critique, arguing that Simon’s points do not actually carry (Cruise 1997, 2004; Hammond 1990). Even if Simon’s attack turns out to be less effective than was first thought, there was more going on than is sometimes appreciated. In his 1946 paper Simon famously turned his back on the administrative literature that dealt with structure, command, and control, which thinking pushed the employee into the background as an object, a passive resource to be directed and manipulated by managers. Labour became a resource like any other, though contracted for rather than fully owned. Simon, in contrast, pulled the individual being managed into the foreground. He explicitly adopted what is now called a ‘micro-foundational approach’ (Felin and Spender 2009), theorizing forward from his axiomatic ‘boundedly rational’ MoI at the core of the organization, rather than from classical notions of rationality and organizational design, or the organizational system’s emergent characteristics. How did Simon arrive at this intellectual vantage point, given it helped precipitate a revolution in English-language organizational and administrative theorizing? He related reading Barnard’s Functions of the Executive (Barnard 1938) with ‘painstaking care’ shortly after its publication in 1938, and led a discussion group on it at Berkeley (MML: 73, 86). Barnard’s book, and his lengthy response to Simon’s mimeographed draft, caused Simon to change both method and target, presaging another methodological shift later in his career. Barnard became the major influence on Simon’s PhD thesis (Wolf 1972), not completed until after the publication of the ‘proverbs’ paper that became AB’s Chapter 2. Barnard also wrote the ‘Introduction’ to AB (MML: 88). Simon went on: ‘The other central idea that appears in (AB) that appears in only muted form in Barnard’s (book) is bounded rationality’ (MML: 87). Barnard’s Chapter 2 opened: ‘I have found it impossible to go far in the study of organizations, or of the behavior of people in relation to them, without being confronted by a few questions . . . For example “What is an individual?” “What do we mean by a person?” “To what extent do people have a power of choice or free will?” ’(BRA: 103) (Barnard 1938: 8). Barnard explored the managerial and organizational implications of adopting a MoI that was far from RM (O’Connor 2011). He concluded that the executive’s principal function was to provide ‘leadership’ which being the resource in shortest supply was the organization’s ‘strategic factor’ (Barnard 1938: 288). Simon, in contrast, came to focus on what individual decision-makers lacked beyond leadership or, more precisely, what administrators would still have to deal with, even if they had been able to provide ‘perfect’ leadership. To use the vernacular, Simon addressed a leader’s quintessentially American question—‘What didn’t you understand about what I just told you?’ His focus was on the ‘intendedly rational’ individual rather than on the organization as a ‘thing’ even as he matched Barnard’s micro-foundational and organizationally committed move—‘In the study of organization, the operative employee must be at the focus of attention, for the success of the structure will be judged by his performance within it’ (AB: 3). Barnard’s MoI differed from Simon’s BR person, and as Simon brought BR to the

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centre of his thinking he headed away from Barnard’s answers—even as both agreed the ‘only real certainty in life lay in accepting the burden of personal ethical choice’ (AB: xxix, n. 8; BRA: 102) (Barnard 1938: 296). Simon went on: ‘The closest parallel (to bounded rationality) is Barnard’s notion of opportunism and strategic factors, ideas he derives from John R. Commons. Since I had also read Commons, (his) Institutional Economics may have been a common source for these various conceptions of rationality that deviate from the economists’ maximization of subjective expected utility’ (MML: 87). In his Nobel lecture Simon argued: ‘The principal forerunner of a behavioral theory of the firm is the tradition usually called institutionalism’ (Simon 1978: 351). A fourth aspect of Simon’s question was that he contrasted observable decision-making against the abstractions that came with RM, so laying a course towards empirical individualist psychology and behavioural theorizing driven by induction and evidence. His methodological stance was not that of a deductive theorist deriving testable hypotheses from RM-like assumptions—epitomized by the Chicago ‘rational choice’ economists (Stewart and Clark 1994). Ironically, Simon’s guide was what he had learned at Chicago of Tolman’s empirical behaviorism (AB: 80, n. 1). His hope to ‘harden’ the social sciences through the application of scientific rigour was balanced against (a) his respect for empirical evidence and (b) his respect for Chicago sociological theorizing’s ‘higher aims’ of social relevance. He told a ‘teachable moment’ story of a paper he wrote for Henry Schultz, the Chicago statistician for whom he eventually worked as a graduate assistant. Schultz gave him a lowly B for presuming to know more than necessary to construct a testable equation—rather than proposing a more general equation. Simon wrote: ‘The incident stuck in my memory and perhaps helped convince me that in empirical science the final test is not mathematical elegance or a priori plausibility, but the match between theory and data’ (MML: 53). He concluded that examining real decision-making behaviour would mean going beyond the boundaries of mathematics and logic and into the psychological, political, and sociological causes and constraints ordinary people took into account. He equipped himself assiduously to draw from many disciplines. Even then, while some regarded him as arrogant and imperious, with an intimidating encyclopedic knowledge of almost everything, he remained generally respectful of others’ views. Likewise, his empirical bent made him patient with experimental failure, yet profoundly optimistic about the possibility of science’s improving the human condition. A fifth and perhaps more fundamental aspect of Simon’s approach was that having soundly disparaged RM and, under pressure, eschewing Tolman’s psychology, Simon drew on his sense of himself as the most proximate MoI to underpin his own theorizing, much as Freud drew on himself as his first patient. Crowther-Heyck argued Simon’s greatest legacy from his father was his strong sense of personal identity, defined by his family and professional memberships (BRA: 19). Simon’s self-confidence was as obvious as his intellect, focus, and capacity for hard work. At the core of his self-image was an Enlightenment commitment to the power of human reason—not to the exclusion of emotion or faith, but to reason’s priority. For Simon, as for many, the challenge around personal identity then pointed to the struggle between reason and various forms of

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irrationality. He took the logical positivist line that separated facts and values (AB: 4; MML: 44). One implication was that rationality was value-free, a ‘gun for hire’, subordinated and available to the actor’s specific purposes (Mingus 2007; Nieuwenburg 2007; Sent 2001). A second was that rationality could neither exist on its own as a fully detachable abstraction nor ever be sufficient to our thinking about a specific situation—for we must be actively present in an incompletely known and ethically penetrated world made up of others with equally limited and differing views, values, and utilities. If we reject RM and agree our identity cannot be condensed into a simple Spock-like capacity to ‘reason alone’, we must seek another MoI that occupies a place in the social world, ‘be a Man’ in a situation that cannot ever be completely comprehended just as we cannot ever fully comprehend ourselves. Thus AB was not only about the implications of non-RM decision-making, it engaged the management of socially situated BR actors with problematic identities (Fiori 2011; Jones 2002, 2003; Sturm 2012). There is a significant difference between reading Simon’s life-long question literally, as some do, and concluding he spent his life as a positivist psychologist exploring individuals’ decision-making, versus arguing, as I do here, that his core question was essentially philosophical, even if it was sometimes expressed in the language of formal modeling rather than in regular philosophical language (Cook and Levi 1990; Wilson 1978). Simon, especially when arguing in defense of the potential of AI, could come across as the epitome of inhumanity, and was often characterized this way (H. L. Dreyfus 1965, 1987; Mintzberg 1977). Yet in the longer run his MoI comprised rationality, emotion, intuition, learning, memory, sociability, and sexuality among the many dimensions of its empirically observable behaviour. While he often declared his interest was in human decision-making (Spice 2000), his first engagement was with political sociology, implying the decision-making he had in mind was not simply the mental process of an isolated quasi-computer-like individual, but something richer, the way human choosing affected and articulated the broader and ethically burdened business of living in contemporary society, especially in its administrative situations (Stewart and Clark 1994). After all, Simon was a widely read, multilingual, cultured man, a proficient musician who liked to play every day, and for many years an effective administrator of large research teams and a successful ‘politician’ of the university, government research, and grant-getting milieu and its arcane ways (BRA: 151). His grasp of these practical realities was obviously well above average—though it was never clear whether his researches provided him with any ‘competitive advantage’. Taking Simon’s oeuvre as a whole, we can think of it as a sustained Lakatosian research programme to model human decision-making scientifically and ‘explain’ Man the Decision-Maker, or as an essentially philosophical programme in which he pressed rigorous science to the limit, seeking a clearer sense of what of Man might lie unexplained in the void beyond science’s boundaries (Cruise 1997; Hatchuel 2001). Opinion remains divided, though I conclude neither is correct and that Simon remained ambivalent until the end of his life—in the middle, sometimes stressing the positivist programme, sometime the humanist, but generally reflecting both (RHA: 5, 24). Clearly an important part of Simon’s appeal was his focus on a philosophical issue we all recognize in ourselves

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(the limits to our rationality) without using esoteric philosophical language (Campitelli and Gobet 2010). The contrast between ‘Simon as scientist’ (Augier and March 2004a) and ‘Simon as humanist philosopher’ was nowhere clearer than in his career-long writings about ‘rationality’ and the various neologisms he found as he explored the boundary between the positivist and humanist projects: ‘boundedly’, ‘procedurally’, ‘substantively’, ‘objectively’, ‘subjectively’, ‘consciously’, ‘deliberately’, ‘organizationally’, ‘personally’, ‘intendedly’, ‘purposively’—all modifiers to be set against ‘perfect’, for irrationality can only be defined against some viable form of rationality-in-practice (AB: 76) (Barrett 1962; Heuklom 2006: 8; Hoffrage and Reimer 2004; Kalantari 2010; Simon 1997: 76). At the same time Simon’s project dealt with the specific philosophical issues of the organizational life-world rather than of society generally—so his language differed from the professional philosophers’ writings on rationality. The philosophical context of Simon’s move was the shift of the economics and management disciplines towards positivism—just getting under way in Simon’s time but now fully established as a methodological hegemony pushing almost all alternative notions of research aside (Khurana and Spender 2012; Locke and Spender 2011). Positivistic science’s project is about establishing knowledge of the real, of what lies beyond the scientist (and his/her community) as knower. It is located within a philosophical aesthetic that aspires to be universalistic and independent of humans’ fallible sense-making, seeking insulation from their subjective relativism, idiosyncrasy, emotions, and other irrationalities. There are other philosophies. But all are about taking up and fleshing out a coherent view of the human condition: how we might make sense of our world and ourselves in ways that have justifiable implications for our choices and behaviour. Merely to have a view, as do all bigots, is not to have a philosophy: that requires the further capacity to doubt, to be able to step back from one’s beliefs, to critique and probe how one’s view might be wrong, and to ponder how and what can be done about it. In the end philosophizing is more about posing penetrating questions than about finding definitive answers. If the world presented its true nature to us unequivocally we would have no doubts and so have no need of philosophy—a broader version of Simon’s intuition about administrative theory growing out of what people do not know as a result of their being boundedly rational. Today much philosophizing has moved on from axioms that presume and seek certainty, what some call the ‘God’s Eye View’. Over the past two centuries the trend of Western philosophy has been away from realism and naïve positivism, with its assumption that certainty is potentially available to us with its attendant possibility of complete ‘objectivity’. Primarily under the European impulse the focus has moved towards subjectivism and forms of phenomenology, to accepting that human perceptions and experiences must remain central to all human knowledge. Simon was ambivalent in that he espoused a weak form of positivism, even as his thinking reflected his critical shift away from positivism. His project called for a non-mechanical and non-deterministic philosophy of the administrative situation that admitted the human being as an agentic contributor rather than as a passive calculator— a position for which there was no established language, though Barnard’s was probably the best available. The mainstream economics project, in contrast, remains focused on

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developing languages and methods for the study of markets as a form of objective reality we do not create and about which we simply calculate (Arrow 1974; Balzer and Hammings, 1989). The rest of my chapter argues that Simon was, at bottom, a ‘working philosopher’ puzzling about ‘What is Man?’—but doing so narrowly, in the value-penetrated organizational contexts that interested him most, rather than in society generally—and that all else was peripheral and, if necessary, expendable. By ‘working’ I mean ‘artisan’, the antithesis of ‘scholastic’, passionately engaged in experiencing, observing, and shaping the administrative world around him, with little patience for the abstractions and methodological weaknesses of academic philosophizing—however amusing its mind-games might be to someone, like himself, with more than enough ability to play them. Simon’s initial target was probably an empirically researchable extension of Barnard’s somewhat pragmatist humanist philosophy of administration, so Simon’s take on the underlying philosophical questions about being human was unusual but not original—it was through the lens and language of administrative decision-making. Even though this specification hid his project’s philosophical nature from most readers, it was a handy way of explaining his ideas, eventually memorialized in the citation to his Nobel. But his interest in individual decision-making did not end at the individual or contradict his initial interest in political action and social reform. Thus the family discussions with his parents and brother probably meant more to him—intellectually—than the rigorous abstractions of the ivory tower; and when his Nobel was awarded, his longtime friend and colleague Jim March was surely correct in describing him as an: ‘unrepentant knight of the Enlightenment’ (Augier and March, 2004a: 8). Before moving on to the next evolutions in Simon’s career and thinking, it is useful to look again at its founding document—AB—and reconsider whether or not this offers the sound platform from which we can evaluate Simon’s overall contribution.

Evaluating Administrative behavior (1947) Given its prominent place in our canon, AB is curiously under-analysed and its critiques more or less forgotten (Banfield 1957; Kerr 2007; Morçöl 2007; Peng 1992; Storing 1962; Vickrey 1964)—in spite of the symposium organized by Golembiewski (Bartlett 1988; Chisholm 1989; Dunn 1988; Golembiewski 1988a, 1988b, 1989), the debate between Simon and Argyris (Argyris 1973; Lovrich 1989) and the even more acerbic spat with Waldo (Harmon 1989; Waldo 1952, 1953). It is not clear how AB influenced management research, save for the part it played in introducing the Simonian language of bounded rationality, satisficing, partial decomposability, and so on, all of which helped ‘psychologize’ management beyond the Hawthorne studies, the pre-World War II work at Harvard, and the evolving ‘human relations’ syllabi in business schools and elsewhere. AB is likewise curiously under-considered in the extensive commentary on Simon’s legacy assembled by Augier and March (Augier and March 2004b). Exceptions

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were the pieces by Williamson and Winter. As a Carnegie student himself, Williamson noted Simon ‘epitomized the “Carnegie Triple”—to be disciplined, inter-disciplinary and have an active mind’ (Williamson 2004: 280). He implied AB achieved the grand synthesis Weber sought—for it brought organization theory, economics, and psychology together, being ‘concerned with the same decision-making phenomena’—and contained several lessons for theorists like himself (Williamson 2004: 291). But he offered no analysis or critique of Simon’s synthesis—and Augier and March noted ‘conflicts of interest’ between them (Augier and March 2001). Winter likewise provided no analysis but indicated the importance of Simon’s attention to learning (Winter 2004: 301). Simon’s obituary in the New York Times (10 February 2001) captured the ‘received view’ of his contribution. It reported he proposed ‘satisficing’ in lieu of RM and in AB set out the implications, rejecting the notion of omniscient ‘economic man’ capable of making decisions that would bring the greatest benefit possible, and substituting instead ‘administrative man’ who looked for a course of action that was ‘satisfactory’ or ‘good enough’. Administrative man would adjust his ‘aspiration levels’ depending on the costs of gathering information to improve his decision-making and on how things turned out. It neglected to mention this only made sense if the decision-maker was able to act rationally, albeit on unproblematic expectations, and that Simon offered no coherent theory of organization or choice based on satisficing, and that his work was therefore merely suggestive, even as it seemed enough to earn him a Nobel. In contrast, Crowther-Heyck’s careful unpacking of AB argued it grew out of the critique of the ‘proverbs’ and was Simon’s offer in their place (BRA: 98). Its principal sources were Parsons, Tolman, Barnard, and Dewey (BRA: 99). First, even in the absence of full knowledge and thus full determination by ‘causes’, Simon’s MoI still hinged on ‘purpose’, the intentionality provided by the actor that set a direction, absent which there was only disorientation and chaos. Second, Simon presumed a hierarchy of purposes that bound together the organization’s heterogeneity and divisions of labour—both horizontal (productive) and vertical (administrative). Third, there was the matter of communicating these disaggregated purposes and values. Bounded rationality problematized all three, implying an inevitably incomplete communication and control by the hierarchy that led, for instance, to individuals’ tendency to adopt local sub-goals—as explored majestically in Chapter 3 of Organizations (March and Simon 1958: 34). Crowther-Heyck showed how Simon tried to repair the damage he had inflicted by bridging fact and value, turning to ‘organizational identification’ as the underpinning to effective communication. Doing so, Simon displayed a debater’s penchant for changing terms’ meaning to suit his own argument. He sketched his MoI’s fundamentals, dismissing the lay view that ‘decision’ is conscious deliberation while ‘choice’ embraces other modes of behaviour adopting and proposing in lieu, the term ‘decision-making’ as ‘any process whereby one behavior-alternative is selected to be acted out from all the alternatives which are accessible to choice’ (BRA: 103; AB:3). Along with Barnard’s ‘Mind in Everyday Affairs’ (Barnard 1938: 302), Simon noted decision-making involved ‘both conscious and unconscious, rational and non-rational elements’. In this way Simon aligned himself with the Austrian economists’ as well as with Parsons’s attempt to develop a general

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philosophy that brought expectations and subjective elements into the analysis (BRA: 103) (RHA: 7) (Augier 1999; N. J. Foss 1994; N. J. Foss and Klein 2012; Vaughn 1994). Parsons’s ‘voluntaristic theory of social action’ sought to grasp the ways society shaped the actions of independent individuals without completely denying their agency (BRA: 104) (Hayek 1979: 30; Parsons 1968). While Parsons’s theorizing was sociological, grounded social evolution, and survival-seeking functionality, Simon made a different micro-foundational choice, centring his analysis on the individual. The new meaning he gave the term ‘value’ followed from his choice to contrast fact and value. On the one hand, values were those aspects of an employee’s decision-making that stood beyond the limits of her/his rational deliberations, on the other, they were those shaped by higher levels of the hierarchy. Given his public policy background, Simon presumed values in the public sphere should be determined democratically, but without justification he argued that in the private sphere the organization’s values should be set by the Board of Directors (AB: 61), so conflating values with organizational purposes and setting off the long debate with his many critics in the public policy arena for confusing ‘is’s’ and ‘oughts’ (AB: 68)(Argyris 1973: 255; Bendor 2003; Chisholm 1989; Storing 1962; Waring 1991). Simon’s redefinition of values was a remarkable simplifying move that led directly to tractable theory—but it was also a heavily political reconstruction of the lay notion of value. It implied a deep commitment to and uncritical acceptance of democratic capitalism and its modes of executive authority (Morgan, Kirwan, Rohr, Rosenbloom, and Schaefer 2010: 624; Waldo 1952). From a methodological point of view, rationality was thereby detached from any association with the absolute of logic, or even of social institutions, and re-attached—relativized—to the organizational purposes at hand. Rationality as generally understood was replaced by ‘intendedly rational’—pragmatic interests displaced Platonic essences, culture, and objective science. At the same time Simon redefined ‘unconscious’ in a way that similarly trivialized the lay conscious/ unconscious distinction: ‘wholly persuaded . . . that a theory of decision-making had to give an account of both conscious and subconscious processes, I finessed the issue by assuming that both these processes were essentially the same: that they draw on factual premises and value premises, and operate on them to form conclusions that become the decision’ (AB: 131). Mintzberg, reviewing one of Simon’s later works (Simon 1965), was one of the few to even notice this trivialization, let alone criticize it (Mintzberg 1977). Even after such heroic moves Simon’s model remained complicated by the notions of hierarchy, sub-goal adoption and uncertainty avoidance and the problems of internal heterogeneity explored in Organizations (March and Simon 1958). Simon’s model could also be compared with Thompson’s somewhat simpler model, more directly derivative of Barnard’s. Thompson viewed an organization as a coherent and therefore bounded system of managed activity interacting with its environment—suggesting boundary processes acting between a rational core and a mantle of boundary-spanning uncertainty absorption (Thompson 1967: 7). Simon needed further notions to contain the heterogeneity resulting from distinguishing the goals at each operative’s location from those shared as overall organizational goals (Simon 1964a). ‘Organizational identification’ allowed his MoI a degree of personal agency—limited on the one hand by

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the organization’s ‘values’ (instructions from above) and on the other to a ‘zone of acceptance’ that defined individual’s identity (maybe ‘personal’ instructions from beyond the organization’s boundary) (AB: 10, 200). Thus Simon brought the ‘incomplete employment contract’ with its attendant inducements-contribution complex to the centre of his model, following Barnard’s similar move, even as he attempted to formalize the relationship (Simon 1951). Commons’s ideas were hovering in the background, especially his Hegelian distinction between the analytic and synthetic aspects of human economic behaviour. Barnard’s similar Commons-based definition of leadership was the executive’s ability to synthesize the physical, social, and psychological ‘sub-economies’, and so bring a coherent organization into existence (Barnard 1938: 246). Simon got inside the synthesis differently, reframing it as a fusing of (a) fact, (b) value, (c) rigorous goal-oriented decision-making, and (d) practice-based intuition. He also saw that the possibilities for an analysable synthesis were contingent on a consistent epistemological approach to the parts being synthesized. So while today’s sociologies and psychologies are often post-modern—infused with Continental/ European philosophy—rich in methodological disputes that reveal contrasting and sometimes incompatible philosophies, Simon’s notions remained largely positivist. It followed he could look directly at empirical examples of experts synthesizing their bounded knowledge as they generated ‘heuristics’ (Hoffrage and Reimer 2004). Aside from issuing clear instructions to be understood rationally, the ability of superiors to influence the individuals comprising the organization also depended on these individuals’ ‘docility’ or ‘teachability’, a notion of the adaptive individual’s psychology that Simon again took from Tolman (AB: 97, n. 185; RHA: 65). Organizational identification was not mere subjugation, for Simon’s MoI retained a measure of personal agency and individual identity. It was about individuals voluntarily taking up the organization’s complex of task-specific goals, more obviously so than in Parsons’s model. A further simplifying element of Simon’s model was his matching the hierarchy that comprised the organizational problem-solvers’ ‘internal reality’ with an assumption that ‘external reality’ was likewise organized hierarchically, and so decomposable and comprehensible at the various operative different levels. The result was that each person worked within the bounded ‘bubble’ of her/his own task- and purpose-specific ‘intended rationality’, and engaged a local partially comprehended part of the world. The senior executives managed the organization’s values to relate these bubbles and bring them together behind the Board’s chosen purpose, even as each individual, retaining a degree of agency within her/his bubble, engaged the organization voluntarily. Simon illustrated this complex inter-dependence and direction by telling of the major’s ability to influence the battle by ‘directing’ the machine gunner’s hand (AB: 2). AB was rich with insights about organizational behaviour and had many further subtleties and complexities. But from this short analysis we can sense considerable tension between (a) Simon’s humanist rejection of bureaucratic power and its subjugation of the individual, and (b) his uncritical acceptance of the organization’s purposive (Gesellschaftlich) nature that made it possible to tie rationality into the organization as a collective capability. Note the concepts of limited or bounded rationality seemed applied

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principally to the operative within her/his bubble rather than to those at the Board level who set the organization’s values, and who were thereby given the freedom to detach the organization from the kinds of external social or political concerns that stakeholder theory now explores (Freeman, Harrison, Wicks, Parmar, and de Colle 2010). Hence, also, the tension between Simon’s positivist tendencies and flirtation with ‘efficiency’ throughout AB (Simon 1953c, 1964b) and his originating humanism. The final element that helped this all hang together was Simon’s handling of time, learning, and memory (AB: 67), and here his epistemological distance from neoclassical economics was especially clear. Bounded rationality was also a metaphor for arguing that resources were never the ‘strategic factor’, that human beings’ time, attention, learning, and memory set their limits (RHA: 79) (Frank 2004: 42), the axiom Penrose later put at the core of her theory of the growth of the firm (Penrose 1959: 16n). Simon sought descriptive analyses that could help individuals develop ‘working rules’ to shape and improve their practical decisionmaking rather than ‘normative’ timeless laws reflecting neoclassical economics’ ‘physics envy’ (Simon 1972). Again Commons was an influence as he took the notion of ‘working rules’ from Veblen to have them re-emerge in Simon’s analysis—and in Nelson and Winter’s terminology of ‘organizational routines’, duly noted in Simon’s added commentary (AB: 89; RHA: 41) (Commons 1924: 137; Lazaric 2000; Simon 1953c). Thus the analysis in AB is hung within a contingent framework of time-dependent interaction between individuals, their intentions, their knowledge, and their experiences, as they act purposively in a specific context. Given the inclusion of time, it presupposes individuals learn from their experiences, a reflection of Dewey’s philosophizing. In short, AB was not the simple positivist science-based story sometimes suggested or even the ‘received wisdom’ of substituting ‘administrative man’ for RM. On the contrary, AB’s critique and insights sprang from a carefully managed epistemological ambivalence and duality that called for an agentic experience-informed synthesis at every point of the organizational purpose’s application: (a) in each operative’s bubble, as the role-occupant synthesized fact and value together with her/his voluntarily contributed agency, and (b) at the macro-organizational level where the Board synthesized their own agency and freedoms of action along with the complex physical, social, and psychological constraints suggested by Barnard’s analysis of the executives’ function. Simon’s organization was fundamentally a body of intendedly rational and inter-related synthesizing and learning practices hung between incommensurate interfaces: one, the incompletely known socioeconomy, the other the psychologically defined and incompletely known individuals whose memorizing, agency, and practice gave the organization its only ontology. These syntheses could only be achieved by human beings—most definitely not by computers. To summarize this bit of the discussion, in AB Simon created an open analysis or framework by rejecting the presuppositions of rationality and certainty that would pull actor, context, and interaction into a coherent deterministic analysis, and then by adopting three very different axioms, none ever fully formulated: (a) bounded rationality and satisficing as metaphors for his MoI, (b) hierarchy and partial decomposability as a metaphor for the ontology of his MoI, its organization, and its world, and (c) experiential remembering and learning as a metaphor for their interaction and its results. While these axioms were

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obviously under-specified in AB, Simon believed they were neither tautological nor nested; rather they mutually clarified and stabilized each other, as do the axioms in a natural science theory such as F (force) = M(mass) x A(acceleration). Thus decomposability was a corollary of bounded rationality, for individuals could never hope to know anything if they had to know everything before grasping anything. Things had to be decomposable (chunkable, memorable) before human knowledge of them would be possible (Gobet et al. 2001; Simon 1974). Experiential learning likewise implied the time-wise decomposability of knowledge—things (or chunks) were learned seriatim, the present separated from past and future. For boundedly rational people, time was lived in this present through their experiencing, remembering, and learning. The open-ness ensured learning let the individual sustain her/his agency despite her/his docility and partial subordination to the organizational hierarchy’s deliberate purposiveness, views, and values. The three axioms showed Simon’s methodology had little to do with the economists’ pursuit of theory that presumed individual behaviour could be fully and timelessly determined by the situation’s facts or causes. They were the groundwork for Simon’s philosophy of organizations. His humanism led him to define the actor’s world as time-full, bounded, and therefore under-determined, and he thereby placed the synthesizing individual’s ‘free’ choices or agency at the very centre of the analysis. He worked towards an empirically testable philosophy that considered scientific knowledge as useful to guiding the problem-solver’s ongoing synthesizing—but useful for supporting managers rather than prescriptive. He had no intention of displacing them with formulae or algorithms. From his undergraduate days, Simon’s hope was to help policy-makers, public or private, make better decisions. His research programme was empirical—to observe behaviour and memorizing, and distil the successful experience-based and contextspecific heuristics observed into ‘working rules’. In this his project did not differ much from Taylor’s Scientific Management and its attempt to codify workplace ‘best practices’ (Spender and Kijne 1996; Taylor 1911, 1912). Indeed, Waring argued that Simon was our leading post-Taylorite theorist, and that for ‘all of his departures from Taylorism, he did not go beyond its basic psychology and premises’ (Waring 1991: 50). AB’s weakness was not the under-specification of axioms that prevented their being distilled into prescriptive theory, as some might have hoped were AB ever seriously critiqued by positivist management scholars rather than merely accepted—or rejected, as it was by many public administration scholars (Storing 1962). Rather, its most obvious weakness lay in its operationalization, the difficulty of separating the particularities of context that shaped an individual’s synthesizing from their own desire or agency, and then discerning the extent to which their agency had been contributed to the organization; all aspects of what is now called the ‘structure and agency problem’ (Archer 2000, 2003). At bottom, Simon’s positivist inclinations and dependence on empirical inputs prevented him getting to the agentic core of the dynamic quasi-constructivist MoI he adopted after he dumped RM. Comfortable as he was managing the ambivalence and duality of his position successfully, he seemed unaware of, or unbowed by the severity of the philosophical and methodological task he had set himself. Methodologically, it seemed he believed Tolman’s behavioural psychology was rich enough to provide an

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answer. Thus, rather than more of the ‘arm-chair philosophizing’ he noted in his 1944 PAR paper, he took a behavioural route to narrow the context studied from the ‘buzzing confusion’ of the real world into the artificialities of the psychology lab. ‘maze’—like the mazes he long regarded himself as negotiating (MML: 86, 180; BRA: 14)—and then to make scientific sense of the micro-behaviours observed (Simon 1991b:xvii). Before going further into Simon’s work and thought it is useful to step back once again to consider how scholarly reputation arises—especially when it does so rapidly enough for a scholar to be recognized and honoured in her/his lifetime. The comments can illuminate and balance the specificities of Simon’s thought, those considered so far, against the vigour with which he published—his principal means of telling others.

Assessing academic giants The paean to variety is the obvious commonplace in the Simon literature, embracing as it does, computing science, AI, psychology, management science, public administration, and economics (Finch 2003); the philosophy and methodology of science, applied mathematics, various aspects of economics, computer science, management science, political science, cognitive psychology, and human problem-solving behaviour (Boumans 2001: 75); or management science, political science, AI, information-processing psychology, operational research (OR), statistics, economics, computer science, psychology, education, philosophy of science, biology, and the science of design (Gobet and Chassy 2009; Gobet et al. 2001) or, more succinctly, that Simon was a ‘modern Leonardo da Vinci’ or a true ‘Renaissance man’ (Andresen 2001; Secchi 2011: 14). Heuklom’s analysis (Heuklom 2006) puts numbers to these notions just as Cowan’s abbreviated (!) bibliography helps make the point (Cowan 2007). Heuklom, familiar with Cowan’s work, identified the Simon oeuvre—excluding translations, re-issues, and journalistic items—as comprising 684 distinct publications (228 co-authored with 117 other people) ranging across:

Cognitive Psychology Business & Organization Computer Science Economics Political Science Philosophy Mathematics and Statistics Sociology Engineering Social Psychology Biology

248 94 83 79 73 52 26 12 7 6 4

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Volume, of course, is not the sole determinant of academic impact but it certainly helps, as we know with Picasso, Wundt, Binet, and Dickens. There were the various awards Simon garnered aside from his Nobel: the Turing Award (with Allen Newell), the ORSA/TIMS John von Neumann Theory Prize, the National Medal of Science, the American Psychological Association Lifetime Achievement Award, the Dwight Waldo Award from the American Society of Public Administration, and more too numerous to mention—including one from our own Academy of Management (Assad 2004). He was awarded twenty-four honorary doctorates and was one of the few foreigners to be inducted into the Chinese Academy of Sciences (in 1994). He was a Life Trustee of Carnegie Mellon University and a campus building was named ‘Newell-Simon’. Dunn, following Merton’s sociology of knowledge methods, examined how AB had impacted public administration texts. He concluded that AB failed to inspire a ‘new paradigm’ (Dunn 1988: 381). Citation scores, especially problematic in management, offer another measure of scholarly impact (Macdonald and Kam 2007). As I write, AB shows over 15,000 hits on Google Scholar, the 1955 QJE article ‘A Behavioral Model of Rational Choice’ scores 7,000, the 1956 Psychological Review article ‘Rational Choice and the Structure of the Environment’ scores 2,030. Many would regard these, along with Sciences of the Artificial, as Simon’s principal works. The scores compare with Coase’s 1937 ‘Nature of the Firm’ at 21,100, Williamson’s 1973 Markets and Hierarchies article at 23,000, Porter’s 1980 Competitive Strategy at 21,450 and Barney’s 1991 Journal of Management article at 23,400. In spite of the volume of Simon’s publications and his huge academic profile, many commentators noted his project seemed not to have fulfilled its promise—yet (Ando 1979; Bendor 2003; Callebaut 2007; Simon 1997: 269)(Campitelli and Gobet 2010). While oft-dubbed one of the ‘fathers of AI’ (Andresen 2001; Baber 1988; Frantz 2003; Pomerol and Adam 2005), Simon is not memorialized by anything like von Neumann’s ‘computer architecture’, Turing’s ‘machine’, the Church-Turing Thesis, or Shannon’s ‘entropy’. The Logical Theorist (LT) and General Problem Solver (GPS) Simon built with Newell are little more than museum pieces of historical interest as the first running AI programmes (Klahr and Kotovsky, 2001). His Nobel speaks of significant impact in economics—but its nature remains far from clear (Ando 1979; Baumol 1979; Loasby 2004). We also know Simon as one of the fathers of behavioural economics (Schwartz 2002), but no theory of his has the fame of Tversky and Kahneman’s ‘prospect theory’ (Camerer and Loewenstein 2004), nor was Simon’s work cited in their early papers (Campitelli and Gobet 2010; Tversky and Kahneman 1974). Even bounded rationality and satisficing, the centrepieces of his Nobel commendation, remained ‘much cited and little used’ (Fiori 2011; N. J. Foss 2003b; Morçöl 2007; Sturm 2012). How come? Larkey pointed out that Simon’s commitment to practical policy issues, to worldly relevance rather than to academic rigour, set him on a difficult course of perpetual criticism and empirical engagement with detail (Larkey 2002). Simon did not choose the scholastic escape route into sweeping generalities and high theory, especially the one marked ‘subjective expected utility’ (RHA: 12), or even the simplifications the pos-

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tulates of optimization and equilibrium offered (Stewart and Clark 1994). Intellectually doubtful and restless, Simon was never wholly satisfied with either the theoretical or empirical foundations of the subjects he studied. He thought that to declare an interest in human decision-making and then adopt RM uncritically was to accept defeat from the get-go—inter alia an implausible, simplistic, dehumanizing dismissal of our own experience—and all for the sake of a disciplinary rigour that was not worth achieving. Larkey argued that Simon’s notion of rigour reflected the lesson he learned from Schultz: ‘rigor was in the correct application of any language, device, or methodological procedure that would, for the purpose of building and testing explicit models of processes, advance his understanding of how human beings decided and solved problems . . . Simon’s rigor is the rigor of understanding how something works to the extent that you can build and test a model by putting it to a task in a specified domain’ (Larkey, 2002: 243). Especially early in his career Simon brashly co-opted every project, typically done for a client such as RAND, as yet another opportunity to advance his own agenda—all the while hanging onto the multidisciplinary approach he learned at home but developed scholarly knowledge about as a Chicago student. There was considerable professional risk here, for abandoning RM drops the researcher into an epistemological morass that could spell the end of many an academic career. Perhaps Simon, not only hugely self-confident but also having made his name early in public administration and the theory of organization and behavioural economics—even by 1952—concluded he could indulge himself and follow his own star. Without doubt, he spent the next half-century working flatout—but what was there to show for it? How do Simon’s achievement’s compare with other ‘greats’? Was he a genius (Perry and Rainey 1988)? What actually underpins his reputation? We tend to take academic reputation for granted, without enquiring into how it is gained (Frey and Neckermann 2009; Simonton 1988). In fact there is a cottage industry in evaluating seminal figures beyond mere biography. Thus Albert’s work on genius considered how great academic achievement came about, drawing on Galton and Freud (Albert 1975). He noted Galton’s five interlocking propositions about genius: (a) evident eminence, (b) reputation as a leader or originator of ideas, (c) even given the variability of contemporary opinion, the person’s long-term reputation, (d) that being based on real achievements, (e) these being the result of ‘real ability, that blend of intellect and disposition that urges a man to perform the acts that lead to reputation—capacity, zeal and the power to do a great deal of laborious work’. Without doubt, Simon met these criteria in spite of moving from one discipline to another like a ‘gadfly’ (Velupillai, 2001). In contrast, Freud’s criteria were less directed to professional harmony, he showing more evidence of the ‘genius’ required to run against the stream and be a ‘detonator of change’ –though Simon had more than his share of this too. While both Galton and Freud were ultimately dissatisfied and gave up trying to analyse ‘genius’, Albert pressed on to argue ‘the key ingredient . . . is productivity—large in volume, extraordinary in longevity, more or less unpredictable in content’ (Albert 1975:

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144). Many empirical studies of academics who stand out support the connection between publication volume, professional impact, and recognition, though the causality is unclear (e.g. Sackett 2001). There seem to be few connections with IQ—provided the subject’s is over 120 (Albert 1975: 147). We hope that academic reputation follows from the dislocation or reorganization processes that lead to a major shift rather than mere extension or professional politicking. Success seems not much influenced by either seeking after (as in Freud’s case) or ignoring eminence (as in Einstein’s case). Albert’s approach was ‘institutional’ and emphasized the social impact of the work over any criteria that might be independent of time and place. He focused attention on social interplay of the work’s producer and the context’s receptivity. Likewise, Lekachman argued ‘In economics it is reasonable to term a book truly significant if, after its appearance, economists think differently, students are presented with a fresh set of textbooks, politicians hear unexpected voices, and perhaps most important of all, the public at large comes to expect a different set of government policies and a transformed attitude . . . Keynes rewrote the content of economics and transformed its vocabulary’ (Lekachman 1968: 8). Albert argued: Important work is ‘transactive’. Its capacity for developing and being significant over decades is necessary; by doing so it attracts new generations of adherents . . . at several levels: cognitive, cultural, educative, as well as political . . . long term productivity helps overcome others’ resistance . . . (and) makes time a critical variable . . . It often takes a generation of education to overcome resistance . . . Since most published work, at least in the social sciences, does not receive immediate or large-scale attention the importance of persistence is clear. (Albert 1975: 146)

He concluded: Genius is not a blessing, danger, or a fortuitous occurrence: it is not a trait, an event, or a thing. Rather, it is, and always has been, a judgment overlaid with shifting values. What genius has often been based on is far more solid . . . creative behavior which, although highly personalized, is made public and is eventually influential over many years and often in unpredictable ways . . . Of all the qualities attributed to persons of genius the most remarkable, along with perceptiveness, are continuity, endurance, productivity and influence. (Albert 1975: 150)

Given Simon did not change economics, public administration, or even organization theory we need some other way to categorize and analyse his contributions and discern whether they were profound, such as the disciplinary changes noted by Albert, or peripheral, even as they managed to attract considerable attention during his lifetime. Andresen considered Simon’s contributions fell into four principal areas: psychology, economics, management science, and computer science, and he saw these as discrete (Andresen 2001). Crowther-Heyck, knowing well the breadth of Simon’s interests, connections and writings, as well as the historical flow of his career, focused on Simon’s hunt for an alternative MoI to ‘stand up against’ RM, and differentiated an early from a late period. In the first, Simon’s central contribution was the MoI Crowther-Heyck dubbed homo administrativus—the basis for AB

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(BRA: 96). In the second, following Simon’s work with Newell, the development of LT and GPS and the publication of Human Problem Solving (Newell and Simon 1972) the MoI was homo adaptivus, the ‘finite problem solver’ (BRA: 255) (Andresen 2001:71). So one way to survey Simon’s intellectual arc is to wonder whether these two periods—and the two MoIs—share a common underpinning or, instead, showed his rejection of an earlier jejune approach. Did AB capture Simon’s overall philosophy and thinking, or did that evolve considerably later? Specifically, to what extent did Simon’s involvement with the Cowles Commission, RAND, and Allen Newell lead him into new thinking or new politically driven accommodations (Amadae 2003)? Were Simon’s contributions evidence of a single Lakatosian research programme, or did they range opportunistically between the various disciplines that honoured and afterwards ‘claimed’ him?

Carnegie times (and Inventing AI) Simon arrived at Carnegie in 1949, and rapidly found a home using a typically Simonian search routine (BRA: 329, MML: 136). He was already plugged into the political-academic complex that was transforming US social science as part of the nation’s response to the Cold War (Amadae 2003; Hounshell 1997, 2001; Peck 2010; Waring 1991). He got to work helping build the Graduate School of Industrial Administration (GSIA) into a social science research school that could compete with Chicago, Harvard, Wharton, or Stanford, as well as the government sponsored ‘think-tanks’ like RAND (BRA: 143, MML: 135) (Crowther-Heyck 2006). His vision was of an institution that, equipped with the most up-to-date scientific techniques, could make real progress towards the synthesis of organization theory, finance, economics, psychology, and decision science that Weber, Parsons, and the other ‘grand theorists’ had failed to achieve (e.g. Cyert and March 1963: 16; Khurana and Spender 2012). Part of the vision was to inject analytic rigour, in contrast to Harvard’s case-work (MML: 154). Part of the vision recalled Merriam’s multi-disciplinarity at Chicago (Simon 1985a) and, as if to prescribe it for others, he later argued that everyone on the faculty should be able to teach an introductory course in each of the school’s subjects. Aside from Simon’s intuitions about what was involved in building GSIA as an exemplary organization (Khurana and Spender 2012; Revans 1967; Simon 1967), his 1952 RES ‘Comparison of Organization Theories’ paper formalized the paradox that under conditions of perfect competition and full rationality, the distinctions between market-based and organization-based theories collapse (a different way of pointing out that administration would then be unnecessary), while under the typical organizational conditions of bounded rationality and imperfect markets the distinctions were probably unbridgeable, save through a rigorous programme of empirical research along institutionalist lines (Simon 1952b: 44).

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The Cowles and RAND connections established during his Chicago years were strengthened, and ensured a plentiful flow of funded research work from RAND or the government or, as in Charnes and Cooper’s seminal OR work for Gulf Oil (Charnes, Cooper, and Mellon 1952), from the larger private sector firms. But Simon’s feistiness soon generated friction with the other GSIA economists who did not appreciate him ‘preaching his AB heresies’ (MML: 144) and this led to his ‘retreating’ from his administrative roles (he had a somewhat problematic term as Acting Dean and Department Head (MML: 150)). Increasingly, he focused on his own research programme: ‘During the first six years of my research at GSIA I filled out, empirically and theoretically, the decision-making framework I had laid down in AB’ (MML: 161). He plunged into the Controllership Study and, with his GSIA colleagues Cyert and March, a Ford-funded project that led to the Behavioral Theory of the Firm (Cyert and March 1963), plus joining into and administering many other studies. While consulting for RAND, he produced the 1953 report (Simon 1953a) that evolved into the 1955 QJE paper ‘A Behavioral Model of Rational Choice’ (Simon 1955)—often cited as the basis for his Nobel for its explicit call for mainstream economics to adopt a realistic psychology of decision-making (MML: 165) (Cruise 1997; Secchi 2011). In spite of the great span of his working life Simon later wrote that 1955 and 1956 were ‘the most important years of my life as a scientist’ (MML: 189). In the 1955 QJE paper Simon adopted the quasi-formal ‘mathematical format with which economists are comfortable’ (MML: 165). The essence of decision-making was to be found in ‘the properties of the choosing organism’ rather than in the characteristics of the ‘environment of choice’, an aspect left to a second paper—‘Rational Choice and the Structure of the Environment’—that appeared in Psychological Review in 1956 (Simon 1956). This pair of papers—which Simon later implied should be seen as scissor blades (Simon 1990: 7)—was pivotal to Simon’s achievement and reputation. Given the standard story credits Simon with introducing ‘bounded rationality’, it is interesting to note neither paper mentions it. Though he used the term in his 1957 Models of Man (Simon 1957: 198) it did not move into wider usage until he wrote a new Introduction for AB’s second edition (Simon 1958a: xxiv), updating the wording from the ‘rational choice’ he used in the QJE paper (Klaes and Sent 2005; Simon 1953a). In the 1955 QJE paper Simon argued that human decision-makers made process simplifications, such as adopting ‘pay-off ’ functions and ‘aspiration levels’, that enabled them to make a choice once these criteria were met. On the one hand, these simplifications were neither explained nor justified, but on the other, they were clearly changeable in the light of the decision-maker’s information gathering and experience, reflecting the ‘docility’ of AB’s MoI. Experiencing, remembering, and learning changed Simon’s MoI—RM, of course, is unchangeable and never learns anything—simply being fed with new inputs to compute. The contested economic notion of ‘utility’ hovered in the background (MML: 360). Simon noted that whether the simplifications were productive or not ‘depended on certain empirical facts’ about the decision-maker’s situation. Remarkably, the paper’s note 4 and conclusion section also mentioned the possibility of using a computer to ‘simulate’ the kind of human decision-making found in IQ

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tests—signalling the arrival of the new MoI that would mark a radically new phase of Simon’s thinking. The companion 1956 Psychological Review paper leveraged off the 1955 QJE paper as Simon sketched a practical psychology of decision-making and focused on the ‘approximating mechanisms’ adopted. He drew an analogy with an animal hunting for and storing food, and only searching for more when it needed it. He concluded: ‘Provided that the needs of the organism can be specified at any given time in terms of the aspiration levels for the various kinds of consummatory behavior, the model can be applied’ (Simon 1956: 137). Simon’s claim that these papers—and the other papers from this crucial period in his life, 1952 and 1953 especially—‘filled out the framework laid down in AB’ is curious (Simon 1952a, 1952b, 1952c, 1952d, 1952e, 1953a, 1953b, 1953c, 1953d). There was clearly a marked evolution from the MoI in AB—which Crowther-Heyck dubbed homo administrativus—to the new MoI homo adaptivus that began to emerge in these papers. Aside from the 1956 Psychological Review paper’s focus on the decision-making ‘animal’ rather than on a living human being, there was a shift in Simon’s notion of ‘value’. The previous notion of ‘values’ as those aspects the decision-maker was unable to treat as ‘facts’, which in AB were made the purview of the Board, disappeared. To his new MoI, values were simply quantities (Simon 1955: 104). This MoI had no need of the value-inputs that were central to AB and whose management was the core of his previous theory of administration. The problems of administering human beings who had both factual and valuational needs were no longer central. In short, the underpinning philosophical position Simon had shared with Barnard seemed to dissolve. His new MoI was more an automaton of limited information gathering and computing capability whose only functionality was logical processing, where this was seen as computer-like (Katsikopoulos and Lan 2011). (It) did not live in the messy political world of practice invoked in AB. Simon mentioned Grey Walter’s mechanical turtle (Simon 1956: 130, n. 8), and had earlier been excited about Ashby’s similar work (MML: 114; BRA: 185). The bottom line was that during Simon’s early years at Carnegie, far from ‘filling out’, the value-needy MoI of AB crystallized into a ‘nobody home’ logic machine. Artificial intelligence had arrived (Baber, 1988). Simon transformed the challenge of defining AB’s MoI into that of importing a real human being’s rationality into a machine—with a sulfurous whiff of Frankenstein. Simon wrote of his excitement about the advances in mathematics and game theory in the 1940s and 1950s that primed him for this later switch of MoI (MML: 107). As early as 1950 he made a boostering speech to business executives about the prospect for computing in business (MML: 198), a theme that led to The New Science of Management Decision (Simon 1960) and The Shape of Automation for Men and Management (Mintzberg 1977; Simon 1965). As every ‘nerd’ knows, we get excited, even obsessed, with our tool-gadgets and Simon confessed some ambiguity about the tension between his monomania and his love of mechanical methods and machines as he outlined his ‘life philosophy’ (Simon 1992: 265). The ‘tipping point’ was his meeting Allen Newell at RAND in 1952—with the exception of his meeting Dorothea perhaps the most significant event in his life (MML: 168) (Simon 1965). Newell had a background in physics and cognitive psychology (MML: 199). He had also taken classes with the mathematician

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George Polya, the author of How to Solve It who introduced him to the notion of ‘heuristic’ (Polya 1973). Note 1 in Simon’s 1956 Psychological Review paper acknowledges Newell’s involvement in this emerging post-AB MoI. The resulting meeting of minds helped Simon see that computers were not mere ‘number crunchers’ but were the symbol-processing devices Turing had indicated (Simon 1993: 1148) (Stewart and Clark 1994). Likewise, post-Skinnerian cognitive theory suggested the human brain computed with symbols, so the way was immediately cleared to computer simulations of human decision-making—for symbols could be treated as a type of heuristic. Today’s ‘standard Simon story’ presumes all this because the notion of the brain as a biocomputer has permeated the contemporary consciousness (e.g. Gigerenzer and Goldstein 1996; Hoffrage and Reimer 2004). We no longer give the assertion a second thought; especially after Simon’s challenge that ‘a computer will someday beat the world’s chess masters’ was borne out. Of course Simon and Newell were central to bringing this cultural shift about. Simon arranged for Newell to join him at Carnegie, notionally as his PhD student, and together with Cliff Shaw, who had worked with von Neumann building the JOHNNIAC computer at RAND (MML: 202), set about turning the vision of simulating a human decision-making being into reality. The appendix to Simon’s 1953 RAND paper laid out suggestions for programming a computer to play chess (Simon 1953a). Bringing these ideas together, Simon intuited it should be possible to surface the heuristics mathematicians used to solve geometry problems, and a joint project began to build the LT, a programme/machine for proving the theorems of logic (MML: 203). The key to the computer’s ‘problem-solving’ was to programme the human-generated structural and sequential characteristics of problem-solving into the machine as axioms, digital representations of the ‘rules of thumb’ or heuristics human beings used as they went about framing or simplifying the problems in question. So captured, these heuristics would bring the relevant aspects of real human decision-making—in this specific problem-solving context—into the machine. From a technical point of view Simon’s team had to develop a new type of programming language, one that moved sequentially, now known as list-processing (e.g. LISP—MML: 212), and crucial to artificial intelligence (AI). Simon’s contributions to cognitive theory were based on generalizing these intuitions about machine adaptation, memory management, and learning into the proposition that human beings learn by developing work rules or heuristics from their experience of acting in a bounded context (BRA: 233; ML: 190) (Collet 2009). This model stood against the model of learning as developing sense-data-based representations of reality. Like Dewey, Simon posited human knowledge was experiential rather than representational, the product of reflecting on explorative practice in a specific bounded context. The result was not a picture of that context’s reality: it was a reconstruction of the explorer’s experience. Simon considered chess playing a good example of a structured context whose complexity was bounded yet which required actors to develop practice-based heuristics. Plus, once an actor had enough heuristics in place to create some ‘absorptive capacity’, the heuristics could be regarded as mental objects that might also be acquired through

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the study of others’ chess games. An extension might be that, even without being able to specify the processes involved in searching, perceiving, memorizing, and learning, one could probe these mental artefacts as an actors’ rules-in-use in domains other than chess and logic proofs—especially in economic and organizational activity. With this in mind, Simon and his colleagues at Carnegie sought ‘verbal protocols’ from financial decisionmakers (MML: 219) (Augier and Prietula 2007; Clarkson 1963; K. J. Cohen and Cyert 1965: 329; M. D. Cohen 2007; Cyert and March 1963 Frantz 2003). By the summer of 1958 research into advancing simulation into the broad range of projects that now make up the AI field was moving fast (MML: 222). In Simon’s phrase, ‘they had climbed the mountain’ and got a machine to make a human-like choice, an event memorialized in Feigenbaum’s story of Simon coming into their class and announcing that, over the Christmas 1955 holiday, he and Newell had ‘invented a thinking machine’ (MML: 206) (Feigenbaum 2001; Stewart and Clark 1994). Simon’s research programme was now converging on the work of other cognitive psychologists, and questions were arising about whether one could regard computers as ‘intelligent’, whether the ways in which a machine’s task problems were ‘represented’ were similar to the ways in which human beings addressed, considered, or solved problems in the ‘real world’. These questions, of course, had been central to philosophy for millennia so the team’s claims to model human decision-making began to attract the attention of professional philosophers (Bynum and Moor 1998; H. L. Dreyfus 1965; Franchi 2006; Frantz 2003, 2005; Searle 1987; Tsoukas 1998). As Simon’s 1955 Psychological Review paper suggested, the decision-maker’s heuristics might also reflect the ‘real structure of the environment’. Then what a decision-maker ‘knows’ about a context would be her/his inventory of heuristics for engaging it, rather than simply data ‘about it’, recalling the Jamesian distinction between knowledge of something and knowledge about it. Given his multi-disciplinary background, Simon presupposed social contexts had multiple dimensions. The work he did to produce Organizations illuminated the social and political heterogeneity and localization of organizational behaviour. Later, in a comment in a grant application that struck Simon as interesting, he wrote: ‘Our work has led us to the conclusion that there is an intimate connection between organizational structure and the learning of frames of reference and roles by members of organizations’ (MML: 161). This anticipated the work on prospect theory that Simon later championed, recommending Tversky and Kahneman for the Nobel their work eventually attracted—even though their early papers indicated no interest in Simon (RHA: 17) (e.g. Campitelli and Gobet 2010; Kahneman 2003a; Tversky and Kahneman 1974). The theorizing also gave Simon a way of looking at education and educational policy. He drew on his experiences of helping build GSIA in a paper on the problems of managing business schools (MML: 135) (Khurana and Penrice 2011; Khurana and Spender 2012; Simon 1967), and a line of writing about the application of cognitive theories to education that he carried on until the end of his life (Anderson, Greeno, Reder, and Simon 2000). Before moving to Simon’s AI-based disputes, especially to his stand-off with Hubert Dreyfus, it is important to note that AB had already brought him into conflict with his

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erstwhile colleagues in his first field of public administration (Banfield 1957; Bartlett 1988; Bendor 2003; Chisholm 1989; Daneke 1990; Fry 1989; Harmon 1998; Lowi and Simon 1992; Mingus 2007, 2008; Morgan et al. 2010; Ostrom 2008; Rainey 1989, 2001; Simon 1958b; Spicer 1998; Storing 1962). Henry perceived Simon as one of the group of theorists who successfully attacked ‘classical’ principles in the interests of developing a rigorous ‘science’, but who also appreciated the need to link theorizing to policy, application, and reform (Henry 1975: 380). But many in public administration saw Simon as the proponent of ‘positivist science alone’; plus they were not at all amenable to the idea that social psychology would become their discipline’s new base (Mintzberg 1977). The most widespread disagreements pivoted around Simon’s notion of ‘value’ and his a-typical treatment of this central concept (Storing 1962). The contrasts flared into a remarkably public display of academic invective between Waldo, Drucker, and Simon in the pages of the PAR (Frederickson 2001; Simon, Drucker, and Waldo 1952; Waldo 1952). Harmon showed the ruckus was at three levels; (a) an almost accidental insult, (b) some technical disagreements but, most of all, (c) deep philosophical differences (Harmon 1989). Waldo’s review and slap down of Simon’s suggestion that public administration should be evaluated in terms of scientific norms of efficiency was scarcely justified. Simon came back as if recalling his boxing days at Chicago and ripped into Waldo, writing: ‘I do not see how we can progress in political philosophy if we continue to think and write in the loose, literary, metaphorical style that he and most other political theorists adopt’ (Simon et al. 1952: 496). Waldo counter-punched with: ‘Professor Simon seems to me to be that rare individual in our secular age, a man of deep faith. His convictions are monolithic and massive. His toleration of heresy and sin is nil. We must humbly confess our sins, accept the Word, and be washed pure in the Blood of Carnap and Ayer’ (Simon et al. 1952: 501). Aside from the boxing, the technical issues were that Waldo and Storing saw public administration as the challenge to reflect public values in social action, while Simon’s concerns were primarily methodological, on efficiency and his ‘hardening’ agenda. On the one hand were concerns about the nature and role of the public sector, on the other ideas about organizational efficiency. But in the end, it was their philosophies that divided them—Simon’s positivist tendencies colliding with Waldo’s Deweyian pragmatism (Cruise 1997). Another way to put their differences was that Simon’s focus was on decision-making—which he saw everywhere—while Waldo and Storing focused on the practical politics of a democratic system that embraced divergent value systems (Perry and Rainey 1988; Rainey 1989; Waldo 2007). Waldo more or less won the fight and, ironically, had Simon contribute a chapter on efficiency to his popular book of public administration readings (Simon 1953c). More tellingly, Waldo stayed in the public administration field, rising to become its most highly regarded figure, especially after he organized the 1968 Minnowbrook conference at Syracuse that precipitated public administration theorizing’s turn away from ‘physics envy’ and back towards ‘proactive administration’ with ‘positive values’ (Cruise 1997: 355; Marini 1971). Simon, on the other hand, seemed to move away from public administration entirely—some said he abandoned it—even though he

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was awarded the American Political Science Association (APSA) community’s Dwight Waldo Award for his contributions to the discipline in 1995.

The battles in AI While Waldo and Storing established one battlefront in public administration, commanding the attackers on a second front was Hubert Dreyfus, a professional philosopher in the Continental tradition, considered the leading US interpreter of Husserl, Heidegger, and Foucault. Dreyfus completed his PhD in philosophy at Harvard in 1964 and began teaching at MIT, whence he was drawn into the RAND network to consider the possibilities and limitations of digital computing. He had feelings on the matter already, having attended a talk by Simon in early 1961. He was shocked by Simon’s claim that computing was about to solve some of philosophy’s longest-standing problems—and at the hubris of the series of RAND report and papers Simon had been writing with Newell (Newell, Shaw, and Simon 1957; Newell and Simon 1972; Simon and Newell 1958a, 1958b, 1962), including the famous claim that by 1967 a computer would beat the world’s leading chess payers. Dreyfus’s resulting RAND report Alchemy and AI (H. L. Dreyfus 1965) caused an uproar in the nascent AI community—eventually being reworked into the best-selling What Computers Can’t Do (H. L. Dreyfus 1972, 1992). Echoing Mintzberg’s earlier points, Dreyfus attacked the biological, psychological, epistemological, and ontological assumptions adopted by the emerging AI community, arguing their theoretical implications and empirical validity were much in question (H. L. Dreyfus 1987; H. L. Dreyfus and Dreyfus 1986, 1988). Many took his arguments as accusations that the AI community had simply adopted the wrong kind of machine, an impression enhanced by Dreyfus’s work on learning with his brother Stuart who was already working at RAND as a JOHNNIAC programmer. They suggested a five-stage progression in intelligence from awareness to skilled performance (S. E. Dreyfus and Dreyfus 1980). In time the AI field abandoned many of the assumptions Dreyfus identified, such as the likeness of neurons to digital switches. But it took Dreyfus a while to appreciate the real nature of his dispute with Simon and then to take up a position of strategic strength that focused on the undeniably different ways in which they presumed human beings and machines could ‘know’. The heuristics Newell and Simon were programming into their machine (early expert systems) were compensations for the fact the machine could not experience its world as human beings experienced theirs or, rather, the machine’s world is not ‘lived’ and so does not provide it with what we call experience. As Turing pointed out, the computer is a ‘universal machine’ and, as such, detached from our lived experience. Simon and the other AI researchers took note of the machine-learning work of Ashby and Grey, and that sensory feedback and control systems engineering offered a powerful metaphor for learning (MML: 194, 195). But everything that was to count as knowledge had to be subsumed under the machine’s purposive activity, the programmer’s intent that framed the ‘lens’

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through which the machine could learn. The machine was not capable of considering events unrelated with this goal, so was not aware of the life-world or context that lay off the path to its goal—key aspects of the Heideggerian philosophizing that shaped Dreyfus’s views. Simon’s oft-used maze and ant food-seeking analogies simply presupposed the purposiveness of all behaviour—unlike real human beings that also ‘live’ (MML: 409) (Callebaut 2007; Simon 1955). From a technical point of view, the consequence was that a machine had nothing to ‘fall back on’ should its programme halt when it was no longer able to process the inputs it had been given. In this situation—one of Knightian uncertainty—human beings typically (but not invariably) fall back on some ‘background knowledge’ peripheral to their goal seeking and look there for ‘workarounds’. Polanyi’s writing and popularization of ‘tacit knowledge’ have sensitized us to alternative ways of knowing (Polanyi 1962). It has helped us recapture something of the Enlightenment philosophers’ distinction between reasoning and judging, or the Kantian distinction between analysis and synthesis, and how these lead to distinguishing facts from values—matters positivism disregards. The Procrustean treatment of human and social values that so distressed public administration theorists about Simon’s work was precisely the same move as the AI researchers made as they ignored the difference between machinic existence and human living (De Landa 1991, 2011; Guattari 2011). The implication that the world beyond the animal’s explicit goal-seeking was irrelevant would be fine if living human beings could be simulated as never doing anything other than seeking a single overarching goal or as sufficiently omniscient to resolve any complexity or incommensurability in a lived world of multiple goals (Baudrillard 1994). Again, ironically, Dreyfus’s critique demonstrated that Simon’s notion of bounded rationality lay in the lived partially known world, and only made sense as a description of the condition of not fully comprehending a time-full situation. A machine cannot simulate bounded rationality or have any sense of time or awareness of whatever is unrelated to its goal. Its world is completely defined by the heuristics or rules programmed into it, and the notion that its capability can be extended beyond its previously defined goals, and so simulate the human experience of living and learning, simply overlooked the role of the human beings who generated the heuristics programmed into the machine. Thus Dreyfus’s ‘debate’ with Simon and the AI field, reflected a difference of problem-specification, a philosophical disjunction between Simon’s ‘empirical positivism’ and Dreyfus’s Continental-philosophy-based notions of consciousness and the Self that Simon was not familiar with. Opposition to Simon’s notions of BR and learning also arose in neoclassical economics and so circled back to his previous work there. In spite of the rising popularity of the language of ‘bounded rationality’ and ‘satisficing’, nothing much changed. Indeed, the powerful rational choice network that helped change the US social sciences (especially the business schools through the Foundation Reports as part of ‘gearing up’ for the Cold War) pushed back successfully against those, such as the Austrian economists and, perhaps, the Nobel committee, who showed any interest in psychologizing economics away from the naiveté of RM (Khurana 2007). RM shrugged off such critics to stand ever taller

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with the emergence of the new Chicago and Rochester thinking about ‘rational choice theory’ and the many Nobels garnered (Amadae 2003; Amadae and de Mesquita 1999; Peck 2010). Simon noted the ‘rational expectationists’ as among those who had made GSIA ‘less congenial’ to him (MML: 250). Again, deeply ironic, those criticizing neoclassical economics’ ‘colonization’ of the social sciences often lumped Simon’s AI work into the same target area (Fine and Green 2000; Mintzberg 1977). Mirowski, for instance, lambasted Simon for the inhumanity of his schema rather than seeing him as an endangered humanist resisting RM’s intrinsic inhumanity (Mirowski 2002). Simon also recognized divergences between himself and von Neumann. Simon was initially enthusiastic about The Theory of Games and Economic Behavior (MML: 114) (Simon 1945; von Neumann and Morgenstern 1944) and after hearing him at RAND (MML: 166). But he felt von Neumann overstated the difficulties of simulating human decision-making, especially as he felt he already had some good chess-playing examples to hand. He also felt von Neumann’s mathematically rigorous notion of ‘games’ ignored human game playing practice, the ‘going beyond’ the information carried by pieces on the board into sensing the competitor’s thinking and behaviour during the time-full flow of play. Increasingly Simon concluded ‘game theory’ was a blind alley when it came to illuminating human behaviour, a view he made very public much later in his Nobel address (Leahey 2003; Sent 2001, 2004; Simon 1978). Characteristically aggressive in the 1940s, Simon had written to Morgenstern after reviewing the book (MML: 108), who commented to von Neumann that he was at a loss as how to reply. Much later Simon suggested von Neumann had little appreciation of AI’s potential (BRA: 206). Again, the differences were primarily philosophical, identifying a potential third front to add to Simon’s public battles with Waldo, Storing, and Dreyfus. Von Neumann was a true logical positivist who presupposed the world that interested him most was constructed logically and could therefore be understood through the exercise of reason alone (Bochner 1958). While, to my knowledge, Simon never elaborated on the distinction between logical positivism and logical empiricism (MML: 44), they are crucially far from the same. Simon’s third axiom (of the three mentioned above: bounded rationality, hierarchy, and empiricism) stressed the Deweyian principle that human experience was the basis for all knowledge, opposite to the Platonic a priori assumptions about the essentially logical nature of reality, disassociated from the human condition (Sturm 2012). For Simon rationality was one of our ways of dealing intellectually with the lived world, not with its essence, so he spoke of our ability to reason rationally as interesting only because it could be harnessed to human purposes, along with our other attributes, such as our concern with values. Theoretical progress would depend on improving the techniques for distilling and harnessing our experience in ways that rationality could act on, and none of this depended on discovering any of Nature’s essential truths. Again, Simon’s disagreement with von Neumann was ultimately about their assumptions about the nature of reality and human knowledge and its relevance to human action. Von Neumann’s notion of game prescribed a fully knowable logically constructed world—such as within a computer—a notion Simon felt increasingly irrelevant to his project.

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Simon’s work in his early Carnegie years was poorly captured by his comment that he ‘filled out AB’s framework’. Quite the opposite: he dug back down to his pluralist philosophical foundations and, from there, probed new ways of examining his lifelong question that would not require dealing with values—at least not in the way he dealt with them in AB. So it is useful to appreciate Simon’s problem was not transformable into the question that prospect theory or behavioural economics aspires to address—discovering a science of species-wide bias that can be used in lieu of RM because human decision-makers’ behaviour failed to conform to the assumptions of RM. Proposing an alternative set of universals (anchoring and so on) this line of thinking struck some as saving RM from Simon’s ‘proverbs’ attack, so justifying Kahneman’s Nobel. But Simon’s question was actually quite different—a philosophical question about Man’s humane heterogeneity, refracted through Simon’s Barnard-inspired focus on Man as a decisionmaking and searching entity, and life as an endless flow of problem-solving about a dynamic and never fully grasped relationship with the Barnardian world (Campitelli and Gobet 2010; Khalil 2011). Vigorously pushing his thinking into a variety of relatively isolated fields or ‘islands of theory’ (BRA: 166), Simon found the locals resisting for reasons seldom fully articulated but mainly philosophical. Thrown somewhat off-balance and frustrated by not grasping the basically philosophical nature of the repulses, Simon sometimes failed to moderate his feistiness and inclination to invective—as illustrated in his disputes with Waldo, Banfield, Argyris, and Dreyfus. At the same time his frustration showed in a 1977 letter to his daughter Barbara. He wrote that the questions had been moved beyond debate, to ‘become matters of “religion” like those he debated as a Chicago student’ (MML: 274). Simon was not helped by his choice of vocabulary. In his Nobel lecture he referred to decision-making in the title and throughout, perhaps to associate himself more strongly with mainstream economics. But most economists knew perfectly well what decisionmaking meant, and it was little to do with BR. Only towards his talk’s end, when touching on his work with Newell and their huge book together, did he speak of ‘problem solving’ (Newell and Simon 1972; Simon 1979: 507). There is a fundamental difference, of course: decision-making is an abstract mechanical theory-implementing procedure while problem-solving must reflect the context in which the problem arises and cannot be considered without it. While a context could be defined as abstract, such as the logical environment of Principia Mathematica, or quasi-abstract, such as the rule-bound contexts of chess or the Towers of Hanoi Simon loved to play (MML: 195, 327), his project was about problems situated in an incompletely known socio-political world. As we know, his initial insight as a Chicago undergraduate was drawn from the allocation of municipal playground funds, a messy problem without determinable or even stable rules, whose nature and universe of possible solutions grew out of the social, psychological, and political dimensions of the situation, rather than any procedural rationality. Eventually, in the Afterword to MML, Simon philosophized about problem solving itself, but curiously only about his own work as a social scientist, eschewing presenting his MoI as a dynamic and creative Living-in-the-World Problem-Solver. In short, had Simon spent as much time with European philosophy as he did with European languages,

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for he mastered a dozen or more including Swedish, used at his Nobel event (MML: 323), he would have been better armed to plunge into the multi-front conflict his disciplinary precocity exposed him to. In summary, Simon was working towards a post-modern and post-bureaucratic philosophy of Man for our increasingly widespread and immersive post-Weberian machinic administrative situations, a philosophy of the organizational life-world. He memorably scolded his colleagues for thinking of the world as a vast market, the effect of man’s propensity to barter and exchange, suggesting instead they might better focus on man’s propensity to organize (Simon 1991c). Positioning himself to think radically about organizations rather than markets, radically unusual for an economist, he followed in the noblest academic tradition, rejecting his principal mentor’s story just as Marx ‘upended’ Hegel, and Keynes ‘upended’ marginalism. In spite of Simon’s acknowledgement of others, such as Carnap and Schultz, Barnard’s thinking and cooperation on AB shaped him deeply (BRA: 103, 114). As his mentions of Barnard in his Nobel lecture indicated, Barnard was ever-present, reaffirming Simon’s humanist tendencies and interest in an ethically penetrated administrative world-view even as Barnard had none of the mathematical dispositions that led Simon to ‘harden’ his enquiry and develop his three axioms. Simon’s and Barnard’s organizations were both of real human beings, heterogeneous, limited, time-dwelling, and experiencing—that is, living. Their organizations were not machine systems or blind economic agents or the mindless emergent patterns of ‘small worlds’. Perhaps Simon moved on from such ‘childish thoughts’ as he laboured to harden the social sciences and embrace the computer as simulating a mind (MML: 189). There is certainly a good case to be made saying that he forgot his humanism and developed into a full-blown positivist, but I think not. As his disagreements with von Neumann showed, Simon saw a definite limit to the application of mathematics-based rationality and his expectations that computers could meet his needs; again he remained ambivalent, balancing empirical rigour against humanism (RHA) (Crowther-Heyck 2008). He argued later that the challenge of computers is to programme them to help us live better, not to make them function more perfectly (Spice 2000; Stewart and Clark 1994). Even as one of AI’s inventors, HAL was not on his agenda. Rather, Simon saw AI as a locus for scientifically controlled experiments into human judgements based on experience and learning, distinguishing sharply between ‘hard’ AI, the belief that computers can displace human decision-makers, and ‘soft’ AI, the belief that computers were a new tool that could help human decision-makers cope better with their limits. In this respect the programmed computer was an instantiation of Turing’s universal tool (an abstraction)— built only to help us cope with the limits to human reasoning, just as AB suggested the instantiation of a generalized administrative apparatus might salvage the intended rationality of organizational practice from the limited rationality of its participants. But perhaps heuristics were less the phenomenon of empirical interest than some might argue. To focus on them would suggest a huge empirical research project to inventory all known management heuristics and present them as a complete functional model of the individual decision-maker—a project that must fail, of course, as contexts and practices

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are always changing. We now have a keener appreciation that expert systems are only useful when kept up to date with their supposed contexts or life-worlds. We can surmise Simon’s mind’s eye was more on human beings’ remarkable capability to generate heuristics ‘on the fly’, at the point of collision between our freely chosen purposes and our flawed understanding of our contexts, especially as these change. If this is somewhat near the target, Simon was probing behind our learning for some native generative capability, somewhat like human imagination or agency—to be researched, perhaps, by exhausting the possibilities of machine learning. Human beings would be defined as observably able to do what machines could not. So I suspect that what attracted Simon to ‘soft AI’—apart from the sheer fun of playing with expensive and powerful machines that few had access to, and having a ‘boundary object’ in his evolving relationship with Newell—was that it provided him with a relatively controllable situation in which the heuristic-generation processes themselves could be observed and modelled, so establishing an empirical foundation for the broader study of humans negotiating realistic problem-situations. In which case, simulating chess was simply clearing underbrush (e.g. Simon 1972: 165): nothing to do with suggesting Deep Blue or Watson lay on a path to a dehumanized post-digital Big Brother-managed society. Indeed the contrast between Deep Blue and Watson illuminated the different contexts for which they were built and the shortcomings of both as a model of a real human being. Deep Blue’s ‘knowledge’ derived from a massive inventory of past games, more than any human can remember, plus some heuristics associated with great players, and, of course, chess’s rules. In contrast, Watson was built to engage in one-shot question answering in pre-defined and equally massively memorized domains of ‘everyday knowledge’—a far cry from the natural language multi-period open-ended interactions of ordinary conversation. Both machines were capable of searching their memories—that is, exploring their static programmer-defined and inventory. But neither machine ‘lives’ in or could explore their context as a living animal does. Neither machine has any generative capability, so both were utterly dependent on the living programmers who developed and encoded new rules and heuristics as they judged the computers’ contexts changing—leading to new kinds of game-show questions for Watson, more games and changes in chess-playing techniques for Deep Blue. Again, both programmes/machines were best characterized as aides to real world problem-solvers. Simon was long interested in the design of tools that internalized general rules or heuristics (SA: 130) (Simon 1988). His notion of a ready-to-hand tool was a way of articulating his humanist philosophy, spinning around a dynamic sense of bounded rationality as empirical evidence of Man’s most fundamental heuristic-generating identity, that remarkable capability that complemented human rationality and fleshed out Simon’s adopted MoI. Given certainty was inaccessible to the individual mind, he saw humanly generated heuristics as the path to improved efficiency—just as they were the source of dynamic improvement for Adam Smith’s pin makers. Heuristics were evidence of our going beyond the limits of rationality, living as imaginative human beings confronting the kinds of uncertainty-induced breakdowns that brought machines to a standstill. Here Simon’s context-specific agentic tool-making, under-specified as it was, could be

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contrasted with Habermas’s entirely contrary notion of approaching rationality through ‘ideal speech situations’ and rationality-inducing public discourse (Finlayson 2005)— an avenue of analysis Dreyfus did not explore. If this take on Simon’s intuitions about heuristic-generation is more or less correct, the assertion that his move into AI was a ‘second project’ or a ‘retreat’ that abandoned his monomania becomes less tenable. At the same time, the proposition that Simon’s overall project—and achievement—was primarily philosophical, somewhat obscured behind his many unsuccessful attempts to capture BR with the positivist language he had available (Simon 1972), seems illuminated by (a) the nature of his major professional and intellectual conflicts and (b) the paucity of his disciplinary impact.

Legacy So what, then, is Simon’s legacy (BRA: 324)? Going back to Albert’s attempt to define genius, there can be no doubt that Simon changed several fields—but not economics (Earl 2001; Knudsen 2003; Loasby 2004; Munro 2009; Nielsen 2010; Sarasvathy 2010; Sargent 1994). Even as RM rides high, there is a pervasive sense of crisis in economics, exacerbated by the recent financial upheavals. Without doubt, Simon opened up a new way of dealing with Knightian uncertainty, in spite of the economics discipline’s studied disinterest in Knight’s work (Knight 1921; Nelson and Winter 1982: 4n) and, in so doing, created the possibility of radial disciplinary change. Indeed, given that Knight was the dominant figure at Chicago when Simon took his economics courses there, one can surmise some relationship between Knightian uncertainty and bounded rationality, though there is no historical evidence for this conjecture. Note 9 on page 74 and Note 4 on page 252 of AB show Simon had read Risk, Uncertainty and Profit. Using verbal protocols and heuristics, Simon and Newell helped theorize and operationalize a context-bound post-Skinnerian behavioural psychology, and make a connection to AI and the simulation of human thought and behaviour. Simon’s deeper impact on AI, aside from the considerable technical achievement of ‘list processing’, was to establish that discipline’s philosophy of action or computation. Leveraging from Polya, it offered a machine-compatible language for drawing human creativity and agency into machines that lacked that capacity via context modelling and encoding the heuristics humans developed, making ‘the programme the theory’ of contextualized problem-solving (BRA: 215). As an aside, this work also helped prepare the university environment for cognitive science and AI (MML: 248). In these areas Simon impacted business schools worldwide, especially through the GSIA curriculum innovations and the GSIA-driven Foundation Reports (Khurana and Spender 2012). Many bits and pieces of his legacy were lying around. How might we gather them up and evaluate them as Simon sought to evaluate public officials? On the one hand there is his Protean scholarly and professional achievement, on the other, its curiously indefinite legacies (Callebaut 2007; Finch 2003; N. J. Foss 2003b;

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Sent 2000, 2001); or his awesome ability to move through a variety of scholarly fields and take prisoners in each, set against the professional rejections that cut him to the quick and remained unresolved at the end of his life (MML: 273; BRA: 134, 197, 270). His distress here was spiced with frustration, for he felt he was articulating and ‘hardening’ the very positions his attackers adopted as they miscaricatured his efforts. Plus there is the curious business of his move from GSIA to Carnegie’s Department of Psychology (ML: 249)—which many presumed ‘an exile’—when he could have moved triumphantly to his alma mater or to any prestigious university of his choice (Larkey 2002). Or why, as a practising philosopher of the human condition in administrative situations, he became so enamoured of non-human computers, to the point of predicting their writing acceptable music and beating the world’s chess champion (Patokorpi 2008)? I have suggested Simon’s philosophizing rested on three axioms—bounded rationality (which embraced satisficing), hierarchy, and empiricism. If correct, one way of evaluating his intellectual impact is to consider how these are treated today. Taking them in reverse order, management research and business school teaching seem ever more closely wedded to positivist empiricism (Augier and March 2011; Durand 2008; Khurana 2007; Locke and Spender 2011; O’Connor 2011; Spender 2007, 2008b; Spender and Scherer 2007; Starkey et al. 2009). Neither our discipline’s researchers nor Simon paid much attention to the philosophical and methodological implications of the Continental argument that empirical observations are ‘theory-laden’. Even as this seems obvious in the social sciences, it raised questions about the natural sciences that set Kuhn and a group of English-language post-positivist philosophers against the commonplace empiricism of falsificationism (Popper 1968; Putnam 1992). The critique was formalized as the Duhem-Quine thesis (Curd and Cover 1998; Gillies 1998)—that an empirical test only compared one’s faith in an observation against one’s faith in the outcome hypothesized, a situation that, based on induction, offered no hope of certainty for, contrary to Popper’s claim, there is no logical asymmetry between verification and falsification in an unbound universe of possible events—they are simply alternative descriptions. This becomes vastly more complicated when the observation theories that attach disciplinary meaning to experimentation protocols are not widely agreed across the researchers’ community—giving rise to many studies of scientific knowledge generation and institutionalization. It is no secret that in the managerial sciences there is little stability of terms, measures, and conclusions, absent which there can be little ‘accumulation’ or disciplinary progress. Pfeffer’s notorious call for ‘theory police’ brought this to the surface once again and it will not disappear no matter how satisfied we are that we are doing good science and are true scholars (Pfeffer 1993; Walsh 2011). In this respect we might see Simon as one of the last widely influential positivist social scientists standing like King Canute, holding back the European philosophy-based erosion of empiricism that helped precipitate the ‘campus wars’. At the same time, the promise of his devastating critique of RM has, for some unidentified reason, not yet been articulated into a critique and reframing of our positivist methodology (N. J. Foss 2001b). Instead, the ‘rigorous methods’ so central to our research and journals are left standing on wobbly

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foundations and, along with those of neoclassical economics, have become an elephant in the BSchool faculty common room (Blaug 1984; Van de Ven 2007; Walsh 2011), almost everyone conscious of the issue—yet mostly staying quiet (Bluhm et al. 2011). Simon’s second axiom, hierarchy, has become a popular design principle, not only because of the many citations to his engaging tale of the watchmakers Hora and Tempus (SA: 200) (Simon 1973: 7), but because the notion has been widely shared across other research communities and absorbed into the emerging ‘science of complexity’ (Allen and Starr 1982; Egidi and Marengo 2004; Mitchell 2009; Simon, Egidi, Viale, and Marris 2008). There is rising interest in ‘modularity’, though this may not be quite the same thing (Ethiraj and Levinthal 2004). When Dreyfus criticized the AI field’s ‘ontological assumptions’ he also had in mind to reject the idea that ‘the world’ is an assembly of separable ‘things’ or stand-alone building blocks that have some correspondence to reality’s ‘facts’. An associated thought is ‘reductionism’, the assumption that the nature of a thing resides in the properties of its discrete invariant parts. Simon was neither a naïve realist nor a reductionist, even as many of his inclinations were positivist. His appeal to ‘near-decomposability’ attached significance to the heterogeneity within a system or organism, in particular to the non-uniform patterns of interaction that led to patches of intense activity separated by relatively clear regions—islands of activity (SA: 209) and organizations as ‘green masses connected by red lines of market interaction (Simon 1991c: 28). The metaphor sat well with Simon’s humanist MoI and, as noted previously, hierarchy and heterogeneity had long been part of Simon’s thinking, an echo of his mathematical work with Ando (Ando and Fisher 1963; Ando, Fisher, and Simon 1963; Simon and Ando 1961). In the later Architecture of Complexity paper (reprinted in SA: 192) Simon defended hierarchy on three non-mathematical grounds: (i) the empirical evidence provided by social systems, (ii) biological and physical systems, and (iii) symbolic systems. At the beginning of SA, Simon defined ‘artificial’ as ‘produced by art rather than nature; not genuine or natural; affected; not pertaining to the essence of the matter’ (SA: 6), and blithely stepped into a much debated issue, especially in the philosophy of the social sciences (e.g. Andresen 2001: 71). The European philosophizing here goes back at least to the work of Vico, whose influence has long been underrated (Berlin 2000; Vico 2000). Inter alia, Vico argued for the distinction many sense between the physical and social sciences, much debated among philosophers committed to the ‘unity of the sciences’ (e.g. Baert 2005; Schlick 1992). Vico argued that since Man cannot ‘enter God’s Mind’ (in the manner of the certainty Descartes implied with his maxim cogito ergo sum) Man cannot ever have certain knowledge of the natural world God created. We can, however, have profound knowledge of the things we have created—the artificial. Vico was a historian of legal systems and language, social artefacts that do not occur in Nature. Additionally, as Kant pointed out later, the way in which we understand things must inevitably reflect the structure, processes, and limits of the human mind—an empty observation were we completely rational. It follows that our discussion of what we make mirrors the only way in which we can understand what we do; the watches in Simon’s story are ‘hierarchical’ machines because we made them so—this feature is not given by

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some external power. So about Nature we cannot say anything about her/its architecture because we did not make her/it. We can never know for sure whether or not Nature is a machine, as Newton argued, even though it often seems useful for us to think of it as if it were—and herein lies the strength of our positivist assumptions and research methods. The assumption often works—but less so when it comes to understanding the human business of living. Simon’s appeal to ‘social systems’ was little more than a recitation of Parsons’s mechanistic theorizing. It presumed, of course, that absent a Creator of all things, the entities at the various levels of the ‘social system’ inherit or acquire a degree of self-organizing capacity that provides their stability and durability. The critiques of Parsons’s theorizing have thrown this entire edifice into question (Carnap 1992; Fox, Lidz, and Bershady 2005; Oppenheim and Putnam 1992; Trout 1992). Especially damaging is the micro foundational critique that seeks to explain all action as the consequence of properties existing at a single level—especially the human individual—an approach taken up by Simon as he followed Barnard’s philosophy of administration and focused on the individual actor rather than on ‘the organization’. There was an echo of Hayek’s individualistic thinking here. Simon’s appeal to a hierarchy of symbolic systems was even more questionable when he pointed to the chapters, paragraphs, sentences, and words that comprise a book (SA: 199). Words matter, but pictures and signs can be symbols too, and many cognitive scientists believe these must be taken in holistically, ‘in a flash’ as a ‘coup d’oeil’, without being decomposed and recomposed as a TV picture is when captured and transmitted— a process Simon recognized as ‘hot cognition’ (RHA: 29). Neither the TV camera nor the TV set ‘understands’ or ‘organizes’ the picture. Simon’s most problematic example of hierarchy was biological. He asserted, even without claiming to understand the vitalism of living things, that evolution would be more efficient if it occurred at the ‘component level’ of the organism, each level being separated into layers of stable subsystems (Simon 1973: 7). It was not easy to see how this would work without reverting to naïve Lamarckism or some equally problematic teleological ideas. It is not that organisms cannot ‘evolve’ so that the relationships between their parts change: the challenge is to explain why the evolution is in one direction rather than in another, especially one we do not know about until some other time—a reminder that evolutionary theory is not predictive in the sense positivist theory is and so arguably the crucial measure of theory’s truth-content. Simon further diluted the strength of his example by confessing to limited biological knowledge (SA: 203). Precisely the same questions were raised by Maturana’s seeming reversal when he argued that social systems were not autopoietic, in spite of contrary assertions by Luhmann and Beer (a leading British AI theorist) (Maturana and Poerksen 2004; Maturana and Varela 1980). Later work on the natural science grounds that Simon developed with Ando also suggested serious limits to the decomposability that first provided him with the analogy (Shpak, Stadler, Wagner, and Altenberg 2004). The point here is that hierarchy may be less an inevitable characteristic of things natural or artificial than a mere thumbprint of the way we humans comprehend and make things, itself a reflection of the yet-to-bediscovered way our minds work. If this is correct, Simon’s work has added little to our

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understanding of hierarchy and it remains a wobbly axiom for a philosophy of Man or even homo administrativus. Bounded rationality (BR) was unquestionably the jewel in Simon’s philosophical system and the key to his varied contributions (Simon 1972, 1991a). It informed everything in his work, just as the assumption of personal certainty informed Descartes’s philosophy (MML: 88). BR memorialized Simon’s place in the study of human decision-making (Buchanan and O’Connell 2006). It has been interpreted as the intuition behind team theory, transaction cost economics, and the evolutionary theory of the firm (N. J. Foss 2001a; Gavetti and Levinthal 2001; Gavetti, Levinthal, and Ocasio 2007; Radner 2006). Klaes and Sent traced BR’s emergence, confirming its long history (Klaes 2000; Klaes and Sent 2005). Some game theorists have followed Simon’s lead and tried to make more formal sense of BR (Rubinstein 1998; Sent 2004). But Man’s inability to be fully rational was, of course, already axiomatic to Enlightenment philosophy. As Arrow noted tartly, the intuition in economics goes back to Veblen and was not new with Simon (Arrow 2004: 47)—notwithstanding neoclassical economics seemed to forget it. Inasmuch as they could be distinguished, BR and satisficing were complementary aspects of a procedural rationality about what real people do in ‘lived’ contexts (Simon 1972). Simon was clear that BR presumed human problem-solvers were impelled to search their contexts, driven by Lacanian desire rather than mere goal-seeking, so satisficing was a metaphor for the otherwise unjustifiable ‘subjective’ criterion for arresting that search (Simon 1991a). BR also draws the imagining and searching time into the analysis, denying the universality of goals and the instantaneous clearing of markets or equilibrium. In the previously mentioned metaphor, BR arose in the scissor jaws between the world’s complexity and the mind’s limitations (Simon 1990: 7; Todd and Gigerenzer 2003), and the exposition of these ideas was clear in RHA (RHA: 17). The reciprocal relationship between BR and hierarchy was clear too. Thus one strategy for ‘filling out’ BR was to clarify and inventory all its presuppositions and implications in the positivist manner illustrated by Deep Blue and Watson (Bendor 2010b; Koumakhov 2009). Along these lines Jones illustrated four axioms or principles of BR: intended rationality, adaptation, uncertainty and trade-offs (Jones 2002, 2003). The combination of intention and adaptive learning was often taken to be BR’s core message (e.g. Nelson 2008). But the strategy elides the human agency that deals with Knightian uncertainty, such as that of resolving the incommensurabilities in Barnard’s or Jones’s analysis, just as it also presupposes learning converges on full (objective) knowledge of the real. As soon as BR is seen as an essentially philosophical concept lying beyond positivism, entailing (a) abandoning the positivist notion of certainty and (b) our human ability to act agentically, it is not easy to get beyond tautological description and into explanation and/or mechanism. It is obviously difficult to operationalize BR, though Simon’s lifelong interest in ‘chunking’ and ‘expertise’ were among his many attempts (RHA: 94) (Simon 1974). His positivist inclination, frequently cited, was to define BR in terms of some quasi-objective scientifically established physical, computational, memory, or learning capacity limits to the individual mind—as compared to RM who had no such limits (Simon 1972). While Simon invariably had a specific context in

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mind, the notion of BR has floated free of such constraints and many now presume neurophysiology or the like will determine the human mind’s boundaries. Aside from the problem of reflexivity here—how boundedly rational researchers might establish such findings about our poor understanding of the brain and its capabilities—the current excitement about how MRI imaging is approaching this destination suggests clarification remains some way off. A more promising route, somewhat like prospect theory, was to see how the differences between BR and RM might lead to observable discrepancies (Prietula and Simon 1989; Simon 1974; Starbuck and Mezias 1996). Conlisk surveyed the evidence from economics, pointing out that experimental evidence of people failing to be fully rational merely ‘confounds’, without telling us much about BR itself (Conlisk 1996: 672). He worked the distinction between limited resources and information and deliberation costs, reinforcing the economists’ approach to cognitive capability as a scarce resource and theorizable on that account. His conclusion matched that of Foss, that there was no overarching theory of BR; at best it was a way of viewing human activity, a background or philosophically contextualizing concept (Conlisk 1996: 672; N. J. Foss 2001a, 2001b). Forester and, separately, Murphy argued that because the activity being analysed was socially and politically contextualized, BR implied aspects other than the physical and cognitive, the social and political perhaps (Forester 1984: 24; Murphy 1992). This enlargement spoke to Barnard’s conception of organization as arising out of the synthesis of several sub-economies—the implication being that BR would have also to synthesize the many incommensurable aspects of the BR individual’s world and not be a simple ‘falling-back’ into a limited one-dimensional comparison against ‘the real’. Often BR became little more than another term for ‘muddling through’ or ‘doing whatever’, with its implications of our normal experience of living in an incompletely understood or anticipated world in which search can be costly and risky—but in which some action seems mandated by our desire. Both Arrow and Foss noted that BR forced attention onto the relationship between the decision-process and the context of decision or, in other words, the empirical and contextual relationship between the heuristics developed and their range of application. BR was a way of arguing every lived situation called for heuristics—and bounded rational actors had to come up with ways to limit the context of action before it could be analysed. Indeed, all theorizing is grounded in simplifications—the theory’s axioms. It followed no heuristics were of universal application: they were simply reflections of the heterogeneity of life’s bounded contexts. Total knowledge eliminates heterogeneity; everything’s place becomes clear. Thus, to know ‘universality’ is a restatement of certainty, precisely what is unavailable to BR. The entire apparatus of BR, satisficing, decomposability, and heuristics, belongs in a non-positivist contextualized analysis, one that cannot hinge on either universality (general laws) or logical rigour. Hence, inasmuch as prospect theory’s biases are useful in practice, they cannot be mere adjustments to the universality of RM; rather, they must reflect specific bounded contexts of human experience. Many read prospect theory as a universal truth about human biases, whereas it can only be meaningful and differentiated from full rationality when the appropriate boundary conditions have been surfaced and accepted

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(Campitelli and Gobet 2010). Interestingly, there is some empirical evidence that prospect theory’s biases are related to the artificial contexts (psychological labs and so on) in which they have been researched, and that they are not characteristic of everyday living. If this is correct, the route to understanding BR as an empirical phenomenon may lie in the direction Simon suspected, through research into the particular heuristics that people develop in specific situations (Kahneman 2003b; Klein, Moon, and Hoffman 2006a, 2006b) or, as Hatchuel put it, to ‘design their lives’ (Gigerenzer 2004; Gigerenzer, Todd, and The ABC Research Group 1999; Hatchuel 2001; Todd and Gigerenzer 2003). Simon’s enduring habit of explaining BR in terms of the individual’s cognitive limits rather than in terms of the interaction of individual and context did not help illuminate its nature. Aside from the rigour implied, his habit was more a product of his micro foundational move to stress the individual against the social or collective—which, for economists, is the market. Similarly Bendor opened up a gap between alternative notions of BR, charging others with confusing it with satisficing (Bendor 2003: 435). First he pointed out that sometimes people act quite rationally, as noted previously when playing tic-tac-toe after grasping the game’s narrow strategic options. BR came into play as the game was ‘scaled up’ from tic-tac-toe’s trivialities towards chess’s complexities. There is a ‘crossing point’ where the humans’ information-processing limitations become paramount, operationalized as selective perception, serial processing, multiple kinds of information, alternatives to machine-like calculation, the reconstructive memory, limited capacity of short-term memory (Bendor 2010a; Hatchuel 2001). While playing tictac-toe can be ‘explained’, chess play is qualitatively more complicated—and that is the point of chess, since it draws on very different human capabilities. Thus Bendor argued the BR literature focused inappropriately on human beings’ shortcomings—as implied by prospect theory and transaction cost economics (TCE)—where they are compared to RM or computers—inappropriately—thus paying insufficient attention to the human achievement of reasoning imaginatively under uncertainty and then learning from experiences of real complex situations. Instead of thinking of a ‘glass half empty’ Bendor argued that BR should be understood as a ‘glass half full’. This framed BR in constructivist terms, focusing on Man’s agentic ability to synthesize the ‘booming confusion’ of the lived world into a computable pattern and thereby match Barnard’s concept of leadership as order-creation at the organizational level. Bendor argued most of those discussing BR had simply ignored Simon’s argument for organization as a hugely important human-made artefact, an apparatus to help ordinary individuals make better sense of their world/s and practices. As soon as we think of BR in constructivist terms, as an achievement rather than as a failing to achieve certainty (BRA: 9), we abandon the positivist position and move into other philosophical waters—and into very different analyses (Bendor 2003: 437; Flach and Hoffman 2003). For instance, BR is opened up to a feminist critique that it has patriarchal implications (Mumby and Putnam 1992). In an interesting late paper with Anderson and others, Simon attacked constructivism and defended an older style of cognition theory (Anderson et al. 2000). But framing BR as like entrepreneurship and a humanist achievement opens up questions about the place of social, institutional,

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normative, or other ‘external’ influences on the processes of its construction, and thereby the relationship between BR and the considerable literature on ‘sense making’—amongst which Weick’s work is the most prominent. Weick was a social psychologist who, like Simon, was sympathetic to gestalt psychology, to Barnard’s ideas, and was appreciative of AB (Weick 1969: 8; 2001); his methods were unlike Simon’s and would probably have attracted comments like those Simon made about Waldo and Banfield. Yet it may be that Weick and his colleagues did more to clarify BR than Simon and his followers did. The social and/or institutional construction of a local rationality of practice seems as compelling a story as an individual one— especially as Simon suggested there was little technical difference between organizational and individual rationality (Simon 1972: 161; 1991a). Our discipline took up ‘institutional theory’ eagerly without noting its relationship with Simon’s question or the links back to Commons (March and Olsen 1989; Scott 1987). In the opposite direction, there was no indication that Simon paid much attention to the sense-making literature even as Weick’s powerful analyses of the Tenerife Airport and Mann Gulch disasters were superb empirical examinations of ‘collective BR’ at work (Weick 1988; 2001: 100, 125). Nor, again, was there much evidence of the sense-making theorists’ interest in Simon’s individualistic analyses. Generally speaking, the sense-making analyses were less about identifying and analysing the content of the heuristics that had been generated than with how ignoring them or adopting inappropriate ones led to real-world catastrophe, or how people responded to breakdowns to create new rules of action when the context changed in ways that rendered the previous heuristics useless (Hutchins 1995; Van de Ven 1993; Weick 2001: 100, 125; Weick and Roberts 1993). Towards the end of his life Simon was encouraged by the resurgence of interest in BR and by various attempts to formalize and model it. Rubinstein’s work was prominent as he pursued the abstract mathematical line that Simon took in his 1955 QJE paper (Aumann 1997; Conlisk 2004; Simon 1997; Osborne and Rubinstein 1998; Rubinstein 1998). It is useful to recall Simon’s own relativized notion of rationality was bound up with the actor’s purpose and knowledge of the space-time context of the actor’s lived world. But it seems his positivistic inclinations hindered his seeing that world as a dynamic and perhaps socially constructed place rather than as a definable maze to be run by isolated individuals (or ants) struggling to reach their known goals by gathering information and computing it into satisficing activity. So too the Chicago sociologists might have been more interested in seeing how stressed actors reached out to their neighbours or associated to reshape their situation agentically in the various ways that led De Tocqueville to declare ‘the science of association is the Mother Science; the progress of all others depends on the progress of that one’ (de Tocqueville 2000: 492). In the end we are left unsure what Simon really thought about BR—given the limits of his chosen philosophy’s language. Without doubt, he was ambivalent from the time he first adopted the distinction between fact and value—surely just another expression of bounded rationality. On the one hand, there were his many suggestions that BR might be researched rigorously, empirically, neurologically perhaps, so pinning down the absolute limits of our brain-computers. On the other, there is the matter of the

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open-endedness of living, the focus on our evident ‘dynamic capability’ to deal with the new. My sense is that Simon continued to occupy some middle ground as his Deweyshaped humanism led him to see human beings and our doings as the source of all knowledge, that our ‘scientific knowledge’ could never be fully ‘objective’ or separated from the values manifest in our life-world, especially when we collaborate. There remain unbreakable philosophical entailments between what we might mean by BR and our sense of the dynamism of the human condition. As Simon wrote: ‘no conclusions without premises . . . Reason, then, goes to work only after it has been supplied with a suitable set of inputs, or premises’ (RHA: 7)—and among these are our values, emotions, and faith.

Coda Herbert Alexander Simon casts a long shadow into contemporary thinking about organizations, management, chess playing, automation, AI, economics, psychology, public policy decision-making, and even leadership theory (Spender 2008a) and into business schools and management education worldwide (Khurana and Spender 2012). But as far as the analysis of administration and organizational life goes, his principal achievements were philosophical. His life-long project—to develop a way of analysing economic and organizational situations that did not stand on the presumption of ‘rational man’—was monumental, radical, and even if only partially successful, as significant as the development of marginalism in economics or the socio-economic work of Weber. We know the font of all great theorizing is philosophical, and Simon successfully went way beyond merely repeating the questions Barnard posed at the beginning of his equally seminal work. While Barnard opened up new thinking about economic leadership in democratic capitalism, Simon’s theorizing had rigour, embraced the led and the interplay of their context and action, and opened up new theorizing about the organizational situation and its micro foundations. When it comes to evaluating his legacy, he worked long and hard on several fronts to persuade his colleagues towards a new philosophical position from which to rethink economics, organizations, and management entirely. BR was his label for this. There was the complementary view of democratic capitalism as a life-world of organization rather than of markets—though this idea has not yet acquired a resonant label even as the recent crises in the private sector threaten to crush the economy (MML: 325). The biographical puzzle lies in the contrast between the recognition and honours Simon garnered in his lifetime and the extent to which his philosophical offering was dismissed, now almost forgotten, a trend that began while he was still alive and working as hard as he knew how. In the lead-up to his Nobel he noted: ‘bounded rationality seemed to be dying a quiet death, in the United States at least. The neoclassicists had clearly won the day’ (MML: 320). Their victory is no less today (Locke and Spender 2011). It is not easy to guess what comes next. Should Barnard’s and Simon’s work be consigned to the ashcan of history, or should we urge young scholars to think their way

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around ‘rational choice’ and send them back to Barnard and Simon for a basis on which to re-theorize organizations and their management? Prospect theory—replacing RM with ‘Biased Man’—took up only a fraction of Simon’s challenge but required neither a shift of philosophy nor offered a new theory of managing (Campitelli and Gobet 2010). In contrast, Simon remained focused on real people, with values, morals, and emotions, while engaging the most fundamental of sociological questions—‘How might we understand social order given individual differences?’ He probed the deepest philosophical questions around human choice—‘What are we free to choose?’ and ‘Why do we act as we do?’ Choosing under the more or less fully determined conditions of economic analysis was almost totally irrelevant to this project. At best it pointed to the boundaries of the kinds of ‘free’ choosing that are the distinguishing mark of a humanist philosophy. For Simon, administration was about managing those aspects of human choice that are under-determined by the ‘facts’. Yet his project seems to have stalled in the current environment of disciplinary ‘physics envy’ and the excruciating pressure on our young scholars to be risk-averse, simply get done, hew to the mainstream, and focus on A-journal publications that buttress our discipline’s RM-based achievements over the last twenty years—however problematic these might be (Simon 1985b: 303; Walsh 2011). An energetic intellectual magpie, Simon looked into many disciplines for concepts, methods, and problematics that could be harnessed to his project. Overall his achievements in each owed less to the novelty of his theorizing than to the energy and persistence with which he worked his core intuitions into a masterly display of theorizing and, publishing hugely, made a lot of people notice he was there, vigorously engaging their narrower problematics. While most social science philosophers and methodologists had already abandoned positivist inclinations—management being a major exception— Simon’s vigour and productivity shook these fields up. In the case of cognitive science, AI and computing, he helped reconstruct the field and made a lasting impact. In economics, he added to the debate about whether our Emperor wears more than the invisible gossamer of full rationality (Hambrick 1994; Khurana 2007; Spender 2007). In public administration, Simon propelled that discipline into new methodologies and a search for new modern value- and political bases. In psychology he generated productive explorations and solidified an empirical approach to human decision-making (Earl 2001; Gintis 2005; Loasby 2004; Tisdell 1996). In management, alas, his record remains problematic, in spite of his Nobel (Morçöl 2007). The approach he and Barnard shared implied that any viable theory of organizing must include the axiom that non-RM individuals are subordinated to the will of others—a view Coase shared (Coase 1937: 391; Cruise 2004; Langlois 2003). We may forget that Simon was pondering subordination while the nation’s focus was on the Cold War, the Korean War, Communism, and the attendant political propaganda. The Nuremberg Trials were fresh in everyone’s memory. All knew that subordination and docility (even ‘indoctrination’ (AB: 103)) raised ethical issues and the burdens of being responsible for the actions of others. Yet inadvertently Simon’s discussion of subordination helped reinforce the managerial–subordinate distinction that became

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a commonplace after scientific management, without articulating the concomitant managerial responsibilities about which Commons and Barnard wrote. Is disciplinary change simply about waiting a generation or two for the penny to drop, as Albert suggested? The challenge of channelling individual heterogeneity into organizational activity that Simon opened up in AB seems lost to all but those, for instance, exploring principal-agent theory and transaction cost economics (K. Foss, Foss, and Klein 2007; N. J. Foss 2002, 2003a, 2003c; N. J. Foss and Klein 2005, 2012; Hardt 2009; Spender 2011). The answer surely turns on the quality and endurance of Simon’s philosophical contribution. His talent here was considerable and his critique of RM lives on as a ritualistically honoured disciplinary ‘irritant’ (in Luhmann’s sense) without, regrettably, widespread acceptance that RM is of little use if we want to understand human behaviour. Without doubt, the ‘hardening’ Simon espoused helped set the methodological direction we see around us today, especially through his institutional impact via the Committee on Science and Public Policy (COSPUP) and the President’s Science Advisory Committee (PSAC) (MML: 294), the Foundation Reports, and the way he showed how universities might research OR and AI (MML: 248). In spite of his attempts to balance scientific rigour and humanism, Simon’s writings on administrative decisionmaking inadvertently helped reinforce the notion that managing is rational, cold, and unemotional. Equally ironic, his work encouraged our discipline into ways of thinking that actually diverted attention away from the singularities and particularities of the contexts of real-world problem-solving under uncertainty—and the human agency it drew forth. Even given Albert’s researches, Simon could scarcely have anticipated the degree to which the practical policy-shaping results he sought in his earliest research projects have been wholly displaced by A-journal publication counts as our metric of intellectual achievement, and how such institutional pressures have worked to obliterate his agenda of harnessing social science to the service of humanity. Simon was not a naïve positivist searching for more powerful deterministic models. On the contrary, he engaged the essential puzzles of philosophical thinking—the interplay of the general and the specific, the individual and the environment, the past and the future. To ignore the bounded specificity and heterogeneity of the human condition, he sensed, would flush the baby with the bathwater. On the other hand we seem to have mislaid the essence of his achievement—in particular his identification of organization as our invented artefact for coping with our limitations. Here is an echo of Commons and of North’s notion of institutions as the artefacts we created to deal with our society’s anxieties (North, 1991). As Simon moved into simulating individuals he appeared to drift away from administrative and organizational theorizing, though again I think this incorrect. His last public lecture (the 2000 Gaus Lecture1) showed him as attached to his initial undergraduate agenda as ever. In it he argued the Web had opened up new possibilities for administrative coordination, and he touched on socio-economic decomposability as the explanation for why organizations exist and can become the democratic engines of economic progress. He returned to concerns about the political consequences 1

. Accessed 21 June 2012.

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of the centralization of power in large organizations and the need to think about distribution and fairness. Viewing the world through the lens of his own philosophy, he argued the history of human civilization would be better measured in terms of our capacity for democratic organization, reaffirming the neo-Tocquevillian outlook at the centre of his world-view. We might think that Simon, like all great philosophers who, making a massive intellectual effort, to find and communicate a more penetrating question about the human condition—and failing to answer it as they had hoped—end up feeling the disappointment captured in Critchley’s quotation at this chapter’s opening. I think this incorrect, for it misses Simon’s boundless optimism about Man, rigorous criticism, and social theorizing, even as he experienced his fair share of setbacks and disappointments among the accolades. Perhaps the core of his legacy is his optimism about our ability to deal with our condition. That would show Simon was a good man who chose to ride a perilously narrow rail between serving science and serving humanity, who showed all of us what it meant to contribute as an academic and to engage with all the insight, energy, and methodological precision one can muster, an exemplary scholar, debater, and author who, as he faced his own life-boundary, said ‘Tell them I had a good life’.

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pa rt i i i

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chapter 16

a lfr ed ch a n dl er’s m a nager i a l r evolu tion Developing and Utilizing Productive Resources w illiam l azonick∗

Chandler’s managerial revolution Alfred D. Chandler Jr (1918–2007) is widely considered to have been the world’s leading historian of the industrial corporation. He revolutionized the study of business enterprise by analysing the role of management in the operation and growth of industrial corporations, and the role of the industrial corporation in the operation and growth of national economies, particularly that of the United States. He integrated a deep empirical knowledge of company history into simple, but powerful, conceptual frameworks that show the importance of business management in the process of economic development. In synthesizing a voluminous number of company case studies into these frameworks, Chandler sought to influence thinking in the social sciences and possibly in the arena of public policy. In an essay on comparative business history, Chandler (1984, 3) identified ‘at least two exacting and exciting challenges’ for the historian: One is that of relating specific human events and actions to the ever-changing broader economic, social, political and cultural environment. A second is the development of generalizations and concepts which, although derived from events and actions that occur at a specific time and place, are applicable to other times and places, and are, therefore, valuable as guideposts for or as tools of analysis by other historians as well as economists, sociologists, anthropologists and other scholars. They may even be of interest to the informed general public and of some use to actors in contemporary political, social, or cultural dramas. ∗

I am grateful to Louis Galambos for comments on this chapter.

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Chandler launched his career as a business historian with his Harvard University PhD dissertation (awarded in 1952) on Henry Varnum Poor, the nineteenth-century railroad analyst and the founder of a securities rating agency that evolved into Standard and Poor’s (Chandler 1950 and 1956).1 It happened that Poor was also Chandler’s great-grandfather and that, by chance, at precisely the time when Chandler was looking for a PhD thesis topic, he discovered Poor’s personal papers in the home of a recently deceased great-aunt in Brookline, Massachusetts (McCraw 1988, 7). Chandler’s work on Poor led him into the study of the US railroads as the nation’s first ‘big business’ (Chandler 1959 and 1965). While a history graduate student at Harvard (where he had also done his undergraduate degree), Chandler crossed disciplines to study sociology with Talcott Parsons, a leading figure in the structural-functionalist approach to analysing the interconnections of various roles and functions in a social system. As Thomas McCraw (1988, 6) wrote in his essay on Chandler’s intellectual evolution, ‘for the next forty years [after completing his graduate work], Parsonsian and especially Weberian sociology informed the corpus of nearly all Chandler’s studies. Equally important, it guided him toward the broad systemic generalizations that characterized his work that the subdiscipline of business history so badly needed.’ Chandler’s first academic appointment was in 1950 at the Massachusetts Institute of Technology, where he remained until 1963. At that point he took up a professorship in history at Johns Hopkins University, where one of his duties was to edit the papers of Dwight D. Eisenhower. In 1971 Chandler left Hopkins to assume the chair in business history at Harvard Business School (HBS). This professorial chair had been established in 1927 in an effort to provide the study of business with a theory of business (Cruikshank 1987, ch. 4). In Chandler, over four decades later, HBS found someone for the chair who fitted the description. At HBS in the 1970s Chandler developed and taught an MBA elective, The Coming of Managerial Capitalism, while he completed his most prominent book, The Visible Hand: The Managerial Revolution in American Business (1977), for which he was awarded the Bancroft Prize and the Pulitzer Prize. Chandler’s course would become highly popular among MBA students in the 1980s when taught by two younger professors, Thomas McCraw and Richard Tedlow, both of whom had come to Harvard in the late 1970s on HBS’s Newcomen fellowships in business history. With McCraw and Tedlow running his course, Chandler was relieved of teaching duties in the early 1980s, years before his retirement from HBS in 1989, so that he could focus exclusively on his research and writing. In the fall of 1984 the HBS ‘Business History Group’ (of which I was a member) launched a seminar, a prime purpose of which was to discuss Chandler’s project in comparative business history. Six years later Chandler published Scale and Scope: The Dynamics of Industrial Capitalism, with its comparison of the United States, Britain, and Germany from the late nineteenth century until around World War II. In 1993, he launched what he called his ‘paths of learning’ project, researching and writing (always by hand, without the use of a computer) Inventing the Electronic Century: The Epic Story of the Consumer Electronic and Computer Industries (2001) and Shaping the 1

Mary O’Sullivan (2010) delves into Chandler’s work on railroad finance.

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Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries (2005b).2 Taken together, the focus of Chandler’s work over a period of more than half a century was on the role of management in developing and utilizing productive resources within the business enterprise. Through this work, he provided a foundation for understanding and studying the role of the industrial corporation in the evolution and performance of an advanced economy. The central role of the visible hand of management in allocating the resources in ways that generated economic growth in the leading capitalist economies challenged the economic orthodoxy that posited that, especially in the United States, perfectly competitive markets would result in superior economic performance (see Lazonick 1991). In effect, Chandler’s work gave substance to Joseph Schumpeter’s indictment of the theory of the market economy in Capitalism, Socialism, and Democracy (1942, 106): What we have got to accept is that [the large-scale enterprise] has come to be the most powerful engine of [economic] progress and in particular of the long-run expansion of total output not only in spite of, but to a considerable extent through, the strategy that looks so restrictive when viewed in the individual case and from the individual point in time. In this respect, perfect competition is not only impossible but inferior, and has no title to being set up as a model of ideal efficiency.

From the Chandlerian perspective, the key to explaining the growth of the world’s most advanced economies lay in an analysis, rooted in the industrial corporation as the central institution of capitalism, of how management transformed purchased inputs into sold outputs to generate high levels of productivity. What Chandler called ‘the dynamics of industrial capitalism’—a process that he first articulated fully in Scale and Scope— entailed both the development and the utilization of productive resources. To emphasize their dependence on managerial organization, Chandler called these productive resources ‘organizational capabilities’, defined as ‘the collective physical facilities and human skills as they were organized within the enterprise’ (Chandler 1990a, 594). Management developed productive resources by creating and maintaining these organizational capabilities in an economic system characterized by changing technologies and markets, thus contributing to the wider transformation of these technologies and markets. Management utilized productive resources by ensuring the high-speed flow of work through the processes of production and distribution, so that the high fixed costs of creating and maintaining these organizational capabilities could be transformed into low unit costs and large market shares. The outcomes of these processes of developing and utilizing productive resources were economies of scale and scope that enabled the firm to grow and contribute to the growth of the economy in which it operated. 2 See Chandler 2005a for an article that summarizes the findings from these two books. In retirement, Chandler also co-edited five books: Chandler et al. 1997; Chandler et al. 1998; Chandler and Cortada 2000; Chandler et al. 2000; and Chandler and Mazlish 2005.

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In this chapter, I summarize Alfred Chandler’s intellectual journey—one in which he dedicated himself to understanding the role of management in developing and utilizing productive resources. During the first part of that journey from the 1950s through to the 1980s, as I discuss in the next section of this chapter, Chandler viewed the role of management almost entirely in terms of the utilization of productive resources, as evidenced in Strategy and Structure and The Visible Hand. During the 1980s as Chandler wrote Scale and Scope, his attention shifted from the utilization to the development of productive resources. Yet, even with the completion of Scale and Scope, Chandler’s thinking about how management drove economic growth remained dominated by the question of how management could get the most productivity out of existing organizational capabilities rather than how management contributed to the generation of new organizational capabilities. Nevertheless, as I show in the third part of this chapter, with the completion of Scale and Scope, it is clear that Chandler saw the role of management in a new light. In his last two books, researched and written in the decade and a half after the publication of Scale and Scope, Chandler’s focus shifted almost entirely to the development of productive resources, or what he called ‘evolving paths of learning’ as he delved into organization and competition in the consumer electronics, computers, chemicals, and pharmaceuticals industries (Chandler 2001, 6–12; 2005a, ch. 2). To some extent, Chandler’s shift from a focus on utilizing productive resources to developing productive resources reflected a change in industry focus. In some industries, for example petroleum refining, characterized by the physical capital-intensity of investments, corporate success depended much more (but never exclusively) on the utilization than on the development of productive resources. In other industries, for example pharmaceuticals, the key to the growth of the firm was the development of productive resources. More fundamentally, however, this Chandlerian shift reflected the evolution of Chandler’s own understanding of how managerial organization can drive economic development, with his own ‘evolving path of learning’ being highly influenced by his courageous foray into the comparative development of high-technology industry on a global scale during the last decade or so of his long career and life. An understanding of the dynamics of industrial capitalism requires, as Chandler ultimately showed, a theoretical analysis of the role of management in ensuring both the development and utilization of productive resources. This dual focus of the analysis is of critical importance for reasons having to do with a) business strategy, b) organizational structure, and c) industrial finance. a) Business strategy: If the only role of management is to ensure the more complete utilization of productive resources, the implication is that, whatever their capitalintensity, all the productive resources available to the firm are ones that can be bought, ready to use, on the market. The firms that become dominant in competition that depends just on the utilization of productive resources are the ‘first movers’ in making purchases of capital-intensive productive inputs and then speeding their transformation into sold outputs. But virtually every firm in every industry

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makes investments in developing productive resources, including the human resources, that it has purchased on the market, often by complementing or recombining them in ways that are unique to the firm (see Teece 1986; Nelson 1991; Kogut and Zander 1992). These improvements in productive resources are typically the results of collective and cumulative processes of organizational learning, and the role of management in business strategy is to make investments in organizational learning (Lazonick 2005). From this perspective, the use of the multidivisional structure to expand the firm into new technologies or markets did not simply entail making more complete use of a company’s existing research, production, or marketing resources, but also required the strategic development of new productive capabilities. The notion that the growth of the firm entailed only the more complete utilization of existing resources supports the notion that a good manager can manage anything, as was indeed the case in the conglomerate movement of the 1960s, with disastrous results (Lazonick 2004). When management’s role is to develop as well as utilize productive resources, those who exercise strategic control over the allocation of the firm’s resources must have a deep knowledge of the actual and potential productive capabilities of those resources. b) Organizational structure: The development of productive resources within the business enterprise requires the integration of large numbers of people with different hierarchical responsibilities and functional specialties into the processes of organizational learning (see Nonaka and Takeuchi 1995). Organizational integration means that management has to know how and for whom to create incentives (in the forms, not only of pay and benefits, but also of promotion and career opportunities). From the mid-1970s, for example, in the face of Japanese competition that integrated shop-floor workers into the corporate processes of organizational learning, US manufacturing industry faced the problem of its traditional organizational model in which the role of management was to invest in organizational learning within the management structure while excluding shop-floor workers from these learning processes (Lazonick 1990 and 2005). c) Industrial finance: A critical role of management is to ensure the commitment of finance from the time at which investments in productive resources are made until the time that products are sold on the market to generate financial returns (Lazonick 1992 and 2005). The extent of financial commitment required to sustain an investment strategy depends on both the size of the investments in productive resources and duration of time required for those investments to generate financial returns. The need to develop productive resources as well as utilize them increases both the size and duration of the requisite financial commitment and hence the role of management in ensuring the firm’s access to it. In researching the history of the modern business enterprise, as Chandler did, the theoretical challenge is, not only to explain the growth of the dominant firm and its contribution to national economic performance, but also the conditions under which, as I discuss in the concluding section of this essay, the powerful corporation can become a

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barrier to economic progress. More specifically, an analysis of the role of management in developing and utilizing productive resources can help us to comprehend what happens to once great companies, industries, and even nations when ‘the visible hand’ of corporate management on which the health of the company, industry, and national economy depends neither develops nor utilizes productive resources, but rather enables top executives to use their grip over the allocation of corporate resources to appropriate outsized shares of income and wealth for themselves.

Managerial coordination and the utilization of productive resources Although not originally conceived as such, in retrospect The Visible Hand, Strategy and Structure, and Scale and Scope represent a trilogy through which Chandler synthesized detailed historical research by himself and others (including many of his students) into a conception of the evolution of industrial capitalism in which business management played the central role. Covering the period 1870 to 1920, The Visible Hand was the first book in the trilogy chronologically. In its introductory chapter, Chandler (1977, 6–11) laid out eight ‘general propositions’ concerning the managerial revolution in American business that could be derived from the study of the history of the US industrial corporation. These propositions can be summarized as follows: i) In a number of important industries, ‘administrative coordination permitted greater productivity, lower costs, and higher profits than coordination by market mechanisms’. ii) Investment in and building of a managerial hierarchy was necessary to reap ‘the advantages of internalizing the activities of many business units within a single enterprise’. iii) Administrative coordination dominated market coordination in industries characterized by technological innovation and rapidly expanding product markets. iv) Once put in place, a managerial hierarchy ‘became a source of permanence, power, and continued growth’ that was independent of ‘any individual or group of individuals who worked in them’. v) Those who occupied positions within these hierarchies were salaried professionals with specialized skills whose ‘selection and promotion became increasingly based on training, experience, and performance rather than on family relationship or money’ and who ‘could conceive of a lifetime career involving a climb up the hierarchical ladder’. vi) The rise of professionalized managerial hierarchies permitted the separation of the ownership of corporate assets from control over the allocation of corporate resources.

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vii) Given that their lifetime careers depended on the continued growth of the enterprise, ‘in making administrative decisions, career managers preferred policies that favored the long-term stability and growth of their enterprises to those that maximized current profits’, and ‘they preferred to reinvest [profits] rather than pay them out in dividends’. viii) During the first half of the twentieth century, the managerial revolution in American business ‘altered the basic structure of [the industrial] sectors [in which large enterprises became dominant] and of the economy as a whole’. By about 1920, in Chandler’s view, the managerial revolution in the United States was complete. By building cohesive and coherent management structures, US business enterprises that took the lead in making integrated investments in production and distribution in industries characterized by technological change and market expansion were able to generate economies of scale that gave them dominant market shares of the industries in which they were engaged. Before Chandler wrote The Visible Hand, students of US business history knew about the importance of companies such as American Telephone and Telegraph, Carnegie Steel, General Electric, Standard Oil, and Singer Sewing Machine, among others, to the development of specific industrial sectors. But we lacked a general explanation of why and how in the late nineteenth and early twentieth centuries the rise of big business across a wide range of industrial sectors resulted in a fundamental organizational transformation of resource allocation in the US economy. With his documentation of ‘the managerial revolution in American business’ that occurred in these decades, Chandler provided a general explanation that could provide a coherent framework for ongoing research and intellectual debate. Chandler located the origins of professional business management in the rapid expansion of railroads, especially in opening up the north-west of the United States, in the 1850s. The creation of a transnational railroad network in the decades after the Civil War provided the physical communications infrastructure, complemented first by the telegraph and then by the telephone, that enabled industrial corporations to access raw materials and mass markets. In addition, as Chandler stressed, with the demands that they placed on planning, logistics, and finance, the railroads were also a school for professional managers in a period in which the system of higher education had not as yet been integrated into the evolving corporate economy (Chandler 1965). In 1865 there were about 35,000 miles of railroad track operated in the United States, increasing to 47,000 at the end of the 1860s, 87,000 at the end of the 1870s, and 161,000 at the end of the 1880s (US Bureau of the Census 1976, 200). In and of itself, the construction of railroads in the last decades of the nineteenth century generated an immense demand for capital goods, including steel rails. Personifying the contribution of the railroads to US industrial development was Andrew Carnegie (1835–1919), a Scottish immigrant without a secondary education who worked for the Pennsylvania Railroad, one of the nation’s first big businesses, for more than a decade before the Civil War. After the war, Carnegie started his own iron and steel company, and with the mass production of steel rails as its basic product it became the largest steel producer in the world.

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In the last three decades of the nineteenth century, the United States admitted 11.7 million immigrants, as the nation’s population rose from 39.9 million in 1870 to 76.1 million in 1900 (US Bureau of the Census 1976, 8, 104–5). Over this period GDP per capita rose 67 per cent in real terms (Maddison 2010). In The Visible Hand Chandler documented how, with mass markets growing rapidly across the continental United States, a few companies in a number of the more capital-intensive industries were able to capture and hold dominant market shares. He argued that the critical determinant of sustained competitive advantage was the building of managerial organizations to coordinate the large-scale and rapid flow of materials through the processes of production and distribution into the hands of consumers, be they other businesses or households. By managing ‘throughput’ from material supplies to product markets, a company could reap ‘economies of speed’, or economies of scale per unit of time, as the high fixed costs of the company’s competitive strategy were, through large-scale market sales, transformed into low unit costs. In some industries such as steel and chemicals, capital-intensity and economies of speed occurred largely in the production processes, while in other industries such as cigarettes and food products, they occurred largely in distribution processes (for example, brandname advertising and special distribution facilities such as refrigerated railroad cars). In yet other industries such as oil refining, economies of speed occurred in both production (refineries) and distribution (pipelines). To understand Chandler’s arguments concerning the rise of the dominant industrial corporation, it is critical to recognize the emphasis that he placed on the vertical integration of distribution with production.3 Chandler recognized that it made no economic sense to achieve economies of speed in production unless the mass-produced goods could be rapidly sold on product markets. To ensure mass sales, a company had to make investments in distribution channels to access its markets. In the Chandlerian framework, the size of a plant that a company built was to some extent a strategic decision based on the expectations of those who allocated the firm’s resources concerning the size of the product markets that the company would be able to serve. Moreover, as was particularly the case when a company went multinational, in order to access markets in different locations, the company might build a number of plants at different sites. In addition, to serve different but related product markets, the company might build specialized plants, while coordinating the sale of the different products through unified distribution channels. Given its strategy for integrating production and distribution, a company might decide, again strategically, to integrate backwards into the supply of materials or components to ensure its access to the quantity and quality of these inputs into the production process needed to reap economies of speed. For Chandler, such backward integration 3 For the centrality of the integration of production and distribution in Chandler’s analysis, one need only look at the titles of the first four of the five parts of The Visible Hand: Part I: ‘The Traditional Processes of Production and Distribution’; Part II: ‘The Revolution in Transportation and Distribution’; Part III: ‘The Revolution in Distribution and Production’; and Part IV: ‘The Integration of Mass Production with Mass Distribution’.

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was not determined by technological indivisibility, as is typically posited by conventional economists, but rather by a corporate strategy to ensure, through managerial coordination, the high-speed flow of products from purchased inputs into sold outputs. Investment in a managerial hierarchy was essential to the success of such an integration strategy, with managerial coordination reaping economies of speed by transforming the high fixed costs of investing in vertical integration into low unit costs. Again, however, low unit costs could only be achieved through the quick sale of the large volume of goods that the company was producing. Or put differently, mass production without mass distribution would result in high, not low, unit costs (see Lazonick 2010a) From Chandler’s perspective, this administrative coordination demanded the professionalization of management, which undermined the roles of family relations or inherited wealth in top management succession, thus becoming part of the process that separated asset ownership from strategic control over resource allocation in the nation’s large business corporations (Chandler’s proposition vi). In the early decades of the twentieth century, industrial corporations discovered that they could use their managerial organizations to leverage their success in one product market for entry into new, technologically-related product markets. By the 1920s a small number of leading industrial corporations—most notably Du Pont Chemical and General Motors—had begun to cope with the administrative problem of how to organize a number of different business units within one coherent corporate organization. The result in the ensuing decades was the transition from the functional organization that Chandler analysed in The Visible Hand to a multidivisional organization of the enterprise that he analysed in Strategy and Structure. The distinguishing feature of the multidivisional structure was the vesting of control over the integration of specialized functions such as purchasing, production, and sales within divisions that operated as profit centres, with their focus on developing products for sale on particular markets or in particular geographical areas. At the same time, besides controlling staff functions (legal, accounting, finance, human resource, industrial relations, research) that applied to the corporation as a whole, the central corporate office maintained strategic control over major decisions for expansion into, or withdrawal from, the various lines of business and geographic locations in which the enterprise invested. In Strategy and Structure, Chandler (1962, 11) depicted the general office as making entrepreneurial decisions and the divisions as making operational decisions, where ‘entrepreneurial decisions and actions refer to those which affect that allocation or reallocation of resources for the enterprise as a whole, and operating decisions and actions . . . refer to those which are carried out by using the resources already allocated’. The power of corporate headquarters in the multidivisional structure is clear: ‘The general office makes the broad strategic or entrepreneurial decisions as to policy and procedures and can do so largely because it has the final say in the allocation of the firm’s resources—men, money, and materials—necessary to carry out the administrative decisions and actions and others made with its approval at any level’ (Chandler 1962, 11). Chandler’s argument was that this hierarchical division of labour permitted the continued growth of already successful US industrial enterprises by expanding into technologically related businesses or new geographical markets. The ability of these companies

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to carry out successfully this expansion strategy depended on building a coherent managerial structure. As Chandler articulated the thesis of Strategy and Structure: Strategic growth resulted from an awareness [by top executives] of the opportunities and needs—created by changing population, income, and technology—to employ existing or expanding resources more profitably. A new strategy required a new or at least refashioned structure if the enlarged enterprise was to be operated efficiently. The failure to develop a new internal structure, like the failure to respond to new external opportunities and needs, was a consequence of overconcentration on operational activities by the executives responsible for the destiny of their enterprises, or from their inability, because of past training and education and present position, to develop an entrepreneurial outlook.

In the book, Chandler focused in depth on four case studies of companies—Du Pont, General Motors, Standard Oil, and Sears, Roebuck—that in the 1920s pioneered in setting up multidivisional structures to implement their expansion strategies. Du Pont was originally an explosives manufacturer that moved into chemical businesses such as paints, dyes, and synthetic fibres. General Motors (GM) was a collection of car companies put together by William Durant that was then rationalized by Alfred Sloan, GM president from 1923, who created divisions based on differentially priced cars and the annual model change to sustain demand. Standard Oil of New Jersey (which ultimately became Exxon and then Exxon Mobil) was the largest oil producer and refiner in the world, having expanding dramatically in the decade and a half after the antitrust breakup of John D. Rockefeller’s Standard Oil in 1911, propelled in large part by the growth in the demand for fuel for automobiles. Sears, Roebuck was a leading mail-order retailer that in the mid-1920s pursued a strategy of opening its own stores, which in turn by 1929 led it to undertake a major reorganization of its management structure. The fact that four large companies in such diverse industries adopted a multidivisional structure for the successful implementation of their investment strategies in the 1920s demonstrated the importance of the managerial revolution to the growth of the business enterprise. As Chandler documents in the penultimate chapter of Strategy and Structure, by the 1950s the multidivisional structure was widely adopted in US industry, particularly by leading companies in capital-intensive industries, such as electrical and electronics manufacturing, power machinery, automobiles, and chemicals. In both The Visible Hand and Strategy and Structure, the primary role of management is to ensure the more complete utilization of produce resources, not to ensure the development of productive resources. In The Visible Hand, Chandler (1977, 240–4) has a discussion of how the development of mass production technologies made highthroughput possible, but he treats technological change as an exogenous force, rather than as the partial result of improvements by mass-production manufacturing firms that made use of these technologies. In the case of shop-floor production in the United States, Chandler’s exogeneity assumption is to a considerable extent warranted by the fact that from the late nineteenth century manufacturing employers sought to substitute machinery for shop-floor skills rather than, as was later done by the Japanese, mobilize shop-floor skills to help engineers improve machinery (Lazonick 1990). Nevertheless,

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many of the leading mass-production manufacturers of the period of the managerial revolution employed an engineering workforce to improve mass-production technologies (Hounshell 1984). Indeed in a chapter called ‘Integration Completed’ covering the period 1900–17, Chandler (1990a, 375) observes: By the first decade of the new century Western Electric, Westinghouse, General Electric, Electric Storage Battery, McCormick Harvester (then International Harvester), Corn Products, Du Pont, General Chemical, Goodrich Rubber, Corning Glass, National Carbon, Parke Davis, and E. R. Squibb all had extensive departments where salaried scientifically trained managers and technicians spent their career improving products and processes. Other companies followed suit. The research organizations of modern industrial enterprises remained a more powerful force than patent laws in assuring the continued dominance of pioneering mass production firms in concentrated industries.

Toward the end of The Visible Hand in his discussion of diversification in the 1920s in a chapter called ‘Maturing of Modern Business Enterprise’, Chandler argues that ‘managers looked to their research organizations, originally set up to improve product and process, to develop new products that might be particularly suitable to their production processes or marketing skills.’ So too, in Strategy and Structure, in which he had already analysed the growth of the multidivisional structure from the 1920s, Chandler assumed that, by moving into new lines of business or geographic locations, managers ensured the more complete utilization of the firm’s productive resources rather than invest in the development of new productive resources.4 At one point in Strategy and Structure, Chandler (1962, 284) invokes Joseph Schumpeter’s important distinction between a creative response and an adaptive response, which is akin to the distinction between developing productive resources and utilizing productive resources (see Schumpeter 1947). As he put it: ‘In the creation of the “decentralized” multidivisional structure, all four of the firms here studied were making a creative response to new needs and new conditions. On the other hand, in building field units, departmental headquarters, or a central office, they were staying within the bounds of existing business practice.’ Yet in the conclusion to Strategy and Structure, Chandler (1962, 383) made it clear that he viewed management’s role in corporate expansion through multidivisionalizaton as entailing the more complete utilization, not the development, of productive resources: The comparison of the experience of a sizable sample of large industrial enterprises with that of four pioneers in modern American business administration . . . emphasizes that a company’s strategy in time determined its structure and that the common denominator of structure and strategy has been the design for integrating the enterprise’s existing resources to current demand; strategy has been the plan for the 4 Much of the important academic research on the role of corporate R&D in the development of US industry appeared after Chandler published The Visible Hand, and to varying degrees was influenced by the Chandlerian notion of the ‘managerial revolution’. See the contributions by Reich (1985), Wise (1985), Graham (1986), Hounshell and Smith (1988), Mowery and Rosenberg (1989), Galambos and Sewell (1995), Hounshell (1996), and Graham and Shuldiner (2001).

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william lazonick allocation of resources to anticipated demand. The performance of these companies further suggests that a self-generating force for the growth of the industrial enterprises has been the drive to keep resources effectively employed. The same need has shaped the ways, particularly the structure, by which a firm has been managed. Historically, the role of administration and the function of the administrator in the large American enterprise have been to plan and direct the use of resources to meet the short-term and long-term fluctuations and developments in the market.

Organizational capabilities and the development of productive resources Scale and Scope was Chandler’s response to the challenge of understanding the role of management in the comparative development of advanced nations engaged in international competition. Chandler went back to the roots of the managerial revolution in the last decades of the nineteenth century and took the story to the 1930s and 1940s. Hence Scale and Scope covers the same time-frames of the managerial revolution in American business in The Visible Hand and the creation of the multidivisional structure in Strategy and Structure. In the cross-national comparison, Chandler (1990a, 30) chose to include Britain and Germany along with the United States because these three nations were the industrial leaders in the period, with just over two-thirds of the world’s industrial output in 1870 and just under two-thirds in the late 1920s. Britain began as the world leader with 32 per cent of the world’s industrial production in 1870, compared with 23 per cent for the United States and 13 per cent for Germany. In 1913, on the eve of World War I, the share of the United States had risen substantially to 36 per cent, while Germany’s had risen moderately to 16 per cent, and Britain’s had fallen dramatically to 14 per cent. By 1926– 1929, with the Great Depression in the very near future, the United States had attained 42 per cent of the world’s industrial output, compared with 12 per cent for Germany and 9 per cent for Britain (Chandler 1990a, 4, citing Rostow 1978, 52–3). Integral to Chandler’s analysis are the questions of Britain’s relative decline, particularly in the science-based electrical and chemical industries, and Germany’s strength in those industries notwithstanding the instability of the German economy after that nation’s defeat in World War I. Chandler’s analysis focused on the experiences of the 200 largest companies, ranked by assets or market capitalization, in each of the three countries toward the latter part of the period under analysis. Chandler (1990a, 12) labelled the United States ‘competitive managerial capitalism’ and Germany ‘coordinated managerial capitalism’ on the grounds that ‘industrial leaders in the United States continued to compete functionally and strategically for market share, while in Germany they often preferred to negotiate with one another to maintain market share at home and in some cases abroad.’ He also pointed out that German firms had their greatest successes in science-based capital-goods

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industries while US firms were leaders in both capital-goods and consumer-goods industries. In contrast to both the United States and Germany, Chandler (1990a, 12) argued that in Britain a commitment to ‘personal capitalism’ prevented the heads of British companies from making the investments, recruiting the managers, and developing the organizational capabilities to become leading global competitors in the sciencebased industries of the Second Industrial Revolution. The critical concept that emerged from the comparative analysis in Scale and Scope to explain ‘the dynamics of industrial capitalism’ was ‘organizational capabilities’.5 Chandler (1990a, 8) argued that these organizational capabilities derived from three-pronged investments in production, distribution, and management required ‘to benefit from the cost advantages of . . . new, high-volume technologies of production’ (Chandler 1990a, 8). By making the three-pronged investment, a firm could compete ‘functionally by improving their product, their processes of production, their marketing, their purchasing, and their labor relations, and strategically by moving into growing markets more rapidly, and out of declining ones more quickly and effectively, than did their competitors.’ In the conclusion to Scale and Scope, Chandler (1990a, 594) stressed that ‘organizational capabilities . . . had to be created, and once established maintained’: Their maintenance was as great a challenge as their creation, for facilities depreciate and skills atrophy. Moreover, changing technologies and markets constantly make both existing facilities and skills obsolete. One of the most critical tasks of top management has always been to maintain these capabilities and to integrate these facilities and skills into a unified organization—so that the whole becomes more than the sum of its parts.

Chandler went on to argue that organizational capabilities ‘made possible the earnings that supplied much of the funding for such growth’ and ‘[e]ven more important, they provided the specialized facilities and skills that gave the enterprise an advantage in foreign markets and in related industries.’ In Scale and Scope, therefore, Chandler made a transition toward an analytical framework in which not just the utilization but also the development of productive resources became an essential role of management in ensuring the long-run growth of the firm and its contribution to the growth of the national economy in which it was based. In 1992 he articulated this perspective in an article, ‘Organizational Capabilities and the Economic History of the Industrial Enterprise,’ published in Journal of Economic Perspectives, and hence aimed at economists. Still, however, despite the prominent place now accorded ‘organizational capabilities’, the utilization of productive resources retained centre stage. As he summarized the era of industrial transformation in the late nineteenth and early twentieth centuries: ‘Firms in these transformed or new industries differed from older ones . . . The new firms were far more capital-intensive and able to 5 See Chapter 2, ‘Scale, Scope, and Organizational Capabilities’, and ‘Organizational Capabilities as the Core Dynamic’ as a subhead in ‘Conclusion: The Dynamics of Industrial Capitalism’, as well as the appearance of ‘Organizational Capabilities’ in the titles of seven of the other twelve chapters in Scale and Scope.

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exploit the potential economies of scale and scope made possible by the new technologies of production far more effectively.’ (Chandler 1992, 81) Organizational learning had now entered Chandler’s analysis, but it was managerial learning concerning the utilization of productive capabilities, not the development of productive capabilities. As Chandler (1992, 83) stated in his ‘Organizational Capabilities’ article: For most [industrial enterprises], the long-term continuing strategy of growth was expansion into new geographical or product markets. The move into geographically distant areas was normally based on the competitive advantages provided by organizational capabilities learned through exploiting economies of scale. Moves into related product markets rested more on capabilities developed from the exploiting of the economies of scope.

Chandler (1992, 83–4) went on to give a detailed summary of the sources of organizational learning that implicitly involve the development of new technologies, and he recognized that ‘such learned skills and knowledge were company-specific and industry-specific’. Nevertheless, he constantly emphasized that it is the utilization of resources—the achievement of economies of scale and scope, given the investments that the enterprise has made—that creates both the need for organizational learning and the context for the acquisition of skills that permit the realization of economies of scale and scope. On the surface, Chandler closed this gap in his theoretical analysis by endowing the otherwise analytically empty concept of ‘first-mover advantage’ (borrowed from conventional industrial-organization economics) with the substance of investment in productive resources, both physical and human. As Chandler (1992, 81) argued: The first firms to make the three-pronged investments in manufacturing, marketing, and management essential to exploit fully the economies of scale and scope quickly dominated their industries. Most continued to do so for decades.

But, thus articulated, the notion of a ‘three-pronged investment’ raises more theoretical questions than it answers. What were the capabilities that were developed by these ‘three-pronged investments’? How were these capabilities integrated strategically, functionally, and hierarchically so that those people involved in the innovative enterprise had the incentives to cooperate in the development and utilization of productive resources? Writing at the beginning of the 1990s, Chandler (1992, 99) was aware of the need to answer such questions. At the conclusion of his Journal of Economic Perspectives article, he posed a number of ‘significant questions for study’ that derive from an ‘evolutionary theory’ of the firm: How precisely were the learning processes carried out? How and why did industryspecific and particularly company-specific characteristics vary? Why were some capabilities more easily transferred to different geographic and new product markets than others? What were the contents of the routines developed to evaluate and capture new markets and move out of old ones? Why has functional and strategic

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competition in modern capitalistic economies played a larger role in changing market share and profit than price? What are the determinants of competitive success in national industries and national economies?

At this point, one might have thought that Chandler, in his mid-seventies and retired, would have left these questions for younger scholars to answer. Instead, in 1993 he embarked on what he would call his ‘paths of learning’ project, based on a study of the long-run evolution over the course of the twentieth century of the consumer electronics, computer, chemical, and pharmaceutical industries. In this project Chandler sought not only to understand the substance of organizational capabilities but also to bring his historical analysis of the modern industrial enterprise as close as possible to the present. As previously mentioned, Inventing the Electronic Century, concerned with consumer electronics and computers, appeared in 2001, while Shaping the Industrial Century concerned with chemicals and pharmaceuticals, including biotechnology, was published in 2005. In the Introduction to Inventing the Electronic Century, Chandler (2001, 2) argued: In market economies the competitive strengths of industrial firms rest on learned organizational capabilities. That is my basic premise—a premise that is based on the findings of this historical study. The capabilities are product-specific in terms of technologies used and markets served. These product-specific capabilities are learned and embodied in an organizational setting. Individuals come and go, but the organization remains. Thus, in modern industrial economies the large firm performs its critical role in the evolution of industries, not merely as a unit carrying out transactions on the basis of information flows, but, more importantly, as a creator and repository of product-specific embedded organizational knowledge.

Chandler (2001, 2–3) goes on to root the creation of organizational capabilities in three types of knowledge—technical, functional, and managerial. Technical capabilities derive from ‘the knowledge used in basic and applied research to create new products and processes’. Functional knowledge is product-specific involving a) development capabilities ‘required to transform an innovation into a commercial product to be sold in national and international markets’; b) production capabilities that ‘come from learning how to build and operate large-volume production facilities for the new product and to recruit and train the labor force essential to operating these facilities efficiently’; and c) marketing capabilities that ‘are acquired in learning the nature of the product’s markets and building extensive distribution systems to reach them.’ Finally, ‘learned organizational capabilities’ include managerial capabilities required ‘to administer the activities of the functional operating units, to integrate their activities, and to coordinate the flow of goods from the suppliers of raw materials through the processes of production and distribution to the retailers and final customers.’ For Chandler (2001, 4), ‘first-movers’ are those firms that ‘were the first to develop an integrated set of functional capabilities essential to commercialize the new product in volume for worldwide markets.’ ‘Once an industry is established,’ Chandler (2001, 5) argued, ‘learning continues with powerful momentum’:

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william lazonick The integrated learning bases of the first-movers become the primary engines for the continuing evolution of their industry through the commercializing of new technical knowledge. The integrated learning base embodies within the enterprise the procedures to integrate the enterprises’ technical and functional organizational capabilities – to integrate and to coordinate those of applied research, product development, production, and marketing. The development of such integrating and coordinating procedures becomes a basic function of top management if the enterprise is to benefit from the internal economies of scale and scope and continuing advances in proprietary knowledge. Such integrated learning bases thus define an industry’s continuing path of organizational learning. They set the direction in which an industry evolves.

In the Introduction to Shaping the Industrial Century, Chandler (2005b, 6–9) essentially repeated these ‘organizational learning’ arguments. Based on the histories of the 50 largest industrial chemical companies and 30 largest pharmaceutical companies by sales in 1993, he argued that organizational capabilities characterized by integrated learning bases created formidable barriers to entry. ‘By the end of the 1920s,’ Chandler (2005b, 285) observed, ‘the infrastructures of both the chemical and pharmaceutical industries were essentially complete. . . . Once the infrastructures were completed, new entrants have been extremely rare. Only two of the top fifty chemical companies and none of the top thirty pharmaceutical companies [in 1993] were established after the 1920s.’ The two younger top fifty chemical companies (Dow Corning and Air Products) were formed in the 1940s ‘to exploit new technologies amid the extraordinary conditions of World War II’. The organizational learning that developed productive resources was utilized for a long time. New entrants to these industries required a wholly new knowledge base, as was the case in biotechnology from the 1970s. As Chandler (2005b, 260) argued: ‘The knowledge and the materials required for this technology provided the first opportunities since the 1920s for the entry of new companies that had the potential to become large integrated competitors to existing core pharmaceutical companies.’

The dynamics of industrial capitalism The interaction of the development and utilization of productive resources is the essence of the dynamics of industrial capitalism. The development of productive resources can generate high-quality products. The utilization of productive resources can enable these high-quality products to be produced at low unit costs. The business enterprise that can generate higher-quality, lower-cost products is an innovative enterprise (Lazonick 2010a). Although the ‘early Chandler’ emphasized the role of management in utilizing productive resources and the ‘late Chandler’ the role of management in developing productive resources, it was this dual, and interactive, role that made Chandler’s managerial revolution central to the dynamics of industrial capitalism.

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Ironically, even before Chandler published Strategy and Structure in 1962, a theory of the role of management in allocating resources to and implementing this quality-cost dynamic was available in Edith Penrose’s 1959 book, The Theory of the Growth of the Firm. Indeed Penrose rooted her work in the exact same empirical reality of the US industrial corporation as did Chandler. As I have outlined elsewhere (Lazonick 2002a and 2002b), Penrose put forth a cogent and coherent theory of innovative enterprise based on the dual role of management in developing and utilizing productive resources. In effect, researching and writing in the 1950s, Penrose’s theory integrated the insights that would over the half century come to be produced by both the ‘early Chandler’ and the ‘late Chandler’ at a time when the US managerial corporation was at the peak of its power, and when both the economist Penrose and the historian Chandler were launching their careers. The degrees of separation between Chandler and Penrose were even smaller than that. Penrose researched her book in the 1950s while in the Department of Political Economy at Johns Hopkins University, the same university where Chandler would be a professor in the Department of History from 1963 to 1971. In 1960, Penrose’s article, ‘The Growth of the Firm—A Case Study of Hercules Powder Company,’ won the Newcomen Prize as best article published in Business History Review, the pre-eminent business history journal that, published at Harvard Business School, had by the 1980s a decidedly Chandlerian emphasis. Hercules Powder itself was a 1912 spin-off from Du Pont, one of the four companies on which Chandler focused in Strategy and Structure. In Shaping the Industrial Century, Chandler (2005b, 86–92) treated the case of Hercules Powder in some detail, and stated in a footnote: ‘It was on Hercules’s experience that Edith Penrose based much of her seminal study The Theory of the Growth of the Firm’ (Chandler 2005b, 321). Unfortunately, Penrose and Chandler had little intellectual influence on each other. In the Introduction to The Visible Hand, Chandler (1977, 5, 489) includes Penrose in a list of economists who ‘have studied the operations and actions of modern business enterprise’ and in the conclusion cites The Theory of the Growth of the Firm as showing the inability ‘for all units in [a large integrated industrial enterprise] to be operating at the same speed and capacity [created] constant pressure for the growth of the firm’. In the Foreword to the third edition of The Theory of the Growth of the Firm, Penrose (1995, ix) wrote: ‘Chandler’s book [Strategy and Structure] was finished before The Theory of the Growth of the Firm appeared,6 but the analytical structure within which its historical analysis was cast was remarkably congruent with my own work, using much the same concepts and very nearly the same terminology at many points.’ Penrose went on to note that she ‘did not have access [to Chandler’s research] in writing my own work’, but credits ‘the superb historical discussion of the growth of major American firms by Chandler’ as confirming her own analysis of ‘the process of diversification combined with the analysis of the costs of growth on the supply side’, and of making possible ‘the most important extensions and modifications made by others over the past few decades’.7 6

Given the publication dates of the two books, Penrose’s statement is inaccurate. For an early recognition of the importance of Penrose to business history, see Galambos 1966. For the earliest attempts by economists to integrate the thinking of Chandler and Penrose, see Moss 1981 and Best 1990, ch. 4. 7

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If the economist Penrose and the historian Chandler had little influence on each other, the implications of their highly congruent analyses of the dynamics of industrial capitalism are profound. In my 1991 book, Business Organization and the Myth of the Market Economy, I argued that the work of Chandler, Penrose, and others, on the dynamics of industrial capitalism should have alerted academics and policy-makers to the sharp incongruence between the industrial reality and intellectual reality concerning the sources of competitive advantage: As I put it: ‘The industrial reality is that successful capitalist development is increasingly collective capitalist development. The intellectual reality is that the vast majority of economists remain captive to the myth of the market economy, and hence are ill-prepared to enter into debates about the structures of collective business organization that are best suited to gain competitive advantage in an evolving international economy’ (Lazonick 1991, 302; see also Lazonick 2003). Through his analysis of the role of management in American business, Chandler certainly wanted to influence these debates. In the final paragraph of The Visible Hand, Chandler (1977, 500) suggested that a comparative approach to describing and analysing how the modern business enterprise has carried out its basic business functions in different nations can help to define the organizational imperatives of modern economies and reveal much about the ways in which cultural attitudes, values, ideologies, political systems, and social structure affect these imperatives. As important, such studies can provide clues to ways to answer a critical issue of modern times. They may suggest how narrowly trained managers, who must administer the processes of production and distribution in complex modern economies, can be made responsible for their actions—actions that have far-reaching consequences.

Thereafter, as we have seen, Chandler immersed himself in comparative business history. Scale and Scope deepened Chandler’s critique of the theory of the market economy as an explanation of how a modern capitalist economy operates and performs. As David Teece (1993, 199) put it in his review of Scale and Scope: Professor Chandler recounts the history of how managers in the United States, Britain, and Germany built the organizations and took the risks of investment necessary to capture the economies of scale and scope opened up by the technological innovations of the second industrial revolution. His thesis is not that markets shape business organization as is commonly supposed in economic theorizing; rather it is that business organizations shape markets. The implication of this tour de force is that much of what is in the textbooks in mainstream microeconomics, industrial organization, and possibly growth and development ought to be revised, in some cases relegated to the appendices, if economic analysis is to come to grips with the essence of productivity improvement and wealth generation in advanced industrial economies.

But what if the erroneous theory that markets shape business organizations is used as a justification for deregulating markets so that, contrary to the Chandlerian prescription, the role of top corporate executives is to extract value by allocating corporate resources to

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financial interests rather than to create value by allocating resources to developing and utilizing productive resources. Such a transformation of ‘the myth of the market economy’ into a reality of corporate governance is precisely what has happened on an everincreasing scale over the past half century. The result has been the ‘financialized’ business corporation that focuses on quarterly earnings per share and short-term movements in its stock price as the ultimate, and even only, measure of corporate performance. Chandler himself did not come to grips with the implications of the financialized US corporation, although I know from many conversations with him that he was immensely interested in and concerned about the subject. An example of his own ‘path of learning’ on the subject is the case of General Electric (GE). In Strategy and Structure, Chandler (1962, 368–9) held up GE as a model of ‘future trends in the organization of the most technologically advanced type of American industrial enterprise’. He noted how in the 1950s the company implemented the multidivisional structure by breaking down its organization into twenty operating divisions that administered the work of functional departments, the total number of which grew from 70 in 1950 to 105 in 1960. While Chandler (1962, 369) expressed concern that GE had perhaps created too many operating units to be administered effectively, he argued that the organizational changes in the company in the 1950s had ‘undoubtedly facilitated General Electric’s recent diversification into nuclear power, jets, computers, industrial automation systems, and other new fields, as well as in the expansion of the company’s resources abroad.’ The problem is that, based on the multidivisional structure, over the next two decades GE became an unwieldy conglomerate that in fact failed in its attempts to transform its considerable capabilities in electronics into competitive advantage in semiconductors, computers, and factory automation. Moreover in the 1950s it was GE that was in the forefront among US companies in creating the ideology that, by learning general principles of how to manage the work of others—as laid out in the company’s five-volume, 3,463-page ‘blue books’ entitled Professional Management in General Electric—a welltrained manager could manage any type of business (O’Sullivan 2000, 118–121). In the 1960s this ideology became standard fare in US graduate business schools. It was used to justify the diversification of the US industrial corporation into a conglomeration of different markets and locations, even if many of the different businesses in the corporate structure had no technological or market relation to one another. During the 1960s what became known as the ‘conglomerate movement’ significantly reshaped the organization of the US industrial corporation. The mean number of lines of business of the top 200 US manufacturing corporations ranked by sales rose from 4.76 in 1950 to 10.89 in 1975. For the 148 corporations of the 200 largest in 1950 that still existed in 1975 the mean number of lines of business rose from 5.22 to 9.74. In the conglomerate movement of the 1960s, the number of mergers and acquisitions (M&A) announcements increased from an average of 1951 per year in 1963–7 to 3736 in 1968–72, with a peak level of 5306 in 1969 (Merrill Lynch Advisory Services 1994). Between 1950 and 1978 Beatrice Foods did 290 acquisitions, W. R. Grace 186, IT&T 163, Gulf and Western 155, Textron 115, Litton Industries 99, and LTV 58 (Ravenscraft and Scherer 1987, 30, 32, 38, 39). Of assets that large manufacturing and

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mining companies acquired when they bought other companies, 10.1 per cent were in the ‘pure conglomerate’ category in 1948–55, 17.7 per cent in 1956–63, 34.8 per cent in 1964–71, and 45.5 per cent in 1972–9 (Scherer and Ross 1990, 157). In research that built on Chandler’s strategy and structure framework, Richard Rumelt (1974) argued that unrelated diversification resulted in inferior economic performance. In his introduction (dated 1989) to the reissue of Strategy and Structure, Chandler (1990b) recognized that ‘[b]y the late 1960s growth through the acquisition of enterprises in distant or unrelated businesses had almost become a mania’.8 He continued: This rapid expansion into distant or unrelated businesses put an enormous strain on the multidivisional structure. It led to a breakdown of communication between top management at the corporate office and the operating management in the divisions. It did so for two reasons. First, the top managers often had little specific knowledge of, or experience with, the technological processes and markets of many of the businesses that they acquired. The second was simply that the acquisition of many more divisions created a decision-making overload in the corporate office.

Chandler (1990b) noted that during the 1970s ‘[t]he resulting weakness in management led to the selling off of divisions and subsidiaries in unprecedented numbers’: The goal of most restructuring has been to end the separation between top and operating managers by reducing the number of divisions and by concentrating on products and processes in which firms have their strongest production, marketing, and research capabilities. Such restructuring has been successfully carried out as part of long-term strategic planning. It has been far less successful where the initiative has come from investment banks, financiers, speculators, and managers eager for short-term profits.

Drawing on the lessons from the industries covered in Inventing the Electronic Century and Shaping the Industrial Century, Chandler (2005b, 309) argued that the long-term leaders in these industries succeeded by using ‘the profits and learning from each generation of new products to commercialize the next generation and they defined their strategic boundaries around the capabilities in their integrated learning bases. They did not—or not for long—pursue unrelated diversification.’ An exception that proved the rule was RCA, which ‘essentially created the [consumer electronics] industry and came to dominate world markets. . . . ’ In 1981 RCA was the forty-fourth largest US industrial company by revenues, with employment of 119,000. By 1986 it had been taken over by General Electric and sold off in pieces (Chandler 2001, ch. 2 and 3). According to Chandler (2005b, 309), RCA ‘pushed a step too far by attempting to enter mainframe computers and then compounded its misfortune by becoming a conglomerate through unrelated acquisitions. These missteps so weakened the company that it was eventually forced on the auction block and broken apart.’ 8

See also Chandler’s discussion of the forces that underpinned conglomeration and its implications for performance of US industrial corporations in Chandler 1994, 16–23.

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Unfortunately, the demise of RCA is only the beginning of the story of the ascendancy of the financialized US business corporation as it has evolved since the 1960s (see Lazonick 2010b, 2011a, and 2011b). Is the US economy in need of a new organizational revolution? If there is one general lesson from the work of Chandler, it is that the performance of a modern economy is highly dependent on corporate management to allocate resources to investments in organization and technology for the sake of developing and utilizing productive resources. As such, especially for the case of the United States, Alfred Chandler’s work on the dynamics of industrial capitalism over the course of the twentieth century provides as essential foundation for current debates over the roles of corporate investment behaviour and business organization in the operation and performance of the economy.

References Best, Michael, 1990, The New Competition: Institutions of Industrial Restructuring, Cambridge, Mass.: Harvard University Press. Chandler, Jr, Alfred D., 1950, ‘Henry Varnum Poor: Business Analyst,’ Explorations in Entrepreneurial History, 2 (May): 180–202. —— 1956, Henry Varnum Poor: Business Editor, Analyst and Reformer, Cambridge, Mass.: Harvard University Press. —— 1959, ‘The Beginnings of “Big Business” in American Industry’, Business History Review, 33, 1: 1–31. —— 1962, Strategy and Structure: Chapters in the History of the American Industrial Enterprise, Cambridge, Mass.: MIT Press. —— 1965, ‘The Railroads: Pioneers in Modern Corporate Management’, Business History Review, 39, 1: 16–40. —— 1977, The Visible Hand: The Managerial Revolution in American Business, Cambridge, Mass.: Harvard University Press. —— 1984, ‘Comparative Business History’, in D. C. Coleman and Peter Mathias, eds., Enterprise and History: Essays in Honour of Charles Wilson, Cambridge: Cambridge University Press: 3–26. —— 1990a, Scale and Scope: The Dynamics of Industrial Capitalism, Cambridge, Mass.: Belknap Press. —— 1990b, Strategy and Structure: Chapters in the History of the American Industrial Enterprise, reprint of the 1962 edition with a new introduction. —— 1992, ‘Organizational Capabilities and the Economic History of the Industrial Enterprise’, Journal of Economic Perspectives, 6, 3: 79–100. —— 1994, ‘The Competitive Performance of U.S. Industrial Enterprises since the Second World War’, Business History Review, 68, 1: 1–71. —— 2001, Inventing the Electronic Century: The Epic Story of the Consumer Electronic and Computer Industries, New York: Free Press. —— 2005a, ‘Commercializing High-Technology Industries’, Business History Review, 79, 3: 595–604. —— 2005b, Shaping the Industrial Century: The Remarkable Story of the Revolution of the Modern Chemical and Pharmaceutical Industries, Cambridge, Mass.: Harvard University Press.

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Chandler, Jr, Alfred D.,Franco Amatori, and Takashi Hikino, 1997, Big Business and the Wealth of Nations, Cambridge, UK: Cambridge University Press. —— and James W. Cortada, eds., 2000, A Nation Transformed by Information: How Information Has Shaped the United States from Colonial Times to the Present, New York: Oxford University Press. —— Peter Hagström, and Orjan Sölvell, eds., 1998, The Dynamic Firm: The Role of Technology, Strategy, Organization, and Regions, Oxford: Oxford University Press. —— and Bruce Mazlish, eds., 2005, Leviathans: Multinational Corporations and the New Global History, New York: Cambridge University Press. —— Thomas K. McCraw, and Richard S. Tedlow, eds., 2000, Management, Past and Present: A Casebook on the History of Business, Cengage Learning. Cruikshank, Jeffrey L., 1987, A Delicate Experiment: The Harvard Business School, 1908–1945, Boston, Mass.: Harvard Business School Press. Galambos, Louis, 1966, ‘Business History and the Theory of the Growth of the Firm’, Explorations in Entrepreneurial History, 2nd series, 4, 1: 3–16. —— and Jane Eliot Sewell, 1995, Networks of Innovation: Vaccine Development at Merck, Sharp and Dohme, and Mulford, 1895–1995, New York: Cambridge University Press. Graham, Margaret B. W., 1986, The Business of Research: RCA and the VideoDisc, New York: Cambridge University Press. —— and Alec T. Shuldiner, 2001, Corning and the Craft of Innovation, New York: Oxford University Press. Hounshell, David A., 1984, From the American System to Mass Production, 1800–1932: The Development of Manufacturing Technology in the United States, Baltimore: Johns Hopkins University Press. —— 1996, ‘The Evolution of Industrial Research in the United States’, in Richard Rosenbloom and William Spencer, eds., Engines of Innovation: U.S. Industrial Research at the End of an Era, Cambridge, Mass.: Harvard Business School Press: 13–86. —— and John Kenly Smith, Jr, 1988, Science and Corporate Strategy: Du Pont R and D, 1902– 1980, New York: Cambridge University Press. Kogut, Bruce, and Udo Zander, 1992, ‘Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology’, Organization Science, 3, 3: 383–97. Lazonick, William, 1990, Competitive Advantage of the Shop Floor, Cambridge, Mass.: Harvard University Press. —— 1991, Business Organization and the Myth of the Market Economy, New York: Cambridge University Press. —— 1992, ‘Controlling the Market for Corporate Control: The Historical Significance of Managerial Capitalism’, Industrial and Corporate Change, 1, 3: 445–88. —— 2002a, ‘Innovative Enterprise and Historical Transformation’, Enterprise & Society, 3, 1: 35–54. —— 2002b, ‘The US Industrial Corporation and The Theory of the Growth of the Firm’, in Christos Pitelis, ed., The Growth of the Firm: The Legacy of Edith Penrose, Oxford: Oxford University Press: 249–77. —— 2003, ‘The Theory of the Market Economy and the Social Foundations of Innovative Enterprise’, Economic and Industrial Democracy, 24, 1: 9–44. —— 2004, ‘Corporate Restructuring’, in Stephen Ackroyd, Rose Batt, Paul Thompson, and Pamela Tolbert, eds., The Oxford Handbook of Work and Organization, New York: Oxford University Press: 577–601.

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—— 2005, ‘The Innovative Firm’, in Jan Fagerberg, David Mowery, and Richard Nelson, eds., The Oxford Handbook of Innovation, Oxford University Press: 29–55. —— 2010a, ‘The Chandlerian Corporation and the Theory of Innovative Enterprise’, Industrial and Corporate Change, 19, 2, 2010: 317–49. —— 2010b, ‘The Explosion of Executive Pay and the Erosion of American Prosperity’, Entreprises et Histoire, 57: 141–64. —— 2011a, ‘The Fragility of The US Economy: The Financialized Corporation and the Disappearing Middle Class’, theAIRnet working paper, January. —— 2011b, ‘The Innovative Enterprise and the Developmental State: Toward an Economics of “Organizational Success” ’, paper presented to the Second Annual Conference of the Institute of New Economic Thinking,10 April, Bretton Woods, New Hampshire. McCraw, Thomas K., 1988, ‘Introduction: The Intellectual Odyssey of Alfred D. Chandler, Jr’, in Thomas K. McCraw, ed., The Essential Alfred Chandler, Boston, Mass.: Harvard Business School Press: 1–21. Maddison, Angus, 2010, Statistics on World Population, GDP, and Per Capita GDP, 1-2008AD, at . Merrill Lynch Advisory Services, 1994, Mergerstat Review, Chicago: W. T. Grimm. Moss, Scott J., 1981, An Economic Theory of Business Strategy: An Essay in Dynamics Without Equilibrium, New York: Halsted Press. Mowery, David C. and Nathan Rosenberg, 1989, Technology and the Pursuit of Economic Growth, New York: Cambridge University Press. Nelson, Richard R., 1991, ‘Why Do Firms Differ and How Does It Matter?’, Strategic Management Journal, 12, S2: 61–74. Nonaka, Ikujiro and Hirotaka Takeuchi, 1995, The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation, New York: Oxford University Press. O’Sullivan, Mary, 2000, Contests for Corporate Control: Corporate Governance and Economic Performance in the United States and Germany, Oxford: Oxford University Press. —— 2010, ‘Finance Capital in Chandlerian Capitalism’, Industrial and Corporate Change, 19, 2, 2010: 549–89. Penrose, Edith T., 1959, The Theory of the Growth of the Firm, Oxford: Blackwell. —— 1960, ‘The Growth of the Firm—A Case Study of Hercules Powder Company’, Business History Review, 34, 1: 1–23. —— 1995, The Theory of the Growth of the Firm, 3rd edition, New York: Oxford University Press. Ravenscraft, David J. and F. M. Scherer, 1987, Mergers, Sell-Offs, and Economic Efficiency, Washington, DC: Brookings Institution Press. Reich, Leonard S., 1985, The Making of American Industrial Research: Science and Business at GE and Bell, 1876–1926, New York: Cambridge University Press. Rostow, W. W., 1978, The World Economy: History and Prospect, Austin: University of Texas Press. Rumelt, Richard P., 1974, Strategy, Structure, and Economic Performance, Division of Research, Graduate School of Business Administration, Cambridge, Mass.: Harvard University Press. Scherer, Frederic. M. and David Ross 1990, Industrial Market Structure and Economic Performance, 3rd edition, Boston, Mass.: Houghton Mifflin. Schumpeter, Joseph A., 1942, Capitalism, Socialism, and Democracy, New York: Harper and Bros.

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Schumpeter, Joseph A., 1947, ‘The Creative Response in Economic History’, Journal of Economic History, 7, 2: 149–59. Teece, David J., 1986, ‘Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy’, Research Policy, 15, 6: 285–305. —— 1993, ‘The Dynamics of Industrial Capitalism: Perspectives on Chandler’s Scale and Scope’, Journal of Economic Literature, 31, 1: 199–225. US Bureau of the Census 1976, Historical Statistics of the United States from the Colonial Times to the Present, Washington, DC: U.S. Government Printing Office. Wise, George, 1985, Willis R. Whitney, General Electric and the Origins of U.S. Industrial Research, New York: Columbia University Press.

chapter 17

the aston st u dies: a jou r n ey towa r ds a science of a dm i n istr ation ? r ay l overidge ∗

The institutional and intellectual background The Aston Studies were a series of comparative investigations into the sources of organizational structure carried out over the 1960s and 1970s. They were essentially designed to test the notion that organizational structure must in some way fit its operational context and that these contingent conditions could be ascertained in a universally determinative fashion. The programme of research was at first physically located in the Industrial Administration Department of Aston University1 in the British West Midlands. It later transferred to London Business School and Bradford University Business School when the principal investigators, Derek Pugh and David Hickson, moved to their professorial positions in these institutions in 1968 and 1970 respectively. Directly related studies also took place at the nearby University of Birmingham and in Canada at the University of Alberta. At first this diffusion was through the early involvement of visiting or migratory Aston investigators (Hickson, Hinings, and Greenwood 1967–70). Almost immediately the studies created a debate within the thennascent field of Organization Theory (OT) that led to many more attempted replications ∗

I am grateful for the comments of Thomas Powell, Bill Starbuck, and Marc Ventresca on earlier drafts, and also to John Child, Royston Greenwood, and Bob Hinings. I am personally responsible for the historical accuracy and conceptual critique contained in this draft. 1 When the programme began in 1961 Aston University was known as the Birmingham College of Advanced Technology. It was elevated to university status in 1965.

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and extensions. These were mostly carried out independently by North American scholars. Much of the early exchange of research results was carried out in the pages of the US journal, Administrative Science Quarterly (ASQ) recently founded by J. D. Thompson and Edward Litchfield and at that time edited by William Starbuck from the Stern Business School NYU. Significantly, this was the arena targeted at the outset by the British principal investigators. Eventually the team of associated researchers extends over several countries, many of whom are listed in subsequent collections such as that of Pugh and Hickson (1998) The crux of the debate rests upon the Aston propositions that i) it is possible to specify and measure the effects of contextual contingencies upon the formal structure of organizations in a nomothetic and empirically positivistic way; that ii) to do so will demand the construction of measures that will accurately reflect an objective reality and so enable the statistical modelling of the comparative significance of each upon the whole; and iii) that this process removes both explanation and design from the problems of ‘anecdotal specificity’ inherent within earlier and ongoing qualitative studies such as those of Thompson and Bates (1957) Woodward (1958), Burns and Stalker (1961), Lawrence and Lorsch (1967), Perrow (1967); and iv) that organizational taxonomies will arise from the use of scaling and modelling techniques upon data collected from territorial samples of widely various organizations in a way that will allow universal generalizations about all organizational forms. The most significant theoretical influence in their largely descriptive approach is that of Max Weber’s (1947 trans.) ideal-type bureaucracy, introduced early into the study by Bob Hinings. It was to provide both the principal guide in choosing the structural dimensions of organization and in forming the initial hypotheses about expected configurations (Pugh et al. 1963). Debate with North American scholars such as Blau and Schoenherr (1971) both stimulated the initial programme direction and objectives and also shaped much revision within the ongoing publication of their findings.

Field impacts of the Aston Programme The immediate impact of the Aston approach might be seen as being shaped by a widely felt promise of a convincing tool by means of which practitioners in the OT field could support their claim to possession of a legitimate professional and scientific expertise. The availability of a reliable measure of organizational structure that might be used to imply a relationship of structure with wider socio-economic phenomena could be seen to possess considerable leverage across many other fields of socio-economic research deploying modes of nomothetic explanation, particularly those in business management. Udy (1958) had extricated the dimensions of Weberian bureaucracy from his analysis of qualitative workplace studies. Attempts to provide quantitative measures are to be found in subsequent American studies such as Anderson and Warkov (1961) and Haas, Hall, and Johnson (1963). Starbuck (1965) pointed to the need for more sophisticated approaches to empirical causal generalizations in the emergent OT field.

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In the US this need had arisen within already cohering boundaries of an OT community shaped by the long existence of high status vocational schools of business management (Whitley, Thomas, and Marceau 1981, Locke 1996), and accompanied by an established tradition of academic academies, most recently and most notably by the formation of the Academy of Management in 1950. Within this space a foundational body of organizational literature, both behavioural, as in the work of the Carnegie School (March and Simon 1958), and institutionalist such as in the work of Barnard (1938), Blau (1955) and Selznick (1957) had found a ready audience. Blau and Scott (1962, 2003) provides the most comprehensive view of an already rich field of organizational studies in the US at that time. In his introduction to the 2003 Stanford Classical reprint of Formal Organizations, Richard Scott claims that ‘Our work anticipated and paved the way for a generation of studies focusing on the determination of structural variation in organizations . . . The two major efforts of this type during the 1960s were those carried out by the “Aston” group in England. . . . and a series of studies carried out by Blau himself together with a number of collaborators’ (Scott 2003, p. xvii). By 1970, Grusky and Miller was able to include Joan Woodward alongside translations of two other Europeans, Weber and Michels, in their collection of ‘Basic Studies’ of organizational sociology. The central work of this British scholar was, like that of Pugh, conducted while lecturing in Human Relations in a Department of Industrial Administration in a Technical College, South East Essex, between 1953 and 1958. Her research was, like that of the Aston Programme, funded by a British government agency, in this case using US Economic Aid funds. She, like Pugh, moved her research to London where she was appointed Senior Lecturer in the Production Engineering Section of Imperial College in 1962 and, in 1969, was able to establish an independent Industrial Sociology Unit within the College. At that time Human Relations and Personnel Management normally accompanied Industrial Relations in complementing the core teaching of Operational Management in sub-degree vocational education. (The teaching of Industrial Relations was most prevalent at university level.) In 1960 a group of the largest British firms joined with senior Conservative politicians in establishing a Foundation for Management Education. This initiative coincided with the establishment in 1961 of a National Economic Development Council. This was a Government attempt to co-opt capital and labour into a process of national indicative planning.2 The foundation of graduate business schools within the Universities of London and Manchester followed in 1965, jointly funded by the the Foundation for Management Education (FME) and National government. Both Aston and Bradford Universities were also partially funded by the FME in restructuring their Schools of Management in 1973. The twenty years following World War II have recently been described by Eldridge (2009) as a golden period of British industrial sociology. At that time sociology was itself not well recognized as a discipline within the British academic establishment. Although a Sociological Society had existed since 1903, and its journal Sociological Review since 1907, 2 Both ventures might be seen as following exemplars set by apparent French successes in government/ corporate collaborative initiatives (Shonfield 1965).

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most of its members were employed in applied fields or in social studies departments. Tom Burns, whose work shaped that of both Woodward and the Aston researchers, was employed in the Social Sciences Research Centre at the University of Edinburgh over the 1950s. When the British Sociological Association was formed in 1950 the intention of many of its founders was to retain a long tradition of multi-disciplinary openness (Banks 1967). However, fifteen years later it initiated a specialist journal, Sociology. In its first issue five articles set out future thematic tracks for the discipline. Of these, the first is an account of Goldthorpe et al.’s critique of the embourgeoisement thesis of changes in working-class orientations, two other articles address themes of occupational closure, a fourth reviews the work of the Tavistock Institute on Socio-Technical Systems and in a fifth, Hinings and the Aston team write of ‘An Approach to the Study of Organizations’ (1967). In itself the variety in analytic approach displayed in these articles represented a continuum between the analysis of organizational structure and process in terms of its inherently conflictful nature and that which accepts hierarchy as a broadly normative mode of social regulation (Burrell and Morgan 1979). It is a continuum that is perhaps most fully realized in the early OT literature by Blau and Scott’s (1962, op. cit.) treatise. The typology put forward by the latter authors themselves can be seen as reflecting the political nature that their subject holds for many subsequent writers, particularly in Europe. But, in answering the ‘cui bono?’ questioning of hierarchy set out by Blau and Scott (p. 43), European researchers have tended to go beyond the interests of immediate organizational stakeholders and the strategic goals of upper echelons of management. One of the earliest uses of the Aston research was in measuring the contribution of bureaucracy to endemic industrial conflict in the United Kingdom. This was carried out by industrial relations scholars Turner, Roberts, and Roberts (1977). Nevertheless Aston’s greatest contribution has probably been in the development of the field of strategic management within business school research and teaching. As late as 1993 the distinguished writers on International Business, Ghoshal and Nohria, designed their structural classifications of multinational organization around what they described as ‘the landmark studies of the Aston Group’ (p. 35), an attribution they later repeated in their global study of ‘The Differentiated Network: organizing the Multinational Corporation for Value Production’ (1998). Developmental theorists such as Peter Evans (1995) also continue to use instruments based on those designed by Aston researchers in explaining differences in cross-national comparisons of political economic development. In a recent meta-analysis of articles that have used Aston-type structural variables of bureaucracy the analytical power of their model seems to possess a continuing utility for a wide set of strategic researchers (Walton 2005).

Recombinative innovation and its diffusion The initial Aston innovation involves that of transferring the techniques of scaling and multivariate statistical modelling developed in psychological surveys of the personal characteristics of individuals into an attempted measurement of collective or social

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action (Pugh and Hickson 1968). In the Aston Programme this translation had been achieved through the well-documented process of workplace interaction that took place between researchers from both these disciplines. Initially this took place between Pugh and Hickson as senior investigators and Hinings as research assistant in the subterranean spaces allocated to the unit by their college management. (Pugh and Hickson 1976). Of these three Derek Pugh was the only experienced field researcher, having previously been employed as a research assistant in the same Edinburgh Social Science Research Centre as Tom Burns. A key figure in the translation of psycho-metric measurement appears to have been Phillip Levy, then a lecturer at the neighbouring University of Birmingham, and Visiting Research Fellow at Aston between 1963–4 (Pugh 1996).3 Much of the subsequent diffusion of the innovation took place through debates within ASQ and other journals. The focus was as much upon the robustness and perceived validity of this methodological translation as upon extensions or alternatives to the proposed model. Unsurprisingly, this conversation was between a relatively narrow community of organization researchers in Europe and a much larger population of North American scholars. Whereas such nomothetic approaches to the interpretation of social phenomena were, and are still, regarded as mainstream in American research, historically there has been much less acceptance of them in Europe. Nor, indeed, has there been such a high level of European interest or understanding of the logics underlying the arguments deployed in the construction of causal inference within such models. This may well now be changing as an ever enlarging global population of organization and management scholars seek publication in US journals (Usdiken and Pasadeos 1995). By the end of the 1970s doubts about the ontological assumptions represented in the use of nomothetic methodologies were also being raised in debates across leading US and European journals. The functionalist interpretation of the Weberian bureaucratic paradigm as a model of legal-rational efficiency capable of being tested against market performance was seen by some observers as inappropriate. In particular it was seen to neglect his emphasis on the organization’s interactive shaping of stratified power and domination within modern society (Perrow 1972, Clegg 1975, Clegg and Lounsbury 2009). Of more immediate methodological importance, Weber’s (1947 trans.) own verstehen perspectives on the ongoing enactment of organizational structure could be seen to offer the possibility of widely differing agentic interpretations of formal rules and procedures. Meyer and Rowan (1977) went so far as to describe the process of bureaucratization as no more than ‘myth and ceremony’ employed in the legitimation of enacted power. In debates surrounding the validity ascribed to the construction and usage of the Aston survey instrument these critiques might be seen to be have been crucial. The selection of the concrete items seen to be representative of universal dimensions of regularized activities within organizations expounding widely varying operational goals (e.g. manufacturies, banks, churches, labour unions) might be seen to lack depth of analytical meaning (Starbuck 1981). 3 Levy became Professor of Psychology at Lancaster University in 1972. He edited the British Journal of Mathematical and Statistical Psychology between 1975–80 and was President of the British Psychological Society 1978–9.

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Such concerns seem to be of increasing importance within the views of an expanding population of ‘Aston’ researchers. Evidence of internal disagreement can be found in the apparently contradictory stances and growing eclecticism represented in contributions included in subsequent collections of Aston papers (Pugh and Hickson 1976, Pugh and Hinings 1976, Pugh and Payne 1977), including the most recently published collection of works seen to represent ‘The Aston Programme’ (Pugh and Hickson 1998). Faced with the oncoming tsunami of phenomenological and cultural criticism predicted by Alvin Gouldner in ‘The Coming Crisis in American Sociology’ (1971), it might seem that this search for a defining ontological and methodological frame within the field of OT became progressively harder.

Refining methodology within an evolving programme The origins of the early programme sponsorship was in the then-current British Government quest for higher workplace productivity in the national economy (Hickson 1997). A proposal had been submitted to the national Department of Scientific and Industrial Research by the newly arrived Head of Aston’s Department of Industrial Administration, Tom Lupton, from his previous position at the University of Manchester. This was adjudged to have the required operational impact. Taking a broader interpretation of their brief, the freshly convened Aston team at first saw this as demanding a layered, society–organization–group–individual (SOGI), approach to their analysis of the workplace. However, the societal dimension very quickly becomes converted into the effect of immediate operational context, and context into the main variables to be used as causally contingent at organizational level. (It later proves possible to deploy these in follow-up studies of group and individual role.) The description of context is clustered around seven dimensions. Organizational ‘size’ is expressed as number of employees and total net assets; ‘operations technology’ is expressed in terms of automaticity, workflow rigidity, specificity, and continuity of throughput; ‘ownership and control’ is measured against public accountability and the relationship of ownership to management (shareholders, directors, executives); ‘origins and history’ is represented in foundational impersonality,age, and historical changes; ‘charter’ divides into seven very different scales representing diversity of outputs, self-image, and client selection (ideology); ‘dependency’ is focused first on relations with an external parent body and then on suppliers, clients, and trade unions; ‘location’, though included in the initial design, was not seen as relevant in the initial Midlands sample. The determinative role of these variables is endorsed by reference to ongoing research by contingency theorists such as Blau and Schoenherr (1971). But there seems to be an intuitive disconsonance in the description of organizational origins, ownership, and operating technology, etc., as part of an ‘external’ or pre-existing context. The issue returns to haunt them in later debate.

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The initial definition of the dependent variables of organizational structure or ‘regularized organizational activities’ is focused on five key dimensions of the Weberian ideal-type (Pugh et al. 1973). These are those of specialization, standardization, formalization, centralization, and configuration. Specialization is seen to consist of the division of functional activities and of their formal role specification. Standardization consists of lists of procedures relating operational quality control, finance, and employment. Formalization covers thirty-eight streams of documents relating to role definition, information passing, and role performance. Centralization indicates the level of legitimate authorization of thirty-eight recurrent decisions. Configuration is seen in terms of the number of vertical hierarchical layers and the span of control exercised at each level. A sixth is labelled as ‘traditionalism’ and described as the influence of ‘customs’. This is abandoned in later analysis having scored infinity or negatively in the National sample. A first step in the Aston method is that of assembling lists of concrete activities, often involving artefacts such as documents, that represent both the contextual and structural analytical dimensions listed above. In this the researchers are, again, guided by a wide range of existent literatures (Pugh et al. 1968: 1976). For the purposes of an interview schedule these items are listed under the heading of the conceptual dimension they are seen to represent, as being either present within the organization or not. The aggregated responses are then submitted to a so-called Brogden-Clemens test of statistical co-efficiency (Brogden 1949). This is taken as a measure of the likelihood that the items contribute to a cumulative scale with an ideal co-efficiency of 1.00. Acceptance of the achieved score (ratio out of 1.00) as indicating a viable scale, a so-called Guttman Scale, enables the inclusion of the item as a measure, and its retention within a principal components analysis of the overall contribution of the constructed scale to the measurement of the conceptual dimension, say to ‘specialization’, ‘standardization’, etc. Multiple regression analysis can then be used to extract the significance of different combinations of several scales in the creation of an eventual profile. (A detailed description and explanation of these procedures is given by Levy and Pugh 1969: 1976.) The majority of Aston Programme publications are based on data obtained from two cross-sectoral sample populations of organizations. The first is carried out in the early 1960s and located within the Birmingham region (Pugh and Hickson 1976): in later publications this is often referred as the Aston sample. The second major sample covers the whole of England and Scotland, and is referred to as the National sample surveyed over 1967–9 (Child 1972: 1976). An intermediary sample study of forty Birmingham-based organizations is used in a successful attempt to abbreviate the number of items used in the construction of scales (Inkson, Pugh, and Hickson 1970) The original Birmingham sample consists of 52 organizations employing over 250 people, 46 of which were randomly selected from Ministry of Labour data and stratified by size, product, or purpose. Only the latter randomly selected organizations were used in comparative analysis. A later comparison is made with a small sample of nine organizations in neighbouring Coventry (Hinings and Lee 1971: 1975). Other one-to-one comparisons are made in the samples of two or three Birmingham-based organizations in workplace studies of group climate (see below).

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The National sample consists of 82 business organizations chosen on the basis of i) their relative operational autonomy and ii) being stratified by size and iii) being selected from six industries. These industries were seen to display significant differences along two dimensions. First, ‘variability in technical and product environments’, and second being in a ‘manufacturing-service dichotomy’. The former criterion is based on ‘available statistical data supplemented by interviews with persons familiar with each industry’ (Child 1972: 1976, pp. 28–9). An attempt is also made to reduce the influence of branch plants on outcomes and to achieve a balance between manufacturing and service sectors in the selection of participating organization. Clearly there is a desire to explore some of the wider influence of contextual uncertainty and to eliminate a bias towards centralization felt to be present in the weight of branch plants in the Birmingham sample. This shift in focus may be seen to have had implications for later comparisons between the two main stages of the programme. The most significant of the early findings based on the Birmingham sample are seen by their authors as i) a taxonomy of organizational structures and a suggested evolutionary projection; ii) the importance of size (number of employees and net assets) over other dimensions in shaping organizational structure. The latter finding is contrary to the generally supposed weight given to operating technology in determining overall structure by previous contingency theorists Thompson and Bates (1957), Woodward (1958) and Perrow (1967). The taxonomy suggested by Pugh, Hickson, and Hinings (1969) consists of four main types: workflow bureaucracy, personnel bureaucracy, full bureaucracy, and non or implicit bureaucracy. The first has highly structured activities centred round its operational workflow and relative autonomy from centralized authority. They could be seen to represent the typical Midlands engineering firm belonging to a holding group. The second is a highly centralized administrative bureaucracy with a more decentralized line control. It is identified with the large number of public service firms in the Birmingham sample and, later, with the number of branches in the sample belonging to a single retail cooperative group. Full bureaucracies are those combining a high structuring of workflows with a high centralization of authority in decisionmaking. They are seen as being located within very large state-owned groups. Implicit bureaucracies are small in size, low on structuring and are line controlled through personal authority. They are evidently likely to be the small entrepreneurial businesses which may with growth be destined to become either a workflow or full bureaucracies. This, at any rate, was the suggested dual trajectory put forward by the authors on the basis of their inclusion of various intermediary stages suggested by the comparative scores along the dimensions of structuring, centralization, and line control. Pre-work flow and nascent workflow bureaucracies were likely stages in the case of manufacturing and movement to personnel bureaucracy and to full bureaucracy in services. The existence of such a dual pattern might be seen to reduce the significance of the authors’ most important claim, that of the contingent significance of size over operational technology in shaping organizational structure. In a second article within the same volume of ASQ, Hickson, Pugh, and Pheysey (1969: 1976) carry the argument forward. They detail the items that contribute to their measures of operational technology

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as workflow integration, continuity, interdependence, rigidity, and specificity of evaluation. (Material and knowledge technologies which might be seen as crucial to some previous taxonomies are excluded or might be seen as part of other contextual variables such as standardization.) Their conclusion was that the smaller the organization, the more the structuring of line control activities would pervade all its procedures. The larger the organization, the higher the level of standardization of procedures and specialization of administration. The span of supervisory control in line management did in fact appear to follow a pattern suggested by Woodward’s research that could take the shape of an inverted U-curve. Supervisors in large batch production flows are responsible for larger numbers of operatives than is the case in either unit or process production. While Child’s (1972, 1973a) later analysis of the National sample data confirms the dominance of organizational size over organizational structure, he introduces the intermediate variable of ‘complexity’, particularly as represented in role specialization, in explaining size effects relative to those of technology. He hypothesizes that specialization brings about greater need for coordination and control and that this in turn increases the need for decentralization and hence for standardized procedures. In particular his analysis of data from the 54 manufacturing organizations in the National sample (Child 1973b) criticizes the previous conflation of supportive activities around line operations with those concerned with resource maintenance (employment, welfare, and security, legal, and insurance, etc.). The article is entitled ‘Parkinson’s Progress’ referring to a satire on a previously observed tendency for numbers of indirect workers to increase faster that direct operators in expanding organizations. This tendency might be seen to stem from a number of situational contingencies bearing on the management of the surveyed organizations but not included in the Aston measures, including executive politics and ideologies. A similar critique is advanced in Child and Mansfield (1972).4 A further debate ensued around the relationship of bureaucratization to the centralization of authority within a sample that had excluded all but two branch plants. This concludes with Greenwood and Hinings (1976a) questioning the relative narrow basis for measuring the multifaceted notion of ‘centralization’ within organizations. There is actually little explanation given for the numbers of organizations included in either the Birmingham or National samples in any of the published papers, although their relatively low numbers often reduces the data used in specialized comparisons to single digits. This is also true of most similar studies undertaken elsewhere. One explanation may be the constraint present in the complexity of data required to be collected and analysed at a time when available data-handling technology offered few economies of scale. Nevertheless, the wealth of data that results from multi-scalar analysis enables economies of scope to be achieved in the team’s later production of several specialized studies. For example, related studies on management control strategies (Inkson et al 1968: 1977), and management stereotyping (Ellis and Child 1973: 1977) are developed 4 So widespread was this belief in 1965 that a newly elected British Government passed a short-lived law raising the level of company taxes on the employment of ‘indirect workers’. Subsequent worldwide trends in university management have triggered further academic research interest in the field.

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from the re-analysis of data drawn from the Birmingham and National studies. One- toone comparisons of small numbers of Midlands companies are made using the Aston instruments in several later studies of the effects of structure on organizational climate (Payne and Pheysey 1971: 1977, Payne and Mansfield 1973). In these studies the authors use a reformulated measure of workplace climate using similar statistical innovations to those described above. These samples are also used by Pheysey, Payne, and Pugh (1971: 1977) in explaining the effect of structure on group climate and performance. Together these might be seen as taking the Aston analysis down to the level of group and individual activities as promised in the original project proposal. Separate samples of government administrations, trades unions, and churches were taken in the early 1970s using items and scales adapted to the goals of these representative and/or voluntary organizations (Greenwood and Hinings 1976b, Donaldson and Warner 1974a: 1974b, Hinings and Foster 1973, Hinings, Ranson, and Bryman 1976). A Canadian team working with Hickson applied the Aston analytical frame to higher education colleges located across Alberta and British Columbia (Holdaway et al. 1975). Other early members of the original team, Kerr Inkson and Diana Pheysey, were joint authors of a comparative study with organizations in Ohio, US (Inkson et al. 1970). Hickson et al.’s (1974) comparative study of organizations in the UK, India, and Ohio was provocatively entitled ‘The Culture-Free Context of Organization Structure’, a claim not entirely substantiated in the account that follows. Their analysis suggests that a similar set of determinate relationships will hold between measures of contextual variables and those of internal structures across organizations located in different countries, however culturally shaped they may be in their actual enactment. Contrarily, a number of other cross-national studies, such as that of Horvath et al. (1976) find that the configuration of structural measures themselves can vary in the face of measured differences in one or more of their contextual variables. The publication of Geert Hofstede’s (1980) crossnational measures of cultural values changed the nature of many subsequent uses of the Aston measures to embody the use of informants’ beliefs as an explanatory contextual variable. Over the next decade the focus of debate thus shifts to the influence of national culture and/or institutions in mediating between the effects of contextual variables on structural dimensions of organization. Within the context of rapid changes in operational technology and in the territorial dispersion of operations, the interaction between structural dimensions also becomes more prominent in these comparisons (Hickson and McMillan 1981, Hickson and Pugh 2001).

The methodological and ontological debates Pugh’s views on the emergent or grounded nature of explanation in social research resonates through many of the early Aston papers. However, his stance is also accompanied by a belief in the manner in which ‘mathematico-statistical’ procedures will allow the

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construction of scales representing the strength of the contribution of chosen concrete variables to the cohesive shaping of resultant organizational configurations (Levy and Pugh 1969: 1976, op. cit.). As is normal in studies adopting a nomothetic methodology, most particularly those of economists, the Aston findings are usually accompanied by speculation on underlying explanatory processes and actor orientations that cannot easily be accommodated in the inputted measures. Evidently, quantitative analysis can impose constraints on explanations that arise out of the level of complexity—material, technical, and theoretical—which can be accommodated and adequately expressed in quantitative measures and positivistic model building. Pugh (1996) has vigorously defended the amount of qualitative evidence that has supported the choice of the empirical elements contained within the construction of the Aston measures. But, much of the critiques of Aston methods and measures can be construed as criticism of an underlying lack of prior focus in providing theoretical boundaries for the choice of variables and resultant taxonomies. Argyris (1996) is one of the several voices to suggest that causality assumed to exist in statistical variance or correlation needs to be married with a postulated theory of action. Howard Aldrich (1972, Mindlin and Aldrich 1975) provides an ongoing commentary on the direction of temporal causality that is implied in the framing of Aston variables as either contextually causal or internally structurally dependent. It is a stance sometimes shared by John Child in debates which take place within the LBS team and in the pages of the ASQ. Child had recently (1965) completed his doctoral thesis at the University of Cambridge under the guidance of John Goldthorpe, lead author in the ‘Affluent Worker’ (1968) studies. The Weberian notion of verstehen, or action frame of reference, had been centrally deployed in those studies to construct typologies of employee orientations to work and career. This might be seen to continue to shape Child’s stance on the heuristic use of the positivistic analysis of concrete structures needing to be complemented by a more ideographic approach to their meaning for actors. Child’s edited thesis ‘British Management Thought—A Critical Analysis’ is an exercise in sociology of knowledge that appeared in 1969. It demonstrates a marked influence of Reinhardt Bendix’ earlier use of comparative historical method in tracing the evolution of managerial ideology. The publication of his much-cited article on ‘the role of strategic choice’ in the British journal Sociology in 1972 coincides with the publication of his first findings from the National sample in ASQ and Sociology. The ‘strategic choice’ article goes some way in supporting a Chandlerian (1962) view that ‘structure follows strategy’. The formulation of strategy is seen as subject to political negotiation within the organization’s ‘dominant coalition’. Furthermore the degree of ‘environmental illiberality’ or threat is not such as to be wholly deterministic in its shaping of structures of internal control and coordination, thereby allowing considerable slack in the achievement of the coalition’s goals. The proliferation of specialist roles can be one outcome. Child’s published findings from the National sample are accompanied by the suggestion that the intermediation of management ideology might well explain much of the variance in measures such as specialization and standardization rather than size per se. The same concern for actor orientation and for the intermediation of political process is found in the framework for the study of trade union structures proposed by

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Child, Loveridge, and Warner (1973). In reporting on the accompanying survey of union structures (Donaldson and Warner 1974a; Donaldson and Warner 1974b), the authors achieve much of their explanatory depth from Malcolm Warner’s previous and ongoing qualitative research (Warner 1970). The importance of member commitment to organizational forms, processes, and legitimacies is a well-established premise for the contractual view of organizations (Etzioni 1961). The assumed complementarity of commitment with form in Weber’s ideal static taxonomy of the social bases of authority gives place to a much more dynamic role accorded to ideas in his historically based analysis of industrialization (Weber 2002). Increasingly, the ideational interpretation of organizational structure becomes evident in the later work of some of the original Aston researchers. Perhaps one of the most creative of the external contributions to the Aston debates is that of Henry Mintzberg based at that time at McGill University in Montréal. In ‘The Structuring of Organizations’ (1979) he weaves together the differences in the interpretation of their data displayed by leading Aston researchers as evidence of the existence of centrifugal forces present within the empirical phenomena they were studying. These ‘pulls’ develop across five generic areas of structured activity within the organization. The ‘strategic apex’ is joined to the ‘operating core’ through ‘middle line management’. This spinal hierarchy is flanked and serviced by the more professionalized ‘technostructure’ and ‘support staff ’ segments of activity. Each of the five segments is likely to develop its own logic of action. Managerial attempts to coordinate across activities are also likely to take on one of five different configurational modes. These are labelled as ‘simple’, ‘machine bureaucracy’, ‘professional bureaucracy’, ‘divisionalized’, and ‘adhocracy’, or appropriate hybrids of these. But they can also be bound together by a set of shared organizational beliefs or a corporate ideology that can emerge or be promoted over time. Mintzberg suggests that clusters of quantitative measures can thus be seen to indicate stable configurations of bureaucratic structure. More qualitative data is likely to be needed to understand the interdependent nature of configurational measures as well as the processes and ideational context in which they are enacted. Also of the McGill School, Miller and Friesen (1984) extend the empirical and theoretical argument for the viability of taxonomies constructed from such emergent configurations and incorporate both structural and attitudinal measures. Based on evidence from longitudinal studies they suggest that their archetypical typologies are both stable and long-lasting. Organizational changes are likely to be infrequent but radically comprehensive or ‘quantum’. This is because of both external and internal pressures. Externally, the range of variety of form is likely to be circumscribed by ecological forces within their field population. The same forces tend to produce both an internal consistency of internal parts with their external equivalents and, also, an internal mutual complementarity in their internal workings. Hence a major change in one area of the organization’s activity will tend to produce change throughout.5 5 I am obliged to Thomas Powell for pointing out the significance of Aston measures in this later conceptual development.

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Diverging strands and elective affinities Recognition of the role that organization structure and context can play in creating power resources for internal members appeared early in the work of the Alberta-based researchers (Hickson, Hinings, Lee, Schneck, and Pennings 1971; Hinings, Hickson, Pennings, and Schneck 1974). In keeping with the earlier findings of Aston studies that authority becomes delegated with increased size, the Canadian- based scholars propose that structural power can also emerge in sub-units through a convergence of three contingent conditions. These are, their ability to cope with uncertainty, the non-availability of substitute functional specialists, and the strategic centrality of sub-unit role. Measures of these dimensions are constructed from an itemized analysis of activities collected in interviews within four similar functional sub-units located in seven North American manufacturing plants (28 in all). The researchers are able to construct a five-stage powerranking from their results. At each level the capability to cope with uncertainty remains central when taken together with varying measures of complementary sources of power along the other dimensions. This can be taken to confirm Crozier’s (1964) earlier qualitative study of French bureaucracy. The researchers indicate that the process by which contingencies are actually manifested in the creation of influence remains to be explored. David Hickson also initiated a programme of micro-studies from his position as Professor at Bradford School of Business Management (Hickson et al 1986). These focus on the process of decision-making within the senior management of thirty English organizations located across a variety of private and public sectors. A series of structured interviews and in-depth case studies were spaced over a ten-year programme. The results suggested three prevalent modes of strategic decision-making—the informally protracted, labelled as ‘vortex sporadic’, the formally paced ‘tractable fluid’, and the narrow ‘familiar-constricted’. Timing from initiation to authorization lasted from one month to four years. The determining factor was the content matter being considered and not the context. The first type were radical, highly political, and complex, being focused on new products and major organizational restructuring. The second were technically complex but non-political, being exemplified by new share-issues. The third type was highly political but not so complex as in regular budgetary decisions. While differences in style could be made out in cross-organizational comparison, management decisions were highly constrained by trajectories taken in prior decisions, so giving rise to patterned regularities. Child also moved the focus of his analysis in a series of micro-studies undertaken with Alfred Kieser at the University of Mannheim (1979). These supplemented Astonstyle measures of organizational structure with measures of role structure across a sample of British and West German managers. They tended to confirm that both organizational structural and activities within management roles were shaped by

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distinctive societal differences in culture and institutions. But, in papers authored with others (Child and Fulk 1982, Child, Fores, Glover, and Lawrence 1983), he also pursued the theme of cross-national differences in strategies of occupational closure around organizationally specialized roles. Two subsequent programmatic series of research studies on structure and workplace design were initiated at Aston Business School6 over the 1980s, in which Child collaborated with former Aston team associates Peter Clark and Ray Loveridge. The methodology adopted in both programmes consisted of single and comparative case-study investigations similar to those of the Bradford Programme. The best known of these are possibly those based on the chocolate manufacturing division of the Cadbury group (Child and Smith 1987) and on the Birmingham car firm Rover (Whipp and Clark 1986). In both cases institutionalized relations with a sectoral set of strategic referents proved to be important in the creation of both corporate identity and design recipes. Recursive patterns of decision-making were found to underlie strategic responses to changing market contexts. A cross-national study involving six national teams of case researchers across Europe studied the introduction of computerized services in organizations located in the banking, health care, and retailing sectors over a three-year period (Child and Loveridge 1990). Cases were structured by a common emergent analytical frame and monitored at regular meetings of the research teams. Significant heterogeneity in style and mode of implementation was the most evident finding, but within this sample national differences in patterns of the strategic uses of new technologies seemed as evident as the expected sectoral patterns. In 1980 Ransom, Hinings, and Greenwood signalled their movement to a more interpretive approach in their analysis of organizational structures as ‘provinces of meaning’ imbued with political purpose and embedded in a historical consciousness. This new approach led the authors to a later adoption of the concept of the cognitive ‘archetype’ as ‘a set of structures and systems that reflects a single interpretive scheme’ (Greenwood and Hinings 1993: 1052). Strategic actors are influenced by the institutional context provided by their normative field of activities to organize in prescribed ways and not to adopt proscribed ways. These become templates for organizing within the field, and over time can provide evolutionary tracks upon which there is likely to be uneven convergence within the field (Greenwood and Hinings 1988). This evolutionary process is the normal form of change. Radical change can occur through pressures exogenous to the field. Different perspectives on the prevailing archetype can exist within organizations, giving rise to differences in interest when faced with change. Much depends on the pattern of value commitments to the prevailing archetype which Greenwood and Hinings (1996) suggest can range from ‘status quo’ to ‘reformative’. The authors suggest that their research frame is best explored through focus on a single field, which for them has been business-related professionals such as accountants and commercial lawyers. In their 6

The largest of the projects was an Economic and Social Research Council (ESRC) five-year programme grant entitled Work Organization Research Centre (WORC). The second, international project, received government support in each of the six countries, U.K., Belgium, West Germany, Sweden, Italy, and Hungary under the title of Micro-Electronics in the Service Sector (MESS).

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latest work Hinings and Greenwood (2002) express a disquiet with the limited extent to which OT has embraced the societal effects of organizations on wider society—with the ‘S’ in the SOGI framework originally proposed by the Aston pioneers. By contrast, the more limited approach taken by early Aston researchers has found its most notable international exponent in the continued work of Lex Donaldson (1985, 2001) of the Australian School of Business at the University of New South Wales, Sydney. In a series of books and articles Donaldson has proposed that a contingency approach to management remains both the best guide to business practice and as central to the OT paradigm. His own research suggests a model he has labelled ‘Structural adaptation to regain fit’ or SARFT (Donaldson 1999). He proposes that business strategy consists of ongoing adaptations to contextual conditions which, nevertheless, reflect an apparent statis in relationships between activities such as those represented in his Aston-type structural and contextual scales. To these he adds distinctive measures of the strategic clustering of activities around functions or products or regions represented in divisional form. Differences in operational enactment are constrained by these structures and can therefore be discounted against the continued prevalence of significant contingent influences. But the tendency of strategists to base decisions on a subjectively limited set of significant referents can be shown to lead to major errors in their judgement (Donaldson 2001). These diverging trajectories of leading members of the Aston Programme can be likened to changes in the linguistic translation of their original theoretic ideal. The English translation of Weber’s use of the term Wahlverwandschaften or ‘elective affinities’ has gone through several metamorphoses. He uses the term to explain the merger of contextual elements required to sustain ongoing relational structures or to bring about radical changes.7 In the first, linguistic translation by Talcott Parsons (Weber 1937, 1947 edn) Wahlverwandschaften appears as a ‘correlation’ between situational elements. In the second translation given by Gerth and Mills (1946) it becomes the historical marrying of existent ideas with the ongoing interests of actors. In a third version Stark (1958) sees Wahlverwandschaften as ‘the mutual accommodation of ideas and carriers’, the carrier of ideas being seen as something akin to an institutional field (McKinnon 2010). In some ways the later history of the Aston Programme is one of the varying length of journey taken by senior participants from the first Parsonian translation of elective affinity to a more interpretive one. The Alberta researchers appear to have adopted the third translation in much of their work; Child’s later work and that of other colleagues such as Warner might be seen to have been closer to the second, though emphasizing the processural nature of history, while that of Lex Donaldson and the many ongoing North American OT researchers remains closer to the first. The founders, Pugh and Hickson, can be seen to have continued to explore the viability of the bureaucratic archetype as it diffuses across national cultures using a broadly nomothetic view of globalization.

7 Weber is said to have borrowed the term from the title of Goethe’s (1809) novel in which it appears as a metaphor for the chemistry present in affective relationships between his main characters.

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Conclusions—the Aston Programme inheritances ‘Research is a matter of statements of quantity’ (Pugh and Hickson 1976, p. 7). This assertion of their nomothetic premise appears early in the introduction to the first volume of the Aston Programme’s collected works. Another less articulated premise can be found in the authors’ search for explanation through a descriptive approach to organizational phenomena that is only loosely tied to prescription—if the Weberian ideal of bureaucracy can be regarded as such. In this sense, as Donaldson later suggests, it aspires to reaching a level of scientific rigour that is removed from the effects of fashion and fad often present in business consultancy and teaching. The performance of organizations is only tested once in the Aston Programme (Child 1974, 1975) when explanation is left open to the possibility of managerial manipulation of their operating environment. The question of ‘fit’ in the Aston exposition of contingency theory has been challenged at a number of levels. As is suggested in this paper, the assumption that statistical correlation offers a performative meaning to a relationship, while of evident heuristic value, has come to be questioned in the ideographic critique of some Aston researchers. However, this is not the level at which much subsequent debate around contingency theory has been conducted in OT and, more importantly, in the study of Strategic Management. Rather, more functional concern has been shown in the level of correlation between measures of context and design and related levels of effectiveness or efficiency in measured performance (Siggelkow 2002). There is, then, a widespread acceptance of what Pugh describes as the mathematico-statistical tools to which the Aston Programme contributed in an innovative way. These have been put to work in a more performance-directed fashion than was envisaged at that time. Concern over the level of inter-dependency between variables and of multiple contingent effects raised by Child (op. cit. 1975) has been translated into design trade-offs in tests of strategic performance (Gresov 1989). Establishing the existence of successful structural and ideational configurations holding an internal consistency, or which align structure with strategic orientation has also become more salient (Meyer, Tsui, and Hinings 1993, Child 2002, Greenwood and Miller 2010). In this sense the Aston mission to establish a science of organizational design has been overtaken by applied research in organizational strategy driven by relatively limited measures of realized performance and with little concern for its wider social systemic implications. It may even be symptomatic of a wider absorption of the field of OT into the prescriptive teaching of strategic management within business schools. In an ASQ review of Pugh’s festschrift the commentator (Gresov 1999) describes its contents as ‘Eurocentric’. In spite of their acute realization of the locus of academic innovation being in the US, both Pugh and Hickson have been totally committed to building a professional OT community across Europe and to its contribution to management teaching. The exchange of useful knowledge with business practitioners, originally with

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line supervisors and union stewards in Scotland and the British Midlands, and latterly at the Open University, has been a lifelong vocation for Derek Pugh. In 1973 he and David Hickson were among the small group who instigated the first meeting of the European Group on Organization Studies (EGOS) in 1975. The journal Organization Studies was created in 1980. During the 1990s and early 2000s EGOS was to become one of the most active professional gatherings of social researchers across the whole region. Most of the original ‘Aston’ apprentices and associates have continued to be active producers of innovative ideas within the field of OT from academic locations across several countries. Recombinant innovations such as those of the Canadian schools thus ensure a continued robust conceptual development within the field. The long-term contribution of the Aston Programme may well lie in the diversity of its subsequent contributions to management studies rather than in a paradigmatic closure.

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Ellis, T. and Child, J. (1973) ‘Placing Stereotypes of the Manager into Perspective’, Journal of Management Studies, 10, 3, 233–55. Etzioni, A. (1961) A Comparative Analysis of Complex Organizations. Glencoe Ill: Free Press. Evans, P. (1995) Embedded Autonomy: States and Industrial Transformation, Princeton NJ: Princeton University Press. Gerth, H. and Mills, C. W. (1946) From Max Weber: Essays in Sociology, New York: Oxford University Press. Ghoshal, S. and Nohria, N. (1993) ‘Horses for Courses: Organizational Forms for Multinational Corporations’, Sloan Management Review, Winter, 34, 2, 23–35. Goldthorpe, J. H., Lockwood, D., Bechhofer, F., and Platt, J. (1968) The Affluent Worker: Industrial Attitudes and Behaviour, Cambridge UK: Cambridge University Press. Gouldner, A. W. (1971) The Coming Crisis of Western Sociology, New York, NY: Basic Books. Greenwood, R. and Hinings, C. R. (1976a) ‘A Research Note: Centralization Revisited’, Administrative Science Quarterly, 21, 1, 151–5. —— —— (1976b) ‘Contingency Theory and Public Bureaucracies’ in Pugh and Hinings, op. cit., 67–86. —— —— (1988) ‘Design Types, Tracks and the Dynamics of Strategic Change’, Organizational Studies, 9, 3, 293–316. —— —— (1993) ‘Understanding Strategic Change: The Contribution of Archetypes’, Academy of Management Journal, 36, 5, 1052–82. —— —— (1996) ‘Understanding Radical Organizational Change: Bringing Together the Old and the New Institutionalism, Academy of Management Review, 21, 4, 1022–51. —— and Miller, D. (2010) ‘Tackling Design Anew: Getting Back to the Heart of Organizational Theory’, Academy of Management Perspectives, 24, 4, 78–88. Gresov, C. (1989) ‘Exploring Fit and Misfit with Multiple Contingencies’, Administrative Science Quarterly, Administrative Science Quarterly, September, 34, 3, 411–30. —— (1999) Book review of T. Clark (ed.) ‘Advancement in Organizational Behavioural: Essays in Honour of Derek S. Pugh’, Administrative Science Quarterly, December, 4, 44, 830–1. Grusky, O. and Miller, G. A. (1970) (eds), The Sociology of Organizations: Basic Studies, New York, NY: Free Press. Haas, E., Hall, R. H., and Johnson, N. J. (1963) ‘The Size of the Supportive Component in Organizations: A Multi-Organizational Analysis’, Social Forces, 42, i, 9–17. Hickson, D. J. (1996) ‘Reminiscences of the Ivory Tower in the Basement’ in T. Clark (ed.) Advancement in Organizational Behaviour: Essays in Honour of Derek Pugh, Aldershot UK: Ashgate. —— Butler, D., Gray, D., Mallory, G. R., and Wilson, D. C. (1986) Top Decisions: Strategic Decision-Making in Organizations,Oxford: Basil Blackwell. —— Hinings, C. R., Lee, C. A., Schneck, R. E., and Pennings, J. M. (1971) ‘A Strategic Contingencies Theory of Intra-Organizational Power’, Administrative Science Quarterly, 16, 2, 216–29. —— —— McMillan, C. J. and Schwitter, J. P. (1974) ‘The Culture-Free Context of Organization Structure’, Sociology, 8, 1, 59–80. —— and McMillan, C. (1981) Organization and the Nation: the Aston Programme IV, London UK: Gower. Hickson, D. C. and Pugh, D. S. (2001) Great Writers on Organizations, Aldershot UK: Ashgate.

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Hickson, D. J., Pugh, D. S., and Pheysey, D. C. (1969, 1976) ‘Operations Technology and Organizational Structure: An Empirical Reappraisal’, Administrative Science Quarterly, 14, 378–97. Reproduced in Pugh and Hickson, op. cit., 1976. Hinings, C. R. and Foster, B. D. (1973) ‘The Organizational Structure of Churches: A Preliminary Model’, Sociology, 7, 93–106. —— and Greenwood, R. (2002) ‘Disconnects and Consequences in Organization Theory’, Administrative Science Quarterly, 47, 3. 411–21. —— Hickson, D. J., Pennings, J. M., and Schneck, R. E. (1974) ‘The Structural Conditions of Interorganizational Power’, Administrative Science Quarterly, 19/1, 22–44. —— and Lee, G. (1971) ‘Dimensions of Organizational Structure and their Context: A Replication’, Sociology, 5, 1, 83–93. —— Pugh, D. S., Hickson, D. J. and Turner, C. (1967) ‘An Approach to the Study of Bureaucracy’, Sociology, 1, 1, 61–72. —— Ranson, R. and Bryman, A. (1976) ‘Churches as Organizations: Structure and Context’ in D. S. Pugh and C. R. Hinings (eds) Organizational Structure: Extensions and Replications, Farnborough, Hants: Saxon House, 102–14. Hofstede, G. (1980, 2001) Cultures Consequences: Comparing Values, Behaviors,Institutions and Organizations across Nations, London UK: Sage. Holdway, J. F., Newberry, J., Hickson, D. J., and Herron, R. P. (1975) ‘Dimensions of Organizations in Complex Societies: The Educational Sector’, Administrative Science Quarterly, 20, 37–58. Horvath, D., McMillan, C. J., Azumi, K., Hickson, D. J. ‘The Cultural Context of Organizational Control: An International Comparison’, International Studies of Management and Organization, 6, 60–86. Inkson, J. H. K., Hickson, D. J. and Pugh, D. S. (1968: 1977) ‘Administrative Reduction of Variance in Organization Behaviour: A Comparative Study’, in D. S. Pugh and R. L. Payne (eds), Organizational Behaviour in its Context: The Aston Programme III, Farnborough UK: Saxon House. —— Pheysey, D., Horvath, D., McMillan, C. J. Azumi, K., and Hickson, D. J. (1976) ‘The Cultural Context of Organizational Control: An International Comparison’, International Studies of Management and Organization, 6, 3, 60–86. —— Pugh, D. S. and Hickson, D. J. (1970) ‘Organization Context and Structure: An Abbreviated Replication’, Administrative Science Quarterly, 15, 3, 318–29. —— Schwitter, J. P., Pheysey, D. C., and Hickson, D. J. (1970) ‘A Comparison of Organization Structure and Managerial Role: Ohio USA and the Midlands, England’, Journal of Management Studies, 7, 3, 347–63. Lawrence, P. R. and Lorsch, J. W. (1967) Organization and Environment, Cambridge MA: Harvard University Press. Levy, P. and Pugh, D. S. (1969) ‘Scaling and Multivariate Analysis in the Study of Organizational Variables’, Sociology, 3, 2, 193–213. Locke, R. R. (1996) The Collapse of the American Management Mystique, Oxford UK: Oxford University Press. McKinnon, A. M. (2010) ‘Elective Affinities of the Protestant Ethic: Weber and the Chemistry of Capitalism’, Sociological Theory, 28, 1, 108–26. March, J. G. (1965) (ed.) Handbook of Organizations, Chicago IL: Rand McNally. —— and Simon, H. A. (1958, 1993) Organizations, Oxford UK: Blackwell. Meyer A. D., Tsui A. S., Hinings C. R. (1993) ‘Configurational Approaches to Organizational Analysis’, Academy of Management Journal, 36, 6, 1175–95

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chapter 18

ja m e s m a rch, r ich a r d cy ert, a n d the evolv i ng field of orga n izations m ie augier

Introduction James G. March (born 1928) received his PhD in political science from Yale University in 1953 and went to Carnegie Mellon University (then Carnegie Institute of Technology) where he contributed to the origins of modern organization and management theory, most significantly through his co-asuthorship of the two classic books, Organizations (March and Simon 1958) and A Behavioral Theory of the Firm (Cyert and March 1963). March stayed at Carnegie until 1964 where he went to Irvine to become a Professor of Psychology and Sociology and the Dean of the School of Social Sciences at the University of California, Irvine. He began there (with Michael Cohen) a study of leadership and ambiguity in the context of American college presidency (Cohen and March 1974). This book discusses the loose coupling between decision-making problems, and solutions to these problems, and gives reasons for leaders to encourage ambiguity, rather than prediction and control. The idea that choice is fundamentally ambiguous is a central theme to ideas about ‘Garbage Can Decision Processes’ (Cohen, March, and Olsen 1972) which also emphasize the temporal sorting of problems and solutions. The general implications of such ideas were explored with Johan P. Olsen in the book Ambiguity and Choice in Organizations (1976), a collaboration that later led to two books exploring an institutional and organizational perspective on politics and governance. This chapter discusses some of March’s ideas and contributions, and indicates its significance for the evolution of management thought and the field of organizations. In addition, I will discuss the work of one of March’s early collaborators, Richard Cyert.

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Viewed in a historical context, the work of March represents a continuation of the behavioral economic programme developed at Carnegie in the 1950s and 1960s, a tradition deeply influenced by roots in political science. March’s formal education was in political science, as was the education of Herbert A. Simon, though they both diverged later from their early territories. March’s central research question was in many ways the same as the ones that guided Herbert A. Simon and Richard Cyert: What is the proper way to understand human action and decision-making, and, more specifically, how can theories rationality and intelligence be aligned with the facts of the world? In order to pursue these questions, Organizations was written, as was A Behavioral Theory of the Firm, both part of the development of the behavioral economics programme at Carnegie Mellon University. March’s research has spanned six decades and (at least) as many disciplines, and his research centres on questions relating to organization theory, learning and human behaviour (in organizations and elsewhere). The most consistent theme in March’s work, one that runs through the entire publication list, is the study of organizations. And while we can’t easily classify him as a ‘sociologist’, ‘political scientist’, or ‘economist’, there can be no question of his greatness as an organization theorist. For example, he was a co-author of perhaps the first seminal contributions to the field (March and Simon 1958; Cyert and March 1963) as well as the first editor of the Handbook of Organization Studies (March 1965). March’s academic career has been focused on understanding and analysing human decision-making and behaviour. The basic thesis that he has pursued is that human action is neither optimal (or unboundedly rational), nor random, but nevertheless reasonably comprehensible (March 1978, 1994, 1999). The ideas that were developed in order to understand human behaviour in organizations in March’s early work in the analysis of how people deal with an uncertain and ambiguous world included, among other things, the concepts of bounded rationality and satisficing (March and Simon 1958). In the rest of this chapter, I will outline part of the evolution of March’s framework that he has developed in order to understand human action in often complex situations. In particular, this framework became clear and was shaped by his background at the interdisciplinary environment at Carnegie Mellon in the 1950s and 1960s. Understanding the contributions and ideas of March and his colleagues in the early years, and the background of their seminal work, we will also be able to understand the interdisciplinary legacy present in our field(s) of organizations and management today. For example, the non-rational and adaptive aspects of human decision-making and behaviour has figured more prominently in March’s work (and in the field) as time has gone on, contributing to the development of new subfields such as evolutionary theories of organizations; organizational learning, and risk-taking (Argote and Greve 2007; Dosi and Marengo 2007; Sproull 2010).1

1 Another indication of the significance of his work and its implications for the field can be seen in the various special issues of organizations journals that have been dedicated to his work (e.g. Industrial and Corporate Change, August 2003; Organization Science, May–June, 2007), which have contributions from scholars such as Johan Olsen, Oliver Williamson, Richard Scott, Linda Argote, Sidney Winter, Giovanni Dosi, Michael Cohen, and other significant scholars in the organizations field(s).

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Early ideas and work Born on 15 January 1928 in Cleveland, Ohio, James G. March finished his high-school years in 1945 in Madison, Wisconsin, where the March family had moved in 1937. As a young boy, March was an ‘all around American boy’, playing all sports and also serving as captain of his junior high-school football team. He liked school and became interested in politics. While he took all the mathematics courses available in high school, March had at that time no particular intention of going into a ‘hard-science’ career. Rather, he felt a strong interest in government. As a result, although he had offers from both the military academy and the naval academy, March decided instead to go into political science. ‘Had I gone the other way, I supposed I would have become an engineer’, March later recalled.2 Living through the post-war years, March had no clear idea how his career would turn out. He went to study for his bachelor degree in political science at the University of Wisconsin (later continued with doctoral studies in the same field at Yale University). Having spent time in the army (1946–8), March was eager to complete his undergraduate, obtaining his BA from Wisconsin in 1949. Although it might be possible to speculate that an institutional influence might have emerged at Wisconsin, March doesn’t recall being particularly influenced by anyone there, although he was attracted to the strong academic environment.3 He did most of his work there in political science, but also took courses in economics (mostly public finance), and statistics, yet he had ‘very little exposure’ to fields such as sociology or psychology. Having completed his undergraduate years, March went on to graduate school at Yale. The time at Yale was good in the particular sense that, because of faculty disputes, March was afforded a high degree of intellectual freedom. ‘Mostly for perverse reasons’, March explained in the preface to his thesis (1953), the political science department at Yale was a good place for a Wisconsin innocent in 1949–1953. One large segment of the faculty had recently left in a huff; several senior faculty members were hardly talking to each other; there were mutually abusive intellectual and personal factions; some of the smartest people were also the least house-broken; and the university kept trying to find an outsider who would take over as chairman and somehow bring order to it all. There were young faculty 2

Interview with James G. March. There is, of course, a strong institutionalist component to research at Wisconsin (Rutherford 2001). Moreover, there also are strong ties between behavioural economics and Wisconsin: both March and Simon grew up in Wisconsin (as did one of their students, Oliver Williamson). Further note that while March’s father was a student of John R. Commons, so was Simon’s uncle. Yet, despite these early connections, neither Simon nor March seemed particularly biased early on towards the institutionalist tradition, though retrospective speculations surely could attribute more to such connections. These is, however, a thread that followed at least in part from some of March’s institutionalist work, in establishing a resource community at Stanford around organizations. See the recent book by Schoolhoven and Dobbin (2010). 3

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mie augier doing their work and ducking the shrapnel, students wondering whose side to pick, and the main combatants providing an utterly unbearable but charming introduction to the low correlation between I.Q. and good sense. (March 1953, p. iii)

As a result of this situation, faculty had little time for interfering with the students’ education, and March received must of his education from the library. He also took a job at the Yale Center for Alchohol studies, originally to study college drinking habits. However, March was as much influenced by the ideas of people as from books. Interaction with political scientists such as Robert Dahl and V. O. Key, economist Charles Lindblom, anthropologist George Peter Murdoch, and sociologist Fred Strodtbeck, awakened in March a broad interest in the social sciences. Taking courses in such different fields didn’t bother March in the least; on the contrary, what might seem to some a schizophrenic existence, March found essential for pursuing his interest and lived quite happily in many different disciplinary worlds at once. Determined to analyse and understand human decision-making and behaviour, March felt comfortable with the tools of linear algebra and statistics early on, and felt that these tools were important to model-building in the social sciences (Lave and March 1976). At the same time, however, he also had a deep concern for empirical data and for historical and institutional approaches to economics, political theory, psychology, and other social sciences. This interdisciplinary and cross-disciplinary interest had been fostered early on: he grew up in Wisconsin with a father who was a student of J. R. Commons. March’s interdisciplinary interests made him an interesting candidate for the then-beginning behavioural perspective on human decision-making, which was just emerging around Herbert Simon at Carnegie Institute of Technology (later Carnegie Mellon University). In keeping with March’s views, they would develop a strategy for crossing disciplinary boundaries in order to understand human action. This needed the understanding of both the historical perspectives of theories and empirical investigations. As such, March seems to have had little patience with either thoroughgoing empirical research or fully specified theory, which is to say, with the most typical products of academic (perhaps, in particular, economic) research. Not for him the narrow positivist examination of evidence for and against previously specified hypothesis, March preferred to survey other approaches, other ideas, for the pregnant new fact that would set off a new train of thought, often finding that Plato and Aristotle thought of things in a way significant to our times. The first quotation in his dissertation put an interesting twist to his sense of the intellectual project: ‘And this knowledge of the nature and habits of men’s souls will be of the greatest use in that art which has the management of them; and that art, if I am not mistaken, is politics’ (Plato, quoted in March 1953, p. 1). Notwithstanding his unusual ability to bring together different aspects of different disciplines, March did see himself as mostly a political scientist early on, as evidenced by the fact that when he first began thinking about jobs, it was political science departments that were on his radar screen.4 Certainly, he wasn’t thinking about business

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Interview with James G. March.

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schools; yet it was at a business school that March got his first academic job. So why in 1953 did he leave Yale for a business school at Carnegie Mellon University (then Carnegie Institute of Technology) where he would spend the next eleven years of his career? Why Pittsburgh? He certainly could have stayed in political science. He had a degree from a good university with a good reputation in political science, and he was staying at Yale as a Social Science Research Council (SSRC) post-doctoral fellow, so staying at the east coast would probably have been easier. It seems likely that at some point March looked at the way his intellectual life was developing and realized that he would soon have to choose between a life in political science and one of interdisciplinary scholarly activity. March had plenty of ideas, some of which connected to organizational studies, and it was time to pursue them or give them up. His dissertation had opened multiple avenues for future interdisciplinary research. The move to Pittsburgh was a decision to continue living in an interdisciplinary space and to pursue research on decision-making in organizations fully, and a decision to engage in a collaboration with Herbert Simon, who at the time was helping to recruit for the Carnegie Institute of Technology’s business school. Simon knew Robert Dahl, March’s principal dissertation advisor, and asked him for prospective students to meet, and Simon went to interview March. Simon recalled about their first meeting: We were building up this faculty, so Lee Bach and I were doing most of the hiring. In those days, you didn’t have those big committees, advertising jobs for 6 months and such nonsense. We went to schools where we thought that interesting things were happening and where interesting people were. And then we asked our friends about who were the good doctoral students. So someone gave me Jim March’s name, and we had dinner, and I think I phoned Lee back that same night and told him that I was offering Jim a job. That simple it was then. He was tops. (Interview with Simon, in Augier 2001, p. 271)

Although March had warmed up to the idea of studying organizational issues in the dissertation, the theory of the firm itself was ‘little more than a set of words to me’, March would later recall.5 But March decided that it would be interesting to work with Simon, and off he went to Pittsburgh where he helped shape the development of Carnegie Mellon University’s new Graduate School of Industrial Administration. ‘The thing that was attractive about GSIA’, March recalled, ‘was Herb Simon. I didn’t know much else about the school, and I certainly didn’t know anything about Pittsburgh. But Simon was smart, and he was talking about doing this review of organization studies, and by that time I was kind of thinking that may be that was the direction I wanted to go.’6 While March felt comfortable at the school, he was a political scientist and not, at least at that time, particularly interested in management or business or organization theory per se. This would soon change. March first taught courses in political science and later took over the course on ‘the history of ideas in social change’. One of his students (who would later become a pioneer in the field of computer science and artificial intelligence), 5

Interview with James G. March.

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Interview with James G. March.

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Edward Feigenbaum, remembers that it was this course which attracted him to the school, and in particular that March taught ideas from game theory, which was at that time at a very early stage of development, a little more than a decade after the publication of von Neumann and Morgenstern (1944), and before any substantial developments had taken place in non-cooperative game theory. ‘That was fascinating—absolutely fascinating to me’, Feigenbaum recalls. ‘That one could apply analytic and careful models to social phenomena.’7 The fact that game theory was taught side by side with social psychology, sociology, and statistics, by a professor educated in political science, is just one sign of the interdisciplinary spirit at Carnegie. Only gradually did March move into teaching organizations/business course teaching. However, he quickly established very good work relations with Simon and also with Richard Cyert. He also had many conversations with other colleagues such as Bill Cooper, Fred Tonge, Harold Guetzkow, Franco Modigliani, Allen Newell, and Jack Muth, but his principal collaborators were Simon and Cyert. The 1950s and early 1960s was an important period in the history of ideas, and Carnegie Mellon University during those years proved to be a very stimulating and very productive place, where several important ideas were fostered. March, along with Richard Cyert and Herbert Simon, developed the field of behavioural economics, which has proved an important alternative to neoclassical economics. Furthermore, it was the place where several other modern developments in economics and organization theory were initiated, such as transaction cost theory and evolutionary economics (Williamson 1996, 2002, 2003; Augier and March 2007, 2011), not to mention rational expectations theory and linear and dynamic programming. Carnegie was also very important to the development of March’s intellectual formation and early ideas. As a context for accommodating and appreciating his interdisciplinary curiosity and interest, Carnegie Mellon greatly influenced the content of March’s research, early as well as later in his career. ‘I think it would be very hard for anyone who has an academic career’, March said in looking back, ‘not to find the first ten years of his career very, perhaps the most, influential. And this was a place with a lot of excitement and drive.’8 Furthermore, it was at Carnegie that his thoughts became centred on organizations. While he had a vague notion of organizations before he went to Carnegie, ‘It certainly became much clearer at Carnegie’, he said. ‘If I look at everything I have done subsequently, I can see the seeds of all of it at Carnegie.’9 This is the view of a man whose essential intellectual project over the next four decades was driven by the need to understand behaviour and bounded rational, yet intelligent, decision-making in individuals and organizations. Just so, as the pattern of his subsequent research can be best understood as an attempt to develop and refine the views developed at Carnegie, we must examine and understand the thoughts and ideas that were kicking around at Carnegie at the time. This brings us to issues such as ‘how did the idea of behavioural science emerge?’, and ‘why did the Ford Foundation decide to sponsor the research of March and colleagues at Carnegie?’. It also relates to 7 9

Interview with Edward Feigenbaum. Interview with James G. March.

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the history of management/business education in general (for a much more lengthy discussion of the evolution of business schools, see Augier and March 2011).

Business education and Carnegie When business schools began in America over a century ago, it was initially Wharton and UC Berkeley that led the way. Early business schools developed their roles to provide managerial training for railroad executives—the first big businesses to emerge. In America, early business schools had difficulty establishing academic legitimacy. Fortunately, however, several scholars did start on university campuses, providing a future opportunity to reach out to scholars in other disciplines. However, early business schools in America were not considered as serious participants in the world of academic scholarship and intellectual pursuits. They often defined their role primarily in terms of codifying and communicating good business practice, as exemplified by business case writing and teaching. Indeed, many early faculty positions were filled with experienced businessmen (e.g. Arthur Andersen), rather than young scholars. Despite the efforts of some deans and faculty to migrate towards more academic pursuits, the schools emphasized practical, not theoretical courses; applied, not basic science; and the contributions of faculty were more often publishing in practitioner magazines than in academic journals. Herbert Simon, who witnessed and contributed to the transformation of business education, reflected in his autobiography: ‘Accurately or not, we perceived American business education at that time as a wasteland of vocationalism that needed to be transformed into science-based professionalism, as medicine and engineering had been transformed a generation or two earlier’ (Simon 1991, p. 138). The immediate post-war period was an era that glorified big science (Leslie 1993; Zachary 1999). The social and behavioural sciences became more quantitative, more analytical, and more committed to scientific principles. A report by Robert Gordon at Berkeley and James Howell at Stanford defined a watershed in business education when it advocated the adoption of analytical approaches to management education. Spurred by this study (Gordon-Howell Report in 1959), the Ford Foundation dedicated more than 35 million dollars during the 1960s to successful efforts to reform business schools (Schlossman, Sedlak, and Wechsler 1987). The Ford Foundation had at that time formulated a programme for ‘the study of man’ (which became known as ‘the behavioural science research area’), the specific objective of which was stated as follows: ‘The Ford Foundation will support scientific activities designed to increase knowledge of factors which influence or determine human conduct, and to extend such knowledge for the maximum benefit of individuals and of society.’10 10 ‘The Ford Foundation Behavioral Science Program: Proposed Plan for the Development of the Behavioral Sciences Program’ 1951, Herbert A. Simon papers, Carnegie Mellon University Library.

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Research had to be scientific; embodied in the Ford Foundation’s understanding of the behavioural science concept was ‘its emphasis upon the scientific approach to problem solution’ (p. 4). And it had to be practical, to some extend at least, given the Foundation’s interest, not in knowledge per se, but in ‘knowledge which promises at some point to serve human needs’. Furthermore, it explicitly encouraged interdisciplinary research. ‘The program is interdisciplinary and inter-field. Its goal is to acquire and apply knowledge of human behavior, and segments of all fields and disciplines will make contributions in varying degrees.’ Carnegie Mellon University (then the Carnegie Institute of Technology) through its Graduate School of Industrial Administration became the role model for a researchbased, disciplinary-oriented (but very interdisciplinary) approach to business education, and an invigoration of fundamental interdisciplinary research in accounting, finance, marketing, operations research, microeconomics, and organizations. Organizations (March and Simon 1958) and A Behavioral Theory of the Firm (Cyert and March 1963) are two significant results of the early work on business research at Carnegie. In addition to filling a need in the establishment of the behavioural sciences, research on organizations became the emergent discipline of business school education, bringing together different disciplines in the study of decision-making and behaviour in organizations.11 It was the image of the Ford Foundation’s behavioural vision that Herbert Simon, one of the first to arrive at the Carnegie Campus, had in mind when forming the GSIA group. As a result, he hired young faculty with similar interests who had the technical skills, but also a broader knowledge in social science. In addition to March, we find among his hires Harold Guetzkow and Allan Newell. The group at Carnegie soon consisted of many talented young scholars who were all eager to contribute to this newly formed vision of behavioural science. The spirit at Carnegie was such that everybody interacted with everybody else; discussing each other’s ideas and research in a way that encouraged collaborative teams to work together, as well as across projects. Despite different disciplines and interests, and despite different disciplines, and despite varying degrees of admiration for the idea of rationality, these teams always worked together in a friendly way. For instance, while much of Simon’s research centred around bounded rationality, the work of Franco Modigliani had a high rational component to it. Regardless of the differences in their intellectual models, they respected each other and worked well together, since at Carnegie, intellectual curiosity and dedication was highly appreciated and mattered more than disciplinary boundaries. This interdisciplinary, yet disciplined, way of working became pioneering for subsequent developments in economics—and spurred the development of entirely new areas of interdisciplinary research on organizations and organizational decision-making. It was a business school, but they thought of themselves as reforming economics. In keeping with this, and with the spirit of the Ford Foundation emphasis, the two major 11 A much longer discussion of the programme at Carnegie and of the evolution of business education in the US is in Augier and March (2011).

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projects, Organizations and A Behavioral Theory of the Firm, sought to integrate economics ideas with those coming from the more soft disciplines of sociology and social psychology. In keeping with March’s background and perspective (and the ideas of Simon and others), this was a style of analysis and strategy that best suited the emerging business school, but one with very little attention for the boundaries of disciplines. The following section takes a closer look at these early major works.

The emerging behavioural perspectives on firms and organizations At Carnegie, March worked mostly on organizations (March and Simon 1958), the behavioural theory of the firm (Cyert and March 1963, see below), and the concept of power in the study of social systems. The major goal of Organizations was to make a ‘propositional inventory’ about organization theory in order to list generalizations and to assess empirical evidence to support them (March and Simon 1993, p. 1). In their view, organization theory builds on ideas from sociology, social psychology and economics, but also borrows from game theory and statistical decision theory. Again, in keeping with the view of the Ford Foundation, they wanted to unite empirical datagathering research with rigorous theorizing in order to create a rigorous empirical theory that could organize and so give meaning to empirical facts with legitimate theory. Science, they believed, was the product of the organization of empirical facts into conceptual schemes, and the progress of science was based on the development of more sophisticated and elegant theoretical systems, but not necessarily the discovery of new facts. ‘It was hard work’, March recalled, ‘but also fun.’12 Although organization theory as a field was then very new, they examine types of the classical theory—Taylor’s scientific management and Gulick and Urwick’s departmentalization models and discuss the limitations of these approaches, in particular at the behavioural level (neglect of conflict in organizations; incomplete motivational assumptions; ignoring limitations on rationality, etc.). The bureaucratic theories of Merton and Selznick are discussed and incomplete because they do not explore the different motivations in organizational behaviours. Acknowledging debts to Parsonian social theory, the conceptual framework of structural-functional analysis is seen as underlying much of existing organization theory. A good example is the Barnard-Simon inducementcontributions schema as it is evident in the use of terms such as ‘purpose’ and ‘process’ in the description of departmentalization (pp. 41–50) and generally, in the view of organizations as adaptive, self-maintaining systems. The issue of conflict is discussed, in particular in terms of the variable of being able to change the contract and they distinguish between intra-individual, organizational, and 12

Interview with James G. March.

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inter-organizational conflict (as well as the possibility of game theory to contribute to the understanding of conflict). Throughout the book, March and Simon emphasize the important connections between cognitive factors and motivation that are essential to theories of organizations today, thus both elaborating on Simon’s earlier ideas and anticipating themes that March develops later. By the time Organizations was written, March was also publishing articles relating to A Behavioral Theory of the Firm. So for a time, the projects overlapped. Richard Cyert recalled about his early collaboration with March: I came to Carnegie in 1948 and Jim came in 1953, and we really hit it off. I had been doing quite a bit of reading and had come to the conclusion that we weren’t ever going to get a theory of how oligopoly priced without going inside the firm. And I talked to Jim about it and thought that we might be able to do something with organization theory and oligopoly theory. Fortunately, Jim was very interested and we started having our lunches together. . . . [I]t was really an exciting time, because we would talk, get ideas, write something down and eventually we would produce a paper. . . . [I]t was a big thrill for us and the school of course was pleased as well. So we continued working together. . . . I was (and I still am) very pleased with our work. . . . That became the basis of deciding to do a book together. We had I think 8–10 papers that were different and were all beginning to focus on the same thing called behavioral economics. We worked together even though I became the dean of the school in 1962 and it was a really exciting time. By that time we had finished the book and it was published in 1963. . . . That is really how ‘The Behavioral Theory of the Firm’ got started.13

It was to be a friendship that lasted until Cyert’s death (March 1998). Their first coauthored paper, ‘Organizational Behavior and Pricing Behavior in an Oligopolistic Market’ was published in the American Economic Review in 1955, and about seven years later they completed The Behavioral Theory of the Firm. Their last collaborative work was the ‘Epilogue’ to the second edition of that work, published in 1992.14 Many of their conversations would take place behind the auditorium in GSIA, during lunch, ‘so noone could find us’, March recalled. Occasionally, conversations on the theory of the firm would continue at baseball games while watching the Pittsburgh Pirates play.15

Richard Cyert Richard Michael Cyert (1921–98) was born on 22 July 1921 in Winona, Michigan. He was educated at the University of Minnesota and graduated in economics in 1943. After serving as officer in the US Navy for three years during the Second World War, Cyert entered 13

Interview with Richard M. Cyert. For a discussion of the historical roots of A Behavioral Theory of the Firm model, see Augier and Prietula (2007). 15 Interview with James G. March. 14

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graduate school Columbia University, New York, in 1946. He completed his degree in 1951. He received many rewards and honorary memberships for his works and was until his death President Emeritus and R.M. and M.S. Cyert Professor of Economics and Management at Carnegie Mellon University. Cyert came to Carnegie Mellon University (then Carnegie Institute of Technology) in 1948 where he later became Dean of the Graduate School of Industrial Administration (GSIA) (1962–1972) and President (1972–1990) of the university. Even when taking on his leadership duties as a Dean and President, he remained very active in publishing and research during these periods. Cyert came to Carnegie Mellon as an instructor of economics, then Assistant Professor of Economics and Industrial Administration, Associate Professor and Head of the Department of Industrial Management, Professor and the Dean of the Graduate School of Industrial Administration and President of Carnegie Mellon University. Despite his other important contributions, the main work of his that stands out (at least when it comes to the field of organizations and management) is Behavioral Theory of the Firm.

Behavioral Theory of the Firm The particular set-up for A Behavioral Theory of the Firm was a little different than for Organizations. While both grew out of the Ford Foundation’s concern for behavioural theory, Organizations was largely written by two people, Simon and March (with the assistance of Harold Guetzkow), whereas A Behavioral Theory of the Firm was a truly collaborative effort, led by Cyert and March, assisted by graduate students such as William Starbuck, Edward Feigenbaum, Julian Feldman, and Oliver Williamson. Perhaps this difference in set-up was as much a function of the growth of GSIA than anything else; by the time A Behavioral Theory of the Firm got started, there were more students around to work on the projects. A Behavioral Theory of the Firm was also more distinctly oriented towards economics. The authors wanted to present a theory of the firm that was not so much an alternative to the neoclassical theory of the firm as it was an attempt to develop a theory that could be used to study decision-making in firms, not just comparative statistics, as in mainstream price theory.16 At the centre of A Behavioral Theory of the Firm is the idea of the firm as an adaptive political coalition (also presented in March 1962), a coalition between different individuals and groups of individuals in the firm, each having different goals and hence the possibility of conflict of interest. ‘Since the existence of unresolved conflict is a conspicuous feature of organizations’, the authors stated, ‘it is exceedingly difficult to construct a 16 As Cyert and March noted: ‘Ultimately, a new theory of firm decision making behavior might be used as a basis for a theory of markets, but at least in the short run we should distinguish between a theory of microbehavior, on the one hand, and the micro assumptions appropriate to a theory of aggregate economic behavior on the other. In the present volume we will argue that we have developed the rudiments of a reasonable theory of firm decision making’ (1963, p. 16).

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useful positive theory of organizational decision making if we insist on internal goal consistency. As a result, recent theories of organizational objectives describe goals as the result of a continuous bargaining-learning process. Such a process will not necessarily produce consistent goals’ (1963, p. 28). Another insight from the behavioural theory of the firm is the idea of the firm as an adaptive system, whose experience is embodied in a number of ‘standard operating procedures’ (routines): procedures for solutions to problems which the firm in the past has managed to solve. As time passes and experience changes, the firm’s routines change through processes of organizational search and learning. As a result, the firm is seen not as a static entity, but as a system of slack, search, and rules that changes over time in response to experience, as that experience is interpreted in terms of the relation between performance and aspirations. Elements of this view of the firm can now be found in modern developments, such as transaction cost economics (Williamson 1986, 1996, 2003) and evolutionary theory (Nelson and Winter 1982; Dosi and Marengo 2007; Dosi 2004). One of the reasons that the Behavioral Theory of the Firm is important is that it demonstrates that decision-making in organizations can be studied in detail; and provides a model that has been followed by many others. In addition to initiating new areas of research on the foundations of organizations, it also influenced significantly several other areas in economics, such as transaction cost economics, evolutionary economics, and computational modelling. One indication of the early importance of A Behavioural Theory of the Firm to economics is seen by the reviews it received at the time by economists.17 A Behavioral Theory of the Firm received generally positive contemporaneous reviews by economists and in economics journals (Boulding 1964; Day 1964; Winter 1964; Livesey 1964). Kenneth Boulding observed that the book ‘reports some of the most lively and advanced research, and even thought, in this field to date’ (Boulding, 1964, p. 592). In a similar vein, Sidney Winter noted: this book delivers a major blow to that battered but hitherto unshaken intellectual construct, the theory of the profit-maximizing firm. Its importance derives from the fact that it presents a well-elaborated alternative theory that stands up well under the tests of both systematic and causal empiricism, rather than from any novelty in the criticisms it levels against orthodoxy. . . . Those who have not heard the distant rumblings of the ‘behavioral revolution’ will be surprised at the momentum it has achieved. The final verdict cannot be predicted, but this book should at least convince most economists that the revolutionaries bear watching. (Winter 1964, p. 148)

Richard Day added: It is inevitable that economic theory, when used to explain and predict the activities of real going concerns in agriculture and industry, should undergo a radical reorientation. From a concern with the substance of production and rational choice, emphasis has shifted to processes of production and decision making. . . . The authors

17 These two quotations below refer to the early reception of the book. For modern indications of the importance of behavioural theory, see the contributions in the special issues mentioned above.

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provide a convincing argument for giving organizational structure and behavior a prominent place in the theory of the firm. . . . the book should be read by every serious student of microeconomics. (Day 1964, p. 462)

Despite the stronger influence of economics in behavioural theory of the firm, the books, however, also had many similarities. They were both written in a setting in which the interaction between March, Simon, and Cyert was very strong. So the ideas therefore merged a lot. In retrospect, March thinks of the two books as having different objectives, more than different ideas. March and Simon was an attempt to create an inventory; to organize everything known about organization theory, whereas Cyert and March was much more oriented towards finding something relevant to say about the theory of the firm. The latter focused on issues such as problemistic search; it focused on the relevance of learning to the theory of the firm. A more substantial difference, perhaps, is that, although there’s at least one chapter on conflict of interest in Organizations, it was much more central to A Behavioral Theory of the Firm. Also, although March and Simon (1958) is predominantly a descriptive theory, it also makes occasional forays into the prescriptive domain, more than does Cyert and March (1963). However, the idea of organizational slack is more important to Cyert and March (1963) than it is to March and Simon (1958), as is the idea of uncertainly avoidance. On the other hand, classical issues such as satisfaction, planning, and motivation are important ingredients in March and Simon (1958), but less so in Cyert and March (1963). But in both of these works, March and his early co-authors thus proposed to include a more inclusive range of limitations on human knowledge and human computation that prevent organizations and individuals in the real world from behaving in ways that approximate the predictions of neoclassical theory. For example, decision-makers are sometimes confronted by the need to optimize several, sometimes incommensurable, goals (Cyert and March 1963), goals that are unclear, changing, and to some degree endogenous (March and Olsen 1976; March 1978). Furthermore, instead of assuming a fixed set of alternatives among which a decision-maker chooses, March postulated a process for generating search and alternatives and analysing decision processes through the idea of aspiration levels (March and Simon 1958), a process that is regulated in part by variations in organizational slack (Cyert and March 1963). These are all themes deeply embedded in today’s work in organization theory and strategy (Teece et al. 2002).

Cyert’s later work When the Behavioral Theory of the Firm was published, Cyert became the Dean of GSIA, but he continued (as did March and Simon) working within behavioural economics. Cyert also collaborated with Robert Trueblood and Morris Degroot. With Trueblood he worked on statistical sampling methods and statistical decision theory (Trueblood and Cyert 1957). And in the late 1960s, Cyert began working with Morris DeGroot who

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was trained in Baysian statistics. They published their first paper in 1970 and their book was published in 1987 (Cyert and Degroot 1987). Most people would probably not be inclined to equate ‘Baysian’ economics with ‘behavioural’ or ‘managerial’ economics. But in an important way Cyert’s approach to Baysian economics was both a natural outgrowth of his work with March on behavioural economics and a contribution to behavioural economics itself (Day and Sunder 1996; Augier and March 2001). The argument that Cyert’s work on Baysian economics can be seen as a contribution to behavioural economics is twofold. First, in doing this kind of work, Cyert was interested in building a theory of real economic behaviour by taking uncertainty into account (Cyert 1970). This move is consonant with modern behavioural emphasis on uncertainty and behavioural aspects of economics. Second, he built on his work with March and the idea of organizational learning. An important example of how learning can contribute to the development of Baysian economics is found in Cyert’s work on adaptive utility. Noticing the observable difference between assumed fixed utility of decision-making to the observed choices, Cyert wanted to apply the concept of learning to the concept of utility in such a way that changes in utility functions over time (as a result of learning) could be accounted for. This intertemporal aspect of learning is clearly a behavioural idea. During his ten years as the Dean of the GSIA and eighteen years as the President of Carnegie Mellon University, Cyert applied economics, particularly economics and strategy, to the management of organizations of higher education. Under Cyert’s direction, the GSIA became a model institution for other schools in the US and in Europe. Cyert believed in a close relationship between university and industry, and among his goals as a university president was to improve the quality of the university and to develop a strategy for doing so within a balanced budget. This was not an easy task, but due to his knowledge of organization theory of management practice, he managed to achieve his goals and to bring Carnegie Mellon University onto the research map as a cutting edgeresearch institution. In 1990 Cyert edited a book on university management, The Management of Nonprofit Organizations. The book has several essays written by him in which he summarizes his approach to managing universities, drawing both from his training as an economist and from his experience as a dean and a university president. A central basis for his writings on management is a distinction between the role of economics as an instrument for improving economic behaviour and its role as a description of that behaviour (Augier and March 2001). Cyert tried to keep the two aspects of economics separate. He saw the principles of economics as providing much poorer descriptions of economic action than guides to improving it. Cyert maintained that economics needs to be behavioural in order to describe behaviour, but as a contributor to management thought, Cyert was a relatively traditional economist. He described his goals as an academic administrator as being to improve the quality of the university and to develop a strategy for doing so with a balanced budget. He advocated the application of economic analysis and decision theory to problems of firms and universities. And he recommended the application of conventional economic notions of marginal analysis and comparative advantage, and the monitoring of behaviour and performance measures.

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Although Cyert as a manager was an economist and thus deviated a little from the principles he discussed in his work on the behavioural theory of the firm, he did not deviate from these in his understanding of how organizations work. Cyert believed that people make mistakes and that these are important parts of the description of actual human behaviour. He saw universities and other organizations as deviating from the economic idea of efficient organizations, and portrayed them as filled with conflict of interest and uncertainty about goals. As a manager, however, he saw these features of organizations as defects to be overcome or minimized.

Some themes in March’s other work In March’s work after Behavioural Theory of the Firm, the irrational and adaptive aspects of human behaviour become more, not less prominent. After finishing two foundational works in the field of organization studies (and after leaving Carnegie to go to Irvine), March’s own works (at least some of them) followed in the footprints laid out in Organizations and Behavioral Theory of the Firm (the field, to a large extend, did too, especially early on). He also became engaged in a project to identify some of the core research areas, disciplinary approaches, and methodologies involved in the study of organizations as a field: Shortly after completing these core books, March was the editor of the first Handbook of Organizations (March 1965). Writing in the 1970s and 1980s, March also started to develop the point that one of the most important aspect of behaviour and decision-making in organization was its essential irrationality. The early phrase (that was used in March, Simon, and Cyert’s work) of ‘bounded rationality’ did capture some of that, but March was interested in exploring, not only the constraints on decision-making that the less-than-fully-rational behaviour constitutes, but also the more positive implications, thus understanding both how limits to rationality constrain as well as enable certain decision-making behaviours (the issue of learning—as well as identity and rules driven behaviours—for example, result because of human irrationalities, not despite them). The language of economics (and much of political science, and even rational choice sociology), which would have one believe that human behaviour is all about maximizing utility (and ultimately to predict behaviour of agents), seemed to March to gain its persuasive force from a false analogy between theory and the world. People and organizations are forced by the logic of choice to adopt rational rules, but real world behaviour faces no such shaping environment, and the behaviour of organizations is therefore more readily explicable as a phenomenon of disciplines in addition to just economics. This was the perspective at Carnegie which March carried with him to Irvine (and later Stanford) as he went on to further develop many of the Carnegie ideas and also became the Dean of the School of Social Science at UCI. Being a dean gave him the opportunity of trying to establish another interdisciplinary success story; a school without departments, with scholars from different backgrounds working with each other and across

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disciplines. It also, perhaps, helped develop March’s interest in the field of education as evidenced in his writings from that period (e.g. March 1975). While at Irvine, March worked on many parallel tracks. For example, March (along with Charles Lave) developed a set of ideas about the art of formal modelling in the social sciences (Lave and March 1975). Developed both as a class he taught at Irvine and a book, Introduction to Models in the Social Sciencesit showed his continuing interest in models.18 One student of the class (and reader of the book) reported that the class ‘dazzled me with insight after insight about how relatively simple logical and mathematical models of social phenomena like decision-making, diffusion through social networks, trial and error learning, and economic exchange could be assembled and exercised to make powerful predictions of micro and meso-level organizational outcome that could, in turn, be tested, and the models progressively refined’ (Levitt 2010, p. 223). And the work on the Handbook demonstrated (March 1965), not only March’s continuing interest in the field, but also a maturing of the field itself; the fact that the field was ripe for a handbook signals that it had already then elements of foundations and methods in place to become a more structured or systematic field of study. The Handbook represented thus an important step in the professionalization of the field of organizations. Exploring the potential of the field, March felt that it needed to be defined, now that his early work reflected on what kinds of things a field ought to have and what major ideas, foundations, and methodologies might be included in the study of organizations. And in fact, one can see those emerging structures reflected in the way March chose to organize the Handbook into sections of: Foundations, Methodologies, Theoretical— Substantive Areas, Specific Institutions, and Applications. Each of these sections had several chapters, often with contributions from authors from different disciplines within one section. For example, the section on ‘methodologies’ included a chapter by Richard Scott (sociologist) on ‘Field Methods in the Study of Organizations’ as well as a chapter by Kalman Cohen and Richard Cyert (economist) on ‘Simulation of Organizational Behavior’. Similarly, the section on ‘theoretical—substantive areas’ included a chapter by economist Thomas Marshack (on ‘Economic Theories of Organization’) and a chapter by social psychologist Harold Guetzkow (on ‘Communications in Organizations’). Several chapters also discussed its central topic (organizations) through the lens of several disciplines. For example, Donald Taylor (chapter 2) discusses the contributions of economics, psychology, and other approaches to studies on decision-making and problem-solving; a topic that is central to organizations. And a chapter (chapter 13) on ‘Interpersonal Relations in Organizations’ by Abraham Zaleznik discusses ideas from social psychology, sociology, and Freudian psychodynamic theories to illustrate the broadness and complexity of his topic. 18 Raymond Levitt (2010) notes that attending this class of March ‘fired him up’ to do applied social science research based on models of human behaviour, and also significantly influenced his subsequent work (‘pointed me down the intellectual path that I would follow or the next three decades’) (p. 223).

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The inter- as well as cross-disciplinary organization of the contributions to the Handbook reflected both March’s vision for the future then nascent field, as well as reflecting the then current state-of-the art of the field at the time. So, too, does the introduction to the Handbook where March notes that, despite coming from many different disciplines, the area of organization studies is developing a ‘shared language and shared set of concerns’. But he also mentions that the field had ‘a history but not a pedigree’ (p. ix). In searching for the structure of the intellectual genealogy of the field, March then identifies the books most frequently cited in recent work on organizations by sampling literature and citations within that literature. The books were selected on the grounds that they were concerned mostly with organizations; represented a variety of disciplines and methodological approaches; and were well respected (p. x). Two from six different disciplines were selected (sociology, anthropology, management, economics, political science, and psychology), and the references they cited resulted in a list of ‘ancestral books’ that were cited relatively frequently in at least two of the books. March also recorded the citation of these ancestral books in the sample of two from each discipline. The results, he suggested, illustrated some of the suggestions about the ‘immaculate conception’ of the field of organization studies (p. xii): that the roots were in basic social science books (rather than in organizations oriented books); the field had roots in different disciplines (and tended to cite from more than one); and the field was relatively young. (A similar illustration using March’s Handbook as well as more recent ones illustrated that the field has, not surprisingly, become older, but as it has matured, it has also distanced itself from the disciplines) (Augier, March and Sullivan 2005). March’s later work on institutional and political theory, developed especially after March came to Stanford, (March and Olsen 1989, 1995) saw institutions and organizations as fundamentally social in nature, embedded in the larger institutional and historical context of which they are part. Like the more general work, the work on political institutions emphasizes the inefficiency of history, the ways in which history is path dependent, and the ways in which action stems from social identities as much as from incentives. The notion that rules are central is brought to the fore through an emphasis on action as stemming, not from a calculation of consequences, but from matching a situation to rules of behaviour.19 Also, his focus on rule and identity-driven behaviour leads naturally to a concern with the ways in which rules change over time. In recent work with Martin Schulz and Xueguang Zhou, March has explored the development of rules through a quantitative study of rule change over an extended period of time (March, Schulz, and Zhou 2000). Another key theme in his later work is examining the problems of achieving a balance between ‘exploration’ and ‘exploitation’ (see, in particular, March 1991, 1996). Exploiting existing capabilities is full of rewards in the short run, but doesn’t prepare people for changes in technologies, capabilities, desires, tastes, and identities. For such preparation, 19 The ‘Stanford School’ of organizations draws more heavily on sociology than March’s own work (and than earlier in the field); see the contributions in Schoonhoven and Dobbin (2010). Many of the themes and sub-areas, however, are overlapping (such as learning).

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exploration is necessary. Exploration involves searching for things that might come to be known, experimenting with doing things that are not warranted by experience or expectations. March has advocated a ‘technology of foolishness’ (1971) and advises us to engineer choice in such a way as to strike for a balance between exploration and exploitation (1991, 1996), avoiding traps that lead to imbalance (Levinthal and March 1993). He also has examined the determinants of risk-taking behaviour, particularly the ways in which risk-taking is a situational (March 1988, 1991, 1996; March and Shapira 1987, 1992). March has also has shown how issues posed for decision-makers in organizations become detached from the problems that generated them and instead attached to a variety of special interests of particular organizational units and individuals. This theory can help explain how business organizations are sometimes unable for long periods of time to face and resolve problems that appear to outside observers to be critical for their survival and success. Throughout March’s work, a central question has been the way in which organizations and their decision-makers deal with and resolve uncertainties and ambiguities, both in goals and preferences, and in the environments with which organizations are surrounded. As he emphasized in an article published in The Bell Journal of Economics:20 Rational choice involves two kinds of guesses: guesses about future consequences of current actions and guesses about future preferences for those consequences . . . Neither guess is necessarily easy. Anticipating future consequences of present decisions is often subject to substantial error. Anticipating future preferences is often confusing. Theories of choice under uncertainty emphasize the complications of guessing future consequences. Theories of choice under conflict or ambiguity emphasize the complications of guessing future preferences. (pp. 268–9).

Such foundational and path-breaking ideas have been central to developing organization theory as well as certain subfields within economics and management.

Conclusion The idea of rational action starts from the idea that individuals should not make systematic mistakes. Agents are not stupid: they learn from their mistakes and draw intelligent inferences about the future from what is happening around them. Various ideas originating from the (broad) concept of bounded rationality underpin many modern developments in research on organizations. Although Herbert Simon was the first promoter of bounded rationality and the early view was embedded in the work of Organizations

20 The continuing influence of March (1978) is indicated by its citations: it has 447 cumulative citations in the ISI Web of Knowledge (by 25 January 2008).

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(March and Simon 1958), the initial focus on methods for improving the behaviour of boundedly rational agents subsequently changed (in particularly in March’s work) to accommodating (and perhaps even expanding) the boundaries of rationality, rather than trying to fix them. It was this focus which led March to develop themes such as foolishness, intelligences, adaptive aspirations, and search to address their relation to organizational behaviour, and to an emphasis on learning—themes which are central to today’s field of organization theory. The development of March’s ideas and work has been (and continues to be) embedded in the institutional and social contexts where he works; with characteristic modestly, March has emphasized the ‘embeddedness’ of scholarship and research as a social activity (March 2007). The development of the future of the field, too, will depend on the scholarly communities surrounding the core ideas. As he noted: ‘Scholarship is a collective, not individual, enterprise. It depends critically on the institutions of scholarship and on the community of scholars’ (2007, p. 541).

References Argote, L. and H. Greve (2007): ‘A Behavioral Theory of the Firm—40 Years and Counting’. Organization Science 18(3): 337–49. Augier, M. and J. G. March: ‘Richard M. Cyert: The Work and the Legacy’. In M. Augier and J. G. March (eds.) (2001): The Economics of Choice, Change and Organization: Essays in Memory of Richard M. Cyert. Cheltenham, UK: Edward Elgar Publishing. —— (2011): ‘The Roots, Rituals, and Rhetorics of Change’. Stanford: Stanford University Press. —— and M. Prietula (2007): ‘Historical Roots of the A Behavioral Theory of the Firm Model at GSIA’. Organization Science, Vol. 18(3): 507–22. Boulding, K. E., (1964): ‘Book review: A Behavioral Theory of the Firm’. American Journal of Sociology 29, 592–3. Cohen, M. D., J. G. March, and J. P. Olsen (1972): ‘A Garbage Can Model of Organizational Choice’. Administrative Science Quarterly 17(1): 1–25. Cyert, R. M. (1970): ‘Implications for Economic Theory of a Behavioral Approach to the Firm’. In W. Goldberg (ed.): Behavioral Approaches to Modern Management. Goteborg: Foretagsekonomiske institutionen vid Handelshogshkolan I Goteborg. —— (ed.) (1990): ‘The Management of NonProfit Organizations.’ —— and J. G. March (1955): ‘Organizational Structure and Pricing Behavior in an Oligopolistic Market’. American Economic Review, 45(1): 129–39. —— W. R. Dill, and J. G. March (1958): ‘The Role of Expectations in Business Decision Making’. Administrative Science Quarterly, 3(3): 307–40. —— and J. M. March (1963): A Behavioral Theory of the Firm. Second edition 1992. Oxford: Blackwell. —— and M. H. DeGroot (1970): ‘Baysian Analysis and Duopoly Theory’. Journal of Political Economy 78(5): 1168–84. —— (1987): Bayesian Analysis and Uncertainty in Economic Theory. Totowa, NJ: Rowman and Littlefield. Day, R. H. (1964): ‘Review of A Behavioral Theory of the Firm’. Econometrica, Vol. 32(3). (July, 1964): 461–5.

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Day, R. and S. Sunder (1996): ‘Ideas and Work of Richard M. Cyert’. Journal of Economic Behavior and Organization 31(2): 139–48. Dosi, G. and L. Marengo (2007): ‘On the Evolutionary and Behavioral Theories of Organizations: A Tentative Roadmap’. Organization Science 18(3): 491–502. Gibbons, R. (2003): ‘Team Theory, Garbage Can, and Real Organizations: Some History and Prospects of Economic Research on Decision Making in Organizations’. Industrial and Corporate Change 12(4): 753–88. March, J. G. (1953): Autonomy as a Factor in Group Organization: A Study in Politics. PhD Dissertation. Published by Arno Press Inc. 1980. —— (1962): ‘The Business Firm as a Political Coalition’. Journal of Politics 24(4): 662–78. —— (1971): ‘The Technology of Foolishness’. In idem. (1988). —— (1978): ‘Bounded Rationality, Ambiguity and the Engineering of Choice’. Bell Journal of Economics 9(2): 578–608. —— (1988) (ed.): Decisions and Organizations. New York: Basil Blackwell. —— (2007): ‘Scholarship, Scholarly Institutions, and Scholarly Communities’. Organization Science, 18(3): 537–42. —— and M. Cohen (1974): ‘Leadership and Ambiguity’. Second edition. Boston: Harvard Business School Press. —— and J. Olsen (1995): Democratic Governance. New York: Free Press. —— —— (1989): Rediscovering Institutions: The Organizational Basis of Politics. New York: Free Press. Nelson, R. and S. Winter (1982): An Evolutionary Theory of Economic Change. Cambridge, Mass.: Bellknap Press. Schoonhoven, C. and F. Dobbin (2010) (eds): ‘Stanford’s Organization Theory Renaissance, 1970–2000’. Bingley: Emerald Ground Publishing. Teece, D., G. Pisano, and C. Boerner (2002): ‘Dynamic Capabilities, Competence, and the Behavioral Theory of the Firm’. In The Economics of Choice, Change and Organization: Essays in Honor of Richard M. Cyert, Augier M, March, J. G. (eds). Cheltenham: Edward Elgar. Trueblood, R. M. and R. M. Cyert (1957): Sampling Techniques in Accounting. Englewood Cliffs, NJ: Prentice Hall. Williamson, O. E. (1985): The Economic Institutions of Capitalism. New York: Free Press. —— (1996): ‘Transaction Cost Economics and the Carnegie Connection’. Journal of Economic Behavior and Organization 31(2): 149–55. —— (2003): ‘Examining Economic Organization Theory the Lens of Contract’. Industrial and Corporate Change, 12(4): 917–42. Winter, S. G. (1964): ‘Review of A Behavioral Theory of the Firm’. The American Economic Review, 54(2), Part 1. (March, 1964): 144–8.

chapter 19

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Introduction Geert Hofstede was born in Haarlem, the Netherlands, in 1928; he is married with four sons and ten grandchildren. He obtained his PhD at Groningen University in 1967 and founded and managed the Personnel Research Department of IBM Europe between 1965 and 1971. At various stages of his academic career he has held positions of Visiting Lecturer (MD, Lausanne), Professor (EIASM (European Institute for Advanced Studies in Management), Brussels), Visiting Professor (INSEAD, Fontainebleau), co-founder and first Director (IRIC (Institute for Research on Intercultural Cooperation), the Netherlands), Director of Human Resources (Fasson Europe, Leiden), Dean (Semafor Senior Management Program, Arnhem), Honorary Professor (University of Hong Kong), Senior Fellow (IRIC), and Professor (Maastricht University, from 1985 until his retirement in 1993). A Professor Emeritus of Maastricht University, he has since 1995 been an Extramural Fellow at CentER, the business and economics research institute of Tilberg University. He has received honorary fellowships at various academies and doctorates from many universities in the United States and Europe. In 2004 a bi-annual Geert Hofstede Lecture in the area of intercultural communication was established jointly by the University and the Hanze Hogeschool in Groningen. In 2006 the University of Maastricht inaugurated a Geert Hofstede Chair in Cultural Diversity, and in 2008 a group of six European schools and faculties (in Budapest, Groningen, Leeds, Milano, Sofia, and Vilnius), collaborating in a joint programme in international communication, named itself the Geert Hofstede Consortium. Hofstede is one of the major management thinkers in the field of cross-cultural studies. His ground breaking employee attitude survey conducted in the late 1960s and early 1970s within an American electronic company (IBM, initially nicknamed HRMES in the study) and its foreign subsidiaries led to findings the analysis of which made significant contributions to our understanding of employee management. It also inspired

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many students of organizations from various cultural backgrounds to replicate and build on it and enrich the cross-cultural management discipline. This chapter concentrates mainly on this study but also on other smaller related projects, which between them covered major issues on culture and organizations.

The IBM study and its main findings At the time of the survey, Hofstede was a member of a team that conducted the in-house company surveys, the results of which were not intended as a contribution to academia but as an aid to the company’s own internal aims. When the surveys were conducted, the company was perhaps at the height of its power as a multinational firm and had subsidiaries in about 100 countries. Further related data were subsequently collected at a business school in Switzerland, where managers from various countries attended executive courses. The data were collected twice, around 1968 and around 1972, and covered over 116,000 completed questionnaires from employees in 50 different occupations and 66 different nationalities. Each questionnaire contained about 150 questions dealing with values, perceptions, and satisfactions. Twenty different language versions were used. For technical reasons, the analysis of the data which led to Hofstede’s main propositions centred around the questionnaire responses from employees in forty countries. Of the organizations surveyed, thirty-nine were subsidiaries of the same large US-based multinational company. The fortieth was a former Yugoslav worker-managed organization which, among other activities, imported and serviced the US firm’s products in the former Yugoslavia. The data collected in the study were further validated and tested using findings of other cross-national surveys, including a number of representative samples of entire national populations. Data from other studies which measured economic and social indictors at the country level, such as GNP per capita, income equality, and percentage of the national budget of wealthy countries spent on development of poorer countries, were also used in the validation process. This process resulted in a total of some ninety significant and independent correlations (Hofstede 1980). Analysis of the data at country level, using only 20 of the 150 items on the questionnaire, led to a grouping of the work-related value items into four ‘ecological dimensions’ on the basis of theoretical relevance and the statistical relationship of individual country mean scores for forty countries. Four such dimensions of national culture were identified in the study (Hofstede 1980):

Power distance This dimension is conceptually related to ‘concentration of authority’ (centralization). It indicates the extent to which a society accepts that power in institutions and organizations is distributed unequally. This is reflected just as much in the values of the less powerful

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members of the society as in the values of the more powerful ones. Some national and regional cultures are characterized by large inequality, with power concentrated in the hands of a small and permanent elite, centralized organizations with tall, hierarchical pyramids, and restricted upward communication. Others are characterized by less inequality, more social mobility, less concentration of power in the hands of a small elite, decentralized organizations with flatter hierarchies, and upward communication that is relatively free.

Uncertainty avoidance This is related to ‘structuring of activities’ (formalization, specialization, standardization) and indicates a society’s lack of tolerance for uncertainty and ambiguity. This expresses itself in higher levels of anxiety and energy releases, a greater need for formal rules and absolute truth, and less tolerance for people or groups with deviant ideas or behaviours. Some cultures represent higher levels of activity and personal energy. The more active cultures tend to apply more specialization, formalization and standardization in their organizations. They put a higher value on uniformity and are less tolerant of, and interested in, deviant ideas. They tend to avoid risky decisions. The less active cultures attach less importance to formal rules and specialization, are not interested in uniformity, and are able to tolerate a large variety of different ideas. They more easily take risks in personal decisions.

Individualism–collectivism Individualism refers to a loosely knit social framework in society where people are supposed to take care of themselves and of their immediate families only; collectivism to one in which they can expect their relatives, clan or work organization to look after them. More collectivist societies call for greater emotional dependence of members on their organizations. In a society in equilibrium the organizations in turn assume a broad responsibility for their members.

Masculinity–femininity The predominant pattern of socialization in almost all societies is for men to be more assertive and for women to be more nurturing. Various data on the importance of work goals show near consistency on men scoring advancement and earnings as more important, women scoring quality of life and people. With respect to work goals, some societies are nearer the masculinity end of the masculinity/femininity dimension, others nearer the femininity end. Together with a colleague, Hofstede (Hofstede and Bond 1984; Hofstede and Bond 1988) identified a fifth dimension, a result of two questionnaire surveys among a sample of students from ten and twenty-three countries respectively. This dimension, first termed

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Confucian Dynamism and then renamed as ‘Time Orientation’, and finally called ‘Longterm versus short-term orientation’, is argued to embrace two contrasting poles and distinguish ‘short-term oriented’ cultures from the ‘long-term oriented’ ones. A long-term orientation is mostly found in East Asian countries, in particular in China, Hong Kong, Taiwan, Japan, and South Korea. Hofstede’s colleagues, King and Bond (1985), argue that this has something to do with the Confucian traditions in these countries, which emphasize thrift and perseverance, virtues associated with long-term orientation. Some of these five dimensions were later refined or added to (Tayeb 1988; Schwartz 1992; Schwartz and Bilsky 1978; Schwartz and Bilsky 1990) and elaborated further (Trompenaars 1993; Triandis 1990; Triandis 1995). In addition to the four early dimensions proposed by Hofstede, which Tayeb replicated in her study, she proposed six further work-related aspects of national culture: ‘Perceived power’, ‘Tolerance for ambiguity’, ‘Commitment’, ‘Interpersonal trust’, ‘Expectations from a job’, and ‘Attitudes to management practices’. Triandis proposed a theory of individualism and collectivism that can be used both at cultural and individual or psychological levels. Schwartz and colleague presented a theory of universal structure of value that can be used to cluster cultures into different groups and explain their similarities and differences. Trompenaars developed a cultural model which consists of seven dimensions, five of which are grouped under ‘relationships with people’; the other two are concerned with time and environment’: ‘Relationships with people’: universalism versus particularism individualism versus collectivism neutral versus emotion specific versus diffuse achievement versus ascription ‘Attitudes to time’ ‘Attitudes to the environment’ In a later study (Hampden-Turner and Trompenaars 1994) the ‘neutral versus emotional’ dimension was replaced with another one which the authors called ‘equality versus hierarchy’. Trompenaars’ dimensions, although they are different from those of Hofstede’s, have been argued (Gately et al. 1996) to be conceptually related to ‘individualism’ and ‘power distance’. The main thrust of Hofstede’s research was a well-documented challenge to the so-called best practices, the proponents of which tended to ignore the environment in which organizations operated and argued for a universalism in management of organizations. Hofstede was not of course the first scholar who challenged the universalist approach. The effect of technology and industry on the ways in which organizations are managed had already questioned to some extent the notion of universal best practices (Woodward 1958; Harbison and Myers 1959). In addition, some researchers had started noting culture’s presence in, and effects on, organizations as far back as the mid-1960s (Crozier 1964; Haire et al. 1966). But we owe, amongst other things, the ‘dimensionalization’ of national culture, certainly in the comparative cross-cultural field, to Hofstede’s seminal study the early findings of which were discussed in a series of EIASM working papers (Hofstede 1976a;

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Hofstede 1976b; Hofstede 1977a; Hofstede 1977b; Hofstede 1978) and eventually culminated in the publication of his influential book Culture’s Consequences (Hofstede 1980).

The IRIC study Hofstede’s research into the American multinational company and the later project with Michael Bond (Hofstede and Bond 1984; Hofstede and Bond 1988) concentrated on national culture, culminating in the proposed five national cultural dimensions described above. In a separate project conducted in the 1980s at the Institute for Research on Intercultural Cooperation (IRIC) in the Netherlands, Hofstede and his colleagues focused on organizational culture and its constituent dimensions (Hofstede et al. 1990; Hofstede 1994). The study was conducted in twenty work organizations or parts of organizations in the Netherlands and Denmark. Comparing otherwise similar people, the authors found modest differences in values (in the sense of broad, non-specific feelings such as good and evil) between the two national cultures. Among organizational cultures, they found considerable differences in practices (symbols, heroes, rituals) for people who held about the same values. The organizational culture dimensions that the study identified were (Hofstede 1994):

Process-oriented versus result-oriented cultures Process-oriented cultures are dominated by technical and bureaucratic routines, whereas the result-oriented cultures are dominated by a common concern for outcomes. In result-oriented units everybody perceived their practices in about the same way; in process-oriented units there were vast differences in perception among different levels and parts of the unit.

Job-oriented versus employee-oriented cultures Job-oriented cultures assume responsibility for the employees’ job performance only, and nothing more; employee-oriented cultures assume a broad responsibility for their members’ well-being. According to the authors, the study showed that job versus employee orientation is part of a culture and not only a choice for an individual manager.

Professional versus parochial cultures In professional cultures the usually highly educated members identify themselves primarily with their profession; in the parochial ones the members derive their identity from the organization for which they work.

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Open system versus close system cultures This dimension refers to the common style of internal and external communication, and to the ease with which outsiders and newcomers are admitted. In the study, this dimension was the only one for which there was a systematic difference between Danish and Dutch units and, according to the authors, this shows that organizational cultures also reflect national cultural differences.

Tightly versus loosely controlled cultures This dimension deals with the degree of formality and punctuality within the organization; it is partly a function of the unit’s technology. However, the study shows that even with the same technology, units still differed on this dimension.

Pragmatic versus normative cultures This dimension describes the prevailing way (flexible or rigid) of dealing with the environment, in particular with customers. Units selling services are likely to be found towards the pragmatic (flexible) side; units involved in the application of legal rules towards the normative (rigid) side. However, as Hofstede himself admits, These six dimensions ‘can be used to describe most of the variety in organisational practices . . . but their research base in 20 units from two countries is too narrow to consider them as universally valid. For describing organizational cultures in other countries and in other types of organizations, additional dimensions may be necessary or some of the six may be less useful (Hofstede 1994: 160).

The Danish insurance company study In a later project, conducted in a large Danish insurance company, Hofstede (1998) examined, among other things, the issue of the relationship between organizational culture and organizational performance. Other researchers have also argued that an organization’s culture is an influencing factor on its performance (e.g. Denison 1990; Nicholaidis 1992). However, as Hofstede argues: Although nobody has found—or is likely to find—a simple one-to-one relationship of any aspect of organizational culture with organizational performance, there is little doubt that organizational culture affects performance; in the long run it may be the one decisive influence for the survival or fall of the organization—although

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this is difficult to prove, if only because the necessary longitudinal analyses are hardly feasible (Hofstede 1998: 491).

Business leaders’ goals study This collaborative project investigated the goals that business leaders pursue in fifteen countries. It used the data collected in a survey questionnaire conducted in the 1990s among junior managers and professionals attending evening MBA courses at local universities, a total of 1814 respondents (Hofstede et al. 2002). According to the study, a hierarchical cluster analysis of perceived goals divided the countries into seven clusters. The relative ordering of goals within these clusters suggested seven different archetypal business leader roles. Perceptions correlated significantly with national wealth, as well as with dimensions of national culture. The authors conclude: The results of our comparative study of perceived goals of successful business persons show that the national component in goals is real and robust. There are no globally universal business goals. Globalization is often more a slogan and wishful thinking than a reality. The national origin of an enterprise continues to matter; it matters precisely in one of the most profound issues in the management of the enterprise, the goals held by its leaders. An appeal to a shared rationality will not be enough. Nationality constrains rationality. (2002: 800)

The project does not make any original contribution to theory, but as the authors point out, it has implications for practice: In decisions about international ventures, this fact should be taken into account more seriously than is usually the case. Parties should think twice before entering any cross-national venture, and estimate the risks and cost attached to co-operating across their national borders. If they decide to go ahead they should devote sustained top management attention and high quality resources to monitoring and managing the consequences of goal discrepancies. (2002: 801)

Culture and medical communication project This collaborative study (Meeuwesen et al. 2009) investigated at a country level how cross-national differences in medical communication can be understood from the first four of Hofstede’s cultural dimensions (power distance, uncertainty avoidance, individualism/collectivism, and masculinity/femininity), together with national wealth.

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A total of 307 general practitioners and 5,820 patients from ten European countries participated in the study. Medical communication was videotaped and assessed using Roter’s interaction analysis system. Additional context information of physicians (gender, job satisfaction, risk-taking, and belief of psychological influence on diseases) and patients (gender, health condition, diagnosis, and medical encounter expectations) was gathered by using questionnaires. The study found that countries differed considerably from each other in terms of culture dimensions. The larger a nation’s power distance, the less room there was for unexpected information exchange and the shorter the consultations were. Roles were clearly described and fixed. The higher the level of uncertainty avoidance, the less attention was given to rapport building, for example, less eye contact. In ‘masculine’ countries there was less instrumental communication in the medical interaction, which was contrary to expectations. In wealthy countries, more attention was given to psychosocial communication. The four culture dimensions, together with countries’ wealth, was found to have contributed significantly to the understanding of differences in European countries’ styles of medical communication.

Other projects Hofstede’s other research projects were far smaller in scale and contribution in comparison with his earlier ones mentioned above, and some of them were simply replications of his earlier study in different contexts or reworking of earlier data (see, for example, Franke et al. 1991; Hofstede and Vunderink 1994; Hofstede 1996; Van de Vliert et al. 1999; Wildeman et al. 1999; Wennekers 2002; Hofstede 2004; Hofstede and McCrae 2004; Deschepper et al. 2008; de Mooij and Hofstede 2010; Hofstede et al. 2010).

Observations on the IBM study As was mentioned earlier, Hofsted has been involved in many research projects, and his long list of publications (over 240 articles and books to date) is a testimony to his outstanding scholarly achievements. However, it is his seminal project in the late 1960s and early 1970s which had a most significant impact on the management discipline. As Petrson (2007: 372–3) rightly points out, the study provided an integrative theory that international organization studies had lacked, and it did so by ‘providing a taxonomy of dimension for understanding culture, and by linking that taxonomy to an established theory of social functions. It provided enough theoretical insight into the nature of the culture dimension to use them to make predictions about how they would relate to other social phenomena’.

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The study subsequently stimulated, over the years, many cross-cultural studies which enriched that discipline along the way (see for example, Tayeb 1979; Tayeb 1984; Tayeb 1988; Shackleton and Ali, 1990; Søndergaard 1994 [recording 61 replications, and 274 citations in which Hofstede’s dimensions had been used as a paradigm]; Lowea 1996; Smith 1996; Winch et al. 1997; Merritt 2000; Metcalf and Bird 2004; Parboteeah et al. 2005; Garibaldi De Hilal 2006; Merkin 2006; Chui and Kwok (2008), Tang and Koveos (2008), Chakrabarti et al. (2009), Nielsen et al. 2009). See also Hofstede (2010), Maseland and van Hoorn (2009) and Shi, X-m. and Wang, J-y (2011) in connection with comparisons between Hofstede’s dimensions and those of the Global Leadership and Organizational Behavior Effectiveness project (GLOBE). Hofstede himself describes and cites a number of large-scale replications covering between fifteen and thirty-two countries, on country elites, employees of other organizations, airlines, and consumers, on civil servants, and on employees of a multinational bank. He points out that the replications usually confirm most but not all the dimensions and that different replications confirm different dimensions (Hofstede 2001; Hofstede 2002). The study has attracted criticisms as well as replications and support (see for example, Jaeger 1983; Tayeb 1988; Søndergaard 1994; Tayeb 1994; Yeh and Lawrence 1995; Smith et al. 1996; Tayeb 1996; Fang 2003). Some of these criticisms have been quite harsh, and others more balanced. As a sample representing the range, five sets of comments by Portwood 1982, Triandis 1993, McSweeney 2002, Peterson 2003 and those by the present author are cited below. After the publication of the original edition of Culture’s Consequences in 1980, Portwood commented on it thus: The book can be evaluated from three separate perspectives, for it is at once a research report, a reference work, and a commentary on the field. As a research effort, it has several advantages over much of the existing research deriving primarily from the size and scope of the study and from Hofstede’s sensitivity to the problems inherent in conducting research across cultural boundaries. It does have some limitations, however, the most critical apparently the fact that the HERMES data set was generated from employees of a single multinational corporation located in forty different countries. The risk in this type of study is that selection or socialization may create artificial homogeneity in the data. This concern is at least partially relieved by the similarities found between the HERMES data and findings of other, unconnected studies. Another limitation is that implications drawn concerning the impact of culture on organization and individual behavior are generated from logic rather than hard evidence. A significant and worthwhile extention of this research would be the testing of these ‘hypotheses’ concerning culture’s influence. In spite of these limitations, however, the study does make several contributions in the areas of cultural definition and mapping and of theory building. For these contributions it must stand as one of the most significant comparative organizational studies to date. (Portwood 1982: 129)

Triandis offers his comments on the basis of the 1991 edition of Hofstede’s book: An evaluation of Hofstede’s work must start with the realization that, first, values are only one aspect of culture, and the focus on ‘software’ in this book’s title misses

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many complexities. Second, his IBM study’s data were collected ‘for reasons internal to the corporation, not for studying cultural differences’ (p. 257). He linked them with UN and other statistics in ways that made sense, and the study tapped ideas that have been in the social science literature for some time, such as collectivism– individualism’s correspondence with Durkheim’s two kinds of solidarity, and similar distinctions by Toennies, Weber, Parsons, Linton, and others. The present book makes no attempt to link with the recent social science literature on the dimensions that are discussed. Its 200 or so references reflect Hofstede’s own work or the work of those who provided useful examples for his dimensions. His discussion of this work is sound, as long as one realizes that the sample of values was not theoretically obtained, and there are better examples of cross-cultural work on values (e.g. Schwartz, 1992). Hofstede also suffers from too uncomplicated a presentation of some of the contrasts. For example, it is too simple to talk about shame vs guilt cultures (p. 60); it is preferable to argue that shame may organize more of the social life than does guilt in the former, and guilt organizes more of the social life in the latter, but both mechanisms are present. In addition, the neglect of the literature that relates to his discussion of collectivism and individualism (e.g. Gudykunst and Ting-Toomey 1988; Triandis et al. 1990; Markus and Kitayama 1991) leads to the presentation of a partial picture. The over-dependence on affluence as the determinant of individualism misses an opportunity to explain such phenomena as the shift from collectivism to individualism in the Arctic after television became available. Finally, too often a correlation between an attribute of culture and some other attribute is presented, at least implicitly, as if one causes the other, when it is equally plausible that they are both caused by a third variable. Yet I do recommend this book. For those who do not know his earlier book it is an easy and up-to-date introduction to that study, and as one of my graduate students said: ‘Fascinating!’ The last chapter, with implications, makes a lot of sense and even contains some wisdom concerning how parents, organizations, and governments need to act to take into account cultural differences. (Triandis 1993: 133–4)

McSweeney’s (2002) criticisms are by far the harshest of all comments ever made on Hofstede’s work. The main thrust of his criticisms are two-fold: the study’s research methodology (and the analysis of the findings) and the characterization of national culture. He argues that a large number of respondents does not of itself guarantee representativeness, but that in any event a closer examination of the number of questionnaires used by Hofstede [116,000 from the two 1968–9 and 1971–3 surveys] reveals that the average number per country was small, and that for some countries it was minuscule. In only six of the included countries were the number of respondents more than 1,000 in both surveys. Furthermore not all the questionnaires were used—although the survey covered sixty-six countries, the data from only forty countries were used in characterizing national cultures. He goes on to say that the scale problem of Hofstede’s research is radically compounded by the narrowness of the population surveyed. The respondents were exclusively from a single company, IBM, and covered all employees, but the data used by Hofstede to construct national cultural comparisons was largely limited to responses from marketing-plus-sales employees.

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Later in the paper he asserts that: Although the management literature includes work as good as the best in other social science disciplines, the on-going unquestioning acceptance of Hofstede’s national culture research by his evangelized entourage suggests that in parts of the management disciplines the criteria for acceptable evidence are far too loose. . . . . . Perhaps the quantity of data and the ‘sophistication’ of its statistical analysis impress some. But fallacious assumptions necessarily lead to inaccurate empirical descriptions regardless of what quantity of data and statistical manipulation is used. . . . Hofstede’s apparently sophisticated analysis of extensive data necessarily relies on a number of profoundly flawed assumptions to measure the ‘software of the mind’. . . . . . Hofstede’s claims are excessive and unbalanced; excessive because they claim far more in terms of identifiable characteristics and consequences than is justified; unbalanced, because there is too great a desire to ‘prove’ his a priori convictions rather than evaluate the adequacy of his ‘findings’. (McSweeney 2002: 111–12)

Regarding the characterization of national culture, McSweeney challenges five assumptions that he argues lie behind the following quotation from Hofstede: The only thing that can account for systematic and consistent differences between national groups within such a homogeneous multinational population is nationality itself . . . Comparing IBM subsidiaries therefore shows national culture with unusual clarity. (1991: 252)

These assumptions are (1) three discrete components [organizational, occupational, and national cultures], (2) the national is identifiable in the micro-local, (3) national culture creates questionnaire response differences, (4) national culture can be identified by response difference analysis, and (5) it is the same in any circumstances within a nation. Having extensively discussed the above assumptions and other related issues, McSweeney goes on in effect to dismiss Hofstede’s characterization of national culture and indeed the study as a whole: The limited characterization of culture in Hofstede’s work; its confinement within the territory of states; and its methodological flaws mean that it is a restricter not an enhancer of understanding particularities. The identification claims are fundamentally flawed and the attribution of national level actions/institutions to national cultures is an easy but impoverishing move. . . . . . If the aim is understanding then we need to know more about the richness and diversity of national practices and institutions–rather than merely assuming their ‘uniformity’ and that they have an already known national cultural cause. . . . Extreme, singular, theories, such as Hofstede’s model of national culture are profoundly problematic. His conflation and uni-level analysis precludes consideration of interplay between macroscopic and microscopic cultural levels and between the cultural and the non-cultural (whatever we choose to call it). Instead of seeking an explanation for assumed national uniformity from the conceptual lacuna that is the essentialist notion of national culture, we need to engage with and use theories of action which can cope with change, power, variety, multiple influences–including the non-national–and the complexity and situational variability of the individual subject. (McSweeney 2002: 112–13)

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Peterson’s (2003) comments are made in connection with his review of the 2001 edition of Culture’s Consequences. Fairly early on in the article he defends the study against some well-known criticisms: The original data set and the measures certainly continue to generate controversy. The pattern of the controversy has been long fixed. Critics continue to question things like the heavy reliance on data from a single company, the increasing passage of time since the data were collected in the late 1960s and early 1970s, and what many find to be a nonintuitive link between the questionnaire items and culture dimensions. Central to Hofstede’s strategy for defending the original measures is a thorough process of correlating them with other data sets that include multiple nations… The most persuasive evidence for validity and continued utility comes from a few direct replications and some large-scale studies using values measures similar to Hofstede’s… The validation strategy also includes showing correlations with various demographic characteristics of nations, a number of which are used to construct plausible ‘culture’s antecedents’ arguments. For example, wealth produces individualism, and ‘as long as the wealth of nations grows, the individualism of those nations’ citizens will increase’ (pp. 254–5). More generally, Hofstede provides evidence for moderate culture change in individualism/collectivism, less in power distance, less still in uncertainty avoidance, and least in masculinity/femininity. Despite change, the ranking of nations remains relatively stable. (Peterson 2003: 128)

The author then goes on to express some of his own concerns. I have several concerns about the book. One is that in terms of evidence for good overall validity for the set of nations taken as a group, some particular data points are probably misleading. This is the same as recognizing that data about any given individual may be problematic even in a well-validated selection instrument. For international management scholars, it implies that one should take care when relying exclusively on Hofstede’s database to provide a theoretical context for research about a single nation or about culture differences between a small number of nations. Several studies of culture distance subtract the scores for a host of nations in which a multinational corporation (MNC) has overseas operations from the culture scores for the nation where the MNC has its headquarters. If this is done, the reliability of the culture distance scores are disproportionately affected by the accuracy of a single data point—that of the nation where the MNC has its headquarters. For example, I have some trouble being confident about the modest level of power distance reported in Japan, unless IBM systematically attracted Japanese employees who would have been misfits in Japanese companies. I would contest that many analyses of Japanese culture fit my own observation of quite a large power distance. Is my subjective assessment on this point unsystematic and biased? Perhaps. The good news is that Hofstede’s review actually helps to answer questions like mine about the validity of any single nation’s score on a particular dimension by directing our attention to other multiple-country projects. It also helps identify multiple sources of information for pinning down the culture of any single nation or small set of nations that scholars wish to compare. (Peterson 2003: 129–30)

The present author’s own observations on Hofstede’s study are based principally on my own 1979 and 1984 replications of the study and also later works.

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National culture versus organizational culture One of the problems that most cross-cultural studies experience is the extent to which one can disentangle the influence of national culture from that of the organizational culture on employees’ work-related values and attitudes and working practices. This, as Evan (1975) points out, limits the extent to which one can claim the variations found in comparative studies are due to societal culture, because it could be due to organizational sub-culture. Hofstede’s study was a major exception at the time, in that it was carried out in the subsidiaries of a single multinational company and the organizational culture was to some extent held constant. However, this meant that the study suffered from an inevitable bias, that is, American ownership and types of job. As a consequence, the samples are not representative of their respective countries (see also below). Instead, the findings map out the relative positions of different countries and occupations. The IRIC study described above also shows how difficult it is to disentangle the influence of national culture on employees’ work-related values, attitudes, and practices from that of organizational culture: All in all, having gone out to study organizational value differences and having done this in two countries for reasons of convenience, we seem to have mainly caught national value differences. (Hofstede et al. 1990: 300)

Dimensionalization of national culture Culture is a woolly concept, almost impossible to observe and ‘measure’ all its visible and hidden corners; like the air that we breathe, we cannot see or weigh it, we cannot put our arms around it and feel its strength and power, but we know it is there. Many researchers, certainly those who work within a positivist paradigm, have attempted to measure it. To do that, one obvious course of action would be to break culture down to what are thought to be its components, or ‘dimensions’ (Tayeb 1996). As mentioned earlier, we owe the ‘dimensionalization’ of national culture to Hofstede’s seminal study. The main advantage of breaking down culture into its constituent characteristics is that it facilitates comparisons across cultures: one looks at the same trait and observes similarities or differences among the nations under investigation or even notes its absence from some cultures altogether. However, by putting culture into neat, sometimes unconnected, little boxes, we are in danger of losing the big picture. National culture cannot really be simplified and reduced to a handful of boxes into which some nations are placed and from which others are excluded. To do this will give one only a myopic and incomplete picture of a nation. Neither is it possible to attribute a certain degree of cultural characteristics to a nation and their opposites to others, and then pigeon-hole them there forever (Tayeb 2001).

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Take the collectivism/individualism dimension, for example. There seems to exist in each of us, not only as individuals but also as members of our respective coherent cultural grouping, a little bit of both individualism and collectivism, which could surface from time to time and in different circumstances. The French are an individualistic nation but their emphasis on having social policies, be it public transport or radio and television services, or shelter for the homeless, shows their collectivism and respect for common good. In the individualist United Kingdom a tragedy befalling for example a school in a small town brings the best of community spirit in all the citizens up and down the country. In the collectivist India, people can behave in a most individualistic, self-centred manner towards their fellow citizens, and sometimes just on the ground of caste membership or the degree of poverty and wealth. You need only to take a ride on a crowded train or walk in the streets to see how harshly some of the poor and low-caste members of the society are treated by others. Within the workplace Indian managers do not seem to show any signs of the collectivism which characterizes Indian culture in general (Tayeb 1988). Japanese culture, to give another example, is perceived by many both in Japan and in the rest of the world to be characterized by, among other things, a high degree of collectivism. However, Masakazu, a Japanese sociologist and an expert in aesthetics and drama, challenges this perception. Focusing on the question of individualism in Japanese culture, as opposed to the groupism that is commonly assumed to define it, Masakazu (1994) highlights the prominent role individualistic attitudes and strong personalities have played in the formation of Japan’s cultural traditions. With respect to another dimension, uncertainty avoidance, and drawing on Chapman and Antoniou’s (1994) research, one can argue that it is too simplistic to say that country A is lower on this dimension compared to country B. Country A may in fact be higher on uncertainty avoidance when it comes to driving habits (an uncertainty and anxietygenerating activity), but lower on sexual conduct expected of the young (another activity with an uncertain outcome), in comparison with country B. Attitude to power and authority is also highly situation-based: an Indian man might feel more powerful than his wife at home, but less so at work if he happens to be the director of a firm of which she is the owner-chairman. There may in fact be a whole host of complicated reasons why some people behave in one way under one condition, and in a different way under another (Tayeb 1996).

Sample and methodology The 1968/1972 project had other drawbacks as well. The research was entirely based on an attitude-survey questionnaire which is certainly the least appropriate, least desirable way of studying culture. Moreover, the respondents—employees of a multinational corporation’s subsidiaries—were an extremely narrow and specific sample of their countries’ populations. They belonged to the middle classes of their society, and the working classes and rural population were excluded from the sample. In addition, the

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company was a US one with a well-known strong organizational culture, which might well have ‘ironed out’ certain manifestations of local national cultures. There is some inconsistency in the ways in which the core items of the survey questionnaire have been formed into indices. For power distance and uncertainty avoidance indices we have percentages added up, subtracted, and multiplied by constant numbers; for individualism and masculinity indices it is the factor analysis which decides what items are included in each index. The indices themselves, moreover, are argued to be ‘ecological’ and, as such, are unsuitable for use in comparative studies where fewer than ten countries are investigated (Hofstede 1991). Also, the formulation of the questions which constituted the basis for these dimensions may have left other dimensions of cultural variation undetected. As mentioned above subsequent studies identified further culture dimensions. As indeed a later collaborative project by Hofstede and Bond identified a fifth dimension (Hofstede and Bond 1984; Hofstede and Bond 1988). In addition, Hofstede did not empirically investigate the relationships between the national cultural dimensions and the management styles and structures of the organizations whose managers participated in the study. The proposed relationships are conceptual and speculative. He arrived at his conclusions about the overwhelming influence of cultural factors on organizations on the basis of these speculations rather than ‘hard’ evidence. For instance, the study does not investigate or provide any information as to how each subsidiary of IBM whose employees’ attitudes and values were measured was organized. It shows, for example, that Iranian employees of the company scored differently on the four cultural dimensions from, say, the American ones, but there are no data about how the Iranian subsidiary differed from its American counterpart in its organizational structure and management style. Nor is there any information about the cultures of the Iranians and American peoples in general and how they compare, and whether or not the Iranian and American employees’ work-related attitudes and values are consistent with their respective cultures (Tayeb 1994). The absence of such information is of course understandable. As mentioned earlier, the study was originally an in-house company survey conducted on two separate occasions; it had not been planned in advance to investigate the effects of national culture on organizations and their members. As Hofstede himself points out: The data consisted of answers to questionnaires about employees values and perceptions of work situation that were collected in the context of two worldwide rounds of employee attitude surveys. Their use for studying differences in national cultures was an unintended, serendipitous by-product, for which the corporation opened its files of 116000 survey questionnaires collected between 1967 and 1973. (Hofstede et al. 1990: 287)

This particular issue of empirically investigating the effects of national cultural characteristics on employee attitudes and values on the one hand and on their work organizations on the other was addressed in Tayeb’s 1988 study, in which, among other things, the

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first early four dimensions of Hofstede’s project (1980) were replicated. In Tayeb’s study three independent surveys and interview programmes were conducted in England and India: national culture characteristics, employee work-related values, and attitudes in eight closely matched companies (in pairs) in each country, and the organizational structures and management styles of the same companies. The study was therefore able, through pre-data collection hypotheses and then their verification or rejection, to map out the ways in which national culture and non-cultural factors could eventually influence organizations. Hofstede has responded to some of the criticisms of his work (Hofstede 2001, Hofstede 2002) and acknowledged some of the limitations of the study as discussed in his own 1980 book. In his 2002 article, Hofstede responds specifically to McSweeney’s (2002) criticisms thus: The first edition of this book’s disrespect for academic borderlines paid off in a multidisciplinary readership. It also caused very mixed reviews: Some enthusiastic (e.g. Eysenck 1981; Triandis 1982; Sorge 1983), some irritated, condescending, or ridiculing (e.g. Cooper 1982; Roberts and Boyacigiller 1984). I had made a paradigm shift in crosscultural studies, and as Kuhn (1970) has shown, paradigm shifts in any science meet with strong initial resistance (Hofstede 2002: 1355). […] McSweeney’s criticism of my interpretation of survey data (his pages 100–6), if correct, applies to all survey and test-based cross-cultural studies, including those of Schwartz, Triandis, market researchers, sociologists, and political scientists around the world. All of these draw conclusions from central tendencies calculated from individual survey answers. There is no creative accounting in the way I treated my data, I followed common practice and moreover in the 1980 and 2001 books provided all the data by which others can verify my findings. What we social scientists all do is called statistical inference, but McSweeney is obviously unfamiliar with it (Hofstede 2002: 1361).

Conclusions We are living in a complex world, where peoples and countries are more than ever interdependent. Mass communication media and fast and far-reaching means of transport are bringing together people from various parts of the world closer and closer. The electronic revolution which started in the first half of the twentieth century and got on to an incredible speed in the late 1980s and the 1990s has contributed greatly to the shrinking of our world. Other technical and scientific discoveries and innovations have also left their imprints on our life styles. MNCs, especially those with global customer base and workforce play a significant part in this complex, fast-moving, and multi-faceted world. They sponsor innovations and apply scientific breakthroughs. Major MNCs are also in the forefront of the cutting-edge technology and innovation: they spend huge amounts of money on research, development, and design of their products. In the process not only do

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they produce and move goods and services around the world, they also transfer ways of doing things from one country to another and transform societies along the way as well. At the same time, and at a deeper level, people around the world preserve their cultural identity and values while embracing positive aspects of the so-called globalization and the escalation of business and cultural interaction among diverse peoples. In other words, the world is still a cultural patchwork with all the complexities that it entails. Understanding and recognizing other people’s values and fostering sensitivity to their ways of life are extremely crucial to the success of our social and business interactions. Hofstede’s immense role in this understanding and recognition in the field of management is indisputable. He opened up new horizons in the field and gave researchers a theoretical framework and practical research tools which could help them explain their findings via a new perspective. And managers of multinational firms are also as a result better equipped to understand the diversity of their employees. As Mead (1998) and Denny, (2000) observe, Hofstede has carried out the biggest and, almost certainly, one of the best studies of cultures. The strengths of his work in comparing cultures and applying cultural analysis to practical management problems and the importance and value of his work cannot be overstated.

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Nicholaidis, S. (1992). ‘Cultural Determinants of Corporate Excellence: The Impact of National Cultures on Organisational Performance’. Unpublished PhD thesis, University of Reading. Nielsen, C. S, Soares, A. M., and Machado, C. P. (2009). ‘The Cultural Metaphor Revisited: Exploring Dimensions, Complexities and Paradoxes through the Portuguese Fado’. International Journal of Cross Cultural Management, 9/3: 289–308. Parboteeah, K. P., Bronson, J. W., and Cullen, J. B. (2005). ‘Does National Culture Affect Willingness to Justify Ethically Suspect Behaviors? A Focus on the GLOBE National Culture Scheme’, International Journal of Cross Cultural Management, 5/2: 123–38. Peterson, M. F. (2003). ‘Review of Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations across Nations by Geert Hofstede 2001’, Administrative Science Quarterly, 48/1: 127–31. ——(2007). ‘The Heritage of Cross Cultural Management Research: Implications for the Hofstede Chair in Cultural Diversity’, International Journal of Cross Cultural Management, 7/3: 359–78. Portwood, J. D. (1982). ‘Review of Culture’s Consequences: International Differences in WorkRelated Values. By Geert Hofstede 1980’. Industrial and Labor Relations Review, 36/1: 129–30. Roberts, K. H. and Boyacigiller, N. A. (1984). ‘Cross-National Organizational Research: The Grasp of the Blind Men’, in B. L. Staw and L. L. Cummings (eds), Research on Organizational Behavior. Greenwich, CT: JAI Press, 423–75. Schwartz, S. and Bilsky, W. (1978). ‘Toward a Universal Psychological Structure of Human Values’. Journal of Personality and Social Psychology, 53/3: 550–62. ————(1990). ‘Toward a Theory of the Universal Content and Structure of Values; Extensions and Cross-Cultural Replications’, Journal of Personality and Social Psychology, 58/5: 878–91. Schwartz, S. H. (1992). ‘Universals in the Content and Structure of Values: Theoretical Advances and Empirical Tests in 20 Countries’, in M. Zanna (ed.), Advances in Experimental Social Psychology (vol. 25). New York: Academic Press, 1–66. Shackleton, V. and Ali, A. (1990). ‘Work-Related Values of Managers: A Test of the Hofstede Model, Journal of Cross-Cultural Psychology, 21/1: 109–18. Shi, X-m. and Wang, J-y. (2011). ‘Cultural Distance between China and US across GLOBE Model and Hofstede Model’. International Business and Management, 2/1: 1–7. Smith, P. B. (1996). ‘National Cultures and the Values of Organizational Employees: Time for Another Look’, in P. Joynt and M. Warner (eds.) Managing Across Cultures. London: International Thomson Business Press, 92–102. ——Dugan, S., and Trompenaars, F. (1996). ‘National Culture and the Values of Organisational Employees: A Dimensional Analysis across 43 Nations’, Journal of Cross-National Psychology, 27/2: 231–64. Søndergaard, M. (1994). ‘Research Note: Hofstede’s Consequences: A Study of Reviews, Citations and Replications’, Organization Studies, 15/3: 447–56. Sorge, A. (1983). Review of Geert Hofstede: ‘Culture’s Consequences’, Administrative Science Quarterly, 28: 625–9. Tang, L. and Koveos, P. E. (2008). ‘A Framework to Update Hofstede’s Cultural Value Indices: Economic Dynamics and Institutional Stability’, Journal of International Business Studies, 39/6: 1045–63. Tayeb, M. H. (1979). ‘Cultural Determinants of Organisational Response to Environmental Demands’. Unpublished M.Litt. thesis, University of Oxford.

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——(1984). ‘Nations and Organisations: A Comparative Study of English and Indian WorkRelated Attitudes and Values in Manufacturing Firms’. PhD thesis, Aston University. [An edited and shortened version of this thesis was published as a book in 1988 (see below).] —— (1988). Organizations and National Culture: A Comparative Analysis. London: Sage Publications. ——(1994). ‘Organizations and National Culture: Methodology Considered’. Organization Studies,15/3: 429–46. ——(1996). ‘Hofstede’, in M Warner (ed.) International Encyclopaedia of Business and Management, Vol. 2, London: International Thomson Business Press, 1771–6. ——(2001). ‘Conducting Research Across Cultures—Overcoming Drawbacks and Obstacles’. International Journal of Cross Cultural Management, 1/1: 113–29. Triandis, H. C. (1982). Review of Geert Hofstede: ‘Culture’s Consequences’. Human Organization, 41: 86–90. ——(1990). ‘Cross-Cultural Studies of Individualism and Collectivism’. in J. J. Bremen (ed.), Nebraska Symposium on Motivation 1989. Lincoln: University of Nebraska Press, 41–133. ——(1993). ‘Review of Cultures and Organizations: Software of the Mind. by Geert Hofstede 1991’. Administrative Science Quarterly, 38/1: 132–4. ——(1995). Individualism and Collectivism. Boulder, CO: Westview Press. ——McCusker, C., and C. Hui, H. (1990). ‘Multimethod Probes of Individualism and Collectivism’. Journal of Personality and Social Psychology, 59/5: 1006–20. Trompenaars, F. (1993). Riding the Wave of Culture. London: Economist Books. Van de Vliert, E., Schwartz, S. H., Huismans, S. E., Hofstede, G., and Daan, S. (1999). ‘Temperature, Cultural Masculinity, and Domestic Political Violence’. Journal of CrossCultural Psychology, 30/3: 291–314. Wennekers, S., Noorderhaven, N., Hofstede, G., and Thurik, R. (2002). ‘Cultural and Economic Determinants of Business Ownership across Countries’, in Bygrave, W. D., Autio, E., Brush, C. G., Davidsson, P., Green, P. G., Reynolds, P. D., and Sapienza, H. J. (eds.). Frontiers of Entrepreneurship Research. Massachusetts: Babson College: 179–90. Wildeman, R. E., Hofstede, G., Noorderhaven, N. G., Thurik, A. R., Verhoeven, W. H. J., and Wennekers, A. R. M. (1999). ‘Self-Employment in 23 OECD Countries: The Role of Cultural and Economic Factors’. Research Report 9811/E, Zoetermeer Neth.: EIM Small Business Research and Consultancy. Winch, G., Millar, C., and Clifton, N. (1997). ‘Culture and Organisation: The Case of Transmanche-Link’. British Journal of Management, 8/3: 237–49. Woodward, J. (1958). Management and Technology. London: HMSO. Yeh, R-S. and Lawrence, J. J. (1995). ‘Individualism and Confucian Dynamism: A Note on Hofstede’s Cultural Root to Economic Growth’. Journal of International Business Studies, 26/3: 655–70.

chapter 20

joh n pau l kot ter k arl moore and a lexandra k lein

Introduction John Kotter is one of the world’s most authoritative figures in leadership and change management. His best known work is dedicated to identifying and understanding the factors leading to success of significant organizational change, and also recognizing the most important problems that impede successful transformation. Kotter has also made considerable contributions to our understanding of leadership in general. He has accomplished this work as a scholar at the Harvard Business School (HBS), where he currently holds the title of Konosuke Matsushita Professor of Leadership, Emeritus, and in his consulting work with Kotter International. At 25 years of age, Kotter became a member of HBS’s faculty, and was granted tenure and full professorship at the age of 33, making him one of the youngest faculty members to make full professor at HBS. He has published eighteen books, of which most are benchmarks in academia and practice, setting the standard for change implementation and key aspects of leadership. His work remains largely unchallenged throughout management literature and doctrine, though in the course of this chapter we will identify a few of the more salient criticisms. The impact of his research on peers, students and, perhaps most importantly, business executives, earned him the distinction of being America’s foremost ‘leadership guru’, according to Business Week’s 2001 survey of 504 enterprises. Additionally, in 2009, at the age of 62, the American Society for Training and Development awarded the Lifetime Achievement Award to Kotter. In this chapter we will consider Kotter’s early years, review some of his most central publications/contributions, and finally summarize some of his most critical contributions.

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The early years John Paul Kotter was brought up in a small town in Michigan, where he attended elementary and high school. His family background did not predestine him for a career in management academia, as his father was raised in a destitute farmer’s family living in the Midwest. However, John showed academic promise from a young age and after high school was accepted at one of the world’s great educational institutions. Coming from the Midwest the move east to Boston to attend the Massachusetts Institute of Technology (MIT) was a considerable change in Kotter’s life. While initially intending to become a physicist, Kotter soon abandoned this plan, when he realized that his small-town highschool education had not provided him with the necessary foundation to complete physics studies at MIT. Instead, Kotter decided to study electrical engineering, one of MIT’s distinct strengths. However, rather than becoming a professional engineer, after graduating from MIT, Kotter moved across the Charles River to the Harvard Business School, where he earned a Doctorate of Business Administration (DBA) degree. His early research focused on labour economics, but he soon shifted to management studies, looking particularly at organizational behaviour. Early on in his educational career, Kotter displayed leadership capacity, being chosen as class president and valedictorian; later he was appointed the youngest head of Harvard’s Organizational Behaviour Department. We find it particularly encouraging that one of world’s greatest researchers and writers on leadership is also a leader in his own right.

Work ethic We believe that Kotter’s upbringing still influences his work ethic to this day, and the goals he pursues by researching leadership and change. Kotter’s Midwest upbringing during the 1950s and 1960s taught him to work hard and led him to strive toward being a positive influence on those around him, at no time taking success for granted. This foundation of humility helps explain Kotter’s decision not to seek the academic leadership positions he could have aspired to achieve (such as becoming Dean) as he realized that he did not have the necessary temperament to fulfil such duties. Instead, Kotter has focused on asking timely questions, and has continually worked to reach a wider audience with his answers. He has consistently emphasized the need to contribute to society through his work, rather than just address his fellow academics. As a result, Kotter’s research has focused on the progression businesses need to undertake to keep up in an increasingly fast-paced world. In recent years, Kotter and his wife, Nancy Dearman, have worked closely together. Kotter is now a Professor Emeritus, and focuses much of his time on his change/leadership consulting firm, Kotter International. We will return to Kotter International later in this chapter.

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Research habits Arguably, Kotter’s research could be criticized because he has never gained full-time experience in the business world. Indeed, his findings have all stemmed from his academic career and have been part of his educational mission; however, Kotter appears to know how to burst the ivory tower ‘bubble’ which afflicts many university professors. His ideas are founded on personal encounters and in-the-field research, listening to people whom he considers knowledgeable on current and future developments. Kotter pays close attention to patterns and the people behind them, and goes on to conceptualize the narratives involved, examining them systemically. His observations frequently lead him to thought-provoking questions that he finds worth investigating/exploring. As an excellent academic, Kotter proceeds to answer these question on a foundation of what has been learned in previous scholarly research. As a result, the topics Kotter researches form a relatively harmonious and coherent ensemble, as he has a disciplined manner of selecting subjects without being influenced by opportunistic considerations, such as producing publishable articles that conform to the topic du jour for the editor of the day. As previously mentioned, despite being a scholar, Kotter seeks not only to reach the academic audience, but insists on producing useful tools for the business community. As well as being a distinguished scholar in his field, Kotter is also a remarkable pedagogue who has assisted in redesigning the teaching of management. He searches for alternatives to classic teaching methods, which he deplores as lacking long-term learning benefits for students. Regarding his students as future leaders and agents of change, Kotter is deeply concerned with the practicability and usefulness of his teaching. Kotter realized most education happens on the job, and pioneered rethinking the formal classroom setting in order to ensure that students’ acquired knowledge would be applicable years after leaving school. He uses techniques that capture students not only intellectually, but emotionally as well, as he considers the emotional component to have a considerable effect on behaviour. Thus, Kotter was among the first to emphasize audio-visuals as a very useful adjunct to the traditional written cases used by most business schools. In 2007, Kotter’s video ‘Succeeding in a Changing World’ was named best video-training product of the year by Training Media Review and won a Telly Award (a New York City-based organization which has given awards since 1978 for videos, television programmes, and so on).

From leadership to change Early on in his career Kotter decided to focus on behaviour as a tool for performance, and sought to better understand the relationship between these two factors. Though he initially concentrated on organizational behaviour, Kotter, over time, shifted his focus

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to the subject of leadership, specifically looking at the characteristics that distinguish outstanding leaders. Kotter realized that leaders were crucial in facilitating significant change in increasingly fast-paced environments. He found that ‘change’ was a relatively blank page in management scholarship, at the time, and decided that it would be the focus of his studies, creating a niche that would make him famous. Pattern analysis, based on tremendous amounts of observation and data collected over ten years concerning companies undergoing large-scale change initiatives, led Kotter to a startling realization. This discovery would form the basis of what would become his worldfamous eight-step model of change. He quickly put on paper what was later developed into his 1996 bestseller, Leading Change. It is interesting that Kotter’s insight came only after long immersion in the topic, after spending a considerable time ‘mucking around’ in the data. But, when it came, it came quickly: an experience that is not uncommon. We will now move on to review Kotter’s most important contributions to change leadership and change management.

Choosing strategies for change Between 1979 and long before his 1996 best-seller Leading Change, Kotter and a HBS colleague, Leonard Schlesinger, reflected upon strategies to bring about change in a company setting. Interestingly, Schlesinger went on to become a business executive, and in 2008 the President of the Boston area’s Babson College. The duo considered why resistance to change might be met, how to tackle it, and how to choose the appropriate strategy to do so. Schlesinger and Kotter (Schlesinger, Schlesinger, Sathe, and Kotter 1992) acknowledged that change always generates an emotional reaction, despite the change’s size or importance. These emotional reactions manifest in different ways, either passively or aggressively. By understanding why people resist change, one can better predict the impact of an announcement of change. The authors identified four common triggers for resistance: 1) Parochial self-interest. If people are afraid that organizational change will lead to personal loss, they will very much resist any transformation. This has the potential to result in open confrontation, between the groups the change will benefit and those that feel they will incur harm. 2) Misunderstanding and lack of trust. People may resist change when they do not trust the change leaders, when they do not understand the value of the anticipated end result, or when rumours circulate. 3) Different assessments. Resistance may be met if management and employees assess risks differently, and therefore draw different conclusions. This often results from assumptions and a lack of communication. 4) Low tolerance for change. Although people may realize the need to change, they may be emotionally incapable of implementing it, as a result of a potentially

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karl moore and alexandra klein unconscious low tolerance to change. Also, resistance may occur if people feel that their previous work will lose credibility, and affect the image others hold of them. Finally, peer pressure is one of the standard reasons why a group of people resist concertedly.

In recent years, the importance of emotions in change has received more attention, exemplified in the 2010 book Switch: How to Change Things When Change is Hard, by brothers Chip and Dan Heath. Chip is a professor of Organizational Behaviour at Stanford University’s Graduate School of Business, and Dan is a consultant who has worked at both Harvard Business School and Duke University. They argue that it is difficult to make lasting changes because of a conflict built into the human brain. The Heaths go on to suggest that our minds are ruled by two different systems, the rational mind and the emotional mind, and these two minds compete for control. This best-selling book highlights in a populist way, the importance of emotions. Many outstanding scholars have done academic research on the importance of emotions, such as Quy Huy of INSEAD, Michigan’s Jone Pierce, Australia’s Neal Ashkanasy, consultant Ron Ashkenas, and many others. In order to deal with resistance, Kotter and Schlesinger suggest various tools: 1) Education and communication: Both are useful tools to be employed at best a priori in order to avoid resistance. However, they also function a posteriori. 2) Participation and involvement: By avoiding taking people by surprise, resistance can be forestalled, and participation increases a person’s commitment to a cause. Broad participation, however, can be extremely time-consuming and may not be the most useful tool for urgent change scenarios. Finally participation allows the different networks of the various change team members to be approached, offering a much broader coalition of potential supporters. 3) Facilitation and support: By providing additional training and mental support, managers can relieve employees who feel overwhelmed by the transformation effort. 4) Negotiation and agreement: People who resist can be rallied to the cause through financial and non-financial incentives. This can be particularly effective when the incentive is offset against the person’s initial resistance points, for example early retirement. 5) Manipulation and co-optation: During manipulation only selected information is divulged, while in co-optation a person is enrolled in the change process in an attractive position—his or her opinion is not actually desired. In both cases, the illusion created may break the resistance, but both situations could lead to problems if the illusion is exposed. 6) Coercion: Kotter and Schlesinger list coercion as a last resort if speedy but unpopular change is necessary. Though coercion can overcome any kind of resistance, its victims are likely to hold discontent towards the initiators. These different approaches must be carefully selected to align with a vigilantly chosen strategy analysed according to: the speed of the change required, the effort of

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pre-planning, and the level of people’s involvement. The above-mentioned strategies all differ in terms of time investment and level of resistance, some involving the staff and some simply putting it before the fait accompli. In any case, strategies need to be planned and consistently followed, otherwise the transformation will result in an incoherent movement of resources.

Managing your boss In the year 1980, Kotter decided to focus on the nature of the crucial, but often passively endured, relationship between a manager and his or her boss. Kotter co-authored an important article on the subject with John Gabarro (1980), published in the Harvard Business Review. Kotter’s rationale was to encourage action, rather than passivity, in this relationship. If the relationship is unsound, Kotter deems it to be the manager’s responsibility to start managing upwards, rather than solely focusing on managing subordinates. Kotter praises influence without manipulation, and recommends identifying the boss’s expectations and needs to achieve this. Kotter and Gabarro consider typical mistakes managers and bosses can make when interacting with each other. Some may view the other as infallible, and make unrealistic assumptions about how the other person thinks and acts, or make assumptions on certain subjects when they lack supporting data. This can lead to major disappointments and conflicts, resulting from mutual misunderstanding. Additionally, the link of dependency is sometimes underestimated, especially when one partner considers himself or herself self-sufficient. In order to avoid these traps, a manager must recognize his boss’s characteristics early on: what goals and pressures is he or she subject to? What are their major strengths and weaknesses? What are their objectives, working style, and potential blind spots? What is the preferred means of communication? The next step in improving the relationship, as a manager, is becoming aware of one’s own working style, predisposition towards authority, and the strengths of the link of dependence. By taking into account all of these considerations, and factoring in both people’s needs and styles, the ideal relationship can be formed. Additionally, the manager should keep the boss informed, while taking care to not exceed the time the boss can allot the manager. Finally, a healthy relationship is based on dependability, and honesty in formulating expectations. Though things have changed since Kotter and Gabarro’s partnership, this article is still useful for managers and their subordinates; and if it were to be rewritten today, it is likely that the content would remain much the same. A testament to the lasting popularity of this article is that when one of the authors renewed his Harvard Business Review subscription earlier this year, a gift volume received from Harvard included this very article.

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Corporate culture and performance In 1992, together with fellow Harvard Professor James Heskett, Kotter published a book examining corporate culture and how differing cultures can impact a company (Kotter and Heskett 1992). The duo identified a link between corporate culture and financial results. True to his preferred research method of pattern analysis, Kotter surveyed 207 US companies, categorized their cultures, and compared them to their performance. The conclusion drawn was that though there is a clear link between a strong culture and strong performance, a strong but ‘wrong’ culture can lead to a company’s demise. The most important finding was that the ‘right’ culture serves all three stakeholder groups: customers, employees, and stockholders. The authors also discovered that companies were able to undergo change if new executives, hired from the outside the organization, artificially created or emphasized a crisis to move people to undergo change. Reviewers have criticized that the book only touched the surface of how to motivate change, and ignored how difficult it is to implement (Dumaine 1992: 2). Nonetheless, this book has been an important resource that has opened the way to a plethora of studies into the importance of corporate culture to business success.

Leading change: the eight-step process of change Perhaps Kotter’s greatest contribution has been in the area of leading change. Kotter observed several techniques to restructure the conduct of businesses in need of adaptation to changing markets: some used quality management, re-engineering, rightsizing, restructuring, cultural change, or turnaround (Kotter 1996). The success rate was low, and Kotter deliberated as to why this was the case. He realized that the businesses that were successful in their transition all had several criteria in common. Kotter went on to identify the eight most common mistakes made during change: 1) Not establishing a great sense of urgency: Although this phase sounds simple, many companies do not communicate aggressively enough in the beginning to make their people aware of what is to come. Driving people out of their comfort zones requires time, therefore executives need to demonstrate patience in creating a sense of emergency. Concerns expressed through defensive reactions, low morale, and fear of jeopardized results or loss of control, further slow the change process. Here Kotter emphasizes the need to distinguish between managing change and leading change. While management needs to maintain control of the systemic consequences of the change process, the business’s leadership needs to drive the transformation. Change is doomed if there are only change managers

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and no change leaders. Communication plays a significant role in creating urgency, for instance by voluntarily publishing bad results or bad polls. Kotter underlines that playing it safe can be risky, as it may lead to a mitigated understanding of the size or urgency of the change that needs to occur. He sums this idea up with a simple statistic: when 75 per cent of all managers are convinced that the current state of affairs is no longer tolerable, the sense of urgency is sufficient. 2) Not creating a powerful enough guiding coalition: Kotter warns of limiting the change process to a couple of selected few employees invited to fashion tomorrow’s business. In order to be successful, the change process needs to be supported by many, not just a few key people. This may include powerful members of a union or even customers. Kotter states that the existing hierarchy cannot implement change because if it were working well there would be no need for transformation. 3) Lacking a vision: Going further than a typical business plan, change needs to incorporate an appealing vision to develop support. It often takes several months to establish that vision, which should be followed by a strategy to implement it. Failure at this step often results from a multiplicity of plans and programmes that lack vision. In contrast to methods and procedures, a vision rallies and inspires people. 4) Under-communicating the vision: In order to implement an appropriate vision, very considerable efforts must be made to communicate what must be undertaken. Communication must be credible, shared by all senior executives, and spread repetitively. Routine operations should be embedded in the new vision, with all meetings and actions tied back to it, and all communication channels should be used to circulate the new vision. 5) Not removing obstacles to the new vision: Obstacles can be everywhere, in the organizational structure of the company, in the minds of people, or in the form of a person blocking the way to transformation. These obstacles must be removed, or the entire effort will lose its credibility and collapse. 6) Not systematically planning for, and creating, short-term wins: In order to keep motivation up, the long-term goal needs to be attainable by setting short-term goals. When change takes a long time to implement, the urgency level deteriorates. It is therefore necessary to keep the pressure on by insisting on reaching multiple short-term goals. Achieving short-term wins encourages those on the fence to see that the need for change is real and attainable, hopefully leading to a fuller commit of their energy to the change effort. 7) Declaring victory too soon: Change takes time to become part of the organizational culture. Hence, declaring the effort a success too early can threaten the fragile process. Even when the results seem clear, it takes years to ensure that the transformation will last. Kotter suggests using the credibility gained from early wins to tackle the bigger problems right away. One cannot help think of former President Bush on an aircraft carrier declaring, ‘Mission Accomplished’ too early in the process. 8) Not anchoring change in the organization’s culture: The change process must result in an attitude of ‘that’s the way we do things around here’. Only when the transformation is no longer tied to a particular person that implemented and represented

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karl moore and alexandra klein the effort, will the change be followed by future generations of executives. Therefore, even the next generation must be champions of change, because they need to take over the legacy. The hard wiring of the organization’s reward and motivational system—who gets promoted, who gets featured in organizational magazines, the kind of new hires, etc., reflect the anchoring of change in an organization.

From this research Kotter derives his eight-step model of successful change: 1) Creating a sense of urgency 2) Creating a guiding coalition: a team of people who share the urgency and drive the change 3) Developing a vision and strategy 4) Communicating the change vision widely throughout the organization 5) Empowering people to start to make it happen 6) Generating short-term wins for credibility’s sake 7) Consolidating change and not letting up 8) Taking measures to make it stick: anchoring the change in culture. Culture comes last, not first! These lessons, drawn from observed failures and successes, are the basis of Kotter’s doctrine; one can even call it the dogma of organizational change. Kotter’s change model is probably the most widely used in the world. It has been criticized by Michael Beer of HBS and Henry Mintzberg of McGill, among others, for being too CEO centric, failing to recognize the power and role of middle management in bringing about successful change strategies. Considerable amount of academic research conducted since has suggested that most CEO led changes fail, and that the most effective change comes from middle managers who are closer to the action than senior executives. Unlike first level managers, middle managers generally have greater credibility with senior executives who control the resources of the organization. In a recent interview with one of the authors of this chapter, Kotter readily admitted that he agreed with the importance of middle management in implementing change, and that he included this in his teaching and consulting work. Kotter believes that his model is one that is equally applicable to every level of management within an organization, effectively answering his critics.

Matsushita leadership: lessons from the twentieth century’s most remarkable entrepreneur In 1997, Kotter wrote a biography of one of Japan’s most famous businessmen, Konosuke Matsushita. Matsushita’s hardship in life inspired Kotter to seek to understand how he became a top entrepreneur, despite having left school at the age of 9. Kotter outlined

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Matsushita’s philosophy regarding the purpose of business and its link to society: a manufacturer is endowed with a mission towards society, to help it overcome poverty and bring material and spiritual wealth (Kotter 1997). Over the years, Matsushita developed the ideology behind his company, urging his employees to be dedicated and energetic, emphasizing values such as service, honesty, and teamwork. He underlined the need to stay modest, to always aim for customer satisfaction, and to create useful goods for society. This ideology encourages his workers to believe that they work for a noble and just cause. Kotter concluded that Matsushita disposed of qualities that made all the difference: a sense of risk-taking when competitors stalled, the desire for life-long learning, and the capacity to bounce back from hardship.

Our iceberg is melting In 2006, Kotter and executive Holger Rathgeber partnered to publish a refreshingly innovative tale about how to lead a group to change; in concreto how to convince a group of penguins to leave a melting iceberg. True to his passion, Kotter dedicated another book to organizational change, this time putting the emphasis on group dynamics. Taking his seasoned eight-step model for change, Kotter fictionally applied it to a colony of penguins and their melting iceberg. This short book is readable in perhaps forty-five minutes; the strength of the book lies in its easy understanding, brevity, and educational value. Kotter is constantly seeking new educational devices, and a fable is an innovative tool that easily embeds itself in readers’ memories. The book can be considered an introduction to leadership and change, and has the potential to lead novice readers to Kotter’s more thorough pieces of work. Although it has been criticized for being too short, Kotter believes that the book is a way to expose people to his ideas, and interest them to explore his concepts in greater depth.

A sense of urgency In 2008 Kotter once again returned to his influential eight-step change model and dedicated an entire book to the first, and in Kotter’s mind the most crucial, phase he had identified in the model: establishing a sense of urgency. Kotter believed, after having studied change for several decades, advising on it and seeing his eight-step model used by many organizations, that the first step was the most vital and perhaps the most misunderstood. His central argument in the book surrounded overcoming complacency, which he identifies as the major trap in the first step of creating urgency. Once again, Kotter uses real-life—though anonymous—examples, of how companies drifted into complacency and never saw the results of the change efforts. Kotter also underlines the

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necessity to engage both mind and heart in order to create genuine urgency requiring the change leader to display true passion about the transformation. To arouse the participant’s emotions, Kotter suggests four tactics: 1) Display what challenges and opportunities lie outside the company bubble, and how competitors will take them away if the company does not act soon. This can be done by inviting external parties, such as critical experts and customers, to talk about how they view the competitive situation. 2) Change leaders need to display urgency themselves and set an example for the rest of the company. 3) Crises are formidable triggers for urgency: they are a true opportunity to turn the situation around. 4) Finally, Kotter describes how to deal with permanent resisters, the so-called ‘No-nos’—to whom he already dedicated a penguin in his Iceberg book. The No-no is a person who desperately clings to the status quo, refusing any kind of change. Such an influence cannot be ignored, and Kotter suggests kicking him or her upstairs1 to gain damage control. Complacency, or non-urgency, is the attitude that Kotter denounces by giving leaders the tools to recognize and tackle it.

Buy in: saving your good idea from being shot down In 2010, Kotter and Lorne Whitehead published another book that opened with a story set in a town divided about a computer deal for the local library. This book was essentially a follow up to A Sense of Urgency from 2008, where Kotter had written about the biggest problem with making his eight-step model work. The new book focused on the second biggest problem in making the model work, obtaining buy in. Following Kotter’s 2008 book, the reader again encounters the No-nos who constantly oppose fresh ideas. Kotter’s goal was to teach people how to make a good idea survive its confrontation with stakeholders. This book was set in the post-innovation process, when a solution has been found but not yet implemented. Kotter and his co-author identify naysayer techniques used to ambush new ideas, and present counterstrategies. The book considers a total of twenty-four objections and arguments typically raised when opponents try to drown a new idea, or change. 1

Occurs when a disliked or underperforming executive is said to be promoted (and might then report to the person his current boss is reporting to), but is given only a small amount of responsibility, if any.

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Kotter and Whitehead track the twenty-four arguments back to four underlying strategies: 1) Fear-mongering: The opponents deform reality or invent arguments mostly devoid of logic to create a fearful atmosphere among the consulted persons. 2) Delay: Different techniques are used to delay the implementation of the new idea, either by never actually deciding to implement it, or by declaring other priorities. 3) Confusion: Opponents blur the discussion by bringing up irrelevant numbers and facts. 4) Ridicule: Instead of openly attacking the idea, some opponents choose to question the competence of the person bringing forth the idea. True to his philosophy, Kotter went back to his well-known principles, emphasizing the importance of: capturing people’s attention, winning over people’s minds, and reaching their hearts. Kotter insists on reacting in a way that may seem counterintuitive when confronted with criticism: instead of drowning objections, let them be aired. This kind of open back and forth is unusual in organization life and this causes a considerable attention to be paid to the questions and answers to those questions. In an age of attention deficit for many, this kind of focused audience attention is powerful. When simple, convincing answers are provided much of the audience will be won over, including the critics. John and his co-author argue that overwhelming the audience with data and facts does not win over their minds but tires them, and counter-arguing needs to be done politely and respectfully, as ridiculing an opponent does not help win over people’s hearts.

Conclusion Across the decades, Kotter’s research has been timely and cutting edge, leading him to be included in this volume. His interests reflect the key issues the business world has been and are facing, and his scholarship answers questions that few scholars have succeeded in formulating as precisely before. His influence is tremendous, and supported by the fact that his work received little opposition in the management literature. John Paul Kotter is an authority on leadership and change, with few rivals. Even though he is retired from the Harvard Business School he continues his quest, and his most recent project involves the creation of his own company, Kotter International, which aims at providing leadership expertise and training to Global 5000 company leaders. One of Kotter International’s slogans is ‘Millions leading . . . Billions benefiting’, displaying the ambition and the belief Kotter personally invests in his projects. He is certain that as more managers are trained to be leaders and implement change, more customers, consumers, and citizens will benefit from greater business

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performance. Professor Kotter’s utmost motivation is his altruistic contribution to society, using management as a tool to make a difference.

References Dumaine, B. (1992). ‘The Corporate Culture Connection’. Fortune, 125/9: 1–2. Gabarro, J. J. and Kotter, J. P. (1980). ‘Managing Your Boss’. Harvard Business Review, 58/1: 92–100. Heath, C. and Heath, D. (2010). Switch: How to Change Things When Change Is Hard. New York: Crown Publishing. Kotter, J. P. (1996). Leading Change. Boston, MA: Harvard Business School Press. ——(1997). Matsushita Leadership: Lessons from the 20th Century’s Most Remarkable Entrepreneur. New York: Free Press. —— (2008). A Sense of Urgency. Boston, MA: Harvard Business School Press. —— and Heskett, J. L. (1992). Corporate Culture and Performance. New York: Free Press. ——and Rathgeber, H. (2006). Our Iceberg Is Melting. Boston, MA: Harvard Business School Press. ——and Whitehead, L. A. (2010). Buy-In: Saving Your Good Idea from Getting Shot Down. Boston, MA: Harvard Business School Press.

Other works by Kotter Books Kotter, J. P. (1982). The General Managers. New York: Free Press. ——(1985). Power and Influence: Beyond Formal Authority. New York: Free Press. ——(1986). The General Managers. New York: Free Press. ——(1988). The Leadership Factor. New York: Free Press. ——(1990). A Force for Change: How Leadership Differs from Management. New York: Free Press. ——(1995). The New Rules: How to Succeed in Today’s Post-corporate World. New York: Free Press. ——(1999). John Kotter on What Leaders Really Do. Boston, MA: Harvard Business School Press. ——Clawson, J., Faux, V., and McArthur, C. (1985). Self-Assessment and Career Development. (2nd ed). Englewood Cliffs, NJ: Prentice Hall. ——and Cohen, D. S. (2002). The Heart of Change. Boston, MA: Harvard Business School Press. Schlesinger, P. F., Schlesinger, L. A., Sathe, V., and Kotter, J. P. (1992). Organization: Text, Cases, and Readings on the Management of Organization Design and Change (3rd ed). Homewood, IL: Richard D. Irwin Inc.

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Published Papers Gabarro, J. J. and Kotter, J. P. (1994). ‘Retrospective Commentary on: “Managing Your Boss”.’ Harvard Business Review, 72/1: 92–9. Hill, L. A., Gabarro, J. J., and Kotter, J. P. (1998). ‘Leadership for New Managers.’ Business Fundamentals as Taught at the Harvard Business School.

Book Chapters Gabarro, J. J. and Kotter, J. P. (2005). ‘Managing Up.’ In Managing Yourself, Boston, MA: Harvard Business School Publishing.

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Henry Mintzberg was born in Montréal on 2 September 1939. He took a degree in mechanical engineering from McGill University in 1961, and also received a BA in General Arts from Sir George Williams University (now Concordia University) in 1962. From 1962 to1964 he worked in the operations research department at Canadian National Railways, the state-owned railway operator. He then attended Massachusetts Institute of Technology, where he received a Master’s degree in 1965 and then a PhD from the Sloan School of Management in 1968. His thesis was entitled ‘The Manager at Work—Determining His Activities, Roles and Programs by Structured Observation’, which went on to form the foundation of one of his most famous books, The Nature of Managerial Work. He has spent the rest of his working life in academia, mostly at McGill University, where he is currently Cleghorn Professor of Management Studies. The importance of Mintzberg’s work has been widely recognized and he has received a number of honours and awards. He won the McKinsey Prize for best article in Harvard Business Review in 1975, and the Academy of Management named his book The Rise and Fall of Strategic Planning best management book in 1995. He is a fellow of both the Academy of Management and the International Academy of Management. He was elected a Fellow of the Royal Society of Canada in 1980, and named an Officer of the Order of Canada in 1998. Mintzberg has a reputation as a heterodox thinker, one not afraid to challenge academic convention or the intellectual status quo. ‘Mintzberg was destined to become the “Darwin” haunting the “Established Church” ’ wrote Charles Hampden Turner (1998: 467). Mintzberg has argued against deeply entrenched concepts such as strategic planning and the separation of leadership and management. But, as HampdenTurner also says, Mintzberg goes beyond mere opposition to overly formal concepts, and seeks instead to show how the parts of management connect to each other. Best known for his work on strategy, he has also written on leadership, control, power, managerial mindsets, organization structure, public policy, design, and many other subjects. He often explores linkages between subjects, as seen for example in his ideas on pattern-making in strategy (Mintzberg 1972). Mintzberg is also notable for his

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continuous and long-term engagement with practitioners, starting from the 1970s. Unlike some academic scholars who rarely publish in journals where their ideas can be read by practising managers, Mintzberg has regarded managers as a primary audience. His articles in practitioner-oriented publications are at least as numerous as his contributions to scholarly journals. Mintzberg left his post at CNR and went to MIT, says Rudman (2001), with the idea of writing a fairly formal book that would define exactly what it is that managers do in policy terms. In fact, as he began to study and research the nature of management, he learned that managerial work was nothing like as structured and ordered as most studies assumed it was. The true nature of management was surprisingly fuzzy and hard to define. There was, of course, a large literature on management, and many attempts to define what it is that managers do, but Mintzberg ultimately dismissed most of these as ‘folklore’ (Mintzberg 1975; Mintzberg 1989: 6). He singled out formalized lists of managerial tasks such as ‘plan, organize, coordinate, control’, which he attributed to Henri Fayol, and the POSDCORB schema of Luther Gulick (Planning, Organizing, Staffing, Directing, Coordinating, Reporting and Budgeting)—both highly influential in subsequent writing and management education—as being examples of this folklore, founded in beliefs about what managers might do rather than in any detailed analysis of what they actually do do. As David Lamond (2004) has shown, Mintzberg’s critique of Fayol is overly harsh and does not give enough credit to the latter’s own realization that management is not a precise science. It should also be added that Mintzberg did not dismiss all previous management theory out of hand: he offered high praise for the work of Mary Parker Follett, for example (Mintzberg 1995). But he felt that a generation of management scientists who put scientific rigour first and foremost had led management theory into some blind alleys. There was a growing disconnect between the theories of management academics and the beliefs, attitudes, and actions of managers themselves. An ongoing leitmotif running through nearly all of Mintzberg’s writings on leadership strategy and management is the need to close that gap and reunite theory with practice.

The nature of managerial work Mintzberg’s PhD research had involved studying managers in action, cataloguing the tasks in which they engaged on a daily basis and how much time was spent on each. He found that, rather than being reflective practitioners, most managers were ad hoc respondents to unforeseen situations. Decisions were made quickly, often on the move, and usually based more on intuition and experience than considered analysis. Action was more important than reflection. What is more, managers themselves seemed genuinely uncertain as to their own role and the tasks they were meant to perform. As he wrote some years later,

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If you ask managers what they do, they will likely tell you that they plan, organize, coordinate and control. Then watch what they do. Don’t be surprised if you can’t relate what you see to those four words. . . . The fact is that those four words . . . tell us little about what managers actually do. At best, they indicate some vague objectives that managers have when they work. (Mintzberg 1989: 9)

The picture which emerges from Mintzberg’s research is one of managing by ad hoc methods and rules of thumb, not scientific principles. Managers are always under time pressures, always ‘firefighting’, always working to find, not necessarily the best solution, but the one that can be implemented given the time and resources available. Of the daily tasks undertaken by chief executives in Mintzberg’s study, half lasted less than nine minutes and only 10 per cent required more than one hour to complete (Mintzberg 1989: 10). Nor do managers work with perfect information. They rely on informal information-gathering methods such as telephone calls or conversations with colleagues to provide them with the information they need and seldom turn to formal sources: I was struck by the fact that the executives I observed—all very competent by any standards—were fundamentally indistinguishable from their counterparts of a hundred years ago. The information they needed differed, but they sought it in the same way—by word of mouth. Their decisions concerned modern technology, but the procedures they used to make them were the same as the procedures of the nineteenth-century manager. Even the computer, so important for the specialized work of the organization, had apparently no influence on the work procedures of general managers. In fact, the manager is in a kind of loop, with increasingly heavy work pressures but no aid forthcoming from management science. (Mintzberg 1989: 14)

Mintzberg’s PhD was adapted and published several years later under the title The Nature of Managerial Work (Mintzberg 1973), a work which is still regarded as one of his best books. Here he begins by summarizing the various ‘schools’ of thinking about management: the classical school of Fayol and Gulick; the ‘great man’ school which urges managers to study examples of successful business leaders such as Alfred Sloan of General Motors and then try to emulate them and their methods; the entrepreneurship school, founded on the ideas of Joseph Schumpeter, which tries to explain the purposes and aims of business (Mintzberg comments that this school tells us what managers do, but not how they do it); the decision theory school, based on the ideas of Chester Barnard and Herbert Simon; the leader effectiveness school; the leader power school; the leader behaviour school; and finally the work effectiveness school, into which he fits his own work. He is not entirely dismissive of these earlier schools—in fact he draws heavily on the programming approached developed by the decision theory school—but he is clearly opposed to those which formalize and rationalize managerial activity, and expressed a clear admiration for the ‘muddling through’ approach described by Charles Lindblom (1959). Mintzberg went on to identify a series of common themes in how managers work. These are, briefly, as follows.

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1 Time pressure is a constant. ‘Because of the open-ended nature of his job, the manager feels compelled to perform a great quantity of work at unrelenting pace.’ (Mintzberg 1973: 51) 2 Work is fragmented, consisting of a series of short, discrete tasks. ‘The vast majority [of tasks] are of brief duration, on the order of seconds for foremen and minutes for chief executives’. (Mintzberg 1973: 51) 3 Further to the above, managers have become conditioned to this fragmentation and brief, simple tasks rather than long, complicated ones. This leads to the danger that they might become bogged down in superficial details and lose sight of the larger picture. 4 Managers also prefer action-oriented, non-routine tasks, which engage their imaginations and also offer the promise of quick and visible results. ‘The pressure of the job does not encourage the development of a planner, but of an adaptive information manipulator who works in a stimulus-response environment and who favors live action.’ (Mintzberg 1973: 52) 5 Much of the manager’s work consists of contact with other people, either verbal or written, but with a clear preference for the verbal. 6 Managers dislike dealing with correspondence. Most receive more correspondence than they generate, and most of what they do generate is in response to messages coming in. This means that subordinates and colleagues beyond verbal reach may not always receive necessary information. 7 Informal telephone calls and meetings are the most common way of transmitting information. 8 However, formal scheduled meetings consume more of a manager’s time than any other activity. 9 Few managers spend much time ‘touring’ or ‘walking around’ the business, even though this is a very effective way of gathering information. 10 Between a third and a half of a manager’s time is spent engaging with contacts outside the organization including clients, suppliers, personal contacts, and others. ‘Nonline relationships are a significant and complex component of the manager’s jobs.’ (Mintzberg 1973: 52) 11 Similarly, between a third and half of a manager’s time is spent in contact with subordinates. ‘The manager interacts freely with a wide variety of subordinates, bypassing formal channels of communication to do so.’ (Mintzberg: 1973: 53) 12 Only about 10 per cent of managerial time is spend in contact with superiors. 13 Managers exert control in two important ways. First, they are responsible for the ‘initial commitments’ to a project or programme, ‘which then lock him into a set of ongoing activities’ (Mintzberg 1973: 53), and second, they can exercise control on an ongoing basis through requests for information and through the exercise of leadership. The issue of control is, Mintzberg argues, the key factor in determining whether managers are successful. All managers face many demands on their time, and few actually

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determine how their time is to be spent: they attend meetings that others schedule, they deal with unexpected demands from subordinates and customers, and they handle unforeseen problems. Mintzberg divides managers into two groups, ‘conductors’ and ‘puppets’. Conductors manage the flow of events around them, while puppets are at the mercy of those events: All managers appear to be puppets. Some decide who will pull the strings and how, and they then take advantage of each move that they are forced to make. Others, unable to exploit this high-tension environment, are swallowed up by this most demanding of jobs. (Mintzberg 1973: 51)

Those managers who are able to manage their environment do so by adopting a series of roles. Mintzberg identifies ten managerial roles, which he groups into three classes: interpersonal roles, informational roles, and decisional roles. It is clear that managers play all of these roles, often several of them simultaneously. No manager can be successful by adopting or playing only one of these roles. Role theory is now widely used when discussing managers and leaders, but this was a new concept at the time Mintzberg was writing. Interpersonal roles are the roles through which managers attempt to influence the actions of others. There is first of all the figurehead role. This is the formal, even ceremonial function that managers play as ‘head’ of an organization or part of an organization. The figurehead role embodies the manager’s formal responsibility. The second role is leadership. Through leadership, the manager attempts to exert that responsibility and cause things to be done. Mintzberg articulates a clear view that all managers must be prepared to act as leaders, a view he has continued to espouse in his later work. The third role is the liaison role in which the manager interacts with people outside the organization, coordinating resources, or just keeping channels open. The informational roles are also three in number. First there is the role of monitor, checking on the activities of others and ensuring that subordinates in particular are doing what they are supposed to do. The monitor collects information, while the disseminator role passes information on to others who need it within the organization. Finally, the spokesman role, rather like the liaison role, interfaces with people outside the organization, passing on information and representing the organization’s views. Finally, there are four decisional roles: entrepreneur, disturbance handler, resource allocator, and negotiator. Entrepreneurs are responsible for taking decisions that start new projects going; very often, they themselves are the originators of the ideas behind these projects. Disturbance handlers are in a ‘firefighting’ role, dealing with problems as they arise. Resource allocators determine what resource of people, technology, finance, etc will be deployed where and when. Finally, negotiators help resolve competing demands for resources, as well as any disputes that might arise. Thus far we are in a rather curious position in that, having rejected typologies of managerial work such as those of Fayol and Urwick, Mintzberg has then gone on to create yet another typology. But Mintzberg makes it clear that these ten roles are subject to very considerable change and variation. He attacks the notion, derived from Drucker (though not wholly supported by the latter’s work) that managerial work has broad similarities

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across organizations. Not so, says Mintzberg: each organization is as unique as an organism, with its own characteristics, environment, needs, and resources. In Chapter 5 of The Nature of Managerial Work he presents a contingency theory of managerial work listing a wide range of variables which can affect the exact nature of tasks. He classifies these into four groups: • Environmental variables, including the nature of the business, organizational structure and culture, the sector in which it operates, local and national culture • Job variables, including the exact type and function of job the person is doing, the level of the job within the hierarchy and the level of supervision required • Person variables, including the personality and personal style of the manager • Situational variables, any other features of that particular job Every manager faces different situations, and every manager responds to those situations in different ways. This contingency theory, coupled with the fragmented and sometimes fuzzy nature of managerial working, means it is very difficult to describe and analyse scientifically: ‘The evidence suggests that there is no science in managerial work. That is to say, managers do not work according to procedures that have been prescribed by scientific analysis’ (Mintzberg 1973: 173). Mintzberg agrees with Drucker that ‘managing is an art, not a science’ and goes on to say that ‘most of the methods managers use are not properly understood; hence they are not taught or analysed in any formal sense . . . Managing requires first and foremost a set of innate skills. Up to now, management science has done very little to supplement these’ (Mintzberg 1973: 174). The implications of this work are considerable and long-lasting. If we accept Mintzberg’s view of managerial work, then we are confronted with the notion that managers do not work in the ways that management theorists think that they work. Not only are their actions and tasks fragmented and brief, not only do they behave irrationally and eschew formal systems and reports and logical decision-making tools for informal, off-the-cuff conversations and snap decisions based on instinct and intuition, but there is strong evidence for believing that they do so deliberately. In a very similar vein, the economist Geoffrey Poitras notes how, more than fifty years after the development of modern portfolio theory: use of the techniques of MPT in the securities markets is minuscule. Security market professionals, particularly in the equity markets, appear to adhere to techniques that were the bread-and-butter of the old finance school. Leading investment professionals, such as Warren Buffett, criticize key elements of modern financial economics such as ‘beta’ with dictums such as: ‘it is better to be approximately right than precisely wrong’. (Poitras 2007: 7)

What Poitras and Mintzberg both noted, from very different perspectives, was the preference of managers for ways of working which make them feel personally fulfilled and in control. Mintzberg’s managers prefer human contact to rational systems; they prefer to make decisions and take actions that give quick gratification and where results can be observed, rather than tackle fuzzy issues. In this, they are no different from their

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forebears. Mintzberg’s view that ‘the modern manager appears to be basically indistinguishable from his historical counterparts’ (Mintzberg 1973: 173) is confirmed by Witzel (2009), who notes that standard elements of managerial practice such as risk management, strategy making, marketing, and many others, though affected by forces such as globalization and new technology, have remained basically the same for centuries. The cold reality may well be that, as Mintzberg says, management theorists have only had a very limited impact on the practice of management, and this is true even of figures such as Fayol and Taylor—and of course, of Mintzberg himself. Another question also poses itself. Mintzberg confirms that the advent of management science has seen little change in management itself. But should management change? Mintzberg paints a warts-and-all picture of management, and not all of the elements he sees are positive. Rather than engaging with the idea of whether management should become less intuitive and fragmented and more formal and systematic, Mintzberg turns to another argument that he has continued to make since: the current theories of management science, and the current system of management education are not fit for purpose. Regardless of what managers need, the system is not providing it. In Managers, not MBAs (Mintzberg 2004), he launches a highly critical attack on the management education system for failing in its duty to educate and train managers fit for the modern world.

Organizational structure Though others regard him as primarily a theorist on strategy, Mintzberg has described himself as an ‘organization theorist’ (Mintzberg 1989: 337). His next major work after The Nature of Managerial Work was The Structuring of Organizations (1979). Here Mintzberg proposed a typology of organizational ‘species’, similar to that attempted by Boulding (1956). Mintzberg classified organizations regardless of size or industry sector along three dimensions: coordinating mechanisms, internal structure, and the nature of organizational power. He refers here to organizations as ‘configurations’ of different elements brought together, an idea reminiscent in some ways of Ronald Coase’s much earlier definition of organizations as a nexus of contracts (Coase 1937). Organizations, Mintzberg says, have six component parts. The first three are part of the classic ‘line management’ model, including the operating core or production line, middle management and top management, the ‘apex’ of the hierarchy. The next two elements are ‘staff ’ standing outside the hierarchy, and include technical analysts and support staff (such as public relations departments, etc.) The sixth element is intangible: Mintzberg calls this the organization’s ‘ideology’, the traditions and beliefs that make it individual and give it life. Others have referred to this element as culture. Mintzberg then defines six methods of coordination by which organizations are directed and managed: direct supervision, standardization of work processes, standardization of skills, standardization of outputs, mutual adjustment, and standardization of norms (that is, implementing accepted common beliefs and values across the organization).

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How the organization is configured and the nature of the coordination mechanisms used determines in turn the ‘pulls’ to which the organization’s managers respond. Mintzberg initially defined six ‘species’ of organization, each dominated by one of the six elements, and describes the pulls to which each responds and how each is coordinated: 1. Entrepreneurial organizations: pull provided by strong leaders at the apex of the organization, coordinated through direct supervision. 2. Machine organizations: pull provided by the technical staff, with rationalization the primary goal, coordinated through standardization of work processes. 3. Professional organizations: pull provided by the operating core with improvement of core technical processes the primary goal, coordinated through standardization of skills and knowledge. 4. Diversified organizations: pull provided by middle management, with leadership provided by the divisional heads rather than head office, which plays only a light coordinating role, coordinated through standardization of outputs. 5. ‘Adhocracies’: also sometimes called innovative organizations: pull provided by the support staff, which plays a role in coordinating and collaborating the organizational elements in the absence of formal bureaucracies, coordinated through mutual adjustment. 6. Idealistic or ‘missionary’ organizations: pull provided by commonly held ideologies or beliefs, coordinated through standardization of norms. Adhocracies can be divided into two forms, the ‘operating adhocracy’, which is outwardly focused and solves problems on behalf of clients, and the ‘administrative adhocracy’ which is internally focused and concentrates on solving process-related problems and making the organization more efficient. There is then a seventh type of organization, the ‘political organization’, in which no organizational element is dominant, and coordination is either lacking altogether or is exerted through a series of alliances as elements seek to gain power over other elements. Idealistic organizations, by contrast, are those which are entirely focused on a common purpose, and belief in tht purpose and vision are what holds the organization together. Mintzberg concludes that what managers do, then, and how they do it depends to a large degree on the kind of organization they are in, the nature of its ‘pull’ factors and the sources of organizational power. The Structuring of Organizations is a fascinating book and contains theme to which Mintzberg would return many times, notably in the papers published in Mintzberg on Management (1989). But it is not certain how successful this typology really is. There is a tendency to treat the seven types as being exclusive: an organization is either one or the other. In fact many, if not most, organizations will partake of more than one type. ‘The Church’ is referred to as an example of an idealistic organization, but large churches such as the Church of England and the Roman Catholic church also have strong elements of the political organization, the diversified organization, and the professional organization. In other words, they do not partake of only one ‘species’ but have features that could result in their being classified under several different species.

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Gareth Morgan, who developed a similar typology in Images of Organization (Morgan 1986) was surely nearer the mark when he wrote that each metaphor of organization gives us a partial insight into the nature of organizations, but it is only when we combine these insights and accept that all the metaphors are valid that we reach something close to the truth.

Emergent strategy Mintzberg’s interest in strategy had begun in the 1960s while he was still a doctoral student. His first published article (Mintzberg 1967) argued that strategy-making more nearly resembled Darwinian evolution than biblical creation (thus unwittingly setting in motion a series of comparisons between himself and Darwin by later commentators). Theorizing about strategy at the time was very much dominated by the strategic planning school following the works of H. Igor Ansoff (1965) and Kenneth Andrews (1971), in which strategy was conceived of as a formal and rational activity, highly structured, with planning followed by execution in logical order. Just as in his studies of managerial work, Mintzberg found himself struggling to match this view of strategy with how companies actually made strategy. In the 1970s when he was part of a collaborative research project studying the process of strategy-making in large firms, he found he was struggling to find terms with which to describe how strategy was actually made in practice. He had already begun to look at pattern-making in strategy, drawing on his interest in design (see Mintzberg 1978). His response now was to reach out beyond the world of management and seek inspiration elsewhere: All the while, my wife was crafting pottery in the basement. One day she put up a retrospective of her work, and I saw strategy evolving before my eyes . . . I realized I was hearing from her much the same as I had heard from creative strategists in business (for example, the serendipitous role of ‘mistakes’ in pottery and of ‘opportunities’ in business, ‘a feel for the clay’ and ‘a knowledge of the business’). (Mintzberg 1989: 25–6)

This metaphor formed the basis for one of Mintzberg’s most famous articles, ‘Crafting Strategy’, in 1987. These ideas were further refined, and continued to form a large of part of Mintzberg’s output for many years. Their best expression is to be found in Mintzberg on Management, and it is worth quoting his views in detail: Imagine someone planning strategy. What most likely springs to mind is an image of orderly thinking: a senior manager, or a group of them, sitting in an office formulating courses of action that everyone else will implement on schedule. The keynote is reason—rational control, the systematic analysis of competitors and markets, of company strengths and weaknesses, the combination of these analyses presenting clear, explicit, full-blown strategies.

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Now imagine someone crafting strategy. An entirely different image most likely results, as different from planning as craft is from mechanization. Craft evokes traditional skill, dedication, perfection through the mastery of detail. What springs to mind is not so much thinking and reason as involvement, a feeling of intimacy, and harmony with the materials at hand, developed through long experience and commitment. Formulation and implementation merge into a fluid process through which creative strategies evolve: My thesis is simple: the crafting image better captures the processes by which effective strategies come to be. The planning image, long popular in the literature, distorts those processes and thereby misguides organizations that embrace it unreservedly. (Mintzberg 1989: 26)

This passage illustrates several key themes in Mintzberg’s work, and casts light not just on his views on strategy but on his theorizing about management more generally. First there is the notion of strategy emerging and evolving through a creative process; indeed, Mintzberg’s concept of strategy came to be known as ‘emergent strategy’. He employs the artistic metaphor over and over, referring to the the process of ‘crafting strategy’ as being an inherently creative process, one in which the materials one works with merge with the creative consciousness to create a result. The metaphor of the potter shaping clay is a powerful one, and is not original to Mintzberg: it has been used many times in the past, perhaps most famously by Omar Khayyam in the Rubaiyat, who uses it as a metaphor for all creation. This might lead us to think that strategy-making is an art rather than a science, but Mintzberg insists it has scientific antecedents as well. Only, his science is not management science; wittingly or no, he follows in the footsteps of the early American management writer Harrington Emerson (1913) in rejecting the physical, mechanical approach to management adhered to by Taylor and the later management scientists, and turning instead to biology for inspiration. Like Emerson, Mintzberg felt that Darwin’s theories were highly relevant. As noted above, he made reference to Darwin in his first published article, and continued to do so: Man’s beginnings were described in the Bible in terms of conscious planning and grand strategy. The opposing theory developed by Darwin suggested that no such grand design existed but that environmental forces gradually shaped man’s evolution. (Mintzberg 1989: 189)

There is a strong debt here to the incrementalism of Lindblom (1959) and Quinn (1980), who insisted that strategies were best formulated in small steps rather than bold leaps forward. Linked to this is the insistence that strategy formulation and strategy implementation are not separate processes but are—or should be—intrinsically linked. In The Rise and Fall of Strategic Planning, Mintzberg argued that separating the two essentially meant disconnecting thinking from acting. The strategy makers were the ‘thinkers’, detached beings who lived in the rarefied air of head office and told everyone else what to do; the strategy implementors were the ‘doers’ who took instruction and obeyed orders, and were given no latitude in what they did. There is a tendency when things go wrong for the formulators to blame the implementors for failing to carry out orders. But, says

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Mintzberg, ‘every failure of implementation is also a failure of formulation’ (Mintzberg 1994: 285). Strategies fail because there is a disconnect between what the strategy is intended to do and what the organization can do or is doing. Only when formulation and implementation are closely linked will strategies become realistic and achievable; and this, says Mintzberg, does not happen in strategic planning. Strategy, like management, is not an activity that lends itself well to scientific analysis, says Mintzberg, at least not to the methods used by management science. In an article entitled ‘Planning on the Left Side and Managing on the Right’ (Mintzberg 1976), Mintzberg once again turned to biological science for inspiration and drew on recent research into brain activity to conceptualize planning as formal and rational activity carried out by the left side of the brain, and management—including strategy—as a partly intuitive and wholly creative activity carried out on the right. The left side of the brain monitors, the right side creates and, so it would seem from Mintzberg’s analysis, never the twain shall meet. It is tempting to think that he is exaggerating for effect, pushing this metaphor hard in order to get his audience’s attention, for in fact the research he cites shows that people need both sides of their brain in order to function. But his case for strategy-making being at least in part a matter of intuitive thinking is well argued and persuasive and has echoes elsewhere, notably in the work of the Japanese strategy writer Kenichi Ohmae (Ohmae 1982) and, much earlier, the work of the Florentine statesman Niccolò Machiavelli (Machiavelli 1961). Similar to Machiavelli too is Mintzberg’s insistence that strategy is about dealing with the unknown. Machiavelli had argued that fortuna (fortune or fate, but also the environment and circumstances in which one finds oneself) are fickle, and cannot be predicted. It is not clear whether Mintzberg was influenced by Machiavelli, but on this point they are certainly in agreement: ‘Large-scale strategy deals not just with the uncertain, but with the unknowable.’ The strategist, therefore, is forced to to beyond mere analysis and rely somewhat on accumulated experience, on the ‘feel of the situation, or on that marvellous bit of highest intellect often called intuition’ (Mintzberg and Quinn 1988: xi–xii). Karl von Clausewitz (1819) had observed that how well leaders deal with ‘friction’, the concatenation of unforeseen and unexpected events that conspire to knock any strategy off course, plays a major role in determining success or failure. Ansoff (1988) made a very similar observation, terming this phenomenon ‘turbulence’. Mintzberg’s view would be that friction and turbulence can only be dealt with if managers are capable of dealing with the unknown and reacting to unforeseen circumstances rather than remaining wedded to the plan (Mintzberg 1994). Here again there are similarities with Ohmae (1982). Did Mintzberg revolutionize the concept of business strategy? The answer is yes, and no. He has become strongly identified with the emergent strategy school. Even if he was not its sole founder—credit should go also to the likes of Lindblom (1959), Quinn (1980) and Wildavsky (1983), and as Witzel (2009, 2012) argues, to Clausewitz and Machiavelli too—he is certainly its most elegant and eloquent proponent. He has launched a very strong challenge to the orthodoxy and legitimacy of strategic planning. Yet strategic planning remains. As McKiernan (1996) has commented, emergent strategy is now just

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another of many competing schools of strategy all striving to reduce the dominance of the strategic planning school, which latter remains the orthodox approach in many business schools and indeed in many businesses. There is no sign the prophecy implicit in the title of The Rise and Fall of Strategic Planning will come true any day soon.

Managerial mindsets Mintzberg’s interest in the brain function which had so powerfully informed his ideas on strategy can be found in other areas of his work as well and spread to embrace an interest in psychology. His work with Jonathan Gosling on ‘managerial mindsets’ represents perhaps the fullest form of this strand of his ideas. Gosling and Mintzberg (2003) start from a right–left brain perspective and argue that, at heart, management is fundamentally a matter of two things, action and reflection. The reflective side of the manager considers and analyses, while the action side carries out the necessary tasks. ‘Everything that every effective manager does is sandwiched between action on the ground and reflection in the abstract’ (Gosling and Mintzberg 2003: 56). To this binary concept, however, Gosling and Mintzberg add three further elements which they see as bridging the gap between action and reflection. First there is collaboration, the ability to act through and with other people. Second, ‘action, reflection and collaboration have to be rooted in a deep appreciation of reality in all its facets’ (Gosling and Mintzberg 2003: 56). This leads to the element which the authors describe as ‘worldly’. Finally, action and reflection need to be guided by rational logic, which gives the fifth and final element, analytical ability. These five elements in turn lead to five managerial ‘mindsets’, ‘five ways in which managers interpret and deal with the world around them’ (Gosling and Mintzberg 2003: 56). Each of these mindsets has a particular focus, as follows: • The reflective mindset focuses on the self and seeks self-knowledge. • The analytical mindset focuses on the organization, breaking down and aggregating activities. • The worldly mindset focuses on the context and environment, on what is going on around the organization. • The collaborative mindset focuses on relationships with other people. • The action mindset focuses on managing change and getting things done. Gosling and Mintzberg acknowledge that the boundaries between these mindsets are porous and that the attributes of one mindset may also apply to another, and indeed they see this as a positive thing. Perhaps again reflecting Mintzberg’s interests in patternmaking and design, they speak of the importance of ‘weaving together’ these mindsets to create a seamless whole. Some people will be naturally inclined to one mindset or another, but it is important that managers—and organizations—are able to utilize all of them and think in all five domains. If they can do so, then they will in effect get the best

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of both mental worlds, the left brain and the right, with thinking and action, intuition and analysis crafted together into a single entity. It is tempting to see this work on mindsets as being an attempted solution to a problem which emerges in The Nature of Managerial Work. There, Mintzberg found that not just some, but most managers gravitated towards the action and collaborative mindsets, and that this was a matter of deliberate choice. Recall managers’ fondness for action and for the self-gratification that comes with seeing quick results; recall too how much of their time is spent in contact and communication with others, subordinates, people outside the organization, occasionally with superiors. At the time, Mintzberg did not really engage with the problems that this approach could create. What Gosling and Mintzberg are saying now, however, is that this is wrong. A balance of action and reflection, of logical analysis and intuition, is needed. Part of their work in this article is based on the International Masters Programme in Practising Management, which they developed and which attempted to inculcate this sense of balance into participating managers.

Management and leadership The notion of balance, too, is evident in Mintzberg’s attitudes to leadership: Most of us have become so enamoured of ‘leadership’ that ‘management’ has been pushed into the background. Nobody aspires to being a good manager anymore; everybody wants to be a great leader. But the separation of management from leadership is dangerous. Just as management without leadership encourages an uninspired style, which deadens activities, leadership without management encourages a disconnected style, which promotes hubris. And we all know the destructive power of hubris in organizations. (Gosling and Mintzberg 2003: 55–6)

In The Nature of Managerial Work, Mintzberg was clearly aware of the growing trend to separate leadership from management in academic discourse. Once again, he felt that this did not reflect reality. He made clear his own belief that leadership was one of the ten key roles that managers play, and argued for the inseparability of leadership and management: leadership permeates all activities; its importance would be severely underestimated if it were judged in terms of the proportion of a manager’s activities that are strictly related to leadership. Each time a manager encourages or criticizes a subordinate he is acting in his capacity as leader. Most often he does these things when he is engaged in activities that have other purposes—to transmit information, or to make strategic decisions. But in virtually everything he does, the manager’s actions are screened by subordinates searching for leadership clues . . . The manager looks for operations that are going wrong, problems that are in need of attention, subordinates who require encouragement or criticism. In effect, it is up to him to encourage a certain degree of alertness in the organization. The manager

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is able to probe freely because he alone is not constrained by well-defined bounds of authority within his organization. He is the only one in the organization with a very broad mandate—to put it another way, he is the only one who can meddle at will—and his activities clearly reflect this: the key purpose of the leader role is to effect an integration between individual needs and organizational goals. The manager must concentrate his efforts to bring subordinate and organizational goals into a common accord in order to promote efficient operations. Second, it is in the leader role that managerial power most clearly manifests itself. Formal authority vests the manager with great potential power; leadership activity determines how much of it will be realized. (Mintzberg 1973: 60–1)

Yet here, as so often, Mintzberg was swimming against the intellectual tide. Influential writers on leadership including Warren Bennis (1989) and John Kotter (1990) argued that leadership and management were two separate concepts. The key tasks of the leader are to set and articulate vision and to motivate and inspire others; the key tasks of the manager are to execute on the vision the leader has defined and oversee the processes of implementation. This sounds remarkably like the separation between strategy formulators and strategy implementors that Mintzberg attacked so forcefully in The Rise and Fall of Strategic Planning and other works, and it is hardly surprising that he should reject this concept. In a paper entitled ‘Society Has Become Unmanageable As a Result of Management’ (published in Mintzberg 1989) he fired his first warning shots, and has continued to write on this theme right up to the present day. An article in Business Week in 2009 (Mintzberg 2009b) argued the case that America’s economic and financial problems were in part caused by too much leadership and not enough management, and his book Managing, published that same year (Mintzberg 2009a) encouraged managers to go against the orthodox view and think of themselves as leaders. Ultimately, the separation of management and leadership is rejected by Mintzberg for two reasons. First, as Gosling and Mintzberg noted in 2003, management and leadership don’t just need each other, they are two halves of a whole. Management without a leadership element becomes simple working by rote, going through the motions. Management needs a guiding purpose, and leadership gives it that purpose. Similarly, leadership without management can deteriorate into a detached and air exercise divorced from reality. Leaders need to be on the ground metaphorically, getting their hands dirty, and they do this by managing. Second, as Mintzberg indicated in 1973, whether managers think of themselves as leaders, it seems clear that subordinates think of their managers as leaders. Subordinates expect their managers to be able to lead. If that is the case, then it is incumbent on managers to exercise leadership to satisfy the demands of those subordinates. If managers cannot do so, then they will fail. Once again, however, Mintzberg’s powerful arguments on this issue have done little except confirm his reputation as a heterodox thinker. The view put forward by Kotter and Bennis has become accepted as the orthodox one, and is widely repeated in both academic and professional literature today.

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Analysis and impact Mintzberg is a prolific author, and thanks to his engagement with the professional world, many practising managers are aware of his ideas. Despite his heterodoxy, his views on strategy in particular are often taught in business schools. In the scholarly world, he has had a good many allies, including James Brian Quinn, Joseph Lampel, Jonathan Gosling, and others who have likewise made an impact through their own views and contributions, and he has influenced a good many younger scholars as well. Yet, as we saw above, his views remain outside of the mainstream, and even his powerful contribution to the concept of emergent strategy has eroded but not entirely shifted the dominance of the strategic planning school. Hampden-Turner’s (1998: 467) comment comparing him to Darwin falls down on one level: whereas Darwinism in time supplanted creationism as the dominant view of evolution, there is no sign that Mintzberg’s views are likely to overturn the established church of management science. Why? His work is persuasive and his ideas are backed up with evidence. His critics argue that by abandoning conceptualization and focusing on the realities of the managerial task, Mintzberg is making the field too narrow and that his work is too negative. Mintzberg is very good at telling us what management is not, say the critics, but he is less good at telling us what it is. But is asking what management is, asking the wrong question? Again, Mintzberg would argue that what managers do and what management is are the same thing: it is impossible to separate the two. And if we accept this point, then the charge that he is not conceptual enough falls apart. Mintzberg has no prescriptions because he sees management as an art and not a science, and art is not prescriptive. But he does know what managers need to do and what abilities they require. Knowledge of their own business in all its aspects and all its capabilities and drawbacks is an essential requirement, more important than ‘generic’ management skills. So too is the ability to manage through discontinuity, to be able to detect changes but also to recognize patterns and focus on those things that do not change. Here again, his ideas on pattern-making take on new relevance. Change is rarely all-embracing: as in nature, some elements of the environment change while others are static or dormant, and different elements change at different times. An emergent approach to strategy—and indeed to management—can detect discontinuities and manage with them and through them as a seamless process, obviating the need to go back and ‘unpick’ the strategy and start over again each time new circumstances arise. Mintzberg’s approach to strategy is considered radical, and in terms of Western business models it is, but other approaches to strategy would seem to confirm his ideas. Eastern ideas on strategy tend to be much more fluid (see Ohmae 1982). Ambler et al. (2008) have commented that Chinese businesses, for example, do not have formal strategy teams and their leaders seldom speak of strategy-making in abstract terms; for them, strategy is something they do every day. Military strategy, too, is full of references to change and flux. Clausewitz (1819) maintained that although there were simple principles

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of strategy, putting these into practice is almost impossible. ‘In strategy, everything is very simple,’ says Clausewitz, ‘but that does not mean that everything is very easy.’ It is a point of view with which Henry Mintzberg would most likely agree.

Bibliography Ambler, T., Witzel, M., and Xi, C. (2008) Doing Business in China, London: Routledge, 3rd edn. Andrews, Kenneth R. (1971) The Concept of Corporate Strategy, Homewood, IL: Irwin. Ansoff, H. I. (1965) Corporate Strategy, New York: McGraw-Hill. —— (1988) The New Corporate Strategy, New York: John Wiley. Bennis, W. G. (1989) On Becoming a Leader, Reading, MA: Addison-Wesley. Boulding, K. (1956) The Image, Ann Arbor: University of Michigan Press. Clausewitz, Karl von (1819) Vom Kriege, ed. and trans. Michael Howard and Peter Paret, On War, Princeton: Princeton University Press, 1984. Coase, R. H. (1937) ‘The Nature of the Firm’, Economica, New Series, 4: 386–405. Emerson, H. (1913) The Twelve Principles of Efficiency, New York: The Engineering Magazine Co. Gosling, J. and Mintzberg, H. (2003) ‘The Five Minds of a Manager’, Harvard Business Review, November, 81(11): 54–63. Hampden-Turner, C. (1998) ‘Mintzberg, Henry’, in M. Warner (ed.) The Handbook of Management Thinking, London: International Thomson Business Press. Huy, Q. N. and Mintzberg, H. (2003) ‘The Rhythm of Change’, Sloan Management Review 44(4): 79–84. Kotter, J. P. (1990) A Force for Change: How Leadership Differs from Management, New York: The Free Press. Lamond, D. (2004) ‘A Matter of Style: Reconciling Henri and Henry’, Management Decision 42(2): 330–56. Lindblom, Charles E. (1959) ‘The Science of Muddling Through’, Public Administration Review 19(2): 79–88. Machiavelli, Niccolò (1961) Il principe (The Prince), trans. G. Bull, Harmondsworth: Penguin. McKiernan, P. (1996) ‘Introduction’, in P. McKiernan (ed.) Historical Evolution of Strategic Management, Aldershot: Dartmouth. Mintzberg, H. (1967) ‘The Science of Strategy Making’, Industrial Management Review, Spring, 8(2): 31–6. —— (1970) ‘Making a Science of Management’, Canadian Business, 43. —— (1972) ‘Research on Strategy Making’, Proceedings of the Academy of Management Conference. —— (1973) The Nature of Managerial Work, New York: Harper & Row. —— (1975) ‘The Manager’s Job: Folklore and Fact’, Harvard Business Review (July–August), 53(4): 49–61. —— (1976) ‘Planning on the Left Side and Managing on the Right’, Harvard Business Review (July–August), 54(4): 49–58. —— (1977) ‘Strategy Formulation as an Historical Process’, International Studies of Management and Organization, Summer, 7(2): 28–40.

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Mintzberg, H. (1978) ‘Patterns in Strategy Formation’, Management Science, (May), 24(9): 934–48. —— (1979) The Structuring of Organizations: A Synthesis of the Research, Englewood Cliffs, NJ: Prentice-Hall. —— (1981) ‘Organization Design: Fashion or Fit’, Harvard Business Review (January–February), 59(1): 103–16. —— (1983) Power in and Around Organizations, Englewood Cliffs, NJ: Prentice-Hall. —— (1984) ‘Who Should Control the Corporation?’ California Management Review (Fall), 27(1): 90–115. —— (1987) ‘Crafting Strategy’, Harvard Business Review (July–August), 65–75. —— (1989) Mintzberg on Management: Inside the Strange World of Organizations, New York: Free Press. —— (1991a) ‘The Effective Organization: Forces and Forms’, Sloan Management Review, 32(2): 54–67. —— (1991b) ‘Generic Strategies: Towards a Comprehensive Framework’, in R. B. Lamb and P. Shivastava (eds), Advances in Strategic Management, Greenwich, CT: JAI Press. —— (1993) ‘The Pitfalls of Strategic Planning’, California Management Review, 36(1): 32–47. —— (1993a) The Rise and Fall of Strategic Planning, New York: Free Press. —— (1993b) ‘25 Years Later . . . The Illusive Strategy’, in A. Bedeian (ed.), Management Laureates: A Collection of Autobiographical Essays, Greenwich, CT: JAI Press, vol. 2. —— (1994) ‘Rounding Out the Manager’s Job’, Sloan Management Review, 36(1): 11–26. —— (1995) ‘Some Fresh Air for Management’ in Collected Papers of Mary Parker Follett, Boston: Harvard Business School Press. —— (1996a) ‘Managing Government, Governing Management’, Harvard Business Review (May–June), 75(3): 75–83. —— (1996b) ‘Musings on Management’, Harvard Business Review (July–August), 74(4): 61–8. —— (2004) Managers, Not MBAs: A Hard Look at the Soft Practice of Managing and Management Developement, San Francisco: Berrett Koehler. —— (2007) ‘Productivity is Killing American Enterprise’, Harvard Business Review (August), 25. —— (2008) Tracking Strategy: Towards a General Theory of Strategy Formation, Oxford: Oxford University Press. —— (2009a) Managing, Englewood Cliffs, NJ: FT-Prentice Hall. —— (2009b) ‘Overled and Undermanaged in America’, Business Week, August 17. —— (2009c) ‘Rebuilding Companies as Communities’, Harvard Business Review (August), 87(7–8): 140–3. —— (2010a) ‘Developing Leaders? Developing Countries!’, Oxford Leadership Journal 1(2): 1–10. —— (2010b) Management? It’s Not What You Think!, Englewood Cliffs, NJ: FT-Prentice Hall. —— Alstrand, B. and Lampel, J. (1998) Strategy Safari: A Guided Tour Through the Wilds of Strategic Management, New York: The Free Press. —— —— —— (2005) Strategy Bites Back: It is Far More, and Less, Than You Ever Imagined, Englewood Cliffs, NJ: Prentice Hall. —— and Bourgault, J. (2000) Managing Publicly, Ottawa: Institute of Public Administration of Canada. —— and Gosling, J. (2004) ‘The Education of Practising Managers’, Sloan Management Review 45(4): 19–22. —— —— (2006) ‘Management Education as if Both Matter’, Management Learning (December), 37(4): 419–28.

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—— and Lampel, J. (1999) ‘Reflecting on the Strategy Process’, Sloan Management Review, 40(3): 21–31. —— and McHugh, A. (1985) ‘Strategy Formation in an Adhocracy’, Administrative Science Quarterly, 39(2): 160–97. —— and Quinn, J. B. (eds) (1988) The Strategy Process, Englewood Cliffs, NJ: Prentice Hall. —— and Westley, F. (1989) ‘Visionary Leadership and Strategic Management’, Strategic Management Journal, 10, Special issue. —— —— (1992) ‘Cycles of Organizational Change’, Strategic Management Journal, 13: 39–59. Moore, J. I. (1992) Writers on Strategy and Strategic Management, London: Penguin, 1992. Morgan, G. (1986) Images of Organization, Newbury Park, CA: Sage. Ohmae, K. (1982) The Mind of the Strategist, New York: McGraw-Hill. Poitras, G. (2007) ‘Introduction’, in G. Poitras (ed.) Pioneers of Financial Economics, vol. 2, Cheltenham: Edward Elgar. Pugh, D. S. and Hickson, D. J. (1996) Writers on Organization, 5th edn, London: Penguin. Quinn, J. B. (1980) Strategies for Change: Logical Incrementalism, Homewood, IL: Irwin. Rudman, S. T. (2001) ‘Mintzberg, Henry’, in M. Witzel (ed.), Biographical Dictionary of Management, Bristol: Thoemmes Press, pp. 684–93. Wildavsky, A. (1983) ‘If Planning is Everything, Maybe it’s Nothing’, Policy Sciences 4: 127–53. Witzel, M. (2003) Fifty Key Figures in Management, London: Routledge. —— (2009) Management History: Text and Cases, London: Routledge. —— (2012) A History of Management Thought, London: Routledge.

chapter 22

the competiti v e a dva n tage of m ich a el porter john m athews

Introduction Michael Porter is by far the world’s best known professor of strategy, and has been so for at least three decades. His book, Competitive Strategy, (1980a) was the first ‘blockbuster’ business book, paving the way for others such as Peters and Waterman with In Search of Excellence (1982), as well as Porter’s own follow-up blockbusters, Competitive Advantage (1985) and The Competitive Advantage of Nations (1990a). Prior to the publication of Competitive Strategy, Porter was a young post-doc at Harvard Business School, struggling to make a name for himself by straddling the fields of strategy (or business policy as it was then known at Harvard) and Industrial Organization, a species of applied economics concerned with market structure. After the book’s appearance he was a celebrity, appearing on the front cover of Newsweek, and attracting a devoted following of MBA students at Harvard as well as business practitioners, to whom he mastered a style of discourse that was both rigorous and devoid of scholarly trappings. The two ideas floated in the 1980 book, namely that the competitive environment of a firm could be allocated across five ‘competitive forces’, and that firms have to choose one of three ‘generic strategies’ if they are to successfully ride these competitive forces, became celebrated, even beyond Porter’s own imaginings. In the wake of the success of this book, Porter’s ambitions were raised, and he embarked on an original study of how firms frame their strategies in terms of their various value-adding activities, each one of which would be subject to competitive forces and would call on the firm to make strategic choices. This view of the firm as a value chain of activities, which Porter opposed to the conventional economic view of the firm as a production function, was unveiled in the next blockbuster book, Competitive

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Advantage (1985), making that phrase the best-known pair of words in business discourse. Porter was by now the First Lord of what Walter Kiechel III has aptly called the Lords of Strategy (2010), and his ambitions were correspondingly raised further. After being invited to join President Reagan’s Commission on Industrial Competitiveness, which reported in 1985, Porter went on to mount his own international collaborative study to bring out the determinants of national competitive advantage, as reported in the third blockbuster, The Competitive Advantage of Nations (1990). This was the book that introduced his famous quartet of issues that together can be viewed as favouring the competitiveness of an industry exposed to international competition—the Porter diamond. Since then Porter has made arresting and original contributions to several fields associated with strategy and competitiveness—examining the trade-off between ecology and economics (the ‘Porter hypothesis’ that stringent environmental codes encourage innovation and firms’ lower costs, in place of seeing environmental regulations as raising costs); examining specific industries like US health care, with a view to reforming it through making it more competitive; examining specific countries like Japan from an original competitiveness perspective; and extending his reach to finally encompass (in 2011) a new view of capitalism as a competitive system embedded in a network of social relations all of which need to be nurtured if the system is to be sustained.1 One has to go back to Schumpeter to find a scholar with a similar range of interests and depth of contributions. In this overview of his work, I will attempt to do justice to this range of interventions, in a very limited space, by focusing on the commonalities that link them. Porter, particularly in his more recent interviews and statements, has emphasized his approach as being described as a paradigm based on dynamic competitiveness—so let us call it the ‘Dynamic Competitiveness Paradigm’ (DCP) and use it to evaluate each of his contributions.2 After dealing with them in turn, I will ask what may be the lasting impact of this body of work—and where Porter might go from here.

Porter ‘before Competitive Strategy ’ Just as we divide our dates into two eras—Before Christ (bc) and Year of our Lord (ad)— so we can divide the Porter phenomenon into two eras—before Competitive Strategy and after it. Before it, Porter was a young Harvard post-doc looking to make his name in 1

Evaluations of Porter’s work are now appearing in greater number, see De man (1994); Foss (1996); Sheehan and Foss (2007; 2009) for creative contributions, and Huggins and Izushi (2011) for a very recent treatment, and the contributions they gathered, particularly Spender and Kraaijenbrink (2011) with their emphasis on the early influences that have shaped Porter. Recent interviews include Argyres and McGahan (2002); Stonehouse and Snowden (2007) and Huggins and Izushi (2011). 2 In Porter and van der Linde (1995) we read that ‘this paradigm of dynamic competitiveness’ may be applied to the environmental regulation problem, where the argument is developed that ‘properly designed environmental standards can trigger innovation that may . . . offset the costs of complying with them’ (1995b: 98).

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the field of industrial organization, bringing a particular strategic insight to his observations that other IO specialists lacked. He took his PhD work on retailer power and market performance in consumer goods industries, done under the supervision of Richard Caves in the Economics Department, and used it for an initial publication in Cave’s favoured journal, The Review of Economics and Statistics, in 1974, a year out from the PhD. He followed this with a second paper, completed a year later with Caves and another of Caves’ doctoral graduates in London, that extended his results with a better measure of scale economies as barriers to entry, again using his set of forty-two consumer goods industries. In 1976 he published his PhD thesis as a book (courtesy of Harvard Business School Press) and a short paper that he managed to get into American Economic Review, summarizing his arguments and extending his analysis of the effects of advertising by introducing measures of choice of media (particularly focusing on advertising by large consumer brands in network TV). The next year, when he turned 30, Porter combined with Caves again to publish his first major theoretical economics statement which was accepted for publication by the Harvard ‘house’ journal, The Quarterly Journal of Economics (and perpetual rival of the Chicago ‘house journal’, The Journal of Political Economy). This was the paper where Porter (with the support of Caves) went beyond existing IO theory to posit ‘mobility barriers’ as a means of defining structure within industries, and keeping firms within well-defined groups named as ‘strategic groups’. These concepts, which Porter picked up during his PhD studies at Harvard, became central to his work with Caves in allowing them (as they saw it) to strengthen and extend the ‘Structure-Conduct-Performance’ (SCP) Harvard school as a means of explaining industry competitiveness, as against the Chicago efficiency approach. The next year, 1978, Caves and Porter went much further and published a completely new paper based on Profit Impact of Marketing Strategy (PIMS) data provided to Harvard by the Strategic Planning Institute, where they examined ‘stability of market share’ in relation to several structural variables, such as industry concentration, newness of markets, capital intensity, vertical integration and scale economies.3 There were also variables capturing buyer and supplier characteristics that could be equated, more or less, with notions of buyer and supplier power; while ‘stability of market share’ could be equated with degree of competitiveness—in the sense that stable market shares indicate oligopoly and unstable shares indicate higher competitiveness. Thus, lurking behind the scenes in this paper, but never revealed, is Porter’s new notion of competitiveness as being distributed across five factors or ‘forces’—an idea that he had published as an in-house HBS ‘Note on the Structure of Industries’ (1975), and which formed the basis of Porter’s emerging popularity as a teacher through his MBA course ‘Industry and Competitive Analysis’. Indeed, it is safe to say that this was the closest that Porter ever came to trying to get the ‘five forces’ concept into the scholarly literature with a quantitative exposition—and the paper never even referred to the ‘five forces’ by name! 3 The PIMS database was compiled by the Strategic Planning Institute and utilized by strategy analysts in the 1970s and into the 1980s as a dominant source of strategizing insight. See Wensley (1982) for a critical discussion at the time.

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Neither did this 1978 joint paper with Caves mention the idea of ‘strategic groups’, even though they were central to Porter’s thinking. The definitive statement of their characterization and role was saved for Porter’s next paper, authored on his own, in 1979, and again accepted by Review of Economics and Statistics (his third paper in this journal) entitled ‘The Structure Within Industries and Companies’ Performance’. This paper boldly proclaimed the ‘theory of strategic groups’ as a means of making sense of differential performance by companies, and their existence was confidently asserted to provide the ‘missing link’ between the industry and the firm in explicating competitive behaviour (and hence, strategic choice). For good measure, Porter in this paper defended his ‘strategic groups’ theory as a means of explaining the empirical data relied on by Chicago economists (such as Demsetz) in their ongoing ideological (and political) struggle over the underpinnings of antitrust law and enforcement in America. This was the closest he would ever come to revealing himself as a partisan of the Harvard approach—which incidentally was then about to be eclipsed by the Chicago marketoriented approach which emerged as dominant in the 1980s. And then came Competitive Strategy in 1980, backed by the prior appearance of the article ‘The Five Competitive Forces that Shape Strategy’ in HBR in 1979. The world, and Porter, would never be the same thereafter. But Porter still had some work already in the pipeline. He followed up this series of six papers in the refereed literature (plus a popularization of the 1977 ‘mobility barriers’ paper in California Management Review) with one further refereed paper, published in 1981 in Academy of Management Review, on ‘The Contributions of Industrial Organization to Strategic Management’ where he revealed the IO sources which had been suppressed in the 1979/80 book and article.4 His fame after 1980 came so rapidly and with such force, and his capacity to draw large business audiences (and large fees) through expounding his approach to strategy based on competitive positioning, that he never felt the need to publish as a serious scholar again—at least, not until he entered the debates over the sources of profits, from the firm vs the industry, with his former student Anita McGahan, in 1997 (and excepting a 1991 paper published in Strategic Management Journal, which was a reflection on the field). This was a long gap in scholarly publishing—a lifetime for most people. But Porter had the Harvard publicity ‘machine’ behind him now, promoting him and his ideas relentlessly, and he was furiously busy taking his approach to strategy up to the next levels, involving the firm and its value chain (the subject of the next blockbuster book Competitive Advantage in 1985), and then the sources of competitiveness emanating from nation and region, the

4

These early papers by Porter are Porter (1973) (his PhD thesis), Porter (1974; 1975; 1976a; -b; -c; 1979a; -b; and 1981; the joint papers with Caves were Caves and Porter (1977; 1978; 1980) and Caves, Khalilzadeh-Shirazi, and Porter (1975). The 1980 paper by Caves and Porter, on ‘The Dynamics of Changing Seller Concentration’ appears to be the single excursion by Porter into quantitative estimation of changing market structure, and it was a disappointing outcome; perhaps this is why Porter has been so enamoured of cross-sectional, comparative static regression work that avoids the complexities of dynamics.

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subject of the third blockbuster, The Competitive Advantage of Nations (1990a). Porter was just far too busy to be concerned with publishing in the scholarly literature. Prior to this huge success, as he published one paper after another in the economics and IO literature, each one getting more and more ambitious, Porter could be considered a moderately competent scholar straddling the worlds of strategy and industrial organization. He was certainly canny in the way that he fashioned a mode of public presentation tailored to his audience—as a scholar, with full engagement with the literature, in scholarly forums, but in business forums as a straight-talking analyst of industry and competitiveness, speaking with authority. He conveyed the sense that his prescriptions were backed by disinterested scholarship, thus differentiating himself from management consultants like BCG or McKinsey who could never throw off the perception that they had something to sell. He knew, not only how to tailor the message to these different forums, but also how to maximize his earning power. It is notable that he never published a single account of how to actually perform a ‘five forces’ industry competitiveness analysis—neither in the literature nor as a Harvard case study. The HBS cases that he worked on, such as a study of the disposable diapers industry as of 1974 (and published by HBS as a case in 1980) provided data on the industry in question, such as financial accounts of the major firms and their estimated market shares, but never came close to providing actual data on switching costs, scale economies, buyer or supplier power, or any of the other quantitative estimates needed to complete a full Porter five forces analysis. One can only presume that students were given some clues in the classroom, but that the real insight would only be provided to firms that engaged Porter as a consultant. As mentioned above, the closest he came to providing an account in the refereed literature was in the joint paper with Caves, in the JIE in 1978, where the theme was ‘stability of market shares’ (using PIMS data supplied to Harvard) and the structural determinants of the changes observed—but without ever alluding to the five forces by name. The other notable feature of his work post-1980 is that his focus on strategic groups, which had been so intense in the 1970s, almost entirely disappeared. The 1981 paper published in AMR, where the IO underpinnings of the approach outlined in Competitive Strategy were revealed, made scant mention of strategic groups, nor of switching costs (which figure as a component in all five of the five forces), nor mobility barriers. Here is what Porter said in the 1981 article: The beginnings of a model [of firm-level corporate strategy] have emerged in the concept of strategic groups, a term coined by Hunt [1972]. I have made efforts at generalizing this concept, and Newman (1973) has artfully examined an important subcase. The concept of strategic groups is that firms within industries can be clustered according to their strategies, and that their reactions to disturbances and the pattern of rivalry will be determined by the configuration of groups. On the heels of the notion of strategic groups came the generalization of entry barriers to the concept of ‘mobility barriers’. The argument is that the difficulty of entry into an industry depends on the strategic position the firm seeks to adopt (or on its strategic group). Mobility barriers are deterrents to a shift in strategic position of firms within an industry, deterrents that give some firms stable advantages over others. Thus,

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mobility barriers provide an explanation of differences in performance by firms in the same industry, and provide a conceptual basis for positioning a firm within its industry. (1981: 615)

That is virtually the last we hear from Porter on these topics. Instead of pursuing these IO-inspired aspects of strategizing, he turns instead to get down to the level of the firm, and then—by 1990—up to the level of the region and the nation. Strategy groups and mobility barriers are simply discarded, like so much unwanted cargo on a ship looking to accelerate towards its destination.5 With the publication of Competitive Strategy in 1980, everything changed for Porter. Gone was the struggling young post-doc looking to make his mark by upending IO in the pursuit of insights into competitiveness of industries. With his mastery of the internal machinery of IO (OLS regressions that reveal the impact of ‘structural variables’ like industry concentration and R&D or advertising expenditures on industry profit rates, at a point in time) and his mastery of the field of strategy and the tricks and models of the major consulting firms, BCG and McKinsey, Porter was ready to make an entrance. And in 1979/80, at the age of just 32, an entrance is what he made. Despite the title, there was very little in the 1980 book concerning firm-level strategic choices. There was the last-minute addition of Chapter Two, on generic strategies, where Porter realized that he had to make up the deficiency by saying something about actual strategies. Drawing on the work done on strategic groups, which enabled him to view generic strategies as the property of different groups, he made the plunge and identified three such generic strategies—cost minimization (adapted from the BCG experience curve approach, and based on capturing economies of scale), differentiation (diversification, and based on economies of scope) and a third strategy of niche-targeting derived

5 It was probably a sound decision on Porter’s part to leave strategic groups behind. Work on strategic groups continues in a fitful way in the wider strategy literature—but without any clear purpose or resolution. In the US brewing industry, for example, some scholars found two groups, others six, and Carroll and Swaminathan conducted a fresh study, from an organizational ecology perspective, and found three groups, based on whether firms pursue mass production, micro-brewing or niche markets for brew-pubs. There followed further scholarly debate, until Carroll and Swaminathan (1993) eventually responded, making the general point that ‘We do not believe that “strategic group theory provides the only explanation for performance differences among firms in an industry”. In fact, we doubt that anyone seriously holds such a belief. That many factors of all kinds—systematic and non-systematic, economic and non-economic—affect firm performance is obvious’ (1993: 100). If these seem strong words, consider the even stronger terms used by Barney and Hoskisson (1990) in their characterization of strategic group approaches as based on ‘untested assertions’—namely the assertions that ‘strategic groups exist, and that firm performance depends, at least partly, on which group a firm is in’ (1990: 187). In other words, ‘strategic groups’ constitute a messy, ill-defined and wholly unsatisfying field of research in strategy, and most scholars have stayed well clear of it, for obvious reasons. Porter was well advised to distance himself after his initial flirtation—apart from another mention of the concept (without qualification) in a much later paper, Porter and Siggelkow (2008). The point for us in this review is that we can trace how thinking in ‘strategic group’ terms enabled Porter to make the breakthroughs that led to the ‘five forces’ and ‘generic strategies’—and that was indeed the function that strategic groups served (whether they existed or not).

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also from the work on strategic groups, where firms could be grouped in terms of covering a full-line or partial-line of products. Much to his surprise, this chapter turned out to have a big impact, so that the book sold on basically its first two chapters—the first on five forces, and the second on generic strategies. The rest was really background derived eclectically from IO and from other sources (sometimes directly contradicting IO insights, such as product life cycle theory). Porter was not then, nor indeed has he since been troubled (apparently) by such contradictions. But the success of the five forces and generic strategies ideas eclipsed all else, and made Porter a celebrity. In explaining the enormity of this success based on what was after all pretty slim intellectual offerings, we have to look at the sociology of the management strategy field at the time, and the notions of competitiveness that were coming to the fore. Competitiveness, while it was confined to questions of monopoly and oligopoly power and anti-trust enforcement, was a fairly arcane field, dominated by the rival schools of Harvard (with its Bain/Mason/Caves tradition of structural barriers to competition based on entry barriers) and of Chicago with its alternative account of industry concentration based on firm-level efficiencies. The two perspectives obviously had very different implications for anti-trust action. But beyond that circle, largely confined in the US to lawyers and legal firms, basing their arguments loosely on economic arguments from the rival camps, the ideas of competitiveness had little traction. But the decade of the 1980s, when Porter was making his mark, changed all that. The decade of the 1980s saw the rise of Japan as a serious competitor to US firms, particularly in hightechnology fields like electronics and semiconductors, where US leadership had been presumed at both Harvard and Chicago as an article of faith. But as the US semiconductor industry was nearly wiped out by Japanese success in the first half of the 1980s, things didn’t look so rosy. Suddenly competitiveness, at the firm-level and the regional and national-level, became a matter of survival.

Birth of the ‘Porter phenomenon’ and ‘competitive advantage’ Such was the atmosphere into which Porter was born, and which nourished the ‘Porter phenomenon’. For it is important to note that Porter himself was as surprised as anyone by his outrageous success in the 1980s. He had the talent, certainly, and the energy (producing three major books with only five-year intervals between them, from 1985 to 1990)—but there was something more that was involved in his extraordinary success. That ‘something’ must be the desperate search for a clue to ‘competitiveness’ in the face of the Japanese challenge (and the challenge from a renascent Germany as well, and then from the Japanese followers in East Asia, Korea, and Taiwan). Porter developed a formula for competitiveness in the 1980s that he brewed himself from a variety of sources, mingled with a newly minted notion of ‘strategy’. (Had the 1980 book been

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called ‘Business Policy and the Structural Analysis of Industries’—instead of the catchier ‘Competitive Strategy’ we can imagine what its fate might have been.) Porter was convinced that the source of competitiveness must lie within the firm itself, and its technological construction as a series of value-adding activities. He had the McKinsey formulation of the firm as a ‘business system’, whose depiction must surely be taken as a starting point for Porter’s famous value-chain conception of the firm that he unveiled in the 1985 book, Competitive Strategy. The McKinsey version is below (Figure 22.1). Also below is the Porter version (Figure 22.2). Apart from the obvious similarities, there are two key changes in the Porter development of the McKinsey conception. The firm’s functions are transformed to activities, each of which adds value to the firm’s eventual product offering according to its strategic traction, that is, its competitiveness. And the activities are divided into those that are directly involved in adding value, and those that support these primary activities, the secondary activities. These are admittedly important extensions and elaborations—but the gist was clearly there in the McKinsey ‘business system’ framework. The key to the conceptual innovation that Porter introduced in the 1985 book (and the product of continuous reflection and refinement since the publication of the 1980 book) was to break the firm into a series of value-adding activities, each of which could be shown to be subject to its own idiosyncratic cost drivers; each activity in this way could be analysed with respect to its own positioning in the competitiveness landscape. Whereas in ‘five forces’ Porter was locating the firm in its competitiveness landscape, and treating the industry as his frame of reference, in the 1985 book the frame of analysis shifts to the firm itself, and the distribution of value-adding activities along the value chain, and their responsiveness to the competitive forces they are exposed to. There are many possible sources and inspirations for this strategic conception of the firm developed by Porter. Apart from McKinsey itself, which was an obvious (if unacknowledged) source, there were others in the economics and industry literature that had developed a similar conception—but not to the level of refinement Porter achieved. The point of departure—and the point from which to take an opposing conception—was the neoclassical conception of the firm, which was viewed as a point in production space, defined by perfect information regarding its technological possibilities, and bearing zero resemblance to any real firm. Despite his pretensions to economic orthodoxy (or at least to IO orthodoxy), Porter deep-down knew that this neoclassical conception of the firm was a barrier to real understanding, and one to be dispensed with. Plenty of nonorthodox people had made the same point, such as Kaldor and others in the Cambridge (UK) tradition—but none with the ‘clout’ that Porter now possessed. Some of these potential sources are worth speculating about—as has been done by my colleague, Nicolai Foss6—because they shed light on the eventual solution that Porter developed and promoted. (I say ‘potential’ for good reason, for in this case Porter has never revealed his sources for the value chain innovation.) 6

See Foss (1996); Sheehan and Foss (2009) for insightful accounts.

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Technology

Manufacturing

Distribution

Marketing

Service

Design

Procurement

Transport

Retailing

Parts

Development

Assembly

Inventory

Advertising

Labor

figure 22.1 The McKinsey ‘business system’ presentation of the firm from a strategic perspective, circa 1980 Source: Ghemawat (2002), based on Bales et al. (1980).

Firm Infrastructure Human Resource Management

Support Activities

Technology Development Procurement

Primary Activities

Inbound Logistics

Operations

Outbound Logistics

Marketing & Sales

Service

figure 22.2 The Porter value chain Source: Porter (1985), p. 37.

One has to admire the sheer daring and audacity of Porter’s intellectual move in introducing the value chain as a strategic theory of the firm grounded in the competitiveness of the firm’s individual activities. With a single blow it lays waste the neoclassical theory of the firm as a production function—a conception of the firm which has been dying a lingering death ever since. And it was pre-eminently a management-oriented theory of the firm, couched in terms that managements could readily understand and apply in their own firms. In my view, it has been taken up as a tool by managements of real firms even more than the 1980 ideas of five forces and generic strategies. Strategic analysis within a firm now usually starts with the value chain, even before the competitive industry analysis—which after all elicits nothing more than some vague notion as to whether the industry is ‘attractive’ or not. But it is worth making some further points about this intellectual innovation introduced by Porter. One is that it is, after all, a rather obvious and straightforward idea. One is left wondering why the field of management and strategy went without a decent ‘value chain’ conception of the firm for so long prior to Porter’s arrival on the scene. Now that Porter has enunciated and elaborated it, one is struck by its obviousness. Of course the firm is a chain of value-adding activities; of course an activities-based view of the firm is strategically correct.7 7

Oddly enough, Porter himself is markedly reluctant to use this terminology, as a counterpoint to the ‘resource-based view’. Even in a very recent contribution, on activity systems and sustainability of competitive advantage (Porter and Siggelkow 2008), the term ‘activities system’ is used in preference to ‘activities-based view’.

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A second point is that the idea is presented as a conception from on high, without reference to sources and parallel modes of thinking. This is characteristic of Porter—and extremely annoying. One would think that it would not cost him much to acknowledge forerunners in the activity-based tradition. One forerunner whom he could have acknowledged (assuming he knew about him) was the American marketing pioneer, Alderson. This scholar developed a concept of ‘transvection’ as the dynamic counterpart to the static notion of transaction: he envisaged products coming to market with a ‘chain’ of value-adding activities leading to each one. It was this chain that he called a transvection.8 Lacking Porter’s resources for building an idea into a quantified model, and Porter’s sheer audacity, Alderson never saw his notion of transvection take off in the same way as Porter’s value chain. Yet the two ideas are almost identical—with the important exception that Porter’s value chain lies internal to the firm (at least in the 1985 book), whereas Alderson’s spans several firms. But in his later work, involving clusters, Porter would arrive at the same destination. A third point is that Porter—for all his quantitative mastery of regressions—offered scant evidence for the workings of value chains within firms, in the 1985 book or elsewhere. As mentioned above, no effort was made (at least as far as we know) to get the value chain conception of the firm into the refereed literature; to this day it stands as a principal idea in strategy without any learned references to it by its founder. One is left with the impression that again (as in the case of the five forces framework) Porter was advertising his wares through the medium of a blockbuster book, and leaving the details to be fleshed out, firm by firm, for paying customers. This is, needless to say, a somewhat reckless approach to science. A fourth and final point is that the value chain is, to all intents, a dynamic conception—but Porter still presents it as tied to comparative static reasoning, consistent with his roots in IO frameworks and the SCP school. Eclectic as he is, Porter shows marked reluctance to ever revise his earlier frameworks. For example, in the 2000s he is still happy to discuss the five forces framework as if it still held major validity—in spite of all the deficiencies that have been pointed out. Likewise he introduced the dynamic value chain conception of the firm without offering any revisions of the static five forces view of competitiveness in industry. And yet there have always been dynamic frameworks available that Porter could have utilized, or used as a reference point. One can only lament that he has shown an astonishing disregard for dynamic frameworks and for the dynamic perspective generally, in both his research (which is rigorously comparative static, employing cross-sectional regressions) and in his consulting. I have always found this to be the most puzzling aspect of Porter. Why shield yourself from the obvious dynamism and disequilibrium of the business world? Why insist on tackling dynamic, evolutionary processes using only the tools of comparative static analysis? Why not invest some intellectual capital in building longitudinal studies, which follow a firm or an industry over time? It is not that Porter lacked the resources to do so.9 8

See Alderson (1965) for the original exposition of the transvection concept. Things have finally started to change with the clusters studies. Reference is made below to the very recent publications of Porter with members of his cluster studies group, where a longitudinal database is utilized (e.g. Delgado and Porter 2010). 9

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4. The Competitive Advantage of Nations No sooner had Porter revolutionized the strategic analysis of firms in terms of their value chains, than he found himself in the thick of the national debates in the US over national competitiveness—for which read, competing with Japan. And now he had a comprehensive toolkit for analysing competitiveness—at the industry level (five forces) and at the firm level (value chain), with the focus always on the strategic angle as taking priority. As he tells the story in numerous interviews, Porter had not paid much attention to the national and international debates over competitiveness, absorbed as he was in the firm-level analysis that occupied all his waking hours. But in 1983 he was invited to join the Presidential Commission on Industrial Competitiveness (as one of a blue-ribbon list of twenty invitees) and thrown into the debates concerning the competitiveness of American industry compared with Japan—and this opened up a whole new perspective which he was ready and prepared to adopt. Indeed, Porter seems to have been dogged by sheer good luck in terms of timing—after a decade of work on the wellsprings of competitive behaviour at the firm and industry level, he was now invited to join the national debate over the future of US competitiveness, as one industry after another went down to superior Japanese competitive prowess. The Commission actually reported in 1985, with a report that no doubt Porter argued vigorously against. But it set the tone for the work that he now felt qualified to do. With his customary energy, Porter threw himself into this new challenge, and now had the resources, from his Harvard base and his consulting income (with the Monitor Group now earning very good money) to undertake research projects on a grander scale. And in this case he did it on a grand scale indeed. In the second half of the 1980s Porter mobilized research collaborators in ten countries to undertake national-level inquiries into their own countries’ competitiveness, utilizing a new framework that Porter had fashioned for the purpose. This was the famed ‘NCA diamond’ consisting of four elements: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry. Like the five forces framework that preceded the diamond by a decade, it was little more than a checklist of factors, or issues, that Porter had demonstrated to be tied to a country’s competitiveness—where competitiveness of an industry at the country level was viewed as a simulacrum of competitiveness at the firm level, namely as the ability of the firms in the industry to hold their own in international competition, without relying on the government, or each other, to do so.10 10

In Porter’s own words: National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labour pool, its interest rates, or its currency’s value, as classical economics insists. A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong, domestic rivals, aggressive home-based suppliers, and demanding local customers. In a world of increasingly global competition, nations have become more, not

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Porter’s magnum opus turns on two propositions, namely that (1) the ‘competitive advantage’ of a nation’s industries is determined by four broad attributes of the home base, namely the four elements of the ‘diamond’; and (2) that countries move through a series of stages in their industrial development, from an initial factor-driven stage, to an efficiency-stage, and then to an innovation stage, where all four elements of the diamond are called upon to sustain and enhance competitiveness—plus a fourth wealth-driven stage where the industry declines and its firms become rent-seekers. Both propositions are eminently plausible—but so are many others, and Porter offers no real foundation for these propositions other than his own convictions. Perhaps the ten country studies undertaken during the second half of the 1980s generated a large amount of quantitative data, and perhaps it was Porter’s intention to utilize the relationships so generated to support his basic proposition and his choice of elements of the diamond. But if this was the intention, it must have turned out to be too hard to realize, and nothing of this sort is mentioned in the final product, the massive 1990 book. Many efforts to replicate his work have been undertaken, but most have ended up refuting one or more of Porter’s basic relationships (Davies and Ellis 2000). The propositions are based on a four-year study in ten trading nations. Over 100 case studies of industries in these countries were developed, taking a historical perspective, plotting the position at three dates—1971, 1978, and 1985. The ten countries studied, including Japan, Germany, the US, plus Denmark, Italy, Sweden and Switzerland in Europe, and Korea and Singapore in Asia—all provided their own research teams, making for more than thirty dedicated researchers in all. This was indeed a large-scale comparative study that sought structural determinants of international success (presence of substantial and sustained exports from the industry to other countries and/or significant outbound foreign investment based on skills and assets created in the home country) (Porter 1990a: 75). No doubt there were quantitative regression analyses, undertaken at each of the chosen dates, and which underpinned the conclusions developed in the outputs of this study—but oddly enough they have never been reported. Perhaps the scale of the undertaking was too complex, and the results too confused to provide reliable insight. The study, thus, has to count as a qualitative exercise—despite its scale, international reach, and temporal dimension. The key contribution of the 1990 CAN book is the contrast between ‘comparative advantage’—which belongs to the intellectual world of international economics—and ‘competitive advantage’ which belongs to Porter’s world and to international business. Porter is at pains in both 1990a and 1990b to point up this contrast. Comparative advantage, whose argument originated with Ricardo in the 1820s, and which has been updated and rendered more rigorous in the Heckscher-Olin factor price equalization theorem (buttressed by the Stolper-Samuelson theorem), poses international trade between

less, important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown. Competitive advantage is created and sustained through a highly localized process. . . . . Ultimately, nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging. (1990a: 73–4)

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countries specializing in those sectors where they have greatest ‘comparative advantage’ in terms of factor endowments as leading to optimal outcomes.11 Porter set his face against these neoclassical fantasies. Just as he proposed his activitybased view of the firm as a value chain, in a radical break with the neoclassical production function view of the firm in his 1985 CA book, so in 1990 Porter made an equally radical break with international economics and its doctrine of comparative advantage, proposing instead his notion of NCA based, not just on factor endowments, but on three other ‘factors’ or elements—demand conditions; firms’ structure, strategy and rivalry; and related and supporting industries—that would together create a competitive environment in which firms would be best equipped to excel in international competition. Porter’s approach has neither been accepted by the IE community, nor really understood. The most celebrated opponent of his approach has been Paul Krugman (Nobel laureate in 2008) who states categorically that: Economists in general do not use the word ‘competitiveness’. Not one of the textbooks in international economics I have on my shelves contains the word in the index. (Krugman 1996: 24)

For Krugman, the problem with ‘national competitiveness’ (which he equates with ‘pop internationalism’ where his target is explicitly the work of Robert Reich and Lester Thurow, but could be extended to that of Porter) is that it emphasizes competition between nations as if they were firms, leaving gains from trade to one side. Krugman was making the point that international trade is not a zero sum game: it can create (and does) create gains for both parties.12 But Porter was not denying this; indeed he saw the gains from trade as being a powerful contributor to the growth of firms themselves and of their industries. I think it is fair to say that these are gross misreadings of Porter. He is at pains to say that he is concerned with the competitiveness of particular industries in a country (i.e. national competitiveness of, say, autos in Japan or semiconductors in China) where the focus is on the national competitive environment that will lead firms in the particular industry to be strong or weak when it comes to international competition. This seems to me to be a perfectly fair and interesting question to ask, and one that evades all the silly objections thrown at Porter, even by Nobel laureates like Krugman. Porter himself lets it be known, through the title for the book reporting this study in 1990—The Competitive Advantage of Nations—that he wishes it to be regarded as his masterwork, his own ‘Wealth of Nations’. Yet for all the impressive machinery

11 The Heckscher-Olin Theorem states that under certain conditions (including perfect competition, constant returns, equality of the number of factors to the number of products), a rise in the relative price of a certain good will result in a rise in the return to that factor used most intensively in its production. 12 Robert Reich (also Krugman’s target) on the other hand is even more dismissive of Porter’s ideas:

National competitiveness is one of those rare terms of public discourse to have gone directly from obscurity to meaningless without any intervening period of coherence. (Reich 1990: 925)

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displayed, it is ultimately an unsatisfying piece of work, one that is rarely read today, a couple of decades later.13 The first point to make is that there is no econometric demonstration of the propositions that underpin the work, which is extraordinary, given the length of the book (running to over 900 pages) and the air of authority with which it is presented. The two fundamental propositions are grounded in the industry case studies and in Porter’s own convictions. These convictions may well be correct—but one would expect someone in his position, and making his claims, to back them on something more solid than case studies. I mentioned above that perhaps the econometrics got out of hand, and that in the end Porter might have thrown the whole set of regression equations up in the air to see how they landed—and, ipso facto, there emerge four elements of a diamond! This is linked to the second point, emphasized in reviews like that of Davies and Ellis (2000), that much work has been expended in proving counter-propositions. Given the complexity of the issues, and Porter’s unfortunate predilection for comparative static reasoning, the confusion thus generated is understandable. A third point is that the 1990 work is virtually silent on the issue that would most interest readers today, namely how do countries lift themselves out of poverty through development. Porter evinces little conception of how a country might pull itself out of a ‘factor-driven’ stage of development utilizing government-driven strategies—precisely the route taken by the East Asian ‘miracle’ countries Taiwan, Korea, and Singapore—and now, of course, China as well. They stood in 1990 as the great exception to the Porter world view, and continue to stand today as the great exception. Yet Porter has shown a marked reluctance to deal with their success—perhaps because the role played by the state in their successful development is too clear and obvious. The stimulus for the 1990 book, to understand how American industry could stand up to Japanese competition, stands all too clearly in the background; such a framework just doesn’t fit the case of a challenger country looking to make its mark. Finally, it is worth making the point that the arguments over the sources of national competitiveness have been extended by bodies such as the International Institute for Management Development (IMD) in Lausanne and the World Economic Forum (WEF) with its annual meetings in Davos, and by Porter himself working closely with the WEF, into a series of global competitiveness indices and associated reports.14 The number of variables entering into measures of national competitiveness have seen a gross inflation, from Porter’s original four (the diamond), to the nine ‘pillars’ utilized in the Global Competitiveness Report, to the breakdown of the nine pillars into (at last count) 84 variables. But no regressions are offered explaining what influence each of these 13 The 1990 Competitive Advantage of Nations book is listed by Amazon.com as ranking 298,832 in books—way down the list—compared with 3,074 for Competitive Strategy (1980) and 7,846 for Competitive Advantage (1985) which still qualify as ‘best sellers’ after all these years in print. [Accessed 27 March 2011.] 14 The national competitive advantage arguments have been pushed by the various authors of the Global Competitiveness report, which through the 1990s and into the 2000s regularly and patriotically reported the US as being the world’s most ‘competitive’ country—despite the failing infrastructure, the excessive indebtedness, and the swing away from manufacturing to financial engineering.

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independent (structural) variables might have, nor indeed what is the dependent variable being investigated (exports as a proportion of total GDP? average profit rates of exporting industries? Measures of productivity in internationally traded industrial sectors?). The GCI actually embodies Porter’s conceptual innovation of 1990 in classifying countries as being ‘factor-driven’, ‘efficiency-driven’, or ‘innovation-driven’—which is remarkable, given that this is yet another of Porter’s conceptual innovations that has never been submitted to peer review in a journal (as far as I know). A little historical perspective would have greatly enhanced Porter’s CAN 1990 effort. Porter’s concern with ‘competitiveness’ has been matched in earlier periods by a concern for ‘national productive power’ (the term preferred by Friedrich List in the nineteenth century) or ‘productive capacity’, while his concern for the factors of success has been matched in the past with concern for the building of new industries and their nurturance to the point where they could hold their own. Such practices go back to Venice and Genoa in the thirteenth and fourteenth centuries, and to Florence (which was the latecomer in the context of Italy), and were all concerned in one way or another with promoting industries that generated increasing returns through imperfect competition—and usually this meant manufacturing industries. The success of these Italian city states in international trade and the prosperity they generated, followed by similar stories in England under the Tudors (e.g. conversion of a wool export industry to a woollen garments industry), in the Netherlands, in Germany in the nineteenth century, and then in Japan, all indicated how countries had indeed generated ‘national competitive advantage’ in key industries—creating the greatest puzzle yet confronted by the social and economic sciences.15 If Porter had been less ambitious (less arrogant?) in trying to demonstrate that he could reveal the key ingredients of national competitive advantage and go where no man or woman had gone before, and instead settled on a few key measures such as productivity improvements in key industries over time, and their dependence on five or six key structural variables, based on extant work already reported, he might have had more success and more acceptance. As it is, the ‘Porter diamond’ is seen by most to rest on nothing more than Porter’s convictions and a few supporting case studies of ‘success’.16

Industrial clusters The outcome of the 1990 NCA book and HBR paper was not only the stream of work on national competitiveness, associated with the WEF and GCI reports, but also (even more significantly) the work on industrial clusters. In fact Porter appears to have been fascinated and obsessed by industrial clusters for the past decade and more—and 15

See Reinert (1995) for an illuminating discussion of these historical antecedents. Davies and Ellis (2000) provide a well-balanced review, incorporating summary evaluations of the work conducted to confirm or refute Porter’s propositions. 16

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according to interviews and reports of his close associates (e.g. Ketels 2011), it was more or less an ‘accidental’ outcome of the work on NCA. One of the corners of the ‘diamond’ is ‘related and supporting industries’, and these came to be interpreted, by Porter and others, as meaning clusters of firms with complementary activities. As the 1990s wore on, and the debates over NCA grew more strident, and the ‘branding’ of different measures of competitiveness (such as the IMD’s World Competitiveness Index, competing with the WEF’s Global Competitiveness Index which was supported and contributed to by Porter) grew more ridiculous, so Porter’s attention turned more and more to industrial clusters as a ‘real’ source of international industrial success. The evidence was already there in the 1990 book (such as the Italian success in apparel illustrated by the Italian textile industrial district of Prato, near Florence), but it took Porter some time to recognize its significance. He was ready to go public with a paper on clusters by 1998, where again the HBR was the chosen vehicle, and the opening salvo was another one of those Porter manifestos that proclaims the fundamental truth of his new insights with scant regard to their consistency with his earlier frameworks, nor to recognition of earlier work conducted by others. In the case of clusters, there is certainly a core of truth to Porter’s proclamations. Firms do indeed enhance their competitive strength and productivity by clustering into groups of related and complementary activities. There are hundreds and thousands of examples of the phenomenon, moving from cases in earlier industrial success stories such as Italy, the Netherlands, to the UK and Germany in the nineteenth century (e.g. the ‘industrial districts’ studied by Marshall such as Sheffield in Britain and Solingen in Germany),17 and now encompassing the rapid diffusion of Special Economic Zones in China and India and the numerous industrial clusters they encourage within them. Porter’s championing of clusters has certainly made a difference in the acceptance and recognition of the phenomenon, and he has himself (with his Institute for Strategy and Competitiveness at Harvard and the consulting activities of the Monitor Group) played a major role in promoting the concept, particularly at the level of individual states in the US. And in this case he has been at pains to pursue econometric studies that look to identify and characterize industrial clusters, and publish the results, from the year 2000 onwards. Comparable to the earlier phase in the 1970s, when Porter was a young post-doc looking to make his name, he has in the 2000s been publishing again in refereed journals on cluster-related topics.18 Again we find the signature of Porter in his characteristic approach, regressing one group of variables on another performance variable, at a single point in time—and in this case repeated in awesome detail for hundreds of industrial clusters newly discovered by Porter and his collaborators in the various states of the US and elsewhere. But in this case we also see the first glimpses of a new concern with longitudinal effects; a paper by Porter 17

See Potter and Watts (2010) for a historical overview that encompasses the rise of industrial districts, but also their decline, with particular emphasis on the Sheffield industrial district that Marshall had studied. 18 See for example Porter (2000); Porter (2003); Delgado, Porter and Stern (2010).

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with his collaborators Mercedes Delgado and Scott Stern on ‘convergence: clusters and economic performance’ (2007: not yet accepted for publication) actually uses a growth model with data covering the period 1990 to 2003 and performance variables related to convergence and agglomeration effects over this time period as the basis for econometric estimation—instead of the usual regression of variables measured at one point in time on other variables measured at the same point. This would be a welcome departure from Porter’s relentless insistence on regressing structural variables on performance variables at a point in time, which as he must surely recognize himself by now, after more than thirty years of pursuing this line of work, yields only limited results and partial insights.

Porter’s ‘related and supporting’ intellectual activity I have so far considered the main topics and conceptual innovations introduced by Porter—the five forces and generic strategies (1980), the value chain and competitive advantage (1985), national competitive advantage, the diamond, and stages of development (1990) as well as the clusters work that grew out of the NCA concerns. But there are ‘related and supporting’ pieces of work associated with Porter’s cluster of researches on competitiveness in all its guises that deserve to be mentioned.

Sources of profits: industry or the firm Neoclassical economic theory based on perfect competition predicts that profit rates will be equalized across industrial sectors, as capital investment flows from sectors with low profits to sectors with higher profits. But in practice, of course, differential profit rates across industrial sectors persist: this is the starting point for the Harvard work of Bain, Mason, and Caves, culminating in the SCP view. Independent verification of interand intra-industry profit rates had to wait for the work of Schmalensee (1985) who conducted a full-scale estimation of the variance of profit rates across US industrial sectors, broken down to the Federal Trade Commission (FTC) line of business level. This was followed up with further work by Rumelt (1991), who with a careful methodology set out to answer the question ‘How much does industry matter?’, and demonstrated that there were ‘negligible corporate effects, small stable industry effects, and very large stable business-unit effects’ in accounting for variance in profit rates. He concluded that the most important sources of economic rents accruing to businesses are business-specific, while industry membership is of much less importance, and corporate membership is of negligible importance. Rumelt’s results run directly counter to the SCP view of the world, and attracted a response from Porter (working with his former doctoral student, Anita McGahan) in a

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paper that is celebrated (McGahan and Porter 1997) in that it brought Porter back into engagement with his peers in the refereed literature—after a gap of sixteen years. The McGahan and Porter study utilized fresh data and brought novel variance decomposition techniques to bear on the issue, and demonstrated that stable segment-specific effects account for the bulk of variance in profits.19 McGahan and Porter claim that their results differ because they use data that represent all economic sectors and cover a longer period of time, encompassing several phases of the business cycle. They report that when they confine their data to manufacturing, as did Rumelt, they obtain results similar to his—thereby purporting to show that manufacturing would be an outlier in this case. The point of these exercises is that they reveal the limits of cross-sectional and comparative static frameworks in attempting to apportion the variances in firms’ profits; the issues will never be resolved unless the scholars concerned move to investigate them with dynamic, Schumpeterian frameworks that encompass firm entries and exits, or churning.20

Environmental regulation For another angle on the working out of Porter’s Dynamic Competitiveness Paradigm, consider his suggested new conception of the ‘environment-competitiveness relationship’ (Porter and van der Linde 1995). In this 1995 paper co-authored with Claas van der Linde, Porter argues that the conflict between economy and ecology grows out of a static conception of environmental regulation, where technology and rules are fixed and firms are forced to work within these rules, which are viewed as raising costs. A more dynamic view, by contrast, would see firms profiting from strict regulation by becoming more innovative, and lowering their costs as a result of such innovativeness. Strict environmental standards, then, can actually improve the competitiveness of an industry, according to Porter and van der Linde—if they are viewed in an appropriately dynamically competitive fashion. This work has been extended by Porter and Reinhardt (2007) into a strategic approach to dealing with climate change; again the gist is that progressive firms will find innovative ways to reduce their carbon emissions, and by so doing will also find 19 McGahan and Porter (1997) found that 32 per cent of aggregate variance in business-segment profits was caused by segment-specific effects, followed by stable industry effects with 19 per cent, corporate-parent effects at 4 per cent, and variation in year effects for just 2 per cent—thus reversing the order of emphasis demonstrated by Rumelt, and putting industry membership back as the primary driver of business unit performance. As they put it, ‘These results support Schmalensee’s (1985) principal conclusion that industry effects contribute importantly to variation in business-specific profitability, and call into question Rumelt’s finding that stable industry effects have low influence’ (1997: 29). 20 McGahan and Porter returned to the issue five years later, with a paper that asks ‘What do we know about variance in accounting profitability?’ (McGahan and Porter 2002) and returned to the same theme in McGahan and Porter (2005).There is an investment by Porter and collaborators of at least a decade’s work in trying to resolve this issue in a way that supports the Harvard structural approach.

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new ways to compete and excel. Here Porter has offered propositions that are eminently suited to empirical testing, and will no doubt generate much interesting work in coming decades. I for one think that this ‘Porter hypothesis’ of stricter regulation leading firms to enhance their competitiveness is ‘right on the money’, and will be increasingly relevant in a carbon-constrained world looking for more effective ways of dealing with global environmental pollution.

Competitiveness of the US health sector Another close interest of Porter’s in recent years has been the reform of the US health care industry—which he characterizes as being peculiarly inefficient because of its fundamental lack of competitiveness in the key sector of individual patient care and competing treatments. In a series of papers with Elizabeth Olmsted Teisberg, culminating in a book published by HBS Press in 2006, Porter has argued that the competition in the US health care industry is intense—but of the wrong kind, in the wrong place. It ends up with costs being displaced from the patient, to the doctor, to the health plan, to the hospital, from the insured to the uninsured, and so on. Porter and Teisberg argue that a fundamental reform based on introducing real competitiveness into the system is what is needed, underpinning any other attempt at reform.21

Creating shared value Capitalism and social sustainability is the most recent of Porter’s interests. In an initial article (Porter and Kramer 2006) the links between competitive advantage and corporate social responsibility (CSR) are spelt out, with the argument that corporate social responsibility can be turned into a source of competitive advantage by firms that see the opportunities. But in the most recent of these forays, Porter and Kramer (2011) coin the term ‘creating social value’ (CSV) as an alternative to CSR, and argue that companies that pursue ‘shared value’ strategies with their customers, suppliers, resource providers, and communities are the ones that will generate a future not just for themselves, but for capitalism as a system. Porter and Kramer put it bluntly: ‘Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth. But a narrow conception of capitalism has prevented business from harnessing its full potential to meet society’s broader challenges’ (2011: 4). With typical modesty, Porter proclaims this as nothing less than the ‘reinvention of capitalism’. But with rising inequalities, global warming, industrial spoliation, and pollution all around the world, who are we to argue against the reinvention of capitalism?

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See Porter and Teisberg (2006a; -b).

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A summing up: Porter’s Dynamic Competitiveness Paradigm Porter is by far the most famous business professor at work today—and he has been so for the past three decades, ever since his youthful work Competitive Strategy of 1980 shot to best-seller status and brought him fame and rewards that must have been beyond his imaginings. As a phenomenon, he is of more than passing interest to his social science colleagues. He has undoubtedly been lucky in the timing of his intervention, in that there was enormous interest in the US in notions of strategy and competitiveness, following in particular on the successes of Japan against US industries in international competition. Porter’s 1980 book should more accurately have been called ‘Competitive Industry Analysis’ or even more accurately ‘Structural Industry Analysis and Business Policy’—but would surely have made much less impact that the title eventually chosen, Competitive Strategy. And the next book, which really was about competitive strategy at the firm level, was addressed to an audience that was looking then for insights into competitive advantage, and so was it was duly named. But in addition to timing, Porter brought considerable energy to his task—the three books of 1980, 1985, and 1990 (in rapidly expanding scale) are merely the tip of an iceberg of strenuous activity devoted to producing case studies at HBS, teaching strategy courses and utilizing the case studies, consulting with companies, and offering executive programmes to managers. But above all Porter brought a capacity to translate the findings of scholarly discourse into the language of practitioners, a capacity which he exhibited virtually from his initial public appearance as a business professor and which has been his signature ever since. There is no doubt that Porter’s lasting achievement will be his paradigm of competitiveness, which he has been exploring and interpreting in novel ways for more than three decades now—and always from a position of dominance in the field. It is quite remarkable how he has sustained this high-wire balancing act. For Porter, competitiveness precedes strategy; strategy only makes sense in competitive industries. And strategy starts with diagnosing the competitive forces in an industry, with a view to positioning the firm in a way that is most favourable to its present and future profitability. But competitiveness is not just about collecting rents, it is about upgrading and innovation, which as Porter has repeatedly stressed, are the elements that provide the core to dynamic competitiveness. More generally, Porter argues that ‘Competitive advantage . . . rests not on static efficiency nor on optimizing within fixed constraints, but on the capacity for innovation and improvement that shift the constraints’ (Porter and van der Linde 1995: 98). This is Porter in a nutshell. There are many implications of such a viewpoint, which Porter has been teasing out assiduously now for many years. In his 2002 interview with Argyres and McGahan, he mentioned as an implication a novel approach to anti-trust enforcement. The traditional approach, he argues, is based on a narrow conception of short-term consumer welfare; a secondary goal has been efficiency; and a distant last goal has been dynamic efficiency,

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or innovation. Porter suggests on the basis of his ‘Dynamic Competitiveness Paradigm’ (let us so name it) that these elements are in the reverse order, and that the primary goal of antitrust enforcement should be to bring about productivity growth—rather than trying to bring about competitive markets in a neoclassical sense, where there is little differentiation, and profits are close to zero. Indeed, he argues that in place of using an index of competitiveness like the Hirschman-Herfindahl Index (a measure of concentration) it would be better to utilize the five forces, which provide a ‘more textured view’ (Argyres and McGahan 2002: 49). An antitrust judgement based on consideration of the dynamic impact of the five forces would certainly be worth reading! For another angle on the working out of the DCP, we may consider again Porter’s reformulation of the relationship between environmental standards and competitiveness. In successive papers, he and Claas van der Linde have overturned the notion that environmental regulations raise costs for business, by pointing to the ‘innovation effect’ of such standards when they are well crafted. The same kind of idea clearly underpins Porter’s notion of national competitive advantage, which is an attempt to specify the environmental competitive conditions in which firms are most driven to raise their productivity and their capacity for innovation, subject to the influence of foreign competition. As the field of application of the Dynamic Competitiveness Paradigm has broadened, so the difficulties in providing statistical demonstration of its beneficial effects grow, and the opportunities for scholars to provide counter-cases also grow. The work on clusters fits this Dynamic Competitiveness Paradigm very well, in that after the appearance of the 1990 book, Porter became more and more convinced that clusters provide the best such business environment for groups of firms looking to excel in international competition.22 Porter appeals to a dynamic perspective to argue that ‘While traditional agglomeration economies centred on cost minimization, cluster advantages rest on information, transaction costs, complementarities, and incentives as well as “public” goods that result from both public and private investments’ (1998: 10). This is a far more comprehensive view than demonstrated in the 1980 or 1985 books. One can be sympathetic to such a viewpoint, which clearly veers towards idealist and utopian conceptions (as opposed to the image of Porter as a hard-edged quantitative teacher handing out lessons to a recalcitrant American business audience). But at the same time, is it necessarily churlish to point out that Porter’s methods have rarely lived up to these grandiose goals? All the way through the 1980s, Porter rigorously worked within a comparative static setting based on the rigidly static SCP framework—five forces, positioning, and value chain—without ever considering the kinds of issues that concerned economists more sympathetic to evolutionary structural dynamics, such as

22 As Porter put it in the Adam Smith lecture in 1998 (one of his first considered statements on the cluster question), ‘Clusters increase productivity vis-à-vis outsourcing or vertical integration through improving access to specialized inputs and information, facilitating complementarities among cluster participants, and improving incentives and performance measurement. More important, in many cases, is the role of clusters in improving the rate and success of innovation. Finally, clusters lower barriers to new business formation that improve the environment for productivity.’ (1998a: 10)

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churn rates in an industry (entries and exits by firms over a given period).23 Porter must certainly have had access to such data, but to the best of my knowledge never made any effort to utilize it in an argument couched in terms of ‘lowering the barriers to new business formation’—as in the clusters quote above. Then in the 1990s he brought innovation and productivity enhancement to the fore, and broadened his gaze from the firm in its immediate competitive environment to the manner in which industries could grow and prosper in the face of international competition. But the statistical techniques which might have buttressed such a view were nowhere to be seen, and instead Porter frittered away his time and energy on devising global competitiveness indices (couched at a single point in time) that became more and more frivolous and ridiculous as one succeeded the other. Even when examining industrial clusters in the 2000s, as providing an optimal competitive environment in which innovation and productivity improvements might be favoured, Porter’s statistical tools continued to be the comparative static, cross-sectional regressions that he had cut his teeth on—tools that through their very use are bound to block any clear view of the dynamic processes through which clusters form, and firms within them are created, flourish, and then pass away. How lasting are likely to be the achievements? Porter himself has shown a marked reluctance to revise any of his frameworks, even as they become clearly superseded by later developments. In the case of clusters, cooperative relations were being put on the same level as competitive—without any revision to the five forces framework; in the earlier NCA, it was industry rivalry which was seen as desirable, enhancing productivity and profits, in contradiction with the emphasis on rivalry as reducing profits in the five forces framework. Porter’s easy eclecticism clearly extends to his own work as well as that of others. But we do not have to show the same reluctance, and we are free to evaluate the conceptual innovations on their merits. In the case of five forces, we must bear in mind that the framework, as presented in 1980, is concerned solely with competition and rigorously excludes any form of collaboration or cooperation, even along the value chain—as against abundant evidence available then and certainly since that successful firms are as able to take advantage of collaborative forces as they are of competitive (such as in clusters and networks). The five forces rigorously exclude intellectual property rights (in the sense that they are ignored), and treat only products that might be called commodities or generics—and yet one of the most significant sources of competitive advantage from the 1980s onwards has been intellectual property right (IPR) protection, particularly by US firms. The five forces rigorously exclude government intervention as a factor in competitiveness, in the face of the obvious relevance of government as a shaping force in the case of latecomer firms catching up with their more advanced rivals (as in the stories of Taiwan, Korea, Singapore—and now China). The five forces were said to be most successfully dealt with

23 For an exposition of what such an alternative perspective might be, see Dosi et al. (1995) as well as my own contribution to the debate, in Mathews (2006a; -b; 2010).

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by three kinds of generic strategies, and that the better firms adhered to one or another strategy, without being ‘stuck in the middle’—in face of the fact that one of the strongest forces driving firms in global competition has been the necessity to keep costs low (through outsourcing and managing the value chain) while offering higher quality and greater variety and responsiveness to customer demands. It seems to be firms that focus on only one strategic goal that get battered in international competition. These points all reveal the narrowness of the five forces framework as originally presented, and as revisited by Porter since.24 Consider an example to make these points more clearly. Think of Samsung, surely a successful firm that was little better than a shoddy imitator of others in 1980 and has over the intervening years become a high-tech powerhouse and the backbone of the Korean economy. Does the five forces framework shed any light at all on Samsung’s strategies and success? In the mid-1980s, while Porter was actively developing his five forces and competitive advantage frameworks, Samsung elected to enter the semiconductor industry, specifically the most ‘generic’ part of the industry, namely Dynamic Random Access Memory (DRAMs). The firm was already a master of mass production of electronic goods, but had minimal capabilities in chips, or semiconductors. So Samsung went on a determined round-the-world effort to identify firms that might be prepared to sell access to the key resource needed, namely circuit designs, while all the time hiring skilled engineers and paying them very well to build new generation chips, in both Korea and in a Silicon Valley ‘listening post’ set up by Samsung. All this feverish activity was predicated on the desire to enter semiconductors, not for its immediate profitability, but because it promised a long and prosperous future. Samsung did manage to effect entry, and as a result of the windfall created by the 1986 US-Japan Semiconductor Agreement, which placed a floor under Japanese prices in the US, Samsung was able to turn a profit in 1986, years ahead of its anticipated date. Clearly Samsung’s entry owed much more to strategizing around resources, and how to access them externally, than to any calculations involving distinctiveness of its own resources or distinctiveness of its activities. Samsung then repeated the trick in the early 1990s, with its entry to the flat panel displays industry (an industry then dominated by the Japanese), where again the strategic issues revolved around gaining access to the resources needed to enter the new industry, as well as to the timing involved, with Samsung demonstrating a mastery of counter-cyclical investment, choosing just the right time to frame its entry into an industry with highly cyclical behaviour—an issue completely ignored in Porter’s frameworks.25 As I write, Samsung is actively considering whether to intervene in the new global solar PV panels industry, by leveraging its existing capabilities in thin film transistor liquid crystal displays, which use a very similar sequence of operations as production of thin film solar cells. Far from evaluating the solar PV industry as ‘attractive’ on the basis 24

See Porter (2007; 2008a) for revisits to the competitive forces framework. I have discussed the flat panel display case, with its cyclical industrial dynamics, and the strategizing by the new entrants such as Samsung, in Mathews (2005). 25

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of profitability, Samsung apparently evaluates it in terms of likely future growth, and future profitability—not part of the original Porter conception. It is preparing for the assault by building a strong patent portfolio in thin film silicon technology—not considered at all in Porter’s conception. Samsung will choose to enter the industry on the basis of what it is prepared to invest, and will time its entry in terms of downswings in the industry cycle—as it has done in previous entries into high-tech industries. Timing is not part of the Porter five forces framework: it is rigidly static in operation, if not conception. And investment is not part of the framework either: it only comes into operation once firms have productive capacity. Indeed, if Samsung were taking any notice of the five forces at all, it would be as a mirror image of the way that they were presented by Porter, from the perspective of an incumbent; Samsung, by contrast, is evaluating the industry as a challenger. The principal issue for Samsung will undoubtedly be its capacity to rapidly build up technological and marketing capabilities in the new field of solar PV cells, backed by resources and routines leveraged from its existing operations in electronics, semiconductors, and flat panel displays. Technological capabilities are mentioned only as an afterthought in Porter’s 1980 exposition of five forces, and then (again) from the perspective of the incumbent: how can technological changes in the wider industry be moderated or reversed in order to sustain the competitive advantages a firm already enjoys? Samsung’s problem is of course quite different from this: it wishes to build capabilities that it does not possess, through extending its own existing capabilities and through acquiring new resources (by licensing, acquisition, or buying equipment—the channels are many). Finally Samsung would be committing commercial suicide if it elected to follow either cost minimization or differentiation strategies on their own in its plans for solar PV cells: it would expect to have to excel in both if it is to be a serious player. Thus there is not much validity left in the 1980s’ frameworks when one considers a real case like this. The underlying problem is their static character, and their limited frame of reference, making them of dubious utility in a dynamic, disequilibrium world peopled by challengers as much as by incumbents. Moving to the 1985 value chain framework, that Porter is increasingly calling an ‘activities-based view’ by contrast with the popular resources-based view, the longevity of the concepts would appear to be stronger. Here the unspoken shift is from a static to dynamic perspective, from concepts imported from equilibrium-based SCP to concepts more in tune with the disequilibrium of real economies. Thus, to revert to our Samsung example, the firm contemplating entry to the solar PV industry will certainly reason in terms of the sequence of value-adding activities involved, both within the firm and along the value chain, where some steps will be accomplished by sister firms of Samsung, and others will involve activities producing products that have to be acquired on the market. The real strategic choice for Samsung would be to settle on a particular technology platform for the entire chain of activities leading to production of a solar PV cell (what Alderson perceptively labelled as the transvection). The choice would then be a platform that Samsung would build for itself, making use of technologies that it already possesses, or whether it will be licensed in from an external source. Were Porter to modify the

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conceptual framework of the value chain, it would surely be in this area of bringing it into alignment with recent work on technology platforms and their influence on value chains.26 It is notable that it is in regard to an ‘activity systems’ view of the firm that Porter has made some recent contributions, in partnership with junior colleagues Rivkin and, most recently, Siggelkow.27 Of the 1990 framework involving national competitive advantage, again the focus on competitiveness of particular national industries, and the factors or elements that strengthen a firm’s or industry’s capacity to hold its own in competition with other firms, seems to be well posed, and worthy of the very considerable attention that Porter (and many others) have devoted to it. But the four elements of the diamond reflect on Porter’s experience of American industries and their competitive battles with Japanese rivals rather than anything more general. Again it is instructive to consider a case close to reality, such as the entry by Chinese firms into the solar PV cells industry. How are the Chinese building national competitive advantage in this important new industry? Their first move was to secure the required technology, following in the footsteps of latecomers like Samsung that had previously devised strategies of technology leverage in order to enter new industries. They might form an association and seek discussions with the ministry of industry (or its equivalent) in China—so that issues such as sources of technology, technological standards, and market intelligence could be assessed. In the case of China, the question of national standards would certainly loom large in such a discussion—an issue entirely ignored in Porter’s 1990 treatment of NCA. The issue of foreign direct investment would also loom large, and the evidence to date indicates that the Chinese government is prepared to play hard to trade off market access in China against transfer of relevant technology. All of these technology issues are central to a real case where a national industry seeks to establish and then sustain competitiveness in a new industry—and yet they are marginalized in Porter’s emphasis on factor conditions, demand, and firm rivalry. In the case of solar PV cells there is virtually zero domestic demand in China, and firms entering the industry seek export markets abroad—again a situation that slips the net of Porter’s framework. The one element of the diamond that carries over to this case is the emphasis on clusters—or ‘related and supporting industries’—where there is a clear intent on the part of China to build clusters in several cities (such as Wuxi) specializing in the related and complementary activities associated with solar PV cells production, including producing the equipment needed for such production, and eventually buttressing the firms involved with IPR protection, so that they can sell, not just the products, but the technology for producing

26 See Gawer (2009) for an insightful exploration of the platforms perspective, with contributions from numerous scholars. 27 See Porter and Rivkin (2000) for an early example (a paper never published in the literature) and Porter and Siggelkow (2008) for the most recent case. Here is it striking that Porter is referring to ‘contextuality’ as a proxy for the distinctiveness that he has always insisted underlies competitive advantage.

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the products in markets around the world. All of this is evident in China’s approach to building solar PV cells industry and other ‘green’ industries—and it is hard to see the Chinese following the prescriptions of Porter’s diamond, even approximately. And yet it has to be said that raising productivity and enhancing ‘competitiveness’ is precisely the goal—just as specified by Porter—and that this is combined with a healthy dose of preparedness to invest in risky situations. It would indeed be ironic if the Chinese ended up adhering more closely to the Porter prescriptions than American firms. Taking a longer view, one is struck not just by the breadth of Porter’s activities— encompassing strategic considerations at every level, from the firm to the cluster to the nation, as well as numerous issues in between—but also by the narrowness of the vision. Porter has spent a professional career developing the notion of competitiveness in all its manifestations—yet has spent hardly any effort (at least in his published works) on the complementary notion of cooperative collaboration, involving complementarity. Yet his activities-based view is well-designed to accommodate such a perspective, for it is ‘competitive collaboration’ between firms along value chains that is the key to the creation of successful clusters and ultimately of successful industries. Capitalism favours firms that are able to reduce costs over the long term, because this is the key to the system’s success, but this does not rule out cooperative behaviour between firms at the micro-level, in pursuit of common standards or in the building of platforms. These are just as much a part of the general business picture as the competitiveness that Porter has remained so focused on. And as one contemplates the Porter oeuvre, one is struck that there does not seem to be an underlying model of the firm itself as a key player in the business ecosystem. Is the firm best modelled as a profit-maximizing automaton, as in neoclassical economics, or as a strategizing entity making satisficing choices with bounded rationality as in Simon’s alternative, or as a game player engaged in repeated rounds of games that reward cooperative as well as competitive behaviour—or as simply a nexus of contracts or transaction-cost minimizing device? One searches in vain for any view expressed by Porter on any of these interesting questions. And finally on the system of capitalism itself, where Porter has ventured a view in his very latest works, one is struck again by the narrowness of the conception. Capitalism will be revolutionized, opines Porter in his latest HBR piece with Kramer (2011), by firms paying more attention to ‘shared value’ activities where value is created jointly by firms acting with their customers, suppliers, and resource providers. No doubt the notion of cluster lies behind this formulation. But capitalism is surely a system that depends for its success on a set of implicit rules governing firm behaviour, and it is only through reconsidering those rules—above all the rules that drive firms to go on consuming resources until they create inevitable ‘overshoot and collapse’ scenarios— that a framework could be considered ‘revolutionary’. Yet nowhere does Porter evince any interest in the rules, implicit or otherwise, of the capitalist system within which his emphasis on competitiveness makes sense, but which also sets clear limits to the operation of competitive forces.

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Concluding remarks Where can Porter go from here? How indeed does the ‘First Lord’ of strategy round off his career? He might continue in the way that he has worked for the past decade, extending his Dynamic Competitiveness Paradigm into new areas, and applying it to new problems. But that would be fairly predictable, as most thoughtful observers understand by now the gist of Porter’s views on competition and their implications. Another angle might be to turn his full attention to the issue of industrial development, which (despite his protestations) was largely overlooked in the 1990 book and in the rash of ‘competitiveness indicators’ issued annually ever since; it would be a welcome move to see Porter turn the full force of his intellect and toolbox on such a momentous issue. Probably what Porter most wants to do is set the seal of his ‘brand’ to a conception of strategy that will last beyond his own life span. But to be truly convincing, he would have to drop the pretence that everything he has said before continues to be valid, and instead come up with a third book of his strategy trilogy (going on from the 1980 and 1985 books) that draws the line under all these achievements and sums up the framework as a whole.28 It could start with the latest insights—the role of clusters, of inter-firm connections, of complementarities, and then focus on the means through which firms can generate increasing returns, both on their own and through their connections with other firms. This would lead to an examination of the environment in which national industries generate competitiveness, and lead him to evaluate the value chains involved from their capacity to add value under competitive conditions—both within the firm and outside it, linking customers and suppliers. It would lead to an examination of the evolution of institutions and the role they play in shaping competitiveness—a theme placed on the agenda for strategizing by Ahuja and Yayavaram (2011). Such a study would be both a longitudinal examination, analysing how firms grow and industries develop, as well as an examination at any point in time, when a revised version of the five forces could be brought to bear. In keeping with Porter’s demonstrated predilections, this would be a quantitative examination, based on whole industries and their interactions, viewed both at a point in time and longitudinally. I emphasize that I see Porter’s activities-based view of the firm as a valid representation of a complex economic reality, and his value-chain as a strategic alternative to the neoclassical production theory of the firm, as his greatest contribution. If this could be wedded to a value-chain vision of the economy as a whole, viewed as a network of such value-adding chains, or transvections (as Alderson called them) in all their institutional and organizational complexity, then he would have the foundations for a coherent and far-reaching synthesis, one where his undoubted talents for quantitative estimation and

28 In the 2002 interview with Argyres and McGahan, Porter mentioned that a third book on strategy was nearly ready, opening with the question he posed in 1996: What is strategy? But such a book has not appeared in the intervening ten years.

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generation of insights would flourish. Instead of diminishing the contribution of other perspectives such as the resource-based view (which he tends to do in interviews) he might adopt these alternative perspectives and add them to his own—viewing resources as the underlying means utilized by the firm to generate its activities (as in the Samsung case), and routines as the repository of the capabilities that firms need to develop if they are to become competitive. A rounded view of the firm like this, embedded in its industry connections, and viewed as primarily an activities-based mechanism for adding value (measured according to the profit and loss statement), backed by resources that are measured as assets on the balance sheet, and where routines come into play as the means through which the activities are linked to the resources and in which are embodied their capabilities—this would surely be a fitting challenge for Porter. Each of these entities—activities, resources, routines—would be viewed through a strategic lens and would be seen to be directly under management control, unlike the case of the factors and elements considered in classical and neoclassical economics. I submit this as one suggestion as to how Porter might round off his impressive career.

Bibliography Ahuja, G. and Yayavaram, S. (2011). ‘Explaining Influence Rents: The Case for an InstitutionsBased View of Strategy, Organization Studies, 22(6): 1631–52. Alderson, W. (1965). Dynamic Marketing Behavior: A Functionalist Theory of Marketing. Homewood, IL: Richard D. Irwin. Argyres, N. and McGahan, A. M. (2002). ‘An Interview with Michael Porter’, Academy of Management Executive, 16(2): 43–52. Bales, C. F., Chatterjee, P. C., Gogel, D. J., and Puri, A. P. (1980). ‘Competitive Cost Analysis’, McKinsey staff paper (January 1980). Barney, J. B. and Hoskisson, R. E. (1990). ‘Strategic Groups: Untested Assertions and Research Proposals’, Managerial and Decision Economics, 11(3): 187–98. Carroll, G. R. and Swaminathan, A. (1993). ‘On Theory, Breweries, and Strategic Groups: A Reply to Tremblay’, Industrial and Corporate Change, 2(1): 99–106. Caves, R. E., Khalilzadeh-Shirazi, J., and Porter, M. E. (1975). ‘Scale Economies in Statistical Analyses of Market Power’, Review of Economics and Statistics, 57(2): 133–40. —— and Porter, M. E. (1977). ‘From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition’, Quarterly Journal of Economics, 91(2): 241–61. —— —— (1978). ‘Market Structure, Oligopoly, and Stability of Market Shares’, Journal of Industrial Economics, 26(4): 289–313. —— —— (1980). ‘The Dynamics of Changing Seller Concentration’, Journal of Industrial Economics, 29(1): 1–15. Davies, H. and Ellis, P. (2000). ‘Porter’s Competitive Advantage of Nations: Time for the final judgment?’ Journal of Management Studies, 37(8): 1189–213. De Man, A.-P. (1994). ‘1980, 1985, 1990: A Porter Exegesis’, Scandinavian Journal of Management, 10(4): 437–50. Delgado, M., Porter, M. E., and Stern, S. (2007). ‘Clusters, Convergence, and Economic Performance’ (mimeo), NBER.

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Delgado, M., Porter, M. E., and Stern, S. (2010). Clusters and Entrepreneurship, Journal of Economic Geography, 10(4): 495–518. Dosi, G., Marsili, O., Orsenigo, L., and Salvatore, R. (1995). ‘Learning, Market Selection and the Evolution of Industry Structures’, Small Business Economics, 7(6): 411–36. Foss, N. J. (1996). ‘Research in Strategy, Economics, and Michael Porter’, Journal of Management Studies, 33(1): 1–24. —— (2011). ‘The Evolution and Eclecticism of Porter’s Thinking’, in R. Huggins and H. Izushi (eds.) Competition, Competitive Advantage, and Clusters, Oxford: Oxford University Press, 93–110. Gawer, A. (ed.) (2009). Platforms, Markets and Innovation. Cheltenham, UK: Edward Elgar. Ghemawat, P. (2002). ‘Competition and Business Strategy in Historical Perspective’, Business History Review, 76(1): 37–74. Huggins, R. and Izushi, H. (eds.) (2011). Competition, Competitive Advantage, and Clusters, Oxford: Oxford University Press. —— (2011). ‘Competition, Competitive Advantage, and Clusters: The Ideas of Michael Porter’, in R. Huggins and H. Izushi (eds.) Competition, Competitive Advantage, and Clusters, Oxford: Oxford University Press. Hunt, M. S. (1972). ‘Competition in the Major Home Appliance Industry, 1960–1970’, Unpublished PhD dissertation, Harvard University. Ketels, C. (2011). ‘Clusters and Competitiveness: Porter’s Contribution’, in Huggins and Izushi (eds.) Competition, Competitive Advantage, and Clusters, Oxford: Oxford University Press, 173–92. Kiechel III, W. (2010). The Lords of Strategy: The Secret Intellectual History of the New Corporate World, Cambridge, MA, Harvard Business Press. Krugman, P. (1996). ‘Making Sense of the Competitiveness Debate’, Oxford Review of Economic Policy. 12(3): 17–25. McGahan, A. M. and Porter, M. E. (1997). ‘How Much Does Industry Matter, Really?’, Strategic Management Journal, 18(Summer Special Issue): 15–30. —— —— (1999). ‘The Persistence of Shocks to Profitability’, Review of Economics and Statistics, 81(1): 143–53. —— —— (2002). ‘What Do We Know About Variance in Accounting Profitability?’, Management Science, 48(7): 834–51. —— —— (2005). ‘Comment on “Industry, Corporate and Business-Segment Effects and Business Performance: A Non-Parametric Approach” by Ruefli and Wiggins, Strategic Management Journal, 26(9): 873–880. Mathews, J. A. (2005). ‘Strategy and the Crystal Cycle’, California Management Review. 47(2) (Winter 2005): 6–31. —— (2006a). Strategizing, Disequilibrium and Profit, Stanford, CA: Stanford University Press. —— (2006b). ‘Ricardian Rents or Knightian Profits? More on Austrian Insights on Strategic Organization’, Strategic Organization, 4(1): 97–108. —— (2010). ‘Lachmannian Insights into Strategic Entrepreneurship: Resources, Activities and Routines in a Disequilibrium World’, Organization Studies, 31(2): 219–44. Newman, H. H. (1973). ‘Strategic Groups and the Structure-Performance Relationship: A Study with Respect to the Chemical Process Industries’, Unpublished Ph.D. dissertation, Harvard University. Peters, Tom J. and Waterman, Robert H. (1982). In Pursuit of Excellence: Lessons from America’s Best-Run Companies. New York: Harper & Row.

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Porter, M. E. and Kramer, M. R. (2006). ‘Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility’, Harvard Business Review, 84(12): 78–92. —— —— (2011). ‘The Big Idea: Creating Shared Value. How to Reinvent Capitalism—and Unleash a Wave of Innovation and Growth’, Harvard Business Review, 89(1) (January– February): 1–17. —— and Reinhardt, F. L. (2007). ‘A Strategic Approach to Climate’, Harvard Business Review, 85(10): 22–6. —— and Rivkin, Jan (2000). ‘Industry Transformation,’ Harvard Business School Case 9-701008 (July 10, 2000). —— and Siggelkow, Nikolaj (2008). ‘Contextuality Within Activity Systems and Sustainability of Competitive Advantage’, Academy of Management Perspectives, 22(2): 34–56. —— and Sölvell, Ö. (1998a). ‘The Role of Geography in the Process of Innovation and the Sustainable Competitive Advantage of Firms’, in A. D. Chandler, P. Hagström, and Ö. Sölvell (eds.) (1998b) The Dynamic Firm: The Role of Technology, Strategy, Organization, and Regions, Oxford: Oxford University Press. —— Takeuchi, H. and Sakakibara, M. (2000). Can Japan Compete?, Basingstoke: Macmillan. —— and Teisberg, E. O. (2006a). Redefining Health Care: Creating Value-Based Competition on Results, Boston, MA: Harvard Business School Press. —— —— (2006b). ‘Redefining Competition in Health Care’, Harvard Business Review, 82(6): 64–76. —— and van der Linde, C. (1995). ‘Toward a New Conception of the EnvironmentCompetitiveness Relationship’, Journal of Economic Perspectives, 9(4): 97–118. Potter, A. and Watts, H. D. (2010). ‘Evolutionary Agglomeration Theory: Increasing Returns, Diminishing Returns, and the Industry Life Cycle, Journal of Economic Geography, 11(3): 417–55. President’s Commission on Industrial Competitiveness 1985. Global Competition: The New Reality. Report of the President’s Commission. Washington, DC. Reich, R. (1990). ‘But Now We’re Global’, Times Literary Supplement, 30 August, pp. 925–6. Reinert, E. S. (1995). ‘Competitiveness and its Predecessors—A 500-Year Cross-National Perspective’, Structural Change and Economic Dynamics, 6(1): 23–42. Rumelt, R. P. (1974). ‘Strategy, Structure, and Economic Performance’, PhD Thesis, Boston, MA: Division of Research, Graduate School of Business Administration, Harvard University. —— (1991). ‘How Much Does Industry Matter?’, Strategic Management Journal, 12(3): 167–85. Schmalensee, R. (1985). Do Markets Differ Much? American Economic Review, 75(3): 341–51. Sheehan, N. T. and Foss, N. J. (2007). ‘Enhancing the Prescriptiveness of the Resource Based View through Porterian Activity Analysis’, Management Decision, 45(3): 450–61. —— —— (2009). ‘Exploring the Roots of Porter’s Activity-Based View’, Journal of Strategy and Management, 2(3): 240–60. Spender, J.-C. and Kraaijenbrink, J. (2011). ‘Why Competitive Strategy Succeeds—and With Whom’ in R. Huggins and H. Izushi (eds.) Competition, Competitive Advantage, and Clusters, Oxford: Oxford University Press, 33–56. Stonehouse, G. and Snowdon, B. (2007). ‘Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness’, Journal of Management Inquiry, 16(3): 256–73. Wensley, R. (1982). ‘PIMS and BCG: New Horizons or False Dawn?’ Strategic Management Journal, 3(2): 147–58.

chapter 23

ik u j iro nona k a robert p itkethly

Biography Ikujiro Nonaka was born in Tokyo, Japan, in 1935.1 He lived through the Pacific War in Japan whilst a small boy and was filled with a desire to compete with the US. Thus began a long relationship with the US which has been reflected in and broadened access to much of his subsequent academic work. He graduated in 1958 from Waseda University in Political Science and entered the Fuji Electric Co. where he worked as a staff member for over ten years, including time as a factory personnel manager. This experience of middle management is arguably reflected in some of his later academic work. In the course of developing management training programmes in Fuji Electric Co. he encountered US management training methods. Subsequent collaboration with Keio University’s Business School also brought him into contact with staff who had been to Harvard and used the case study method. This lead to a determination to go to Business School in the US. Saving for this took several years and, after Fuji Electric, he went to the Haas School of Business, University of California at Berkeley in 1967 as a graduate student (Helgesen 2008). In 1968 he graduated from the MBA course. Following this he continued with his academic career by carrying out doctoral research at the University of California, Berkeley. He has said that this combination of work in industry and training in research based on theory development enabled him to combine a compulsion to be ‘practical and seek reality’ in business with an interest in theory development (Nonaka and Takeuchi 1995). At Berkeley he studied consumer marketing, but his interests moved to organization theory after following sociology courses encompassing Neil Smelser’s and Arthur Stinchcombe’s work. He completed his PhD thesis entitled ‘Organization and Market: Exploratory Study of Centralization vs. Decentralization’ in the autumn of 1972 (Nonaka 1972). This was 1

A chronological summary of Professor Nonaka’s biography is contained in an appendix below.

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under Professor Francesco M. Nicosia, whose research was centred on consumer decision processes and took account of information received and processed by consumers. The thesis was based on Herbert Simon’s information-processing model and looked at marketing organization and consumer decision-making processes. His subsequent book Organization and Market: A Contingency Theory (published in Japanese) won the 1974 Nikkei Award in Economics and Business (Nonaka 1974). In 1972 he returned to Japan and taught at Nanzan University. A post as Professor in the Department of Business Administration followed in 1978 before he moved to become Professor in the Department of Social Sciences at the National Defence Academy. There he carried out research on contingency theory based on the information-processing paradigm and published a book (in Japanese) analysing Japan’s failure in the Pacific War (Nonaka, Kamata et al. 1985). In 1982 he moved to the Institute of Business Research at Hitotsubashi University becoming Director of the Institute in 1995. Professor Nonaka has said that in March 1984 he took part in a Harvard Business School colloquium on productivity and technology, along with Hirotaka Takeuchi and Kenichi Imai, which was in part responsible for his transition to seeing innovation as not just information processing but something involving knowledge and its creation (Scharmer 2000). From this point onwards his work begins to be focused on knowledge and its various forms and implications for management, innovation, and more recently, leadership. His book Strategic vs. Evolutionary Management: A U.S.–Japan Comparison of Strategy and Organisation written jointly with Kagono et al. was published in 1985 (Nonaka, Kagono et al. 1985). The Japanese version won the 1984 Book of the Year Award of the Academic Association of Organizational Science in Japan (Nonaka, Kagono et al. 1983). In 1988 his Sloan Management Review article ‘Toward Middle-Up-Down Management: Accelerating Information Creation’ won the 4th annual Richard Beckhard Prize (Nonaka 1988b). His 1991 Harvard Business Review article on ‘The Knowledge Creating Company’ (Nonaka 1991) has also been frequently cited and his related book in Japanese entitled Management for Knowledge Creation won the 1991 Nippon Administrative Management Association prize (Nonaka 1990a). From 1991 to1995 he combined his work at Hitotsubashi with being a Research Director of the National Institute of Science and Technology Policy, the Japanese Science and Technology Agency’s Policy Research Centre based in the centre of Tokyo. The year 1995 saw the publication of his most influential work ‘The KnowledgeCreating Company’ which was awarded the 1996 Best Book of the Year Award in Business and Management by the Association of American Publishers (Nonaka and Takeuchi 1995). In 1997, whilst remaining a Professor at Hitotsubashi University’s Innovation Research Centre, he took up an appointment as Professor at the Japan Advanced Institute of Science and Technology (JAIST) in Tatsunokuchi, Ishikawa Prefecture, in the Hokuriku region of western Japan. During this time he was Research Director of the newly created department of Knowledge Science at the Institute. In 1997 he also became the first Xerox Distinguished Professor of Knowledge at the University of California, Berkeley, a chair jointly funded by Fuji Xerox in Japan and

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Xerox Corporation in the US. He was elected as a Fellow of the International Academy of Management in 1999 and also holds a number of honorary doctorates from a variety of universities around the world. In 2000 he returned to the recently established Graduate School of International Corporate Strategy (ICS) in Hitotsubashi University which enrolled its first twoyear MBA course students that year. He was awarded the best book of the year award in business and management again in 2001 by the Association of American Publishers for Enabling Knowledge Creation published in 2000 (Nonaka, Von Krogh et al. 2000). In 2002 he was elected a fellow of the US-based Academy of Management, being the first Asian fellow of the academy. He was decorated with the Medal of Honour with Purple Ribbon by the Emperor of Japan in 2002, and in 2010 was also awarded the Order of the Sacred Treasure, Gold Rays with neck Ribbon. He became an Emeritus Professor of ICS in Hitotsubashi University in 2006. Since then he has held a number of additional posts, notably as the first Distinguished Drucker Scholar in Residence at the Drucker School and Institute, Claremont Graduate University, to which he was appointed in 2007. The same year he also became the President of the Japan-America Institute of Management Science based in Oahu, Hawaii. In May 2008 Professor Nonaka was named as one of the twenty most influential business thinkers by the Wall Street Journal. Professor Nonaka’s writing has stressed the importance of combining the theoretical with the practical and, whilst he has pursued an academic career for most of his life, he is an external director of a number of Japanese companies including Mitsui & Co. since 2007, and Seven & I Holdings, and from 2005 until 2009 the pharmaceutical firm Eisai. He has also served as a Director of Fujitsu Ltd. Some of these relationships have been reflected in case studies in his published work. Though now an Emeritus Professor of Hitotsubashi University, Professor Nonaka has continued to publish, and amongst his latest work is that concerned with leadership and judgement exemplified by the Harvard Business Review article entitled ‘The Wise Leader’ published in May 2011 and drawing on the Aristotelian concept of ‘Phronesis’ or practical wisdom (Nonaka and Takeuchi 2011).

Key works Overview The long period of time that Professor Nonaka has spent in the US, combined with education in both Japan and the US, has contributed to his unusual ability to bridge the two cultures and write equally successfully for both a Japanese and US readership, something evidenced by the prizes and critical acclaim his work has received in both Japan, the US, and elsewhere.

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His work has ranged widely over the areas of business strategy and organization studies. However, it is for his work in connection with the establishment of knowledge as an area of specialist study within the field of management studies that he is best known. Since his work can be divided into four main areas; strategy and organization studies, self-renewal and innovation management, organizational knowledge creation, and lastly practical wisdom in leadership, these will each be considered in turn. Professor Nonaka, it should be said, has published widely in both English and Japanese. Most of his work in Japanese has subsequently been published in English in some form, with a few exceptions. However, this summary is necessarily limited in referring primarily to his publications in English.

Strategy and Organization Studies Though not his first book, one which summarizes much of his earlier post-doctoral work and contains the seeds of his later work is his Strategic vs. Evolutionary Management: A U.S.–Japan Comparison of Strategy and Organisation written jointly with Kagono et al. and published in 1985 (Nonaka, Kagono et al. 1985). This book describes research carried out between 1976 and the early 1980s. It forms the first attempt to compare systematically the strategy and organization of US and Japanese companies. It also shows the development of his thinking from comparing US and Japanese management using a contingency-based approach to the consideration of an evolutionary theory of organization and the use of a self-organizing organizational paradigm. The work identifies four types of environmental adaption comprising either an operations or a product orientation to strategy combined with either a group dynamics or a bureaucratic dynamics approach to organization. Japanese companies are identified as adapting primarily via a group dynamics/operations approach, whilst US firms are characterized by a bureaucratic dynamics/product orientation. A move towards a more group dynamics/product orientation is advocated for both. A key factor in the adaption process is identified as the accumulation of information and transfer of knowledge and the information orientation of the company. Another feature of the group dynamics/ operations approach is exemplified by the case study of Matsushita where the feature of redundancy in product development is seen as a benefit, an idea that Professor Nonaka develops in his later work. The book concludes with a discussion of an evolutionary view of strategy as a self-organizing paradigm. Knowledge is seen as a key element in this process, and companies with a group dynamics approach are seen to have an advantage in that they can ‘generate, select and retain new variations and thereby continually renew themselves’. This concept of the self-renewing organization is another which Professor Nonaka develops further in his later writing. The main emphasis in this work is on comparative study. A contingency-based approach is used because it is consistent with both information-processing and resource dependency models. However, there are references to Professor Nonaka’s earlier doctoral work and a wish to develop the information-processing paradigm, and it is this

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theme of information, leading onto what he calls the ‘similar but different’ concept of knowledge that runs throughout Professor Nonaka’s work.

Self-renewal and Innovation Management Professor Nonaka’s subsequent writing has developed the themes of information and organization, and highlighted the role of product development and innovation in the self-renewal of a company’s organization. In writing about innovation Professor Nonaka is largely concerned with innovation processes involved in major projects in large companies which helps emphasize the relevance to the organization as a whole. In his article ‘The New New Product Development Game’, Nonaka and Takeuchi advocate a ‘Rugby’ based approach to product development (Takeuchi and Nonaka 1986). This replaces a serial approach to product development with a process similar to that in which rugby team members pass the ball to each other whilst running along. The process more precisely is portrayed as involving six characteristics: ‘built-in instability, self-organizing project teams, overlapping development phases, “multilearning”, subtle control, and organizational transfer of learning’. The key feature of overlapping development phases has been taken up by a number of fields, notably that of software development. This paper in some senses marks the move from an information and contingency-based approach to management, to one focused more on processes associated with the concept of knowledge. Traditional sequential approaches to new product development are seen as more limited than one that involves constant interaction among multidisciplinary team members who move through the development process in overlapping stages. Case studies involving the development of the Honda City, Canon, and Fuji-Xerox copiers, and Canon cameras are used to identify six characteristics of leading product development processes: 1. built-in stability, 2. self-organizing project teams, 3. overlapping product development phases, 4. multilevel and multifunction learning, 5. subtle control, and 6. learning transfer. In a further article ‘Creating Organisational Order out of Chaos: Self-Renewal in Japanese Firms’ (Nonaka 1988a), Professor Nonaka argues that the essence of selforganization lies in information creation, and that self-renewal depends on an organization’s ability to control the consequent creation and dissolution of organizational order. The self-renewing process is described as comprising four steps: 1. creation of chaos or fluctuation in a company, 2. amplification of that chaos and a focusing on contradictions, 3. dynamic cooperation through the formation of self-organizing teams acting in a rugby-like manner and finally, 4. restructuring of the accumulated information into knowledge. The first three steps in this process are identified as information-creation processes, and the fourth as an integrative process by which a learning organization transforms information into knowledge stock to be distributed around the organization.

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Whilst Professor Nonaka’s earlier comparative work was based on contingency theory, in his work on self-renewal and innovation he goes beyond the contingency theory/ information-processing view in which organizations are seen as adopting a structure which can best process information generated by the environment. Professor Nonaka instead takes the view that human beings are not just processors but creators of information, and that this creation of information is an essential part of organizational self-renewal. A further development from Professor Nonaka’s study of the innovation and product development process in large companies occurs in his discussion of the development of the Honda City in his article ‘Toward Middle-Up-Down Management: Accelerating Information Creation’ (Nonaka 1988b). Here Professor Nonaka develops the idea of information creation as a source of innovation and renewal involving self-organizing teams. He does this by highlighting the key role of middle management in Japanese companies’ information-creation processes. In doing so he identifies three modes of information creation, involving deductive, inductive, and ‘compressive’ management. The latter of these involves an emphasis on time, self-organizing teams, and a ‘middle-up-down management’ approach involving both articulate and tacit knowledge. Middle managers are thus identified as being in a key position to act as agents for change. This change process involving contradictions and their resolution, comprises a spiral process of lower hypothesis testing, middle range theory, and top level theory creation, which in turn leads to the creation of further contradictions, thus continuing the self-renewal process. The high level of importance given to middle managers by Professor Nonaka within Japanese companies has been contrasted by him to the generally negative views of middle managers within US firms. In Professor Nonaka’s view, on the contrary, middle managers are the real engineers of creativity within firms, reconciling top-down and bottom-up processes. Professor Nonaka sums up many of his ideas relating to innovation in his article concerning information redundancy in the innovation process ‘Redundant, Overlapping Organisation: A Japanese Approach to Managing the Innovation Process’ (Nonaka 1990b). He re-emphasizes that the innovation process in Japanese companies follows an information-creating, not an information-processing, model. He also defines ‘information redundancy’, as a condition where excess or supplemental information is shared among a group in addition to the basic information that each individual, department, or organization needs to perform its assigned functions. This increases the possibility of loyalty and trust forming within the organization and of generating problems and solutions. This ‘information redundancy’, thus directly affects the information and knowledge-creating characteristics of a company.

Organizational knowledge creation The penultimate shift in Professor Nonaka’s writing is from consideration of information creation in general to a concentration on the subsequent process of knowledge creation identified earlier as the final stage in the self-renewal process followed by many companies. This draws on a number of Professor Nonaka’s books and articles in both

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Japanese and English (e.g. Nonaka 1991; Nonaka 1994) as well as his earlier work on innovation and organizational self-renewal. The key work which summarizes Professor Nonaka’s thinking on this issue is his book The Knowledge-Creating Company (Nonaka and Takeuchi 1995), written jointly with Hirotaka Takeuchi. The focus of this book is on organizational knowledge creation, not on knowledge per se, though it draws on a long line of philosophers’ considerations of the nature of knowledge. Though not listed amongst the foremost of these philosophers, the key one for Professor Nonaka’s approach is Michael Polanyi, whose distinction between tacit and explicit knowledge is central to much of Professor Nonaka’s writing. Within this scheme, Western knowledge creation is seen as individual-based and explicit-knowledge oriented, with an emphasis on the firm as an information-processing machine. In contrast, Japanese knowledge creation is seen as group based and tacitknowledge oriented, depending not on information processing but on tapping the tacit and sometimes subjective insights of employees. The dynamic process by which new knowledge is created within the organization, in the form of new products, services, or systems, is put forward as the cornerstone of innovation. Japanese companies’ organizational knowledge creation is identified as resulting from the interaction between tacit knowledge and explicit knowledge. Four knowledgecreating conversion modes are proposed: tacit to tacit (socialization), tacit to explicit (externalization), explicit to explicit (combination) and explicit to tacit (internalization). Externalization is the key step in creating new knowledge and, in achieving this, the role of metaphors, analogies, and modelling is emphasized. Amongst a number of others, two case studies involving international collaboration in product development are discussed. These emphasize the particular importance of prolonged socialization and externalization. This leads to the interesting observation that both of these processes take time to achieve since it takes time to build trust and share tacit knowledge across cultural and linguistic barriers. At the heart of Nonaka and Takeuchi’s theory of organizational knowledge creation, there is an interaction over time between an epistemological (knowledge conversion) spiral and an ontological (organizational level) spiral process from one organizational level of aggregation to another. The former spiral involving interaction between tacit and explicit forms and the latter spiral interaction between individual, group, and organizational levels, is in part reminiscent of the spiral process involved in ‘middle-up-down’ management referred to above. These three dimensions form the framework for the dynamic knowledge creation process that fuels innovation. Two further important aspects are that neither Japanese nor Western models and neither hierarchical nor task force oriented structures are proposed as ideal for knowledge creation, but rather, a ‘hypertext’ organization which facilitates the process, allied with an integration of both Western and Japanese methodologies. Professor Nonaka’s view of the developing ‘Knowledge Society’ is thus one where knowledge creation skills are crucial and nationality irrelevant. A further consideration in Professor Nonaka’s thinking on knowledge-creation processes concerns the locus or ‘Ba’ (in Japanese) in which knowledge creation occurs

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(Nonaka and Konno 1998). He provides examples of ‘Ba’ in a range of companies, including project teams (Sharp), organizational structure (Toshiba), and the corporate group (Maekawa). The key implication of this analysis is that a key top management role is to create the ‘Ba’ within which knowledge creation can occur.

Practical wisdom in leadership The most recent direction that Professor Nonaka’s writing has taken is at first sight concerned not with middle managers, and the creation or very nature of knowledge as it relates to firms, but instead with the leadership of firms. However, this most recent move is in fact not a new and unrelated strand of research, but rather a development of his earlier thinking regarding knowledge and the characteristics of the knowledge required of successful leaders. The development of this focus on leadership as an aspect of knowledge creation and management can be seen in some senses in the examination of top management in Professor Nonaka’s earlier consideration of ‘Middle-Up-Down Management’ (Nonaka 1988b), and mentioned in later considerations of knowledge creation (Nonaka 1994). Later writing concerning the role of leadership in knowledge creation emphasizes, not just middle management, but ‘distributed leadership’ (Nonaka, Toyama et al. 2000a). However, a more direct consideration of leadership per se is to be found in an article by Nonaka, Toyama, and Konno (Nonaka, Toyama et al. 2000b), which links previous ideas about SECI, and ‘Ba’ with a more detailed consideration of leadership in knowledge creation. Here the emphasis is still on ‘distributed leadership’ with a key role for middle managers, but with added emphasis on top and middle managers providing ‘Knowledge Vision’ to initiate the knowledge creation process. Specific mention is made of the idea that the firm’s knowledge vision defines the firm’s value system, which in turn ‘determines what kinds of knowledge are to be needed, created and retained’. Mention is also made of the need to foster ‘love, care, trust and commitment’ within organizations as ‘it forms the foundation of knowledge creation’. These antecedents of Professor Nonaka’s most recent focus on leadership are drawn together in his most recent Harvard Business Review article entitled ‘The Wise Leader’ (Nonaka and Takeuchi 2011). This draws on earlier work where the ideas behind Professor Nonaka’s exploration of the implications of the varieties of knowledge for innovation and knowledge creation are extended to consider their implications for wise strategic decision-making, viewing it as form of the Aristotelian concept of ‘phronesis’ or practical wisdom (Nonaka and Toyama 2007; Nonaka and Toyama 2005a). In this, Professor Nonaka views, not just knowledge creation processes, but strategic management as a whole, as ‘an art which can only be understood in the language of art’ rather than as a management science. In this, three problems with scientific-rationalist approaches to strategic management are identified i) the search for universal answers which ignore strategy being ‘based on practice in a particular context’, ii) objective analysis which ignores ‘the subjective aspect of strategy that is conceived and practised by

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human beings’, and iii) ex-post analysis which ignores ‘the fact the strategy is a process of creating the future’. The article puts forward knowledge creation as a process of ‘realizing one’s vision of the future or personal belief through the practice of interaction with others and the environment’. This line of thought therefore broadens Professor Nonaka’s theory of the knowledge-creating company (Nonaka and Takeuchi 1995; Nonaka and Toyama 2002; Nonaka and Toyama 2005b), to encompass much more general and practice-oriented (Whittington 2004) views of strategy, by considering the role of wisdom, and more generally, value-based good judgement by managers. Strategy is thereby separated from what Professor Nonaka saw as his doctoral thesis supervisor, Herbert Simon’s, attempts to show management science to be ‘valid science’. In making this distinction and, whilst alluding to manager’s ideas about ‘truth’, there is no attempt to shift strategy into a purely relativist frame. As Professor Nonaka usefully points out ‘the extreme, relativist view that everything is subjective and there is no universality is of little, practical use’. The emphasis on phronetic leadership, however, means that, as with many other conceptions of strategy, the initial setting of strategic objectives and, just as importantly, the values that drive these, receive a renewed emphasis. This brings a welcome addition to the range of factors that strategists are encouraged to consider, and which concentration on a purely financial analysis might easily lead to being overlooked. The essence of Professor Nonaka’s new perspective on knowledge creation and strategic management more generally is thus encapsulated in the term ‘phronetic leadership’. Drawing from an Aristotelian categorization of knowledge, this is distinguished from scientific or universal skills and from mere technical ability by being based on the ‘high quality tacit knowledge’ that enables prudent decisions ‘guided by values and ethics’. In this, rather in the same way that Professor Nonaka drew on the philosophical ideas of Michael Polanyi regarding the distinction between tacit and explicit knowledge to discuss knowledge creation, he here draws on Aristotle’s categorization of knowledge to inform a discussion of more general managerial and strategic decision-making, whilst at the same time firmly anchoring the discussion in its practical context. The SECI model identified four knowledge-creating conversion modes, Professor Nonaka’s call for phronetic leadership identifies a need for six abilities comprising abilities to (i) make a judgement on ‘goodness’, (ii) create shared knowledge space or ‘Ba’, (iii) grasp the essence of particular situations/things, (iv) reconstruct the particulars into universals and vice versa using language/concepts/narratives, (v) use any necessary political means to realize concepts for the common good, and (vi) foster phronesis in others to build a resilient organization. One might summarize this as a call for the use and dissemination of good judgement within organizations. It should be noted that the use of the term leadership with its connotations of a top-down approach is potentially misleading, and Professor Nonaka insists that phronetic leadership should still be a characteristic of the distributed leadership favoured by his earlier work. In fact, Nonaka and Toyama’s article ends with the statement that ‘effective management requires distributed phronesis’ (Nonaka and Toyama 2007). Professor Nonaka’s views about phronetic leadership received a broader audience with the publication in May 2011 of the Harvard Business Review article written with

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Hirotaka Takeuchi, ‘The Wise Leader’ (Nonaka and Takeuchi 2011). Whilst this summarizes earlier work on the topic and the six abilities required, the ethical implications are given a greater emphasis in the belief that ‘the best Japanese companies, we believe, can become the exemplars of a new, communitarian approach to capitalism, as long as their leaders continue to imbue it with a social purpose’. Most recently, a review article coauthored by von Krogh, Nonaka, and Rechsteiner, has looked at the role of leadership in organizational knowledge creation (von Krogh, Nonaka et al. 2012), and proposed a new framework which encompasses centralized and distributed leadership at multiple levels in an organization. The aim is consistent with Professor Nonaka’s prior work to integrate ‘Ba’, knowledge assets, and SECI, with leadership which is distributed and not the prerogative of the privileged few. The article concludes with a call for research on developing shared leadership for organizational knowledge creation, and these themes of distributed leadership and knowledge creation may be seen as persistent, identifying, and memorable features of Professor Nonaka’s research and writing.

Summary Professor Nonaka’s work has evolved over the past few decades from a contingency theory based view of information processing by consumers in the context of marketing studies, to a philosophically inspired view of the role of knowledge in the overall strategic management of firms. The shift has been gradual and has involved moving from an information-based view to one focused on knowledge, and understandings about the nature of knowledge, imported from what might be seen as more general sociological and philosophical considerations. The route Professor Nonaka’s work has taken is thus closely tied to and influenced by the organizations he has himself been involved with. First, his early career as a middle manager within Japanese industry can be seen as a potential source of his advocacy for ‘distributed leadership’ and the importance of the mediating role of middle managers. Second, as he has himself pointed out, he considers himself fortunate to have studied at Berkeley rather than Harvard, and thus been exposed to a greater emphasis on theory generation than case study. This may be seen as a key factor in having led him to the formulation of his thinking about, not just the practice of knowledge management, but the theory behind that practice. Professor Nonaka is acknowledged by many to be Japan’s leading management scholar. The record of well-respected, indeed prize-winning publications, and what is universally acknowledged as creative theory development, supports this. This success might be said to be based on two bridges. First, a bridge between theory and practice through a combination of creative theory generation and interesting case studies. Second, a bridge over the linguistic and cultural gap which so often hinders learning from Japan, but one involving a balanced view of the advantages and disadvantages of both Western and Japanese approaches. With his latest work, Professor Nonaka has brought the focus of his work to bear on aspects of management which are more concerned with the art than the science of

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management, without necessarily abandoning either. This emphasis on the need for good judgement in management, on the values and their implications underlying the objectives set by managers, and the vision that a firm might aim for, are not in themselves new. There are some parallels, for example, with some of the work of Geoffrey Vickers, who cooperated with Peter Checkland on systems thinking, but also wrote about the art of judgement and the importance of values in managerial decision-making (Vickers 1965). The question as to what is ‘good’ is not precisely prescribed by Professor Nonaka’s work, but the inevitable need to consider what good organizations aim for is, and this is something that must be welcomed.

Impact Professor Nonaka’s work is remarkable for the impact it has had internationally. In this respect, his decision to study in the US in the late 60s has arguably been crucial to the wider recognition of his work beyond Japan. In this, he is one of a number of Japanese business academics who has been educated in the US and have thus been better enabled to write for a global English language audience with the, for better or worse, dominant US business school related audience providing a launch pad for the dissemination of their work. Inevitably, the language barrier and difficulties of studying extensively overseas, particularly in the past, have meant that, when the US went through an obsession with a perceived threat from Japanese management in the 1980s and early 1990s, there were relatively few experts to bridge the cultural gaps. Professor Nonaka, whilst having based his career predominantly in Japan, has been able to reach a wider audience than he might have had, had he spent his entire career in Japan. The second aspect of Professor Nonaka’s work that has arguably been important in giving prominence to his work has been the shift in the focus of competition that his career has seen in the predominantly innovative manufacturing industries that his work concerns. When Professor Nonaka graduated from Waseda University in 1958, Japan was emerging from the poverty of defeat, and production was arguably the way to succeed. In the seventies and eighties, production was no longer enough and quality, ironically first emphasized in Japan by US experts such as Deming, became the focus of competition, and with that quality driving competition with long-established US industry, interest in Japanese management practices surged. However, quality is not a sustainable competitive advantage, and by the early nineties, the focus of global competitiveness was shifting towards innovation and intangible assets. At just this point, Professor Nonaka’s emphasis on knowledge and knowledge creation as a key element of strategic management perfectly coincided with concerns about innovation, and intangibles such as the more general category of knowledge. As Japan enters the twenty-first century, it is still moving from being an information to a knowledge-based society, and many aspects of its economy have been and still are shifting towards promoting creativity and originality. Management of knowledge and of other intellectual assets are without doubt major issues in business today, whether

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nationally or globally. However, without knowledge creation skills there will be no new knowledge or new intellectual assets to manage, and thus Professor Nonaka’s leading research and creative thinking in this field will continue to be a significant contribution to understanding this important aspect of management.

Criticisms The majority of Professor Nonaka’s work concentrates on the management of large Japanese companies with a well-established middle management layer. One might question whether a theory of organizational knowledge creation which emphasizes the role of middle management can apply to small companies. However, it seems likely that senior small company managers have in many senses similar micro and macro management roles to large company middle managers. Furthermore, Professor Nonaka’s spirals of knowledge creation begin at an individual level and involve greater and greater organizational units, eventually crossing organizational boundaries. Thus, Professor Nonaka’s theory of organizational knowledge creation would seem to be independent of organization size, though as the case studies on international collaboration show, the greater the cultural or organizational barriers involved, the more they can affect the process of knowledge creation. The issue of barriers is also the source of another potential criticism. Barriers to learning often occur within Western organizations due to internal political considerations. Organizational knowledge creation, as proposed by Nonaka and Takeuchi, depends on a lack of internal barriers to knowledge-creating interactions, and a beneficial lack of such barriers is evident in the Japanese firms studied. However, Nonaka and Takeuchi’s theory is proposed, not as a model for Japanese organizational knowledge creation, but as a generic model. This begs the question as to how the model will fare outside a Japanese context where non-Japanese, and particularly Western employees, may be more self-centred than organization centred, and where the integrative abilities of Western organizations may not match those of Japanese organizations. Against such criticism it must be said that, even if cultural and institutional issues can affect organizational knowledge creation processes, they do not necessarily contradict the theory that Nonaka and Takeuchi propose. Professor Nonaka’s work has unarguably been successful in achieving worldwide recognition. Inevitably, with such success has come, not just praise and rewards, but also the closer scrutiny and criticism one might expect of widely published work by a leading academic. These more critical views have in general focused, as most criticisms of management research tend to, on either the methodological aspects or the theoretical origins of the work. Some without detracting from the impact of the research criticize the depth of the philosophical discussion Professor Nonaka’s theories are based on (Gueldenberg and Helting 2007). This is a common criticism in any interdisciplinary field, and one cannot reasonably expect any one person to provide the same depth of analysis in a multitude of diverse fields. Even in the view of such critical assessment

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though, what Professor Nonaka’s work has done is to draw from other fields and writers in a way which has lead to insights and understanding that others have plainly not reached in the same way. One other aspect that has attracted comment is the convenience sampled surveys and case studies which are used to support and illustrate some of Professor Nonaka’s writing (Gourlay 2006). However, even Gourlay’s general review of criticism of Professor Nonaka’s work admits that ‘the theory appears to have attracted little systematic criticism’. Nonetheless, it is also worth pointing out that these and other criticisms are addressed in Nonaka and von Krogh’s article (Nonaka and von Krogh 2009) about the distinction between tacit and explicit knowledge, particularly in Professor Nonaka’s key work, A Dynamic Theory of Organizational Knowledge Creation (Nonaka 1994).

Conclusion Professor Nonaka’s academic work over the past forty years has had a significant role as the leading influence on field of knowledge creation and knowledge management within organizations. This has been reached by a route which, whilst centred on Japanese practice, has involved an innovative combination of ideas and locations. The combination of study and research in both the US and Japan, which has also drawn theoretical inspiration and examples from fields outside conventional management studies, has led to highly original work which has effectively founded the particular field of knowledge management, as well as informed strategic management more generally. The field is still undergoing development, and it can be expected that Professor Nonaka’s writing is likely to prove an enduring legacy to this area of management research.

appendix Biographical Summary • • • •

Born 10 May 1935 in Tokyo, Japan 1958 B.S. (Political Science), Waseda University, Japan 1958–70 Corporate Staff, Fuji Electric Co., Japan 1968 M.B.A. and 1972 PhD in Business Administration, University of California, Berkeley, US • 1977–9 Professor, Department of Business Administration, Nanzan University, Japan • 1979–82 Professor, Department of Social Sciences, National Defence Academy, Japan • 1982–97 Professor, Institute of Business Research, Hitotsubashi University, Japan

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• 1991–5 Director of Research, National Institute of Science and Technology Policy, Japan • 1995–7 Director, Institute of Business Research, Hitotsubashi University, Japan • 1997–8 Professor, Institute of Innovation Research, Hitotsubashi University, Japan • 1997–2000 Dean, Graduate School of Knowledge Science, Japan Advanced Institute of Science and Technology, Hokuriku, Japan • 1997–2001 Xerox Distinguished Professor of Knowledge, Haas School of Business, University of California, Berkeley, US • 2000–6 Professor, Graduate School of International Corporate Strategy, Hitotsubashi University, Japan • 2001– Xerox Distinguished Faculty Scholar, University of California, Berkeley, US • 2006– Professor Emeritus, Graduate School of International Corporate Strategy, Hitotsubashi University, Japan • 2007– First Distinguished Drucker Scholar at the Drucker School and Institute, Claremont Graduate University, US • 2007– President, Japan American Institute of Management Science, Honolulu, US

Bibliography Bibliographical note The following bibliography first lists key publications by Professor Nonaka primarily comprising those cited in this chapter. It is followed by a brief list of references by other authors mentioned above. Professor Nonaka’s profile on Hitotsubashi University’s website at includes a more comprehensive list of publications.

Key publications by Professor Nonaka Nonaka, I. (1972). ‘Organization and Market: Exploratory Study of Centralization vs Decentralization’, University of California, Berkeley. —— (1974). Organization and Market: A Contingency Theory (in Japanese). Tokyo, Chikura Shobo. —— (1988a). ‘Creating Organisational Order out of Chaos: Self-Renewal in Japanese Firms’. California Management Review: 30(2) 57–73. —— (1988b). ‘Toward Middle-Up-Down Management: Accelerating Information Creation’. Sloan Management Review 29(3): 9–18. —— (1990a). Management for Knowledge Creation (in Japanese). Tokyo, Nihon Keizai Shinbunsha. —— (1990b). ‘Redundant, Overlapping Organisation: A Japanese Approach to Managing the Innovation Process’. California Management Review 32(3): 27–38. —— (1991). ‘The Knowledge Creating Company’. Harvard Business Review 69(6): 96–104.

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—— (1994). ‘A Dynamic Theory of Organizational Knowledge Creation’. Organization Science 5(1): 14–37. —— T. Kagono, et al. (1983). A Comparison of U.S. vs. Japanese Management (in Japanese). Tokyo, Nihon Keizai Shimbun-sha. —— —— et al. (1985). Strategic vs. Evolutionary Management: A U.S.-Japan Comparison of Strategy and Organization. Amsterdam, North-Holland. —— S. Kamata, et al. (1985). Essence of Failure: Organizational Study of the Japanese Armed Forces (in Japanese). Tokyo, Daiyamondo Sha. —— and N. Konno (1998). ‘The Concept of “Ba”: Building a Foundation for Knowledge Creation’. California Management Review 40(3): 1–15. —— and H. Takeuchi (1995). The Knowledge Creating Company. Oxford, Oxford University Press. ———— (2011). ‘The Wise Leader’. Harvard Business Review 89(5): 58–67. —— R. Toyama, et al. (2000a). ‘A Firm as a Knowledge-Creating Entity: A New Perspective on the Theory of the Firm’. Industrial and Corporate Change 9(1): 1–20. —— —— et al. (2000b). ‘SECI, Ba and Leadership: A Unified Model of Dynamic Knowledge Creation’. Long Range Planning 33(1): 5–34. —— —— (2002). ‘A Firm as a Dialectical Being: Towards a Dynamic Theory of a Firm’. Industrial and Corporate Change 11(5): 995–1009. —— —— (2005a). ‘Strategy as Phronesis (in Japanese)’. Hitotsubashi Business Review 53(3): 88–103. —— —— (2005b). ‘The Theory of the Knowledge-Creating Firm: Subjectivity, Objectivity and Synthesis’. Industrial and Corporate Change 14(3): 419–36. —— —— (2007). ‘Strategic Management as Distributed Practical Wisdom (Phronesis)’. Industrial and Corporate Change 16(3): 371–94. —— —— et al. (2008). Managing Flow: A Process Theory of the Knowledge-Based Firm. Basingstoke, Palgrave Macmillan. —— G. von Krogh, et al. (2000). Enabling Knowledge Creation. New York, Oxford University Press. —— —— (2009). ‘Tacit Knowledge and Knowledge Conversion: Controversy and Advancement in Organizational Knowledge Creation Theory’. Organization Science 20(3): 635–52. —— and T. Yamanouchi (1989). ‘Managing Innovation as a Self-Renewing Process’. Journal of Business Venturing 4(5): 299–315. Takeuchi, H. and I. Nonaka (1986). ‘The New New Product Development Game’. Harvard Business Review 64 (January–February): 137–46. von Krogh, G., I. Nonaka, et al. (2012). ‘Leadership in Organizational Knowledge Creation: A Review and Framework’. The Journal of Management Studies 49(1): 240–77.

References Gourlay, S. (2006). ‘Conceptualizing Knowledge Creation: A Critique of Nonaka’s Theory’. Journal of Management Studies 43(7): 1415–36. Gueldenberg, S. and H. Helting (2007). ‘Bridging “The Great Divide”: Nonaka’s Synthesis of “Western” and “Eastern” Knowledge Concepts Reassessed’. Organization 14(1): 101–22.

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Helgesen, S. (2008). ‘The Practical Wisdom of Ikujiro Nonaka’. Strategy + Business 53(3): 1–10. Scharmer, C. O. (2000). ‘Conversation with Ikujiro Nonaka’. Reflections 2(2): 24–31. Vickers, G. (1965). The Art of Judgment: A Study of Policy Making. London, Chapman & Hall. Whittington, R. (2004). ‘Strategy after Modernism: Recovering Practice’. European Management Review 1(1): 62–8.

chapter 24

sum a n tr a ghosh a l s usan s egal-horn

The life Sumantra Ghoshal died in March 2004 aged 55. His death was both sudden and totally unexpected. He died of a brain haemorrage. The shock of it reverberated through both the academic and corporate worlds, generating a series of memorial tributes, testimonials, themed conferences, and named prizes awarded in his name. This was followed by the gradual establishment of a series of scholarships, fellowships, and a commemorative named Chair at the London Business School, where he had been Professor of Strategy and Leadership since 1994. To appreciate the reasons behind such an outpouring of homage and recognition after his death, clues are contained in the language used in obituaries and valedictory publications. Examples include ‘Leadership’s Loss’ (The Economist’s obituary, 11 March 2004); ‘Management Strategy Innovator’ (The Guardian, 8 March 2004); and ‘A Force for Good’, subtitle of an edited volume compiled in his honour (Birkinshaw and Piramal 2005). Ghoshal is universally referred to as a management ‘guru’, suggesting that he was regarded as a great, original, and inspiring thinker. However, the other most significant aspect of his life and work was the amount of time and effort spent in engaging with corporate managers and with management practice. His most famous book Managing across Borders: the Transnational Solution, co-authored with Professor Chris Bartlett of Harvard, was listed in the Financial Times’ fifty most influential management books of all time and has been translated into nine languages. Ghoshal and Bartlett were also prolific contributors to Harvard Business Review, the management journal most read by practising managers. Since Ghoshal’s death, London Business School has hosted an annual event called the Sumantra Ghoshal Conference on Managerially Relevant Research. This forum for bridging academic research and management practice is an appropriate memorial to a business academic who spent much of his professional life explaining and championing such bridges across the theory/practice divide and making sure that his own publications were accessible to both audiences. The Economist

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(11 March 2004) said that Ghoshal ‘married the theoretical and the pragmatic in a way that was rare in the world of management literature’. Ghoshal’s background helped him to do this. He was born in Kolkota (Calcutta) India in 1948, graduated in physics from Delhi University in 1970, and then began a managerial career at the Indian Oil Corporation (IOC). During this twelve-year period with IOC, Ghoshal held a varied set of posts across most major management departments in both operational and general management. In 1981, at the age of 33, he left IOC and went to the US to begin an intensive period of management education. Between 1981 and 1986, he completed a Masters in International Business at the MIT Sloan School of Management, followed by two PhDs pursued simultaneously at MIT (in International Business, completed in 1985) and at Harvard Business School (in Business Policy, completed in 1986). It was while at Harvard that he met Chris Bartlett who became his lifelong collaborator. His first academic post was at INSEAD, a top European Business School based in France, in 1985. In typical style, from 1985 to 1994 he held posts at both INSEAD as Professor of Business Policy, and at MIT’s Sloan School of Management in the US as Professor of International Business. In 1994 he moved to London and joined the London Business School (LBS) as Professor of Strategic Leadership. He continued in this post at LBS until his death. In her obituary, Laura Tyson, the Dean of LBS at the time of his death, called him the intellectual and spiritual leader of the strategy group at LBS, and the heart of a worldwide knowledge network of strategy academics. The word ‘spiritual’ is rarely used to describe academic leadership, but some of the reasons for this may become clearer as this review of his life and work progresses. His career as an academic and management consultant was relatively short, just twenty years. In that time he authored or co-authored twelve books, seventy articles and many case studies, and consulted on strategic, organizational, and managerial issues for multinational corporations (MNCs). He also held many executive and advisory positions all over the world, including Chairman of the Supervisory Board of Mahindra British Telecom in India, Board member of Lufthansa School of Management, Swiss Re, McKinsey & Co., and member of the Board of Overseers at Harvard Business School. Although living and working in Europe for his academic and consulting career from 1985 onwards, he retained strong links and a strong attachment to his home country, India. In addition to many consulting assignments in India, he wrote articles for Indian newspapers and starred in a TV series, Lessons in Excellence on CNBC. This programme was aimed at disseminating his views on corporate management for an Indian context, taken from his co-authored book Managing Radical Change: What Indian Companies Must Do To Become World-Class (Ghoshal, Piramal, and Bartlett, C. A. 2000). Probably Ghoshal’s most significant legacy to his Indian roots was the establishment of the Indian School of Business (ISB) in 1998, a project in which he had invested great personal effort. He was the Founding Dean at ISB from September 2000, with the first students arriving in July 2001. He had believed, not only in the importance of a world-class business school for India, but also that it should be based on values that should constitute the basis of a

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distinctive ISB experience for both students and faculty. The nature of those values will emerge from the discussion that follows.

The work: key contributions This review of Ghoshal’s contribution will cover six broad areas of work: managing across borders—global strategy; managing across borders—the transnational; new managerial, and organizational pathways; caring for the organization and the person; a critique of managerial education; grounds for ethical optimism: lessons from Ghoshal’s work.

Managing across borders: global strategy The two earliest papers cited here, Bartlett and Ghoshal (1986), Ghoshal (1987), were major contributions to the understanding of global strategy. The 1986 Harvard Business Review paper ‘Tap Your Subsidiaries For Global Reach’, presented their first statement of a theme that continued throughout their years of work together: the need to rethink organization structures and management processes in order to build effective organizational capabilities for cross-border competition. Historic centralized MNC structures and processes blocked the possibilities made available by global, as compared to international, competitive strategies and markets. Bartlett and Ghoshal (1986) argued that less centralized MNC structures were needed in global markets to provide three things: the ability to sense changes in market needs and industry structure occurring away from home; the resources to analyse data and develop strategic responses to competitive challenges that were emerging worldwide; and the managerial initiative, motivation and capability in its overseas operations to respond imaginatively to diverse and fast-changing operating environments. (1986: 87)

In one of the seminal papers on global strategy Ghoshal (1987) further developed these themes. It provided a framework to help managers understand the potential benefits, and hence relevance, of global strategy for their organization. It clarified the distinctions between international strategies such as MNCs had pursued for many years, and global strategies, which were just emerging and needing to be better understood by both academics and managers. Ghoshal’s (1987) framework outlines both the most significant strategic objectives of global strategy, and the specific potential sources of competitive advantage that may be derived from a global strategy by MNCs. He gives three strategic objectives for any global strategy and three sources of potential competitive advantage derivable from a global strategy. An annotated version of the resulting framework (including practical examples) is given in Figure 24.1.

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STRATEGIC OBJECTIVES

Scope Economies

Country Differences

Scale Economies

Operational Efficiencies

Obtaining advantage from factor cost differences between countries

Achieving benefits from size in all operations

Spreading costs or asset use across markets, product groups and businesses

Risk Management

Benefitting from government or regulatory changes in countries creating lower-risk or higher-risk opportunities

Benefitting from leverage in the creation of market or positioning opportunities

MNC arbitrage from information asymmetries

Innovation and Learning

Scanning other markets to benefit from innovations in different countries in which MNC operates

Cost reductions arising from innovations

Benefitting from transfer of learning internally within the MNC, across processes, borders and within businesses

figure 24.1 Global strategy: an organizing framework Source: adapted from Ghoshal (1987).

In Figure 24.1 the three basic strategic objectives of a global strategy are: 1 Efficiency, that is, carrying out all value chain activities to a required quality at lowest cost. This is the most frequently emphasized objective in the literature. Indeed, it is often the only objective mentioned. 2 Risk management, that is, managing and balancing the risks inherent in operating in a number of diverse countries, for example, exchange rate risks, political risks, or raw material sourcing risks. 3 Innovation, learning and adaptation, that is, the opportunity to learn from the different societies, cultures, and markets in which one operates. In this sense, having a presence in many markets around the world is a very helpful market-sensing, intelligence-gathering mechanism. Arising from the three types of strategic objective are three key sources of potential competitive advantage: 1 National differences, that is, competitive advantage arising from exploiting differences in input and output markets in different countries. Although low-wage countries are perhaps the most commonly cited examples of such factors, for many MNCs it is the tax regime or relative cost of capital, that are the main ‘national differences’ that attract them to a particular country.

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2 Scale economies provide a source of advantage if one firm is able to operate at the optimal economic scale, especially if competitors fail to match them. 3 Scope economies, such as global brands, are the third source of global competitive advantage cited by Ghoshal. The argument is that within global strategies, the sources of competitive advantage for an MNC arise from country differences, scale economies, and scope economies. These should provide the basis for higher levels of efficiency, risk management, and innovation in global MNCs. Thus a type of cross-border arbitrage is occurring. Ghoshal’s (1987) ‘organizing framework’ is conceptual but also practical. It enables managers to identify which of the potential sources of global competitive advantage are available to their firm. If no such benefits can be identified, then the firm should probably think again about its pursuit of a global strategy.

Managing across borders: the transnational The theme running forward from the earlier global strategy papers into their famous bestselling management text Managing across Borders: the Transnational Solution (Bartlett and Ghoshal 1989), is that of building effective organizational capabilities for cross-border competition. What made this research so popular and this book a best-seller? The transnational organization was an attempt to develop a new managerial theory of the firm able to combine high degrees of complexity and flexibility, and new ways of integrating activities and resources across borders. It was a concept whose time had come: how to be both local and global at the same time—and make that paradox work. Earlier MNC theory by Stopford and Wells (1972) had developed a framework to illustrate the typical progression for companies moving towards an international organization structure. They saw this as a matrix organization built on two dimensions: the number of products sold internationally (foreign product diversity), and the importance of international sales to the company (foreign sales as a percentage of total sales). When both foreign sales and the diversity of products were high, a global matrix emerged. This is the basis of the common MNC matrix structure. However, as globalization became more complex, centralized global structures were evolving into more decentralized structures needed to operate locally, regionally, and globally simultaneously, to meet varying market and industry conditions. In a series of collaborative papers (Bartlett and Ghoshal 1987a, 1987b, 1988; Ghoshal and Bartlett 1988) preceding the publication of their 1989 book, Ghoshal and Bartlett showed why it was necessary to move beyond the standard MNC matrix structure, and what aspects of the MNC structure and organization should be changed. Their theme is summarized in the title of their paper ‘Organising For Worldwide Effectiveness: the Transnational Solution’ (Bartlett and Ghoshal 1988). The concept of the transnational MNC was being born. A transnational is an MNC with an organizational form that maximizes both scale economies and local (‘national’) responsiveness by being extremely flexible and building

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on skills, capabilities, and centres of excellence, rather than hierarchy. Two particular differences in this new transnational form were: first, multilateral communications between all levels and layers, replacing top-down or bottom-up communication; and second, the idea that resources, responsibilities, and decision-making, skills, capabilities, and knowledge, are dispersed across all types of units, not just concentrated either at the centre or at the periphery. Bartlett and Ghoshal (1989) describe building and managing a transnational organization as a state of mind which is adaptable and which sees efficiency across international boundaries, as something that companies achieve through responsiveness, flexibility, and the ability to learn. Thus decision-making is approached at whatever level, and in whatever geographic context is most appropriate for the global objectives of the firm. Resource units are often therefore asymmetrical in both size and duration, for example a project team may be disbanded after six months and a different unit formed, for a different purpose, somewhere else in the organization. Achievement of goals, rather than protection of turf, country managers’ pet assumptions, or the historical traditions of the firm (‘administrative heritage’), is what should influence decisions: By creating the diversity of a truly multidimensional organisation, management creates the core of an organisation flexible enough to respond to environmental change and strong enough to compete on the basis of multiple strategic capabilities. (Bartlett and Ghoshal 1989: 156)

Bartlett and Ghoshal (1989) describe the organizational objective of a transnational as building an ‘integrated network’. This theme of the integrated network is reinforced in Ghoshal and Bartlett (1990). Managing an integrated network requires complex processes of coordination and cooperation, and continuous flows of components, products, resources, people, and information between interdependent units. Obviously this is not an easy organization to manage, and practical examples of successful transnationals were always scarce. Although Bartlett and Ghoshal saw the transnational as an ideal-type of organization for ‘developing flexible coordination’ (1989: 157) by means of ‘decentralized centralization’ (1989: 159), it has fallen out of favour. Rugman (2005: 201) describes it as: ‘somewhat overly optimistic’. Grant (2010: 388) described it as ‘a concept and direction of development, rather than a distinct organisational archetype’. Ghemawat (2007) and Peng and Pleggenkuhle-Miles (2009) discuss it as an impractical organizational form. What all these negative comments are reflecting is that there are almost no actual operational examples of MNCs with a transnational organization structure. However the term ‘transnational corporations’ (TNCs) has gradually come to focus more on internal processes and, in particular, the idea of knowledge distribution and the ability to foster organizational learning. It has been suggested (Faulconbridge, 2008), that one of the main competitive advantages of TNCs is their ability to generate communities that allow organizational learning through inter-subsidiary collaborations, often called communities of practice (CoP) (Wenger, 1998). Faulconbridge (2008) shows that, with varying degrees of success, TNCs use CoP to transfer and implement forms of corporate ‘best practice’.

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It seems likely that developments in information and communication technologies in the twenty-first century have eased many of the most difficult managerial and communication problems of the transnational. In some ways, the transnational is an easier concept to grasp in the twenty-first century than in the twentieth when it first emerged. It may be that the Bartlett and Ghoshal (1989) transnational does not exist in all its specifics, but the mindset of the endlessly flexible, highly collaborative, highly networked modern MNC organization is certainly a recognizable development from it.

New managerial and organizational pathways After the extensive research and discussion of the concept of the transnational organization, Ghoshal’s research moved to a deeper consideration of the inner workings of organizations. He began to consider what needed to change, both in the design of the organization itself and also in the behaviour of people, especially that of managers and those in leadership roles. Ghoshal started to look at how such change would occur and what it would consist of, in order to really build an integrated network organization. He published an extensive series of high quality research papers with two main collaborators: Chris Bartlett, his long-standing colleague and collaborator and Professor of Business Administration at Harvard Business School, and Nitin Nohria, who was appointed Dean of Harvard Business School in 2010. This discussion will focus in particular on three specific papers, while indicating the place in the flow of intellectual development of all their other related papers and books in this area. The three papers I will focus on are: Bartlett and Ghoshal (1990) ‘Matrix Management: Not a Structure, a Frame of Mind’; Ghoshal and Nohria, N. (1993) ‘Horses for Courses: Organisational Forms for Multinational Corporations’; and Bartlett and Ghoshal (1993) ‘Beyond the M-Form: Toward a Managerial Theory of the Firm’. Part of the intense interest in the concept of the transnational organization had been in its potential to supercede the immensely popular matrix organization that was the typical organization structure of choice for MNCs. In a matrix structure, responsibility for products occurs on one management dimension, whilst responsibility for markets occurs on another. The essential point about matrix management is that most managers have a dual reporting line: both to the head of their product division, and to the head of their geographic market. Despite the potential, and frequently actual, confusion that this duality created, matrix management was hugely popular in the 1970s and 1980s since it was a genuine attempt at an organization structure that could resolve the central organizational dilemma arising from managing across borders: balancing product geographic/market focus. This was the same dilemma that the transnational organization addressed in a more fluid way.

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However, in their article in the Harvard Business Review in 1990, Bartlett and Ghoshal offered a seminal critique of the matrix structure and suggested a series of specific problems and inherent design faults (especially for MNCs). The dual reporting led to ‘conflict and confusion’. In large multinationals, ‘separated by barriers of distance, language, time and culture, managers found it virtually impossible to clarify the confusion and resolve the conflicts’. There was also a proliferation of reporting and communication channels that created information and communication log-jams. These were exacerbated by an equal proliferation and duplication of committees and reports. Overlapping responsibilities produced, indeed almost encouraged, internal political turf wars and a loss of accountability. Most MNCs had problems with making their expensive and complex matrix structures work effectively. Most problems with the matrix structure arose from the confusion over responsibilities and decision-making inherent in the dual reporting structure. Where a high degree of staff turnover occurred, such difficulties were increased. The very high number of meetings between the groups and individuals involved in each decision, while part of the attempt to reduce confusion, often added to it. Indeed some MNCs, despite having invested years of management time and billions of dollars in building their matrix, abandoned the matrix structure and returned to more simple reporting lines, with clear responsibility being given to geographic or product group managers. Intended as a flexible structure, containing multiple perspectives and able to shift the balance of power between products, markets, and functions as commercial need required, the matrix instead amplified differences, and its dual reporting structure often prevented resolution of differences between managers of different views but overlapping responsibilities. Battles emerged between different countries, divisions, or regions as they fought for organizational resources, possibly exacerbated by cultural differences (Bartlett, Ghoshal, and Birkinshaw 2004).

The beginnings of a new behavioural theory of the firm In ‘Matrix Management: Not a Structure, a Frame of Mind’, Bartlett and Ghoshal (1990) suggested that three things were needed for good matrix management: clarity of the firm’s basic objectives; continuity in the company’s commitment to those objectives over time; and consistency in how the various divisions of the organization worked together. If these three ‘C’s (i.e. clarity; continuity; consistency) were present, then the matrix structure could be very effective. They maintained that matrix management focused only on the anatomy of the organization (the reporting lines). It ignored the physiology (the systems that allow information to flow in and around the organization), and the psychology (the ‘shared norms, values and beliefs’ of the organization’s managers). Organizations could implement matrix management successfully, Bartlett and Ghoshal claimed, if they started at the other end. Their first objective should be ‘to alter the organisational psychology . . . only later do they consolidate and confirm their progress by realigning organisational anatomy through changes in the formal structure’.

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Therefore Bartlett and Ghoshal (1990) argued that companies need to alter their organizational psychology (their shared norms and beliefs) and their physiology (the systems that allow information to flow around the organization) before they start to redesign their anatomy (the reporting lines). This applied not just to matrix structures but to all organizations. Managers continually tinkered with redesigning reporting lines (anatomy), when they should be seriously attempting to understand the organizational psychology (their shared norms and beliefs). Their work set off a search for new metaphors for organizational structures, borrowing in particular from psychology and biology—for example, the corporate DNA and the left brain of the organization. These themes of the ‘anatomy’ versus the ‘physiology’ and ‘psychology’ of an organization were themes that Ghoshal, with his two major collaborators Bartlett and Nohria, returned to again and again in his work as it progressed and deepened in understanding. Although the terminology of ‘anatomy’, ‘physiology’ and ‘psychology’ were not used elsewhere, their meanings of reporting lines, systems for information flow and, most particularly, shared norms and beliefs, recurred consistently as his work proceeded. The development of these ideas may be seen in the following series of articles, first the set of three from the Harvard Business Review: Bartlett and Ghoshal (1994) ‘Changing the Role of Top Management: Beyond Strategy to Purpose’; Bartlett and Ghoshal (1995a) ‘Changing the Role of Top Management: Beyond Structure to Processes’; Bartlett and Ghoshal (1995b) ‘Changing the Role of Top Management: Beyond Systems to People’. Then in a highly prolific period, these were matched by the pair of Sloan Management Review articles: Bartlett and Ghoshal (1995c) ‘Rebuilding Behavioral Context: Turn Process Reengineering into People Rejuvenation’; and Ghoshal and Bartlett (1996) ‘Rebuilding Behavioral Context: A Blueprint For Corporate Renewal’. Finally, the arguments in these papers were more fully developed in the book Ghoshal and Bartlett (1997) The Individualized Corporation. From all this flowering of thought I have chosen to look at one other paper in more detail, by means of which our understanding of the next stage in Ghoshal’s contribution to management research and management thinking may be most easily demonstrated: Bartlett and Ghoshal (1993) ‘Beyond the M-Form: Toward a Managerial Theory of the Firm’: We believe that the management of . . . a number of the companies we studied is premised on a set of basic assumptions regarding organisation structure, decisionmaking processes and, ultimately, human behaviour, that are significantly different from those that underlie the economic and behavioural theories that currently dominate academic analysis of business organisations. As a result, these theories are of limited usefulness . . . and a major reason for the widening gap between existing management theory and emerging management practice. (1993: 25)

As the subtitle of this paper says, this is the beginning of a new managerial theory of the firm. However, it may be more appropriate to call it a new behavioural theory of the firm. They start from the premise of the sociologist Max Weber (1964: 29) in using his concept of ‘verstehen’, which captures the need to view a system from the perspective of those within it. This perspective would ‘stimulate both managers and students of management

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to analyse managerial roles, organisational tasks and even the underlying rationale and purpose of the firm’ (1993: 25) in different ways. They discuss the roles and responsibilities of three layers of manager (front-line management, middle management, top management) in respect to three critical processes in each organization: creating a better entrepreneurial process to pursue new opportunities for the company; creating stronger organizational integration through the alignment of resources, capabilities, and values; and embedding shared trust and organizational purpose to enable organizational renewal. These three core processes, the entrepreneurial process, the integration process, and the renewal process, are aimed at shifting management attention towards ‘stewardship of various horizontal coordinating mechanisms . . . explicitly designed as forums where managers can negotiate differences and resolve conflicts in an open and legitimate manner’ (1993:39). Managerial behaviour within the firm is thus built around a specific cluster of roles and relationships amongst front-line, middle, and top management of a company. We contrast such ‘horizontal coordinating mechanisms’ with the traditional managerial hierarchical division of labour that divides rather than interrelates. In addition to the emphasis on coordinating mechanisms, the network organization also promotes a second requirement: a changed role for senior management to provide shared corporate purpose. These ideas are developed in Ghoshal and Bartlett (1990, 1994, 1995, 1996 and 1997). In Ghoshal and Bartlett (1994: 91) they argue that organizational context is ‘created and renewed through tangible and concrete management actions’. They further identify discipline, stretch, trust, and support as the primary dimensions of organizational context that influence the levels of individual initiative, mutual cooperation, and collective learning within companies. They therefore suggest that shaping the organizational context and purpose is the central task of general managers and the most appropriate way to assess the quality of management in an organization. Figure 24.2 summarizes this view of the ‘new model’ of the roles of management appropriate to flexible network organizations (‘now’), contrasting it to requirements in earlier organizational forms (‘then’). Integration and coordination bring great benefits, but many companies are not sufficiently skilled to implement them effectively. In another Harvard Business Review article, Bartlett and Ghoshal (1992) ‘What is a Global Manager’, present more plainly some of the arguments from Bartlett and Ghoshal (1993). Here they have argued that there is no such thing as a ‘global’ manager. Instead, MNCs need four different types of manager to succeed. First they need three different kinds of specialist manager: business managers, country managers, and functional managers. Then, most importantly, they need a fourth type: a set of senior executives to nurture the specialists and coordinate their efforts. Here is the entire material of a new managerial and behavioural theory of the firm reduced to essential parts. We shall now turn to the last of my three selected articles in this section: Ghoshal and Nohria (1993), ‘Horses for Courses: Organisational Forms for Multinational Corporations’. This too is being treated here as a flagship for a stream of work published by Ghoshal and Nohria across the same time period as all the publications from Bartlett and Ghoshal mentioned above: (Nohria and Ghoshal (1989) ‘Internal Differentiation Within Multinational Corporations’; Nohria and Ghoshal (1994) ‘Differentiated Fit and

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Middle management

Front-line management

Then Resource allocator

Then Administrative controller

Then Operational implementor

Now

Now Horizontal information broker and capability integrator

Entrepreneur and performance driver

Creator of purpose and challenger of status quo

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figure 24.2 New roles and tasks of management Source: adapted from Bartlett and Ghoshal (1993).

Shared Values: Alternatives for Managing Headquarters-Subsidiary Relations’; Nohria and Ghoshal (1997) The Differentiated Network: Organising Multinational Corporations for Value Creation). ‘Horses for Courses’ (1993) is a well-known and much-quoted article whose aim is simple: it provides evidence from forty-one companies from a variety of industries and business contexts, to show how some combinations of environment and organization structure ‘fit’ better than others. They thereby demonstrate a dynamic relationship between organization structure, management process, and competitive environment. To explain ‘fit’ they have developed a unifying principle: the principle of ‘requisite variety’. By this is meant that the ‘complexity of a firm’s structure must match the complexity of its environment’: Organisational complexity is costly and difficult to manage, and simplicity, wherever possible, is a virtue. Just as a company can suffer from too simple an organisation if it is operating in a complex and turbulent environment, so can it also pay an efficiency penalty for adopting an organisation too complex for its environmental demands. (Ghoshal and Nohria 1993: 24)

Therefore Ghoshal and Nohria (1993: 33) argue that their findings show that ‘the appropriate level of organizational complexity leads to effective performance in . . . MNCs’. Ghoshal and Nohria’s (1993) ‘Horses for Courses’ propositions sit very well alongside another famous international strategy framework that was also the basis of much of the analysis discussed earlier in Bartlett and Ghoshal’s (1989) Managing Across Borders and their concept of the transnational organization. It is known as the ‘global integration/local responsiveness’ framework (Prahalad and Doz 1987; Bartlett and Ghoshal 1989). This framework emphasized global integration (of MNC organization structure), combined with local responsiveness (to the particular tastes and preferences of local, national, or regional markets). Differing industry forces influence the appropriate organization structure of the firm. Each movement around the global integration/local responsiveness grid denotes the need for a review of the existing configuration of the MNC, and a corresponding change in its levels of global or regional coordination and integration.

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For example, as food becomes less local, with many products (e.g. pastas, yoghurts) acceptable across a set of countries in a region, local responsiveness to local (food) preferences no longer dominates. Relevant trade-offs will have different solutions for each contingent set of circumstances. How then should a multi-product, multi-market global company be organized? There is not one response, but a number of responses to this issue and as environmental circumstances change so will the organizational pressures, and the optimal solutions. Bartlett and Ghoshal (1989) have used variations of the global integration/local responsiveness framework in their work. This approach is not deterministic or prescriptive of organization structure; it is contingent on specific circumstances. The emphasis is on the optimal functioning of MNCs in the industries and markets in which they operate. This is exactly the point that Ghoshal and Nohria’s (1993), organizational ‘horses’ for different contextual ‘courses’ makes: that the forces for global integration and national responsiveness can vary from one industry to another. Therefore organization structure must be contingent upon that environmental business context for the firm and its various businesses and subsidiary parts. That is exactly what their principle of ‘requisite variety’ means in practice. They give managers a timely reminder that, both organizational simplicity as well as organizational ambiguity and complexity, coexist and are relevant to firm performance. It is impossible not to observe what an intellectually creative period this was for Ghoshal from 1988 to 1999, after which other themes and ideas took over.

Caring for the organization and the person From the late 1990s until his death, a new set of collaborators (who often began as Ghoshal’s PhD students) began to emerge and a related, but different, research agenda. Powerful new ideas emerged such as ‘organizational advantage’ and ‘social capital’. If we start by discussing ‘A New Manifesto For Management’ (Ghoshal, Bartlett, and Moran 1999), many of the themes of this section on new ideas will emerge. In ‘A New Manifesto For Management’, Ghoshal, Bartlett and Moran (1999), encourage managers to replace the narrow economic assumptions of the past, with a new ‘moral contract’ as the basis for the firm’s activities. The intention is to replace a historic paternalistic exploitation with a relationship of ‘shared destiny’ between all levels in the organization. They argue for a new role for management based on a better understanding of individual and company motivation. ‘Managers need to define their companies as value creators rather than as value appropriators’ (Ghoshal et al 1999: 9) As managers redefine their focus from value appropriation to value creation, the most important role of managers becomes that of facilitating cooperation among people rather than enforcing compliance, and valuing initiative more highly than obedience. Instead of strategy-structure-systems, the core of the managerial role becomes instead purpose-process-people.

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In other words, the primary tasks of management become that of establishing a sense of purpose within the company from which strategy should emerge. These ideas are (not surprisingly) developed from earlier work in the book The Individualized Corporation (Ghoshal and Bartlett (1997). What they mean by the term ‘the individualized corporation’ is an organization designed around the individual person/employee as the building block. This is in contrast to the old concept of the ‘organization man’ where the employee is responsible for moulding himself into the shape of all corporate requirements. Ghoshal and Bartlett (1997) saw the individualised corporation as one in which the organization was built around the ideas and initiative of its people. So the systems and processes reflect the person rather than the person being fitted to the prevailing systems. Such ‘shared destiny’ is highly unlikely to arise in organizations managed under purely market-based managerial philosophies. Ghoshal and Moran (1996) in ‘Bad For Practice: A Critique of the Transaction Cost Theory’ put forward a powerful critical concept of ‘organizational advantage’. This was a relatively early articulation of Ghoshal’s growing concerns about what he began to think of as the pathologies of traditional management theory. Ghoshal and Moran (1996) argued that transaction cost theory (Williamson, 1975) in particular had a damaging impact on management practice because it was based on opportunistic, and therefore negative, assumptions about human behaviour. They were concerned with its normative implications for management and managers. They wanted ‘to stop building on theories of organisations that persist with the myth of the market economy and to start afresh by developing an alternative theory that acknowledges the reality of the organisational economy’ (Ghoshal and Moran 1996: 42). Their concept of ‘organisational advantage’ argued that firms are able to build a context for behaviour and a set of shared values that will enable them to combine resources in ways that markets are unable to do. These ideas are part of the larger argument in ‘A New Manifesto For Management’ (Ghoshal, Bartlett, and Moran 1999) in which Ghoshal et al. urge the view that ‘modern societies are not market economies; they are organisational economies in which companies are the chief actors in creating value and advancing economic progress’ (Ghoshal, Bartlett, and Moran 1999: 10). Their arguments in the 1999 paper are based on the building block of the critique of transaction cost theory in Ghoshal and Moran (1996). Their ideas are further developed in Moran and Ghoshal (1996); Moran and Ghoshal (1999); and Ghoshal, Hahn, and Moran (1999). They see the growth of firms, and therefore of economies, as primarily dependent on the quality of their management, which should not be driven by opportunistic values and behaviour. These ideas of the significance of building shared values link very strongly to the two major papers, co-authored with two of Ghoshal’s best PhD students, that develop the concept of ‘social capital’: Nahapiet and Ghoshal (1998), ‘Social Capital, Intellectual Capital and the Organisational Advantage’; and Tsai and Ghoshal (1998), ‘Social Capital and Value Creation: The Role of Intrafirm Networks’. The one that has become most commonly quoted is Nahapiet and Ghoshal (1998) who refer to the concept of ‘social capital’ as networks of strong ‘personal relationships developed over time that provide

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the basis for trust, cooperation and collective action’ (1998: 243). Social capital theory suggests that networks of relationships constitute a valuable resource for the conduct of social affairs: ‘Social capital makes possible the achievement of ends that would be impossible without it or that could only be achieved at extra cost’ (Nahapiet and Ghoshal 1998: 244). Nahapiet and Ghoshal (1998) discuss the conditions under which ‘social capital’ embedded in individual relationships may lead to significant increases in the ‘intellectual capital’ (i.e. organizational knowledge) of the firm. Such positive contributions from the personal social capital of individuals to the enhancement of the intellectual capital of the firm as a whole were considered unlikely to happen under a market-based system of exchange. As Nahapiet and Ghoshal (1998: 260) explain:‘organisations build and retain their advantages through the dynamic and complex interrelationships between social and intellectual capital’. Nahapiet and Ghoshal (1998) see organizational advantage as based on social capital within the firm, since the concept of ‘organizational advantage’ is used here as incorporating shared tacit knowledge. Since social capital is ‘owned jointly by the parties to a relationship’ (1998: 256), this gives rise to the strong argument that organizations as institutional settings are conducive to the development of social capital in ways that markets are not. These papers formed another important link in the chain of arguments in all of Ghoshal’s collaborative papers described in this section that ‘firms are qualitatively superior to markets as engines of value creation’ (Birkinshaw and Piramal 2005: xviii). Two papers (Bruch and Ghoshal (2003) ‘Unleashing Organisational Energy’; Bruch and Ghoshal (2002) ‘Beware the Busy Manager’) and a book, Bruch and Ghoshal, (2004), A Bias For Action, all with inspiring titles, provide a further strand of Ghoshal’s late-flowering agenda of managerial process as personal and active, rather than impersonally imposed and passive. The work published by Bruch and Ghoshal (2002, 2003, 2004) uses terminology about ‘action-taking’, human willpower, and organizational energy. Particularly attractive is the paper ‘Beware the Busy Manager’ (2002), in which Bruch and Ghoshal ask why some managers exhibit ‘purposeful action-taking’ while others do not. In other words, why do so many managers fail to get anything worthwhile done? They show that ‘purposeful action-taking’ is a combination of two traits: energy and focus. Only 10 per cent of the managers studied showed high energy and high focus. The remaining 90 per cent exhibited an absence of one or the other, or both. The most worrying condition was high energy but low focus, which they call ‘busyness’. For Bruch and Ghoshal, the critical task of the leader is to harness willpower and create ‘a bias for action’ (2004) among their employees. The (2002) paper and the book A Bias For Action (2004), provide guidance on moving nearer to ‘purposeful action-taking’, that is, higher energy and higher focus in a higher proportion of managers. While being less intellectually powerful than the social capital papers, these publications do give some basic handson advice about poor performance and how managers may start addressing it. Ghoshal and Gratton (2002) sits somewhere between the social capital discussion on the contribution that personal social networks can make to the resource base of the firm and the push of getting individual managers to become less ‘busy’ and more focused and effective in their personal behaviour. ‘Integrating the Enterprise’ (Ghoshal and Gratton

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2002) can be read as an attempt to create an ‘integrated’ organization in which the whole is greater than the parts. Their argument is that this must be achieved through operational, social, intellectual, and emotional layers. Greater autonomy and horizontal integration can evolve in most organizations through a combination of empowerment and support, so that a ‘culture of collaboration’ can develop. One of the managers involved described this ‘culture of collaboration’ as: ‘ . . . you get there when people take enormous pride in helping their colleagues to succeed’ (Ghoshal and Gratton 2002: 223). Ghoshal, Bartlett, and Moran (1999), Ghoshal and Bartlett (1997), Nahapiet and Ghoshal (1998), Ghoshal and Moran (1996), together provide the analytical and conceptual background for the recommendations for organizational and personal practice made by Bruch and Ghoshal (2004), and Ghoshal and Gratton (2002).

A critique of managerial education The most important source of a nation’s progress is the quality of its management. Shortly before he died, Ghoshal wrote one of his most contentious papers, Ghoshal (2005) ‘Bad Management Theories are destroying Good Management Practices’. The title says it all. In this paper he suggested that much of the blame for corporate corruption in the early 2000s could be laid at the feet of business schools and the way they try to teach management as a science. Such a method has no room for morality: ‘a precondition for making business studies a science has been the denial of any moral or ethical considerations in our theories and, therefore, in our prescriptions for management practice’ (Ghoshal 2005: 77). Thus, argued Ghoshal, ‘business schools have actively freed their students from any sense of moral responsibility’ (Ghoshal 2005: 76). Ghoshal’s criticisms of business education mirror those of Mintzberg (2004). In Managers not MBAs, Mintzberg too argued that MBA graduates are ‘glib and quickwitted . . . not committed to particular industries but to management as a means of personal advancement’, and stated that ‘our ideas have done much to strengthen the management practices that we are now all so loudly condemning’ (Ghoshal 2005: 75). This is strong stuff, especially in an academic context. In order to rescue management practice from the blind alleys that it had run into, business schools in both their teaching and their research needed to recast management theory from the ground up. He saw today’s disillusion with companies and managers as the fault of management theory—in particular the narrowly economic assumptions about human nature and the nature of companies that in practice cause managers to subvert themselves and their companies. Ghoshal and Moran (2005) ‘Towards a Good Theory of Management’ was published posthumously. It was intended to be the first chapter of a new book by Ghoshal and Moran entitled ‘A Good Theory of Management’. The argument is a continuation of that in Ghoshal (2005). In other words, many well-known and respected management theories have influenced management practice for the worse: ‘Far from being irrelevant or obscure, such theories have profoundly influenced the behaviour and beliefs of an entire generation of managers’ (Ghoshal and Moran 2005: 1).

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Today’s management theory, Ghoshal summarized, was undersocialized and one-dimensional, a parody of the human condition more appropriate to a prison or a madhouse than an institution that should be ‘a force for good’. Ghoshal clearly says that: ‘human intentions matter’ (2005: 79).

Grounds for ethical optimism: lessons from Ghoshal’s work I could have discussed earlier Ghoshal, Piramal, and Bartlett (2000) Managing Radical Change: What Indian Companies Must Do To Become World-Class. It would have sat appropriately in the section ‘Caring For the Organization and the Person’. However, in many ways this seemed a very personal piece of work that begins with another beautifully descriptive story from Ghoshal. He describes what occurred at a two-day retreat with the CEO and all the Board members of a multi-billion dollar European MNC. Having been asked to ‘review their overall corporate strategy’, he had prepared some simple figures giving comparative performance data between this firm and two of its major competitors (one Japanese and one US) both of whom were performing far better. The Board responded by explaining in every conceivable way why these figures were irrelevant. Nobody was prepared to recognize the reality of their poor performance. Why was this? On a conceptual level, Ghoshal, Piramal, and Bartlett (2000) call this common phenomenon ‘satisfactory underperformance’. In this process, many firms get stuck in a rut of underperformance, by means of a predictable series of stages. The stages are: ‘successful business strategy; competitiveness, growth and profits; managers begin to believe they are the best; builds layers of staff to cope with growth; external arrogance and internal focus on control; innovation and initiative stifled; gradual decline into satisfactory underperformance and then into crisis’. So far; so familiar: a predictable pathway of decline. They show how ‘satisfactory underperformance’ as a pathology becomes embedded in the organization and develops its own dynamic. On a practical level, and this is why in some sense this book represents something personal, Ghoshal argues that ‘satisfactory underperformance’ is pervasive in India. Indian corporate managers often have lived most of their working lives in an era of ‘crippling regulations, bureaucratic dominance and poor systems and infrastructure’. Everything happened very slowly, or not at all. Therefore in India, the organizational pathology of ‘satisfactory underperformance’ is embedded in the culture as well as in the organization. In his last published work, Rocha and Ghoshal (2006) ‘Beyond Self-Interest Revisited’ proposed a ‘self-love view of human behaviour’ as opposed to the more usual ‘selfinterest’/selfishness framework as the only valid behavioural assumption: ‘Self-love is the inclination of human beings to strive for their own good and perfection’ (Rocha and Ghoshal 2006: 601). It is quite distinct from selfishness, although often confused with it: ‘This lack of distinction between self-love and selfishness is one of the reasons why the concept of self-love has not received much attention in the literature on human and

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social motives’ (Rocha and Ghoshal 2006: 601). Self-interest is identified with rational behaviour: ‘This identification of self-interest with rationality begs the question of what is considered productive or, more generally, good for the individual. Our argument that people search for good and perfection, aided by self-scrutiny and freedom, directly relates to the issue of what are the different goods that motivate individuals’ (Rocha and Ghoshal 2006: 590). By avoiding the usual continuum of human motivation from selfinterest to unselfishness Rocha and Ghoshal (2006) are able to argue that self-interest ‘is not the most important feature of human nature; seeking good and perfection . . . , is’ (Rocha and Ghoshal 2006: 589). This was the last piece of work on which Ghoshal collaborated. The ideas it discusses are a suitable epitaph to this intellectual journey through Ghoshal’s early and late research and the ideas it has generated. The corporate responsibility agenda has now moved beyond a totally gloomy vision of humanity. As Ghoshal (2005) pointed out, humanity exhibits a taste for friendship, can be altruistic up to a point, and frequently shows concern for justice and fair play. Chris Bartlett tells a story (reported in The Economist, 29 May 2009) of what he called Ghoshal’s ‘springtime theory’ in which Ghoshal would tell his audiences about his annual visit to Calcutta to see his parents in July. ‘Imagine the heat’, he would say, ‘the humidity, the noise, the dirt. It sucks up all your energy, drains your brain, and exhausts your imagination.’ And then he would take them to the forest of Fontainebleau, France, near INSEAD, where he was a professor at the time, and point to ‘the smell of the trees, the crispness in the air, the flowers, the grass underfoot. How one’s heart lifts up, how the energy and creativity bubble away.’ Go through the door of any business, he would say, and you can tell whether it is Calcutta or Fontainebleau. A manager’s task is to create a working environment that is like Fontainebleau, not Calcutta. This story perhaps explains why, despite the great success of his books and HBR articles, Chris Bartlett (his co-author) said after his death that Sumantra was more inspired (and inspiring) as a teacher and conversationalist than as a writer. So what have we learned from this journey through Sumantra Ghoshal’s life and work? The simple lessons must include: first, making the link between theory and practice; second, the centrality of values in corporate and business life; third, the gift of collaborative working with others and the mutual benefit derived from these enormously productive personal and professional relationships. So much of his work was about the idea of a new role for management and a new moral compass for the relationships between managers and workforce in any organization. It is in this context that the power of the concept of social capital must be understood. Ghoshal’s work and legacy was strongly about breaking away from the limited (mainly economic-based) set of assumptions about the respective roles of managers and other employees, and into a set of interrelationships based on ‘shared destiny’. He certainly revelled in challenging existing assumptions and managerial certainties in order to provoke greater thoughtfulness. Perhaps that is why Julian Birkinshaw, his colleague from London Business School, in the valedictory volume published after Ghoshal’s death (Birkinshaw and Piramal 2005), called Sumantra Ghoshal ‘a force for good’.

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References Bartlett, C. A. and Ghoshal, S. (1986), ‘Tap Your Subsidiaries For Global Reach’, Harvard Business Review 64(6), November–December, pp. 87–94. —— —— (1987a), ‘Managing Across Borders: New Strategic Requirements’, Sloan Management Review, 28(4), Summer, pp. 7–17. —— —— (1987b), ‘Managing Across Borders: New Organisational Responses’, Sloan Management Review, 29(1), Fall, pp. 45–53. —— —— (1988), ‘Organising For Worldwide Effectiveness: The Transnational Solution’, California Management Review, 31(1), pp. 1–21. —— —— (1989), Managing across Borders: The Transnational Solution, Boston, MA: Harvard Business School Press. —— —— (1990), ‘Matrix Management: Not a Structure, A Frame of Mind’, Harvard Business Review, 68(4), July–August, pp. 138–45. —— —— (1992), ‘What is a Global Manager’, Harvard Business Review, July–August, pp. 101–8. —— —— (1993), ‘Beyond the M-Form: Toward a Managerial Theory of the Firm’, Strategic Management Journal, 14 Special Issue, Winter, pp. 23–46. —— —— (1994), ‘Changing the Role of Top Management: Beyond Strategy to Purpose’ Harvard Business Review, 72(6), November–December, pp. 79–88. —— —— (1995a), ‘Changing the Role of Top Management: Beyond Structure to Processes’ Harvard Business Review, 73(1), January–February, pp. 86–96. —— —— (1995b), ‘Changing the Role of Top Management: Beyond Systems to people’, Harvard Business Review, 73(3), May–June, pp. 132–42. —— —— (1995c), ‘Rebuilding Behavioral Context: Turn Process Reengineering into People Rejuvenation, Sloan Management Review, 37(1), Fall, pp. 11–23. —— —— and Birkinshaw, J. (2004), Transnational Management: text, cases, and readings in cross-border management, fourth edition, New York: McGraw-Hill/Irwin. Birkinshaw, J. and Piramal, G. (eds.) (2005), Sumantra Ghoshal: A Force for Good, London, FT Prentice Hall. Bruch, H. and Ghoshal, S. (2002), ‘Beware the Busy Manager’, Harvard Business Review, 80(2), pp. 62–9. —— —— (2003), ‘Unleashing Organisational Energy’, MIT Sloan Management Review, Fall, 45(1), pp. 45–51. —— —— (2004), A Bias For Action, Boston, MA: Harvard Business School Press. Faulconbridge, J. R. (2008), ‘Negotiating Cultures of Work in Transnational Law Firms’, Journal of Economic Geography, 8(4), pp. 497–517. Ghemawat, P. (2007), Redefining Global Strategy, Boston: Harvard Business School Press. Ghoshal, S. (1987), ‘Global Strategy: An Organising Framework’, Strategic Management Journal, 8(5), pp. 425–40. —— (2005), ‘Bad Management Theories are Destroying Good Management Practices’, Academy of Management Learning and Education,4(1), pp. 75–91. —— and Bartlett, C. A. (1988), ‘Creation, Adoption, and Diffusion of Innovations by Subsidiaries of Multinational Corporations’, Journal of International Business Studies, 19(3), pp. 365–88. —— —— (1990), ‘The Multinational Corporation as an Interorganisational Network, Academy of Management Review, 15(4), pp. 603–25. —— —— (1994), ‘Linking Organisational Context and Managerial Action: The Dimensions of Quality of Management’, Strategic Management Journal, 15, Special Issue, Summer, pp. 91–112. —— —— (1995), ‘Building the Entrepreneurial Corporation: New Organisational Processes, New Managerial Tasks’, European Management Journal, 13(2), pp. 139–55.

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—— —— (1996), ‘Rebuilding Behavioral Context: A Blueprint For Corporate Renewal’, Sloan Management Review, 37(2), Winter, pp. 23–36. —— —— (1997), The Individualized Corporation, New York: HarperCollins. —— —— and Moran, P. (1999), ‘A New Manifesto For Management’, Sloan Management Review, 40(3), Spring, pp. 9–20. —— and Gratton, L. (2002), ‘Integrating the Enterprise’, Sloan Management Review, 44(1), Winter, pp. 203–26. —— Hahn, M., and Moran, P. (1999), ‘Management Competence, Firm Growth and Economic Progress’, Contributions to Political Economy, Vol. 18, pp. 121–50. —— and Moran, P. (1996), ‘Bad For Practice: A Critique of the Transaction Cost Theory’, Academy of Management Review, 21(1), pp. 13–47. —— —— (2005), ‘Towards a Good Theory of Management’, in Birkinshaw, J. and Piramal, G. (eds.) Sumantra Ghoshal: A Force for Good, London, FT Prentice Hall. —— and Nohria, N. (1993), ‘Horses for Courses: Organisational Forms for Multinational Corporations’, Sloan Management Review, 34(2), Winter pp. 23–35. —— Piramal, G., and Bartlett, C. A. (2000), Managing Radical Change: What Indian Companies Must Do To Become World-Class, New Delhi: Penguin Books. Grant, R. M. (2010), Contemporary Strategy Analysis (7th edition), Oxford: Blackwell Publishing, Mintzberg, H. (2004), Managers not MBAs: A Hard Look at the Soft Practice of Management, New York, Berrett-Koehler Publishers. Moran, P. and Ghoshal, S. (1999), ‘Markets, Firms, and the Process of Economic Development’, Academy of Management Review, 24(3), 390–412. —— —— (1996), ‘Theories of Economic Organisation: The Case for Realism and Balance’, Academy of Management Review, 21(1), pp. 58–72. Nahapiet, J. and Ghoshal, S. (1998), ‘Social Capital, Intellectual Capital and the Organisational Advantage’, Academy of Management Review, 23(2), pp. 242–66. Nohria, N. and Ghoshal, S. (1989), ‘Internal Differentiation Within Multinational Corporations’, Strategic Management Journal, 10(4), pp. 323–37. —— —— (1994), ‘Differentiated Fit and Shared Values: Alternatives for Managing HeadquartersSubsidiary Relations’, Strategic Management Journal, 15(6), pp. 491–502. —— —— (1997), The Differentiated Network: Organising Multinational Corporations for Value Creation, San Francisco: Jossey-Bass. Peng, M. W. and Pleggenkuhle-Miles, E. G. (2009), Current Debates in Global Strategy, International Journal of Management Reviews, 11(1), pp. 51–68. Prahalad, C. K. and Doz, Y. (1987), The Multinational Mission, New York, The Free Press. Rocha, H. and Ghoshal, S. (2006), ‘Beyond Self-Interest Revisited’, Journal of Management Studies, 43(3), pp. 585–619. Rugman, A. M. (2005), The Regional Multinationals: MNEs and ‘Global’ Strategic Management, Cambridge: Cambridge University Press. Stopford, J. M. and Wells, J. (1972), Managing the Multinational Enterprise, London, Longman. Tsai, W. and Ghoshal, S. (1998), ‘Social Capital and Value Creation: The Role of Intrafirm Networks’, Academy of Management Journal, 41(4), pp. 464–76. Weber, M. (1964), Basic Concepts in Sociology, New York, Citadel Press. Wenger, E. (1998), Communities of Practice: Learning Meaning and Identity, Cambridge, Cambridge University Press. Williamson, O. E. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, New York, Free Press.

chapter 25

c. k. pr a h a l a d p eter j. w illiamson and k eeley w ilson

Challenging conventional wisdom Trade-offs lie at the heart of a great deal of our thinking and modelling in strategy, perhaps because of its roots in economics. The late C. K. Prahalad’s constant, restless desire to break free of this conventional wisdom: that more of ‘A’ meant accepting that one could have less of ‘B’, is one of the innovative hallmarks of his life’s work. To Prahalad, accepting trade-offs along an immutable frontier was an admission of defeat. Instead of optimizing your choices across a constrained set of possibilities, he kept looking for ways to shift the frontier outwards. In his work on multinationals, this meant asking how a multinational could gain the benefits of global integration as well as local responsiveness. In his papers and books on strategic management, Prahalad looked for ways that executives could maintain a longterm ‘strategic intent’ while continually delivering short-term performance and social good. He showed how companies could combine cost competitiveness with product differentiation, rather than choosing between the two—an idea he would later extend even further to argue that companies could unlock the massive, but hitherto untapped, demand at the ‘bottom of the pyramid’ by showing how ‘less could be more’. Prahalad also exploded conventional trade-offs in his work on the organizational structures and processes within firms and the boundaries of the corporation itself: Why did a firm necessarily need to own resources in order to access and use them? Why were opportunities for profitable diversification seen as being confined to adjacent products and industries, rather than the broader possibilities of deploying the ‘core competencies’ of the corporation into areas where they would be unique and difficult for competitors to replicate? Why were firms caught in a paradigm of ‘innovate inside the firm and sell’, rather than co-creating new products and services with customers? In what follows we discuss the powerful insights that came from Prahalad’s determination to tackle these questions and push theory and practice beyond the existing boundaries in every one of a remarkable sequence of the areas from global strategy and

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organization, through strategic management, diversification, market positioning, and ultimately, to the process of innovation itself. It is a rich and diverse journey that involved both conquering new peaks and opening up fertile new pastures that others would subsequently explore.

Global strategy and organisation: combining integration and responsiveness In his first published article, ‘Strategic Choices in Diversified MNCs’, which he wrote while visiting Harvard Business School from the Indian Institute of Management in 1976, Prahalad examined the relative power of businesses, geographies, and functions in a multinational organization.1 He quickly understood that each of these constituencies had very different world views so that the locus of relative power would be a key influence on the way a company viewed opportunity and risk, and the strategic choices it ultimately made. A company where the relative power lay with the geographic units (or country managers), for example, would make different acquisitions and divestments than one where the business unit managers were dominant. Where the relative power was with business units, the multinational would favour the development of managers with specialist skills, while one dominated by geographic units would favour generalists. Joint ventures (which tended to be country-based at the time), meanwhile, would be easier to manage when managers with geographic responsibilities enjoyed more power, and proved to be more riven with stress when business unit managers had the upper hand. Powerful functional managers would likely lead to strong control systems and financial strategy shaping key decisions. Right from the start, however, Prahalad demonstrated his determination to go beyond descriptive theory and propose positive solutions that would assist real-world managers. In this case his prescriptions centred on shifting the locus of power and improving the interaction between managers representing different perspectives, including moving key individuals between geography and business groups, applying better information technologies to improve the flow of information across the multinational organization, and introducing new reporting structures. This early interest in the links between strategy, organization structure, power, and processes in multinational companies led to a string of insights on the topic over the next decades as well as posing paradoxes and possibilities that fuelled Prahalad’s work in other areas. His next article (Doz, Bartlett, and Prahalad 1981) looked at the alternative processes top management used to harness the conflicting demands of local 1 Prahalad, C.K. (1976), ‘Strategic Choices in Diversified MNCs’, Harvard Business Review, July– August: 67–78.

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requirements and global competitiveness. It proposed four different approaches top management could use to deal with what they termed the ‘variety and ambiguity’ of running a multinational (ranging from simple to more complex): • Substantive Decision Management: In this scenario management groups from product and local geographies work together and supply top management with information for decision-making (to overcome problems of top management getting ‘selected information’, information overload, and when decisions are made implementation being resisted by one of the management groups) • Substantive Decision Arbitration: Top management delegates specific problems to trusted arbitrators • Temporary Coalition Management: Using mixed project teams, task forces, committees, etc. to work on specific problems • Division Context Management: Creating a culture in which managers from different areas are able to work together to make decisions for the benefit of the overall organization and not their vested interest—cooperative not adversarial. The next step in evolving this thinking about optimal decision-making in a multinational was to consider the problem of how to manage the problem of what was now termed (global) ‘integration’ and (local) ‘responsiveness’ across multiple businesses with different economics and market requirements (Hamel and Prahalad 1983). The research undertaken for this paper turned up evidence of a lack of fit between strategy and structure. While the strategic imperative might be for local responsiveness, for example, decision-making responsibility might be centralized at headquarters; or an imperative for more global integration might be thwarted by decision-making dominated by local subsidiaries. The solution proposed was for top management to take a different approach and employ alternative mechanisms to manage strategic decision-making: They needed to think about what kinds of decisions call for cross-national coordination, build a strong culture to recognize the different requirements, put the right managers in place with global/local perspectives, and have supportive systems and tools. The key role of developing the right processes and tools was developed further (Doz and Prahalad 1984) to look beyond formal organization reporting lines to structure the relationships between headquarters and subsidiaries using a wide array of management tools. Consistent and inconsistent patterns in the use of these tools were identified and assessed, based on detailed analysis of management tools in a selected group of multinational companies. Findings suggested that selected tools must be used to manage data, to manage managers, and to manage conflicts; and that successful companies blended an array of tools into a consistent management process. Companies with a repertory of tools that was either too narrow or too wide, and companies that failed to blend tools consistently would face difficulties in trading off needs for responsiveness and needs for co-ordination. Having looked deeply into the question of how decision-making processes might be improved to make multinationals more effective in operating in a global market, Prahalad took a step back and asked an even more fundamental question: whether the

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multinationals he was studying really had a global strategy at all (Hamel and Prahalad 1985). The stimulus for this inquiry was the rise of Japanese companies who, in just over a decade from the 1970s, had evolved their global strategies from poor quality, low-cost suppliers to world-scale players with respected global brands across a range of products from consumer electronics to machinery and textiles. The response of established multinational players such as RCA and Philips seemed woefully inadequate. Again, Prahalad viewed the incumbents’ inability to properly manage (and even more importantly, to leverage) the power of their international reach as a core contributor to the problem. He began to argue that a different mindset about the roles and relationship of headquarters, global business units, and local subsidiaries was required: National subsidiaries needed to provide competitive intelligence, learn about the world from competitors, and be committed to global business initiatives. The headquarters and global business units needed to see that different markets offered different potential sources of advantage and roles, including low-cost sourcing, scale, cash generation, scope for retaliation against global competitors, or benchmarks for products and technologies. Many of these ideas about global strategy and management that had been developing over a decade came together in Prahalad’s first book: The Multinational Mission: Balancing Local Demands and Global Vision (Prahalad and Doz 1987). The book combined his earlier thinking with in-depth field research at a number of multinationals from the US, Japan, and Europe (each included between twenty and fifty interviews with executives in subsidiaries, product divisions, and headquarters). A key insight was the idea that the global strategic co-ordination and integration of activities, and responding to the needs of local markets did not have to be mutually exclusive strategies. The result was what Prahalad and Doz term the ‘integration-responsiveness (IR) grid’ (see Figure 25.1). The drivers of integration were multinational customers, multinational competitors, the need for large investments, cost reduction pressure, universal needs, and access to raw materials. The drivers for local responsiveness were different customer needs and distribution channels, strong local competitors, and host government demands. A company should begin by mapping their different businesses on the IR grid (Prahalad and Doz helpfully provided a questionnaire for the purpose). Managers could then assess whether the current positioning of each business was optimal, relative to the economic and market drivers. Perhaps even more importantly, the book provided a large number of ideas and frameworks to help managers work out how the optimal positioning of a business might change over time. Important forces of change highlighted in the book included underlying industry economics prompting a move from local to global for example; shifts in regulation and government policies; changes in the focus of large customers (e.g. from local to global); and a firm’s own learning and recognition of new opportunities. The book also explored how various interdependencies between businesses in what the authors termed a ‘Diversified Multinational Corporation’ (DMNC) (including vertical integration, logistics links, common technology, cross-business demands from host governments, or shared distribution and marketing) could have an impact on where a business sits in the IR grid.

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High Global Businesses

Pressures for Global Integration

Multifocal Businesses

Locally Responsive Businesses

Low Low

Pressures for Local Responsiveness

High

figure 25.1 The Integration-Responsiveness Grid Source: Adapted from Prahalad and Doz (1987), 27.

Prahalad recognized, however, that shifting the position of a business within the IR grid and managing the interdependencies between businesses in a DMNC presented very significant managerial challenges. The latter half of the book was therefore devoted to the issues of strategic control, change, and flexibility. The book proposed a dynamic ‘matrix organization’ as the tool of choice to meet these challenges. But again, Prahalad showed he was always a realist as well as a visionary, acknowledging that many managers have difficulty with matrix organizations—preferring ‘pure’ organizational forms, where the locus of power for strategic direction and resource allocation was clear, over ambiguous matrix structures where responsibilities were not well defined and decision-making was often slowed down by the need to resolve conflicting aims. Suggesting how to overcome these difficulties, the book explored the role of data provision, incentives, and how conflict management might be deployed by successful top managers of a DMNC. The book was also prescient about how the critical sources of competitive advantage leveraged by multinationals were poised to change. It predicted that over the next ten years (from the late 1980s), the managerial debate would shift from resource-based advantages to what it called the ‘strategic capability of a firm’—‘its ability to conceive and execute complex strategies’. Strategic capability implied a strong infrastructure with

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good data collection and analysis skills; a differentiated management system that recognized the competing requirements of the business, function and country; the ability to shift strategies and manage strategic change, and to overcome the inherent differences between entrepreneurship and interdependencies to manage innovation and new businesses; building common anchors such as culture and vision; and the collaboration of a visible top team. It concluded that the ‘ideal organization’ of the future would have the following traits: multiple advocacy processes based on analysis and balance; a fluid power structure (relative power dissociated from hierarchical position); legitimate dissent based on analysis and not turf wars; and disciplined implementation (with strong communication, clear reward systems, and inclusive discussions). A parallel article (Doz and Prahalad 1986) looked at the human resource management challenges of creating this ideal multinational. It argued that even matrix structures that were designed to balance different challenges have largely failed because of a lack of active management of the matrix by senior managers, combined with a lack of preparation of middle and senior managers for an advocacy process that deals with the tensions of global integration and local responsiveness. Human resource management had a key role to play in strategic control through developing a large pool of flexible managers who can successfully face ambiguous situations, with unclear priorities and complex trade-offs. By the turn of the decade into the 1990s, however, Prahalad began to question whether academics had properly grasped the fact that these issues were becoming even more critical as on-going globalization re-shaped the competitive landscape. In ‘Globalization: The Intellectual and Managerial Challenges’ (Prahalad, 1990), he provocatively argued that while the industrial competitive landscape had changed dramatically, with the US no longer dominant in many industries (thanks to Japanese and, to a lesser extent, European competition), academics in leading US business schools had been less willing to experiment and innovate and therefore weren’t influencing the management agenda for the future. He contended that the task facing managers in multinationals would become more difficult as they had to deal with new trade flows, industry restructuring, competing in emerging industries, greater collaboration, industry convergence, intellectual property (IP) threats, and the ‘intellectual transformation of industries’ (i.e. major shifts that require new competencies). Research was on a quest for ‘clean models’ when management is ‘rich’ and ‘messy’. By treating ‘bite sized pieces’ as if they were the totality of real situations, Prahalad said, meant that management theory, ‘falls short of developing a comprehensive understanding of a theory of managerial action in a complex global environment.’ Unless things changed, the gap between managers and researchers would grow. This theme was extended in Doz and Prahalad (1991), which summarized the distinctive demands facing the management of diversified multinational corporations: no single uni-dimensional structure; management processes needing to differentiate between countries, products, and functions; information management as a central task; latent linkages and interdependencies and a wider network of partners, customers, and suppliers. When these demands were arrayed against existing organizational theory

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paradigms, they found that most streams of organization theory were not suited to the study of multinational corporations because they tended to fall between the highly theoretical and descriptive. Instead, theories that bridged this gap and were also capable of spanning various levels of aggregation, from individuals and small groups within MNCs, to clusters of multinationals following conceptually similar strategies were required. While dealing with broad and far-reaching questions being thrown up by macro forces such as globalization, therefore, Prahalad continued his determination to link these back to the competitive advantage of a particular corporation and the decisions made by its individual managers. Not surprisingly, then, this led to a parallel stream of research on strategic management that generated a series of insights grounded in the particular issues faced by multinationals, but with implications for strategies, structures, and processes that were relevant to any firm.

Strategic management: straddling longterm goals and short-term performance Right from the early 1980s, Prahalad had begun to consider the fundamental question of how managers could best contribute to building sustainable advantage for their firms. He felt that instead of indulging in the latest managerial fashions, tools, and ideas, top managers needed to focus on developing a ‘strategic capability’—which he defined as the ability of an organization to think and act strategically. He cautioned that this was no quick fix because such a capability would take an extended period to develop. But he believed organizations could no longer rely on simple, dominant strategies to ensure competitiveness. Instead, different types of strategic approach were now required for different scenarios: ‘negotiated strategy’ when dealing with national governments; ‘cooperative strategy’ when standards are present or resources are scarce; and ‘fragmented strategy’ when multiple organizations are involved in an activity. Building the strategic capability to deal with these different types of scenarios, in turn, would require: • Shifting focus from products and markets to ‘core skills’ • The ability to deal with different types of information (especially information coloured by culturally dissimilar sources) • Challenging ‘conventional wisdom’ in decision-making • The ability to interpret ‘weak signals’ (emerging trends from multiple places) • The ability to act fast • Flexible resource allocation Bettis and Prahalad (1983) delved more deeply into this last aspect of strategic capability: resource allocation in what they termed the ‘visible and invisible hand’ at work in allocating capital inside a corporation. They challenged the conventional wisdom that

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capital was allocated according to the laws of economics and finance by exploring the reality inside corporations. Three different models were identified: • The Economic Model: This was in line with financial theory. It is usually observed where firms are dependent upon external sources for growth capital. These tend to be relatively small firms. In this environment, managers need to focus on the shareholder risk/return trade-off. This method of resource allocation leads to success where the market is the primary arbiter of performance. • The Administrative Model: This is observed where the primary source of funds for growth is internal as is often the case in large multi-industry/multi-business firms. The resource allocation process here often deviates from financial theory as there is information asymmetry regarding the health of each business within the firm, and managers rely on selective internally supplied information for making resource allocation decisions. Such a situation can persist where the firms are relatively immune to the pressures of the capital markets. • The Political-ideological Model: This is observed where the State is the primary supplier of capital and so resource allocation is dependent upon how managers, politicians, and bureaucrats work together. Clearly different, the resource allocation models would also have an important impact on the relative role of long-term goals or even beliefs versus financial (often short-term) performance in shaping companies’ strategic choices. Prahalad began to think about whether such differences might be impacting companies’ differential ability to build competitive advantage over the long term. This thinking was crystallized by what he began to observe in the behaviour of rising Japanese firms. These new global competitors, he concluded, were approaching strategy from a fundamentally different perspective from that which underpinned Western management thought. In Hamel and Prahalad (1989), the authors proposed that these new competitors had ‘strategic intent’ that included stretch goals, creating a sense of urgency or quasi crisis, a desire for a leadership position, motivating staff by communicating the targets, leaving room for individual and team contributions, setting clear milestones, and using intent to decide resource allocation. Strategic intent is long term but leaves room for new opportunities to emerge. Canon’s strategic intent to ‘beat Xerox’, for example, led it to abandon technical orthodoxies and innovate to meet this stretching goal, but the areas into which it expanded emerged as opportunities arose. To succeed in reaching their strategic intent, a company would need to embrace competitive innovation (not competitive imitation). The authors outlined four approaches to competitive innovation that they discerned in the global expansion of Japanese companies: building layers of advantage, searching for loose bricks (soft entry points), changing the terms of engagement, and competing through collaboration. By focusing on financial metrics and shorter-term performance targets, and on obvious present threats and not emerging competitors, they argued, Western companies were failing to retain the initiative in the global market. They observed that: ‘While some Western companies have had global brand positions for 30 or 40 years or more (Heinz,

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Siemens, IBM, Ford, and Kodak, for example), it is hard to identify any American or European company that has created a new global brand franchise in the last 10 to 15 years. Yet Japanese companies have created a score or more-NEC, Fujitsu, Panasonic (Matsushita), Toshiba, Sony, Seiko, Epson, Canon, Minolta, and Honda, among them.’ This thinking was extended in Hamel and Prahalad (1993) in which they argued that long-term competitiveness is dependent upon managers challenging and changing their own frames of reference to break out of conventional wisdom. Here the authors reiterated the idea that the critical difference between large incumbents and challengers is that in the latter, there is a greater gap between the company’s available resources and aspirations. They termed that gap ‘stretch’. Incumbents tended to try to achieve increased resource productivity by downsizing. Instead, they should be thinking about how to stretch their resources to achieve ambitious new goals. Existing resources could be leveraged to achieve stretch goals in any of five ways: • Converging resources around strategic intent • Learning from experience and drawing upon that experience (including using alliances to learn) • Complementing/blending different types of resources (e.g. by integrating functions and creating new product permutations) • Conserving/recycling resources by using competencies across multiple product lines, or co-opting partners to create standards • Resource recovery—speeding up cycle times so that revenues flow more quickly from the resources invested. These ideas about the need to move beyond incrementalism and a focus on short-term performance improvement were brought together and extended into what was to become Hamel and Prahalad’s manifesto for a new type of strategy-making, their book: Competing for the Future (Hamel and Prahalad 1994). The book began with a bold claim: that even senior management actually spent very little time planning for the future because they had become captive of a cycle of trying to improve performance through restructuring, re-engineering, and downsizing. They argued that this is dangerous: many, once successful companies have been overtaken by non-traditional competitors because these companies could not change their assumptions and basic beliefs quickly enough to respond to the new competitors. To break out of this cycle, according to the book, requires four things: • • • •

An understanding of how competition for the future is different A process of finding new opportunities The ability to energize the whole company for the journey The capacity to outrun competitors without taking undue risks

Much of the remainder of the book discusses how managers should go about achieving these key requirements. It argues that the journey to the future begins with foresight— being the ability to: define what types of customer benefit they will need to provide in

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five, ten, or fifteen years; understand what competencies will be needed to deliver those benefits; and finally understand how to reconfigure the customer interface. Foresight should be informed by insight into lifestyle trends, technology, demographics, and geopolitics and involves imagination about what ‘could be’, not what probably will happen based on scenario planning. This imagination can only flourish if the company thinks of itself in terms of a set of competencies (and not the markets it currently serves). They describe a number of ways to challenge orthodoxies, including thinking beyond the current served market and the current product functionality, challenging price/ performance, and asking naive questions. Based on foresight, the company needs to develop a ‘strategic architecture’. Strategic architecture isn’t a detailed plan but a high-level blueprint that sets out what a company needs to be doing in the present in order to be ready for the future (i.e. building of new competencies, deployment of new functionalities, reconfiguring of customer interfaces, finding partners, etc.). This can be achieved without spending a huge amount of money or making too many concrete commitments. They key is to ‘learn about the future faster than competitors while making fewer and smaller, irrevocable commitments’. The strategic architecture provides the basis for stretch goals and leveraging resources—echoing their earlier article about how to move beyond incrementalism. Then a company needs to develop a migration path between the present and future. This will involve investing in core competencies, creating and managing alliances (coalitions), learning and experimenting in the market, building a global brand, and distribution and setting standards. Particular emphasis is placed on alliances because, Hamel and Prahalad argue, although these are common, they are often quite uncoordinated. They propose that coalitions should have a clear ‘cumulative logic’ (i.e. each contributes to the ultimate goal of leading in the future), although nodal firms should not expect all partners to show equal levels of commitment. The aim must be to build the competences of the corporation. This involves four stages. First, firms must acquire or develop the skills and/or technologies that make up a particular core competence. Next they need to blend and integrate those separate skills and technologies. The third stage is to develop core products or platforms (which leverage core competencies and can be sold to other companies so that market share extends beyond brand share). And finally firms are in competition to maximize their endproduct or platform share (this is almost exclusively where companies have focused, leaving out the other key steps). These competences can then be optimally deployed using a process they call ‘expeditionary marketing’ (a concept that had been earlier introduced in Hamel and Prahalad, 1991). This is critical—that is, getting product/service iterations to market that include all current knowledge about customer needs. These early iterations should not be overhyped as this could destroy future potential market leadership if the product is not up to scratch. Prahalad’s work here ends with two ‘calls to arms’. First, that firms need to think differently about strategy—in too many companies it is merely incremental tactical

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planning that is rarely concerned with unmet customer needs and new opportunities. Strategists need to start by asking ‘what could be’. Second, that firms need to think differently about the organization—instead of treating strategic business units (SBUs) as semi-independent, a wider perspective of the company is needed to leverage competencies and hidden value. Managers should be empowered to be creative, room should be made for ‘renegades’ who challenge the status quo, and innovation should be customer and not technology led. Prahalad would later apply and extend the ideas set out in Competing for the Future in order to guide strategists in dealing with new and far-reaching changes to the business environment, such as the massive advances in IT and cheap computing power and the increased volatility managers began to face. In an article entitled ‘Competing in the New Economy’ (Hamel and Prahalad 1996), he proposed a set of questions that he felt managers needed to address as the economy moved from being dominated by manufacturing to one being dominated by knowledge-based industries. These included the following: How do you build legitimacy around decisions (with loss of positional authority)? Shouldn’t managerial ‘control’ be replaced by managerial flexibility? How can managers be responsible for that which they don’t control (i.e. collaborations)? How do you get loyalty and commitment in a world of down-sizing and re-engineering (in light of ‘people’ being such an important resource)? In a world of discontinuous change, shouldn’t authority rest not only on experience, but also on the capacity to learn and adapt? Should more be done about competence allocation and knowledge inventory? How do you unleash corporate imagination? Prahalad and Krishnan (2002), meanwhile, would contend that, in order to be able to respond rapidly to changing competitive pressures, managers need sophisticated information technology (IT) support. Based on work with 500 senior executives in large organizations over four years, the authors argued that IT is increasingly unable to deliver this (and in some cases is even acts as an impediment). Chief technology officers were hampered by legacy infrastructure, incompatibility of systems, poor quality data, multiple vendor applications, and being assessed on cost control not ability to support strategy. The authors present an application scorecard to enable business managers and IT managers to work together and outline needs and priorities. It includes assessing all applications as core to strategy or in support of it, classifying processes as either stable or evolving, and outlining the flexibility of needs in each business domain. In one of his last articles (Prahalad, 2009) he came back to the theme again, arguing that volatility is a factor businesses are having to deal with more, and to deal with it, firms need to have strategic clarity and consistency on the one hand and agility and resilience in operations on the other. Organizations can handle extreme change only when they can address it within a clear strategic framework—the alternative is to react. He went on to cite examples of Indian companies that have become adept at scaling up and scaling down due to volatility (they have rules such as no single customer contributing more than 5 per cent of revenues, constant staff training, and assessment). Companies need to become ‘Velcro organizations’– that is, with people and capacity that can be rearranged and recombined creatively and quickly.

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Related to the need for corporations to be flexible, another theme that runs through Prahalad’s work on strategic management is the concept of the corporation as a set of competencies that needs to be evolved, reconfigured, and deployed in new ways to meet the changing requirements of the market. But this same idea also had another important implication: that the boundaries of the firm and the concept of diversification needed to be re-thought.

Diversification: re-thinking the boundaries of the firm Prahalad’s first major contribution to thinking about the boundaries of the firm and the reconceptualization of what might underpin optimal diversification began with a seminal article (Prahalad and Bettis 1986). This looked at linkages between a firm’s diversification and performance. The article introduced the idea of a ‘dominant general management logic’ (or way of conceptualizing the business and making critical resource allocation decisions). This dominant logic, it was argued, plays a significant part in the level of diversification and the performance of diversified firms. The authors went on to point out that management decisions are made based on managers’ own experience, and the complexity of the top management process is ‘a function of the strategic variety not just the number of distinct businesses or the size of those businesses.’ Consequently diversified, yet strategically similar, businesses can be managed using a dominant logic, where strategically different businesses require different logics. They also highlighted the danger of companies not recognizing that a new business might be strategically different and require a different logic. Texas Instruments’ dominant logic, for example, that had been successful in the semiconductor business failed them in the personal computer (PC) business. IBM, by contrast, recognized that its PC business was very different from its mainframe business and should not be managed by the same dominant logic. Almost a decade later (Bettis and Prahalad, 1995), the authors revisited the dominant logic concept, exploring how it might interact with a changing business environment. Their idea of ‘dominant logic’ had evolved so that they also saw it as an information filter that results in organizational attention being focused on information that conforms to their existing dominant logic, while other information or data is ignored. The filtered information is incorporated and internalized and so reinforces the dominant logic. To break out of this cycle and learn or change strategically, organizations must first un-learn their dominant logic. This would probably require changes to organizational structure and systems, as these tend to reinforce dominant logic. This unlearning is most likely to occur when there is a crisis, but ideally managers would initiate the process to keep moving the firm forward before it found itself boxed into a corner requiring a drastic response.

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Prahalad’s second stream of thinking on diversification and boundaries of the firm had its roots in a competence-based perspective. In another seminal paper (Prahalad and Hamel 1990), he argued that in the long run, competitiveness will be derived from core competencies (collective learning in the organization). The authors explain the importance of core competencies by using NEC as a case: In the 1970s, NEC’s strategic intent highlighted that communications, computing, and components would converge and there would be huge advantage in having competencies in all three. NEC set about acquiring the necessary competencies through over 100 strategic alliances. A decade later they had global leadership positions in the newly converging segments. The authors identified three tests for defining core competencies (CCs): • CCs provide potential access to multiple segments or markets • CCs should make a significant contribution to perceived customer benefits • CCs are difficult for competitors to imitate. They contended that most Western companies did not think about competitiveness in these terms. And by indiscriminately outsourcing activities that were actually critical sources of learning, many had actually lost their core competencies. This idea gave the risk of ‘hollowing out’ of the firm a new poignancy. The article also argued that the SBU structure that had been adopted by so many large firms was an impediment to building core competencies: investment is distributed on the basis of criteria that do not take account of interdependencies through shared core competencies, there is no wider overview, resources are imprisoned, and innovation is bounded (only incremental, with no hybrid opportunities). Instead, they proposed that core competencies needed to be a managed as a corporate resource (using the analogy of an organization being like a tree with CCs being the deep roots that needed to be nurtured by the headquarters—a job the branches cannot, almost by definition, successfully undertake). These ideas were extended (Conner and Prahalad 1996) by exploring the links between the idea of core competencies and knowledge within a company with the resource-based view of the firm. The authors argued that the potential to use knowledge assets in new activities has an important role in extending the transactions-cost analysis in determining the optimal boundaries of the firm and explaining internalization of activities (such as vertical integration) as opposed to the use of external markets in co-ordinating and combining resources.

Market positioning: becoming a low-cost differentiator Some of the contributions for which Prahalad is most well known are in the area of strategies for emerging markets and the impact they could have on multinational corporations, including lessons to be drawn from the country of his birth: India. Once again,

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we can trace a long gestation period for these ideas that, when they came fully to fruition, embodied a radical shift in traditional thinking—often turning conventional wisdom on its head. In the late 1990s (Prahalad and Lieberthal 1998) he introduced the idea that doing business in emerging markets would transform multinational companies. Although little recognized at the time, this represented a radical departure from the deeply entrenched focus of attention in the literature on how multinational companies would transform these markets. The paper argued that multinationals had been treating these markets in an imperialistic fashion, merely seeing them as places to sell old products or to ‘skim the cream’ off the market by serving only the tiny proportion of people at the top of the pyramid. Instead, to access the enormous, latent potential of emerging markets, multinationals needed to rethink their business models from the ground up by challenging: the mix of local/global leadership, the price-performance equation, the aspirations of their customer base, the skills and talent available locally, the potential to innovate locally, the way to align the expectations and goals with local partners, and their willingness to invest in new distribution networks. As growth in emerging markets continued apace, leading them to become ever-more prominent in the consciousness of multinational companies, Prahalad again raised the bar, arguing that multinationals could not only profit from emerging markets but also play a key role as agents of economic and social development. He asserted that to close the gap between rich and poor in the world required abandoning the models and solutions that have failed. Overt and implicit subsidies cannot remove income inequalities. Instead the problem needed to be re-defined from ‘solving poverty’ to one of how to ‘convert the poor into active consumers’ (Hammond and Prahalad 2004). This fundamental idea became the basis of Prahalad’s path-breaking book: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Prahalad 2005a). It began from the premise that almost everyone involved in eradicating poverty has been unsuccessful because they have been trapped by their dominant logics—largely based on ‘aid’ and ‘appropriate technology and quality’, including firms, government agencies, and non-governmental organizations (NGOs). Without access to globalquality products and services, he argued, the poor cannot participate in the benefits of globalization. He saw no reason, however, why the poor (those he described as ‘Bottom of the Pyramid’ (BOP) consumers) could not be profitably served by global companies so long as these suppliers were willing to break out of the straightjacket of their existing mindsets, business models, and distribution systems. Contrary to conventional wisdom, Prahalad argued that, by virtue of their numbers, the poor have significant latent purchasing power; that the poor are aspirational, brand conscious, and value conscious; that telecommunications and hence connectivity were growing rapidly amongst the poor; and that BOP consumers were very open to new technologies. For these reasons there is a need for new goods and services rather than simplified versions of existing ones.

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Firms wanting to engage the BOP needed a new philosophy that includes a new price performance relationship, hybrid solutions (such as new technologies using existing infrastructure), solutions that are scalable to other BOP markets, resource conservation and sustainable development, focus on functionality, process innovations rather than just new products, education of consumers on product usage and benefits, and the search for new paradigms that challenge conventional wisdom about product and service development and delivery. The opportunities in BOP markets are worth the efforts and changes an MNC would have to make to participate: because any of these markets are large, innovations can be leveraged across other BOP markets and some in developed markets. Meeting BOP market requirements can lead to innovations in business models and processes because BOP markets offer a rapid learning environment with the traditional ‘S-curve’ (spread over fifteen years in developed markets) being compressed into a three to five-year ‘I curve’. To gain these benefits, however, Prahalad argued, companies needed to build new kinds of balanced market-based ecosystems in order to create sustainable markets. These ecosystems would need to involve a large number of different types of partners including NGOs, local government, etc. The relationships in these ecosystems would have to reward players fairly and encourage self-governance amongst the poor. If these relationships and incentives were properly designed, these results could be both rapid and dramatic. BOP consumers are very entrepreneurial and so, once given access to information, choice, and infrastructure, they will become partners in innovation, leading to a rapid expansion in the use of products and services. As a private sector emerges, individuals at the BOP gain an identity (often a legal one for the first time through contracts for services). And in the BOP segment women play a critical role and so co-opting them in development and market-building is key. Prahalad acknowledged that, despite the huge opportunities, many multinational companies were reluctant to take them, maybe because of concerns about corruption. However, it is important to understand the difference between local practices that aren’t explicit and real corruption. Alliances with local partners can help distinguish between the two. Real corruption must be eradicated through what he calls ‘transaction governance capacity’. Governments can do this by passing, strengthening, and implementing strong contract laws. Prahalad gave a rich set of examples of how these approaches have worked in practice, including Hindustan Lever developing a low-energy, low-cost freezer unit to enable the poor to have ice-cream; Grameen bank and microcredit; and Aravind Hospital and its pioneering eye surgery systems—the largest eye-care facility in the world—that is highly profitable but treats 60 per cent of patients for free. From a social and development perspective, meanwhile, success would have been achieved when the pyramid has been transformed into a diamond, and Prahalad had no doubt that following this prescription, ‘the elimination of poverty and deprivation is possible by 2020. We can build a humane and just society.’ Prahalad also believed that these dynamics, leveraging the BOP, could provide an important route by which budding multinationals from emerging markets such as India,

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could build their competitive advantage. Thus in an article entitled ‘Learning to Lead’ (Prahalad, 2005b) he argued that instead of focusing on best practice, Indian firms now needed to become a source of innovation for the world. The factors that would drive this innovation were consumer-firm value co-creation, innovating at the bottom of the pyramid, and global industry restructuring. A case in point is his example of Tata using video ethnography to uncover customer requirements and create a new type of hotel ‘IndiOne’ with rates of just $20 per night but with modern, fantastic facilities such as flat screen TVs, wireless broadband, and coffee machines. As time passed Prahalad became even more convinced that partnerships between business and NGOs could play a powerful role in unlocking the BOP market. In Brugmann and Prahalad (2007) the authors observed that the boundaries between firms and NGOs in emerging markets were blurring. Over the past fifteen years NGOs had become involved in entrepreneurial business ventures while companies had set up ‘corporate social responsibility’ (CSR) units. Companies and NGOs have recognized that they each have competencies, infrastructure, and knowledge that the other needs in order to operate in low-income markets, and some are trying to learn from and work with each other. Danone, for example, has set up a joint venture with Bangladesh’s Grameen Bank to manufacture and sell BOP dairy products. But these developments also create challenges for both firms and NGOs. For firms, these include a move from individual standards to industry-wide ones and a need to integrate CSR units into business decision-making. For NGOs, the challenges include moving from anti-business campaigns to promoting joint efforts and cooperating with firms in some forums, whilst still disagreeing in others. New types of ecosystems that brought together corporations and NGOs to unlock demand from BPO consumers and promote economic and social development could therefore play a role in helping both groups to better meet their objectives in the changing environment.

Innovation: co-creating value Underlying much of Prahalad’s contributions is clearly the idea that companies need to continuously innovate and re-invent themselves in order to survive and prosper. He had explored the wide varieties of ways by which this could be achieved, including creative use of its subsidiaries by multinationals, wide engagement of managers and employees at all levels in processes of developing strategy, and the use of alliances and partnerships with a broad spectrum of parties. Reviewing the managerial debates about strategic innovation (Prahalad, Ramaswamy, and Venkatram 2000), however, he began to fear that the role of the customer in this process had been ignored. In that article the authors argued that ‘customers are fundamentally changing the dynamics of the marketplace’. The customer could act as a new source of competence that organizations need to engage in an on-going dialogue with, mobilize communities of customers, manage customer diversity, and co-create personalized experiences with customers. They saw this

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happening in a number of Internet and IT-related companies such as Microsoft doing Beta testing with customers, Amazon personalizing recommendations, and Dell Computer building personal computers to order. In Prahalad and Ramaswamy (2003) these ideas were developed further. The authors argue that now industry convergence and an active role of the consumer in a more networked society call into question the basic concept of value and the processes that lead to value creation. They say that innovation can no longer be based on products and services. Instead, individual customers should actively co-construct their own unique consumption experiences in what they call ‘co-creation experience innovation’. The authors differentiate experience co-creation innovation from customer-based ‘demand innovation’, as co-creation is a ‘purposeful interaction of the individual consumer with a network of companies and consumer communities that enable personalized experience’. To achieve this a lead company needs to create an ecosystem (or network) where the nodal company pulls together a large number of suppliers, partners, and consumer communities to form an experience network that can generate innovation. Rather than the nodal company trying to manage the individual’s experiences directly, the idea is to create the conditions under which the ecosystem allows the customer to co-design an innovative solution. These ideas were further elaborated in Prahalad and Ramaswamy (2004). Here the authors returned to the implicit assumptions underlying the concept of a market, pointing out that the market is traditionally viewed as either a locus of exchange or as an aggregation of consumers. In both cases the market is seen as separate from the value creation process. But new technologies call for us to re-think the market because they are transforming the nature of the relationship between the customer and the firm by enabling interaction between the consumer and the company to become the locus of value co-creation. They cite online auctions, the development of video games, and patients ‘co-creating’ their treatments with doctors and hospitals as examples of how this relationship is changing. They suggest, however, that this new approach can be deployed well beyond those industries immediately impacted by new technology and the Internet. To avoid price erosion (and what they call the ‘Walmartization’ of many businesses), firms across a wide spectrum of industries must escape the firm-centric view and seek to co-create value with customers through an obsessive focus on personalized interactions between the consumer and the company. They also point out that this new value co-creation is very different from mass customization, which they see as a firm-centric approach because the variants of customer choice are all still pre-defined by the firm. To move to true co-creation requires that companies open new types of dialogues with customers that enable them to involve the customer right back at the conception and design process of new solutions, and to understand how customers perceive and trade off the benefits and risks associated with a new offering. The development of these ideas again took another step forward when Prahalad drew together earlier stands of his thinking, resulting in yet another book: The New Age of

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Innovation: Driving Co-Created Value Through Global Networks (Prahalad and Krishnan 2008). His previous research had led Prahalad to define three critical elements of innovation and value creation: value will be increasingly be co-created with consumers; the skills needed to do this don’t reside in any single firm; and emerging markets will increasingly be a source of innovation. Building on these elements, he worked with Krishnan to understand what organizational capabilities would be needed to turn these ideas into reality. The book set out the path for transformation of a business based on two ‘pillars’. First, a shift from product to solution focus, embodying what it described as ‘N = 1’: value based on individual and unique co-created experiences. Second, a shift from internal firm resources to a position where resources are accessed from a global pool or ecosystem—what they dubbed ‘R = G’. This is necessary because no firm has the size or scope to do everything themselves. These shifts need to be complemented by flexible management systems that enable the ecosystem resources to be constantly reconfigured. As a result, the authors contend that ‘the focus should be on access and influence not ownership and control’. In a world where access to raw materials, capital, technology, and talent will not provide sustainable competitive advantage in most industries, what will differentiate firms are business processes. These need to be optimized in support of reaching N = 1 and R = G, rather than traditional models of competition. This would require changes to information technology and communications (ITC) architecture and tools (in particular business specific and analytical applications), as well as the managerial processes, training, skills, and motivation of staff (what they call the ‘social infrastructure’ of companies). ITC architecture needs to extend beyond the firm to connect to external devices, customer and supplier systems and multiple databases as well as have the capacity to change in relation to external pressures quickly and at low cost. It needs to ensure security of customer data, be user-friendly, and support new knowledge creation (through data mining across multiple sources). Current legacy systems are not up to the task. To be competitive, firms must develop ways to continually spot new trends (weak signals) in terms of consumer needs, technologies, and supply chain opportunities. Analytical tools allow firms to crunch both transaction data and unstructured data to reveal valuable insights for both R = G (by anticipating demand and resource needs, the real-time configuration of resources) and N = 1 (by anticipating customer expectations, capacity to co-create with customers and identify individual preferences). But given the magnitude of these tasks for most companies, the technical and social infrastructure should be changed in small steps (not by revolution) and by continual learning and scaling up of pilot initiatives, for example, expanding engagement with customers, encouraging transparency, building a culture around a common logic, disbanding silos, and sharing knowledge at all levels. This will require the visible support of senior management, discipline, accountability, and a clear understanding of how business processes are connected to ITC networks. In making these transitions to the new value-creation paradigm, organizational legacies (including the managerial dominant logic, organizational structure, performance

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metrics, and training philosophies) will represent a key obstacle, and conflicting demands for efficiency and flexibility will be unavoidable. In response, managers need to identify areas that can be flexible and those that cannot (for example, customers cannot design the shape of an iPod but they can have individual, flexible software elements). In many firms there exists a disconnect between the goals of business managers who focus on value creation, and technology managers who are assessed on efficiency metrics and the deployment of ITC. These issues need to be tackled by establishing a shared logic and goals to connect strategy and technology in a firm. While all these initiatives are ultimately aimed at treating customers as individuals, it is important that employees are not forgotten. Firms will have to continually and rapidly mobilize talent from inside and outside the firm (outsourcing) around specific tasks. With outsourcing, cost arbitrage is becoming less of an issue to accessing skills. In this area as well, the brave new world is not without its challenges. For example, managers will have to learn how to put together teams with a diverse and complementary mix of skills and to manage complex projects—both micro-projects (specific tasks achieved in a short time frame) and macro-projects which are broader, complex more open-ended tasks). In addition, new career management and mentoring processes are required as staff face less certainty in what the authors describe as a ‘velcro organization’—one in which people come together around tasks and then disengage seamlessly. Prahalad and Krishnan end the book with a plea for urgency. Managers, they caution, will need to adopt the new, value-creation paradigm rapidly because: ‘by 2015 to 2020 . . . this transformation will not be big news. It will increasingly be the norm in many industries.’ This final theme of the urgency for change in the way companies innovate and create value was picked up in Prahalad’s final articles. In Prahalad and Mashelkar (2010) he argued that coming out of the recession that followed the global financial crisis of 2007–2008, the nature of innovation had to change. It had always been based on the assumptions of affluence and abundance but now needed to be driven by the need for affordability and sustainability. The authors contended that while few Western companies were able to do this, there were some developing economy firms that were leading the way—transforming every element of the value chain and creating novel ecosystems. Indian companies were in the vanguard. Again, the idea of breaking free of conventional trade-offs that flowed through so much of Prahalad’s work came to the fore. Based on a study of sustainability initiatives at thirty large companies (Nidumolu and Prahalad 2009), the authors disputed the commonly held notion that companies have to choose between the largely social benefits of developing sustainable products or processes and the financial costs of doing so. They argued that being environment-friendly lowers costs because companies reduce the inputs they use and increase bottom-line and top-line returns. Companies on the road to sustainability go through: 1. Coming to view regulations and standards as an opportunity rather than a threat because by complying with the most stringent standards, at least a company could force itself to develop innovative approaches ahead of competitors

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2. Helping make the value chain more environmentally friendly 3. Using competencies acquired in stages 1 and 2, companies can then start to develop sustainable new products/offerings 4. Developing new business models with sustainable development already built in 5. Questioning implicit assumptions to develop innovations that lead to next practice and so learning to challenge and change their paradigms.

Prahalad’s contribution to shaping the future C. K. Prahalad was one of the great independent thinkers in his field. He had the courage to tackle complex issues and conundrums that were almost always drawn from his observations of what was happening in the real world. Time after time he demolished the false trade-offs that others had come to regard as immutable, to open up new horizons in areas as diverse as the management of the multinational corporation, strategic decision-making, diversification and the boundaries of the firm, innovation, sustainability, and the alleviation of global poverty. In doing so he set the agenda for countless others. Today, many of his concepts are deeply embedded in the lexicon of management thinking—core competencies, unlocking latent demand among consumers at the bottom of the pyramid, and integration and responsiveness within a multinational. The dominant logic in a corporation, co-creation of innovative new solutions with customers—it is easy to forget what radical departures from conventional wisdom they were at the time. Perhaps his greatest legacy, however, was to remind us through his own research experience that what might look like sudden breakthrough ideas in fact develop over a long period of time, and that continual searching, missteps, experiments and doubts are essential ingredients if our understanding of complex phenomena is to continue to evolve.

References Bettis R. and Prahalad, C. K. (1983), ‘The Visible and the Invisible Hand: Resource Allocation in the Industrial Sector’, Strategic Management Journal, Vol. 4, pp. 27–43. —— —— (1995), ‘The Dominant Logic: Retrospective and Extension’, Strategic Management Journal, Vol 16, Issue 1, pp. 5–14. Brugmann J. and Prahalad, C. K. (2007), ‘Co-creating Business’s New Social Contract’, Harvard Business Review, February, Vol. 85, Issue 2, pp. 80–90. Conner K. and Prahalad, C. K. (1996), ‘A Resource-based Theory of the Firm: Knowledge Versus Opportunism’, Organization Science, Vol. 7, No. 5, pp. 477–501.

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Doz, Y., Bartlett, C., and Prahalad, C. K. (1981), ‘Global Competitive Pressures and Host Country Demands Managing Tensions in MNCs’, California Management Review, Spring, Vol. XXIII, Issue 3, pp. 63–74. Doz, Y. and Prahalad, C. K. (1984), ‘Patterns of Strategic Control within Multinational Corporations’, Journal of International Business Studies, Vol. 15, Issue 2, pp. 55–72. —— —— (1986), ‘Controlled Variety: A Challenge for Human Resource Management in the MNC’, Human Resource Management, Spring, Vol. 25, Issue 1, pp. 55–71. —— —— (1991), ‘Managing DMNCs: A Search for a New Paradigm’. Strategic Management Journal, Vol. 12, Special issue, pp. 145–64. Hamel, G. and Prahalad, C. K. (1983), ‘Managing Strategic Responsibility in the MNC’, Strategic Management Journal, Vol. 4, Issue 4, pp. 341–51. —— —— (1985), ‘Do you really have a global strategy?’, Harvard Business Review, July–August, Vol. 63, Issue 4, pp. 139–48. —— —— (1989), ‘Strategic Intent’, Harvard Business Review, May–June, Vol. 67, Issue 3, pp. 63–76. —— —— (1991), ‘Corporate Imagination and Expeditionary Marketing’, Harvard Business Review, July–August, Vol. 69, Issue 4, pp. 81–92. —— —— (1993), ‘Strategy as Stretch and Leverage’, Harvard Business Review, March–April, pp. 75–84. —— —— (1994), Competing for the Future, Harvard Business School Press, Boston, Massachusetts. —— —— (1996), ‘Competing in the New Economy: Managing Out of Bounds’, Strategic Management Journal, Vol 17, Issue 3, pp. 237–42. Hammond, A. L. and Prahalad, C. K. (2004), ‘Selling to the Poor’, Foreign Policy, May–June, Issue 142, pp. 30–7. Nidumolu, R., Prahalad, C. K., and Rangaswami, M. R. (2009), ‘Why Sustainability Is Now The Key Driver Of Innovation’, Harvard Business Review, Vol. 87, Issue 9, pp. 56–64. Prahalad, C. K. ‘Strategic Choices in Diversified MNCs’, Harvard Business Review, July–Aug., pp. 67–78. —— (1990), ‘Globalization: The Intellectual and Managerial Challenges’, Human Resource Management, Spring Vol. 29, Issue 1, pp. 27–37. —— (2005a), The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, Upper Saddle River, NJ: Wharton School of Publishing. —— (2005b), ‘Learning to Lead’, Journal for Decision Makers, Vol. 30, Issue 2, April–June, pp. 1–9. —— (2009), ‘In Volatile Times, Agility Rules’, Business Week, Vol. 9/21, Issue 4147. —— and Bettis, R. (1986), ‘The Dominant Logic: A New Linkage Between Diversity and Performance’, Strategic Management Journal, Vol. 7, Issue 6, pp. 485–501. —— and Doz, Y. (1987), The Multi-national Mission: Balancing Local Demands and Global Vision, New York: The Free Press. —— and Hamel, G. (1990), ‘The Core Competence of the Corporation’, Harvard Business Review, May–June, Vol. 68, Issue 3, pp. 79–91. —— and Krishnan, M. S. (2002), ‘The Dynamic Synchronization of Strategy and Information Technology’, MIT Sloan Management Review, Summer, Vol. 43, Issue 4, pp. 109–17. —— —— (2008), The New Age of Innovation: Driving Co-created Value Through Global Networks, New York: McGraw-Hill. —— and Lieberthal, K. (1998), ‘The End Of Corporate Imperialism’, Harvard Business Review,, July/August, Vol. 76, Issue 4.

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—— and Mashelkar R. A. (2010), ‘Innovation’s Holy Grail’, Harvard Business Review, July– August, Vol. 88, Issue 7/8, pp. 132–41. —— and Ramaswamy, V. (2003), ‘The New Frontier of Experience Innovation’ MIT Sloan Management Review, Summer, Vol. 44, Issue 4, pp. 12–18. —— —— (2004), ‘Co-creation Experiences: The Next Practice in Value Creation’, Journal of Interactive Marketing Vol. 18, Issue 3, pp. 5–14. —— —— ‘Co-opting Customer Competence’, Harvard Business Review, Jan./Feb., Vol. 78, Issue 1.

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Index

absorptive capacity 252–3, 322–3 academia and real world, relationships 2, 4, 6, 34, 44, 69–70, 86, 98, 100, 107, 131, 175, 182, 187, 189, 190, 250, 292, 294, 304, 309, 315–19, 342, 371n, 387, 393n, 400–1, 40–10, 413, 442, 450, 456, 463, 474, 475, 523, 527–8, 529, 535, 541, 551 Académie Française 52 accountability 168, 169, 390, 534, 563 accountants 51, 398 accounting 16 accounting, cost 16, 285 Ackoff, Russell 169 action research 70, 155–6, 157, 158, 159, 160–1, 162, 167, 169, 171 adaptive learning 335 Adelaide, South Australia 94 adhocracy 396, 469 Adler, Paul 3 administration 51–2, 68, 103, 115, 116, 119–24, 300–1, 304, 309, 314, 315, 316–17, 319, 321, 324–5, 334, 339–40, 372, 385–406 administration, coordination 246, 341, 366, 369 administration, military 52, 59, 63, 66, 118, 120, 124, 130, 198, 282 administration, public 126, 314, 315–17, 318, 324–6, 340 administrators 88, 96, 98, 103, 305 advertising 482, 485, 488 aesthetics 135n, 143, 227, 308, 440 agriculture 214, 256, 418 Ahmedabad 166, 167 A. K. Rice Institute 165 Albert, R. S. 317–18, 341 Alderson, Wroe 489, 503, 506 Allen, M. 22

allowance values 15–16 Amazon 493n, 562 America 11, 13, 21, 39, 74, 116, 170, 208, 220, 238, 242, 274–5, 282, 287–9, 413, 483 American Academy of Management 11 American Institute of Public Administration 119 American Management Association (AMA) 115, 123, 128, 241 American Society for Training and Development 448 American Society for Quality (ASQ) 198, 222, 238, 240, 241 American Society of Mechanical Engineers 18, 35, 37, 43, 115, 240 American Society of Public Administration 316 American Telephone & Telegraph (AT&T) 367 American Telephone and Telegraph (AT&T) 97, 135–8, 145n, 197, 220, 221, 367 American Tobacco 97 analysis 24–5, 53, 79–80, 83, 87–8, 121–3, 131, 167, 170–1, 178, 179–80, 182, 183, 184–90, 204, 211, 215, 237, 255–6, 279, 302–3, 311, 313–14, 326, 335, 336, 339–40, 363, 366, 372–5, 377–8, 386, 390–1, 393–4, 395–6, 397–8, 408, 415, 427–8, 433, 436, 437, 463, 470, 472, 474, 482, 484, 487, 488, 490, 499, 518–19, 548, 551 analysis of variance 211, 215 Andersen, Arthur 413 Ando, Albert 333, 334 Andrews, Kenneth 470 Ansoff ’, Igor 470, 472

570

index

anthropology 139, 140, 147, 164, 165, 167, 168, 361, 410, 423 anti-trust legislation 246, 248–9, 263–4, 486, 500–1 anxiety 158, 163–4, 206, 429, 440 Appley, Lawrence 236 apprenticeship 13, 33, 35, 57, 272, 401 Aquinas, St Thomas 272 arbitrage 530, 531, 564 Argyres, Nicholas 499, 506 Argyris, Chris 6, 309, 328, 395 Aristotle 135, 410, 519 Arrow, Kenneth 309, 335–6 artificial intelligence 28–9, 297–8, 307, 315–16, 319–31, 333, 334, 339, 340, 341 Ashby, Harold 166, 171, 321, 325 Ashkanasy, Neal 452 Ashkenas, Ron 452 Asia 6, 40, 289, 486, 491 Aston Group 179–80, 190, 385–406 Aston University 179, 385, 387 AT&T 97, 135, 136, 137–8, 145, 220–1 Attewell, M. 24–5 auditing 109 Auergesellschaft 40 Augier, Mie 245n, 309, 310 Auschwitz 22 Australian National University 171 Austria 219, 272, 273, 290, 294 Austrian School 310, 326 authoritarianism 100, 107 authoritative communication 246 authority 64, 67, 74, 81–4, 88–9, 106–7, 118–19, 122, 123, 136, 140, 142–3, 146–7, 161, 163, 189, 190, 191n, 262, 311, 392–3, 396, 397, 429–30, 440, 453, 475, 556 authority, managerial 82, 88, 89, 106

Babbage, Charles 3, 22, 127, 247, 261 Bakken, James F. 196 balance 15, 102, 117, 123, 140, 142, 143–4, 147, 392, 423–4, 474, 551, 560 Baldridge, Malcolm 198, 223, 239, 241 Balliol College, Oxford 78, 114

Bamforth, Ken 157, 162, 166 Bancoft Prize 362 Bangladesh 261 Bank Wiring Room 105 banking 398, 435, 560, 561 Barnard, Chester 1, 4, 5, 134–151, 301, 304, 305–6, 308, 309, 310, 311–12, 313, 321, 328, 329, 334, 335, 336, 337, 338, 339–41, 387, 415, 464 Barnes, Ralph 43 Barnett, Corelli 22 Barth, Carl 15, 28, 39–40 Bartlett, Christopher 527, 528, 529, 531–41, 542, 543 Bata Management System 204, 205–8, Bata, Tomas 206–7, 212 Beatrice Foods 379 Bedford, Joan Wilhelmina 115 behavioural science 41, 108–10, 188–9, 258, 261, 262–3, 302, 306, 314–15, 331, 387, 410, 412–14, 415–16, 417–21, 534–8, 542 Bell, Agnes 197 Bendor, Jonathan 337 Bennington College 275 Bennis, Warren 291, 475 Bentham, Jeremy 41 Berle, Adolph 139 Berlin 40 Berwick, Dr Donald 28–9 best practice 38, 70, 314, 430, 532, 561 Bethlehem Steel 15, 17, 18, 38 Bettis, R. 552–3 Big Society 75, 89–90 biology 126, 138–9, 140, 254, 286, 315, 325, 333, 334–5, 471, 472, 535 Bion, Wilfred 157–8, 159, 162, 164, 165–6, 167, 168 Birkinshaw, Julian 1–2, 543 Blakeman, Leslie 176–7 Blau, Peter M. 386, 387, 388, 390 bookkeeping 58, 68 Bordeaux 62 Boston 32, 33, 75, 76, 77, 78, 135, 140, 180, 449 Boston Consulting Group (BCG) 484, 485 Boston Placement Bureau 78 bottom of the pyramid (BOP) 559–61

index Boulding, Kenneth 418, 468 bounded rationality (BR) 140, 298, 301, 303, 305–6, 307, 308, 309–10, 312–14, 316, 320, 326–7, 328, 330, 331, 332, 335–9, 408, 412, 414, 421, 424–5, 505 Bournville Village Trust 181 Boussac, Marcel 67 BP (British Petroleum) 144 Bradford University Business School 385, 387, 397 Braila, Romania 219 Brandeis, Louis M. 37–8 branding 368, 482, 531, 549, 553–4, 555, 559 Braverman, H. 25 Brazil 207 Brech, Edward 122, 126, 127–8 Bridger, Harold 158 Bridgestone 225 Brinton, Crane 139 British Academy 76 British Broadcasting Corporation (BBC) 185, 190, 280 British Institute of Management 114, 281, 282 British Management Council 114 British Productivity Centre 22 British Sociological Association 388 Bruce, Kyle 74 Bruch, H. 540–1 Brunel University 160 Buchenwald 22 Buckley, Peter 256, 261 Bureau of Personnel Administration (BPA) 77, 78, 85, 127 bureaucracies 19, 26–7, 28, 58, 69, 76, 90, 115, 170, 187, 189, 203, 215, 221, 312, 329, 386, 388, 389, 392–3, 396, 397, 399, 400, 415, 431, 469, 514, 553 Burns, Tom 174, 180, 181–93, 388, 389 business administration 74–93 business and society 75, 85–6, 88–9, 127, 281 business history 2, 22, 42, 125, 127–8, 239, 361–2, 366, 367, 375, 377–8, 395–6, 398, 399, 410, 411, 413, 417n, 423, 468, 491, 494, 529, 532 business process re–engineering (BPR) 172, 209, 230 business schools 5, 96

571

Cabot, Philip 97–8, 135n Cadbury Group 398 Calico Textile Mills 157, 162, 166, 167–8 Cambridge University 75, 168, 273, 395, 487 Canada 95, 115, 170, 385, 462 Canute, King 332 capital 54, 165, 176, 205, 231, 247, 253, 255, 274, 289, 364–5, 368, 370, 372–3, 387, 482, 531, 552–3, 263 capital, social 76, 538, 539–41, 543 capitalism 35, 97, 107, 135, 188, 255, 259, 275, 279, 284, 288–9, 311, 339, 362–3, 364, 366, 372–3, 375, 376–81, 481, 498, 505, 520 capitalism, industrial 376–81 capitalism, managerial 135, 255, 372–3 careers 57, 70, 190, 279, 284, 286, 365, 366–7, 395, 564 Carlson School of Management 223 Carnap, Rudolf 301, 324, 329 Carnegie, Andrew 289, 367 Carnegie Mellon University (Carnegie Institute of Technology) 4–5, 6, 297, 298, 310, 316, 319–25, 328, 332, 387, 407–8, 410–17, 420, 421 Carnegie Steel 367 Casals, Pablo 286 Casson, Mark 256, 261 categorization 44, 177, 188, 318, 454, 519 Catholic Church 469 Caves, Richard 482–4, 486, 496 centrality of relationship 75, 79–80 Centre d’Études Administratives (Centre for Management Studies) 67, 68 Certified Quality Engineer (CQE) 222 Chandler, Alfred 5, 245, 255, 257, 361–84, 395 change 19, 20, 23, 29, 39, 78, 89–90, 97, 99, 103, 105, 117, 135, 156–7, 159, 160–2, 182–6, 190, 191n, 200–5, 208, 222, 224, 225, 229, 231, 237, 251, 254, 262, 284, 286–9, 291, 317, 364, 367, 370, 379, 394, 396, 398–9, 411, 418, 423–4, 438, 448–60, 468, 473, 476, 503, 516, 528–9, 530, 536, 537–8, 542–3, 549–2, 554, 556, 560, 563–5 change management 448–60

572

index

Chantilly 62 Chatalier, Henri Le 20, 40, 65, 127 Checkland, Peter 521 Chicago 98, 135n, 197, 297, 299–303, 306, 317, 319, 320, 324, 327, 328, 331, 338, 482, 483, 486 chief executives (CEO) 226, 232, 238, 277, 456, 542 Child, John 116, 124, 385, 393, 395–6, 397–8, 399, 400 China 24, 284, 289, 430, 492, 493, 495, 501, 504–5 Chinese Academy of Science 316 Chinese Enterprise Management Association (CEMA) 24 Christianity 272, 273, 275 Church of England 469 circular response 77, 79, 89 civil servants 435 Claremont College 4, 271, 281, 290, 513, 524 Clark, Peter 398 class, industrial 51 class, social 12, 17, 20–1, 29, 34, 36, 39, 51, 94, 98, 106, 136–7, 139, 388 class, working 12, 18, 94, 136, 388, 440 classification 55, 68, 178–80, 199, 279, 388, 467, 468–70, 494, 556 Claude, Bernard 60 Clausewitz, Karl von 472, 476–7 Clegg, Hugh 176n Clemenceau, Georges 21 Cleveland, Ohio 409 cloth/textile trade 23, 157, 162, 166, 167–8, 495, 549 cluster analysis 433 coal mining 50, 157, 166–7, 170, 282 Coase, Ronald 246, 249n, 258, 260–1, 316, 340, 468 coercion 107, 452 Cohen, Kalman 323, 422 Cold War 319, 326, 340 collaboration 40, 55–6, 98, 99, 103–4, 141n, 155–7, 159, 162, 166, 169, 170, 171, 254, 304, 339, 387n, 407, 411, 414, 416, 427, 433–4, 441, 469, 470, 473–4, 481, 490, 497n, 501, 505, 517, 522, 532–3, 538, 541, 543, 551, 553, 556

collectivism 4, 51, 60, 75, 78, 79, 84, 86, 86–7, 88, 141, 147n, 156, 272, 312, 337, 338, 363, 365, 378, 388–9, 429, 430, 433, 436, 438, 440, 536, 540, 558 Colorado Fuel and Iron Company (CFI) 95–6 Columbia University 38, 196, 417 Comité International de l’Organisation Scientifique (CIOS) 115, 126, 127–8 Comité National de l’Organisation Française (National Committee of the French Organization) (CNOF) 67 command, hierarchies of 209 command, military 63, 66, 118, 120, 124, 130 commanding 52, 53, 123, 142, 183, 209, 285, 305 Commentry–Fourcahmbault et Decazeville 49, 51, 53, 59, 62 commerce 126, 198, 280 commercial enterprises 24, 34, 280, 375–6, 534 Commission on Industrial Relations 177n Commission on Industrial Competitiveness 481, 490 Committee on Science and Public Policy (CosPUP) 341 communication, mass 442 communications 66, 68, 88, 90, 96, 125, 126 fig, 140, 142, 161, 191n, 201, 206, 215, 246, 281–2, 284, 310, 367, 380, 422, 427, 429, 432, 433–4, 442, 451, 452, 453, 455, 465, 474, 532–3, 534, 551, 558 communications technology 210, 367, 558, 559, 563 communism 98, 272, 340 communities 76, 79, 85, 87, 89–91, 97, 127, 129–30, 158, 171, 181–2, 185–6, 206, 210, 289–90, 325, 332, 333, 387, 400–1, 425, 440, 492, 498, 520, 532, 561–2 communities, local 76, 79, 90, 181, 182 communities of practice (CoP) 532 competence 134, 142n, 223, 235, 257, 263, 279, 459, 555–6, 558, 561 competition 22, 24, 104, 168, 210, 246, 248–9, 253, 280, 319, 363–5, 372, 375, 481, 486, 490–4, 496, 498, 499–505, 506, 521, 529, 531, 551, 554–5, 563

index competitive advantage 209–10, 226, 248, 258, 263, 307, 368, 374, 378, 379, 480–507, 521, 329, 530–1, 532, 550, 552, 553, 561, 563 complexity 16, 135, 171–2, 177, 178, 179–80, 186–7, 252, 297, 304, 322, 326, 333, 335, 393, 395, 422, 437, 506–7, 531, 537, 538, 557 compromise 77, 81, 212, 216 computers 28–9, 198, 255, 281, 286, 299, 303, 313, 315–16, 318, 320–3, 325, 327, 329–32, 337, 338, 340, 362, 364, 375, 379, 380, 398, 411, 418, 419, 458, 464, 556, 557, 558, 562 Comte, Auguste 60 conceptualization 100, 476, 557 Concordia University 462 Conférence de l’Organisation Française 67 conformity 54, 215, 232, 557 Confucian values 430 Connamasset Conference 180, 181, 184 constructive conflict 75, 79, 80–2, 88–9 consultancy 4, 18, 26, 38, 41, 59, 69–70, 74, 98, 113, 114–15, 129, 138, 157, 158, 167, 168, 177, 198, 221, 289, 294, 400, 484 consultancy, internal 129, 70 consultation 129, 161, 434 consumers 129, 199, 216, 251, 255, 368, 459, 512, 520, 559–60, 561–2, 564, 565 Conti, Robert F. 2, 26, 28 Conti, Tito 238 Continental Mills 95–6 Continental Philosophy 301, 326 contingency theory 180, 190, 400, 467, 512, 516, 520 continuity 117, 122 fig, 124 continuous improvement 27, 28, 205, 209, 212 Cook, Morris 39–40 Cooper, Bill 412 cooperation 17, 98, 106, 136, 138, 140, 141, 144, 145–7, 198, 210, 239, 251, 254, 258, 392, 412, 501, 505, 515, 532, 538, 540, 548, 552 coordination 16, 55, 69, 79, 81, 96, 120, 123, 130, 141, 181, 205, 206, 210, 213, 246, 341, 366–72, 393, 395, 468–9, 532, 536, 537–8, 548

573

coordination, managerial 366–372 core competencies (CC) 59, 210, 279, 546–7, 555, 558, 565 core process of management 75, 82–5, 88, 536 Corn Products 371 Cornell University 24, 43 Corning Glass 371 corporate social responsibility (CSR) 498, 561 cost minimization 24–5, 208, 485, 500, 503 cotton trade 24 Coubrough, J. A. 125 Cowles Commission 299–319, 320 Creative Experience 77, 86 credit 56 crisis 19, 21, 28, 135, 139, 142n, 244, 251, 264, 274, 282, 285, 331, 454, 542, 553, 557, 564 cross–cultural studies 428, 431–2, 435, 436, 439, 442 Crowther–Heyck, Hunter 297–8, 299, 306, 310, 318–19, 321 Crozier, Michel 69, 175, 397 cultural analysis 443 culture 59, 109, 143, 144, 146, 147, 157, 162, 165, 184, 215, 238, 249, 262, 311, 394, 398, 399, 428, 429, 430–43, 454–6, 467, 468, 513, 530, 634, 542, 548, 551, 563 culture, corporate 105, 431–43, 454–6 culture, national 394, 398, 399, 428, 429–32, 433–4, 436–7, 439–42, 467, 531 culture, organizational 155–6, 158–9, 160–65, 171, 431, 432–3, 439, 441, 455 currency 274, 490n Curtis, Charles 139 customer 25, 26, 56, 105, 183, 203, 204, 205–6, 207, 209–10, 211, 212, 215–16, 227, 228–9, 230, 231, 232–5, 236, 238, 274, 277, 279, 375, 432, 454, 455, 458, 459, 466, 489, 490, 498, 502, 505, 506, 546, 549, 551, 554–6, 558, 559, 561–5 customer base 442, 559, 562

574

index

Customer Intervention Point (CIP) 210 cybernetics 27 Cyert, Richard 245, 258, 262, 320, 407–8, 412, 416–21, 422 Czechoslovakia 241

da Vinci, Leonardo 315 Dahl, Robert 410, 411 Daiei Company 289 Dale, Ernest 124 Danish Insurance Company Study 432–3 Darwin, Charles 462, 470–1, 476 Davis, Louis 170 Davis, Parke 371 Dawson, Dame Sandra 179 Day, Richard 418–19 de Tocqueville, Alexis 338, 342 de–skilling 22, 25, 29 Dearman, Nancy 449 debt 130, 144n decentralization 34, 118–19, 275–6, 280, 285, 371, 392–3, 429, 511–12, 531, 532 defensive techniques 158, 164, 454 Degroot, Morris 419–20 Delegacy for Social Administration 176 delegation 118–19, 121, 122 fig, 126, 146–7, 183, 200, 226, 397, 548 Delgado, Mercedes 496 Delhi University 528 Dell Computers 210, 562 demand chains 201, 210 Deming Prize 198 Deming, W. Edwards 2, 3, 4, 5, 135n, 196–217, 224–6, 234, 235, 236, 242, 278, 292, 521 democracy 27, 35, 40, 41, 76, 79, 87, 89–91, 95, 98, 101, 102, 105, 106–8, 139, 160–1, 169, 170, 176, 190, 192, 208, 275, 299, 300, 303, 311, 324, 339, 341–2, 363 democracy, industrial 41–2, 94, 161, 169–70, 190 demography 278, 438, 555 Denmark 431, 491 Dennison, Henry Sturge 78, 80, 119, 127

Department of Scientific and Industrial Research (DSIR) 176, 390 Descartes, René 60, 333, 335 design 12, 26, 28, 35, 91, 99, 120, 156, 157, 159, 169, 177, 179, 183, 184, 187, 198, 199, 201, 205, 210–11, 216, 227, 229, 233, 251, 288, 315, 330, 333, 371, 390, 398, 400, 442, 462, 470, 473, 502, 534, 560, 562, 564 design, job 15, 19–20, 22, 24, 25, 26, 159, 165–171 design, organizational 165–71, 305, 400 design, work 24, 36, 159, 165–71 determinism 116, 121, 122 fig, 313, 341, 395, 538 developing countries 246, 250–2, 263 DeVoto, Bernard 139 differentiation 318, 546, 558–561 Dill, William R. 292 direction and control 116, 121, 127 directors 52, 55–8, 59, 61, 69, 78, 96, 129, 161, 198, 311, 390, 440 disabled 40, 43, 168 discipline 16, 64, 122 fig, 294, 536, 563 diversification 2, 23, 176, 248, 249, 253, 255, 371, 377, 379–80, 469, 485, 531–2, 546–7, 550, 551, 557–61, 565 Diversified multinational corporation (DMNC) 549–50 diversity 2, 89, 176, 390, 437, 443, 531–2, 561 documents 55, 56, 60, 391 Donaldson, Lex 399–400 Donham, Wallace 96, 97–8, 138, 139 Dostoevsky, Fyodor 272 Dow Corning and Air Products 376 downsizing 284, 554 Doz, Yves 552 Dreyfus, Hubert 323–4, 325–6, 327, 328, 331, 333 Drucker, Doris 273 Drucker, Peter 74, 86, 196, 236, 271–294, 324, 466–7, 513, 524 Du Pont Corporation (see E I Du Pont de Nemours) 97, 369, 370, 371, 377 Duhem–Quine thesis 332 Dunning, John 244n, 250, 263 Durant, William 370

index duties and responsibilities 120 dynamic capabilities (DC) 245, 257–8 dynamic competitiveness paradigm (DCP) 481, 497, 499–505 dynamic random action memory (DRAM) 502 dynamics 88, 123–4, 127, 139, 158, 159, 160, 165, 168, 179, 181–2, 184, 363, 364, 373, 376–81, 483, 500, 502, 514, 561 dynamics, group 88, 139, 165, 457, 514

E. R. Squibb 371 East Asia 430, 486, 493 Eastern Railroad Company 18 Eastern Rates 37 École de Paris de Management 70 École National Supérieure de Mines 49 École Polytechnique 63 economic analysis 224, 340, 378, 420 economic theory 103–4, 244, 246, 255, 276, 418–19, 496 Economic and Social Research Council (ESCR) 398n economics 99, 103, 104, 119, 146n, 212–13, 216, 223, 245–57, 259, 263–4, 273, 274, 275–6, 280, 287–8, 299, 300, 304, 308–9, 310, 313, 315, 316, 317–20, 326–8, 331, 333, 335, 336, 339, 340, 374, 408, 409n, 412, 414–16, 417, 418–24, 449, 467, 481, 482, 484, 487, 490n, 491–2, 505, 507, 546, 548, 549, 553 economics, Baysian 420 economics, behavioural 316, 317, 328, 409n, 412, 419–20 economics, institutional 134, 147 economics, neoclassical 104, 245n, 253, 255–7, 258, 259–60, 299, 300, 302, 304, 313, 326–7, 333, 335, 412, 417, 419, 487, 492, 500, 505, 507 economies of scale 363, 367, 368, 374, 376, 378, 393, 485 economies of speed 368–9 education 36, 56, 57, 59, 67, 74, 97, 114, 140n, 146, 157, 171, 196, 197, 202–3, 205, 210, 213, 238–9, 276, 278, 281, 282, 293, 318,

575

323, 339, 367, 370, 387, 394, 413–15, 420, 450, 452, 463, 468, 529, 541–2, 560 education, business/management 114, 128–9, 339, 387, 413–15, 463, 468, 541 efficiency 253, 530 Elbourne, Edward 127 Electric Storage Battery 371 Ellis Island 220 Ely, Richard 299–300 Emerson, Harrington 18, 116, 471 Emery, Frederick 155, 156, 157–60, 162, 166, 168, 169–171 empowerment 89, 235, 285, 541 Engels, Friedrich 188 engineering, industrial 32, 41, 42, 43 England 13, 77, 94, 98, 182, 186, 273, 387, 391, 442, 494 Enlightenment 306, 309, 326, 335 entrepreneurship 202, 206, 207, 245, 250, 253, 257–8, 260, 262, 274, 277, 279, 283, 289, 338–9, 369–70, 392, 456–7, 464, 466, 536–7, 551, 560–1 epistemology 6, 245, 254, 259, 302, 312, 313, 317, 325, 517 equity 65, 117, 122 fig errors 25, 26, 27, 50, 141, 143, 228, 235, 399, 424 esprit de corps 65, 122 fig ethics 57, 85, 146n, 147, 130, 215, 273, 274, 275, 276, 281, 288, 292–3, 294, 303, 306, 340, 519, 520, 529, 541, 542–3 ethics, Christian 275, 288 eugenics 39 Euripides 196 European Central Bank 285 European Group on Organization Studies (EGOS) 401 European Institute for Advanced Studies in Management, ( EIASM) 427, 430–1 European Organization fro Quality (EOQ) 238 European Union 285 evidence 22, 87, 90, 100, 117, 176, 200, 254, 288, 292, 306, 330, 331, 333, 336–7, 395, 396, 410, 415, 435, 437, 437, 441, 467, 476, 489, 495, 501, 504, 537, 548

576

index

exception principle 16, 24, 122 fig executives 52, 53, 57, 83, 84, 97, 103, 134–40, 143, 145–6, 161, 214, 225, 280, 282, 283, 305, 311, 393, 428, 451, 457, 458n, 499 Exeter Academy 12 experience 15, 27, 50, 51, 60–2, 64, 68, 75, 77, 83, 84, 85, 86, 97, 108, 109, 116, 119, 135, 140–1, 143, 156, 163, 165, 167, 168, 175, 185, 197, 199, 214, 216, 247–8, 254, 256, 277, 289–90, 300, 303, 313–14, 317, 322, 325–6, 327, 329, 336, 366, 371, 380, 418, 424, 463, 471, 472, 485, 511, 554, 556, 557, 562 experimentation 33, 36, 50, 60–1, 69, 189, 205, 306, 332, 336 exploitation 20, 21, 88, 99, 176, 188–9, 374, 376, 423–4, 466, 530, 538 Exxon (see Standard Oil)

failure 17, 66, 87, 88, 91, 101, 109, 136, 143, 144n, 146, 215, 232, 233–4, 261, 279, 286, 289, 291, 292, 306, 319, 329, 370, 379, 455, 456, 471–2, 475, 493n, 512, 540, 548, 551, 554–5, 557, 559 families 39, 94, 155, 220, 259, 366, 369, 429 Fannon, William 13 fatigue 14, 40–1, 95, 102 Fayol, Henri 4, 20, 49–70, 115–16, 117, 119–21, 123, 124, 125–7, 128, 132, 282, 291, 463, 464, 466, 468 Fayolism 20, 50–65, 67, 68, 69, 70, 125 Federal Trade Commission (FTC) 496 feedback loop 211, 229 Feigenbaum, Armand 238, 242, 298, 323, 412, 417 Feldman, Julian 417 feminism 43, 83n, 337 Ferrell and Jones 12 Filene, Edward 78, 123, 129 Filene, Lincoln 78 financial abilities 52 First World War 40, 50, 113, 272 First-mover advantage 364, 374, 375–6 Fisher, Ronald 197 five forces framework 482, 484–90, 496, 500, 501–3, 506

Five Year Plan 20 Flanders, Allan 176 flexibility 122 fig Florence 494 Florence, Philip Sargant 247, 261 Follett, Mary Parker 2, 3, 44, 74–91, 100, 116, 119, 121, 125, 127–8, 463 Fondation des Sciences Politiques 50 Ford Foundation 412–15, 417 Ford, Henry 15, 275, 287, 289 Ford Motor Company 23, 25, 196, 277, 320, 554 Fordham University 197, 205, 216–17 forecasting 53, 56, 120, 121, 122 fig, 123, 201, 209, 278, 283, 284, 285 foreign direct investment (FDI) 249, 251, 264, 504 fortuna 472 Foucault, Michel 44, 106, 325 Foundation for Management Education (FME) 387 fourteen principles 64, 65, 70 Fourteen Points 196, 200–3 Fownes Brothers 113 Fox, Alan 191 France 20–1, 40, 49–50, 62–3, 65–6, 67, 125, 127, 528, 543 Franco–Prussian War 63 Frankfurt University 272–3 Frankl, Victor 108 free will 140, 142 Freeman, Michael 313 French Revolution 275 Freud, Sigmund 271, 302, 306, 317–18 Fromm, Eric 108 Fuji Electric Co. 511 Fuji Xerox 512, 515 Fujitsu 513, 554 functional foreman 16, 24, 28, 59, 65–7, 88, 117, 120 functionalism 189, 362, 389 fusion 186 Future Search Conferences 171

Gabarro, John 453 Galbraith, John Kenneth 84 Galton, Frances 317–18

index Galvin, Bob 238 game theory 321, 327, 412, 415, 416 Gantt chart 20, 28 Gantt, Henry 39, 127 Gantt Medal 115 Gates, Bill 291 General Chemical 371 General Electric (GE) 277, 367, 371, 379, 380 General Motors (GM) 19, 23, 120, 276, 283, 290, 294, 369–70, 464 General Motors Export Company 120 General Problem Solver (GPS) 316, 319 generalists 547 Geneva 97, 114, 128, 272 Genoa 494 George, Henry 299–300 Germany 21–2, 35, 37, 40, 49, 62, 139, 181, 273, 275, 283, 287, 290, 362, 372–3, 378, 397–8, 486, 491, 494, 495 gestalt 157, 159, 164, 279, 291, 301–2, 338 Ghoshal, Sumantra 1, 2, 3, 5, 388, 527–43 Gilbreth & Co. 33, 34 Gilbreth, Frank 2, 3, 32–44, 127 Gilbreth, Lillian 2, 3, 32–44, 127, 280 Glacier Metal Company 156–7, 158–9, 160–2, 163, 166, 167 global sourcing (GS) 210, 211 Global Leadership and Organizational Behavior Effectiveness (GLOBE) project 435 globalization 5, 245, 249–54, 258, 399, 433, 443, 468, 531, 551–2, 559 goals 27, 54, 80, 99, 105, 108, 136, 145, 171, 180, 190, 202, 203, 204, 206, 217, 223, 224, 226, 229, 233, 236, 237, 311, 312, 326, 335, 338, 388, 389, 394, 417–18, 419, 420–1, 424, 429, 433, 449, 453, 455, 475, 500, 532, 552–557, 559, 564 goals, long-term 455, 552–7 Goffma, Erving 188 Goldthorpe, John 395 Goodrich Rubber 371 goods and services 184, 212, 214, 246, 443, 559 Gordon, Robert 413 Gosling, Jonathan 473–4, 475, 476 Gouldner, Alvin 134, 390

577

governance xiv, 44, 87, 90–1, 105, 109–10, 135, 198, 287, 379, 407, 560 government 19, 21, 79, 89–90, 115, 135, 139, 146, 161, 167, 174, 179, 182–3, 187, 200, 213, 214, 251, 252, 253, 263–4, 275, 279, 280, 281–2, 289, 318, 387, 390, 394, 398n, 490, 493, 501, 504, 530, 549, 559–60 Graduate School of Industrial Administration (GSIA) 319–20, 323, 327, 331–2, 411, 414, 416, 417, 419–20 Graicunas, A. Vytautas 119, 121, 124, 125, 126–7, 128 Grameen Bank 560, 561 Gratton, Lynda 540–1 Great Depression 18–19, 42, 85, 138–9, 165, 300, 372 Greenwood, Royston 385n, 393, 398–9 Groningen University 427 groupthink 87 Grove, Andrew 291 growth 23, 49, 120, 147n, 198, 216, 245–50, 252, 253, 254, 255–64, 278, 289, 313, 361, 363–7, 369–72, 373–4, 377–8, 380, 392, 492, 496, 500, 503, 539, 542, 553, 559 growth, endogenous 247, 252, 254, 256, 258, 260, 262–3, 264 growth, limits to 120, 246, 247, 248–9, 256, 258, 284 Gryna, Frank 222, 238 Guetzkow, Harold 302, 412, 414, 417, 422 Guillaume, Charles Edouard 50 Guillén, M. 19 Gulf and Western 379 Gulf Oil 320 Gulick, Luther 78, 116, 119, 305, 415, 463, 464 Gutenberg, Erich 286

Haarlem 427 Habermas, Jürgen 107, 331 Halpern, David 292 Hamburg 272, 289 Hamburg University 272, 289 Hamel, Gary 553, 554–6

578

index

Hampden-Turner, Charles 430, 462, 476 Handy, Charles 291 harmonization 54 Harvard Business Review (HBR) 124, 284, 291, 293, 453, 462, 483, 484, 494–5, 505, 512, 513, 518, 519–20, 527, 529, 534, 535, 536, 543 Harvard Business School (HBS) 94n, 96–7, 98, 100, 135, 138, 139, 180, 362, 377, 448, 449, 451, 452, 456, 459, 480, 482, 484, 498, 499, 512, 528, 533, 547 Harvard University 12, 137, 362 Hatchuel, Armand 337 Hathaway, Horace King 38, 39–40 Hawthorne experiments 27, 39, 95, 96–101, 102, 103–5, 127–8, 134n, 139n, 309–10 Hawthorne Works 197, 220 Hayek, Friedrich von 256, 259 headquarters 56, 58, 59, 63, 66 health care 28, 481, 498 Heath, Chip 452 Heath, Dan 452 Heckscher-Olin 491, 492n Hegel, Georg Wilhelm Friedrich 302, 312, 329 Heidegger, Martin 325, 326 Heimann, Paula 163 Helsinki University 181 Henderson, Laurence J. 98, 119, 135n, 138–9 Herbst, Phil 166 Hercules Powder Company 246, 248, 254, 377 Hermann, Aukam & Co. 40 Herzberg, Ferderick 27, 108, 144 Heskett, James 454 heuristics 312, 314, 322–3, 325, 326, 329–1, 336–8, 395, 400 Hicks, Clarence 95–6 Hickson, David 385–6, 389–92, 394, 397, 399, 400–1 hierarchy, managerial 226, 366, 369, 536 hierarchy, organization 55–6, 90, 109, 170, 177, 183, 190, 231, 311–12, 314, 332, 333–5, 366, 369, 455, 467–8 hierarchy of needs 144, 286 Highland Union 76 Hill, John 162 Hindustan Lever 560

Hinings, Bob 385n, 393, 398–9 Hirohito, Emperor of Japan 198 history, management 2, 42, 100 Hitler, Adolf 21, 274, 275 Hitotsubashi University 512 Hoess, Rudolf 22 Hoffman, W. Michael 292 Hofstede, Geert 394, 427–43 holistic approach 184, 279, 291, 334 Homans, George 139 home economics 42 Honda 23 Hong Kong 430 Hoover, Herbert 42 House of Representatives 18, 75, 87 Howard, Aldrich 395 Howell, James 413 human agency 178, 179–80, 181, 188, 189, 301, 335, 341 human relations 27, 44, 79, 95–6, 97, 98–101, 102, 105, 107, 108, 109, 128, 134, 136, 138, 156–72, 176–7, 280, 309–10, 387 human relations school (HRS) 3, 4, 44, 95–97–101, 105–10, 134 human resource management (HRM) 53–4, 69–70, 88, 96, 101, 104–110, 245, 257–8, 488, 551 Human Error Probability (HEP) 25 humanism 298, 302–3, 313, 314, 329, 339, 341 Huy, Quy 452 hygiene factor 144 Hymer, Stephen 252, 262

IBM 97, 210, 277, 427–31, 434–42, 554, 557 Illinois Institute of Technology (IIT) 301 Imai, Kenici 512 Imperial College, London 174, 178, 179, 188, 189, 387 implementation 18, 26, 40, 82, 129, 226, 226–7, 292, 370, 398, 448, 459, 471–2, 475, 548, 551 incentive pay schemes 13, 17, 102, 103 incentives 13, 41, 99–100, 102n, 144, 247, 261, 262, 365, 374, 423, 452, 500, 550, 560

index India 166, 167, 168, 394, 440, 442, 495, 528, 542, 556, 558–9, 560–1, 564 Indian Institute of Management 547 Indian Oil Corporation (IOC) 528 Indian School of Business (ISB) 528–9 individualism 87, 99, 106, 306, 334, 338, 429–30, 433, 436, 438, 440–1, 535, 539 inducements 140, 143–4, 312, 415 industrial democracy 14, 95, 160, 169–70, 176, 190, 192 industrial disputes 101 industrial finance 364, 364 industrial organisation (IO) 80, 84, 105, 174–5, 178, 180, 188–9, 245, 374, 378, 480, 482, 483–4 industrial rationalization 21, 129 industrial relations 19, 23, 95, 95–7, 158, 170, 176–7, 369, 387–8 industrial relations counselors (IRC) 96–7 Industrial Revolution 22, 103, 281, 373, 378 Industrial Welfare Society 167 industrialization 20, 396 industry, British 22–3, 77, 114, 130, 190, 373 information 13, 16, 51, 55–6, 58, 107, 183–4, 190, 199, 201, 205, 211–14, 256, 262, 285–6, 310, 320, 321, 336, 338, 375, 434, 452, 464–6, 487, 500, 512, 514–17, 520–2, 532, 534–5, 537, 548, 552–3, 557, 560 information gathering 303, 310, 320, 321, 338, 415, 464, 465, 530 information processing 315, 337, 512, 514–17, 520 information technology and communications (ITC) 255, 289, 556, 562, 563 infrastructure 365, 376, 488, 493n, 542, 550, 556, 560–1, 563 innovation 21, 23, 39, 88–90, 108, 167, 175, 182–7, 190, 200, 209–10, 230, 235, 246, 248, 249, 251, 260–1, 262–3, 274, 278, 281, 283, 289, 293, 366, 375, 378, 388–90, 394, 401, 442, 458, 481, 487–8, 491, 494, 496, 499–501, 512, 514, 515–18, 521, 530–1, 542, 547, 551, 553, 556, 558, 560–5 innovation management 514, 515–18, 551 INSEAD 427, 452, 528, 543

579

Insititut Français de Gestion (IFG) 67 inspection 58, 200–1, 204, 220–1, 223, 229 Institute for Management Development, Lausanne (IMD) 427, 493, 495 Institute for Research on International Cooperation (IRIC) 427, 431–2 Institute of Industrial Administration 114, 120 integrated networks 532, 533 integration 77, 79–82, 84, 86–7, 88, 137, 138n, 184, 205, 210, 235, 248, 251, 254, 277, 291, 365, 368–9, 371, 393, 475, 482, 500n, 536, 537–8, 541, 546, 547–52, 558, 565 integration, global 537–8, 546, 548, 550, 551 integration process management (IPM) 205, 217 integration responsiveness (IR) 549–50 integration responsiveness grid 549–50 intellectual property (IP) 501, 551 interaction analysis 434 interdisciplinary work 139, 155, 159, 263, 408, 410–12, 414, 420, 522 International Business (IB) 245, 254, 388 International Engineering Conference 40 International Labour Office 114 International Labour Organization (ILO) 97 International Management Institute (IMI) 114, 118–19, 123, 124, 125–6, 129 International Organisation for Standardization (ISO) 203, 232, 236 International Patent System 246 internationalism 253, 492 Internet 287, 562 Interstate Commerce Commission (ICC) 18, 37 intervention 29, 178, 274, 481, 499, 501 inventory 54, 58, 208, 488 fig investigation 81, 88, 95, 96, 98–100, 104, 121, 235, 385, 398, 410 investment 88, 214, 231, 253, 255, 256, 278, 364–5, 367, 368, 370, 373–4, 378, 380, 381, 467, 491, 496, 500, 502–3, 504, 549, 558 investment, capital 278, 364, 496 investment, foreign 352, 491

580

index

Iran 441 Islam 288 ISO 9000 232, 236 Istanbul 49 Italy 398n, 491, 494, 495

J. P. Morgan 97 Jacques, Elliott 155, 156–7, 158–9, 160–4, 165, 167 Japan 19, 23–4, 26, 27, 40, 196, 198–9, 207–8, 214, 223–6, 231, 237–8, 239, 278–9, 281, 283, 284, 285, 287, 289–90, 292, 365, 370, 430, 438, 440, 456–7, 472, 481, 486, 490, 491–2, 493–4, 499, 502, 504, 511–18, 520, 521–3, 542, 549, 551, 553–4 Japan Advanced Institute of Science and Technology (JAIST) 512, 524 Japanese culture 273, 289–90, 438, 440 Jena 40 job rotation 205, 109 job security 19 Joffre, General 63 John Hopkins University 140n, 362, 377 John Lewis Partnership 176, 190 Johnson, Samuel 294 Jonson, Ben 38 Joudreville 49 Juran Center for Leadership in Quality 223 Juran Foundation Inc (JFI) 223 Juran, Joseph M. 3, 4, 198, 203–4, 207–8, 219–43, 278, 280, 291, 292 just in time (JIT) 209 justice 65, 273, 543 justice, social 273

Kahnemann, Daniel 316, 323, 328 kaizen 23, 27–8, 209 Kant, Immanuel 298, 326, 333 Kanter, Rosabeth Moss 74, 291, 293 Kantrow, Alan 291, 293–4 Keio University 511 Keio University Business School 511 Kempf 80 Kent, Robert 37

Key, V. O. 410 Keynes, John Maynard 273, 274, 281, 289, 318, 329 Khayyam, Omar 471 Kiechel, Walter 481 Kierkegaard, Søren 272, 281 Kieser, Alfred 397 Kindleberger, C. P. 250 King, A. Y. C. 430 King, William Lyon Mackenzie 95–6, Klein, Melanie 157–8, 163 Kluckhohn, Clyde 139 Knightian uncertainty 326, 331, 335 knowledge 18, 27, 44, 59, 61, 64, 70, 82, 85, 89, 96–7, 99, 100, 106, 107–8, 120, 125, 128, 157, 181, 183–4, 189, 196, 198–9, 201, 202, 204, 205, 206, 209–10, 211–14, 216, 217, 223, 225, 231, 234, 235, 237, 245, 248, 250, 252, 256–65, 280, 281–2, 283, 284, 286, 288, 289, 303, 304, 308, 310, 312–14, 316, 322–3, 325–7, 330, 332, 333–6, 338–9, 374, 375–6, 380, 393, 395, 400–1, 410, 413–14, 419–20, 424n, 450, 469, 473, 476, 491n, 512–23, 528, 532, 540, 555–6, 558, 561, 563 knowledge creation 263, 512–13, 514, 516–20, 521–23, 563 knowledge, dissemination of 85, 169, 222, 237, 466, 519, 521 knowledge management 209–10, 214, 520, 523 knowledge, technical 59, 376 knowledge, technology 53–4 knowledge worker 280, 281–2, 284, 286, 288, 289 Kolkata (Calcutta) 528 Kondo, Yoshio 224–5, 239 Koopman, Tjalling 302 Korea 430, 486, 491, 493, 501–2 Kotler, Philip 5 Koyanagi, Kenichi 198, 223 Krishnan, M. S. 556, 563, 564 Krugman, Paul 253, 492 Kurnow, Ernest 196 Kyocera Corporation 208

index l’Instituts d’Administration des Enterprises (IAE) 52 labour costs 13, 283 labour disputes 138 labour, division of 14, 16, 20, 21–2, 24–5, 38, 64, 185, 260, 304, 369–70, 391, 536 labour, organized 39–40, 99 laissez–faire 104, 139 Lamond, David 463 Larkey, P. D. 316–17 Lawrence, Paul 74, 180 Le Creusot 62 leadership 6, 70, 74, 82–4, 89–90, 97, 106, 121, 122 fig, 124, 126 fig, 128, 130, 134, 135, 139,140, 145–6, 158, 161, 162, 165, 180, 191n, 200, 201–3, 206, 222, 223, 226, 231, 232, 236–9, 253, 262, 286–8, 293, 305, 312, 337, 339, 407, 435, 448–51, 454, 456–7, 459, 462–3, 465–6, 469, 474–5, 486, 512, 513, 514, 518–20, 527, 528, 533, 553, 558, 559 leadership, political 253 leadership, quality 201, 231, 232, 236–7 leadership, strategic 70, 528 League of Nations 272 lean production 19 , 23, 26–8 learning 23, 29, 158, 165, 169, 170, 235, 249–50, 310, 313–14, 320, 322–3, 325–6, 329–30, 335–7, 362, 364, 365, 374–6, 379–80, 408, 418–19, 420, 421–2, 423n, 425, 450, 457, 515, 520–1, 522, 530, 532, 536, 549, 554, 555, 557–8, 560–1, 563, 565 learning, continual 563 learning, organizational 365, 374, 376, 408, 420, 515, 532 Leicester Conference 165 Lekachman, Robert 318 Lend–Lease Administration 221, 240 Lenin, V. I. 19–20 Levitt, Raymond 422n Levitt, Theodore 291 Levy, Philip 389, 391 Lewin, Kurt 44, 108, 139, 155–6, 157, 159, 162, 164, 166, 170–1 Lewis, C. I. 217

581

Limoges 63 Lindblom, Charles 410, 464, 471, 472 Link–Belt Engineering 18 Litchfield, Edward 386 Littler, C. 25 Litton Industries 379 logic theorist (LT) 316, 319, 322 logistics 367, 549 Lombard, George 97 London 273, 387, 482, 528 London Business School (LBS) 179, 385, 395, 527–8, 544 London School of Economics 77, 78, 82, 119 Lorsch, Jay 180, 183, 386 Lowell Institute 140 Lowell, Lawrence 139, 140 Ludlow massacre 95 Luftansa School of Management 528 Lupton, Tom 390 luxury goods 21 Lyon 49 Lyth, Isobel Menzies 155, 156, 158, 163–4, 166

M–form organization 256–7, 533, 535 MacArthur, Douglas 198 Machiavelli, Niccolò 2, 3, 286, 472 Maciariello, Joseph 293 macroeconomics 211 Mahindra British Telecom 528 Mahoney, Joseph T. 135n, 244n, 248, 253n Mallow, Abraham 27, 108, 144, 282, 286 management and leadership 130, 134, 474–5 management by objectives and self–control (MbO) 277, 292 management, commercial 22, 183, 503 management, definitions of 53 management, democratic 27, 208 management, functional 16, 59, 65–6, 67 management, general 5, 528, 557 management, international 114, 438 management, Japanese 225, 281, 514, 521 management, labour 19 management, philosophy of 11, 18–19, 116, 129, 138, 143–4, 162, 197, 200, 212, 225, 238, 277–8, 292–3, 297–342, 457, 459, 517, 519, 520, 522, 539, 560

582

index

management, quality 3, 135n, 204, 206, 234, 285, 292, 454 management, strategic 140, 257, 388, 400, 483, 518–23, 546–7, 552–7 management, university 282, 290, 393, 409, 420–1 management education 114, 128, 339, 413, 463, 468 management gurus 196, 237, 448, 527 management history 100 management methods 39, 62 management operations 55, 56–8 management practice 6, 14–15, 16, 23–4, 34, 38, 40, 54–5, 60, 69, 70, 78, 85–6, 91, 105–6, 107, 113–14, 116, 129, 131, 147, 160, 162, 178, 181, 182–3, 190, 199, 200, 206, 210, 212, 237, 263, 277, 281, 283, 288, 293–4, 304–5, 313–14, 321, 329–30, 338, 399, 413, 420, 430–3, 439, 463, 468, 470, 494, 496, 518–21, 527–8, 535, 538, 539, 541–2, 546–7, 560–1 management research 68, 70, 309, 332, 522, 535 management science 3, 27, 28, 65, 68, 315, 318, 464, 467–8, 471–2, 476, 518–19 management systems 2, 181, 183, 188, 208, 563 management theory 2–3, 5–6, 43, 55, 77, 99–104, 109, 116, 120, 127, 155, 156, 160, 171, 177, 183, 407, 463, 535, 539, 541–2, 551 management tools 55, 56, 59–60, 63, 68, 70, 239, 548 management training 24, 27–8, 29, 33, 35, 36, 40, 50, 53, 57, 61, 69, 87, 91, 97, 98, 103, 118, 122 fig, 126 fig, 145, 159, 201, 203, 205, 206, 210, 222–3, 225, 227, 232–3, 235, 239, 251, 366, 413, 448, 450, 452, 511, 556, 563–4 Management of Innovation, The 182 Management Research Group (MRG) 114, 125 Management Research Group 114 manager, responsibilities of the 16–17, 56, 82–4, 117–20, 122 fig, 123, 124, 142–7, 200, 201, 202, 226, 235, 237, 281, 341, 365, 453, 466, 533–4, 536, 547–8, 550

manager, tasks of the 279, 463–8, 475 managerial mindset 473–4 manipulation 22, 197, 305, 400, 452–3, 465 manufacturing 15, 23, 24, 27, 28, 98, 120, 156, 178–9, 182, 187, 197, 199, 208, 221, 227, 236, 283, 365, 370, 374, 379–80, 392–3, 397, 398, 493n, 494, 497, 521, 556 Manufacturing Investment Company 18 Maoism 100, 107 March, James 4, 262, 309–10, 320, 407–25 market analysis 279 market intelligence 504, 530 market performance 389, 482 market research 42, 129, 442 marketing 5, 51, 52, 128–30, 179, 250–1, 258, 365, 371, 373, 374, 375–6, 380, 468, 488–9, 503, 511–12, 520, 555 markets 180, 183–4, 185–7, 188, 207, 227, 246–8, 252, 254, 255, 259–61, 263, 278, 279–80, 280, 281, 304, 309, 319, 329, 333, 335, 337, 339, 363, 364–80, 389, 417n, 454, 467–8, 470, 480, 482–5, 499, 500, 503–5, 512, 529–31, 533–4, 537–40, 547, 548–9, 552–3, 555, 557, 558–61, 563 Marne, battle of the 62 Marris, Robin 244–5, 255, 256 Marshall, Alfred 257, 495 Marshall Plan 21, 22, 176 Marx, Karl 97, 188, 259, 272, 274, 282, 285, 288–9, 302, 329 Marxism 188, 272 Mary Parker Follett Foundation (MIFF) 74 masculinity/femininity 429–31 Massachusetts Institute of Technology (MIT) 159, 200, 206, 325, 362, 449, 462, 463, 528 Massachusetts Minimum Wage Board 76, 80 Matsushita, Cainozoic 456–7 Mayo, Elton 27, 44, 94–110, 119, 128, 138, 139, 282 McCaw, Thomas 362 McConnell, Dorothea 94 McCormick Harvester 371 McGahan, Anita 483, 488–9, 499, 506n McGill University 462

index McGregor, Douglas 27, 282, 286 McKiernan, Peter 472–3 McKinsey and Company 284, 462, 484, 485, 487–8, 528 McKinsey business system 487, 488 McLuhan, Marshall 290 McSweeney, Brendan 436–8, 442 Means, Gardiner 139 measurement 14–15, 28, 36, 44, 121, 186–7, 199–200, 204, 212, 213, 230, 236, 293, 388–9, 391, 393, 500n mechanics 123, 124, 126 fig, 281, 301 mental health 95 mental revolution 17, 38, 44 mergers and acquisitions (M&A) 246, 248, 249, 250, 379–80 Merkle, Judith 29 Merton, Robert 139, 301, 316, 415 Mesopotamia 281 Metal-cutting 15, 18, 131 Metcalfe, Henry 76–8, 79n methodology 6, 60n, 70, 156, 159, 160, 165, 169, 172, 186, 226, 227, 230, 232, 254, 302–6, 308, 309, 311, 312, 314–15, 317, 324, 332, 340–1, 342, 389–96, 398, 421, 422–3, 436, 437, 440–2, 496, 517, 522 Metz 49, 63 Michelin, Edouard 21 Michels, Robert 387 microeconomics 244, 302, 304, 378, 414, 419 micro–behaviour 315 micro–credit 560 Micro–Electronics in the Service Sector (MESS) 398n micro–foundation 305, 311 micro–motion or motion economy 36–7, 43 micro–politics 184, 190 Microsoft 562 Middle Ages 2 Middle East 250 Midvale Steel Works 12–14, 16, 18 Miller, Eric 155, 156, 158, 160, 166, 167, 168 Ministry of Supply 183 Mintzberg, Henry 1, 2, 5, 69, 74, 83, 291, 311, 325, 396, 456, 462–77, 541 Mirowski, Philip 327

583

mobility barriers 482–3, 464–5 model of the individual (MoI) 301, 303–7, 310, 311–12, 313–14, 318–22, 328–30, 333 modelling 331, 386, 387, 418, 422, 517, 546 modern portfolio theory (MPT) 467 modernization 23, 35, 36, 38, 44, 135, 283 Modigliani, Franco 412, 414 Mol, Michael 1, 2 monopolies 50, 135, 246, 248, 252, 254, 263, 486 Montiro Group 490, 495 Montréal, Canada 462 Mony, Stéphane 51 Mooney, James D 116, 119, 120–1, 123, 128 Moore, Jennifer Mills 292 morale 102, 120, 126 fig, 130, 137, 161, 187, 454 morality 59, 134, 141, 142, 143, 146–7, 185, 261, 262, 304, 340, 538, 541, 543 Morgan, Gareth 470 Morgan, J P 97 Morgenstern, Oliver 327, 412 motion studies 14, 23, 35, 36–41, 43–4 motivation 27, 96, 99, 100, 104–6, 108, 140, 168, 175, 178, 215, 254, 255, 277, 416, 419, 455, 529, 538, 543, 563 Mount Hermon School 136 MPT (modern portfolio theory) 467 Mu Xiangyu 24 multilearning 515 multinational companies 245, 249–51, 254, 256, 257, 264, 368, 388, 428, 431, 435, 437–40, 443, 528, 534, 546–52, 558–62, 565 multinational enterprise (MNE) 245, 249–54, 258, 264 Multinational companies/corporations (MNC) 438, 442, 528, 529, 530–3, 534, 536–8, 542, 547, 552, 560 Mumford, E. 88 Münsterberg, Hugo 41, 100, 282 Murdoch, George Peter 410 Murray, Henry 139 Museum of Paris 50 Muth, Jack 412 mysticism 85

584

index

Nabisco 97 Nahapiet, J. 539–41 Nakagawa, Ichiro 225 Nakauchi, Isao 289 Nanzan University 512 national competitive advantage 481, 490, 492–6, 500, 504 National Board of Prices and Incomes 179 National Carbon 371 National Coal Board 167 National Competitive Advantage (NCA) 490, 492, 494–5, 496, 501, 504 National Economic Development Council 179 National Health Service 158 National Institute of Standards and Technology (NIST) 231, 512, 524 National Science Foundation 138n natural science 188, 301–2, 303, 314, 332, 334 Nazis 273, 274 negotiation 19, 138, 185, 191n, 250–1, 292, 330, 372, 395, 452, 466, 536, 552 Nelson, Aven 197 neoclassical theory 244, 255–7, 258, 417, 419, 488, 492, 506 Netherlands 427, 431, 494, 495 network cooperation 210 New College, Oxford 113 New England 34, 40 New England Butt Company 38–9 New Jersey Bell Telephone (NJBT) 137–8 New Society 181 New Statesman 181 New York University 196, 198, 240, 276 Newell, Allen 316, 319, 321–2, 323, 325, 328, 330, 331, 412, 414 Newnham College, Cambridge 75 Newport News Shipbuilding 208 Newton, Isaac 5, 334 Nicosia, Francesco M. 512 Nishibori, E. E. 217 Nissan 23 Nobel Prize 253, 298, 299 Nohria, Nitin 388, 533, 535, 536, 537, 538 nomothetic approach 386, 395, 399, 400 non–governmental organizations (NGOs) 559

Nonaka, Ikujiro 511–23 North America 170, 282 Northcott, C. H. 114 Norwegian Industrial Democracy Project 170

observation 12, 33, 36, 41, 60–1, 68, 83, 89, 135n, 158, 186, 224, 252, 332, 438, 450–1, 482, 517, 565 Ohmae, Kenichi 6, 472 Ohno, Taiichi 23, 27 Olsen, Johan P. 407 ‘one best way’ 42, 123–4, 180, 187, 286 Open University 282, 401 Operational Research (OR) 63, 315, 320, 341 optimization 167–8, 169, 199, 202, 213, 231, 235, 256, 258, 317, 499, 546, 563 organic system 136, 159, 183–4, 185, 187, 252 organization charts 69, 101, 102, 104–10 organization, formal 105, 136, 140, 141–2, 196, 548 organization, informal 105, 139n, 140, 141–2 Organization of Petroleum Exporting Companies (OPEC) 251, 253n organizational behaviour 95, 99 organizational capabilities 257, 258, 261, 264, 312–13, 363–4, 365, 372–6 organizational forms 183, 386, 396, 536, 550 organizational pathways 529, 533–8 organizational theory (OT) 115–25, 385–90, 399–401 organizations, line and staff 16, 120, 124 organizations, matrix 171–2, 531, 533–5, 550–1 Orr, John Leslie 114 Osaka 23, 217, 223 Osofsky, Stephen 292 Owen, Robert 275, 282 ownership and control 176, 390, 563 Oxbridge 22

P.T.T. 50 Page, H. W. 250 Palewski, J. P. 68

index paradoxes 161, 299, 319 Pareto Circle 97, 98, 139 Pareto principle 234–5 Pareto, Vilfredo 135, 138–9, 234, 280 Paris 19, 20–1, 50, 51n, 62–3, 126 Paris Exhibition, 1900 18, 20–1, 65 Paris Exhibition, 1910 21 Parke Davis 371 Parsons, Talcott 134, 135n, 139, 189, 302, 310–11, 312, 319, 334, 362, 399, 436 participative management 160, 190 Patagonia 381 paths of learning 362, 364, 375 pattern analysis 451, 454 Pennsylvania Railroad 367 Penrose, Edith 4, 244–64, 313, 377–8 performance 15, 17, 22, 27, 51, 85, 90–1, 106, 107, 109, 138, 135n, 162, 168–9, 176–9, 182–4, 186–7, 190, 198, 203–4, 220, 228, 229–30, 231, 235, 236–9, 262, 278, 279, 300, 363, 366, 379–81, 389, 394, 400,418, 420, 431–3, 450, 454, 483, 485, 495–6, 537–8, 540, 542, 552–7, 564–5 Perrow, C 134, 180, 187, 190 personal relationships 34, 539–40 personality 83, 142, 467 personnel management (see also human relations) 44, 69, 126 fig, 175, 282, 387 Peters, Tom 196, 291, 480 Philadelphia 11, 12, 94–5 philanthropy 94, 96–7, 98, 144 Philips Corporation 549 philosophy 11, 19, 27, 86, 129, 135n, 136, 153, 145, 162, 197, 212, 217, 238, 277, 291, 292, 297, 299, 301–2, 308–9, 312, 314–15, 319, 323, 325, 328–9, 330, 332–3, 334–5, 340, 4557, 459, 560 photography 36 physiocrats 104 piece rate 13, 22 Pierce, Jone 452 Piramal, Gita 542 Pittsburgh, Pennsylvania 411, 416 Plan-do-check-act (PDCA) 227, 230, 233 Planck, Max 286

585

planning 16, 21, 23–4, 27, 53, 69, 123, 171, 203–4, 205, 222, 224, 226–7, 228–9, 231, 237, 238, 247, 252, 259, 300, 367, 380, 387, 419, 453, 455, 462, 463, 470–3, 475, 476, 554–5, 556 planning, industrial 20, 21, 96 planning, production 21, 23–4 planning, quality 204, 222, 224, 227, 228–9, 237 planning, strategic 205, 380, 462, 470, 471–2, 475, 476, 482 Plato 135n, 302, 311, 327, 410 Poitras, Geoffrey 467 Polakov, Walter 20 political economy 176, 245, 249–55 political science 74, 77, 87–8, 127, 146n, 315, 408, 409–12, 421, 423 politics 35, 76–7, 80, 87–8, 101–2, 105, 106–8, 144n, 165–6, 184–6, 190, 250, 253–4, 278, 280, 283, 288, 299–300, 307, 318–19, 324, 378, 588, 393, 395–6, 397, 407, 409, 410 483, 519, 522, 534, 553, 555 Polya, George 322, 331 Pomerantz, R 176 Pont-à-Vendin 49 Poor, Henry Varnum 362 Popper, Karl 304, 332 population 287–8, 368, 370, 391, 396, 428, 436–7, 440 Porsche 26 Porter, Michael 261, 291, 480–507 Porter value chain 488–9, 490, 492, 496, 500, 501, 503–4, 506 Portwood, James D 435 POSDCORB 119, 463 positioning 257, 261, 483, 485, 487, 499, 500–1, 530, 549, 558–61 positioning, market 547, 558–61 positivism 35, 60n, 299, 301, 302, 307–8, 312, 313, 314, 324, 326–7, 329, 331, 332–8, 340, 341, 386, 395, 410, 439 positivism, logical 301, 307, 327 post-capitalism 288–9 Pourcel, Alexandre 49 poverty 77, 285, 440, 457, 493, 559–60, 565 Powell, Thomas 385n, 396n

586

index

power 19, 20, 26, 57, 64, 73, 75, 78, 79, 82–4, 87, 89–91, 98, 100–1, 106–9, 120, 140, 146–7, 161, 170, 175, 180, 181, 184, 188, 190–1, 202, 228, 248, 250–1, 263, 275, 288–9, 305, 312, 342, 365–6, 369, 377, 389, 397, 415, 428–30, 440, 464, 468, 469, 475, 482, 484, 486, 547, 549, 550–1 power, balance of 26, 83, 190, 534 power, disciplinary 106–8 power, organizational 468, 469 power distance 430, 433–4, 438, 441 Prahalad, C. K. 2, 3, 5, 291, 546–65 Prato 495 President’s Science Advisory Committee (PSAC) 341 prevention, appraisal and failure costs (PAF) 234 Prévoir, Organiser, Commander, Coordonner et Contrôler POCCC 53 prévoyance 58 price theory 260, 300, 417, 491 price-performance 555, 559, 560 prices 60, 62, 67, 129, 179, 199, 200, 204, 214–16, 246n, 250, 260, 300, 375, 417, 491, 492n, 502, 555, 559–60, 562 principles of organization 77, 117–18 principles of scientific management 14–29 private sector 18, 50, 292, 320, 339, 560 privatization 50, 280–1 problem-solving 80, 88, 89, 315, 319, 322, 328, 331, 341, 422 procedures 55, 61, 107, 114, 116, 203, 236, 369, 376, 389, 391, 393, 418, 455, 464, 467 process analysis 27, 188 process innovation 209, 560 process management 44, 54, 201, 205–8 Procter and Gamble 276 product quality 199–200, 208 production, ‘rule of thumb’ 21, 103, 116 production, lean 19, 23, 26–8 production, mass 15, 19, 23, 183, 208–9, 367, 369–71, 485, 502 production systems 116, 169, 177, 178, 179, 180–1, 188, 204, 211 productive resources 53–4, 56, 246, 248, 361–81

productivity 17, 23, 29, 95, 99, 102, 108, 114, 167, 171, 182, 184, 187, 199–202, 204, 209, 213–14, 231, 259–60, 274, 276, 278, 317–18, 340, 363–4, 366, 378, 390, 494–5, 500–1, 505, 512, 554 productivity, labour 259–60 professionalism 85, 88, 89, 107, 130, 134, 202, 366, 369, 396, 413, 422 profit 57, 58, 278 profit-sharing 57, 207 Profit Impact of Marketing Strategy (PIMS) 482, 484 Profound Knowledge 198–9, 206, 211–13, 225, 333 progressivism 35 project evaluation and review technique (PERT) 28 Prospect 181 Protestantism 35, 286, 288 Prussia 63 psychoanalysis 95, 156, 157–9, 160–5, 168, 169, 282 psychodynamics 164 psychology 38–9, 41–4, 77, 78, 86–8, 95–6, 100–1, 105–9, 125, 126, 136, 139, 140, 144, 147, 161, 165–6, 168–9, 171, 213, 262, 288, 301–2, 306–7, 309–10, 312–28, 331, 337, 338, 339, 388, 409–10, 412, 415, 422–3, 430, 434, 473, 534–5 psychology, industrial 41–3, 95–6, 100, 126, 161 psychology, organizational 107, 108, 535 psychology, social 77, 86–8, 108, 139, 147 public policy 139, 311, 339, 341, 361, 462 public relations 18, 95, 100, 468 public sector 18, 50, 54, 238, 300, 324, 397 Pugh, Derek 115, 385–7, 389, 392, 394–5, 399, 400–1 Pulitzer Prize 362 Purdue University 43, 44 Pye, Dorothea 300, 321

Quakers 11 qualitative analysis 209, 386, 395, 396, 397, 491

index quality control 27, 58, 198, 203–4, 208, 221, 223–5, 227–39, 391 quality definition 232–7 quality improvement 147n, 198, 204, 214, 227, 228, 230–2, 233, 234, 236, 237, 238–9 Quality Price Ratio (QPR) 216 quantitative analysis 29, 199, 202, 386, 395, 482, 483–4, 489, 491, 500, 506 questionnaires 55, 186, 428, 429–30, 433, 434 436–8, 440–1, 549 Quinn, James Brian 476 quotas 20–1, 26, 202, 204, 292

Radcliffe College 75 railways 23, 32, 37, 463 RAND Corporation 297, 299–304, 317, 319–22, 325, 327 Rathenau, Walter 127, 275, 282, 289, 290–1 Rathgeber, Holger 457 rational choice 298, 306, 316, 320, 326–7, 340, 418, 421, 424 rational man (RM) 298, 301, 302, 303–4, 305, 306–7, 310, 313, 314, 317, 318, 320, 326–7, 328, 331, 332–3, 335–7, 34–1 rationalism 22, 36, 129, 131, 302, 518 Rayner, Sir Derek 115 RCA 380 re-engineering 172, 209, 221, 230, 284, 454, 554, 556 record-keeping 57 recruitment 53, 57, 59, 68, 126 fig, 277 regulation 106–8, 139, 168, 190, 245, 378, 388, 419, 381, 497–8, 500, 530, 542, 549, 564 Reiley, Alan C. 121 relay assembly study 99, 102 remuneration 57, 58n, 64, 126 fig Renaissance, the 38 reporting 16, 119, 166, 463, 553–5, 547, 548 Repton School 113 research 4, 15, 22, 24, 50, 65, 68, 69–70, 74, 86, 88, 95–100, 103, 108–9, 118–19, 121, 124, 127, 155–62, 167, 169, 171, 176–7, 179–80, 181–3, 186, 188, 201, 203, 217, 226–7, 232, 253, 292, 294, 300, 303–4, 307–9, 314, 319–20, 323,

587

325–6, 329–30, 332–4, 336, 337, 338, 341, 365, 366, 371, 375–6, 380, 386–91, 393–401, 408, 410, 411–15, 418, 420–2, 424–5, 430–43, 448–52, 454, 459, 463–4, 470, 472, 489, 490–1, 512, 518, 520, 522–3, 527, 533, 535, 538, 541, 549, 551–2, 563 research and development (R&D) 182, 183, 193, 371, 485 resource–based view (RBV) 257, 258, 261, 262, 488n, 507, 551, 558 resources 24, 53–4, 56, 61, 109, 121, 122 fig, 143, 208–9, 210, 211, 214, 231, 237, 246–9, 253, 254, 256–7, 259–63, 278, 336, 361–81, 433, 453, 456, 464, 466–7, 502–3, 505, 507, 531–2, 536, 539, 546, 552, 554, 555, 558, 563 retailing 398, 488 reverse logistics management (RLM) 210 Ricardo, David 104, 491 Rice, Ken 156, 157, 159, 162, 164–5, 166, 167–8 Richard, Viscount Haldane 76 Richardson, G. B. 254, 256, 260 Rifkin, Jeffrey 11 rights 19, 90, 100, 107, 170, 186, 202, 287 risk 29, 66, 141, 277, 317, 378, 408, 424, 429, 433–4, 451, 455, 457 risk assessment 278 risk management 468, 530, 531 Robinson, Austin 247 Rocha, H 543 Rockefeller Foundation 95–6, 98, 105, 137n, 138n Rockefeller John D., Sr 289, 370 Rockefeller John D., Jr 95 Rockefeller Plan 95–6 Rodin, Robert 216 Roethlisberger, Fritz 97–8, 100, 104–5, 134n, 138, 139n, 142 Rogers, Carl 108 Romania 219, 240 Roosevelt, Franklin D. 18 Roosevelt, Theodore 76 Rostow, W. W. 372 Rowntree 114, 116, 124, 127, 129

588

index

Rowntree, Benjamin Seebohm 77–8, 114, 129 Rowntree conferences 114 Roxbury Debating Club 76 Roxbury League 76 Royal Doulton China 25 Royal Society of Canada 462 Rugman, Alan M. 532 Ruml, Beardsley 95, 101 Russia 19–20, 62

Saint-Simon, Henri de 51 Samsung 502–4, 507 Samuelson, Paul 491 Sapir, Eric 165 Sarah Lawrence College 275 Sarasohn, Homer M 207–8 Sawbuck, William 385–6, 417 Say, Jean–Baptiste 282 Schlesinger, Leonard 451–2 Schmalenbach, Eugen 496, 497n Schmidt case 15, 22 Schultz, Henry 301, 306, 317, 329 Schumpeter, Joseph 139, 259, 263, 273–4, 279, 282, 294, 363, 371, 464, 481, 497 scientific management (SM) 14–29, 97, 99, 107 Scotland 182, 183, 186, 391, 401 Scott, Richard 387, 388, 408, 422 Scott, William G. 135n, 140, 141 Scottish Council 182 Sears Roebuck & Co. 277, 370 Second World War 4, 43–4, 63, 98, 115, 416 security 104, 393, 563 selection 17, 23, 57, 117, 126 fig, 144, 158, 165, 303, 366, 390, 435, 438 self-actualization 27, 108, 109–10 self-improvement 202 self-interest 17, 90, 104, 142, 147n, 190, 451, 543 self-knowledge 288, 473 self-renewal 514, 515–17 Selznick, Philip 134, 387, 415 Senlis 62 sense of purpose 539 Servan-Schreiber, Jean-Jacques 21 shareholder value 207

shareholders 26, 49, 52, 62, 207, 261, 275, 281, 390, 553 Shaw, Cliff 322 Sheffield 495 Sheldon, Oliver 114, 116, 132 Shell Philosophy Project 169 Shell Refining (Shell UK) 162 Shewhart, Walter A. 135n, 197, 198, 206, 220 Shigeo Shingo 27 Shupe, Lola Elizabeth 197 Siemens 554 Silicon Valley 502 silo thought analysis 279 Simon, Herbert A. 1, 3, 4, 5, 27, 29, 116, 124, 134, 143, 297–342, 408, 409n, 410, 411–17, 419, 421, 424, 464 simplification 22, 37, 117, 122 fig, 213, 221, 238, 311, 312, 316–17, 320, 322, 336, 439, 537, 538 Singapore 491, 493, 501 Singer Sewing Machine 367 Sioux City, Iowa 197 situation, law of the 81–3, 87, 89, 91 skills 12, 22, 88, 98, 142, 183, 211, 252, 284, 300, 304, 363, 366, 370–1, 373, 374, 467, 468–9, 476, 491, 519, 532, 547, 551, 552, 555, 559, 563–4 Sloan, Alfred P. 285, 290, 370, 464 Sloan Foundation 138n Sloan School of Management 463, 528 Smith, Adam 3, 22, 257, 259, 274, 282, 500n social anthropology 147, 168 social contract 106 social integration 166 Social Science Research Council (SSRC) 411 socialism 101, 139, 279, 287–8, 289, 363 society 3, 75, 77, 81, 85–90, 94, 97–9, 104, 106–8, 135, 141, 156, 185, 206, 223, 238, 242, 259, 272–6, 281, 282–4, 286–90, 294, 300, 303, 307, 311, 341, 389, 390, 399, 428–9, 440, 457, 498, 521, 560, 562 Society-organization-group-individual approach (SOGI) 390, 399 socio-technical systems (STS) 88, 156, 157, 159, 160, 165–6, 167, 168, 169, 171, 388

index sociology 60, 105, 134, 136, 147, 169, 187, 189, 300, 302, 307, 316, 362, 387, 395, 415, 421, 423, 486 sociology, industrial 187, 387 soldiering 13 Solingen 495 Sony Corporation 23 South East Essex Technical College 176–7, 178, 387 Soviet Union 20 Special Economic Zones 495 specialization 36, 56, 58, 107, 115, 120, 122 fig, 123, 166, 177, 181, 183, 202, 209, 260, 279, 280, 366, 368, 369, 373, 391, 393, 395, 429, 464, 492, 500n, 504, 536 Speer, Albert 21–2 Spender, J .C. 481n stability 57, 99, 189n, 229, 274, 332, 334, 367, 482, 484, 515 Stahl, Frederich Julius 273 stakeholders 90, 108, 313, 388, 454, 458 Stakhanov system 20 Stalin, Josef 20 Stalker, George 175, 182–3, 187, 386 standard operating procedures 23, 418 Standard and Poor 362 Standard Oil Company 97, 250, 367, 370 standardization 14, 19, 21–2, 23, 27, 29, 117, 122 fig, 144, 180–1, 182–3, 203, 236, 391, 393, 395, 429, 468–9 Stanford University 319, 409n, 413, 421, 423, 452 state, role of the 19, 252, 264 statistical quality control (SQC) 223, 227–8, 233, 234, 237 statistics 22, 25, 58, 126 fig, 137, 197–8, 199, 213, 221, 223, 225, 242, 315, 410, 412, 417, 420, 436 Statue of Liberty 220 Sellers, William 13 Stern Business School 386 Stern, Scott 496 Steuben Glass 25 stewardship 134, 135, 536 Stoll, C. G. 221 Storing, Herbert J. 324, 325, 327 strategic analysis 448, 490 strategic business units (SBU) 556, 558

589

strategic groups 482, 483, 484–6 strategic human resource management (SHRM) 245, 257, 258 Strategic Planning Institute 482 strategy 5, 29, 59,53, 66, 69–70, 140, 157, 170–1, 200, 205, 206, 220, 226, 231, 237, 245, 257–61, 263, 279, 303, 305–6, 313, 363, 364–6, 368–81, 388, 393, 395–400, 420, 438, 451–3, 455, 456, 458–9, 462–3, 468, 470–7, 480–507, 512–15, 518–21, 523, 528–32, 535, 537, 538–9, 542, 546–61, 562, 565 strategy, business 245, 261, 263, 364–5, 399, 472, 514, 542 strategy, corporate 369, 484, 513, 524, 542 strategy, emergent 5, 470–3, 476 strategy, global 529–31, 546–7, 549 strategy, military 476 strategy, organizational 170–1, 365, 400 strikes 19, 21, 62, 101 Strodtbeck, Fred 410 Structural adaptation too regain fit (SARFT) 399 Structural-functionalism 189n, 362, 415 structuration 79 structure, organizational 118–19, 155, 170, 178, 187, 323, 364, 365, 385, 386, 388–9, 391, 392–3, 396, 397, 398, 419, 441–2, 455, 467, 468–70, 518, 535, 546, 557, 564–5 structure-conduct–performance (SCP) 482, 489, 496–7, 500, 503 sub-goals 301, 310 Sun Tzu 2 supervision 16, 99, 102–3, 106, 123, 124, 166, 169–70, 177, 201–2, 220–1, 226, 393, 401, 467, 468–9 Sussman, Herbert 22 sustainability 488n, 498, 564–5 Swaminathan 485 Sweden 28, 170, 398n, 491 Swiss Re 528 Switzerland 428, 491 system, bricklaying 34, 35 system, control 178–9, 180, 188, 190, 325, 547

590

index

system, design 156–7, 159, 160, 165–71 system, field 34 system, mechanistic 3, 136, 183–4, 205, 334 system, open 168–9, 432 systems theory 157, 159, 159 systems thinking 136, 157, 159, 521

Tabor Manufacturing 18 Taiwan 430, 486, 493, 501 Takeuchi, Hirotaka 365, 512, 515, 517, 520, 522 tasks, non–discretionary 25–6, 27 Tavistock Clinic 156, 160, 163, 165–6 Tavistock Institute of Human Relations (TIHR) 155, 157, 158 taxation 288 Taylor, Donald 422 Taylor, Frederick Winslow 1–3, 5, 11–29, 35–41, 44, 52, 59, 62, 65–7, 69, 100, 113, 115, 116, 121, 125, 127, 129, 131, 134n, 136, 165, 177, 187, 282, 285, 314, 415, 468, 471 Taylor Society 23, 37, 40, 44, 78 Taylorism 16–29, 35–8, 40–1, 44, 65, 67, 99–101, 106–7, 156, 225, 314 Tead, Ordway 100 teamwork 84, 88, 89, 166, 201, 203, 260, 280, 457 technical systems 177–9 technology 23, 36, 53–4, 97, 165–6, 168, 175, 179–91, 198, 205, 216, 227, 235, 249, 251, 254, 262, 263, 364, 370, 376, 381, 424, 430, 432, 442, 464, 468, 497, 503–4, 512, 556, 559, 562, 563–4 technology, operational 390–4 Tedlow, Richard 362 Teisberg, Elizabeth Oldsted 498 telecommunications 135, 198, 559 telegraph 50, 367 telephone 36, 50, 137–8, 175, 367 Textron 379 theory, Darwinian 470, 476 theory, equilibrium 256, 335, 503 theory, Freudian 302, 422 theory, institutional 134, 306, 319, 338, 387, 409n

theory, leadership 339 Therbligs 37, 43 Third Reich 21 Thompson, J. D. 386 Thorndike, Edward 38 Thorsrud, Einar 166, 169 Three-dimensional model of management 3, 4 fig time and motion study 27, 44 time studies 13, 14–15, 18, 23, 27, 28, 40, 41, 43 Time Orientation 430 Tokyo 40, 217, 223, 511, 512 Tonge, Fred 412 Tonn, Joan 74, 78, 83 Top-down control 89, 516, 519, 532 total quality management (TQM) 203, 225–6 Towne, Harry 18 Towne, Henry Robinson 18 Toyoda, Kiichiro 23 Toyota 23, 25, 27–8, 200, 214–15, 225 Toyota Production System (TPS) 23–4, 27 trade, international 253, 491–2, 494 trade–offs 199, 201, 214, 216, 335, 400, 481, 538, 546, 551, 553–5 trades unions 19, 20, 22–3, 41, 138, 157, 167, 170, 176n, 389, 390, 391, 394, 396–7 Trades Union Congress 23 Traindis, Harry C 435–6, 442 transaction cost economics (TCE) 337 transaction costs 257, 258, 260–1, 335, 337, 341, 412, 418, 500, 505, 539 transactions costs economics 335, 337, 341, 412, 418, 539 transnational corporations (TNC) 529, 531–3, 537 transport 89, 440, 442, 488 transvection 489, 503, 506 trial and error 12, 238, 422 Tribus, Myron 203, 204, 205–7 Trist, Eric 109, 155–60, 162–3, 165–7, 169–71 Trotsky, Leo 20 Trueblood, Robert 419 trust 90, 200–1, 232, 287, 430, 451, 516, 517–18, 536, 540 Turing, Alan 304, 316, 322, 325, 329

index Tversky, Amos 316, 323 Twentieth Century Fund 114 Tyson, Laura 528

Ueno, Yoichi 40 uncertainty 143, 171, 178, 186, 246, 256, 259, 274, 311, 326, 330, 331, 335, 337, 341, 392, 397, 420, 421, 424, 429, 433–4, 438, 440, 441 uncertainty avoidance 311, 429, 433, 434, 438, 440, 441 uniformity 117, 122 fig, 429, 437 Unilever 165 Union of Japanese Scientists and Engineers (JUSE) 198, 217, 223–4, 225, 236, 241 United Nations Atomic Energy Committee 138n United Nations Conference on Trade and Development (UNCTAD) 250 United Services Organization (USO) 137n, 143 United States of America 242 unity of command 20, 56, 66 universalism 308, 430–1 University of Alberta 385, 397, 399 University of Birmingham 385, 389 University of Bristol 181 University of California, Berkeley 413 University of California, Irvine 407, 421–2 University of California 32, 34, 39, 407, 511, 512–13, 523–4 University of Chicago 98, 298, 299 University of Colorado 197 University of Edinburgh 181, 388 University of Hong Kong 427 University of Liverpool 175 University of Maastricht 427 University of Mannheim 397 University of Minnesota 220, 223, 416 University of Oxford 175 University of Queenland 94 University of St Andrews 165 University of Wisconsin 409 University of Wyoming 197 Urwick, Beatrice 115 Urwick, Lyndall Fownes 2, 4, 19, 65, 74n, 75, 76–8, 113–32, 291, 415, 466

591

Urwick, Orr & Partners 114–15, 128, 130 US Centre for Medicare and Medicaid Services 28–9 US Steel 97 utility 99, 117, 122 fig, 171, 199, 200, 306, 307, 316, 320, 388, 420, 421, 438, 503

value 75, 78, 186, 210–12, 214, 215–16, 236, 245, 259, 263, 274, 276, 279, 291, 304, 307, 310–13, 321, 324, 338, 340, 378–9, 398, 400, 428, 430, 439, 487–8, 498, 505, 507, 559, 561–5 value capture 263 value chain 233, 234–5, 480, 483, 487–90, 492, 496, 500–6, 530, 564–5 value creation 245, 538–40, 562–4 values 15–16, 29, 34–5, 51, 79, 86, 106, 108, 171, 188, 202, 206, 207, 212, 262, 304–5, 307, 310, 311–14, 318, 321, 324, 326–8, 339–40, 378, 394, 428–9, 431, 435–6, 438, 439, 441–3, 457, 468, 519, 521, 528–9, 534, 536, 537, 539, 543 van der Linde, Claas 481n, 497, 500 Van Kleeck, Mary 100 variance 211, 215, 395, 496–7 Veblen, Thorstein 313, 335 Venice 494 Ventresca, Marc 385n Verbeke, Alain 244 Verdun, battle of 63 verification 53, 54, 55, 56, 57, 66, 332, 442, 496 vertical integration 84, 183, 248, 310, 368, 369, 482, 500n, 549 Vickers, Geoffrey 521 Vico, Giambattista 333 Vienna 271–2, 294 vision 75, 89, 206, 212, 262, 278, 284, 291, 294, 319, 414, 423, 455–6, 459, 475, 505, 506, 518–19, 521, 551 volunteers 137n, 143, 284 Volvo 28 von Bertalanffy 157, 159, 168, 169 von Neumann, John 316, 322, 327, 329, 412 Vroom, Victor 108

592

index

Waldo, Dwight 309–10, 316, 324–5, 327, 328, 338 Wall Street 272 Wall Street Crash 272 Warner, Lloyd 98 Waseda University 223, 511, 521, 523 waste reduction 42, 204, 207, 211, 214, 221, 227–8, 231, 232–3, 237 Waterbeach 254, 258 Waterford Glass 25 Watertown Arsenal 18 Watson, Thomas J. Jr 286, 330, 335 wealth creation 78, 259–60, 378, 438, 498 Webb, Beatrice 96 Weber, Max 82, 115–16, 156, 187, 272, 310, 319, 329, 339, 362, 386–7, 389, 391, 395, 396, 399–400, 436, 535–6 Weick, Karl E. 338 Welch, Jack 291 welfare 96, 107, 126 fig, 147, 171, 181, 186, 191, 206, 239, 246, 288, 289, 393, 499 West Germany 398n West Midland Group on Post–war Reconstruction and Planning 181 Western Electric Company 96–100, 104–5, 128, 135n, 220, 221, 371 Westinghouse 371 Wharton School 94–5, 96, 101, 319, 413 White, Maunsel 65 Whitehead, Alfred North 139 Whitehead, Lorne 458–9 Whitehead, Thomas North 97, 98, 119 Williamson, Oliver E. 134, 255–6, 258, 310, 408n, 417 Williams,Whitling 100 Wilson, Harold 186

Wilson, Sir Horace 114–15 Wilson, Tommy 156–7, 158, 165 Winona, Michigan 416 Winter, Sidney 310, 313, 418 Witte, Irene 40 Wolf, William 128, 142n Women’s Municipal League of Boston 76 Woodward, Joan 174–91, 387, 388, 393 work intensity 25 Work Organization Research Centre 398n workable society 272, 273, 276, 294 working conditions 102, 165, 283 World Economic Conference 129 World Economic Forum (WEF) 493, 494, 495 Wren, Daniel 2, 100, 115, 134n, 139n

Xenophon 286–7 Xerox Corporation 210, 513, 553

Yale & Towne 18 Yale University 197 Yang Xingfo 24 Yasukawa Electric 23 Yokohama 23 Yost, Edna 43 Young, Allyn 260 Young, Arthur H. 96–7

Zalezn ik, Abraham 422 Zeiss, Carl 40 zero defects 202, 234 Zimmerman, Heinz 290