Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance - Economic Controversies [Paperback]

We all know that in the last 30 years or so that the rich have got richer and the poor have borrowed. We know too that manufacturing in the US and the UK has drastically declined over this same period and that we are in the midst of an economic crisis the likes of which has not been seen since the 1930s. It is clearly the case that the neoliberal economic model is a major contributor to the current woes. But what has sustained this model even in the face of growing evidence that it not only wrecks societies but does not even live up to its own pronouncements? In this book, Locke and Spender go a long way to providing answers. And those answers in turn point to alternatives.

'Managerialism', suggest the authors, really got going after World War 2. 'Operational Research' was developed during the war as a way of:

'solv[ing] unprecedented strategic planning, logistics, and operational problems that could not be dealt with by the methods governments and military bureaucrats had hitherto employed. Operational Research (OR) projects drew on statistical and mathematically informed techniques...that were particularly suitable to maximising efficiency in large-scale military operations.' (P11)

Such statistical analysis and mathematical modelling clearly has a role to play in manufacturing, particularly in, for example, the car industry. It developed as a management tool. But during its development it 'morphed' into 'managerialism':

'Managerialism as opposed to management means "a vast array of customs, interests, prestige, actions, and thought" associated with but nonetheless transcending the need for the efficient running of commercial and industrial organisations.' (P18)

This move from 'management' to 'managerialism' led to the formation of a self-interested 'management caste' that became increasingly detached from the actual businesses of the enterprises that they supposedly managed. At the same time, the use of mathematical modelling, statistical analysis and other 'scientific' tools made management into an academic discipline which in turn enhanced the status of the management caste. The management caste thus became increasingly detached from the actual businesses of the companies they ran.

Meanwhile, Milton Friedman was further developing neoliberal economic theory. Hayek's original idea that competition would safeguard individual liberty and consumer choice was replaced by, as Colin Crouch put it in his recent book,:

'the dominance of giant corporations and the replacement of the demotic idea of consumer choice by a paternalistic concern for 'consumer welfare'' (P16-17 'The Strange Non-Death of Neo-Liberalism.')

This effectively legitimises the 'Greed is Good' credo of the 1980s. The managerial caste is freed of any social responsibility as the pure pursuit of profit will, like the incoming tide, 'raise all boats'. Of course, it does no such thing.

It turns out that the managerial caste is not even particularly entrepreneurial. They had, for example, no hand in the development of Silicon Valley, which was largely based on technologies developed during and because of the Cold War.

And then there is the example of the US car industry. A classic top-down management structure that simply could not cope with the Japanese incursion. The Japanese management philosophy is fundamentally different. While General Motors' philosophy might be summarised as 'We don't make cars, we make money' (Alfred P Sloan, Jr., President of GM 1923-37, quoted on P112), the Japanese were intent on making the best cars for the money that they could. 'Total Quality Management' (TQM), the 'Toyota Production System' (TPS) demanded that the companies be run by people who actually knew about making cars. Instead of an insulated, 'scientific' and academic management divorced from the actual business product, here the business IS the product. Reminiscent, perhaps in more ways than one, of 'Zen and the Art of Motorcycle Maintenance'.

The Germans were also threatened by the burgeoning Japanese car industry. But their response emphasises yet again the failure of managerialism. Whereas the US/UK management model is, as has already been indicated, 'top-down' or pyramidal (with more or less inevitable conflict between management and workers), the Germans put in place 'Codetermination' laws:

'Codetermination laws legally entwined employee representatives and management in German firms, and after a two-decade educational effort homogenised behaviour and knowledge. In the US, management not only excludes labour from a firm's governance but the two groups constitute distinct cultures in American life.' (P129)

Still, managerialism was not dead yet. It really got going when it moved into the financial sector. Here, reliance on mathematical modelling and the amoral disregard for the material realities of this 'meta-business' (i.e. the business of business) were, indeed are, at their clearest. Rampant short-termism, the determination to keep the share price as high as possible, even at the cost of future R&D and company pension funds, has nothing to do with developing sustainable businesses that benefit all stakeholders. Quantitative analysts, or 'quants', developed the exotic, and fundamentally flawed, financial instruments that finally led to the current malaise. It seems now, looking back, to be an inevitable outcome of the rise of the management caste. And it's not over yet.

Finally, the authors put forward some suggestions for the future. As they rightly point out, we have been threatened and blackmailed for too long by T.I.N.A. - neoliberal capitalism has been compared to a failed socialism and we have been repeatedly told that There Is No Alternative. We've been here before. From Dani Rodrik's suggestion that governments finally exert some control, to Colin Crouch's support for extra-governmental pressure groups and Jeffrey Sach's faith in the Millennium Generation, we've seen a range of proposals. But Locke's and Spender's are different again.

'Management...has been and is far too important to be left to business schools or a management caste, especially since in America they both have renounced any sense of responsibility towards the life of the community or towards promoting the sustainability of the firm on whose existence the community depends.' (P184)

The authors recognise that the management caste is not going to give up its privileges easily and that '[n]ot much reform can be expected either from the political side of the American ledger' (P188), which tallies exactly with Jeffrey Sach's analysis. The choice is not simply between neoliberalism and socialism - that is a false and misleading dichotomy. Instead the challenge, the authors suggest, is to develop 'an internationally regulated form of dynamic capitalism in which firms are more efficient because of participative management, and the markets function better because of a more equitable distribution of wealth in society.' (P192)

A very interesting and rewarding read.

First things first - I agree with the general thrust of the authors of this book - namely that what they call managerialism (a special management caste, short termism, exclusive focus on shareholder value...) presents a real challenge and a problem of the later part of the 20th and early 21st century and that management education is to blame in many cases. They also cannot be blamed for putting too little time into researching the subject, even if the focus was not always as sharp as could be desired. Unfortunately the reliance on secondary sources and a lack of own experience prevented the authors from making the book more relevant.

The US style managerialism and the business school education that both supports it ideologically, as well as feeding countless practitioners / members into it, is confronted throughout the book with the Japanese and German approaches, which in the author's opinion resisted the wholesale takeover of the running of companies by 'managerialist' managers.

The authors blame a combination of neoclassical economics, mathematical modelling and an eroding focus on ethics (all three from the education stage on) for many of the failures of the American economy and many of its sectors and use the German and Japanese examples to define a counterproposal, since both of these approaches have successfully persisted in spite of 'doom and gloom' predictions of the more neoclassically trained Anglosaxon commentators.

So far so good. Where the book started unravelling for me was in the chapter on automotive industry. Having had lots of first hand exposure to the sector, from an academic, and consulting perspective and last but not least from working within it (with companies very much from one of the praised cultures) many of the arguments used are somewhat naive, or at the very least hopelessly out of date. Unfortunately this section - in spite of fairly radical changes taking place in the last 10 years or so hardly uses sources from this millenium and talks about a world that does not exist in the form described anymore.

I was also somewhat disappointed with the equivalent section on the financial services industry, having read many much more thorough and insightful analyses (some of which the authors even quote) on the causes of the upheavals there.

Sadly there is often missing attention to detail, with incorrect sums, poorly formated tables (at least in the Kindle edition), an imperfect understanding of the role and use of OR, etc. The book's organization also suffers in places, at times appearing to be a product of previous work being merged into a not so coherent whole.

In spite of all this quite some of the main statements are sound leading to the 3 star rating. Having said that, there are much better books on the subject, such as Matthew Stewart's The Management Myth: Why the Experts Keep Getting it Wrong or Kim Warren's The Trouble with Strategy both coming from authors combining rich first hand experience of the sector with an equally strong academic rigour.

This is the best - and by far most profound - business book I've read this year. In fact, for many a year. Amidst all the finger pointing at bankers and politicians that has taken place following the global crisis, no one - until now - has gone to the source: and no it's not Wall Street. Wall Street boardrooms are the end point, where those trained and some might say brainwashed into believing greed is good (for them) ended up.

Where they came from, how they go there - worse - how they came to believe in the math based cult of managerialism in the first place that got us all into this mess - is the real problem here. And that source, as this book brilliantly exposes with an almost thriller like pace, can be traced back to the post WW2 rise of a handful of `elite' US business schools and their legions of morally bankrupt MBA students, on whose collective and some would rightly argue corrupt watch the blame now shifts.

Of course, I do the book a great disservice here. The case Locke and Spender make is much richer than I can report in a review. The book looks globally, focusing on the impact of MBA education in Silicon Valley and the US automobile industry for example, while at the same time shedding light on the global political, historical and educational developments in South America and China and Europe that have also had to counter and deal with the US (and UK) banking system and the `managerialist' export that came bubble wrapped around it. In doing so, it challenges us to radically rethink the options available and the kind of educational system we want to create. If comparisons have recently been made in the UK between the morality, or lack of, of bankers, politicians and vandals, one could say going to the source, where their values and sense of community were eroded might not be a bad thing.

Like I said, this book is both a fascinating and fast paced ride. But it also teaches you something. It offers answers and ways forward out of this mess. I for one hope those answers are taught early enough for the next generation not to make the same mistakes.