In this article Sumantra Ghoshal takes an in-depth look at how some of the management theories that have developed over the years have had a negative effect on our business culture. He states that business schools have been a major part of creating situations like Enron, simply because some of these destructive theories have gained a lot of their momentum in the classrooms. Ghoshal believes that business schools have taught their students that managers cannot be trusted because their interests are directly in line with those of the shareholders, that monitoring and tightly controlling people is the best way to run an organization from a cost standpoint, and that companies must not only compete with their competitors but with their suppliers, customers, employees, and regulators as well. Overall, Ghoshal believes that academic research related to the conduct of business and management has had some very significant and negative influences on the practice of management, and that business schools, specifically, have freed their students from any sense of moral responsibility. The article focuses on two major causes for this phenomenon: the pretense of knowledge and the ideology-based gloomy vision.
The pretense of knowledge is the scientific approach of trying to discover patterns and laws that has replaced all notions of human intentions with a firm belief that past occurrences can explain all aspects of corporate performance. Basically, what this means is that business is a science that is determined by the economic, social, and psychological laws that inevitably shape people’s actions. Ghoshal argues that this trend takes away any ethical or moral debates that may arise when a decision has to be made. This specifically relates decisions made by CEOs. They sometimes have to make decisions simply to satisfy the shareholders and do not care about the plight of the other stakeholders involved. He believes that business should not be treated as a science and that we should use more common sense that combines information on “what is” with the imagination of “what ought to be” to develop an understanding of what corporate governance and decision-making represents.
The ideology-based gloomy vision concept comes from the theory that there is a pessimistic view of human nature, on the roles of companies in society, and of the processes of corporate adaptation and change. Some of the most influential theories of business and management have these negative assumptions embedded in them and often times prevent managers from having a more positive role in society. This pessimism, Ghoshal believes, has led directly to destructive management behavior.
In order to turn this situation around the author believes that collegiate leaders need to spearhead the operation. Business schools have taught this way for years and it is now time for a change. All classes need to be restructured and focus more on the business as a whole and the ethics behind it all. One class in corporate responsibility will not make a change in the academic and business community; it has to be a complete refocus of the entirely curriculum.
This article was very difficult for me to follow mostly because some of the author’s ideas are brand new to me and are based on theory and science and I have never looked at the business world from that angle. He raises some interesting points about employees and other stakeholders not being as valued as shareholders and that many leaders feel so much pressure to please the shareholders that lose their morality when making decisions. This piece would be much easier to understand if there was less science related jargon, and more information that can easily be read and absorbed by anyone.