Why we need to re-think leadership/management in the ongoing crisis of investment capitalism

The vast majority of textbooks, business school programs and research projects around the world, most professional management and leadership development programs in organizations, most management consultants and people in organization, including senior executives, all talk about how organizations should be governed, all making the same taken-for-granted assumptions. There is a dominant discourse in which it is assumed, without much questioning, that small groups of powerful executives are able to choose the ‘direction’ that their organization will move in, realize a ‘vision’ for it, create the conditions in which its members will be innovative and entrepreneurial, and select the ‘structures’ and ‘conditions’ which will enable them to be in control and so ensure success. The problem is that to be at all effective these activities rely to a significant extent upon the ability of powerful executives to know enough about what has been, is now and will be happening around them. Executives are supposed to know what is going on because they are supposed to be avoiding emotion and personal politicking so that they can make roughly rational decisions on the basis of the ‘facts’. If they cannot do this then, on the basis of dominant thinking, they must simply be pursuing only their own interests and gambling with society’s resources.

However, recent and current economic developments are making it clear that executives of large corporations and their management consultants, as well as politicians and their advisors, are far from sure of what has been happening and they simply do not know what is now happening, let alone what will happen in the future as a consequence of the actions they are taking. The contrast between the dominant thinking and our experience is striking. While people and their ongoing messy daily political interaction are absent in the dominant discourse, or feature simply as obstacles, they are the central aspect of our experience. In the dominant discourse uncertainty plays a very minor role and leaders know what is going on; in our experience, neither leaders nor anyone else really knows what is going on and few pay much attention to what they could know about, namely, what they are actually doing to live in uncertainty. In thinking in the dominant way, we are covering over the complexity and uncertainty we actually experience in our ordinary, everyday lives in organizations and we are positing capacities of foresight in leaders which they do not actually possess.

The story of the last few years must surely raise questions about the validity of the dominant discourse. Not only is there a huge volume of research on how to lead and manage, there is a large population of senior executives educated by business schools who disseminate the research and are advised by enormous numbers of management consultants, all mostly reinforcing the dominant discourse. How could the events of the past few years have occurred if this dominant discourse, backed by enormous research and expert consulting activities reflected organizational reality? What happened to the rational decision making supposed to lead to success that this discourse prescribes? Were executives making irrational decisions or were they making rational decisions but the dynamics of the world economy were so unusual that the decisions did not produce what was hoped for? Either way it is clear that executives could not choose what happened to their organization. How are we to explain this? How are we to explain the dynamics of the economy that make it impossible for managers to know what is happening? Some might argue that the present ‘debacle’ is an unusual sequence of events, a crisis executives could not have been expected to deal with because they were caught in complex dynamics of world markets, but once the crisis is past, organizations can continue to be managed in ways prescribed in the dominant discourse. However, what is the evidence that dominant management prescriptions have been working before the obvious ‘failure’ of the past three or so years? Then, what are we to make of the claim that the dominant discourse about organizations and their management is based on science – organization science and management science? Fundamental to the scientific method is the subjection of hypotheses about some phenomena to empirical testing. Science is science because it is based on evidence. So an organization and management science can only be such if there is a reliable evidence base for its propositions and prescriptions. However, a review of the literature reveals that there is no coherent, comprehensive body of evidence that could genuinely be called scientific.

But despite not being able to know what the outcomes of actions will be as required by the prescriptions of the dominant discourse for choosing the ‘big picture’ over ‘the long term’, executives and others doing their jobs in organizations are, nevertheless, sustaining some kind of stability and change, producing growth and decline while generating all manner of technological innovations. If none of them know enough to choose outcomes as prescribed then how are they doing all this?  It becomes a question of importance to ask what it is that they, and the rest of us, are all actually doing which the dominant discourse is making us rationally blind to.

What I think is required to move away from the magico-mythical thinking, dressed up in the rational sounding jargon of the dominant management discourse, is an approach to thinking about our lives in organizations in a way that involves taking our ordinary, everyday experience seriously. Taking seriously one’s experience of what one is actually doing in local interactions with others, taking seriously our interdependence, leads to very different views on what is practical. Taking this route we come to see that there are no mysterious social forces acting upon us, no abstract cultures that visionary leaders can move around at will. Instead we see how we are taking up global patterns in our local interactions, so reproducing and potentially transforming those global patterns.

If your experience resonates with these questions you might be interested in joining a Complexity and Management Conference of the Business School of Hertfordshire University from the 4th to the 6th June 2010. Mats Alvesson from Lund University will be one of the speakers.

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4 thoughts on “Why we need to re-think leadership/management in the ongoing crisis of investment capitalism

  1. Hank Sohota

    If we accept that the need for and use of this magico-mythical ideology has co-evolved with the ideology itself then, in order to understand its persistence we have to look at the pay-off for those perpetuating it.

    I agree with Stacey when he points out in his latest publication that the fundamental pay-off is one of credibility for managers, politicians, consultants and business schools alike. Credibility in the eyes of either (the metaphorical or real) purse-string holders or the speculative economy. No-one is going to invest in an entity that as a minimum is not convinced about its ability to identify and manage risks. The fact that this conviction may be based on an illusion does not seem to matter. Perhaps because once some people make at least a short term profit from it then no one wants to miss out. It then has the potential to take on a momentum of its own until it eventually comes crashing down.

    Add to this Enteman’s managerialism of the executive and political classes and we have a powerful dynamic working for the preservation of this ideology. It is not therefore surprising that an alternative such as CRP finds little traction among these classes even when broadly based experience brings it into question.

    It seems to me that CRP is most likely to find traction in domains that are based on an entirely different dynamic, one where our capacities and capabilities as human beings (producing both positive and negative but unknowable outcomes) are central. In other words, domains in which human wellbeing (in its broadest sense) and environmental sustainability are more than marketing ploys or campaign slogans. And where ‘our ordinary everyday experience is taken seriously’.

    Reply
    1. Chris Mowles

      Of course risk, in the finance world, is not necessarily a bad thing, since the bigger the risk the bigger the financial reward. However, it is illusory to think that it is possible to design financial instruments which manage away risk entirely, which is what seems to have happened in some of the investment banks, where some of the bankers seem to have convinced themselves, al la Enron, that they were ‘the smartest guys in the room’.
      Chris

      Reply
  2. Greg Fisher

    Ralph & co, thank you for developing this blog. I hope it evolves in to a constructive forum for the discussion of critically important matters. The following are the thoughts of a practitioner who has worked in the belly of the beast (the City) but who is familiar with Ralph’s work.

    Ralph Stacey’s emphasis on the teleological weaknesses of the dominant discourse in the management “science” literature is useful to those of us who work in the financial sector because orthodox economics and finance appear to suffer from the same fundamental failings.

    Neoclassical economics is based on partial and general equilibrium models that resemble formative teleology (they assume a tendency to a single-point equilibrium). Within finance, Modern Portfolio Theory frames things similarly, with the assumption that uncertainty and risk can be reduced to a knowable future distribution. The justification for these models strikes me as being based on reductionism (cf Kauffman) and an attempt to identify fundamental laws in an ergodic system (cf Douglass North) via Newtonian mechanics; whereas in fact they are over-simplified, linear abstractions.

    To borrow a computing metaphor, I would argue that the implosion of investment capitalism is also about the “software” being used by all levels of management, as well as the nature of relating and management in financial firms. Clearly, the two are not unconnected. The management of trillions of dollars of financial assets is done under the umbrella of Modern Portfolio Theory, “Value At Risk” risk management tools, free market fundamentalism (cf Stiglitz), and a broad acceptance that the Efficient Markets Hypothesis is true.

    More broadly, it strikes me that the teleological frameworks Ralph et al have described map on to the metaphorical framings that social scientists, including management scientists and economists, have used to make sense of social systems. They also provide the desirable illusion of control. In effect, these frames are highly abstract patterns, discretely embedded in a lot of social science theories that have been instrumental in designing many of the institutions and methods we see about us. They also inform the design of foreign policy e.g. linear thinking in the International Relations literature leads many Western governments to the view that pre-modern states will evolve in to liberal, Western democracies. This type of thinking has not been totally useless but they have proven to be inadequate in the (whole) system in which we now live.

    The empirical evidence is undeniable, intellectually, which ought to lead us (Popper-like) through a Kuhnian revolution (cf Kuhn’s “The Structure of Scientific Revolutions”) across multiple social science disciplines. But “ought” and “will” are different words. Many social scientists (economists in particular) have shown a propensity to ignore empirical evidence in favour of ideas and theories they prefer to believe. The ultimate paradox in all of this is the contrast between global social complexity and our capacity to understand it. Understanding complexity, including Ralph’s CRP framework, can help to bridge that gap but it is a paradox that is not possible to transcend entirely.

    Reply
  3. Chris Mowles

    A very interesting post, Greg, thanks. Not just ‘ought’ and ‘will’ but ‘ought’ and ‘is’. Ralph is making the argument that by paying attention to what is happening we might call into question the assumptions of the dominant discourse.
    Chris

    Reply

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