The Rise and Fall of Management

A Brief History of Practice, Theory and Context

Gordon Pearson

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780566089763
• eBook ISBN: 9781317017646
• Topic: Business
• Subtopic: Business General
• Index: Business

Insight into today's economic and financial problems comes, in this revealing book, from an understanding of how and why the practice and the teaching of management has developed as it has. Gordon Pearson, who has spent equal parts of his long career as a practising manager and a management educator, clarifies through rigorous historical review the difficult issues around management with which we struggle today, such as why management custom and practice so often lead to contravention of the law. Pearson reviews how management became a practice and body of understanding, the development of its crucial role in economic progress, and then how its corruption came about as a result of malign theory, leading to the dominance of the bonus payment culture and short term deal-making that plague us today. Understanding management's past, suggests Pearson, will help its improvement for the future. Contributing to that understanding, this challenging book sheds light on how management might be renewed and on the benign role it could play if freed from the restraints of inappropriate economic theory. This book is not just a history or a sociological analysis of management. It gives a broad, practically informed, critical view of the subject that will be welcomed by any reader with a professional or an academic interest in practice, theory, and context.

PART I
The Emergence of Management

The full history of the skills and competencies which later became known as management may have started back in 5000 BC with the Sumerian temple priests, whose tax system involved the amassing of worldly goods for which records had to be maintained; or in 4000 BC with the building of the pyramids, which must clearly have involved some understanding of organization among the Egyptians. Evidence on Moses suggests the Hebrews had some management awareness around 1500 BC and similarly, so did the Chinese from 1100 BC. And there are well-documented military antecedents from the fourth century BC in both Greece and China, with references now included in the modern literature. Since then the literature of pre-industrial management relates almost exclusively to the military and to the management of the sovereign state, with some limited references to the organization of the Christian church and overseas trading monopolies. These sources may be of some academic interest, but the history of management as it is now understood really starts with the creation of an economic surplus and the subsequent introduction of industrial manufacturing in eighteenth-century England.

This opening part is concerned with that first revolutionary century of practice and its reflection in the economic theory expounded by Adam Smith and others. It sees the decisions, processes and responsibilities now associated with management starting to emerge first in the new agriculture and pre-industrial businesses and subsequently in the development of the first transportation infrastructure, the canals and turnpike roads, and only then in the process of industrialization itself.

Smith recognized the revolutionary changes that might be enabled by the cost reductions that could be achieved by the division of labour into specialized tasks. Such reduced costs would bring what were previously luxury commodities within the reach of a far greater number. Thus a virtuous cycle could be established which was limited only by the size of markets. He therefore argued against the old protectionist systems of trade and commerce which limited the size of markets; all such government intervention could only inhibit economic growth.

Industrialization, based on the division of labour and the accumulation and investment of capital, resulted in an explosion of industrial factory building and the creation of whole new urban populations. It changed everything both for the better and for the worse. It created great wealth and great misery. It supported an explosion in population and established an unprecedented and ever expanding level of consumption simultaneously with the creation of an underclass of paupers and workers who from time to time became the unemployed as the economy progressed through booms and slumps.

Smith did not live to see the poverty and disease of the new industrial towns. It was left to his successors to observe such inequity and consider ways to organize better the industrial system of economics and governance. Some suggested the misery had to be accepted if the increase in wealth was to be achieved. Others violently rejected that proposition. Thus from the beginnings of industrialization there was a fundamental divide between employers and employed, between rich and poor, capitalists and labour. The management responsibility began to emerge as a separate and partly autonomous category. Those who carried that responsibility were recognized by labour simply as the agents of the capitalists, while the capitalists came to suspect them of maximizing their own self-interest at the expense of capital. But management, by definition neither capital nor labour, was in the front line of economic development, and in a position to influence its course for good or ill.

1
Creating the First Economic Surplus

Industrialization depended on the prior generation of an economic surplus and the establishment of ways of working for which management, as we now refer to it but didn’t then, was primarily responsible. Industrialization improved the standards of living, health and longevity of industrializing people but it had negative effects as well as positive.

Prior to industrialization, life in England for the vast majority was fairly short and uncomfortable, if not ‘brutish’. The English population remained at around five and a half million through the first half of the eighteenth century, held there by recurrent harsh climatic conditions (1708–10, 1725–29 and 1739–42), poor harvests resulting in famine, poor public hygiene resulting in disease (notably dysentery, smallpox and consumption) as well as much alcoholic excess – output of spirits reached eight million gallons in 1742-43, six times higher than in the early years of the century, and didn’t fall till after 1750 when taxes on alcohol were substantially raised. Infant mortality ran at one in 15 for most of the first half of the century. The population lived in poverty and for the majority life was a struggle against the odds. It was no golden age.

In the last four decades of the century, as industrialization was beginning, conditions overall improved substantially. More productive agriculture resulted in the elimination of famine and improved diet for the masses. Greater supplies of coal for domestic heating, improved ventilation, more soap and washable garments contributing to improved hygiene, improvements in medical practice and surgery with the creation of hospitals and dispensaries and the adoption of the smallpox inoculation, all contributed to the reduction and elimination of disease. As a result England’s population grew by around two thirds to over nine million by the end of the century, infant mortality fell almost eightfold to one in 118 and life for the majority became progressively less precarious, though not for all.

The improvements which enabled industrialization to take off were only achieved by the intelligence, diligence and energy of large numbers of people and perhaps the genius of a small number, all motivated to create something better than had been previously known.

Assuming such people were motivated solely by their own self-interest, or greed, is an inadequate proxy for the truth. There had to be something less dismal within man which motivated such heroic achievement.

Human Needs: Engine of Economic Growth

The fundamental idea which underpins much of economic thought is that of ‘economic man’, the utterly rational, amoral, self-interested individual identified by Adam Smith and eternally associated with his name. Writing in 1776, he identified the ‘self-love’ of producers and tradesmen, rather than their concern for any social ends, as the solid foundation of economic activity and growth:

‘By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.’1

This is the simple, direct Adam Smith that survives most explicitly in economic thinking today, but his examination of what motivated people was actually rather more nuanced than just that of economic self-interest.

He recognized that economic growth depended on people being motivated to satisfy certain needs and ‘conveniences’. He suggested a progression of needs, starting from childhood with those arising from hunger and thirst, heat and cold.

‘The preservation and healthful state of the body seem to be the objects which nature first recommends to the care of every individual … The first lessons which he is taught by those to whom his childhood is entrusted, tend, the greater part of them, to the same purpose. Their principal object is to teach him to keep out of harm’s way.’

Smith expressed these needs in adulthood as desire, firstly for food (for which desire is ‘limited by the size of a man’s stomach’), and then for satisfying:

‘the other wants and fancies of mankind. Cloathing and lodging, household furniture and what is called Equipage’2 (equipage being identified as articles for personal ornament and use and a carriage etc.).

These wants may be unlimited, clearly extending to what was later referred to by Thorstein Veblen as ‘conspicuous consumption’.3 These were the human needs and wants driving economic growth.

Smith also identified the desire to save as the ultimate human need. By saving, rather than consuming all, a person could accumulate capital in order to ‘improve’ themselves. While others objected that immediate consumption on pleasure, vice and luxury, would be the more effective driver of economic progress, Smith argued that ‘frugality’ was more powerful than vice and luxury. Frugality which enabled people to become:

‘proper objects of this respect, of deserving and obtaining this credit and rank among our equals, is, perhaps, the strongest of all our desires, and our anxiety to obtain the advantages of fortune is accordingly much more excited and irritated by this desire. Than that of supplying all the necessities and conveniences of the body, which are always very easily supplied.’4

Adam Smith therefore had a richer appreciation of human motivation than is now widely assumed. More recent contributors have added to, rather than replaced, Smith’s model. The much quoted Maslow proposed a hierarchy of human needs5 starting with physiological needs (food, sleep, shelter, sex, etc.) at the lowest level, rising through safety needs, love needs, esteem needs and finally, at the top level, which would be salient once the lower level needs were satisfied, the need for self-actualization (which was exampled as ‘a musician must make music’). Maslow’s model appeals intuitively and seems sound common sense even though it was not based on empirical evidence.

Less elegant approaches, such as Murray’s original work in the 1930s,6 later enhanced by Atkinson7 and McClelland,8 suggested there were more than 20 intrinsic human needs, any one or more of which might be potent at any one time. Moreover, there was not necessarily a hierarchical relationship between needs, no structured progression from one need to the next and no indication that the various needs were necessarily of equal importance. This less structured account offers some diversity and flexibility as well as the messiness of reality.

Alderfer9 produced a simplified model suggesting just three basic human needs: existence, relatedness and growth. Existence can be taken as similar to Maslow’s physiological and safety needs. Relatedness is similar to Maslow’s love and esteem needs and also to McClelland’s need for affiliation. Alderfer’s growth need is equivalent to Maslow’s self-actualization and McClelland’s needs for achievement or as Smith suggested, the need to become a ‘proper object of respect’.

There is therefore some basic consistency among many theoreticians, more or less independent of their era, about the human needs which might motivate behaviour: basic needs (existence, food, shelter, clothing, safety, etc.), social needs (love, esteem, affiliation, relatedness, ‘wants and fancies’, etc.) and growth needs (achievement, self-actualization, ‘frugality’, etc.).

To this simple model Adams added the idea of equity,10 i.e. the concepts of fairness and justice. This is not an absolute measure, but is a comparative one. An individual perceives his or her own treatment and compares it with the apparent treatment of others and so assesses the equity of their own treatment.

Growth needs appear to be the most powerful motivators once the basic needs have been satisfied. But growth means different things to different individuals. For example, growth may, as Maslow indicated, lead certain individuals to make music, or paint or write poetry. These creative outlets are recognizable as satisfying the need for self-actualization. Others may feel more motivated to the achievement of quite different outcomes, such as great buildings, or feats of civil engineering, such as the bridges and tunnels of railway lines, or even the lines themselves. For others the creation and development of a new enterprise, contributes directly to, and involves in many various ways, the lives of other people.

Any such projects may be the focus of the growth needs for some individuals. For others the focus may be rather less heroic. Examples of Smith’s amoral, self-interested ‘economic man’ certainly existed and for them the focus may well be on the acquisition of money and power. And as Smith suggested with some disdain, they may well be motivated by the ability to display their power or money in front of a wide audience with the expectation that they will be accorded respect, if not love, for their celebrity.

Lower level needs, including the need for equity, are likely to fall into the category of what Herzberg called hygiene factors which do not themselves motivate behaviour, but could well demotivate or aggravate if unsatisfied.

Using this simple model as the backdrop it seems clear that, initially at least, as Adam Smith suggested, it was the basic set of human needs which led people to initiate and accept the developments in agriculture which resulted not only in the population being more reliably fed but also the generation of an agricultural surplus simultaneously with the disadvantaging of some. Similarly, social needs, including the need for esteem from peers, would explain the unlimited market potential for all kinds of commodities, while growth needs among some sections of the population must have driven the accumulation of capital and the process of industrialization. At the same time, the lack of satisfaction of basic and social needs among other sections, and the obvious lack of equity, was clearly the cause of considerable and continuing discontent.

The rational, amoral, self-interested ‘economic man’ was always an inadequate substitute for this richly varied reality which encompasses human beings who also exhibit courage, generosity and kindness, as well as corruptibility, characteristics which economics is simply not equipped to address and therefore excludes from its analysis.

Agricultural Development

Prior to industrialization the main purpose of economic activity was to satisfy man’s basic needs, that is, to provide food, shelter and clothing to support a subsistence society. Most activity was essentially localized, with each village being largely self-sufficient, having little need for long-distance communications. One of the critical prerequisites to breaking out of this subsistence economy was the creation of an agricultural surplus. Formerly the dominant notion had been that a farm should be just big enough to support a family. In motivational terms that would mean satisfying basic survival or subsistence needs. Such a unit would achieve satisfaction except in dearth years when poor harvests might result in hunger and disease or even famine. There would therefore be some motivation for the farmer to achieve an additional surplus and accumulate it as capital against more needy times.

Capital accumulation by the few also provided the funding to invest in new scientifically based methods which substantially raised productivity. But concomitant with this benign development was the conversion of the peasant subsistence farmer into the landless waged agricultural labourer who may from time to time find himself unemployed.

England’s experience of this process was different from that on continental Europe, where the ancient rights of the peasant farmer were protected and still influence today’s Common Agricultural Policy. The process in England was more ruthless. Though it culminated in the eighteenth century with larger landlords dispossessing the peasant by enclosing his land, the process of dispossession had actually started much earlier.

The breakdown of the old manorial system whereby the peasant worked his few strips of land and shared in labouring for the lord of the manor had started in England before 1348-49 when the Black Death gave it further impetus by killing off more than a third of the population. After the Black Death the lord of the manor was left without tenants to ...

Table of contents

• Cover Page
• Half Title Page
• Dedication
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Prologue
• Part I The Emergence of ManagemENT
• Part II The Rise of Professional ManagemeNT
• Part III The Educated Fall of ManageMENT
• Part IV Management for New ResponsibilitIES
• Epilogue
• Bibliography
• About the Author
• Index