Explanation

Managerism is, of course, derived from manager, one whose profession or work is management; although it signifies a deviant form thereof. This deformation is reflected in the nature of planning and control, the way people are treated, how responsibility is handled and remunerated, how resources are utilized and how enterprises are supervized.

This deformation manifests itself in the behavior of individuals and groups. It is rooted in egoistic behavior, servility to capital markets, a penchant for analysis, central planning processes and bureaucratic systems, pseudo-professionalism, dependency on management consultants, and a detachment from people, society and values. It is encouraged by group pressure and inappropriate financial incentives.

Managerism is the opposite of entrepreneurship and good business leadership. The epithet managerist should be assigned to practitioners of managerism to distinguish them from good managers.

The key differences are as follows.

Managerism Entrepreneurship
 Employee, administrator
No or small capital shareholding
Status Owner or co-owner
Risk avoidance or
High-risk decision-making
Low job risk (golden handshakes)
No or low salary risk
Risk Risk awareness
Appropriate capital shareholding
Total loss possible
No D&O insurance
(with or without personal liability)
Liability Unlimited
Capital markets
High growth and strong market power
Short-term
Focus Customers and employees
Organic growth
Sustainability
Long-term
Employees as planning resource Attitude to employees
Employees as valued asset
High, variable or progressive remuneration Success-related pay
Profit-sharing
Few, Opportunistic Values Core values, Lasting
Power-oriented,
Bureacratic
Central planning
Style Culture of trust
Pragmatic
Action-oriented, Agile
Employment and career platform Role of company Opportunity to organize and accept responsibility

 

History

Aspects of managerism can be traced back to the scientific management theories of Frederick Taylor (1856 – 1915). Typical characteristics are a detached relationship to people – people as expendable and replaceable – an excessively bureaucratic and analytic approach clearly distinguishing between planning and execution; moreover a perception and treatment of production workers like machines; attempting to use scientific methods to determine to the last detail the optimum means of performing a task. This was also the criterion used for selecting and training workers. The piece-work system was intended to ensure that standard performance levels were exceeded. One consequence of this approach was surprizing improvements in productivity and continuing high growth rates. However, the piece-work system only worked well in a static environment; it would eventually lead to mediocre performance, required a huge planning and administrative effort and gave rise to a culture of mistrust.

Taylorismus was adopted in market economies as well as centrally planned economies.

The systematic core of Taylorismus was the separation of enterprises into managers, responsible for planning, direction and supervision, and workers, who unquestioningly carried out standardized processes. This production method gave rise to complex structures with numerous levels of hierarchy, a plethora of rigid systems, rules and regulations, a lack of direct communication, and a plethora of paperwork.

A broader understanding of management, performance-oriented but embracing a humanist perspective and social responsibility, was provided by Peter F. Drucker (1909 – 2005), a world-renowned management theorist, lecturer, consultant and philanthropist. Starting in the 1940s and until the beginning of this century, Drucker was a peerless student of the origins of management, the emergence of managers as a professional and social class, and of changes in management behavior.

According to Drucker, management emerged as a generic function after the Second World War. Management became a discipline, comparable to a sophisticated craft (not a science), with the focus on planning, decision-making, communication, and performance supervision.

According to Drucker, a manager is more than a so-called technocrat. Management is culturally based, and has an obligation to the values and traditions of society. As enterprises are clearly embedded in society, managers also have a social responsibility and should provide leadership beyond their own enterprise. Drucker saw early on that demands placed on managers in terms of leading people, corporate engagement, knowledge management, and the internationalization of business would continue to grow.

Drucker's shortest definition of management is: It's about people. This means the task of management is to enable people to achieve a common purpose by applying their strengths while counterbalancing their weaknesses. As management focuses on the integration of people in joint enterprise it is necessarily strongly influenced by the prevailing culture in which it operates. Generating a profit is not the sole economic purpose of enterprises, it is merely a precondition for their continued existence. Profit is not an explanation, cause and justification for entrepreneurial activity but instead a key measure of effective and efficient behavior.

Drucker's view of management was idealistic but nevertheless true for the great majority of managers until the 1990s. Great demands were placed on the moral integrity and self-perception of management, which Drucker placed close to that of entrepreneurship.

In the USA, during the past 10 to 15 years, capital markets have increasingly become drivers of management behavior. The stockmarket bubble at the millennium gave rise to euphoria about growth, styling of chief executives as "business heroes" and to balance-sheet fraud; there was an upsurge in hostile M&A activity, unscrupulous firing practises, mega-transactions contrived and initiated by consultants and investment bankers, increasing cases of self-enrichment by top management. The beneficiaries in each case were first and foremost managerists and their immediate environment.

The great majority of employees lost out in this distribution of realized profits; effective earnings of employees declined, while income of top managers multiplied unchecked.

The exponents of these dark arts of business were praised by the media while business schools used companies such as Enron, WorldCom, and Tyco in the USA, and other lesser-known firms, as case studies of best-practise management.

Germany did not suffer the same excesses and deviations from Drucker's ideal of responsible management but corporations such as DaimlerChrylser, Arcandor, TUI, and other firms established during the euphoric, but short-lived, dot-com bubble were clear evidence of the spread of managerism.

Another clear sign was decades-long manipulation of markets by secret cartel structures while the underhand practise of corruption and collusion was not uncommon.

Numerous studies show that in many countries, particularly in the USA and Germany, the public reputation of top managers of stock corporations has suffered serious and lasting damage. This was not the case in smaller countries; in particular not in Scandinavian countries.

It will now be extrenely difficult to restore Drucker's positive image of the manager.

A powerful critic of the excesses of capitalism and of those culpable was John Kenneth Galbraith (1908 – 2006), US economist, presidential advisor, ambassador and nobel prize winner. In his last book, Galbraith analysed the loss of realism in modern society, the role of major corporations and of management.

According to Galbraith, since the end of the 20th century if not before, the real relationships in business and politics have been purposely concealed; he called this ironically "innocent fraud".

In modern economies conglomerate corporations have come to dominate. The control over these public stock corporations has switched from shareholders to managers. Management has gained de facto absolute sovereignty over these enterprises and pursues the objective of growing enterprises continuously, easiest of all by acquiring other companies, in order to grow market power to the utmost limits allowed by cartel law. Size, measured by number of subordinate employees, is the most common criterion for determining salary levels.

Galbraith was also a strong critic of corporate governance as institutionalized fraud. The members of boards of directors are supposed to represent the shareholders' interests and yet are appointed by the executive management and as such they are directly answerable to the latter. This dependent relationship opens the door to legal personal enrichment where remuneration proposals made by executive management are approved by board of directors as a formality.

A key characteristic of major corporations is a management system that places little or no restriction on company over-expansion and personal self-enrichment. Even when managements strongly deny an affinity to bureaucracies, Galbraith considers it proper to speak of "corporate bureaucracy" rather than management or corporate leadership.

 

  • Taylor, Frederick W, Scientific Management, New York: Harper & Row, 1911, reprint New York: Harper and Brothers, 1947
  • Drucker Peter, F., Management, New York, Harper & Row, 1974 and The Essential Drucker, HarperCollins, 2000
  • Galbraith, Kenneth, J., The Economics of Innocent Fraud – Truth for Our Time, Houghton Mifflin Harcourt, Boston, 2004
  • Hoefle, M./ Marquart H./ Schnopp R., Managerismus – Pathologien deutscher Unternehmen, Planwirtschaft, Munich, 2007, ISBN 978-3-00-020994-9