MANAGEMENT GURUS — DECLINE AND FALL

Manfred Hoefle

 

CONTENTS
Foreword
Why They Suddenly Emerged
. Management fashions
Why You Do Not Need Them
. The great pretenders
. Many pay the price, but only a few profit
Conclusion
Literature
Notes

 

FOREWORD

Businesses and economies usually progress cyclically. Fashions come and go. But a recent trend in business management teaching was unique: the management guru hype. It originated like many zeitgeist phenomena in the U.S. in the mid-1970s and soon spread to other countries. After a rapid rise, its steep fall began around 2010. By then a formerly se-rious academic discipline had navigated itself into a maelstrom.

The originators of this hype were moneywise 'evangelist' professors of business administration at renowned U.S. business schools such as Harvard, MIT and Stanford, as well as staffers at new business strategy consultancies like McKinsey, Boston Consulting and their offshoots. Their methods and formulas were American, as was their logic and style: holistic, optimistic, paradigm-changing, and success was 'guaranteed'.

When this phenomenon first surfaced, during the late 1970s, the golden years of the post-WWII economic boom were fading and corporate uncertainty was widespread. There was a sharp upsurge in foreign competition, especially from Japan, and microelectronics emerged as a disruptive force. There was also a general social trend toward individualism. Today there is similar uncertainty: China is an over-powering competitor, digitalization is an unstoppable socio-technical force, and societies have become divided.

At that time, high earning big corporations, worried about growth opportunities and profitability, were easily seduced by the management gurus with their management fashions. A unique case was that of Siemens, a long-established and successful German company, that became an expensive European testing laboratory for U.S. gurus and consultants.

With hindsight, what lessons can be learned?

First, be very careful of management concepts marketed by any consulting firm founded or influenced by gurus, and the benefits and success they promise. Instead, rely on the wisdom of renowned management thinkers like Peter Drucker. Also, prefer the practical wisdom of successful entrepreneurs and refer to successful enterprises, like the hidden champions, who practice responsible business management; and notice how valueoriented investors like Warren Buffet take into account the moral character of manage-ments. That it is unwise to follow management fashions is clearly shown by this short history of the management gurus.

On 6-7 March 1980, a special 'workshop' was held at Hotel Bachmair Am See, Rottach-Egern, Bavaria, Germany. At the seminar on Organization and Innovation a seven-hundred-page document was theatrically unveiled by McKinsey staffers, Tom Peters (the guru) and McKinsey Director Robert Waterman. The workshop featured a plethora of techniques, stories, statistics, rankings, newspaper clippings and interviews, in what later became the legendary McKinsey 7S Framework(1). Surprisingly, everything in that seminar was about U.S. firms, even though the project and event were funded by Siemens, a Ger-man company. The attendees could not know they were witnessing a preview for In Search of Excellence, the international best-selling book by Peters and Waterman, published two-years later(2). That Siemens seminar marked the worldwide start of two-decades of hyperbole about management gurus and their management concepts.

 

During and after the hype era much was written in the U.S.A. and U.K. about this parasitic phenomenon. In fact, the business media were a constant companion of the guru industry. At long last, after the publication of 'How The Mighty Fall: And Why Some Companies Never Give In' (2009) by Jim Collins, the magical spell was broken. The gurus finally lost their undeserved halos.

This piece, based in part upon personal experience, examines the management gurus and consulting hype and reaches some critical conclusions.

 

WHY THEY SUDDENLY EMERGED

Following that inaugural event at Siemens, the bacillus of management hype soon spread. But to spread so quickly and so widely, it needed favorable conditions: these were intensified competition after years of economic growth, an uncompetitive position vis-a-vis Japan (which was long ignored), the over-complexity of many firms (especially U.S. corporations), and changes forced upon established firms by technical progress. Also, microelectronics was laying the foundation for a new dynamic high-tech sector, clustered in California, Massachusetts and Texas. The golden years up to the mid-1970s were succeeded by a time of uncertainty and apparent irrationality.

In Europe, firms became aware of their weakness in innovation and their declining compet-itiveness, especially compared to mass-producing Japanese manufacturers and high-tech U.S. companies. The early 1980s also saw the onset of globalization, China opened up to world trade, and many other states followed. Danger was looming. Managers frantically searched for quick solutions to revitalize their large unwieldy corporations.

This era of uncertainty and indecision was captured by Charles Handy in his book The Age of Unreason. It was a time of greater individualism and the economization of values, a loss of belonging, and the vague hope of commercial survival, if only the right choices were made.

Although Japanese competitors set new higher standards, product quality was still not a priority for U.S. business managers: too much effort was needed, it was too engineering-focused, and too alien for corporate managements dominated by MBAs. Paradoxically, it was U.S. management teachers (primarily William E. Deming and Joseph M. Juran) who had achieved great and lasting success in Japan. Strangely, although many management gurus were professionally trained as engineers, none of their management solutions were engineering-oriented.

The 1970s was a boom-time for management consulting. Strategic and operational management tools spread rapidly: like Portfolio Management and Learning Curve concepts, devised by Boston Consulting Group (BCG). Many new techniques were introduced: Reengineering, Shareholder Value, Change Programs, which promised short-term success, as well as long-term contracts for external consultants.

The time was ripe for big promises. Anything that guaranteed success had a good chance of finding a paying client. Consulting firms spied on, adapted and rebranded the successful concepts of competitors: for example, with their own variants of Strategy Matrices or modified Value Management methods.

Business publications (Fortune, Forbes, Business Week, Wall Street Journal and New York Times) gained significance by publicizing these management methods and their actors. Academic periodicals (above all Harvard Business Review and Sloan Management, California Review and others) became accelerators of change and referees for the aca-demic value of management solutions. Readers relished their rankings of management experts and methods: The most influential expert in …, One of the leading global …, The 25 most influential management thinkers, The 20 most influential business books, The top 10 of the past 20 years …, and so on. An inflationary use of superlatives and hyperbole became the standard journalistic style. It was good for their business, and the gurus — but serious journalism suffered.

Management fashions

Gurus were soon launching ever more management concepts and practices: Business Process Reengineering (BPR), Core Competencies, Management by Walking Around, Strategic Planning, Six Sigma, Outsourcing, Visionary Companies, Organizational Development and so on.

These management fashions were mostly introduced in the 1980s and 1990s. According to Richard Pascale, consultant, professor of business studies(3) and author of Managing on the Edge, two-thirds of 27 popular management concepts emerged in the 1980s. Of over 100 management fashions (methods, techniques, tools) launched between 1950 and 2000, the most significant were:

Strategic Planning
Learning Curve
Portfolio Management
Benchmarking
Balanced Scorecard
Key Success Factors
Five Forces
Competition Strategies
Shareholder Value Analysis
Value Management
Reengineering
Performance Management.

The Financial Times(4) identified Six Sigma, Core Competency and another top 10 management favorites: Emotional Intelligence, Management by Walking Around, There's No "I" in Team, Embracing Mistakes, Fun by Fiat, Matrix Management, Authentic Leadership. Their average life-span rarely exceeded 5 years — the record holder at 30 years is Performance Management. All of these management fashions were made in the U.S.A.

However, in retrospect the most effective and sustainable management method was made in Japan: lean production. It is based upon the practical experience and undeniable superiority of Japanese manufacturing practices. Although this method (especially its Quality Circles) cannot be exactly copied by firms in other countries, because of different mentalities and cultural traditions, attempting to apply this process still generates indirect benefits.

In opposition to the tried and-tested Japanese methods were the theoretical and trend-setting approaches devised by U.S. business schools and their professors (while also working for consulting firms): Balanced Scorecards, Competitive Strategies and Share-holder Value Analysis. Graduates of these business schools transferred to the management consulting firms, who were now hiring a growing number of MBAs. The management consultants were also inventing further management concepts: Experience Curves, Time-Based Management, Benchmarking and Reengineering.

The connections between academia and consulting grew increasingly close. The business models of consulting firms openly exploited the 'academic' reputation of the new business schools (a new discipline) attached to universities. Their new creation, the MBA, provided academic justification for the private business consultancies. The knowledge they gained from consulting contracts was rewoven to create teaching courses and workshops for managers. This cross-pollination had a primary purpose: to boost the reputations and earn money for the gurus. They are people who are expert at marketing their message. However, they also made sure to present their private consulting and teaching activities as the professional services of a 'collective', as services rendered by a professional consulting practice (just like lawyers or accountants). The maxim of the day was, "What matters is not what you are, but what you appear to be." And yet, as we all know, appearances can often deceive.

 

The word guru is Sanskrit and a Hindu name for a spiritual teacher. In western languages the name guru is often used critically – to describe people who employ quasi-religious, ideological or philosophical teachings to attract disciples. Today, self-proclaimed experts with questionable specialist knowledge, limited practical experience, but armed with eloquence and charisma, are often called gurus.

 

The most famous management gurus, with different approaches and styles, were:

Tom Peters (the 'Management Revolutionary'), Michael Hammer (the 'Re-engineer'), and Michael Porter (the 'Professor of Strategy').

All three are now over 70 years old. Their private wealth has multiplied. The unpredicted success of these gurus is history. Almost without exception they were American university professors, some of Indian origin, without any practical experience of business management or entrepreneurship. Their first practical experience in the world of commerce was when they started-up their small consulting firms: such as Hammer & Company, Tom Peters Group, CSC, or spin-offs from larger consulting partnerships. They were faculty members of business schools, mainly at MIT, Harvard and Stanford.

Their shared characteristics were their race to stardom, the comprehensive commercialization of their theoretical concepts, aggressive self-marketing (numerous academic papers and publications) and a talent for repeatedly prolonging the life-cycle of their consultancy products.

The contrast to Peter Drucker, the man who turned management into a serious discipline, could not be greater. He was an authority on management with encyclopedic knowledge: who was honest, reflective, critical and questioning, a Socratic thinker, with a large dose of common sense, and a deep understanding of human nature. Drucker's life-style was unusually modest. He repeatedly surprised with new fundamental findings and insights that went beyond the limits of corporate management. He avoided prescriptive statements and speculative forecasts. Many of his powerful insights were gained by closely observing business organizations, the business economy and society, in the U.S., Europe and Japan. Drucker believed management was more an art than a science. Accordingly, for many years he taught management as a liberal art at Claremont College, California. At an advanced age he continued to work as a voluntary advisor, mostly for non-profit organizations, as a civic duty. He disapproved and explicitly distanced himself from certain modern management practices such as pay for performance and excessive executive pay.

He considered himself a "social-ecologist", helping to improve institutions and the society they are part of. Drucker and his life's work were recognized by several honorary doctorates and the U.S. Presidential Medal of Freedom (2002). Peter Drucker is still the world’s most renowned management thinker.

 

WHY YOU DO NOT NEED THEM

There are basically four types of management teachers: confusers, simplifiers, analysts and investigators — and those in-between. Gurus belonged to the first two categories. They claimed to know it all, but all they delivered was zero orientation and formulaic solutions. Gurus were 'evangelists' or salesmen, who aimed to impress wealthy corporate clients — above all, their highly paid top managers.

The great pretenders

The typical attitude and behavior associated with management consultants is narcissism, arrogance and a 'superior' persona. The chief characteristic of gurus was their carefree ignorance of detail and extreme short-termism. This was allied with the triggering and ex-ploitation of groupthink, consensus and conformity: which, contrary to their self-perception, are the dominant attitudes among top managers. The explosive growth in books for managers, the converging narratives of management gurus and business journalists, and in-numerable business conferences, were all elements in the management consulting strategy. Eventually sales promotion became (almost) all that mattered.

The typical diagnosis by a guru would be that a corporation or sector was facing an irresistible discontinuity (often several) that was potentially disruptive. Therefore, existing managerial traditions and the experience of managers became worthless overnight; now the only hope was management consultancy. In the words of Hammer Business Consulting, "Tradition counts for nothing, reengineering is a new beginning". Managers facing such 'threatening' discontinuities — a favorite guru word — were told that only transformational solutions made sense: this was the only 'logical' conclusion. Such a transformation called for superior leadership, which gurus defined as the willingness and ability of managers to implement their management concepts. This was, of course, an enormous challenge. However, the necessary advisory support could be procured by awarding a consulting mandate, as indeterminate as possible, to the guru's own management consultancy. In this way, a speedy business transformation and future managerial success was guaranteed, or so they claimed.

Tom Peters used a different approach. He argued that individual managers, whatever their function in an organization, should become pro-active, and simply change whatever they think needs changing. This agreed with the American philosophy of self-help and was suit-ably accompanied by motivating slogans and impressive case-studies. The positive message was simple — How to Make your Company Great Again.

Some key criticisms of guru methods.

Firstly:
These management consulting concepts were one-sided and mono-causal or else a compendium of reformulated former management methods with allusions to academia to lend them 'authority'. At worst they were merely the distilled duplicates or plagiarized ideas of earlier management thinkers. Consulting became exaggerated and generalized story-telling, packaged in new terminology with lots of buzzwords (catchwords) like high performance and excellence. This later became management speak. The superficiality and effrontery of their approach was breath-taking. You have to ask yourself, "Isn't it incredible that this stuff sold?"

Secondly:
Comprehensive statistical analyses, gigantic databases and multiple databanks were used to make consulting conclusions and their management solutions appear scientific and sure to succeed.

Thirdly:
The most popular method used by management consultants is best called anecdotal evidence. Individual case-studies from selectively chosen firms are used to 'prove' the superiority and effectiveness of the consultant's ideology.

Fourthly:
When failure becomes apparent, when firms that follow consulting advice fail, which is not unusual, the standard excuse of gurus is that they do not predict certain outcomes, but only describe possible outcomes. Bad outcomes are explained as exceptional possible outcomes outside the standard bandwith.(5)

The management guru approach is essentially a superficial attitude. Humility and the recognition of one's own limitations are alien to management gurus.

Many pay the price, but only a few profit

Experience shows that doing something badly can be worse than doing nothing. That is especially true for business managers who reject solutions based on deep analysis by in-house experts and instead buy-in what are essentially 'standard' management solutions from external consultants. This delegation of managerial responsibility to gurus/consultants although expensive is easy but unsustainable. When things go wrong, trying to blame outsiders for being unable to solve inside management problems will damage and not save the reputation of those executives. Indeed, enterprises that avoid the management guru circus are generally more successful. Often these are private companies that develop and apply their own customized leadership concepts, or are high-tech enterprises, like Intel when headed by Andrew Grove, or hidden champions — small and midsize enterprises (the famous mittelstand).

Also, experience shows that managers who initially accept guru solutions are soon disillusioned. Over 6 million copies of The Excellence Dividend by Tom Peters were sold, but only one per cent or less than a thousand were read cover-to-cover.

Phil Rosenzweig called this The Halo Effect: How Managers Let Themselves Be Deceived(6). According to Rosenzweig, managers who believe in gurus are being swindled by a "delusion of rigorous research". And if a client business is subsequently successful, it is still a thinking error to overlook how far good luck and coincidence can be factors in success. Another serious thinking error is to overlook the regression to the mean effect(7), a phenomenon described by Daniel Kahnemann (Nobel Memorial Prize in Economic Science).

Professors and lecturers of business administration and management studies must answer a hard question: why did it take them so long to expose the various management concepts as nothing but management fads and fashions (and their creators and marketeers as management gurus)? That failure could have been easily avoided by a few professional academic criticisms of the management gurus and their simple one-sided recipes and euphemistic, success-guaranteed, trendy concepts, which were tailored to seduce desperate senior executives at major capital corporations.

A clue to the questionability of the guru business was the huge number of the publications they produced, of which hardly any survive. It was a highly profitable business for a few. The annual sales revenue of the consulting segment was estimated at over 1 billion U.S. dollars. The waste was enormous. There was incalculable expense incurred by the managers and in-house specialists who were seconded to deal with these management guru projects; not to mention the side-effects and frustration suffered by many when the out-come was not success but failure. Luckily, the firms who incurred these costs were mostly high-earning major corporations. However, another lasting negative side-effect was the unprecedented polarization within their corporate management.

 

CONCLUSION

Peter Drucker rejected the title of management guru or guru of gurus. He said management guru was a weasel word or fake name for a trickster or swindler. He pointed out that proper management advisors would put questions to managers and not, like gurus, claim they had ready-made answers; serious management advisors do not tell others how to do their job better, without ever having done that job themselves.

Most great management thinkers often attribute many of their insights and conclusions to the influence of Peter Drucker. Kathryn Harrigan, Professor for Leadership at the Columbia Business School, referring to Tom Peters who is typical of many management gurus, said "Americans are into cults, particularly the cult of personality. They are all searching for a recipe of success". That statement by Prof. Harrigan is more than a piece of good advice — it is a wise warning. So, instead of reading the management gurus, why not go straight to the root of modern management thinking, and read Peter Drucker?

It makes good sense to read these comprehensive and original thinkers and teachers of management — notable among them are Peter Drucker(8), Mary Parker Follet, Karl E. Weick, Herbert Simon, Joseph Schumpeter, Friedrich A. von Hayek. Studying this classic literature should be an essential part of vocational training for business managers. It should be mandatory that management students are confronted with the heterodoxy of teachers like Henry Mintzberg.

There is no reason why non-American businesses should automatically adopt American business methods, no matter how highly praised by business schools and business magazines. These methods reflect American attitudes and American business culture. So, for example, European management training should follow the liberal arts cannon and not U.S. pseudo-science, and instead teach a management style characterized by independent thought and prudence, rather than formulaic solutions and sometimes reckless optimism. In real terms, this means that management teaching should be practical teaching, oriented toward the proven successful practices of domestic enterprises and attuned to local com-mercial culture. For example, German management teaching should focus on entrepre-neurship and SME (mittelstand) styles of leadership — and not theoretical U.S. corporate-oriented concepts and methods, like Shareholder Value, Corporate Compliance or Corporate Social Responsibility (with superfluous new departments and voluminous manuals): the latter concepts are just consultant-driven substitutes for basic moral behavior (described in a simple Code of Ethical Behavior that even morally challenged executives can understand and abide by).

American-style management consulting still has too strong an influence on management teaching and thinking worldwide, even in Germany, despite Germany having more hidden champions (globally successful small and midsize enterprises) than any other economy in the world. The successful management methods of these world champions are still under-represented at German business schools and universities. These prefer to copy U.S. academia and teach mostly theory, with few practical case studies, while enterprises on their doorstep are demonstrating world-beating performance by practical example: how constant innovation and continuous improvement, allied to responsible and ethical behavior toward stakeholders including employees, is a proven formula for sustainable managerial success. This contrasts with the unsustainable short-term profit-maximizing behavior of many U.S capital corporations.

The hidden champions in Germany do not simply focus on strategy, structure and systems; instead they emphasize comprehensive vocational training and professional specialization (from apprentice to fellow to master, from management trainee to functional department head, from division to corporate leader). A responsible ethical attitude toward employees and community is integral to their enterprise culture. That is their managerial recipe for success and not mythical Teutonic discipline, punctuality, obedient employees or a self-sacrificing work ethic.

Not only these hidden champions, many other businesses also succeed without the advice of management gurus. There are many U.S. software and internet firms, like Microsoft and Google, high-tech businesses like Gore, and investors of the caliber of Warren Buffet (Berkshire Hathaway), who succeed without the guidance of management gurus or their disciples. They succeed because they are entrepreneurially minded and create and develop their own leadership methods customized to their own business.

Thinking and acting entrepreneurially is the best way to avoid the zeitgeist (mainstream consensus), fashionable management trends, seductive siren sounds of management gurus (and journalists who spread their messages), public corporations with institutional proximity to capital markets, technology companies run not by technologists but by MBAs, and any firm with a large share of MBAs in its management.

Ask yourself a simple question: if executive officers did not listen to management gurus, and themselves found in-house solutions to their business challenges, would they be more or less successful? Do competent top managers really need gurus(9) or young consultant MBAs to tell them how to manage their business?

Manfred Hoefle, January 2018

 

LITERATURE

  • Wooldridge, Adrian; Micklethwait, John: The Witch Doctors - Making sense of Management Gurus, William Heinemann, London, 1996.
  • Wooldridge, Adrian: Masters of Management, HarperCollins Publishers, New York, N.Y., 2011.
  • Kiechel III, Walter: The Lords of Strategy, Harvard Business Press, Boston, Mass., 2010.
  • Mintzberg, Henry: The Rise and Fall of Strategic Planning: Reconceiving the Roles for Planning, Plans, Planners; Harvard Business Review, I/1994.
  • Simon, Hermann: Hidden Champions des 21. Jahrhunderts Die Erfolgsstrategien unbekannter Weltmarktführer, Campus, Frankfurt a.M. and New York, 2007.
  • Winfried Weber: Innovation durch Injunktion – Warum man Innovationen nicht planen(lassen) kann, Verlag Sordon: Göttingen, Germany, 2005

 

LINKS

See https://www.managerism.org
Lesson No. 2 – Fads and Fashions of Management Consultants
Lesson No. 27 – Business Strategy — What are the Learnings of J. Welch und M. Porter?

 

NOTES

(1) 7S stands for Strategy, Structure, Systems, Skills, Staff, Style, Shared values.
(2) The author of this essay was the youngest workshop participant, and afterwards wrote a critical paper. This McKinsey project was sold by Herbert Henzler, the McKinsey Siemens account manager, to the head of business administration and member of the managing board at Sie-mens AG.
(3) Pascale first worked for McKinsey, where he devised the McKinsey 7S framework model with Tom Peters.
(4) See: Where others failed: Top 10 fads (management fashions), Financial Times, 09 Apr 2013.
(5) In particular, the firms profiled in In Search of Excellence, Good to Great and The Future of Management must have made serious mistakes: once excellent companies soon became falter-ing companies.
(6) This refers to an over-optimistic perception: the so-called Halo Effect.
(7) This can be paraphrased as, "It will be your fate to succeed, eventually."
(8) Management thinkers with practical experience, like Charles Handy, said, "… virtually every-thing can be traced back to Drucker."
(9) The leading gurus: Tom Peters, Michael Hammer, Michael Porter, Jim Collins
C.K. Prahalad, Gary Hamel, Peter Senge, Kenichi Ohmae.