80: Management Theory & Practice - Sumantra Ghoshal - Talking About Organizations Podcast

In the wake of various corporate scandals in the 1990s and 2000s, questions surfaced about the roles that business schools played in contributing to poor or dangerous management practices. For this episode, we chose one of the more widely cited critiques that proposed a model for the perverse relationship that has emerged between management theory and practice. It is Sumantra Ghoshal’s article from the Academy of Management Learning and Education, “Bad Management Theories are Destroying Good Management Practices.”

In it, Ghoshal calls out a feedback loop between the schools and practitioners that has led to theories based on two things. First is a “pretense of knowledge” that assumes causality and predictability of the business environment that leads to practices and tools based on quantification at the expense of ethics and morals. Second is a “gloomy vision” that assumes the worst of human nature. In effect, theories are built around ideas that managers cannot be trusted and matters of complexity can be managed. Ghoshal calls out several prominent theories in his critique, include seminal ones such as Williamson’s transaction cost model that we covered in Episode 44, that encourage managers to care only about shareholder value and other quantifiable factors without consideration to the social or ethical consequences.

Is this a fair or even a complete critique? Unfortunately, as we discuss in the episode, Ghoshal passed away tragically while preparing the article and it fell upon his colleagues and family to finish it for publication. We present the model that he developed in the article but also talk about the gaps that might need to be filled if Ghoshal’s recommendations are to effect real change in the ways the business community educates its future managers.