AMC 2004
Lecture 1: Introduction
We are about to begin a massive flow of effort in this course, lasting from now
to May. Some of this effort will be mine; most will be yours, at least in the
aggregate and, ideally, you individually. This is a collective, interdependent
effort. My own formal role in this effort is as teacher and guide. What that
means is that I am always a resource to you as you optimize your efforts
within the AMC context.
What is the point of all this effort? A very narrow definition would be for me
to earn my (small) salary and for you to get good marks on the coursework.
But that is too narrow a conception of the point of all this effort.
How to think about it more broadly? One approach is to say that we need to
make a major contribution to MBA program, which has involved two years of
effort.
What is the point of those two years of effort? In management practice, it is
not unusual to conceptualize the point of effort in terms of a desired or target
“end-state.” An end-state is a description of what is desired or targeted as the
state of affairs that will exist at the end of a period of time. (You could make
that statement more precise by saying that an end-state is the outcome of a
series of events that includes your efforts and those of the teaching staff and is
affected by other influences.)
Let me propose to you a conception of the end-state of the MBA at the level of
an individual student.
(1) The end state of the MBA is an intellectually developed young man or
woman, educated in the applied social sciences, possessing a firm grasp of
several management subjects, and modestly skilled in the exercise of practical
reasoning about management issues.
What is intellectually developed? Try this definition on for size: you, the
graduate, can use the specialized cultural resources available to early 21st
century humankind with access to leading universities. You have a welldeveloped reasoning ability, both qualitative and quantitative. Further you
have an ability to communicate effectively and interactively with individuals
whose specializations and cultural backgrounds may be different than his or
her own.
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What social sciences should you know about? Economics, psychology, and
sociology. What management subjects? For sure, financial accounting and
management control, HR, strategy and marketing. But also you should know
something about such management subjects as production, corporate
governance, process and product innovation, organization design, and
leadership.
As for the exercise of practical reason, you should be able to evaluate choices
that companies have made and also design and defend plausible answers to
forward-looking what-to-do questions. Such answers should be satisfactory
to others who know about management subjects, are schooled in social
sciences, and engage in the intellectual discipline of practical argumentation.
You can ask yourself how well you are progressing towards this graduate
end-state. What was the outcome of your efforts in Year 1? Mainly
intellectual development, in two styles: qualitative and quantitative. Also,
grounding in economics, psychology, and sociology. For some, grounding in
financial accounting and management control, IT, and corporate finance.
****
Let’s turn now to your efforts as part of AMC. Your efforts AMC will have a
significant impact on your progression toward the overall MBA end-state.
The following statement (2) describes this intended impact, from my
standpoint.
(2a) AMC will add depth to your social-science education, mainly through
exposure to theories and research about organizations with roots in sociology,
psychology, and political science.
(2b) Your efforts will strengthen your faculties of critical, qualitative
reasoning – especially in the context of the overall subject of management.
(2c) Your efforts will provide an overall framework for understanding the
subject of management and will strengthen your understanding of such
management topics as production, corporate governance, process and
product innovation, organization design and management control, strategy,
and leadership.
(2d) Your efforts, especially in the case study component, will exercise your
practical reasoning skills, mainly in evaluating particular choices to be made
in particular organizations at particular moments.
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AMC will expose you to theories about organizations with roots in economics
and strengthen your faculties of critical, quantitative reasoning in the context
of the overall subject of management. I think AMC will do more than any
other single subject in the MBA to progress you towards the end-state
described in Statement (1), provided that you work at it.
****
Statement 2 is too long to remember easily. Let me encapsulate those ideas in
the following statement:
(3) The end-state of MBA is an intellectual grounding within the field of
management.
Let us now spend quite a few minutes discussing this statement before I help
you to visualize how we are going to pursue this end-state. I’ll be very
systematic about this – it means that the following few minutes will be very
dry.
Since “end-state” has been defined, three terms need to be discussed here. (1)
intellectual grounding; (2) field; and (3) management. I think it is wise to
start with the third of these terms, “management”, and work backwards.
Consider the following very sketchy and partial definition:
(4) Management is a flow of effort.
This statement is abstract but not empty: it refers implicitly to human beings,
whose efforts are involved. It suggests that management is a kind of work.
And it suggests that management occurs over time. Notice also that this
definition is different from others that could readily be suggested, such as
4a. Management is a set of occupational roles in formal organizations
4b. Management is a set of responsibilities
4c. Management is a set of functions
4d. Management is decision-making
4e. Management is designing organizations
These are all sensible alternatives as general definitions, but I find each
wanting. Management is a set of occupational roles in formal organizations is
too sociological and institutional; and it steers attention away from the process
of managing. The next two definitions are too doctrinal or normative, unless
put in a broader context; they steer attention away from the practicalities of
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managing. Management is decision-making is good in that it focuses on the
process of management, but it could steer attention away from the subject of
leadership and may evade normative questions. Management is designing
organizations is simply too narrow as an understanding of managerial effort;
and it steers attention away from the subtle process dynamics that shape the
outcome of events within the unfolding life course or history of an
organization. So let’s stick with Statement (4), “Management is a flow of
effort.”
Compared with Statement (4b) on which it builds, Statement (4) introduces a
new term – effort. This concept’s meaning needs to be specified.
In economics, the concept of effort comes up in discussions of principal-agent
relations. In that context, an agent makes choices about his or her effort level
for a given period. The point of the effort is to maximize the agent’s utility,
which is a function of the income that might be earned as a result of the effort
and the disutility of the effort.
In AMC, economics is a major reference discipline, along with sociology,
psychology, and politics (which includes public ethics and rhetoric).
In sociology, effort is called “action.” Classically oriented sociologists, like
Max Weber, usually explained action in terms of what it meant for the actor.
An action might mean a rational or intelligent choice, given some end and
what can be known about the causal effects of the action. An action might be
an appropriate choice, given environing norms and the agent’s understanding
of how they apply to the situation they face. Either way, we can think of
effort as purposeful.
Sociologists find it easy to believe that, under some conditions, people will
feel sufficiently part of a group or organization that their efforts will be
oriented toward what are taken to be the ends of the group or the
organization. These conditions are not fully understood or always satisfied,
but the idea that managerial effort is sometimes oriented toward collective
ends has considerable plausibility. Enough plausibility to see where the
thought takes us.
Students of politics – let’s call them political scientists – tend to think that the
point of an institution’s collective efforts is to have salutary effects on
aggregate conditions in a society, including the satisfaction of the enlightened
wants of the citizenry and the maintenance (or creation) of a proper
institutional order. They tend to think that this statement applies to business
firms almost as much as to the government. People can argue about what
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enlightened wants are, which citizenry is involved (local, national,
continental, global), and what is a proper institutional order. However these
ideas come to be specified, the argument goes, the institution’s collective
efforts should be directed toward those ends. That is a normative claim, not
a descriptive one. So its relevance depends on whether you want to consider
management as a normative subject.
I do think of management as a normative subject, although intelligent,
purpose-directed action needs to be informed by truthful descriptive
understandings.
We need a term to describe the point of managerial efforts, taken as a whole,
in a given organization, over a particular span of time. I’d like to propose we
use the term “organizational achievement” to play this role in our thought.
What constitutes organizational achievement is always going to be a matter of
debate, with maximal shareholder value and the absence of criminal activity
being just one position among several. I would argue that the purpose of an
organization – any organization -- is the creation of value, and that goes
beyond a short-term fixation on share price. Whether achievement – once
defined -- has been obtained after the fact is a matter of measurement.
Whether efforts are optimized to obtain organizational achievement before
the efforts’ consequences are empirically revealed is a matter of practical
judgment.
Assuming you don’t object strongly to what I’ve said so far, then I would
propose we move forward on the basis of the following statements.
(5) Organizational achievement brings about salutary effects on aggregate
conditions in a society, including the satisfaction of the enlightened wants of
the public and the maintenance (or creation) of a proper institutional order.
(6) The essence of management is a flow of purposeful effort, directed at
organizational achievement (and, stated in negative terms, forestalling
organizational failure).
These efforts can involve decision-making, organizational authority figures,
designing organizations, and the discharging of responsibilities, but these
attributes of management are not part of this conception of the essence of
management.
****
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Let me remind you of the analytic effort we’re engaging in now. We’re trying
to embellish our understanding of the statement (3):
(3) The end-state of MBA is an intellectual grounding within the field of
management.
Now that we have a working definition of management, what do we mean by
“field of management.” By field, I want to distinguish managerial effort and
their causes and consequences, on the one hand, from discussions of
management that take place outside the context of its being done, on the
other. My inclination to devote more attention to academic discussion reflects
my identity and experience as an academic. But I started my career as a
practitioner and I’ve met several practitioners who were at least as insightful
about the subject of management as any of the academics I know. So I
understand that most academic discourse in this field stems from
management practice.
Summarizing this unit of discussion:
(7) The field of management includes organized academic and professional
discussions of managerial efforts (i.e. flows of purposeful effort, directed at
attaining organizational achievement and forestalling organizational failure).
How about the term, “intellectual grounding,” in statement (2’)? How should
this idea be described as an end-state? I prefer a definition that emphasizes
what you can do with your mind, rather than emphasizing what you know or
your stock of knowledge. This reflects the fact that I believe that “knowing
how” is different from and more important than “knowing that.” Let me
propose the following clarification of the AMC end-state:
(8) You will have an intellectual grounding when you are adequately
prepared to reason and communicate interactively about pervasive and
significant issues within the field of management, up to the standards
expected of you by your future employers.
I don’t feel that I need to describe, in advance, all of the “pervasive and
significant issues within the field of management” that might be covered by
statement (9). But I can illustrate some such issues, posed at a very high
level:
(i) How can and should corporations be properly governed?
(ii) How can and should managerial efforts be directed towards
organizational achievement over time-scales of several years or even decades?
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(iii) How can and should managerial efforts be directed towards
organizational achievement over time-scales of an operating period (e.g. a
year) or the life cycle of the planning and execution of a capital project?
(iv) How can and should managerial efforts be directed towards forestalling
organizational failures in short-run production cycles?
Notice the repetition of the terms “can and should.” The term “should”
underscores the normative character of management discussions. The term
“can” underscores the fact that these discussions are prescriptive, in the sense
that efforts are supposed to be practical (and taking into account matters of
feasibility and risks of unintended perverse consequences of efforts).
Notice that achievement or failure has a reference to the time-scale of the
events being considered.
You are invited to accept that the end-state of AMC is that you will be
prepared to reason and communicate interactively about pervasive and
significant issues within the field of management, especially about issues (i)(iv) listed above.
The standards I refer to above will become increasingly apparent as we go
along, so I will leave that clause unspecified for now.
****
How are we going to attain the AMC end-state of an intellectual grounding
within the field of management?
The design for doing so includes the topic selection. Working backwards, let
me mention the topics in the second part of the course: production, product
and process innovation, and management control, including performance
measurement, organizational design, strategy, leadership and governance.
These categories are quite established in the management field.
There is a relationship between the AMC topics and the “pervasive and
significant issues within the field of management.” You need that assurance
to accept that the course is well designed to attain its end-state:
(i) relates to corporate governance as well as to organizational strategy and
structure (ii) relates to building relationships within the organization and to
corporate evolution (iii) relates to product and process innovation as well as
management control. (iv) relates to production. The broader topic of
leadership relates to all four.
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An advantage of organizing your intellectual grasp of the field of
management in these terms is that they are a means to disaggregate the allencompassing notion of management into cognitively manageable
components. That is, overall efforts directed at organizational achievement
are usefully divided into component efforts. There is no natural division, but
it can be useful to divide managerial efforts into three broad components.
One component is efforts related to developing strategy. Another component
is efforts related to innovating products and processes. A third component is
efforts related to delivering goods and services.
Over some span of time, these components are not unrelated to one another in
real organizations. What the efforts to deliver goods and services can achieve
in a given operating cycle depends on the outcome of prior efforts to innovate
products and processes. For instance, the failure to innovate products, while
other firms succeed in doing so, may lead to a loss of revenues. The failure to
innovate products may be due to the outcome of prior efforts to develop
strategy. And the same point can be made by presenting these scenarios in
more positive terms.
I find it convenient to inscribe this last series of thoughts in a diagram, which
I call the functional view of the organization. [show and explain] In
conceptual mapping terms, its nodes are functions and its links are functional
relationships. Our discussion of management in the second part of the course
is largely organized around these functions. We’ll give less time to
discussion of the strategy development function than to either of the others,
but overall the discussion will be roughly balanced.
[show slightly reordered version]
We will also discuss management topics that fit awkwardly within the
functional view, but do make more sense from other perspectives on
organizations. Two such topics are corporate governance and leadership.
Corporate governance refers more to how overall organizational achievement
comes to be defined – and then how those definitions come to shape efforts.
Leadership is relevant to just about every topic in management – depending
on how one wants to understand this contested concept.
As an aside, I think the functional view of organizations can also be a good
discipline for practical reasoning about management. For instance, the
functional view invites people to define what constitutes organizational
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achievement at the level of each component. This intellectual procedure is not
unlike what goes on in engineering design, program planning, and project
management. The overall design problem or project task is subdivided into
more intellectually manageable chunks. For a product component, engineers
and marketers seek to define what constitutes adequate characteristics or
attributes. For a completed project task, project managers seek to define what
constitutes an adequate end-state. Think of the practice of management by
analogy. Managers could conceptualize what would be adequate end-states
of cycles of efforts in each of several functional domains: to include, strategy
development, product and process innovation, and delivery. Notions about
adequate end-states of cycles in such domains would serve as criteria for
designing or evaluating the organizational practices used to perform the
corresponding functions.
I’d concede if you want that the functional view of organizations is very
abstract. It leaves out specification of organizational techniques or
technologies, like apportionment rules in cost accounting systems. It leaves
out specification of patterned relationships among people or among units or
among groups of units within an organization, patterned relationships
between organizations., and patterned relationships with customers And it
leaves out specification of the series of events occurring before an end-state
arises. All of this detail – about techniques, patterned relationships, and the
flow of events -- becomes very relevant when we want to discuss how
organizational functions are performed. But for now, we should just note
that the overall shape of our subject matter is defined functionally, at least in
the second part of the course. And you might add as a footnote that giving
priority to a functional view is something that would come naturally to
somebody who tries to think practically about attaining some kind of
achievement, such as an engineering designer.
Let me now talk about the first part of the course. Your efforts in this part of
the course will help you to think critically and perhaps creatively about the
academic discussions of management in the second part of the course.
On the whole, this material provides a language of description of managerial
efforts and context. At first, managerial effort will be considered mainly in
terms of collective decision-making. The aim is to develop a sophisticated
process understanding of organizations. This is a distinctive type of
understanding. It is different in focus from a technical understanding or an
institutional understanding, but that is only a difference in focus. A technical
understanding might focus on the organization’s systems. An institutional
understanding might focus on legal context, on organizational culture, and on
the allocation of power and prerogatives among units and positions.
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You’ll come to see that discussions of decision-making involve a number of
other descriptive concepts, like identities, situations, conflict resolution,
sequential attention to goals, decision-rules, organizational routines,
retrospective sense-making, persuasive communication, stress, learning, and
commitment dynamics. In the background are concepts like technology,
structure, and culture, but these categories are not in the foreground of the
process-focused conceptualization of decision-making. As you can see, we
will develop a pretty rich conceptual frame to give more content to the
general terms of “efforts” and “process.” Some conceptual models will help
you through this thick conceptual terrain. That provides the agenda for the
following two lectures.
The first part of the course also includes a topic that introduces a relational or
institutional view of the organization. That is the topic of organizational
design or structure. The basic framework here surrounds entities and their
patterned relations. The entities can be organizations, or parts of
organizations, or units within the parts of organizations, or individuals within
the units of those parts. To illustrate, the parts of the organization in the
specific text we will focus on include the strategic apex, middle line, operating
core, technostructure, and support staff. Relations are understood in terms of
allocations of prerogatives and patterns of communication. In this context,
political and sociological concepts, like structure and influence, come into
focus.
Why do we need to talk about this? An important perspective on the process
of management is relational or institutional. It complements the functional
perspective that I outlined earlier. We need to be able to describe the
patterned relations among the people inside a situation in order to
understand why they act the way they do and in order to understand why
their actions sometimes influence others in the situation and sometimes do
not. And the effects of actions on others’ actions ultimately affect the
outcomes of cycles, such as strategy development, product and process
innovation, and delivery.
The problem with this view is that patterned relations only shape in a general
way actions and the effects of actions on others’ actions. The effect of
authority relations, for instance, depend on how people become committed to
certain kinds of understandings and lines of action – and on the particular
habits a group has developed for resolving conflict among its members. An
intellectual grasp of the subject of management requires more than an
understanding of patterned relations among entities within an organizational
situation, but it does require that, too.
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No organization is an island or operates in a vacuum – to use two overused
cliché expressions. Some of the patterned relations are between the
organization and entities within the so-called environment: competitors,
suppliers, customers, shareholders, courts, government bureaus, professional
bodies, and international public institutions. For the most part, we rely on
your economic and finance courses to shed light on patterned relations with
competitors and capital suppliers, marketing to shed light on patterned
relations with suppliers, and customers.
Let me know recap the most important point of this lecture, which is to
describe the end state of AMC. In summary form, the end-state is for you to
possess an intellectual grounding within the field of management. In
extended form, the end-state is as follows:
(2a) Your social science education will be deepened, mainly through
exposure to theories and research about organizations with roots in sociology,
psychology, and political science.
(2b) Your faculties of critical, qualitative reasoning – especially in the context
of the overall subject of management – will be strengthened
(2c) You will acquire an overall framework for understanding the subject of
management and specifically such management topics as production,
corporate governance, process and product innovation, organization design,
strategy, and leadership.
(2d) Your skills of practical reason about management issues, as they arise in
particular circumstances, will be honed.
Process design of the course.
1. Guiding ideas. Already set forth.
2. Event structure. Lectures, classes, case study “lectures”, writing
assignments, office hour meetings, email exchanges, presentations.
4. Materials. Readings, including Notes and cases.
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