Following are excerpts of an interview with Professor Julian Birkinshaw, Deputy Dean London Business School in the United Kingdom. London Business School is ranked No 1 in the Global MBA Rankings, by UK’s Financial Times
By Dinesh Weerakkody
Q: To begin, has the United States lost its dominance in the global business stage?
A: In the years following World War II, the United States dominated the global business world completely – it was the major source of capital, the home of advanced manufacturing, and the source of most major technological developments. It provided the best quality management education, and it was the source of all the latest management thinking.
Today, we live in a more complex, more plural world. The US is now the world’s largest debtor nation, and the biggest sources of capital are the large Sovereign Wealth Funds of the Middle East, Russia and China. Leadership in advanced manufacturing is spread across such countries as Japan, Korea, Germany and the US.
Technological innovation is dispersed across the world, in countries like India, China, Singapore, Israel, Sweden and the UK, as well as North America. Top-quality business schools exist in every major market. In short, the rest of the world has caught up. North America no longer holds a clear advantage in any of these fields of accomplishment it used to lead.
Q: Are you saying that even the management ideology it preached and taught the world has been hijacked by emerging nations?
A: There is a management ideology in existence today that took shape a hundred years ago, primarily through the ideas and practices of US-based management thinkers, and which continues to dominate the way we think about management. Its key features are:
- Setting and delivering of objectives according to the demands of shareholders
- Coordination of effort and activities through professional bureaucracy
- An emphasis on efficiency and productivity as the key measures of success
Of course this ideology is not without its detractors. There is an ongoing debate (among academics) about each one of these principles, and there have been periodic challenges to this way of thinking from other parts of the world (for example the Japanese quality movement in the 1960s, and the European Quality of Working Life movement of the 1970s).
But the point is, this ideology is the mainstream – it is the primary way of thinking about, teaching, and executing management. For those studying management, or applying its methods, any nuances to the debate are entirely lost. This management ideology, with its North American roots, endures primarily because there is no viable alternative.
Consider a few basic facts. At London Business School, one of the top B-schools outside North America, more than 90% of the faculty gained their PhDs in North America. The same is essentially true at Insead (France), IESE (Barcelona), the Indian School of Business (Hyderabad), and CEIBS (Shanghai).
The top management journals, from Fortune to Harvard Business Review to Administrative Science Quarterly, are all based in North America. The top management consultancies, from McKinsey to BCG, Bain and Booz Allen, all have deep American roots. One consequence of this dominance is that other perspectives get suppressed.
There are strong traditions of management writing in both the French and German languages, but they are being marginalised: the up-and-coming scholars in continental Europe are increasingly writing for English-language journals, and large French and German companies are increasingly bringing in North-American trained consultants and academics to advise them.
As for the developing world, there is no better way of proving that you are an ambitious, progressive company, than by hiring “professional” managers and advisors that cut their teeth in the North American system: look at Ambev (Brazil), Infosys (India), Huawei (China), DTEK (Ukraine) or Korea Telecom. The entire business world is seemingly in thrall to the dominant American ideology of management. America may have lost its lead in other areas of business, but it still holds sway in this one, vital area.
Q: Perhaps the reason there was so much support for the American management model is because the American management model promoted shareholder capitalism?
A: Well, there is some truth to this argument. An influential set of studies on cross-national management practices conducted by Stanford Professor Nick Bloom and colleagues sought to get to the bottom of things. These studies showed, essentially, that American firms outperformed all others.
‘Why American Management Rules the World’ was the headline on their blog post from June 2011. I have two responses to this argument. First, the methodology used by Bloom and colleagues, while painstaking and rigorous in its execution, was itself a product of the ideology I described above. In other words, the evaluation of success was based on such metrics as productive efficiency, consistent use of incentives, professional training, and so on. We shouldn’t be too surprised to see that American companies score best on the measures of success that they themselves developed.
Second, even if the American model is genuinely better today, why would we assume that it will still be so 10 or 20 years from now? Many observers have commented on America’s declining influence over the world. And as we know from history, it is often the imperial power’s worldview that is the last thing to decline.
Wikipedia defines hegemony as “a state of affairs where the dominant class impose their world view as if it were natural, inevitable, and beneficial to every social class.” Management ideology is, in essence, the last bastion of American hegemony. We continue to see the principles of shareholder capitalism, professional bureaucracy and productive efficiency as natural, inevitable and beneficial. But they can –and should – be challenged.
Q: So what is the alternative to the traditional American business model that you are proposing?
A: In terms of objective-setting, why don’t we put a greater focus on higher-order purpose or vision, rather than short-term financial returns? And what about giving equal emphasis to multiple stakeholders, rather than focusing singularly on shareholders? In terms of coordination, can we imagine putting a greater focus on self-organisation and collective wisdom, rather than bureaucratic rules and procedures, as a way of getting things done?
In terms of outcomes, should we put a greater emphasis on innovation, creativity and employee engagement, rather than just productivity and efficiency? Each of these ideas has its own body of adherents – management thinkers pushing a particular point of view, and practising executives experimenting with a different way of working. But there is no coherence to these points of view, and there is not sufficient evidence of success for the established ways of thinking to be challenged.
Q: Will the balance of power in the business world shift to the East in this decade?
A: We now look to Asia as a source of finance, for advanced manufacturing, for technological innovation and for well-educated workers. Therefore, it likely that we will in future look to Asia as a source of management ideology.
Up to now, most Asian companies have been happy to play catch-up, by incorporating the best of the American model of management into their working environment. But once they are competitive, there is no reason for them to stop there.
India and China have highly-distinctive cultures and rich traditions on which their own distinctive management ideologies might be built. Already, there is some evidence of a distinctive Indian model of management emerging. Peter Cappelli and his colleagues recently published a book, ‘The India Way’.
They focus on “holistic engagement with employees,” “improvisation and adaptability” and “broad mission and purpose” as the defining features that make the Indian model different to the American model. These features, they claim, are inspired partly from ancient writings, such as the Bhagavad Gita, and partly from the experience Indian executives had growing up in the chaotic post-war years.
Q: Will there be a ‘China Way’ soon?
A: Yes, it’s just a matter of time before a ‘China Way’ emerges. Chinese companies now have a level of self-assurance and success on the world stage that is allowing them to experiment with their own ways of working, and they are well placed to bring together the best of the American model with the best of their own unique cultural heritage. I don’t know what this will look like, but it is surely coming.
Q: I am of the view the values and the culture practiced in India and China will influence the new management ideology?
A: Culture is a complex thing, but we do know a few things about how to characterise the cultures of different countries. For example, the Anglo-American world is relatively individualistic and it has a relatively short-term orientation. Most Asian countries, in contrast, have a more collective orientation and a relatively long-term orientation.
So if we go back to the elements of the “alternative” model I sketched out above, with its emphasis on purpose and a stakeholder-based approach to capitalism, it seems pretty clear that these elements have a natural affinity with the Asian cultural norms around collectivism and long-term orientation.
Q: So can we conclude that the American management ideology will be challenged and replaced by the next decade?
A: Yes, Asian companies with Asian values will influence the way business is done in the next decade.