ORGANIZATIONAL IMPACT OF MANAGEMENT THEORIES - …

1 ORGANIZATIONAL IMPACT OF MANAGEMENT THEORIES Randall L. Schultz University of Iowa MANAGEMENT THEORIES range from fads to those that become part of the repertoire of decision making. This research classifies MANAGEMENT THEORIES and proposes a "Beaufort-type" scale to measure ORGANIZATIONAL IMPACT . March, 2006 2 MANAGEMENT THEORIES One seemingly sure way to write a best selling book is to come up with a new diet or a new MANAGEMENT theory. The routine for MANAGEMENT THEORIES is straightforward: take an idea however small write a book, visit the talk shows, count the royalties. As a preliminary matter to developing a new scale for measuring the IMPACT of such THEORIES of MANAGEMENT , we collect most of these THEORIES over the past four decades. USE OF MANAGEMENT THEORIES Our primary question is: Are any of these THEORIES actually used in corporations? The nature of use is subtle. Take the theory of core competency, proposed by Hamel and Pralahad (1990).

2 Is the theory used if an organization talks about it, perhaps often, and perhaps in meetings as a matter of course? Is the theory used if it becomes a part of reports that state the firm s core competence? Or should we demand something more than that to consider a theory to be used, such as the possible fact that some or all decisions are made with reference to core competence? Even then, such use of the theory may make no difference to the actual decisions. What, then, does this mean? This hierarchy of use parallels the hierarchy of use observed in the implementation of models and systems in organizations (cf. Schultz, Ginzberg and Lucas, 1984), where measures of use range from no use at all to change without use a situation where the very fact that the model or system was introduced to the organization in some way accounts for a change in decision making, but not the model or system itself. 3 IMPACT OF MANAGEMENT THEORIES Equally important is the question of IMPACT : If a theory is used, did it make any difference in performance?

3 Like use, the nature of IMPACT is varied. There can be IMPACT without change, change without IMPACT , change with IMPACT , positive IMPACT and negative IMPACT . How can these types of IMPACT (and the types of use) be sorted out? We propose a simple scale that embodies both use and IMPACT so that the usefulness and consequences of all of these popular and not so popular MANAGEMENT THEORIES can be judged for what they are supposed to be: ways of improving ORGANIZATIONAL effectiveness. LIMITATIONS OF EXISTING MEASURES OF USE Most existing measures of use are of limited practicality, primarily because they must be parameterized for each type of innovation and each organization. Consider the most common way of looking at use in organizations: innovation and adoption. ADOPTION There is a vast literature on adoption that generally takes as its starting point the influential book of Rogers (1995), the first edition of which was published in 1962. The suggestion of Rogers was that innovation in organizations followed a five stage process, viz.

4 1. Agenda-Setting 2. Matching 4 3. Redefining/Restructuring 4. Clarifying 5. Routinizing This process begins with agenda-setting, conceived of as in continual operation with action triggered by performance gaps between actual and desired states or goals. Organizations scan the environment looking for new ideas innovations that could help close the performance gaps. Matching is essentially a feasibility check and, according to Rogers, this may result in termination of the idea if there seem to be too many problems with fit. Although Rogers does not discuss this, it is implied that there would be some if not considerable discussion about the innovation ( , talking about it in groups). The first two stages are considered as an initiation process and the next three stages as the implementation process. So, in this view, implementation only begins after talk about fit. Redefining/restructuring implies that either the innovation or the organization is changed so that the fit is improved.

5 This concept is similar to the concept of ORGANIZATIONAL validity used in the implementation research literature to show a pre-condition for implementation (Schultz and Slevin, 1975a). The clarifying stage would then occur (if the implementation proceeded), and here Rogers says that the innovation is put into more widespread use (Rogers, 1975, p. 399). Since Rogers does not discuss MANAGEMENT innovations or THEORIES per se, the nature of this use is not elaborated. But, importantly, the innovation is linked with the question of who will be affected by the implementation, especially the individual ( Will it affect me? ). This concept also finds support in implementation research which has found that the single most important factor 5 is personal stake or what the innovation will do for the individual adopter (Schultz and Slevin, 1975b). Finally, in Roger s scheme, comes routinizing, where the innovation has become incorporated into the regular activities of the organization, and the innovation loses its separate identity (Rogers, 1975, p.)

6 399). This may or may not imply use by all, and for many innovations from information and decision support systems to MANAGEMENT THEORIES (that involve certain reports and stylized calculations) there would be reason to believe that they would not lose their separate identity. Indeed, that is one way to measure their continued use by looking for the reports, calculations or decisions that give evidence of the innovation. LIMITATIONS OF EXISTING MEASURES OF IMPACT Like measures of use, most existing measures of IMPACT are of limited usefulness, primarily because they must be parameterized for each type of innovation and each organization. In addition, there is a pro-innovation bias in most research such that the negative consequences of use are often ignored. ORGANIZATIONAL CONSEQUENCES Rogers (1995) ends his book on diffusion of innovations with a chapter on ORGANIZATIONAL consequences, by which he means the changes that occur to an individual or to a social system as a result of the adoption or rejection of an innovation (p, 405).

7 This definition does not attempt to separate changes that may be indicators of 6 use from changes that may be indicators of performance gains or loss. Rogers points to one problem with almost all studies of ORGANIZATIONAL consequences: a pro-innovation bias that looks for positives from the innovation but not negatives. This problem clearly needs to be dealt with in any measure of ORGANIZATIONAL IMPACT . From the perspective of ORGANIZATIONAL innovations (and it should be noted that Rogers does not focus on ORGANIZATIONAL innovations when he discusses ORGANIZATIONAL consequences) Rogers examples of consequences are all related to performance, , increased production or greater expense (Rogers, 1995, p. 410). Such measures are clearly part of any change in ORGANIZATIONAL effectiveness due to an innovation. The Rogers approach, however, is limited by its inclusion of any change in an organization as evidence of ORGANIZATIONAL consequences. A better approach would be one that separates change as an indicator of use and change that serves as an indicator of effectiveness.

8 This is because the adoption process can lead to changes in effectiveness without actual adoption (use) and changes in behavior that may be indicators of use that are not necessarily followed by changes in ORGANIZATIONAL effectiveness. In other words, merely talking about a MANAGEMENT theory may improve things but actually using one may not. ORGANIZATIONAL EFFECTIVENESS The implementation literature has long focused on ORGANIZATIONAL effectiveness as the appropriate measure of ORGANIZATIONAL IMPACT (Schultz and Slevin, 1979). In addition, one definition of implementation separates use from effectiveness by arguing that implementation is changed decision making and successful implementation is improved 7 decision making (Schultz and Henry, 1981). This view allows ORGANIZATIONAL consequences to fall into the two logical groups of indicators of use and indicators of ORGANIZATIONAL effectiveness. Performance A more straightforward indicator of ORGANIZATIONAL effectiveness and one that applies particularly to MANAGEMENT THEORIES is performance.

9 In the information systems literature, the main IMPACT measure of model use has been performance. Depending on the nature of the model, performance could refer to an individual decision maker s performance (Schultz, Ginzberg and Lucas, 1984; Lucas, Ginzberg and Schultz, 1990) or an organization-wide measure of performance such as profit. Good Performance. To most managers and shareholders, good performance means good financial performance, although other measures of success such rates of technology development or new product success may also be meaningful. So any MANAGEMENT theory that improves performance would be considered as having led to good performance. Bad Performance. But the use of MANAGEMENT THEORIES doesn t necessarily lead to good performance and businesses are all to aware of THEORIES and plans leading nowhere or, worse, to declines in performance. We must consider, then, bad performance as a possible outcome of the use of a MANAGEMENT theory that has had an IMPACT , in this case a poor one.

10 8 MEASURING THE IMPACT OF A THEORY What is really interesting about a MANAGEMENT theory is whether it has had an IMPACT on anything. Did it change the way decisions are made? Did it improve performance? Did it simply lead to improvements without actually being used? These questions suggest that a common scale of force of IMPACT could be useful. Particularly useful would be a scale that uses levels of force that are apparent to any observer. A model of such a scale is the Beaufort scale for wind. THE BEAUFORT SCALE Although it takes his name, Admiral Francis Beaufort of the British Royal Navy did not originate the Beaufort Scale. Attempts to measure wind force with a descriptive scale were made many hundreds of years before Beaufort came up with his version in 1805. Not surprisingly, Beaufort scale points (13 at first, 12 later on) that ranged from calm to storm were based on nautical observation of the wind by its effect on the sails of a frigate. Thus, by 1838, the Royal Navy was using scale points that ranged from Calm (0) to Hurricane (12) with descriptors such as Beaufort 1 (Light Air) Just sufficient to give steerage way and Beaufort 11 (Storm) With which she would be reduced to storm staysails.