What explains the growth of the firm?Prior to 1800s: small, family run businesses, providing for one household. Excess supply was sold at regional markets.End of The Second Industrial Revolution: large corporations, run by managers, large volume of product

Technological developments & improved transport LinksTransaction Costs

Business History

'Modern business enterprises first appeared, grew and continued to flourish in those sectors and industries characterised by new and advancing technology and expanding markets'

Chandler (1977): technological change and access to wider markets which enabled and encouraged firms to increase in size.

Three pronged investment strategy: production, distribution and marketing, managers.

Example: Petroleum IndustryTechnological advances increased normal output from 900 barrels a week (early 1860s) to 500 barrels a day (1870).

Example: KeroseneA quarter of the world's kerosene in three refineries(NB this only works for certain products. Huge diseconomies of scale if this were done with consumer products.)

Increasing volume meant firms wanted to sell their products in new markets and in far away locations. This was possible due to new transport technology (the railway was 'fast, regular, dependable, all weather transportation'.)

Example: Steels/metalsHigher start up costs due to new technology (average blast furnace costs quadrupled). So firm had to product a much larger output and grow much larger in order to justify the higher start up costs.

Transaction CostsCoase (1937): there are a number of transaction costs to using the markete.g. search, information costs, bargaining costs, keeping trade secrets, policing and enforcement costs.Firms will arise when they can arrange to produce what they need internally and somehow avoid these costs.

Example: Railways

'By interconnecting with each other and enabling produce and passengers to transfer easily between railroads, these companies were able to increase revenues and profits.'

Grossman and Evans (1983)

Railways went from small sections of track controlled by small units to large federations. Transferring between the sections presented a transaction cost, so firms grouped together.

'The most obvious sort of friction and undoubtedly one of the most important is the cost of transferring assets from one form to another.'

Hicks (1935)

Continuous/mass production meant volume of transaction costs increased drastically, so 'friction' increased as well.

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increased as well.

'Chain reaction'Initial growth in a few firms meant small businesses were under threat.Larger firms had lower unity costs, and were able to integrate forwards and backwards.

Example: Sewing Machine Industry

'Only three [firms] attempted to integrate forward, however, an only they remained major factors in the industry.'

Williamson (1985):

Example: AluminiumAlco backwards vertical integration: acquisition of bauxite deposits and hydroelectric sites.

Vertical integration meant that small manufacturers and traditional family run businesses saw demand for their goods falling, and a more restricted supplier network.

How big were these firms?

'British entrepreneurs failed to grasp the opportunities the new technologies had opened up, precisely because they failed to make the necessary three-pronged investment in production, marketing and management.'

Chandler (1990):

Lack of access to financial capital? Or entrepreneurial failure?Most inventors' workshops were financed by private investors, not financial institutions.Edison was backed by Drexel, Morgan & Co. British inventors didn't have access to the same financial backing.

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Neo-classical theory: black box model where internal processes are not considered but an entity that maximises profit/market share based on information of the competitive market.

Principal-agent: friction exists between firm members due to asymmetric information between the parties

Transaction cost: firm exists to minimise the costs associated with market transactions -internalisation of these costs require firm growth

Evolutionary theory: the business firm and its managers are not merely reacting to broader technological and market forces; rather they are shaping technological development and markets outcomes using their own capabilities

Rail and shipping developmentsWider choice of products (due to transport) prompted advertising and marketing, which favours larger companiesStandardisation of parts and continuous process => mass productionLower transaction costs (Coase)Diversification to spread risk, esp. in the uncertain war period

Reasons for the growth of firms and managerial capitalism from 1850:

Coase: asymmetric information as well as search, negotiation and monitoring costs, led to the growth of firms to internalise these costs. Also in a long term contract, where the buyer decided the direction of resources, a firm is made

Williamson: 'bounded rationality' where actors rationally consider costs and benefits of the transaction with the information they are given, which is usually not complete; asset specificity-assets are locked into a specific task.

First entrepreneurs gain competitive advantage and oligopoly status by competing for market share/profits through strategy, function and operation

Multidepartmental structure due to vertical integration, and multidivisional structure with a general office to administer diversified division

Firms with multiple units could use legal policy enforcement to ensure common buying, pricing etc., but would lose coordination and productivity gains from management administration

Chandler: firms have corporate capabilities that allow them to do certain functions better than other firms can. 'Three pronged investment' in order to achieve cost benefits, a firm must invest in a marketing and distribution network, large production facilities and management to administer facilities and personnel, monitor the two functions and plan allocation of resources

Growth achieved geographically, functionally, through scale and scope; led to the development of legal and organisation systems of the firm

The First Industrial Revolution1760-1830 - UK, US, France, GermanyMechanisation of textiles

The Second Industrial Revolution1840-1930- US, UK, Germany, Japan

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1840-1930- US, UK, Germany, JapanFordism, Assembly Line

The Third Industrial Revolution1960-Present- US, Europe, JapanManufacturing => digital, costs of producing small batch of wide variety down, mass customisation

Growth in the US - competitive managerial capitalism

Growth in the UK - personal capitalism, British bias for small scale management

Growth in Germany - cooperative managerial capitalism, much like the US, but companies would negotiate with each other

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What is corporate governance?The control mechanisms to prevent self interested managers from taking actions detrimental to shareholders and stakeholders

How and why do systems of corporate governance differ across the globe?

UK & US: Single tiered Board of Directors. Emphasizes interests of shareholders.Large number of small owners => Separation of ownership and control (Berle and Means)=> No incentive to monitor management (it's a public good - free riders). Hart (1995)

Executive Board, made up of company executives, runs day to day operations-Supervisory board (non-executives) represent shareholders and employees, and fire/hire members of the executive board

-

Germany & Japan: Two tiered Board of Directors

Families owned large proportions of the companiesBanks sat on boards

UK and America combat monopolies, promote competitionGermany and Japan don't promote competition, allow higher concentration

What explains the recent rise in executive compensation?

Justified?

Increase in pay reflects 'a shift in the relative importance of general and specific 'managerial capital''.Increase in CEO hires from outside the firmAverage experience of CEOs at point of hiring has increased

Murphy and Zaboknik (2007):

Example: Yahoo hired ex-Google executive with decades of experience

Increase in skills required for work reduces potential supply and increases wages.Increased revenues raised by skilled executives justifies higher wages.Globalisation: potential revenues for single company are much higher. (Winner take all market -Robert H Frank)

But are the CEOs of today so much better than those of only a few decades ago?

Increased use of stock optionsBase salary and bonus as a percentage of CEO pay halved in the past 20 years. Increased use of options.

'From the perspective of many boards and practitioners, however, the cost of granting stock options is perceived to be far below their true economic cost. Options are perceived as inexpensive because they can be granted without a cash outlay.'

Murphy (2002): stocks options have low perceived cost

Did not incur an accounting cost until 2005.Example: incorporating options into Microsoft's 2002 accounts would have reduced EPS rom 1.32 to 0.91

Do not properly align interests of executives and stakeholders - short term profits and stock price

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Do not properly align interests of executives and stakeholders - short term profits and stock price are the only focus.

Managerial Influence

'CEOs and their management teams have considerable influence over boards. Directors have both financial and non-financial incentives to favour executives The cost to directors of pay arrangements that hurt shareholders is low, and directors therefore have little economic inventive to resist a CEO's compensation demands.'

Bebchuk and Fried (2004):

Managers can influence/punish the board.Interlocking boardsWhen boards decide on a CEO to hire, they will do whatever they can to get them. (i.e. pay them excessively high wages)

Cultural differences

'When potential outrage costs are large enough, they will deter the adoption of some arrangements that managers would otherwise favour.'

Bebchuk and Fried (2004):

Cultural changes in the 80s (Reagan and Thatcher - creation of corporations and modern managers) meant that managers were more likely to seek higher compensation. Public were less outraged.

Recently, outrage is back up, and some executives (Example: CEO of Morgan Stanley) are rejecting bonuses on the back of poor firm performance.

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Corporate governance- the rules and regulation through which we try to balance the usually conflicting interests of the stakeholders in a company - agency problem

Corporate governance needed to correct agency problems when contracts are incomplete (usually due to high costs when planning and writing up a contract)/

Governance structure - decides who has residual rights of control over nonhuman assets (e.g. sole ownership, joint ownership, partnership) - used to make decisions that have not been detailed in the initial contract when the opportunity arises

Weak shareholder rights, stronger creditor rightsGovernance by permanent large shareholders and banksHostile takeovers rare

German model

Widespread ownership (leads to separation of ownership and control and little incentive for an individual shareholder to monitor performance) - danger that managers pursue their own interestsHigh legal protection of investors that protect minority rightsWeak relations with banks and other investors

Anglo-American model

Medium shareholder and creditor rightsTraditionally had cartels, but now there is a mix of large and small investorsHostile takeovers rare

Japanese model

Setting up a board of directors made up of executive and non executive membersProxy fight - shareholders may vote to replace some of management's candidate on the board of directors with their own candidatesHaving a large shareholder to make proxy fights more effective and performance monitoring more likelyHostile takeover by a raider who places greater value on the company, with the intention of replacing the managementCompany's choice of debt, which could restrict management inefficiencyCredible threat (E.g. dismissal if income is too low)Share ownership or stock options

Some methods of solving the agency problem (with regard to managerial opportunism)

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The determination of the basic long-term goals and objectives of an enterprise-And the adoption of courses of action-And the allocation of resources necessary for carrying out these goals-

Strategy:

(Chandler - Strategy and Structure)

Corporate Strategy: What industry/areas are we in?Competitive Strategy: How do I compete in this marketFunctional Strategy: Sales, Marketing, Operations

Competitiona.Life Cycleb.Exit Barriersc.Fixed Costsd.

Rivalry1.

Concentrationa.Sophisticationb.Switching Costsc.Economies from Integrationd.

Customers2.

Concentrationa.Sophisticationb.Switching Costsc.Economies from Integrationd.

Suppliers3.

Scale Economiesa.Patents/Brandsb.Tariffs/Governmentc.

New Entrants4.

Price/Performancea.Switching Costsb.Make or Buy?c.

Substitutes5.

Porter's Five Forces

Profits go hand in hand with market share - Monopoly power.

Strategy:Focus on industries where the Five Forces are favourableChange the Five Forces by: consolidating competition, investing in entry barriers, differentiating your products

Core CompetencePrahalad and Hamel - Core Competence of the Corporation

A bundle of skills and technologies-Of fundamental customer benefit-Competitively unique-A gateway to new markets-

A core competence is:

Shift from a battle of market position towards a mastery of skills and capabilities

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Shift from a battle of market position towards a mastery of skills and capabilitiesWhat are you best at?

Is it valued by customers? - Will they pay you more than it costsIs it superior? - Do you command a premium over competitorsIs it imitable? - Something your competitors cannot copyIs it substitutable? - So that your competitors cannot trump youIs it durable? - Are you managing and investing in itIs it core? - Is it at the heart of nearly everything you do

Porters Generic Strategies

Don't get stuck in the middle.Cost leadership vs Differentiation

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Strategy is the determination of the basic long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. (Chandler)

Competitive strategy is concerned with how the firm can build market power over its rivals in the industry/sector

Porters Five Force which determine industry profitability: rivalry, customers, substitutes, suppliers, new entrants

Core value adding competences which are desired by the customer and difficult to imitate can inform the decision of the firm on which operational activities it should focus on and which it should outsource

At the level of the business unit, the primary strategic choices are cost leadership and product differentiation (Porter)

Kay (1993) - Foundations of Corporate Success: How Business Strategies Add Value

To be a source of competitive advantage, distinctive capabilities must be: unique, sustainable, appropriable (adds value for the business)

A capability becomes a competitive strategy when it is applied to a particular industry and brought to a particular market

The value of competitive advantage is determined by: strength of the capability, size of the market and industry profitability

Examples of distinctive capabilities: innovations that are either legally protected or difficult to copy, company 'architecture' (internal and external networks such as strong supplies relationships) which creates flexibility, a sustainable corporate reputation that resonates with customers

Examples of competitive strategy: using skilled labour to be an industry leader on quality, targeting a niche, underserved market segment, low margins with high volume, entering high growth markers, horizontal mergers to achieve economies of scale, outsourcing non-core functions, building a powerful brand identity

Porter (1979) - How Competitive Forces Shape Strategy

The corporate strategist must consider the five forces to identify where repositioning will yield the highest payoff and to anticipate future opportunities and threats such as: progression in product life cycle, expiration of patents, new technology introducing high capital costs

In addition the company should decide on which industries to enter by considering where the five forces are favourable

Rather than passively accepting its environment the firm may be able to actively shape the five forces, for example: merging with competitors to increase market concentration, investing in expensive capital equipment to raise entry barriers, differentiating seemingly homogeneous products through branding

Sources of entry barriers: economies of scale, product differentiation and brand loyalty, capital

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Sources of entry barriers: economies of scale, product differentiation and brand loyalty, capital requirements particularly sunk costs, cost advantages (such as learning curves, exclusive technology, government subsidy, favourable location), access to distribution networks, government regulation such as licensing

Substitute products merit particular attention if there is a trend of the price/performance trade off improving relative to the focal industry or if the substitute industry is currently making high profits (since a change in the market structure could lead to dramatic price cuts)

A powerful supplier group is often: dominated by a few companies, product is differentiated, high switching costs, credible threat of forward integration, product being supplied constitutes a small proportion of sales

A powerful buyer group often features: sales concentrated among a few high volume buyers, standardised product, threat of backward integration, product represents a large proportion of the buyers' costs, high switching costs, product does not impact on the quality of the buyer's goods

Rivalry is likely to be most intense when: there are many similar competitors, slow industry growth creates zero sum arm wrestling, lack of product differentiation, high exit barriers

Prahalad and Hamel

In the long run, competitiveness derives from an ability to build, at lower costs and more speedily than competitors, the core competences that spawn unanticipated products

Decentralisation of control can lead to unconnected business units and prevent the development of company wide competences which give the business the flexibility to capitalise on rapidly changing opportunities

Core competences are the collective learning the organisation, especially how to coordinate diverse production skills and integrate multiple streams of technologies

Decisions to diversify should not be solely determined by industry structure analysis, but the new product should also be a good fit either to existing competences or to the competences which the company wants to cultivate for the future

Three features of core competences: they provide access to a wide variety of markets (for example, a competence in display systems offers possibilities in calculators, smartphones, televisions, vehicle dashboards and computer monitors), they make a significant contribution to value perceived by the end user, they are difficult for competitors to imitate (often achieved through bundling skills)

Companies should seek to maximise their world manufacturing share of core products to maintain leadership in their competence and shape the evolution of applications and end markets

The damaging results of a blinkered strategic business unit mentality include: underinvestment in core competences and products, imprisoned resources (particularly immobility of human capital over organisational boundaries) and bounded innovation (restricted to existing markets)

Recommendations: carry out an audit of the number and quality of those embodying the core competences in the corporation, make unit managers justify their control over human resources as well as company finance, develop a culture of job rotation and collaboration across boundaries

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Sever limitations to Porter's generic strategy model.

Means by which firms may attain profits above the industry average in the long run.

Two basic types of competitive advantage: low cost and differentiation.

Cost leadership: lower than average costs, but commanding about average price, will earn above average profits.(Arguably need to be the lowest cost producer in the industry)

Differentiation: uniqueness in some dimension important to buyers across the industry and recognised as such. Allows a firm to charge an above average price for its product, and provided that it can produce at average/near average costs, to earn an above average profit.

Focus: rest on the choice of a particular target market segment with unusual or distinctive needs. Focuses on one of the two generic strategies for that smaller market segment,

Porter claims a firm must focus on one of the generic strategies and avoid being stuck in the middle.

'Being all things to all people is a recipe for strategic mediocrity, and below average performance, because it often means that a firm has no competitive advantage at all' (Porter, 1985)

Since each of the difference strategies requires a different mix of skills, resources and organisational structure. Any compromise will lead to organisational inefficiencies.

Why can't a firm differentiate on one product line and go for cost leadership on another?Porter argues this can only work if the products are located in separate business units, with a danger that culture from one side will spill over into the other an compromise strategy.

Exception to the rule: new innovation which enhances differentiation and reduces cost.

Counterpoint: what if market share is driven by differentiation rather than cost. So a successful differentiator gains enough market share to establish itself as a cost leader as well.

Japanese car and electronics: quality and cost go together.

Experience curves means brand differentiator can achieve lower costs as well.

Hendry (1990) - The Problem with Porter's Generic Strategies14 January 201411:22

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Learning to Plan and Planning to Learn (Brews and Hunt (1999))

Ansoff: Formal planning is beneficial in both stable and unstable environments

Mintzberg: Logical incrementalism, especially in unstable environments

Ends: major, higher level purposes, mission, goals or objectives set by organisations, each of which significantly influences the overall direction and viability of the firm concerned.

Means: the patterns of action which marshal/allocate organizational resources into postures that, once implemented, increase the probability of attaining organizational ends.

Synoptic ModelPlanning is a deliberate, rational, linear process, where ends are specified first, followed by means.

Deliberate means emerge from the strategy formation process fully specified, ripe for implementation through detailed attention to objectives, programs and operational plans of ever increasing specificity.

Synoptic Formalism is considered best suited to predictable, stable contexts, where uncertainty is low, as fully specified plan emerging from synoptic processes promote conception and thinking, rather than learning.

Incremental ModelStrategy formation according is an adaptive, incremental, complex learning process, where ends and means are either specified simultaneously or are intertwined.

Ends are rarely announced or recorded in a formal planning document, and when they are announced, they remain broad, general and non-quantified.

Means, rather than emerging from the planning process fully formed and ripe for implementation, develop and evolve over time as organisations learn from environmental interaction.

Recommended for unstable, complex, dynamic contexts with high uncertainty.

Study concludes that environment does not moderate the type of planning firms pursue.In stable environments, planning might not be needed until the environment changes.

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Strategy processChandler: Structure follows strategy, for example the strategic goal of diversification led to the development of the multidivisional firm in the earl 20th century

Planning/deliberate strategy linear path: define objectives, select among alternative courses of action, allocate resources accordingly, implement the plan (anticipating responses to various contingencies)

Emergent/learning strategy: good internal and external communication structures provide up to date information to top management, organisation can re-allocate resources at short notice, strategic approach is adapted as more is learnt about the situation through experimentation

Evaluation of strategy: suitability (is it a good fit to the company's mission statement and capabilities?), feasibility (are there resources available to implement the strategy), acceptability (how will stakeholder groups, such as investors, employees and customers, respond)

Classical (profit maximising, deliberate) - rational analysis by senior managersEvolutionary (profit maximising, emergent) - competitive pressures mean that the firm must adapt or dieProcessual (pluralistic, emergent) - strategy is fragmented and emerges from disputes between political factions in the firmSystemic (pluralistic, deliberate) - strategy influenced by social systems such as: gender, class, legal framework, education system, national culture

Whittington's typology of strategy:

Kay (1993) - FoundationsA useful strategic exercise is to ask managers how they would respond to various shocks such as a sharp fall in sales to assess the resilience of the company

Portfolio planning matrix: the dog (low growth x low market share), the cash cow (low growth x high market share), the question mark (high growth x low market share), the star (high growth x high market share)

It may be easier to devise a corporate strategy that suits existing organisational structures than to build the new structures necessary to implement a chosen strategy

SWOT analysis (strengths, weaknesses, opportunities, threats) encourages firms to consider both internal capabilities and the external environment

Diversification where no synergies exist does not add value because investors can replicate this position themselves with a diversified portfolio and shareholders may also be concerned the company is buffering poorly performing business with cash from strong performers

Firms should be seen as shifting coalitions, in which conflicting demands and objectives are constantly but imperfectly reconciled, and all change is necessarily incremental

Copycat strategies fail because the firm cannot easily identify what it is trying to copy or because incremental improvements always leave it one step behind

Wernergelt & Karnai (1988) - Competitive strategy under uncertaintyWhen faced with an uncertain future, the firm has three options: focus early on backing a particular outcome (high payoff for success but equally high risk), invest in a range of outcomes now, wait until

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outcome (high payoff for success but equally high risk), invest in a range of outcomes now, wait until the uncertainty is involved before investing

Major sources of uncertainty: future levels of demand (particularly in the early stages of the product life cycle prior to the emergence of the dominant design), methods of supply (such as new production technologies), state of competition (for example the possibility of new entrants), government regulation

It is more advantageous to act early when there are significant first mover advantages such as: learning curve effects, customer loyalty, patent protection, control of key supply or distribution relationships

Firms with complementary assets may be able to wait for the resolution of uncertainty before investing and then overtake market leaders

Joint ventures or alternative modes of cooperation with other firms in the industry can yield gains in risk sharing and economies of scale, reducing the trade-offs associated with uncertainty

Mintzberg et al. (1996) - The Honda EffectPast accounts of Honda's penetration of the US motorcycle market attribute deliberate strategy to its actions including: the use of high volume production in the Japanese market to mount a low cost challenge on the rest of the world, re-defining the target market through the nicest people campaign, aiming for high quality

According to the executives responsible, the strategy was far more emergent: government officials were highly sceptical of the proposals and would only provide an $11000 cash allocation, the company only stated selling smaller bikes when the US public expressed an interest after seeing employees riding them, the marketing campaign was dreamt up by a student unaffiliated to Honda

We tend to impute coherence and purposive rationality to events when the opposite may be closer to the truth

Corporate direction evolves from an incremental adjustment to unfolding events, top management must have the humility to accommodate changes to their initial strategic positions based on input from, for example, salesman, dealers and production workers

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Taylor (1911)The system comes first. Key efficiency lies in systematic managements and not in searching for the 'perfect man'

Maximum prosperity achieved through workers' highest possible degree of efficiency - smallest combined expenditure of effort resources and capital cost. Worker-employer desires are actually in line. Labour and capital productivity must be at their highest possible

Focus on scientific management

Must give workers incentive above average of industry i.e. promotion

Careful selection of the workman, equal division of work between managers and workers. Managers plan + coordinate work, working periods + detailed scientific analysis of the best working methods. Create laws, rules, formulae to replace judgement of 'stupid' worker. Increase intimacy and workers now only focus on manual work, specialise, no need to worry about planning

Worker given tasks: what to do, how to do it, using what, how long etc. very detailed.

Emphasis on carefully training and developing each worker in the establishment, guiding them to their highest state of efficiency

Aim to avoid systematic soldiering: workers deliberately working less hard because they will be abused by colleagues who also want to do less work. Caused by the belief that increase in productivity leads to lower employment

Ford

Cheap, affordable car

Wanted workers to be able to buy the cars they were making, so money would go back into the company.

Jobs were separated - individuals had their own roles within the production process.

Constant pace of production => Even the most efficient workers were limited by the rate at which the parts were moving. (Contrast Taylorism)

Faulty goods were hard to pick out and fix.

Difficult to change production techniques (whole plant has to be changed)

High turnover rates - individual performance not accounted for. Workers' tasks were boring and repetitive.

Maslow's Hierarchy

McGregor - Theory X, Theory Y

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Morgan's Images

MachinesBureaucracy, precision, speed, clarity, regularity, reliability, efficiencyFixed division of tasks, hierarchy, supervision, detailed rules and regulations.

OrganismsSeeking to adapt and survive in a changing environmentClusters of interconnected human, business and technical needs.

Different environments favour different species of organisations based on different methods of organising.Organisational life cycles => see porter.

Mazlow's hierarchy of needs: from basic to complex. Organisations as more than just machines.

McGregor: Theory X vs Theory Y

Organisations must always pay close attention to their external environmentsSurvival and evolution are central concernsCongruence with the environment becomes a key managerial task

Environments are far less concrete than the metaphor presumes

BrainsLearning abilities and processes that stunt or enhance organisational intelligenceIntelligence is distributed throughout an enterprise

As we move into a knowledge based economy, where information, knowledge and learning are key resources, brain becomes a more relevant metaphor.

Learning to plan vs planning to learn

CulturesMini-societies with their own distinctive values, rituals, ideologies and beliefs

'Pattern of development reflected in a society's system of knowledge, ideology, values, laws and day-to-day rituals.'

Reflecting the culture which the company is embedded in

Instruments of Domination

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Grint (1995) - Management: A sociological introduction

What are managers?Managers are those who are paid to manage, are in charge of resources, and act as economic agents for the owners

The superordinate position within an employment hierarchy. Those groups that dominate employment organisations are managers.

Management is:

Hales (1986) - management's task is to lead, liaise, monitor, allocate resources, maintain production, maintain peace, innovate, plan and control. However, all these could be applied to parents, and management actions are not that different from those undertaken by anyone else.

What separates managers I the context in which they do tasks/actions and therefore their position differentiates them

What do managers do?Tasks carried out by management are relatively unstandardized, changeable, involve developing routines and restructuring, and rarely lead to overt outcomes that can be associated with individual inputs.Management is like firefighting: rush from emergency to emergency, solving short term problems, whilst keeping production and the system goingHandy (1985) - general medical practice, with the GP the first port of call for all problems and spends little time on dealing with one particular case/issue

Fayol (1916) - functions of management: forecasting, planning, organising, commanding, coordinating, controlling

Act as a figurehead/leader or an organisational unita.Liaison: the formation and maintenance of contactsb.Monitoring, filtering and disseminating informationc.Allocating resourcesd.Handling disturbances and maintaining work flowse.Negotiatingf.Innovatingg.Planningh.Controlling and directing subordinatesi.

Hales (1986) - What do managers do?

Mintzberg (1990) - The Manager's Job: Folklore and Fact

Myth 1: The manager is a reflective, systematic planner

Manager's tasks last a very short timeThey respond to issues and needs of the momentSeeking a constant flow of information

Myth 2: The effective manager has no regular duties to perform

Good manager will carefully orchestrate in advance, allowing him to sit back and enjoy the fruits of his labour, responding only occasionally to unforeseeable exceptionManagers will engage in routine activities

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Managers will engage in routine activitiesSee important customers if they want to keep themCeremonial duties are importantSoft external information and pass it along to subordinates

Myth 3: Manager needs more aggregated information, which a formal management information system best provides

Managers favour verbal media, and rarely look at mail or periodicalsThey like soft information (gossip, speculation) due to its timelinessReluctant to delegate as it requires dumping all their knowledge, which will take longer in total

Myth 4: Management is/is becoming a science and a profession

A science involves the enaction of systematic, analytically determined procedures or programsHowever, we don't know what procedures managers use, and we don't know what managers have to learn, so it can't be a profession as it should involve knowledge of some department of learning or science

Work is characterised by 'brevity, fragmentation and verbal communication', meaning there can be no successful scientific attempt to improve it.

Science and ManagementPopper (1934) - falsification. A number of positive outcomes do not prove a theory correct, as a single false outcome proves it wrong. If the subject concerned cannot be subjected to falsification, it is not a science in Popper's view.

Kuhn (1970) - paradigms. Sets of ideas credible enough for the community to accept, and science evolves from conflict occurring as a result of new ideas/discoveries which undermine the dominant hypothesis.

Pre-science: central paradigm is lacking

Normal science: Scientists enlarge the central paradigm. Failure to conform is seen as a mistake of the researcher, rather than contradicting or refuting the paradigm.

Revolutionary Science: One paradigm is rejected in favour of another

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Higher mission-Code of ethics-Self regulation-Social prestige-State certification-Specialised education-Specialised publications-Defined body of knowledge-

Characteristics of Professionals:

Knowledge carrier-Legitimacy provider-Signalling-Embeddedness-

Role of consultancy firms:

Forecasting-Planning-Organising-Commanding-Coordinating-Controlling-

Fayol's Role of Managers:

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McKenna (2006) - The World's Newest Profession

Consultants at Lukens Steel - steel manufacturing firm whose basic product, location and means of production never changed

Consultants allowed the firm to level the playing field of knowledge. Firm was bound by its traditional, centralised management structure, and limited in dealing to long established customers, and used consultants (translators or transmitters of managerial ideas developed in other organisational settings) to supplement knowledge accessible to it. Consultants introduced stream of incremental changes so that dramatic managerial revolutions weren't necessary

Attempts to introduce scientific management from outside firms fail, until productivity bonuses were introduced

1920s: consultants focussed on controlling white collar bureaucracy rather than the line workers. Offered business surveys to help with cost accounting and offered executive level advice on administration and organisation

Reorganised management structures and advised on mergers, looking at benefits to the merger of Republic Steel with Corrigan-McKinney, concluding that there were advantages in complementary strengths and potential savings.

Management Engineering Firms that used detailed general surveys to identify and solve organisational problems. 2 main helps to consulting firms were it would uncover lots of problems that were not immediately evident, and since it required assistance from top executives, consultants would gain instant recognition, access and respect from clients.

Reorganisation of structure at Lukens turned their thin managerial layer into an organisation of divisional managers led by senior executives focused on strategic concerns. Move away from centralised structure, making it more modern - it was consultants that would disseminate this multidivisional form among American firms, not create it.

After 1950s, consultants offered increasingly specialised studies to their clients. Frequent use of consultants for smaller surveys made their presence less ad hoc and more part of the corporate routine.

Many executives would call in consultants to advise them on adopting and using multi-million dollar IT systems

Strategy consulting grew - rethinking corporate strategy rather than structure. Consultants recommended divesting divisions that were dogs, and buying stars.

Allow outside information and new ideas - helping companies be competitive. Economies of knowledge - cheaper

No competitive advantage if everyone uses them. Competitive disadvantage to not using them?

Bloomfield & Danieli (1995)Role of consultants: making themselves invaluable to clients and maintaining that identity for the lifespan of the consultancy

Suddaby & Greenwood (2008)

Professionals (2)16 January 201410:59

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Suddaby & Greenwood (2008)Professional service firms are unique. Differ from traditional firms in organisational and managerial arrangements: performance relies heavily on the reputation and status of the workforce, utilise employment practices and leadership behaviours, . Expected to balance commercial success with professional integrity, and subject to scrutiny from external professional bodies. Governed by partnerships, which increases risk of litigation.

PSFs have grown in size, and are important in mediating and brokering most forms of commercial transaction.

Recruitment and retention issues are complicated by compensation packages that are already extremely high, a workforce that is already highly intrinsically motivated and an increasingly global market for highly talented labour.

Issues in traditional public ownership governance structures due to traditional moral obligations of the firms and bureaucratic control is difficult due to employees being highly skilled and therefore able to find work easily, rather than take a reduction in autonomy over their work

Management consultants differ since they lack the corpus of abstract knowledge that differentiates and defines a profession (Sharma, 1997)

Wilensky (1964)Technical model of professionalism involves finding a technical basis for the occupation, asserting an exclusive jurisdiction, link both skill and jurisdiction to standards of trainign and convince the public that its services are uniquely trustworthy.

The job of a professional must be technical - based on systematic knowledge or doctrine acquired through trainingThe professional must adhere to a set of professional norms (high quality work, service ideal, client and social interest combine with personal or commercial profit)

Science has no clients except society. Professionals main public is clients, who usually cannot judge competence.

Make it full time (create an occupation)1.Establish a training school2.Professional association formed3.Political agitation in order to win the support of the law. Legal protection of the title e.g. chartered accountant

4.

Formal code of ethics produced5.

5 steps to becoming a profession:

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Managers need to find quick and simple solutions to their organisations complex problems and the guru's adeptness with marketing technology to promote these solutions.

Manager's need to make sense of themselvesGurus appeal to the manager's social or externally directed esteem by legitimating and celebrating the manager's role

Huczynski (1993) - gurus recognise, understand and cater to their needs and preoccupations. Helping the managers to make sense of their environmentGurus reduce the feeling of insecurityRepresents a response to widespread self doubt among executives

Pursue new fads because they are not certain that they would not work

Jackson (1996) - Re-engineering the sense of self: the manager and the management guru15 January 201412:03

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Sector knowledge - consultants accumulate which derives from repeated assignments in the industrial sector in which the client organisation resides.

Even 'weak' knowledge may contain structures that are the basis of longer term appeal to clients.

Consultants need clients just as much as the other way around. => specialist knowledge transfer.

Fincham, Clark, Handley & Sturdy15 January 201412:19

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