IT’S ALIVE! BUSINESS THEORY ON THE RAMPAGE IN THE REAL WORLD

Did you know that when Donald Rumsfeld made his ‘known unknowns’ speech he was actually using business-speak? If not, then read on...

Business theory is what the ruling
classes use to communicate
with each other

When former US Secretary of Defense, Donald Rumsfeld, expressed himself at a news conference in February 2002 in terms of ‘known unknown’ he was expressing himself in terms of a management theory familiar to some of his audience: namely ‘project risk management’. As a business blogger remarked, ‘While this quote sounds extremely confusing, this statement doesn’t need to be explained to many of us project managers, especially those among us who have attended formal PM (Project Management) training and/or passed the PMP® exam (Project Management Professional). Those of us who practise sound risk management and budgeting know exactly what he is talking about.’ The fact that this speech was widely seen as mystifying by the media shows that the terms of modern corporate ideology are usually only expressed in the relatively private confines of business, among members of the elite. Which is why we thought it was worth demystifying it for our readers.

Business theory is what the ruling
classes use to justify their existence

Justify it to themselves, and to the rest of us. Business handbooks argue that market freedom – the freedom to buy and sell - is analogous to democratic freedoms. A recent book on marketing strategy published by Pearson, the owners of the Financial Times, assures its readers that marketing is there to help consumers and companies to provide each other with the most suitable services and that this is essential for democracy.

Business theory is for the benefit of a small class of people

A common business platitude is to talk of ‘stakeholders’ in the business – people as diverse as a factory’s local community, its workers, customers, as well as shareholders. In this aspect of business theory, management activity is seen as benefiting everyone, and eager MBA (Master of Business Administration) graduates may plaster their workplace’s walls with slogans such as ‘employees are our greatest asset.’ However, at the same time, the goal of management is the efficient delivery of the most profits, the most growth, the most market share for the company. When it comes to the crunch, everyone is expendable – apart from business managers themselves. An influential Harvard textbook on management by Anthony and Govindarajan states that it is crucial to cut down the workforce and save on wages - nothing should be done by a human that can be automated. However it goes on to add that, of course, due to the uniquely intuitive and interpersonal nature of the management process, managers can never be automated.

Business theory is built on faulty foundations

The theories of Adam Smith form the closest thing to a central body of work that business theory has. Although writing over two hundred years ago, Smith’s writings are still habitually referred to in the latest MBA text books and form a key part of business theory’s justification. The aspect of Smith’s work that is played upon the most is his parable of the butcher, the brewer and the baker, who independently pursue their business interests but in doing so increase the prosperity of all: ‘It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.  We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.’ For modern business writers, such as Brown and Wilson, in their book on outsourcing, this becomes a paean to growth-hungry corporate society: ‘By pursuing maximisation [of profits] firms remain competitive, and the result is cheaper goods and services and a higher standard of living, at lower cost, for consumers’. The economist Amartya Sen sees this as a misuse of Adam Smith, reducing him to a ‘one sentence economist’ and forgetting that Smith in other works emphasised the role of sympathy in human relationships. Huemer, in his book on business relations, says that this use of Smith’s work ‘fits well into the distancing of economics from ethics that has occurred with the development of modern economic theories.’

Business theory dodges responsibility

As the main body of theory influencing monster multinationals you could expect business theory to take its responsibility fairly seriously. But no, for these rugged advocates of individualism and entrepreneurship it is always someone else’s fault. Brown and Wilson, writing on the contentious issue of outsourcing, admit that there has been a ‘jobless recovery’ in the USA since 2001, which means that more money is being made but unemployment is not going down. Could it be that outsourcing is part of the problem? ‘Oh no,’ they splutter, ‘not me, guv.’ The factors to blame include the ‘shift from a domestic to a global economy’ and the ‘shift to a knowledge economy’. You get the idea – a big impersonal ‘shift’ is going on in ‘the economy’ and who can argue with that? As Bill Clinton announced, ‘Globalization is not a policy choice - it is a fact.’ Business theory pushes the idea that the leaders of the most powerful institutions in the world are, in fact, trapped in an unstoppable process which forces them to behave in despicable ways. Thus the system is given an impersonal, almost supernatural underpinning. Who can argue with a ‘global process’?