Old Boots – Wisdom in Business

Robert Chia
Robert Chia

In my last blog I referred to Professor Robert Chia, the eminent critical management scholar who works on phronetic leadership and the like. Long story short, how do we practice wisdom?

It was a real pleasure to welcome Robert to the Centre last night. Robert gave us a review of his thinking, focusing on three things which challenge all boards, and for that matter all business schools.

First, the thinking of many business schools swallows the idea that truth can be represented in theories or models. This is the idea that we can capture truth in a theory or a model. Having captured the truth we then apply this to practice. Second, and part of that application, we set goals, targets, KPIs and the like. These are important but they are also very risky. Third, we confuse excellence and success. This is a critical challenge to governance in every sector and I will provide more space for this, and the second point, in subsequent blogs.

So what about representation of truth/reality? Chia’s point chimes in with both Ghoshal (2005) and Khurana (2010) in their challenge of business schools. Part of the challenge is that business schools peddle a faux scientific view of academic disciplines. It is faux because most of so called ‘theories’ are nothing of the sort. Take the agency theory of governance. Once you examine this you find a threadbare coat of assumptions which have no basis, and which, for the most part, were not critically tested. At its heart is the assumption that the agent, the CEO, is motivated by their own ends, in particular by money, and thus has to be controlled by the board. The incoherence of even this part of the ‘theory’ is dazzling.

First, it has a set of psychological assumptions: that there is only one criterion of worth, money; that motivation is based in this worth; that leaders are dominated by self-interest. Evidence, i.e. systematic reflection on the thinking and practice of leaders, suggests that little of this reflects ‘truth’. Moreover, the truth it reflects is incoherent, viz. leadership is based in trust but by definition we cannot trust our leader, and thus must control her through the board. Second, if we mistake representations for the truth, the temptation is to ‘apply’ that truth to practice. This means, in fact, trying to shoehorn truth into the old boot of theory. The pain! Of course, as Ghoshal (2005) has reminded us this is nothing like theory. We cannot be surprised that many students in business schools do not know what they or we mean by theory! If you are an academic test this out. Go around your next class and ask students what theory is. Better still ask your colleagues what theory is.

Rather than expostulate further on theory I commend to you the cracking debate in the latest edition of the British Journal of Sociology about theory http://onlinelibrary.wiley.com/doi/10.1111/bjos.2016.67.issue-1/issuetoc

       Writers there are responding to Richard Swedberg’s argument that we should be focusing on theorizing, not theory per se. Theorizing I take to be the practice of making sense of what we or others do. Swedberg’s ( http://onlinelibrary.wiley.com/doi/10.1111/1468-4446.12187_5/epdf) point is that this is an ongoing process and students need to take responsibility for making their own sense, in relation, of course, to other narratives (theories, if you want), of what they do and what they want to do, of who they are and what they want to become.

Agency theory, of course, stills clings on tenaciously, though with much more opposition.download So what has been the reason for its dominance? Part of this is that too many have bought into the idea that it is ‘scientific’. An aspect of the definition of that is that it avoids ‘normativity’, and with that, any attempt to impose values. But agency ‘theory’ is shot through with value assumptions, and lurking behind these are a series of other ‘theories’ about freedom and about the leader as individualistic, dominant, and, wait for it….., all knowing. Hence, the so called ‘agency problem’; roughly, the CEO knows everything about the business and the board much less, so how are we going to cope with that? Interestingly in recent governance crises (see the VW scandal) the CEO precisely said, ‘but I cannot be expected to know everything’. Other CEOs have intentionally cultivated ignorance as part of a strategy of ambiguity (Martin 2013).

Ignorance, in fact, is relative and the most effective way of maximising knowledge is through dispersed leadership, not through hanging on to the hoary old ghost of the great leader (cf. Robinson and Smith 2014).

We really need to grow up, and realize that any attempt to make sense of the world involves values: psychological/relational, moral, social, political, and intellectual. Any attempt at theory which squeezes these out, and the critical dialogue that goes with them, resides in cloud cuckoo land. Go back to Aristophanes http://www.fullbooks.com/The-Birds1.html to see how daft that is.

In the next blog I will look at some of the implications of this for pedagogy.

Simon Robinson (@leading360)

Director, Centre for Governance, Leadership and Global Responsibility

Ghoshal (2005) ‘Bad management theories and destroying good management practices’, Academy of Management Learning and Education, Vol 4, no 1, 75-91.

R. Khurana (2010) From Higher Aims to Hired Hands (Princeton: Princeton Univeristy Press).

 I.Martin (2013) Making It Happen: Fred Goodwin, RBS and the men who blew up the British economy (London: Simon and Schuster).

 S. Robinson and J. Smith (2014) Co-Charismatic Leadership (Oxford: Peter Lang).



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