Management Theory

Why hard-nosed executives should care about management theory

Generic prescription: Professors and consultants routinely prescribe generic advice, and managers routinely accept such therapy. Case: Lucent Technology (centralized vs. decentralized organization)

Three steps to make a theory: 1. Observation and description of the phenomenon; 2. Categorization
3. A statement of what causes and why.

Correlation and causality: Don't confuse correlation and causality. People usually confuse the correlation between attributes and outcomes with the underlying causal mechanism.

The breakthroughs that lead from categorization to an understanding of fundamental causality generally come not from crunching ever more data but from highly detailed field research, when researchers crawl inside companies to observe carefully the causal processes at work.

Circumstance contigent: They define not just what causes what and why, but also how the causal mechanism will produce different outcomes in different situations.

The importance of failures: the obsession with studying successful companies and their best practices is a major reason why platitudes and fads in management come and go with such alarming regularity and why much early-stage.

Why doesn't it work?: The question is a magical key that enables statements of causality to be expressed in circumstance-contingent ways.

Trustable theory or advice: We can trust a theory only when its statement describing the actions that must lead to success explains how they will vary as a company's circumstances change.

The moral of theory is that in business, as in medicine, not single prescription cures all ills.

Becoming a discerning consumer of theory:
- Beware of work urging that revolutionary change of everything is needed.
- We need to know not only where, when, and why things must change but also what should stay the same.
- Remember that a researcher's findings can almost never be considered the final word.