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Builders and dreamers: The making and meaning of management

by Morgen Witzel, Financial Times Prentice Hall, 2002.

(Reviewed by Kevin Barham in September 2003)

(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.

We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it. There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window on to some of the benefits awaiting readers of management literature.)

According to management historian Morgen Witzel, many of the challenges that managers face today have been confronted and solved before by a different generation of managers. Take today's e-commerce firms, especially retailers, who have been busily developing 'new' systems in the belief that what they are doing is unlike anything else ever done in retailing. In fact, he says, very many of e-commerce's most perplexing problems were faced by the first mail-order retailers such as Aaron Montgomery Ward and Richard Sears in the late nineteenth century; and many of the solutions developed then would apply now.

But by focusing so heavily on the genuinely new aspect of their operations - the technology - e-tailers have missed the chance to learn from their own heritage as retailers. The mail order pioneers used new methods of communication and transportation to develop a new method of marketing based on a complex and sophisticated distribution model. A hundred years on, the dot.com retailers, 'in the grip of a massive delusion that they were doing something "new" ', tackled the same problem but forgot to develop the distribution model. Some firms have paid for this failure with their corporate lives.

There is no point in re-inventing the wheel at the expense of time, money and talent, says Witzel. Many 'new' ideas prove, on examination, to be old ideas dressed up in new clothes. Having recognised the impostors for what they are, it is possible to look at what happened to these concepts in their earlier form and how and why they succeeded or failed. Generations of managers come and go but certain management principles remain that can provide wisdom, allow understanding and spark inspiration. By studying the past more closely, Witzel believes that managers can use it as a treasure trove of ideas and knowledge which can be adapted and used today.

Few business schools teach the history of management, however. To most managers, the history of their profession is 'as unknown and unfamiliar as the dark side of the moon'. Yet the history of management spans thousands of years of human civilisation. Over the centuries millions of men and women have organised and run business enterprises, for their own profit and for the enrichment of their societies. They have opened up new frontiers, pioneered new trade and transport routes, invented all the technological devices we now take for granted, and improved the quality of our lives many times over.

So why managers don't study their own history - and why they are wrong not to?

A common belief is that everything is new; we live in a time of revolutionary change, and all the old values and traditions are being swept away, so studying history is fruitless. If history could be used to predict the future, then it would be useful; but it cannot, and is not. There is also a view that even if history was of value, managers do not have sufficient time or resources to study it properly.

The author agrees it is impossible to predict the future by reference to the past; but says equally, a knowledge of the past is essential if we are to understand the present. Futurists no longer aim for hard predictions of what will happen; rather, they build on past experience to construct alternative versions of what might happen. Furthermore, not everything will change in future. Continuity and change always go hand in hand. And change itself is not new. Businesses and their managers and leaders have been confronting change since the dawn of civilisation.

The problem of lack of time and resources should be addressed at an organisational level. Study of the past needs to be built into organisational knowledge management systems in two ways. The first is general background history that will be of use for understanding markets, cultures, etc. Second, companies should pay more attention to their own history. Most corporate histories are either pedestrian sequences of events or self-glorifying puff pieces. Few companies produce any kind of history of how the firm was managed in the past; fewer still analyse that history and derive lessons for the future.

The consequences of ignoring the past

Divorcing ourselves from our historical context causes a number of problems. For instance:

Re-invention of the wheel. Time and again when new problems are encountered, we waste time working out solutions from scratch, when we could have looked at how our predecessors managed in similar circumstances.

Narrowness of focus. Tunnel vision results when managers focus on nothing but managing here and now.

Deviation from fundamentals. Managers are losing touch with the fundamentals of their craft. Leadership is often not taught until managers have reached senior positions. In business schools, innovation and entrepreneurship are taught only in specialised selective courses. But what is management about, if it is not about being innovative, entrepreneurial and a leader? In the early 20th century when management was first recognised as a profession, these three features were built into the core of the management concept.

Isolation. By ignoring our past we increase the distance between managers and the broad sweep of society. We are in danger of becoming so wrapped up in our own business that we lose touch with the world. No wonder businesses are accused of caring only about their own profits, not about society as a whole. This not only renders businesses more vulnerable to attack by those who would like to take down capitalism. The real threat is that an elite class develops which thinks it stands apart from society. History should teach managers humility. Reading about the great managers of the past would give managers a proper sense of their own worth and place, and of how they fit into society.

Management and civilisation

Witzel divides his book into three parts. Part I, 'Management and Civilisation', provides an overview of the evolution of management through the ages down to the beginning of the 20th century. This describes unchanging, fundamental principles of management drawn from examples such as:

• The builders of the pyramids of Egypt 'where management was born'.
• The Cistercian order of monks, masters of organisation and innovation.
• The Medici Bank, a medieval multinational M-form company.
• The East India Company, one of the world's greatest knowledge companies.
• Sumitomo, founded by samurai and still one of Japan's great businesses.
• The military 'managers' such as Frederick the Great and Moltke who defined our concepts of strategy.

Such stories, says the author, give managers the heroes they are lacking. He then goes on to describe the so-called 'management revolution', when a combination of Victorian scientific curiosity, an economic drive for efficiency and a genuine desire to improve the lot of working people led to the analysis and codification of the activities which make up management. These pioneers of management thinking did not invent management. Rather, they structured it and gave it form and ideals.

The principles of management

Part II looks at how the different branches of management have evolved. Marketing, organisation behaviour, financial management, strategy and human resources management, functioning under other names but in essence the same, are all as old as business itself. The author compares them across time and cultures to show how the ideas of each field developed and were put into practice. One of his implicit concerns is the way that the different functions have become specialised and divorced from each other. Take marketing, finance and strategy.

Marketing comes full circle

Marketing emerged as a distinct discipline at the beginning of the 20th century. Before then, it was not regarded as a separate specialisation. Marketing was what managers did - it was one of their reasons for being managers.

Modern marketing gurus have been promoting the notion of 'societal marketing', whereby firms are supposed to work actively to promote the well-being of individuals and society. But have the gurus really invented something new, asks Witzel? He takes us back seven centuries to St Thomas Aquinas who mused on the nature and function of markets. Markets, said Aquinas, exist to serve the needs of the people; their primary function is a social one, in that they allow people to buy goods which help them to live better, more rewarding lives. So the 'just' or 'fair' price of a product depends not on its intrinsic worth, but on the value of the product to the purchaser. The modern gurus, says Witzel, have only returned marketing to its roots, going back to a concept of marketing that is both economic and social and that sees marketing not as an isolated activity of 'selling', but as a stage in a process by which human needs are met and civilisation is built.

The rise of the finance professional

Increasingly complex capital markets and ownership structures and more regulations have all led to the development of corporate finance as a distinct branch of management. Again, this is a relatively recent development. The chairmen of large companies used to manage corporate finances directly. Finance, like marketing, was seen as being at the core of the management function, and responsibility for it went right to the top. Although accounts departments existed, their responsibility was to gather and tabulate information, not to make decisions and set policy. Separate finance departments did not appear in most firms until after the Second World War. Today, finance is very much a separate province in most firms, and financial managers are almost a breed apart. But is this a good thing, asks Wizel? The need for specialist expertise cannot be denied; but is it right that something so vital should be so heavily devolved to a specialist department? (Thereby allowing Enron's former CEO to defend himself by declaring 'I am not an accountant'!)

The principles of strategy

A study of the great strategists of history teaches some enduring strategic principles which modern firms would do well to use as a checklist:

1. Focus and purpose.
2. Leadership.
3. Requisite organisation.
4. Deployment of resources.
5. Self-knowledge.
6. Knowledge of the environment.
7. Knowledge of the enemy.
8. Preparation.
9. Virtue (an inner calm or inner strength that can be relied on in times of crisis).
10. Flexibility.
11. Imposition of one's will on the enemy.
12. Use of stratagem and deception.
13. Speed and surprise.

By returning to the roots of strategy, we can obtain a broader and deeper picture of what strategy is. Strategy involves not only keeping the organisation focused on the goal and ensuring its parts work together to achieve that aim, but also recognising that all strategy unfolds in dynamic situations, that unexpected frictions will certainly occur, and that competitors will also be pursuing their own strategic designs which will conflict with one's own. History shows that strategies are comparatively easy to set; they are hell to implement.

The philosophy of management

Part III of the book consists of a series of short chapters considering some fundamental questions. What ethical standards are expected of a business? What is leadership? How are entrepreneurship and innovation to be harnessed? What role does culture play in business? Each of these questions is as old as business itself and all have a fundamental bearing not only on the success and failure of individual businesses but also on whether our societies and civilisations stand or fall. Witzel looks at the historical lessons for each question. For example:

Ethics

Companies often fall into ethical traps, he suggests, because they lose sight of the meaning of existence. What is a company for? Why does it exist? What purpose does it serve? For any company to behave ethically, its managers must be able to answer those questions. For example, do we take the view that businesses are responsible to their owners, and that acknowledging any other responsibility is unethical? Or do we believe that businesses are formed as responses to social needs, and have no other function than to supply that need; thus they have an integral link with the societies that form them?

Risk and reward

History teaches that entrepreneurship thrives in a supportive culture, but that true entrepreneurship is a combination of risk, motivation and intelligence that coincides in only a minority of managers. Rather than teaching entrepreneurship to everybody, we should identify entrepreneurial potential and then encourage and support it. All managers have a role to play here; we should become capable of spotting entrepreneurs even if we do not have their attributes. Let us study history, not to become entrepreneurs, but so we learn to recognise entrepreneurship when we see it.

The quest for knowledge

Knowledge, in business and management is the new buzz word. The importance of knowledge cannot be denied, but nowhere else is reinvention of the wheel so clear. The latest fad is the 'knowledge organisation', a term which implies that there is some other kind! There is no such thing as an organisation without knowledge. As examples over the past two centuries show, the key to successful innovation lies in creating a managerial and corporate culture where innovation is not only possible, but expected. Innovative business throughout history have been distinguished by their philosophy of learning and by leaders who acted as as innovators or catalyst for innovation and drove the innovative process forward. The lesson is that long-term success in management must be about developing a culture of progressive thinking and learning. In that, all managers have their own part to play.

How to use history

Witzel concludes that the value of business and management history is not in any ability to offer concrete practices or guidance for management now and in the future. It has other valuable uses. One is to provide inspiration or comfort for today's harassed managers. History can also serve as a filter through which to examine new management trends and fads. While it provides no certainties, it offers a fertile ground for examining and testing ideas and concepts and analysing information.

This book is recommended as an original and informative read in its own right. Perhaps its biggest contribution is to make us think how we might carry out historical research for our own business purposes. To do this, we must establish priorities. The history of management is a vast subject; we must break it down into smaller fields. We might examine the history of our own organisation (the real history, not the glossy PR propaganda). Or the history of our own industry or market: what happened in the past, what factors caused change, what elements of continuity remain? There is also the history of one's specialist function or discipline: how did marketing emerge and from where? Why did strategy become an issue for businesses? And finally, there are issues of business and society. Concepts such as business ethics, globalisation and culture are not new; they have been around for many hundreds of years. What lessons can we learn from the way managers dealt with these before?

Everything in business is new, and yet everything in business is as old as the hills. Accept and understand that paradox, says Witzel, and you will have added a powerful new weapon to the armoury of your business skills.

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