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Recently, the Economist (Feb. 17, 2005) argued that scholars in management education faulted economics theories of maximization and rationality for what is wrong with corporate management. The magazine asserted that it was the mistake of other disciplines, rather than economics, for not coming up with ideas to rival economic theories, such as agency theory and maximization. While the Economist's argument seems to be sound, its coverage missed the most important points which were made by some eminent management scholars, notably the late Sumantra Ghoshal.
In a provocative article, "Bad Management Theories are Destroying Good Management," Sumantra Ghoshal genuinely challenged scholars to be in tune with societal trends and needs and not to seek narrow goals at the expense of the well-being of the world community and existing circumstances. His article has stimulated genuine debate and raised serious questions. Indeed, the points that were raised and the debate that followed have created a healthy intellectual environment and is certain to lead to a refinement of many management concepts and approaches.
It should be noted that Professor Ghoshal addressed several theoretical and organizational issues. Three points, however, deserve particular attention from management and international business scholars. These points are: pessimistic assumptions, scholarly laborers, and lack of intellectual environment that encourages competing models. The pessimistic assumptions are the most troubling and are more likely the foundation for what professor Ghoshal termed "bad management theories." The management literature and theories have been influenced by three primary assumptions: mankind is imperfect and deficient, rationality in behavior, and profit maximization tendency. The belief that mankind is deficient has penetrated management theories and the field of psychology. Sigmund Freud was instrumental in promoting this thinking when he stated, "in the depth of my heart, I can't help being convinced that my dear fellowmen, with few exceptions, are worthless" (quoted in Wrightsman, 1992, p.57). The assumption that human beings are worthless and deficient implies that people are not dependable and should not be trusted and, therefore, their aspirations should be disregarded. Consequently, this proposition has become the basis for many behavioral and organizational theories which stress that employees must be closely directed, monitored, and controlled.
At the same time, Milton Friedman's assumption and theories have influenced economics and management writing. According to...