Good management matters and the difference between a successful and an unsuccessful business can often be linked to the quality of its management team. The World Management Survey developed by Nicholas Bloom of Stanford University and John Van Reenan from the London School of Economics provides data on the performance of managers across industries and countries.
Writing in the Harvard Business Review last year, Bloom and Van Reenan, with Raffaella Sadun from Harvard University, provided an overview of the key issues they have found in good versus poor managers. In relation to manufacturing firms, at least 10 important areas were highlighted.
The first of these was the ability to connect the firm’s strategic goals with the individual performance of employees. This impacted on the second area, which was the ability to create clearly defined and achievable goals. In third place was the firm’s management’s ability to deal with failure, and in fourth place its ability to take corrective action against underperformance.
Also important was how managers engaged with employees over identifying the causes of problems, then how they implemented continuous improvement programs, and set key performance indicators to track performance. Other factors were the senior management’s commitment to attracting and developing talent, retaining it and helping employees value the opportunity to work for the firm.
According to their analysis, a 1 point incremental improvement on a 5-point management score translated into a 1.4% increase in annual sales growth, 14% increase in market capitalisation and a 23% increase in productivity. As shown in the diagram below, the United States, Japan and Germany ranked in the top three slots for management performance, with Australia falling in the middle between France and New Zealand.
The role of management education
One of the findings from this research is the importance of education in the performance of managers and non-managers. This was outlined by Bloom, Sadun and Van Reenan in conjunction with Christos Genakos in a working paper released last year, which is forthcoming in the journal the Academy of Management Perspectives.
Better educated managers were found to be strongly correlated with high management scores. Although they cautioned against drawing too many conclusions in relation to causal relationships, they made the following conclusion:
“Our belief is that more basic business education—for example, around capital budgeting, data analysis, and standard human resources practises—could help improve management in many countries” (p.17).
Given the potential importance of management education to enhancing the effectiveness of real life managers, it was with concern that I read another paper published in 2012 by Jone Pearce and Laura Huang from the University of California. Writing in the Academy of Management Learning and Education, they raise some serious questions over what they claim is the decreasing value of academic research to management education.
How relevant is management research?
The majority of the world’s universities now house a business school, and these schools employ thousands of academics who teach and research in management. Most are bench-marked against the American business school tradition, with the prestige institutions charging substantial fees for their degree programs.
According to Pearce and Huang there has been a steady shift within business schools since the 1960s away from the applied to the theoretical. Where business schools once housed experienced executives who taught managers from real life, they now mostly contain professional academics that are focused more on scholarly research.
The concern raised by Pearce and Huang is that students – particularly MBA students – enrol in business schools, and pay high tuition fees, in the expectation that they will learn valuable skills and gain useful knowledge. However, if too little business school research is relevant to practising managers it will not have much use within management teaching programs.
They cite a long list of scholars who have expressed concern over the relevance of academic research into management. Then they reach the conclusion that the practical relevance of this research has actually gotten worse not better.
What is actionable research?
Pearce and Huang draw on past studies into the factors most likely to comprise research that is useful and relevant to students of management. They identify actionable research as studies that managers can use either conceptually or instrumentally as a basis for guiding future action. Such research should produce a degree of understanding or knowledge that a manager might apply within their task environment.
The two researchers conducted a survey of management research studies published in two of the most highly cited academic journals, the Administrative Science Quarterly and the Academy of Management Journal. A total of 420 empirical research papers were selected from these two journals dating from 1960 to 2010. Using their criteria for actionable research they coded the papers into those considered actionable and those that were not.
The coding process was undertaken independently by the two authors and even the most marginally actionable paper was included in the “actionable” category. One of the findings that emerged from this analysis was a noticeable decline in the proportion of actionable papers over the decades. Within the Administrative Science Quarterly this fell from 65% in the 1960s, to 52% in the 1980s, down to 19% in the past decade. A similar decline was found for the Academy of Management Journal, which saw the proportion of actionable papers fall from 43% in 1960 to 24% in 2010.
In examining some of the non-actionable studies, Pearce and Huang found examples of work that either provided no information that could be actioned, or data that was overly complex or incomprehensible. One example cited was a study of Japanese banks’ decisions to enter niche markets. This was found to be driven by: “density dependence, mimetic isomorphism, and mutual forbearance”.
Another study, describing a survey of production teams reported its findings as follows:
“For teams engaged primarily in conceptual tasks, interdependence exhibited a U-shaped relationship with team performance, whereas team self-leadership exhibited a positive, linear relationship with performance. For teams engaged primarily in behavioral tasks, we found a ∩-shaped relationship between interdependence and performance and a negative, linear relationship between team self-leadership and performance. Intrateam process mediation was found for relationships with interdependence but not for relationships with team self-leadership” (p.253).
As Pearce and Huang note, this complicated set of findings makes it difficult for students and managers to understand what action – if any – they should or could take based on this study.
Why has actionable research declined?
Perplexed by this trend in the proportion of actionable research being published in the leading academic journals, the two authors undertook a review of The Economist magazine over the time period 2006 to 2010. Their purpose was to see if this high profile news and analysis journal was providing coverage of management research.
It was their assumption that the decline in actionable research in management might be due to an increased level of academic rigour in the scientific methodology and conceptual theory. The Economist is noted for its regular publication of leading-edge research studies and in doing so it typically cites the original scholarly journal as a source.
They examined the mentions made in The Economist of the Academy of Management Journal and Administrative Science Quarterly. Also included in their investigation were the Journal of Applied Psychology and the flagship journal Psychological Science. The first of these journals is a more applied publication, while the latter is a showcase for the most rigorous and theoretical work with no requirement for actionable outcomes.
Their content analysis of The Economist found 18 articles that referred to work published in Psychological Science and only 1 article referring to the Academy of Management Journal. The other two journals were not mentioned at all.
In discussing these findings Pearce and Huang noted that The Economist targets an educated and practitioner audience, the very same audience that is targeted by business schools. Yet they appear to have ignored much of the academic research on management published in two of the leading journals found in the scholarly literature. As they stated their observations:
“Clearly, the decline in the proportion of research useful in our teaching is not the result of any possible increase in the rigor of our research, but appears to come from a shift in the questions management scholars choose to address” (p. 256).
What should change?
In considering what should change to reverse this trend, Pearce and Huang suggest that part of the cause of this decline in actionable research is the process of editorial review within academic journals. They argue that up to the mid-1980s the leading management journals were headed up by powerful editors who were not overly reliant on their reviewers for publication decisions. Today, they claim, editors have become overly dependent on reviewers, and many reviewers do not encourage actionable research. As they state in their paper:
“Not all reviewers are as professional as they should be in helping the authors to produce and communicate their own research more effectively. Instead, today all multiple reviewer theoretical preferences and antipathies are demanded in revisions, with editors avoiding telling authors which issues can be safely ignored (no matter what they personally think)” (p. 258).
Another underlying cause of this decline in actionable research they point to is the quest amongst academics and the editors of journals for “citation counts”. This favours new methodologies and theories that will attract the attention of other academics and research students. Yet such knowledge is likely to be of less relevance and use to practising managers, who generally don’t publish and therefore cite such research.
They also suggest that senior academics within the management discipline favour research that is “highly erudite or statistically complex”. This is now a requirement to enhance their academic credibility and build up their school’s rankings. The pressure on academics by Deans and other university leaders for staff to publish in highly cited journals only serves to feed into this process.
Rather than chasing citations from other academics and the approval of anonymous peer reviewers, Pearce and Huang propose that business schools should focus more on serving the needs of their fee-paying students and the practising managers. However, they lament that:
“Yet our experienced students and other practitioners don’t expect more from us. After all, harsh as it may seem, we have convinced them ‘that’s academic’ often means ‘that’s pointless’” (p.259).
The reaction to Pearce and Huang’s paper
The reaction to Pearce and Huang’s paper can be found in the same edition of the Academy of Management Learning & Education (Vol 11, No 2 of 2012). Here a series of leading authors criticise the work, arguing on the grounds of flawed methodology and inappropriate definition of “actionable research”.
Duane Ireland from Texas A&M University argued for this issue to be understood within a context in which too much focus on gaps between research and practice risked losing sight of a larger purpose. While agreeing with many of their observations, he noted the study’s limitations (e.g. only two journals and some subjectivity in the coding process).
Others, such as Greg Stewart from the University of Iowa, Murray Barrick from Texas A&M and Ramon Aldag from the University of Wisconsin, Madison were more critical. They accused Pearce and Huang of lacking rigour in their coding procedures and ambiguity in their definition of “actionable research”.
Roger Martin from the University of Toronto, while acknowledging the study’s limitations, generally agreed with their view that there has been a proliferation of non-actionable management research. As he states in his paper:
“I find their results sufficiently intriguing to warrant exploration of the implications as if the author’s findings are robust” (p. 294).
He even estimated that the cost of producing such research in “A level” journals might be in the order of US$600 million per year for a business school such as Rotman at Toronto. This cost estimate was based on the average expenditure within universities of academic salaries, accommodation and research grants.
In their defence, Pearce and Huang (in a follow up paper in the same edition of the journal) acknowledged some of the weaknesses in their study. However, they also made the following point:
“There are only two things that matter: Are we wrong about the declining proportion of research that supports our teaching mission, and, if not, what makes research actionable?” (p. 301).
Does it matter?
These findings from Pearce and Huang are controversial. Some management academics may view them as overly critical of their own discipline. They may also argue – with some justification – that many journals now demand authors provide a clear statement of the implications of their research on policy and practice. Some might even argue, again with justification, that the development of a field of academic scholarship demands there be theoretical and conceptual work undertaken.
Yet many scholars and the majority of students and practising managers will find their paper strikes a chord. For example, in 2002, writing in the Academy of Management Learning and Education Jeffrey Pfeffer and Christina Fong of Stanford University, raised similar concerns. Their paper “The end of business schools?”, suggested that:
“There is little evidence that business school research is influential on management practice, calling into question the professional relevance of management leadership”.
A further article by Warren Bennis and James O'Toole from the University of Southern California, published in the Harvard Business Review in 2005 suggested business schools had lost their way.
They highlighted the business school’s focus on scientific research at the expense of practical relevance. This they described as “physics envy” and made the somewhat provocative comment:
“Virtually none of today’s top-ranked business schools would hire, let alone promote, a tenure-track professor whose primary qualification is managing an assembly plant, no matter how distinguished his or her performance. Nor would they hire professors who write articles only for practitioner reviews” (p.98).
Indeed the issue of how relevant business school research is has been a concern of the Association to Advance Collegiate Schools of Business (AACSB). This is the international body that provides quality assurance for many of the world’s business schools.
In a report published by the AACSB in 2008 and re-released last year, similar concerns were raised over the relevance and impact of management research. They argued that this was not a matter of trading off relevance over rigour. Their report identified what they defined as “discipline-based scholarship”, “contributions to practice” and “learning and pedagogical research”. Each was important. As they state in their report:
“A business school cannot separate itself from practice to focus only on theory and still serve its function. On the other hand, it cannot be so focused on practice that it fails to support development insights into principles and theories that serve to increase understanding of practice” (p.15).
The AACSB report concluded that a gap between theory and practice had emerged and needed to be closed. Amongst their recommendations for change were a requirement for business schools to demonstrate their impact on key audiences, including business and not just other academics. Also sought was a greater diversity within business schools of different types of contribution, not just publication in highly cited scholarly journals. There was also a desire to see greater engagement between academics and practising managers.
The three-legged stool
In an earlier article in “The Conversation” I raised the issue of the relevance of academic research into entrepreneurship to the end-user managers seeking to operate business ventures. These views were lauded by some and challenged by others. However, the point that must be made is that academic research into management and related business fields should be beneficial to managers and businesses. As the work of Bloom and Van Reenan shows, there appears to be a positive correlation between enhanced management education and improved business performance.
Academics working within business schools have a responsibility to maintain a balance between the pursuit of discipline-based scholarship, good teaching and learning relevant to their business clients, and useful contributions to practice. This requires a “three-legged” stool that if correctly developed is a solid foundation upon which to build. Too much focus on any one leg places the system at risk of instability.
Note: Tim Mazzarol is President of the Small Enterprise Association of Australia and New Zealand (SEAANZ).
SEAANZ is a not-for-profit organisation founded in 1987. It is dedicated to the advancement of research, education, policy and practice in small to medium enterprises.