The Great Management Debate

In 1927, at Western Electric’s Hawthorne Works in Cicero, Illinois, professors from Harvard Business School set about determining what made workers tick. Their simple but elusive objective: maximizing productivity.

The researchers tried all kinds of strategies on a group of young women assembling parts: more breaks, financial incentives, even better lighting. None of those accounted for much, recounts Walter Kiechel III, former head of Harvard Business Publishing and former managing editor of _Fortune_ magazine. To everyone’s surprise, social factors proved pivotal. Elton Mayo and his Harvard colleagues realized that productivity increased because of the simple fact that the Hawthorne workers had been consulted by the researchers during the experiment and because the women had developed a strong, positive group dynamic.

The Hawthorne studies revealed that “workers were not mere automatons to be measured and goosed with a stopwatch; that it was probably helpful to inquire after what they knew and felt; and that a group had substantial control over how much it was prepared to produce.” At a time when management was thought to be a simple science of supervision and incentives, these were novel insights.

Ever since, Kiechel says, management’s “numbers people” have battled its “people people.” Before World War II, the former swore by texts such as _The Principles of Scientific Management_ (1911), by Frederick Winslow Taylor, an engineer who held that there was “one best way” to accomplish any task.

On the strength of works beginning with _Concept of the Corporation_ (1946), by management maven Peter Drucker, the “people people” overtook such mechanistic and impersonal thinking in the middle of the century. Call theirs the warm-and-fuzzy approach to management. Following from the experiments at Hawthorne, it holds that every employee has potential and every institution is a delicate social system. Treat both with care, and your organization will be handsomely rewarded.

Economic setbacks and technological change brought the numbers people back to the fore in the 1970s and ’80s, led by number-crunching consultants in the mold of Bruce Henderson’s pioneering Boston Consulting Group. Strategy was their mantra. Where companies used to react to the market, consultants implored executives to dictate to it—and to their employees. “Strategy’s constant companion and facilitator,” Kiechel writes, was “the imperative to take a sharp pencil and a stopwatch . . . to every aspect of the company’s operations.”

At business schools, finance professors and hardnosed management theorists such as Michael Porter, author of _Competitive Strategy_ (1980), displaced teachers who’d been offering courses in “soft” fields such as organizational dynamics. Professional managers were in high demand—the number of MBAs awarded per year grew from 26,000 in 1970 to 67,000 in 1985.

Concern for “stakeholders,” such as labor unions, gave way to solicitude for shareholders. As executive pay ballooned and the pressure grew to reward stock shareholders, many companies lost sight of Drucker’s emphasis on the centrality of employees. Layoffs and financially risky hostile takeovers ensued. A new “corporate reengineering” theory inspired many corporate makeovers and upheavals. The days of treating employees as people were over.

Or were they? The softer side of management persisted, exemplified by _In Search of Excellence_, the smash 1982 bestseller by Tom Peters and Robert Waterman Jr. “For the next 30 years, right down to our own day,” Kiechel says, “the two strains of thought . . . would coexist in uneasy tension.”

Managerialism has now gone global. In 2011, some 500,000 people around the world earned an MBA or an equivalent degree. This is all to the good, Kiechel insists. “Capitalism and the managerial ideas that struggle to make it more productive have indisputably rendered the world richer and better educated. . . . [T]here will never be ‘the one best way.’ But there’s almost always a better way.”