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Journal of Education for Business
ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Organizational Behavior: Where Does It Fit in
Today's Management Curriculum?
Robert P. Singh & Allen G. Schick
To cite this article: Robert P. Singh & Allen G. Schick (2007) Organizational Behavior: Where Does It Fit in Today's Management Curriculum?, Journal of Education for Business, 82:6, 349-356, DOI: 10.3200/JOEB.82.6.349-356
To link to this article: http://dx.doi.org/10.3200/JOEB.82.6.349-356
Published online: 07 Aug 2010.
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ABSTRACT.
R
hoshal (2005) questioned and admonished academia for its roleinestablishingthemaximizationof shareholdervalueastheprimarygoalof business executives and managers. He explicitlylamentedthat“bypropagating ideologically inspired amoral theories, businessschoolshaveactivelyfreedtheir studentsfromanysenseofmoralrespon-sibility” (p. 76). This, in his view, has contributed to the corporate scandals, unethical business practices, and mis-treatmentofemployeesthatarecommon intoday’sbusinessworld.Ghoshal’s (2005) major arguments were that (a) maximization of share-holdervalueisnotanappropriategoal for managers to pursue and (b) that academia has played a major part in theestablishmentofthatgoal.Thefirst argument is a philosophical issue that reasonable people may disagree about onthebasisoftheirpersonalideologies andacademictraining.Forthisreason, we doubt that consensus can be estab-lishedwithinacademiaaboutthevalue ofthatgoal.
We also agree with Gapper (2005), Kantor (2005), and Mintzberg (2005) that Ghoshal overstated the power that academiahashadinestablishingshare-holder value maximization as the goal of today’s top management teams. We arguethattheforcesofcapitalism,great technological advances, the changing nature of capital markets, and rising
global competition have had far more to do with the establishment of what Ghoshal viewed as a flawed goal than hasacademia.Nevertheless,webelieve thatGhoshal’sworkopenedthedoorfor serious discussions about management educationandcurriculum.
Academics may differ on how and why the maximization of shareholder value has become the goal of most firmstoday,buttheseissuesmaynotbe asimportantastheeffectsofthatgoal on management education. Whether oneacceptsorrejectsGhoshal’s(2005) two major aforementioned arguments, maximization of shareholder value is thedrivingforcebehindmostmanage-ment decision making in firms today. Although some organizations may choosetopursuealtruisticnonfinancial goals (e.g., nonprofit organizations, government bureaucracies, and some smallerentrepreneurialventureswhose foundersarenotfinanciallymotivated), most executives, managers, and entre-preneurs are measured by the firm’s bottom-line performance in growing profits and shareholder value. This measurement results in decision mak-ing that is consistent with improvmak-ing thebottomline(Beatty&Zajac,1994). Ifresearchersacceptthatmaximization of shareholder value is the dominant goalinfluencingmanagementdecision making in business practice, then we can have a lively debate about how
OrganizationalBehavior:WhereDoesItFit
inToday’sManagementCurriculum?
ROBERTP.SINGH ALLENG.SCHICK
MORGANSTATEUNIVERSITY BALTIMORE,MARYLAND
G
ABSTRACT.Maximizingshareholder valueisthedominantgoalthatinfluences managementdecisionmakinginbusiness practice.Thisgoal—withrapidimprove-mentsintechnology,changesincapital markets,andglobalcompetition—has alteredemploymentrelationsbetween workersandtopexecutives.Theauthors’ purposeinthisarticlewastosharethoughts andconcernsaboutthevalueandrelative importanceoforganizationalbehaviorthe-oryincurrentbusinessschoolcurriculaand toofferrecommendationsforthefuture.
Keywords:businessschoolcurricula, management,organizationalbehavior
Copyright©2007HeldrefPublications
VIEWPOINT
this goal affects management educa-tionandcurricula.
As professors who teach organi-zational behavior (OB) at the levels of undergraduate, master of business administration (MBA), and PhD, we have struggled increasingly with the relevance of major OB constructs in the context of today’s common man-agement practices and executive com-pensation and reward structures. Cer-tainly, OB is a core course for most established management programs. ButasRynesandTrank(1999)pointed out, behavioral sciences struggle for credibility in business schools. Still, most management students are famil-iar with classic theories such as the HawthorneEffect(Mayo,1945;Roeth-lisberger&Dickson,1939),Maslow’s (1954) hierarchy of needs, Herzberg’s (1966) theories on motivation, and McGregor’s (1960) Theory X and TheoryY personality types. However, capstone strategic management cases and class discussion rarely focus on theseorotherOBtheories.Whenthey do,thetheoriesdonottrumpprofitand financial considerations. As Whetten (1989)pointedout,oneofthetestsof goodtheoryistopassthe“Sowhat?” test. In light of Ghoshal’s (2005) discussion about maximizing share-holder value and executives’ behavior today and about how little impact OB apparently has within most capstone strategic management courses, it is unclear what contribution OB makes tobusinesseducation.RynesandTrank (1999) provided a good discussion of the diminished importance of OB to businesscurricula.
The findings of Pfeffer and Fong (2002)raisedaredflagaboutthevalue ofMBAcurricula.Consistentwiththeir viewisarecentlypublishedarticleshow-ing that MBA applications have fallen by 30% since 1998 at the nation’s top-rankedbusinessschools(Merritt,2005). There also has been discussion about a new “professional services model” (Armstrong, 2003, p. 371) for business students to better serve their needs (see Ferris, 2002, 2003). In addition, tradi-tionaluniversitiesandbusinessprograms critical dialogue about core business curricula. To this end, our purpose in thisarticletosharesomethoughtsabout
One can trace the roots of OB back to the emergence of the human rela-tions school and the writings of Elton Mayo.Mayo(1945)railedagainstwhat heviewedastheevilsofTaylorismand industrialization.Headvocatedaprein-dustrial mindset that focused on social cohesionintheworkplace(seeGuillén, 1994;Scott,2003;Trahair,1984).InOB textbooksandclassestoday,authorsand professors still often cite and discuss Mayo’s interpretation of the research conductedbyRoethlisbergerandDick-son(1939)attheHawthorneplantofthe WesternElectricCompany.
Economicforcesandbusiness,how-ever, have changed dramatically over thelast60years.TheInternetandwide-spread out-sourcing did not exist, and institutional investors and global com-petitors did not have the power that they do today. Just as Ghoshal (2005) neglectedtodiscussmacroenvironmen-tal factors, which have led business leadersandacademiccurriculatofocus on maximizing shareholder value, so too has OB failed to keep up with the macroenvironmental changes. These changes have greatly diminished the practicalvalueofclassicOBconstructs andtheory.Wearguethatsuchconcepts astheHawthorneEffectandTheoryX and TheoryY little influence the deci-sion making of today’s executives, because of the broader goal of maxi-mizingshareholdervalue.Thegrowing power of institutional investors (Ben-nett, Sias, & Starks, 2003; Schwartz & Shapiro, 1992), algorithmic equity trading (Friedlander, 2005), globaliza-tion, and technological advances are changing the economic landscape and furthersupportingandstrengtheningthe desireofbusinessestomaximizeshare-holdervalue.
Kantor (2005) briefly mentioned the growingpowerofinstitutionalinvestors inherresponsetoGhoshal(2005).We expandonithere.Institutionalinvestors areentitieswithlargeamountsofcapital toinvest,suchasinsurancecompanies, investment firms, mutual funds, and pension funds. Institutional investors now dominate trading volume on the majorfinancialmarkets(e.g.,NewYork Stock Exchange, NASDAQ), account- ingforasmuchas70%oftradingvol-ume(Schwartz&Shapiro,1992).These entitiesarenowtheprimaryholdersof equity in the United States, and their growthhasbeenastounding.
In1999,institutionalinvestorsaccount-edformorethan50%oftotalU.S.equity ownership,upfrom7%in1950and28% in1970(Bennett,Sias,&Starks,2003). In addition, a growing trend in the use ofalgorithmictradingisdeveloping,pri-marily driven by institutional investors. Algorithmic trading accounted for 25% of all equities trading volume in 2003. Friedlander (2005) estimated it as grow-ingby150%peryearfrom2004to2006. Although we are not familiar with the specificmathematicalmodelsthatmutual funds,investmentbanks,andotherinsti-tutional investors use, we are confident thatthemodelsdonottakeintoaccount employeesatisfaction,motivation,orother common OB constructs. These models arelikelytiedtotheincreaseordecrease in financial performance and the rate of change of firms relative to their respec-tive industries.These changes have con-centrated capital, equity, and power into fewer hands and have put further pres-sureontopexecutivestoachievesuperior financialperformance.
Firmperformanceisgreatlyaffected by the resources and capabilities that the firm mobilized (Castrogiovanni, 1991; Chandler & Hanks, 1993; Tush-man &Anderson, 1986). For example, today’s information technologies have greatly improved organizations’ abili-tiestoaccessandmanageresourcesand capabilitiesaroundtheworld.Theliter-atureisfullofexamplesthatsupportthe notion that companies adopting newer technologies are more likely to enjoy the advantages of such technologies, whichcancreatesignificantcompetitive advantages (e.g., Brown & Eisenhardt, 1995; Cooper & Kleinschmidt, 1987;
Hammer & Champy, 1993; Lawless & Anderson,1996).
There can be no question that pow-erful and ever more affordable infor-mation technologies have altered the competitive landscape by increasing efficiency and allowing global com-munications. This has allowed capital to flow to lower cost labor markets around the world. The result has been globalization and its profound impact on national and world economies. As formerFederalReserveChairmanAlan Greenspan(2004)noted,
Globalization has altered the economic frameworksofbothadvancedanddevel-oping nations in ways that are difficult to fully comprehend . . . . Because of a lowering of trade barriers, deregulation, and increased innovation, cross-border tradeinrecentdecadeshasbeenexpand-ing at a far faster pace than GDP.As a result, domestic economies are increas-ingly exposed to the rigors of interna-tional competition and comparative advantage. In the process, lower prices forsomegoodsandservicesproducedby our trading partners have competitively suppresseddomesticpricepressures.(pp. 450–451)
The need to remain competitive in thegrowingglobaleconomyhaspushed firmstotreatemployeesascommodities and seek out lower cost labor markets (Jones,2005;Wildasin,2006).Clearly, domestic job losses and the out-sourc-ingofmanufacturing,whitecollar,and research and development activities to firmsacrosstheglobehavealteredpsy-chological contracts and employment relations between management and workers (Capelli, 1999; Guzzo, Noon-an, & Elron, 1994). Perhaps because these impacts of globalization are still relativelynew,onecanfindlittlediscus-sionorresearchintheOBliteratureon theseimportantphenomena.
The problem with OB is that profes-sorsoftenteachOBtextbooksandclasses contextfree—withoutconsiderationof macroenvironmentalandeconomicreali-ties.Employeesatisfaction,commitment to the organization, empowerment, and employeeturnoverarecentralconstructs within the OB literature, but it is diffi-culttomeasuretheeconomicbenefitsof theseconstructstoafirm’sbottomline. Asthesoftersideofmanagementeduca-
tion,OBdoesnotenjoythe“nicemath-ematical models” that Ghoshal (2005, p. 81) pointed out as sought by agency theorists and economists and manage-ment practitioners. This has resulted in the question that is often asked about many classic OB constructs, “How do theyaffectfirmperformance?”
Unfortunately, the answers to this questionaretoooften“Wedon’tknow” or—evenworse—“Theydon’t!”Results foundintheOBliteraturethatpertainto thelinkbetweenOBconstructsandfirm performance have been mixed, lead-ingAustin (2000) to suggest that most practitioners do not use much of the academicworkonOB.
Intheirsummaryreviewarticleonthe stateoftheOBliterature,Mowdayand Sutton(1993)criticizedmuchofthelit-eratureasbeingtooheavilyfocusedon individual outcomes and psychological factors, rather than on organizational contextsandorganizationaloutcomes:
Ourreviewofthecurrentliterature,how-ever, suggests that the focus of research andwritinginourfieldisincreasinglyon theoryandmethod,andlessonthestuff of organizational life. Much published research is motivated by the desire to testandextendtheory,resolvetheoretical debates, and apply new, more sophisti-cated methodologies to old theoretical problems.Asaresult,wesometimesfor-getthattheoryandmethodareonlytools to help us understand organizations and theirmembers.(p.225)
We believe that this observation is
truertodaythanwhenMowdayandSut-tonwroteitoveradecadeago,because OBtheoryhasnotchangedtoreflectthe dramaticchangesinthemacroenviron-ment. It is important for OB thought leaders to better reconcile OB theory with the changing macroenvironment. Suchchangesaredrivingthepursuitof shareholdervaluemaximization,which oftencomesattheexpenseofworkers. The underlying value of OB in focus-ing attention on microlevel constructs thatarerelatedtoemployeebehaviors, perceptions, and relations with man-agement will continue to diminish as organizations shift focus more to the desires of institutional investors and shareholders.
HowBusinessStudentsViewOB
To better understand how students view OB, we conducted a survey of MBA students and upper level under-graduatesduringthelastweekofclasses oftheFall2006semester.Wesurveyed (a) 46 MBA students—all of whom hadtakenOB—representingabout60% of the total MBA student body at our universityand(b)70undergraduatestu-dentswhohadjustcompletedtheirOB class.Table1presentsthedemographic profileoftherespondents.
Theparticipantswereallenrolledin AACSB-accredited business programs in a midsized, public urban university on the East Coast. The students were pursuing a variety of majors and had
TABLE1.DemographicInformation,WorkExperience,andSupervisory ExperienceofMasterofBusinessAdministration(MBA)andUndergrad-uateStudents
MBA Undergraduate
(n=46) (n=70)
Item M % M %
Age 28.0 23.8
Full-timeworkexperience(inyears) 6.4 4.4 Full-timesupervisoryexperience(inyears) 2.8 1.1 Gender
Male 41 40
Female 59 60
MBAconcentrationandundergraduatemajor
Marketing 20 11
BusinessandHumanResourceManagement 31 37
AccountingandFinance 39 33
InformationSystems 10 11
HospitalityManagement 8
yearsoffull-timeworkexperience.We asked the students to rank the impor- tanceoffivecourses(strategicmanage-ment,marketingmanagement,financial management and accounting, OB, and humanresourcemanagement)toCEOs orpresidents.Inparticular,weaskedstu-dents,“Whichofthefollowingcourses would the CEO/President of a com-pany find MOST important to LEAST IMPORTANTcourse.Inaddition,67% of both MBA and undergraduate stu- dentsidentifiedHumanResourceMan-agement(HRM)asbeingoneofthetwo least important courses. The surveyed studentsappearedtoviewfinancialand strategicplanningasfarmoreimportant totopexecutives.BothMBA(72%)and undergraduate (80%) students identi-fied financial management or account-ing courses as beaccount-ing either the first or thesecondmostimportantcourse.Sev-enty-onepercentofMBAstudentsand a majority of undergraduate students (54%) identified strategic management aseitherthefirstorsecondmostimpor-tantcourse.
Theseresultsareconsistentwiththe trends that we discussed earlier. They point to the perceived importance of financial and strategic management over human capital management. As further evidence of this, respondents were asked to rate the importance of (a) generating profits, and (b) treating employeesfairly,toafirmCEOorPres-ident in today’s marketplace. Respon-dentsuseda7-pointscale(1=notvery important; 7 =extremely important). The mean score for MBA respondents on “generating profits” was a 6.5 and the mean score on “treating employ-ees fairly” was 4.9. The undergradu-ate responses were similar with mean scoresof6.8and4.8forthetwoitems. Thus,bothgroupsofstudentsbelieved that generating profits was both very important and significantly (p < .001) moreimportanttofirmexecutivesthan treatingemployeesfairly.
We also asked our respondents the following question: “In today’s mar-ketplace, if a CEO or President had to choose between maximizing the firm’s profitandtreatingemployeesfairlywhat doyoubelieveheorsheismorelikely tochoose?”Respondentsindicatedtheir answer on a 7-point scale (1 =
maxi-mizeprofit;7=treatemployeesfairly). ThemeanscoresfortheMBAsandthe undergrads were 2.4 and 2.0, respec-tively. Therefore, if executives have to decidebetweenmaximizingprofitsand treating employees fairly, the students believed that CEOs/Presidents would chooseprofitsoverpeople.
One of the major principles under-lying what is discussed, researched, and published in the OB field is fair treatmentofemployees.Ouraforemen-tionedresultswereagainconsistentwith our broader discussion about the value of OB, because they suggest that fair treatmentofemployeesissecondaryto profits. Because we collected the data forthisstudyfromstudentsatjustone university, the results were somewhat limitedandmaynothavereflectedthe viewsheldbythemajorityofbusiness students across the country. However, we would be surprised if the opinions ofbusinessstudentsatotheruniversities differsignificantlyfromouraforemen-tionedresults.Onthebasisofpersonal workexperiences,whattheyhaveread and observed about today’s economic landscape,andwhathavebeentaughtin businessprograms,studentshavecome totheirownconclusionsaboutwhatis importanttoknow.Webelievethatitis importantforOBscholarstoberealistic and recognize the relative importance thatstudentsplaceonOBcourses.Fur-ther, in the following section, we will discusswhatweperceivetobeagrow-ing credibility gap between academia andpracticewithrespecttoOB.
Sermonizing,Individualism,and theGapBetweenAcademiaand Practice
Ghoshal (2005, p. 86) pointed out, “Wishes and hopes are not theory. Sermons and preaching are not theory either.” Without either consideration of macroenvironmental realities or confirmatory empirical evidence, and in fact with often contradictory evi- dence,mostOBtextbooksandacadem-ics preach and sermonize rather than provide sound, empirically supported theories that work in business prac-tice.WebelievethatmostOBscholars agree with McGregor’s (1960) Theory Y view of employees. But, McGregor
did not provide empirical support for hisTheoryXandTheoryYdiscussion. Rather, his discussion was based on whatappearstobeamoralassumption thatisnotnecessarilybasedonfactbut ratheronhope.
Itwouldbewonderfulfromamoral, ethical, and humanitarian standpoint if more satisfied workers resulted in optimumfirmperformance,butseveral studies have indicated that efforts to boost employee morale, commitment, andsatisfactionhavenotyieldedbetter financialperformance(seeBrayfield& Crockett, 1955; Mitchell, 1979; Petty, McGee,&Cavender,1984;Staw,1984; Vroom, 1964). It is unclear whether sucheffortsmakefinancialsenseinlight ofgrowingglobalcompetitivepressures tofindcheaperlaboraroundtheglobe. Consider the fact that McDonald’s is preparingtotestwhetherdrive-thrucus-tomerorderingcanbehandledthrough remotecallcenters(USAToday,2005). Soonyoumaybegoingthroughadrive-thruataMcDonald’sinSanFrancisco and not even know that someone in West Virginia or even India is taking yourorder.Althoughthereisthepoten-tial advantage of having order takers withsuperiorcommunicationskillsdeal with customers, make no mistake: the real driver for this effort is the cutting of labor costs. We believe that if this out-source pilot test is successful and is more widely adopted, there will be a further erosion of the skills that are necessarytoworkinafast-foodrestau-rant.Somehowwedoubtthattherewill beconcernsabouthowtobetterretain, increasejobsatisfaction,orimprovethe moraleofthesetypesofemployees.
Ghoshal (2005) also made the point that society in general and business education in particular, is being great-ly influenced by the ideological phi-losophy of radical individualism. An inherent contradiction occurs between classroominstruction,inwhichinstruc-tors tell students that firms will reap rewards by treating employees well. On the basis of popular press articles, students read about firms outsourcing jobs, cutting health and pension ben-efits, laying off employees, and at the same time reaping record profits. Sev- eraldecadesagomanyjobsledtolife-longcareers.Today,fewstudentsexpect
tobewithanemployerforlife(Brown, 2005).Theyhavelearnednottoexpect lifelongemployment,andtowatchout for themselves. Executive compensa-tion is just another example of radi-calindividualism.Manytopexecutives receivelargebonuseswhentheirfirm’s stock performance improves (Daily & Dalton, 2002).This may be enough of anincentiveforsometopmanagement teams to manipulate earnings report (Cheng&Warfield,2005),breakrules, and engage in unethical and unlawful behaviors(Nwogugu,2005). bottom-line. OB scholars must recog-nizethatformostfirms,laborcostsare asignificantoperatingexpense,whichis whyexecutivesworktocutlaborcosts. Researchers often cite Wal-Mart, one ofthelargestemployersandoneofthe mostfinanciallysuccessfulfirmsinthe world, as giving poor—and sometimes unethical—treatmenttoitsworkers.
Wal-Martpayslowwages,offerslim-itedbenefits,engagesindiscriminatory practicesagainstwomen,andnegatively affectssocialwebswithincommunities (Quinn, 2000). Federal officials have investigated executives at the firm for spyingonunionorganizerstorootthem out before they can unionize work-ers (Bandler & Zimmerman, 2005). Althoughthelattereffortisillegalunder Mart’s efforts to control labor costs. One could argue that controlling labor costs keeps prices lower for the end consumer and thus are just. Converse-ly, one could argue that it is immoral to achieve tremendous profits on the backs of underpaid and underinsured labor.Asacademics,wearguethatWal-Martandotherfirmswithsimilarlabor practices are simply pursuing what we teach every day in business schools: the established strategy of shareholder wealth maximization, which requires minimizingcosts.
Again, it largely does not mat-ter whether (a) business schools have adjustedtheircurriculatofocusonmax-imization of shareholder value above all else or (b) they have always taught it, resulting in the ethical lapses that we find today.What is relevant is that theprimaryfocus,bothinpracticeand within academic programs in business, is maximization of shareholder value largely to the exclusion of all other goals. Both academics and executives viewworkersasanexpense,andfirms compensate managers on the basis of how well they improve efficiencies, cutexpenses,andincreaseprofits.This focus creates the conflict between OB andmostoftherestofthebusinessand managementprogramcurriculatoday.
SuggestionsforAcademia
Werealizethatbroachingthissubject may not be popular among some OB faculty:However,thegapbetweenaca-demia and practice is wide and grow-ing wider. Braverman (1974) stated that“Taylorismdominatestheworldof production;thepractitionersof‘human relations’ and ‘industrial psychology’ arethemaintenancecrewforthehuman machinery”(p.87).
Itissurelydisheartening,butincreas- inglymoredifficulttoarguethatexecu-tives do not pursue maximization of shareholder value above all else. For OB to have meaning in the 21st cen-tury, other than as a management tool forkeepinglaborundercontrol,serious debate and discussion among scholars isnecessary.OBtheorymaystillhavea placewhenresearcherslookatgovern-ment and nonprofit employers, but the aforementioned macroenvironmental changes have greatly diminished the valueofOBtheorytomostprofit-seek-ingventures.Thequestioniswheredo wegofromhere?Ifnothingisdone,OB theory will continue to wither within management curricula. For OB theory to remain a viable part of core busi-ness curricula, we propose following changes.
Short-TermChanges
The easiest adjustment would be simply to acknowledge and openly discuss limits to the applicability of
OBtheory.ProfessorscouldteachOB as a course that does not necessarily apply to most profit-seeking ventures. Management scholars and OB faculty maychoosetofocustheoryanddiscus-sion on nonprofits, government agen-cies, and smaller organizations whose founding entrepreneurs pursue altru-isticgoalsandarenotconcernedwith maximizing profit and shareholder value (e.g., entrepreneurs who enjoy providingemploymentorimprovinga community).Withinabusinessschool’s curricula, business cases in capstone strategic management classes or other relevant classes, which focus on the aforementionedtypesoforganizations, the financial and strategic applicabil-ityofOBtheoryconstructs.Instructors should eliminate from the classroom these core OB concepts that cannot be empiricallysupported.Weintendthese changes to eliminate preaching about whatshouldbeandtofocusonempiri-cally supported theoretical constructs. Insomecases,firmsmayneedtoextend theirtimehorizonstocapturethebenefits oforganizationalchangesthatarebased on OB theory. For example, organiza-tional benefits from efforts to improve employeemoraleandimproveretention may not be visible for months or even years after formal organizational inter-ventions. Many firms report quarterly financial results, with executives being compensated and often rewarded with bonuses on the basis of these results. This circumstance has contributed to the short-term focus that many execu-tivesexhibitintheirdecisionmaking.It is possible that just extending the time to expect and achieve financial ben-efits from OB-based investments may reveal significant results that support the value of OB theory. Of course this isanempiricalissuethatneedsfurther longitudinalresearch.Therearesignifi-cant risks for both (a) executives who may not enjoy compensation systems that reward longer-term results and (b) academics who are on tenure clocks orwhowishtocompletetheirdoctoral programsinatimelymanner.
Long-TermChanges
If one believes that OB should con-tinuetobetaughttostudentswhointend topursuemanagementorentrepreneur-ial careers in for-profit ventures, then instructors and administrators must change how OB is researched, taught, andpositionedinmanagementcurricula. Executivesmustalsomakeaneffortto changefundamentalbusinesspractices. Morespecifically,achangeinthevigor with which firms or executives pursue and promote the goal of maximizing shareholder wealth would prevent fur-ther erosion of the relevance of OB theory.Theaforementionedsuggestions withrespecttominorandintermediate changes address teaching methods and positioning issues. The latter require-ment, changing fundamental business practices,isobviouslymoredifficult.
Some may argue that academia is reactionary rather than proactive in promoting business practices. Others, such as Ghoshal (2005), believe that academia has a deterministic power overbusinesspractices.Regardlessofa reader’spersonalbelief,itislikelythat heorshewillagreethatacademiahasa responsibilitytoatleasttrytoinfluence business practices and behavior. Still, itmustberecognizedthatanyeffortto changebusinesspracticesandbehavior willrequireasignificantamountoftime: yearsandperhapsdecades.Firmexecu-tives and employees will need time to overcome structural inertia (Hannan & Freeman,1977)thatwouldpreventnew managementandorganizationalvalues, belief systems and behaviors, and per-formance effectiveness evaluation sys-temsfromtakingroot.
In our view, and consistent with Ghoshal (2005), management focus on shareholderstotheexclusionofallother stakeholders is inappropriate. Rather thanencouragingmanagerstofocuson best practices to build lasting relations with customers and committed work-ers to achieve the long-term strategic goals of an organization, shareholder wealthmaximizationencouragesshort-term thinking, unethical behavior, and aculturethatviewsthemostimportant stakeholders of the firm—customers and employees—as secondary because without customers and employees,
firms would not exist, but these stake- holdersarebeingincreasinglymarginal-izedbecauseanyeffortstoaddresstheir needsareviewedasexpenses
The unyielding focus on quarter-to- quartershort-termfinancialresults,util-itarianism, transaction cost economics (Williamson, 1979), and maximization ofshareholdervaluedoesnotmeshwell in practice with most OB theories. If customers and employees are, in fact, important stakeholders, then the firms' executives must pay renewed commit-mentandattentiontothesestakeholders. As we discussed earlier, this circum-stance requires changing the prevail-ing management goal of maximizprevail-ing shareholdervalue.However,nochange inmanagementbehaviorcancomefrom preaching the benefits of a new focus withoutreinforcementthroughnewsys-temsofmeasurementandcompensation. Aslongasthemeasurementsystemsfor effectivemanagementremainthesame astheyarenow,therecanbenochange in practice. Therefore, the employer’s measurement of effective management andresultingcompensationorbonuses mustshiftawayfrommeetingonlythe needs of shareholders to also include theneedsofcustomersandemployees.
Reducing the value that firms place onprofitmayhelptorelievesomeofthe pressureonfirmexecutivestomaximize shareholderwealth.However,firmsmust operateprofitably,andtherecanbelittle doubtthatanyperformanceappraisalof a firm or the effectiveness of manage-mentmustincludenetincome.Thenthe questionbecomesthis:Whatothermea-surementvariablescanbeusedtoassess firm and management performance? Resistance to widespread use of quali-tative measures will be likely because of the difficulty in reliably scoring and meaningfullycomparingresultsbetween firms. Hence, alternative quantitative measuresarethemostlikelysourcefor newperformancemeasures.
One alternative quantitative perfor-mance measure could be maximizing revenues as opposed to maximizing profits.Thereisprecedentforelevating thevalueofrevenuesasaperformance measure. The Fortune 500 list of the largest firms in the United States is basedonrevenues—notprofitsorstock price.Ifacademicsandexecutivespush
for a more aggressive focus on rev-enue growth there may be some trick-ledown effects on the way customers andemployeesarevalued.Retentionof every customer becomes more critical forthosewhopursuerevenuegrowth.A management team that is being evalu- atedintermsofeithertherevenuemaxi-mizationgoalortheshareholderwealth maximizationgoalislikelytoviewthe firm’slargestcustomersasmostimpor-tant. However, managers working with therevenuemaximizationgoalaremore likely to work to deliver high-quality customer service to all customers to increasesalesthroughrepeatandrefer-ralbusinessandtominimizetheamount of customer turnover. With respect to employees, the retention and perhaps an increase in the numbers of employ-ees who deal directly with customers become more critical. Rather than lay-ingoffaworker,afirmmaychooseto retrain the worker to improve longer- termclientrelation,andinternalopera-tional efficiencies, which can improve bothrevenuegrowthandprofits.
Researchers, academics, and firms shouldrecognizethatchangemightnot be possible. The acceptance of share-holderwealthmaximizationmaybetoo well entrenched—and the resistance to changemaybetoogreat—toovercome. However, the effects of the corporate scandals of recent years and the grow-ingdiscussionsofreligiousfaiththatare engulfingAmerican life may be open-ing an opportunity to promote change. There likely are key executives who would encourage shifting focus away from maximizing shareholder wealth as a way to contribute to more ethical behaviorintheirownfirmsandabetter moral society in general. Such execu-tivesmayalsowelcomeanopportunity topromotebetterbalancebetweenprof-itandmoralityintheworkplacewithout being punished for missing quarterly financialgoals.
We are neither advocating any one type of change nor arguing that our proposals for change are the correct proposals. Part of the problem is that the macroenvironment is changing so rapidly it is impossible to really know how the economic landscape will con-tinuetochange.Policychangesthatwill address out-sourcing of jobs or
tory changes that will restrict institu-tionalownershipwillbequitepossiblein comingyearsandwouldhaveprofound effects on the macroenvironment. Still, thebiggerissueremainsthatOBisbeing marginalized. We strongly believe that for OB to remain a part of core curri-culainbusinessprograms,somechanges are necessary. If nothing is done, OB is at risk of obsolescence and at best will simply be a tool for management exploitationratherthanavibrantpartof strategicorganizationaldecisionmaking. Whateverthechanges,researchersneed to reestablish relevance for OB theory toaddresstherealitiesofthenewhyper-competitive economic landscape that is due to outsourcing, technology, institu-tionalinvestors,andrapidglobalization. As such research progresses, it would strengthentheOBfoundationonwhich firmscouldbasetheirstrategicplanning andorganizationaldecision-making.
Conclusion
Therecentpassingofthegreatman-agement thinker, Peter Drucker, brings to mind his lessons about the impor-tance of fulfilling customer needs and focusing on external opportunities. In recent years, many have lost those lessons because of greed and ethical lapses. Building on Ghoshal’s (2005) argumentsregardingacademia’srolein fostering ethical lapses in the business worldandhiscriticismsofthemanage- mentgoalofshareholdervaluemaximi-zation, we have focused our attention onthegrowingobsolescenceofOBas acoresubjectareawithinmanagement education. We have argued here that because of the generally well-accepted proposition that today’s managers and business schools focus on maximizing shareholder value, it is hard for aca-demia to justify how and why OB fits intoanymanagementcurricula.
We recognize that we are offering a decidedlynegativeviewoftherelevance ofOBtheorythatislikelytoelicitstrong defensive responses. There are always significant challenges in going against the establishment and the commitment ofacademicstoexistingtheories(Kuhn, 1996).However,forOBtoremainavital part of the core curricula, doing noth-ing is not an option.We also recognize
that business education will not change overnight.WesimplypointoutthatOB
Dr.RobertP.Singh is an associate professor of Management in the Earl Graves School of BusinessandManagementatMorganStateUni-versity.Hisresearchinterestsareentrepreneurial opportunity recognition, entrepreneurial strategy, organizationalrenewal,andentrepreneurshipedu-cation.
Dr.Allen G. Schick is an associate professor of Management in the Earl Graves School of BusinessandManagementatMorganStateUni-versity.Hisresearchinterestsarebusinessethics, organizationaldownsizing,theroleofbusinessin society,andbusinesseducation.
Correspondence concerning this article should beaddressedtoDr.RobertP.Singh,MorganState University,GravesSchoolofBusinessandMan-agement, 1700 E. Cold Spring Lane, Baltimore, MD21251.
E–mail:rsingh@morgan.edu
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