The management myth

The burgeoning interest in the field of management education at prestigious institutions such as Harvard was a direct result of the rapid industrial expansion and economic amalgamation that characterized the latter part of the nineteenth century.

The industrial magnates of the era, individuals like the brusquely pragmatic railroad tycoon Cornelius Vanderbilt and the autodidactic steel industrialist Andrew Carnegie, could afford to eschew formal education. However, the colossal enterprises they established necessitated a different kind of expertise.

Within the vast corporate structures, success was no longer predicated on enduring the physical rigors of industrial labor, such as inhaling the fumes from a steel mill. Instead, a career in business became synonymous with navigating the complexities of corporate bureaucracy, which naturally fostered a predilection for formal titles and academic credentials.

Concurrently, academic institutions like Harvard were engaged in vigorous debates over the necessity of specialized degrees for those aspiring to careers in diplomacy and public administration.

In the year 1881, the Wharton School was inaugurated at the University of Pennsylvania, thanks to a generous endowment from Joseph Wharton, marking the inception of the first collegiate program where students could specialize in business. Dartmouth College and several other universities soon followed this pioneering initiative. Harvard University, not wanting to be left behind, decided to enter the arena in 1908, although the specifics of the curriculum were yet to be determined.

From these modest origins, the Master of Business Administration (MBA) degree has burgeoned into an entity with its own distinct identity. Over the course of the last century, the MBA has transformed from a beneficial adjunct to an essential prerequisite for many. In 1968, the number of MBAs conferred was less than 18,000, but by 2008, this number had escalated to 140,000, accounting for a quarter of all master's degrees awarded that year. Projections suggest that within the next decade, the number of living individuals with MBAs will surpass the population of a major city like Chicago.

Throughout the annals of business history, a myriad of individuals have risen to prominence as thought leaders and visionaries, leaving indelible marks on the field of management.

Among these luminaries, Frederick Winslow Taylor stands out as a pioneering figure. Employed by the colossal Bethlehem Steel Company in the closing years of the 19th century, Taylor was tasked with a seemingly straightforward yet challenging question: the maximum quantity of pig-iron a worker could load onto a wagon within a day. Through a series of innovative experiments, Taylor dramatically increased the productivity of the workers, from an average of 12.5 tons to an impressive 47.5 tons per day. His groundbreaking work introduced several key principles, including the importance of working intelligently rather than merely hard, the necessity of measuring performance to manage it effectively, and the significance of optimizing worker selection and recruitment processes.

Elton Mayo, another notable figure, ushered in the humanist revolution in the early 20th century, laying the foundational stones for industrial psychology and the study of human behavior within the workforce. Following in these footsteps, Peter Drucker emerged with his seminal work, "Managing for Results," in 1964, introducing the concept of business strategy. Drucker's insights catalyzed the formation of influential consulting firms, such as the Boston Consulting Group, revolutionizing the way businesses approached strategy.

Michael Porter, an aerospace engineer turned economist, developed the influential five forces framework, a tool for assessing industry competitiveness, while pursuing his Ph.D. at Harvard University. His publication, "Competitive Strategy," outlined three generic strategies that could lead most businesses to success.

In a manner akin to how certain authors carve out successful careers by discussing their literary works, thereby ascending to the status of business luminaries, numerous high-profile Chief Executive Officers (CEOs) also amass substantial wealth through their prominence.

The financial rewards of becoming a high-profile CEO are significant. To illustrate, in the year 2006, CEOs at the helm of Fortune 500 companies were reported to have an average annual compensation of $15 million. By 2008, the disparity in earnings had escalated, with CEOs earning approximately 400 times the salary of an average worker, a stark contrast to the 40-fold difference observed three decades prior.

Alongside the financial gains, CEOs have emerged as the celebrities of the corporate realm. It has become commonplace for figures such as university presidents, philanthropists, and politicians to vow to administer their duties with the same acumen as CEOs manage their corporations.

Notably, American CEOs command salaries that are two to three times higher than those of their European counterparts, despite the absence of empirical evidence suggesting superior performance in favor of their shareholders. This raises a pivotal question regarding the dynamics of corporate governance: Are managers in service to their corporations, or is the relationship inverted?

In numerous instances, the board of directors comprises individuals who share personal ties with the CEO, who often concurrently holds the position of chairman of the board. Given the transient nature of shareholders, who may buy and sell shares within moments, the oversight of managers presents a challenge.

Similarly to how business schools and management experts have carved out exclusive and profitable niches within the broader management marketplace, high-profile CEOs have successfully cultivated an aura of expertise around their professional persona, an image not necessarily supported by factual evidence.