Governance and Quackery

From the Game Theory in Management Blog
Modelling Business Decisions and their Consequences

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I believe part of the crazed push to incorporate the opinions of anyone who even remotely qualifies as a “stakeholder” into a given project’s (or organization’s) decision-making process stems from a fear that one of these “stakeholders” has a perspective that, if ignored, may lead to disaster. And fear, being the powerful motivator that it is, has pushed executive management’s perspective into a rudderless, random course, determined not by the best informed and formulated strategic approach, but by whomever happens to be the most influential “stakeholder.” Since the most informed stakeholder is often held to be the asset managers (read: accountants), in those circumstances where their take on the business world is the wrong one (project management, strategic management) the project team/macro organization is setting itself up to make one bad decision after the other, all in the name of proper governance.

One of the key casualties of this enfuzziment of management science perspective is management science itself. Of course, for any theory to be considered truly scientific, it must manifest two properties:

·         It must be observable.

·         It must be repeatable in an experimental setting.

Which leads us to the first problem with management “science”: in the macro economy (or even in the micro, if we are to be completely honest) it’s virtually impossible to isolate the specific causal factors of economic gain or loss. Sure, there’s tons of anecdotal evidence, and much of this comes across as being axiomatic – which leads to the second problem, that the real sciences recognize this, and are led to the conclusion that management “science” is little more than common sense (except for double-entry bookkeeping, adding unearned credence to the accountants’ point of view among engineers and scientists). This kind of a pseudo-scientific environment simply begs for quackery.

The very word “quackery” takes us back to the days before the scientific method came to dominate medicine. Those itinerant snake-oil salesmen? How quaint! How silly of those 19th-century people to fall for their claims! However, as the brilliant Michael Crichton points out in his Caltech Michelin Lecture from January 17, 2003, (“Aliens Cause Global Warming”) in the 1920s Americans were suffering from a disease called pellagra. The medical community was convinced pellagra was caused by a pathogen. The medical researcher who looked into the problem for the U.S. Government, Dr. Joseph Goldberger, thought that the cause was due to poor diet. Goldberger was right, but was relentlessly smeared and mocked by the medical establishment. People died as the medical community largely turned their backs on the very scientific method that had supposedly propelled them past their quackery phase.

Now consider how management science theories are advanced. Participants in successful enterprises are asked their opinions on the causal factors that led to the success. What could go wrong? Well,

·         Those offering their opinions might not know exactly which factors were key, and which were incidental.

·         They also are probably attributing more to their individual contribution(s) than their co-workers, and certainly more than their enemies.

·         If anyone in the organization has complete knowledge on the reasons for the success, they might not want anyone else emulating them.

The advancement of management science theories, then, becomes one of advocacy – the most influential or persuasive communicator sees their pet theories advanced, often elbowing aside better explanations of the causal factors of the success being analyzed. The exact same thing happens in reverse when project failure post-mortem analyses are conducted – hence the axiom “Success has many fathers, but failure is an orphan.”

If, then, a given management science theory is advanced more from contagion then its validity, whose ideas gain prominence in the field?

The business equivalent of the snake oil salesmen’s, of course.

Posted on: April 14, 2013 11:30 PM | Permalink

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