The vanishing middle manager

Can business schools re-invent their role, asks Ajit Balakrishnan.
Illustration: Dominic Xavier/Rediff.com

Business schools are in such a period of boom -- with the leading ones struggling to deal with the flood of applicants and leading recruiters coming through with eye-popping sums as starting salaries for their students -- that it is easy to ignore some worrying signals, which could threaten their very existence.

We also regularly see news headlines report de-layering efforts in businesses ranging from conglomerates like GE, the giant Indian IT services companies, supermarket chains, erstwhile leaders like IBM and Ford... the list is very long.

What is going on?

What could threaten business schools?

After all, starting from the 1970s to up until now, there was no post-graduate degree as sure of putting you on a well-paid, well-respected career track as an MBA.

Students passionate about sociology or psychology or literature or even the hard sciences such as physics or chemistry were used to being cautioned by their well-wishers that jobs in these disciplines were hard to get and compensation levels in these professions would not rise fast enough.

There were no such fears about post-graduates in management: Well-paying jobs in New York or London and superfast career progression were for the asking for the graduates of the top management schools.

To fully appreciate the nature of the threat facing management schools, it is necessary to go back in history a little.

For centuries, running a 'business' meant running a shop where you stocked and displayed goods and to which, hopefully, customers flocked. And in much of the world, perhaps more so in India, even today, being a 'businessman' meant running such a shop.

Of course, there were judgement and strategy involved in running a shop: What type of goods to stock, how much discounts to offer, who to offer credit and so on.

It was the spread of mass production following the Industrial Revolution that large-scale business organisations employing hundreds or even thousands of people, not the half-a-dozen as in a shop, sprung up in the West.

Suddenly, owners needed to find some people who could help him 'manage' these people, tell them what they ought to do and ensure that these instructions issued from the central owner were followed by all.

It is as a response to this demand for people who could 'manage' other people that a flurry of 'management schools' appeared as the 19th century turned to the 20th: In 1908, the Kellogg School of Management was founded as Northwestern University's School of Commerce in Chicago.

In the same year, the Harvard Business School was founded at Harvard University. It was the first programme in the world to offer a Master of Business Administration degree. The Massachusetts Institute of Technology's Sloan School of Management followed in 1914.

The management school movement spread from these origins to other parts of the world, including India, where the first one, the Indian Institute of Management, was set up in 1961 in Calcutta.

Since then and for the last 150 years, management theory has been about making a large centralised organisation effective and about the effective ways to issue orders and get compliance, because extracting productivity by increasing the scale of operations was the essence of the Industrial Age.

It is in this context that management theories such as span of control, which postulated the optimum number of managers that a senior manager could supervise, appeared. The ideal span of control for a manager was seen to be from five to a maximum of 10.

This, of course, meant that a small organisation may have one manager and 10 employees, but one with 100,000 employees and the same 1:10 span of control will have 11,111 managers. That's because an additional 1,111 managers will be needed to manage the managers, points out Gary Hamel, a prominent management theorist.

His radical solution is reflected in the tile of his piece in the Harvard Business Review -- 'First, Let's Fire All the Managers'. He says that management is the least efficient activity in an organisation.

'Think of the countless hours that team leaders, department heads, and vice presidents devote to supervising the work of others.' This hierarchy of managers, he says, exacts a hefty tax on any organisation.

'This levy comes in several forms. First, managers add overhead, and as an organisation grows, the costs of management rise in both absolute and relative terms.'

A tidal wave of new management theories that directly attack this theory of extracting efficiency by centralising decision-making has started building up.

For instance, says Rod Collins in Leadership in a Wiki World: Leveraging Collective Knowledge to Make the Leap to Extraordinary Performance that there is merging a new 'Wiki' world in which 'the digital revolution' has created the unprecedented capacity for large numbers of people to work directly and effectively with each other without the need to go through a central organisation (Wiki is the Hawaiian word for 'fast' or 'quick').

An even more drastic critique of business schools, Duff McDonald's 2017 book The Golden Passport says that the central failure of today's MBA programmes is that they 'have abandoned their academic role, which, aside from educating future generations, is to generate the possibility of critique and train students into doing it themselves'.

On the contrary, business schools function as the 'outsourced recruitment centres' for the corporate world.

Suddenly, the role of a middle manager, which in the last few decades has come to mean a well-paid, secure job, with no personal risk-taking and which the Indian middle class aspired to, is being villainised.

For an organisation to be considered 'forward-looking' is to embrace 'delayering', the process of removing layers of hierarchy between the highest and the lowest levels in order to boost operational efficiency, decrease the wage bill and remove red tape.

Will business schools accept this new reality and adjust their curricula and ideology and teach their graduates about doing more things with their own hands and less about supervising others?

Ajit Balakrishnan, chairman and CEO, Rediff.com, is the author of The Wave Rider, A Chronicle of the Information Age. He can be contacted at ajitb@rediffmail.com