Beware the Sirens of Management Pseudo-Science

Beware the Sirens of Management Pseudo-Science

by Freek Vermeulen  |   9:00 AM August 23, 2013

Management is not an exact science, they say. And I guess most things that involve the study of human behavior cannot be. But I sometimes wonder if that is the reason — or the excuse — that the business sections at airport bookshops are so full of nonsense. Quite often these books are written with panache. And the authors — aspiring “management thinkers” and “gurus” (never scientists) — have an excellent sense of the pulse of the business public. They are neither crooks nor charlatans; they write what they believe. But that doesn’t make their beliefs right. People can believe vigorously in voodooism, homeopathy, and creationism.A common formula to create a best-selling business book is to start with a list of eye-catching companies that have been outperforming their peers for years. This has the added advantage of creating an aura of objectivity because the list is constructed using “objective, quantitative data.” Subsequently, the management thinker takes the list of superior companies and examines (usually in a rather less objective way) what these companies have in common. Surely — is the assumption and foregone conclusion — what these companies have in common must be a good thing, so let’s write a book about that and become rich.

In Search of Excellence and Built to Last, to name a few classic examples, followed that formula — including the getting rich bit. One piece of advice to come out of such tomes, for instance, has been to create a strong, coherent organizational culture, like most of high-performing firms studied. However, we now know from academic research that a strong culture is often the result of a period of high performance, rather than its cause. In fact, a very coherent culture can even be a precursor of what is called a competency trap, where firms get stuck in their old beliefs and ways of doing things. Not coincidentally, the list of superior companies frequently starts unravelling when the book is still at the printer’s.

Another formula is to introduce a new and fashionable management practice, such as Six Sigma, Lean, or the ancient Total Quality Management and ISO9000. The book not only describes the practice but also introduces us to the success stories of early adopters, in the form of awe-inspiring interviews and case studies.

However, nowadays, we know from academic research on such practices that in the long run they usually do not create any value, that early adopters are motivated to exaggerate their benefits, thatthey can stifle long-term innovation and that in the process of popularizing the practice, the original version (which might have worked for the company that developed it) becomes distorted, oversimplified, or just plain ineffectual. Most of them go out of fashion after a while, and some years later get smirkingly referred to as a fad.

But the books continue to sell, new lists of excellent companies emerge, and fads resurface. And that is perhaps no wonder, because it is only human to be susceptible to the beguiling songs of Sirens that bear the promise of prosperous times. But sometimes it makes sense to do what Odysseus instructed his men to do, when the Sirens were in sight: plug your ears with beeswax and just sail past.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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