Figuring Out What Makes Businesses Tick
By Adrian Wooldridge
A FEW YEARS AGO an Arab businessman named Wafic Said had the gall to offer Oxford University a gift of $33 million to build a business school. He might as well have offered to turn one of the university’s hallowed halls into a sex emporium, to judge from the reaction of the dons.
Scholars denounced the proposal as an insult to civilization; a petition circulated urging the authorities to reject the money. Wiser heads did prevail, but a site for the business school could only be found near the railway station. It was abundantly clear that, as far as many of the luminaries of Adam Smith’s old university were concerned, capitalism and philosophy do not mix. And Britain’s intellectuals, remember, are pro-business fanatics compared with their peers on the Continent.
Things could hardly be more different in the U.S., the setting of Andrea Gabor ‘s “The Capitalist Philosophers.” Here business professors are the lords of the academic universe, housed in the best quarters, flown first-class from luxurious conference to lucrative consulting assignment and, to top it all, courted by the most ambitious students. Throughout Europe, many business people secretly agree with Oxford’s snobs, suspecting that the only place to learn their craft is in the school of hard knocks; in America, even Texan auto-parts dealers line up for seminars on supply-chain management.
America’s enthusiasm for business philosophy draws on three sources. The first is the sheer size of the country. The giant companies that sprang up to provide the land mass with power, transport and food required huge armies of skilled managers, and the universities soon established business schools to provide them. The second is the power of religion. In a country that erects churches on almost every block and regards work as a form of prayer, it seemed natural that management thinkers should, at times, rant like revivalists and call themselves gurus.
The third is the tradition of pragmatism. In aristocratic Europe, intellectuals prided themselves on their unworldliness; in the U.S., philosophers like John Dewey worshiped the wisdom that came from getting your hands dirty. Frederick Taylor, the father of scientific management, was so willing to do this that, confronted with a blocked drain in a factory, he once put on overalls, tied shoes to his elbows and knees and crawled through the muck until he had removed the obstruction.
In The Capitalist Philosophers Andrea Gabor does a sound job of providing pen portraits of America’s important business thinkers, from Taylor on down. Ms. Gabor lacks the lightness of touch that might have put this book into the airport bookstores, and her portraits are often crowded with detail. But it will be a pity if her book finds readers only among aficionados, because it makes two points that deserve to be widely recognized.
One is that management theory in the U.S. is the broadest of churches. Management thinkers have come from an extraordinary range of intellectual backgrounds. Alfred Chandler — nicely described by Ms. Gabor as “the Boswell of American capitalism” for his close studies of big businesses and their internal structures — is essentially a historian. (And a very lucky one at that: As a graduate student he discovered the private papers of Henry Varnum Poor, one of the founders of Standard & Poor’s and the greatest contemporary chronicler of the railroad boom, sitting in his great-aunt’s attic.)
Herbert Simon, best known for his work on behavioral theory and corporate decision-making, is a Nobel prize-winning economist who started his career complaining that business schools were a “wasteland of vocationalism.” Both Chester Barnard (“Functions of the Executive”) and Alfred Sloan (“My Years at General Motors”) were captains of industry. Peter Drucker is an 18th-century-style savant who ended up writing about management largely because of the thick-headedness of America’s social-science departments.
These management gurus have also embraced an astonishing range of theories about what makes business tick. Taylor believed in carrots and sticks, a belief that has recently been revived by re-engineers such as James Champy and Michael Hammer. A range of other theorists have embraced more optimistic (or perhaps more naive) theories of motivation. Mary Parker Follett saluted management as an exercise in “democratic experimentation.” Fritz Roethlisberger and Elton Mayo turned “human relations,” with its fuzzy emphasis on teamwork, into the governing orthodoxy at the country’s leading capitalist boot camp, the Harvard Business School.
The second point is that these theorists have had a dramatic effect on the way that businesses are run. Henry Ford’s assembly line was Taylorism in practice. Robert McNamara brought numbers-based management to Ford, the Defense Department and the World Bank, and his disciples spread it throughout American industry. Chandler popularized the multidivisional firm. W. Edwards Deming helped to revitalize Japanese business in the dark days after World War II by pushing for cooperation between labor and management (and then helped to revitalize U.S. business when it was pummeled by the Japanese in the 1970s and ’80s). Mr. Drucker has acted as a sounding board to the heads of some of the world’s biggest companies, including Jack Welch at GE and Walter Wriston at Citibank.
There is plenty that is distasteful about America’s weakness for capitalist philosophers. The bulk of management books are utter tosh, the majority of management conferences a load of hot air. But Ms. Gabor’s book is yet more proof that there is more to management thinking than hype — and proof, moreover, that America’s openness to the capitalist philosophers is rather more admirable than Europe’s snobbish closed-mindedness.
Mr. Wooldridge, a Washington-based correspondent for The Economist, is the co-author, with John Micklethwait, of A Future Perfect: The Challenge and Hidden Promise of Globalization, forthcoming from Crown.
January 28, 1991
You can’t turn on the television or open a magazine these days without hearing or reading about quality. General Motors Corp. trumpets that its Cadillac division has won a Malcolm Baldrige National Quality Award. Federal Express Corp. crows that it has done the same. ”Quality” has infiltrated the corporate mindset.
The man behind the movement is W. Edwards Deming, an American statistician who first gained fame for his role in the postwar transformation of Japan. So taken were the Japanese with his lectures on quality that in 1951 they created the Deming Prize, the inspiration for the Baldrige. By 1960, when he received a medal from Emperor Hirohito, the American had become an icon of Japanese quality management. It wasn’t until the 1980s that Deming, now 90, received the acknowledgement he deserved in his home country.
For all his present acclaim, Deming did not create quality control. That distinction belongs to Walter Shewhart of Bell Laboratories, who pioneered the use of statistics to control manufacturing quality in the 1920s. Neither did Deming coin the phrase ”Total Quality Control.” That now-popular term originated at General Electric Co. in the 1950s. Still, the cranky old man has come to symbolize the current quality movement.
In the age of the quick fix, Deming has been a refreshing antidote. Sure, he promotes a set of succinct guidelines dubbed the ”Fourteen Points” and a set of no-nos called the ”Seven Deadly Diseases.” But there’s nothing simple or easy about his approach to managing.
While earlier quality-control concepts focused on limiting product defects, Deming looks for quality in all aspects of business: what goes on in the factory, how products are sold, how managers deal with workers. Limiting defects is not enough, he contends; the goal must be to eliminate them. And while American managers tend to blame quality problems on labor, Deming says, management must take the initiative to enhance quality and productivity. The only way to improve business systems, he believes, is to use statistical tools that chart the variations that cause problems, to pinpoint where difficulties lie.
A trio of reverential new books celebrates Deming’s management principles. In Deming Management at Work, Mary Walton, a writer for The Philadelphia Inquirer Magazine, focuses on how six organizations, including the U. S. Navy, have applied his methods. You get much of the same from both Rafael Aguayo’s Dr. Deming: The American Who Taught the Japanese About Quality and Andrea Gabor ‘s The Man Who Discovered Quality, even though their titles suggest biographical accounts. Aguayo, a former bank executive, essentially offers a schematic for putting Deming’s teachings to work. What little biographical information he provides is shuffled into a dry three-page appendix.
Gabor, formerly a staff editor for this magazine and now a senior editor at U. S. News & World Report, provides far more insight into the man, which makes hers the most accessible and enjoyable of the three books. Born in Iowa, Deming grew up in a tarpaper shack in Wyoming. He earned a scholarship to Yale University, where he graduated in 1928 with a PhD in mathematical physics. He worked for the Agriculture Dept. and then the U. S. Census Bureau before the War Dept. sent him to Japan in the late 1940s to help rebuild that war-torn nation. Gabor vividly describes Deming’s early visits, using his personal diary to bring to life his rise to prominence.
Deming, she tells us, is a precise man, given to dating the eggs in his refrigerator with a felt-tipped pen to make sure the older ones get eaten first. He also is something of a curmudgeon and holds American managers in contempt. Invited to lecture to a group at Ford Motor Co. in the early 1980s, Deming glowered at the auto executives with his steely blue eyes. ”Why can’t America compete?” he asked in a rage. ”The answer is management!” At General Motors, Gabor reports, even as managers began to preach his gospel, some avoided being seen with him. In 1983, Deming had given then-GM President Jim McDonald a public dressing-down, blaming him for 85% of the company’s problems.
Gabor incorporates these tidbits into a book full of readable case histories of companies that have treated Deming’s teachings as gospel, including Nashua Corp., the first U. S. company to adopt his quality management, and Florida Power & Light Co., the first American company to win Japan’s Deming Prize.
What becomes clear in all three books is that U. S. companies have a long way to go to even approach the obsession with quality that marks Japan. In the late 1950s, the Japan Broadcasting Corp. was broadcasting quality correspondence courses for foremen. Most Japanese bookstores feature sections devoted to quality, and statistical theory is part of the basic high-school curriculum.
How great is Deming’s influence in Japan? On the walls in the main lobby of Toyota’s headquarters in Tokyo, three portraits hang. There is one of the founder and one of the current chairman. But Deming’s is the largest of all.