American Management: Criticized in the 1980s, Admired in the 1990s, Despised Now - Essay Example

? Why was American management criticized so much in the 1980s, so widely admired in the 1990s, and now so despised again? Why was American managementcriticized so much in the 1980s, so widely admired in the 1990s, and now so despised again? Still, America is arguably the wealthiest nation in the world, even though China is rapidly catching up with them. The story of America’s evolution as the world’s wealthiest economic and military power is still unbelievable to many people. Britain ruled the world for a longer period and even America was a British colony once. However, Britain failed to sustain their supremacy whereas America emerged as a superpower. America succeeded in emerging as the sole superpower in the world, after the destruction of former Soviet Union. Industrial revolution and enormous technological development helped America to maintain their top spot intact among the global economies. However, American style of management faced mixed response from international community over the last few centuries. Politics, religion, scientific development etc succeeded in making immense changes in American style of management periodically. America is a democratic country for a longer period. “Until World War 1, the influence of religion on American business was far reaching. Yet religion failed to provide organizational ideas for human relations” (Guillen, 1994, p.30). Scientific developments in America are more than anywhere else in the world. Even amidst all these favourable factors, America failed to develop proper management techniques at times. American management was widely criticized in 1980’s whereas it was highly appreciated in the 1990’s. Today, the American management is again hearing lot of criticism because of various reasons. This paper analyses; why was American management criticized so much in the 1980s, so widely admired in the 1990s, and now so despised again? Criticisms of American management styles in 1980’s Managerial capitalism was the major element in American management styles in 1980’s. it was the management style in which the organizations were managed by the managerial executives rather than the owners. Managerial capitalism made the original business owners taking a lazy approach towards their business. Business owners thought that the managers will handle everything properly and they can take a break from the business. The above assumption proved to be wrong as the managerial executives tried to exploit their increased power in inadequate manner. Mismanagement stories were started to come out in large numbers from prominent organizations in the 80’s as a result of managerial capitalism. According to Heskett (2007) “Companies taken over by private equity groups or managerial executives have been stripped of their assets … and hold unsustainable debt burdens”(Heskett, 2007). Managers enjoyed or claimed the majority corporate success than the original owners or the workers. They spread the rumours that American companies are growing not because of the efficiency of their workers or the capabilities of the owners, but because of the capabilities of the efficient management force. Thus managerial executives in the 2980’s became dictators in the corporate sector as a result of the managerial capitalism. There was also a very serious banking crisis in the 1980s – what became known as the ‘savings and loan’ scandals, when many of the thousands of small banking operations around the States became insolvent. Banks became ‘hemmed in by government restrictions. Moreover, banks watched helplessly as much of their business disappeared into the capital markets (Chapter three – The USA: the world’s foremost economic, political, and military power, n. d., p.20) Another major criticism for American management in 1980’s was the banking crisis. American government started impose strong restrictions upon banking exercises. The interest rates in America increased sharply in the late 1970s as a result of inflation. Between 1976 and 1980, interest rates increased around four times more than that in the previous years, which forced American government to enforce strong restrictions upon the banking industry. These restrictions resulted in huge losses in banking sector and organizations which relied banks for loans faced stiff problems in finding money for their business expansion. The world oil price collapses caused more problems in the organizational world. The shift from managerial capitalism to investor capitalism occurred in the 1980’s. A number of institutions which had mutual ownership converted to stock ownership as a result of investor capitalism. Thus the authority shifted from managers to the investors as a result of the investor capitalism in the 1980’s. Investors started to demand higher returns on their investment which caused additional problems in American management in 1980’s. In short, in 1980’s, “Individual financiers, managers and shareholders have profited from ignoring the dynamics of managerial enterprise in capital intensive industries. But the consequences of their action hurt the long term health of the enterprises and the industries involved (Chandler, 2001, p.140) “Between 1962 and 1993, the number of US firms in the top 500 dropped from 296 to 160”(Chandler et al, 1990, p.52). In short, American model of management was unsuccessful till 1990’s. However, the scenario started to change from 1990 onwards. Why American management admired in the 1990’s? “Organizational change ideas, such as Business Process Re-engineering, culture change, and Six Sigma, were all originally developed in the States, are used extensively at home and are exported to large firms the world over” (Chapter three – The USA: the world’s foremost economic, political, and military power, n. d.,p.2). American model of management earned great respect in the 1990’s because of the various scientific management principles developed and implemented during this period. Prominent companies developed their own management methods in order to cater the needs of the changing world. For example, Motorola Company developed the Six Sigma total quality management system during this period which is still used in many of the organizations worldwide. The evolution of the U.S. model in the 1990s centered on the goal of securing greater importance for profit as the primary goal of business, in contrast to earlier “stakeholder” models, which asserted that businesses had many stakeholders other than shareholders and that the interests of these different stakeholders had to be balanced (Cappelli, 2009, p.7). “American entrepreneurs respond more creatively to innovation and change in the 1990’s” (Landes et al, 2010, p.402). Earlier US model of business management was aimed only to safeguard the interests of the managers and the shareholders. However, in 1990’s Americans realized that the number of stakeholders in a business set up cannot be limited to the number of shareholders or the managers. They have realized that apart from the shareholders and managers, employees and the communities in which the business operate are also prominent stakeholders. It is difficult for a business to develop properly if it fails to safeguard the interests of the community in which it operates. It is the duty of the organizations to give something in return to the communities since the organizations are exploiting the community resources for making profits. In other words, the term corporate social responsibility has gained prominence during this period. Thus, the inclusion of more stakeholders in business management has succeeded in giving a new face to American business management in 1990’s. American business management model in 1990’s gave more “flexibility to firms and their ability to reconfigure the nature and organization of core activities and skills to respond to rapid and radical changes in markets and technologies” (Whitley, 2009, p.15). Till 1990, business management in America was based on some traditional management techniques. The employer was the authority in all management process till 1990. However, the above scenario changed a lot in 1990’s because of the introduction of new technologies and changes in markets. Internet and computers started to conquer the business world during this period and it was difficult for the companies to stick with the old methods at that time. Changes happened not only in communication, but also in every aspect of business because of the introduction of computer technologies in business. Another significant change happened in 1990’s was the changes in the banking system. Big banks started to take over smaller banks as a result of this change and interstate banking starter to develop during this period. American Banks made lot of profits during this period through risky lending methods. Moreover, American banks started to enter into the stock markets during this period and stock-market capitalism started to develop. Criticisms of current American management styles Current America style of management is criticized by many mainly because of the inability of American organizations in coming out from the present recession problems. While most of the Asian countries like India, China Japan and Korea succeeded in escaping from the recession problems, many of the huge American companies collapsed. In fact the recession affected majority of the American companies which shows the failure of present American management model. “The Chinese economy grew a blistering 99% from 2001 through 2007, compared to a more anemic 18% in the United States” (Cappelli, 2009, p.8). Even though China is a communist country, it succeeded in handling the recession problems more effectively than any other countries. According to the article, A special report on America's economy: Export or die, published on The Economist, “a country’s relative trade performance is mainly determined by two (connected) factors: its exchange rate and its growth rate in relation to those of its trading partners” (A special report on America's economy: Export or die, 2010). American dollar value has come down drastically in the emerging countries at present because of less economic growth in America and better economic growth in the emerging markets. For example, one American dollar was exchanged for around 50 Indian rupees in 1990’s whereas at present it is difficult to get even 43 rupees for an American dollar in India. This is because of the better economic growth of India compared to America. India was able to achieve tremendous growth because of the superiority of their management policies over the American management policies. Lots of changes are taking place in emerging economies as a result of globalization. For example, s new concept about multinational enterprise (MNE) is evolving from the emerging economies at present. In other words, the American model of MNE has given way for a “new type of MNE in which foreign direct investment is driven not only by the exploitation of firm-specific competencies but also by the exploration of new patterns of innovation and ways of accessing markets” (Guille?n and Garc??a-Canal, 2009, p.33). Many of the Indian and Chinese firms already acquired some of the prestigious companies of America and Britain as a result of the new challenging and aggressive management models evolving in these countries. On the other hand, American firms are currently struggling to counter the tactics of firms from emerging markets. Instead of preparing effective strategies, American firms are trying to use short cuts. Outsourcing and offshoring like business strategies are extensively used in America at present because of the inability of the American firms in countering the tactics of foreign firms. American companies have migrated most of their manufacturing jobs to foreign countries where it is cheaper to do business. Furthermore, service and technical jobs are currently undergoing a large exodus to foreign labour too. President says to overcome these lost jobs, Americans will get better education. But even higher education, jobs such as medicine and research and development are successfully being done in other countries. In greater numbers, Americans with college degrees are unable to find work, while the same degrees in other countries are in demand. Even the education in the United States is regressing too (The Effects of Globalization on the United States of America, 2010) Corporate scandal stories are coming out more from America than in any other countries at present because of the failures of current American management model. “The common theme across all these scandals was financial fraud in various forms, attempts by executives to manipulate finances in order to improve share prices and enrich themselves” (Cappelli,2009, p.7). Accountability and credibility of the American management model are getting weaker and weaker as the day progresses because of the many loopholes in current American management model. Conclusions American management model in 1980’s was heavily criticized because of the dominance of managerial capitalism, investor capitalism and banking crisis in 1980’s. On the other hand, the American management model in the 1990’s was appreciated because of the huge economic growth America achieved during this period. The current American model of management is criticized heavily because of its inability in tackling recession problems and exploiting the possibilities of globalization effectively. References 1. A special report on America's economy: Export or die, (2010). The Economist. Retrieved from http://www.economist.com/node/15793128?story_id=15793128 2. Chapter three – The USA: the world’s foremost economic, political, and military power, (n. d) 3. Chandler A.D. (2001) The enduring logic of industrial success. Retrieved from http://astro.temple.edu/~rmudambi/Teaching/BA951/Week_13/Chandler-HBR-1990.pdf 4. Chandler A.D. Amatori F, and Hikino T (1999). Big business and the wealth of nations Cambridge University Press, 1999 5. Cappelli, P (2009), The Future of the U.S. Business Model and the Rise of Competitors Academy of management 6. Guillen, M.F (1994), Models of Management. The university of Chicago press, 1994 7. Guille?n M.F and Garc??a-Canal, E (2009). The American Model of the Multinational Firm and the “New” Multinationals From Emerging Economies. Academy of management 8. Heskett, J (2007). Has Managerial Capitalism Peaked? Retrieved from http://hbswk.hbs.edu/item/5794.html 9. Landes D.S. Mokir J, and Baumol W.J (2010). The invention of enterprise. Princeton University Press, 2010 10. The Effects of Globalization on the United States of America,( 2010) Retrieved from http://www.philforhumanity.com/Globalization_of_the_U.S.A..html 11. Whitley, R (2009).U.S. Capitalism: A Tarnished Model? Academy of management Read More