Modern Management Theories - Literature review Example

CRITICAL REVIEW ESSAY: FROM THEORY TO PRACTICE By Name Course Instructor Institution City/State Date Table of Contents CRITICAL REVIEW ESSAY: FROM THEORY TO PRACTICE 1 Table of Contents 2 Introduction 3 Review of the literature 4 Implications of the literature: 7 Practice Relevance: 9 References 14 Critical Review Essay: From Theory to Practice? Introduction Without doubt, modern management theories taught in class have proved to be ineffective in handling the contemporary management issues facing scores of business organisations. Agency theory has strongly affected business policy and organization theory that portrays top managers in present companies as agents whose care much about themselves rather than for stakeholders. According to Vincent (2008, p.876), contemporary leaders must be trusted by their employees since trusting is the mortar that connect the employees to the leader; hence a leader positively correlates with diverse results such as organizational performance, behaviours, and satisfaction. Cheng et al. (2013, p.6) assert that confidence is a significant satisfaction antecedent for the leaders since both arise from cognitive state, whereby leadership is based on abilities and capabilities, as well as affective states. On their part Feldman and Orlikowski (2011, p.1243) maintain that perceived competence or ability is vital in organizational leader-employee relationship since employees are implausible to create trust with their leader unless they have faith that the leader will manage to fulfil his leadership role. With regard to 2008 Global Financial Crisis (GFC), arguably the most terrible economic catastrophe since the Great Depression that occurred in 1930s; economist maintain that it was caused by poor leadership (Rosso, 2014, p.554). According to Rosso (2014), the 2008 fiscal crises had a momentous insightful impact, much more than that expected by majority. The state borders were violated and the consequences are still being experienced far-off from the epicentre. The big question “is there any connection between the management theories taught in class and applying those theories to practise? In this regard, the literature seeks to view the connection that exists between Ghoshal (2005) paper, Agency Theory as well as the 2008 Global Recession, an how it matters for Post Graduate studies in Management and Organizations. Review of the literature With the need to generate and defend the knowledge deception, in the endeavor to make business studies a science, Ghoshal (2005, p.76) posit that lecturers may have gone extremely far in disregarding the cost not just for the learners but as well for the public. Knowing more or less the unlimited authority that educators do have over every educational issue, especially those in the promoted faculty, Williamson (1998, p.25) thinks an authoritative counterbalancing force could be needed for any considerable redirection in teaching as well as research. Maybe the governors’ boards of various institutions represent the just likely basis of this counterbalancing force according to Ghoshal (2005, p.77). For nearly all business learning institutions, the governing board characterizes maybe the most fallacious misrepresentation of unproductive corporate boards. Casciaro and Piskorski (2005, p.169) concur with Ghoshal by claiming that the majority board members are asymmetrical in their turnout; and those who turn out tend to observe such meetings as basically social occurrences, and so the genuine actualities of the institution are hardly ever exposed in the board conferences. Instead, the program in general concentrates on outdoor associations, fund-raising, or on empty-headed idea avowals. Ghoshal (2005, p.79) thinks that maybe business institutions governors have be more engaged in making sure that the outdoor oratory of the institutes are in fact excogitated in their in-house choices as well as decisions. However, Eden, 2003 (p.391) disagrees by claiming that this will not prove that the governors must lay down the teaching or research plan for every department or that they must possess a undeviating authority on academic promotion or staffing procedures. Feldman and Orlikowski (2011, p.1247) think that the board members are playing the role of policing that agency theory have set aside for corporate board members, an assertion that Ghoshal (2005, p.79) strongly brushes aside. According to Ghoshal the role played by governors of business school is more akin to that of a stewardship; concerned in backing, as well as testing instead of controlling. As higher delegates of the external societies, Dacin et al. (2010, p.1394) posit that business schools can vehemently slot in diverse viewpoints as well as external information into the vastly narrow-minded world of business school departments. Bearing in mind the tremendously partial authority of students, employees, and other groups openly associated with business learning institutions, Ghoshal believes that it is just the board of governors which could have the legality and authority to face the overriding doctrine with confutative information as well as perception, and in so doing to fortify the power of the deans. Agency theory posit that the manager's role is to act as the connection amid organization’s shareholders and employees who work as agents, whereby an agent acts as a connection between clients and shareholders with the principal goal being profit. On the other hand, stewardship theory backed by Ghoshal (2005) states that managers take care of the stakeholder’s wealth and likewise they are the company’s shareholders; additionally, they are accountable and enthusiastic stewards who have a sense of membership and own the organization dreams. Therefore, when organization endures a profit or losses, managers are influenced unlike agents who act for their intrinsic self-interest. According to Fournier and Grey (2000, p.12), recent comprehension based on strategic management and business policy has been affected by agency theory since it states that managers will not act to heighten the returns to shareholders unless suitable governance structures are incorporated in the organization to protect the shareholders’ interests. Agency theory argues that in the present organization, in which the company shares is held widely, managerial actions leave from those needed to maximise the shareholder returns. According to Katkalo et al. (2010, p.1179), agency theory indicate mechanisms, which minimises agency loss, these mechanisms include enticement schemes for leaders, which financially rewards them for increasing shareholders interests. In addition, these schemes typically entails plans where managers attain shares, at a minimised price; thus, aligning the executives financial interests and participates in executive compensation put off to the future. On the other hand, Ghoshal backed theory is based on preventing managerial opportunistic behaviour that entails wallowing and shrinking excessive perquisites at shareholders interest expense. Critically, I have observed that diversification is observed frequently as an opportunistic hunt by present management of their own self-interest without caring for the shareholders who can diversify their intrinsic portfolios by procuring shares from different companies. Latest meltdowns in international fiscal markets have offered advocates of behavioural economics with sensible proof to confront the supporters of the Efficient Market Hypothesis (EMH) and neoclassical economics. According to Feldman and Orlikowski (2011, p.1240), fundamental analysis of 2008 global recession was anchored in the theory that suggests business assets were either under-priced or over-priced in the global marketplace in contrast to their inherent value. In essence, the asset inherent value can be measured by examining numerous aspects that can influence the potential asset cash flows. In equities instance, a fundamental analysis example could be to embark on a production, market and corporation analysis and afterward estimate cash flows to the organization and markdown at a suitable rate; further techniques comprise diverse accounting metrics and ratios. Fundamental analysis which is hardly ever practices as a management theory advocates that a financier who can properly recognize under and over-priced assets can ultimately make higher profits to the market (Katkalo et al., 2010, p.1179). What’s more, the fundamental analysis method which is theory deficient clashes with a fundamental keystone to the Efficient Market Hypothesis, which posit that all openly accessible data are hastily accounted for and in view of that the prices at the market, are attuned. EMH, especially the semi-strong structure, advocates that fundamental analysis will merely offer ‘average’ profits as every financier has access to the equivalent information. Implications of the literature: Regarding agency theory implications, this matter is purposely dealt with by Klaas and Donaldson (2009, p.153), who condemn the circumstances under which management theories from business class fail to instigate any change in the real world. I have seen that dogmatic management theories can effortlessly be shunned in practice. Poor leadership characterised by class theories rather than experience can as well be avoided by the accurate supervision and/or reward systems. Agency theory implication as observed in Hoskisson et al. (1999) study could be most noticeable for circumstances wherein result ambiguity is far above the ground. I have seen this mostly in IPO companies, whereby they carry a more all-encompassing array of risks as compared to bigger, more accomplished corporation, and leads to high level of end result ambiguity. Purposely, I selected this example in order to prove that a classed-based theory cannot help to carry out a longitudinal analysis of control choices impact at during the primary public offering on ensuing sales, stock prices, as well as efficiency. I have further note that flourishing management practice is by no means completely reproducible. For instance, in a multifaceted world of business, neither the most in-depth management academic nor the most conscientious practicing manager are certain of recognizing let alone assessing every essential element in real cases of triumphant management practice. What’s more the circumstances of any (unavoidably flawed) reproduction of productive management practice according to Friedman (1970, p.1) will be different from the primary, whether based on the company, nation, market segment, physical state of affairs, technological knowledge state of art or cultural norms as well as organizational skills. Therefore, in circumstances of intricacy as well as transformation, I think there are no straightforward valid formulas for thriving management practice, and according to Dacin et al. (2010, p.1402) this reason why there are incessant sways in management approach. Valuable knowledge from practice and critical analysis from various literatures has proved that management success does not solely rely on management theory but rather on experience. Part of the robust conclusion I have retrieved from Cheng et al. (2013, p.15) study with regards to management experience and research is that the main elements in the successful execution of modernism are valuable connections in the midst of functions in the company as well as with external basis of pertinent marketing as well as scientific knowledge. Even though extremely valuable to management this knowledge according to Eden (2003, p.392) has its confines. As I will explain later in the ‘practice relevance’ the fundamental connection between management theory from business school and development of product are overwhelmingly deceptive for large companies, wherein the main connections are between the supply chain, production, and product development. Practice Relevance: According to Vincent (2008, p.881), the effect of agency theory and managerial theory as part of the developing company economics movement; however, lately such observations have been what the followers such as Ghoshal call stewardship theory. Basically, stewardship theory presumes that management leaders are pursuing to maximize organizational overall functioning. Cheng et al. (2013, p.14) article recognized the fundamental role diversification strategy in deciding the financial performance of U.S companies via the potential structures; thus, approving the findings of Hoskisson et al. (1999) study This categorically reported that firms become diversified when they gain significant appreciation related with corporate-level performance and strategy. According to Feldman and Orlikowski (2011, p.1252), whereas stewardship theory rouses as a significant counterweight to agency theory, it endures from being fixed as it takes into account the connection of principal-agent at one point in time. Additionally, when an agent and steward communicate together, the agent behaves opportunistically, and the steward feels betrayed, as a result, the two parties end up implementing the agent position. Klaas and Donaldson (2009, p.162) claims that agency problems rouse under circumstances of deficient information and ambiguity from business schools; for instance based on adverse selection, the principal fails to assess if the agent gratify his capability for the job, which he is assigned. According to Rosso (2014, p.569), agency theory differentiates amid symmetric information theory and the asymmetric information theory, and both theories presume that the principal can view a certain result, generated by the connection of the effort level exercised, and the incident of a particular nature state, which refers to outer variables that affect effectiveness level. Additionally, the theories presume the agent is not keened in taking the risks; thus, when provided the selection amid a contract with a stabilized fee and that with a variable fee in case of hapless results, the agent will always prefer the sureness of the former. Based on the spectacular corporate bankruptcies and scandals witnessed in the past decades have provided most employees with a superior reminder of the risks that are entailed in the enterprise ownership. In this regard, most modern employees prefer stewardship cultural organization that focuses much on the employee’s welfare, rather than family organization that protect their interests. Essentially, most modern employees dislike agency theory because it is based on self-interest, whereby managers act from egoistic perspective instead of altruistic motives. In the 21st century, eliminating human resources is a significant method through which an organization can manage to keep an elastic workforce and minimise cost; consequently, the organization will manage to reduce the risks and costs, and make employees more reactive to ambivalent altering environment. Dacin et al. (2010, p.1409) assert that employees understand that full time employees have firm affective obligation than the agency workers and that the agency employees associate more firmly with standard obligation than their full-time counterparts. In modern times, agency employment have managed to offer organization with workforce elasticity, and enhanced labour cost reduction; however, most as the company benefits the employees remain the losers since their job is not secured, and their seniors manipulate them. According to Wagner (2007), permanent employees and agency employees are different in diverse ways such as job satisfaction and organizational obligation such that the relationship amid the user company and the agency workers is sophisticate due to lack of desirable incentives and efficient monitoring. Consequently, in case of a financial crisis like the one endured in 2008, agency workers often lose their jobs first through layoffs. In additional, agency workers have to work extra hard by working overtime for free to attain an opportunity to be hired as permanent employees. In this regard, most employees prefer permanent jobs where they work less, comfortably and earn a lot; thus, agency theory fails to satisfy their job specification. The aspiration of making business studies a science according to Ghoshal (2005, p.83) has made a noteworthy progress owing to the substantial amount of wherewithal business schools get through individual as well as corporate rewards. Devoid of the slack generated by charitable donations, Fournier and Grey (2000, p.24) think that scholars in business schools would be unable to detach their studies from the practical desires of their students or the affirmative wishes of community somewhat as totally as scores have done. Newton (2010, p.1372) posit that if executives bear in mind the their companies behavior and concerning the legality of their personal roles within the community, which is plainly a key subject in nearly all countries across the globe, maybe they must turn out to be a somehow more perceptive in relation to their contribution. Both as personally as well as jointly, Ghoshal (2005, p.86) posit that corporate leaders as well as business school former students can put forth substantial pressures to realign the viewpoints and precedence of the schools they support. Eden (2003, p.390) posits that organizations like the Academy of Management must as well play a crucial part. Whereas the Academy leaders have accordingly articulated their worries concerning the corporate outrages, Ghoshal (2005, p.87) claim that they may do much more to generate a novel academic program that might brace the social sciences vision offering real assistance in the cogent modernization of society. Management academy according to Vincent (2008, p.890) can institute a channelizing committee of higher-ranking entities to steer the attempt and offer protection for the low-ranking faculty who decide to become involved. What’s. More, the academy leaders can make sure that every journal of the academy offers exceptional issues to legalize the novel academic program. Without a doubt, maybe they could make this subject the key topic of a forthcoming yearly assembly in order to embrace the joint knowledge of every member in molding the journey in front. Disapprovals of the conventional form of America institutional economics have been contemptuous according to Katkalo et al. (2010, p.1178). Powerless or disinclined to present an opponent research program, the conventional institutional economics was presented over to practical oppositions to prevailing attitude. Akin to the American Legal Realism movement with which conventional style of institutional economics shares loads of universal academic and society policy characteristics, DiMaggio and Powell (1983, p.149) posit that conventional style of institutional economics steered itself out of track. According to Dacin et al. (2010, p.1397) the setback was not that the legal and economic beliefs with which such two movements disapproved were beyond legal condemnation. What’s more, the aphorism that “it takes a theory to beat a theory” still is applicable. Both conventional forms of institutional economics as well as legal realism were negligent by failing to press on an affirmative research program. What is more, it not adequate to lay down an all-purpose approach; for instance, business schools. Hoskisson et al. (1999, p.443) posit that concentration is desirable for Post Graduate studies in Management and Organisations, whence matters of thoughtfulness as well as selection of the analysis unit are imperative. Based on the scores of functions served by business schools, the key function according to Ghoshal (2005, p.79) is going afar the suggestion that management theory practiced in class is impractical in real management situation. Even though the global financial system is recuperating from the 2008 global recession, the certainty in the global markets is still feeble as partakers in the market are searching for a course which is not in the slightest straight onward. Feldman and Orlikowski (2011, p.1247) opine that economic disasters share some camaraderie, especially disasters that are related with the surfacing of elation and smugness in monetary markets. This characteristically is braced by hasty credit advancement and a mounting belief that novel theories such as fiscal novelty or hi-tech developments have provided aged boundaries on financial performance archaic. Simultaneously, Newton (2010, p.1374) recognizes the reality that all crises are as well only one of their kinds, whereby every financial disaster has its personal attributes, which make it special from the preceding ones. So as to avoid the subsequent crisis it is vital to comprehend the causes and means behind the recent financial crisis. Arguably, every financial crisis pursues its own route in the market and influences explicit segments more as compared to others. The outcome is that the international economic crisis has seen the sharpest and major drop in international financial activity of the contemporary epoch. In 2009, nearly all main developed countries find themselves in a cavernous slump, whereby the global trade fallout, both for the trade pattern and volumes has been theatrical. Undoubtedly, the class knowledge obtained by post graduate students in management and organisation field failed to offer any serious solution to the global catastrophe of 21st century. Conclusion In conclusion, it has been argued that managers as leaders require to be trusted by their employees since trust is the mortar that connect the employees to the leader; hence trust in the leader positively correlates with diverse results such as organizational performance, behaviours, and satisfaction. Besides, stewardship theory somewhat relates to trust in the leader and promotes trust development in the leader for the leader’s own commitment and determination to the organization vision, as proved by self-sacrificial behaviours, which exhibits that a leader is a person who ‘walks the talk’, thereby developing credibility. Agency theory indicate mechanisms, which minimises agency loss, these mechanisms include enticement schemes for leaders, which financially rewards them for increasing shareholders interests. Managers as organization leader should develop a pathway for the modern employee to reach their goals, and should designate definite metrics and milestones that will assist this group of generation to climb the ladder and not feel isolated. 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