Explanation

Managerism is derived from the term manager – a job or function

Managerism is a dysfunctional form of management, which is widespread in corporations (public joint-stock companies) in Western economies. This deformation can be recognized by the way that planning, control and people are managed, executives avoid responsibility and accountability, wide executive-to-workforce pay gaps, resources are misused, how firms are supervised, a dismissive attitude to rules and regulations, and the abuse of corporate power to influence politics and society.

Managerists (individually and collectively) practice an inappropriate form of management with pathological characteristics. The attributes of managerists include egoistic behavior, servility to capital markets, central planning, bureaucratic systems, pseudo-scientific professionalism, dependence on consultants, detachment from people and community/society, and disregard for moral values. Managerism is encouraged by group/peer pressure, short-term monetary incentives, rigid budgeting and planning, and share buy-back schemes.

Managerism is the opposite of entrepreneurship and of responsible and accountable business management. A managerist differs from those managers who are aware of their social responsibility and who act accordingly.

The key opposing differences are listed below – whereby managerism and entrepreneurship are considered 'ideal types' in the sociological sense.

A Short History of Managerism

Elements of managerism are attributable to the scientific management of Frederick W.Taylor (1856-1915). These are, first of all, a detached relationship to people –people as interchangeable units – and an excessively bureaucratic and analytic approach to management.

Taylorism

Taylorism is the managerial perception and organization of the workforce as semi-skilled multi-functional ‘machines’ and an attempt to apply scientific methods to work tasks, so that these are controlled down to the smallest detail (micro-management). The same criterion is used for selecting and training workers. Piece-work production systems were introduced to ensure that standardized performance levels were exceeded, by triggering competition between workers. And Taylorism was successful, within its limited remit. Two initial consequences were a significant rise in the productivity of manufacturing businesses; as well as sustained high-growth rates in national economies. However, piece-work systems only work well in a static corporate environment. Eventually, performance levels decline, planning and supervision costs rise, and the command-and-control system generates a corporate culture of mistrust. Taylorism was adopted in both market economies (with privately-owned companies) and command economies (with centrally planned state-owned companies).

A systemic element in Taylorism widens the gap between managers, who are responsible for corporate planning, direction and supervision, and workers, whose role is to unquestioningly execute standardized processes. This gap creates a need for complex multi-level hierarchies, an excess of rigid processes, rules and regulations, because the personal relationship between managers and workforce is lost.

Peter F. Drucker

A broader definition and understanding of management, which is still performance-oriented but also human-centric and embracing the workforce (as humans not human robots), was suggested by Peter F. Drucker (1909-2005). This renowned management theorist and teacher was, ever since the 1940s, an inimitable researcher of managing and management. It was Drucker who defined management as a new profession. He identified managers as a rising social class, and observed the transformation of the manager's role in industry and the emerging knowledge society.

According to Drucker, management first became a generic function after the Second World War, when managing evolved into a function, comparable to a sophisticated craft (but not a science) with the focus on planning, decision-making, employee/manager development, public relations (propaganda), and profit planning.

Drucker realized that the role of a manager was more than that of a so-called technocrat. He argued that because business management is culturally based, managers are also obligated to the values and traditions of society, and not simply to earning maximum profits for shareholders, and obtaining high-salaries and bonuses for themselves. And because business companies are, or should be, embedded in society, managers must also shoulder social responsibility and provide leadership beyond their own business corporation. Drucker saw very early on, that society would place growing demands on managers, in terms of leading people, business engagement in the community, knowledge management, and the internationalization of business operations.

What management is: It's about people. So said Peter F. Drucker. The necessary corollary is that the task of management is human-centered: the manager’s task is to enable people to achieve a common purpose by engaging and encouraging their strengths, while compensating for their weaknesses. Because management is focused on integrating people in a common enterprise it is necessarily influenced by and influences the prevailing culture in which it operates. It is also important, says Drucker, to understand that the maximization of profit cannot be the sole purpose of a business enterprise.

Profit is only a measure for testing the effective and efficient management of a business enterprise, to ensure that monetary incomings exceed monetary outgoings. In the real world (outside accounting and management textbooks) and in a real socio-political context, profit maximization is not acceptable as the sole explanation, cause or justification for the existence and actions of a business enterprise.

Corporate Managers

In the USA, over the past 40 years, the behavior of corporate managers has become determined by capital markets (keyword: shareholder value). During the stock market bubble around 2000 there was misplaced euphoria about continuous economic growth, business media characterized CEOs as "business heroes", executives became overpaid, balance-sheet fraud was widespread, there was a rise in hostile M&A transactions, unscrupulous workforce dismissals, management consultants with overblown concepts, mega-transactions contrived by investment bankers, self-enrichment by top executives, and major share buyback schemes.

The transformation of corporate management and managers was promoted and exploited by an expanding parabusiness industry: mostly US-origin consulting firms, corporate law firms, auditing firms, investment banks, proxy firms (shareholder proxy voting agencies), and revenue-chasing, trend-setting and trend-following finance/business media.

Most corporate employees had no share in the distribution of short-term profits and their real income declined, while that of top employees (executive managers) rose thanks to cleverly devised remuneration systems and collusive relations between supervising directors and management executives. It was not uncommon for the pay of a (corporate employed) CEO to be over two-hundred times higher than the pay of a (corporate employed) operative at the bottom of the pay-scale.

These expert proponents of the dark arts of business management were highly praised by business media and business schools, who even used them as best-practice case studies: like Enron, WorldCom, Tyco, GE, Boeing, and other less prominent corporations.

Global Impact of US Management Methods

In many other economies, business corporations began adopting these new US management methods (particularly from the late 1990s onward). The businesses too, began to deviate from the traditional ethos of responsible business management. Corporations like Arcandor, DaimlerChrysler, Hoechst, Mannesmann, Volkswagen, Deutsche Bank, as well as numerous start-up firms on the short-lived German stock-market index NEMAX 50, all succumbed to managerism.

Another aspect of managerism is the manipulation of international industrial markets over decades by secret cartels, and the oligopolization of industry sectors – which eliminates competition and holds back innovation, whilst boosting profit margins. This was accompanied and facilitated by an upsurge in corporate lobbying. Meanwhile, corporate images were being washed clean by a series of innovative PR methods; one outstanding exemplar of this is Corporate Social Responsibility (CSR).

Numerous studies in many countries, above all the USA, UK and Germany, show that the public reputation of top executives of business corporations (major joint-stock companies) has been seriously damaged. Interestingly, that is less so in smaller European countries, where the mittelstand (SMEs) predominate, like in Scandinavia, for example.

The Disappearance of Responsibility

A powerful critic of the excesses of modern corporate capitalism and culpable corporate managers was John K. Galbraith (1908-2006), Canadian-American economist and US presidential advisor. In his last book, The Economics of Innocent Fraud, Galbraith diagnosed a loss of reality in modern society with regard to the role of major corporations and corporate managers.

According to Galbraith, since the end of the 20th century, if not before, the real relationship between corporate business and politics has been purposely concealed from the general public. Galbraith calls this "innocent fraud". It could also be described as the disappearance of responsibility.

Giant corporations now dominate modern economies. The power and control over these corporations has shifted from the owners (shareholders) to the top managers. In this way executives have gained de facto absolute sovereignty over these corporations and now set their own primary objectives: one of these is the pursuit of continuous corporate growth. This is best achieved by acquiring other businesses and instrumentalizing them to grab even more market power – to the furthest limits allowed by cartel law. In other cases, conglomerates are acquired and asset stripped, urged on by activist shareholders. In this way, many long-standing business companies are destroyed for short-term capital gain. In the UK, for example, whole manufacturing industry sectors have been wiped out.

Corporate Governance

Galbraith strongly criticized what is known as corporate governance, which he believed was simply disguised institutionalized fraud. Boards of directors who are supposed to represent shareholder interests are appointed by the executive managers and, therefore, are answerable to the people they are supposed to be supervising. This dependent relationship opens the door to legalized personal enrichment, whereby top executive managers propose huge pay increases for themselves, which are approved by the board of directors as a formality.

Conclusion

Managerism is an inappropriate form of management, which favors corporate over-expansion and personal enrichment, and is often practiced by major companies. Even if they do not cause it, major corporations tolerate managerism.

• Taylor, Frederick W, Scientific Management, New York: Harper & Row, 1911, reprint New York: Harper and Brothers, 1947
• Drucker Peter, F., Management, New York, Harper & Row, 1974 und The Essential Drucker, HarperCollins, new York, 2000
• Galbraith, John, K.: The Economics of Innocent Fraud: Truth for Our Time, Houghton Mifflin Harcourt, Boston, USA, 2004
• Hoefle, Manfred: Managerismus, Wiley-VCH, 2010