What Bandwagons Bring: Effects of Popular Management Techniques on Corporate Performance, Reputation, and CEO Pay

Administrative Science Quarterly, Sept, 2000 by Barry M. Staw, Lisa D. Epstein

This paper examines some of the important organizational consequences of popular management techniques. Using informational reports on quality, empowerment, and teams, as well as a measure of the implementation of total quality management programs, we found that companies associated with popular management techniques did not have higher economic performance. Nevertheless, these same companies were more admired, perceived to be more innovative, and rated higher in management quality. Higher pay was also given to chief executives when their companies were associated with these management trends. These results provide strong support for institutional theory, demonstrating how both internal and external legitimacy can be gained by using popular management techniques. They also extend institutional theory from its usual emphasis on organization-environment relations to new within-firm dynamics. [*]

It is hard to get a sense of scientific progress by reading a chronology of popular management techniques: Management by Objectives, Zero-based Budgeting, T Groups, Theory Y, Theory Z, Diversification, Matrix Organization, Participative Management, Management by Walking Around, Job Enlargement, Quality Circles, Downsizing, Re-engineering, Total Quality Management, Teams, and Empowerment. There is not a steady progression of ideas based on systematic knowledge of people and organizations, nor are there clear-cut discoveries of principles for motivating and coordinating the work of others. Instead, the chronology of management techniques reads more like a list of claims not quite substantiated and promises not quite fulfilled. Though many techniques once enjoyed the enthusiastic support of consultants, journalists, and management scholars, all but the most recent have fallen from favor, replaced by newer philosophies and procedures.

Abrahamson (1996) described the ebb and flow of management techniques as similar to that of a fashion cycle. At any particular time, practitioners and researchers are likely to agree that older management techniques were deficient, that their popularity was not justified by gains in efficiency or economic performance. But, as with any fashion trend, discussions of contemporary techniques tend to be much more positive. Today's business writers and consultants, for example, extol the virtues of techniques such as total quality management (TQM), teams, and empowerment, pointing to their widespread use by high-prestige organizations and their role in corporate success stories. Many academics have also jumped on the bandwagon. Lawler (1992) has called employee involvement the "ultimate competitive advantage." Pfeffer (1994) has described a broader set of human relations procedures as a source of "competitive advantage through people." And Pfeffer and Sutton (2000) have gone so far as to argue that the main problem of modern management is not knowing what the right set of techniques is (this is presumably clear) but reducing what they call the "knowing-doing gap."

If the merits of current management techniques are as obvious as Pfeffer and Sutton claim them to be, then it makes sense to shift our attention from the identification of effective procedures to their implementation. We should, as they suggest, start to specify norms, incentives, and strategies to help organizations implement the most popular or best practices. If effectiveness cannot easily be attributed to these contemporary techniques, however, then there may not be as much of a knowing-doing gap as a simple deficiency in our understanding of organizational behavior, requiring continued search for effective procedures rather than shortcuts for their implementation. In this article, therefore, we take a critical look at some of the most popular management techniques and their consequences. We assess whether these procedures really are associated with the performance of firms. We also ask if there are social and material outcomes that may drive organizations and their management toward popular programs, eve n when economic or technical benefits are hard to find. To begin such an inquiry, we turn to the literature of institutional theory.

AN INSTITUTIONAL VIEW OF POPULAR MANAGEMENT TECHNIQUES

Institutional theorists have long dealt with the issue of why many organizational forms and procedures can exist without obvious technical or economic value (Meyer and Rowan, 1977; Scott, 1995). Early qualitative and descriptive studies illustrated how organizations structure themselves not so much to execute their tasks more efficiently but to gain legitimacy or cultural support (e.g., Selznick, 1949; Zald and Denton, 1963; Meyer and Rowan, 1983; DiMaggio, 1991). Some quantitative research also showed that, while technical or functional criteria may be important determinants of the early adoption of an innovation, these factors become weaker predictors over time (e.g., Tolbert and Zucker, 1983). Although most institutional theorists have argued that late adopters use legitimacy rather than technical rationality as the basis of their actions, Scott (1995) noted that most of the evidence has been indirect, providing more support for the absence of technical or economic determinants of adoption than for institu tional processes.