In Praise of Management Theories

?Of late, in some circles, it has become fashionable to bash management theories. Business schools worldwide are often accused of favouring the ivory tower 'theoretical' approach at the cost of practice orientation. Are management theories losing relevance in the world outside academia? Not really. Way back in 1945, Kurt Lewin, a legendary German-American organisational psychologist, cleared the air emphatically, announcing, "Nothing is as practical as a good theory". A ?statement that has not dated even a wee bit after all these years!

The explanatory, reductive, and generalising power of sound management theories is simply indispensable in any real-world application. A lack of thorough understanding of theories may reduce managers to technicians dealing with decision-making merely at the transactional level. On the other hand, an analytical understanding of relationships among multiple variables is likely to lead to a ?more holistic and, hence, more effective managerial decision.

?Critical thinking requires a conceptual framing to develop its pathway. Without conceptual frameworks, it is not easy to comprehend any mental representations of a phenomenon or an experience. Management theories provide analytical frameworks, enabling us to think and act more like designers, not technicians. Businesses have benefited enormously from incorporating an overt hierarchy of objectives, contingent constraints, subtler trade-offs, hidden costs, game-theoretic constructs, latent risks, and many other subtler concepts in their strategic planning and day-to-day functioning. In their absence, we relied only on garnering isolated individual insights by rough-and-ready processing of field knowledge limited by a here-and-now perspective.

The real import of theories is difficult to grasp as it is invisible to eyes that are not trained to see them. For example, we often fail to recognise how information asymmetry and capital structure theories have influenced the financial statement framework to evolve into its current form. Without understanding the essence of such theories, we may fail to realise the fuller potential of the framework that financial statements embody. No matter how much application exposure we give to students, unless they learn how to evaluate the underlying logic and assumptions that drive the practice, they will struggle to grapple with the complexities of rapidly changing contexts. Ironically, It is easy for eyes to miss what is hidden in the plain daylight. The obviousness and ubiquity of applications conceal the fundamental force of theory underneath.

Another example is the network theory's explanation of how networks of different types and forms impact us, eluding our cognisance. Without the network theory, how can one make sense of the paradox that a country's trading partners, on average, trade more with more countries than the country itself? Or, for that matter, why did Johan Ugander, Brian Karrer, Lars Backstrom and Cameron Marlow, in their 2011 study, find that Facebook had around two hundred friends and their friends, on average, had more than six hundred friends?

Paraphrasing and extending what Albert Einstein mentioned in a 1933 lecture that everything should be made as simple as possible, but no simpler, it can be argued that an MBA curriculum without theoretical rigour is much less than an MBA Lite. It is a concoction of simplistic notions of the world with the potential to cause much harm. Faux-simplicity is not a virtue. It is dangerous to think that the real world is any less complex than what well-grounded management theories convey. After all, management theories find their way into textbooks only after years of empirical validation.

There is, of course, no denying the need for healthy scepticism against dodgy theories and the arrogant overreach of theorists. Scientific rigour is not an end in itself. Ultimately, it should translate into solutions to real problems of real people. Let us also be clear that no theory is immune to decay. There has never been a theory that is fully immutable. Theories, too, have their use-by dates. Tomorrow's more potent theories will replace today's influential ones. We cannot afford to get off the treadmill of constantly upgrading our knowledge.

Perhaps the MBA curricula also need to reintegrate thematically with many other branches of social sciences. We should not live in denial anymore, hoping management science can remain an academic enclave for serving as the human supply chain for corporations alone. The absence of robust linkages with theories drawn from other social science disciplines enfeebles management science's application edge.

Business schools should embrace theories more, not less, provided they choose them judiciously and teach them with imagination. The need to continually update the curricula, making room for newer theories emerging from the ashes of those who have lost credence, can not be overemphasised. That is how any science progresses.

Finally, we should see the theory versus practice debate as a false dichotomy. A management theory is nothing but the essence of the practice-logic, distilled through layers of assumptions and boundary conditions. Businesses, too, must strive to find answers for their "How" questions as much as their "Why" questions. Without the latter, business decisions cannot remain logical, coherent, and effective in a world drowning in a deluge of data and distractions.