Is Management a Profession?

Is Management a Profession?

Despite the fact that the number of degrees in MBA conferred all over the world is increasing year by year, the value in having this qualification in business is often questioned. Scepticism is practically true for innovation businesses: Moshe Alafi, an American venture capitalist and a biotech pioneer, tells a story of how he fired a Harvard graduate, having a degree in MBA, who was newly recruited at Physics International start-up company for the position of CFO. The new employee was charged with his first task to give a rough estimate of overheads and administrative expenses for the future company. He showed Alafi two figures calculated with three decimal places in a week, after which he was immediately fired not having understood that the task was to make a rough estimate under conditions of uncertainty. Alafi, who grew up on the streets of Baghdad of the 1940s, turned out to be better prepared for challenges of technology entrepreneurship than a degreed manager from the right bank of the Charles River.

 

Harvard College, Cambridge, Massachusetts

 

This story is certainly not the last case of this sort: qualification in the field of business administration is not a substitute for “entrepreneurial” abilities, and perhaps it even hinders their development. Nevertheless, in the last two decades, the number of MBA diplomas awarded all over the world has grown virtually faster than the number of graduates in all other academic qualifications. From a sociological perspective, such demand for a formal qualification can be seen as a measure for professionalization of this or that kind of activity. However, an answer to the question whether management is a profession is not obvious. Moreover, the discussion in that regard has been going on for already one hundred years, reaching from time to time pages of editions such as Harvard Business Review.

 

What is Considered as a Profession?

 

The position of professions in society can be described as one based on an implicit agreement: a community of professionals socializes its members within a framework of specific ethics prescribing to act for the benefit of society, and it may claim its autonomy, social prestige and monopoly in the expert labour market. Professionals are in control of how much their colleagues meet the occupation norms, reducing thereby the information asymmetry for society, which returns them its respect and provides them with a high level of autonomy in managing their internal issues. It is clear that not every profession keeps in step of this ideal, but the ethical aspect is imbedded in its very notion, i.e. it distinguishes a profession from just an occupation or a specialty. By proceeding from examples in jurisprudence and medicine, i.e. “bona fide” professions, which have in common the pursuance of public benefit, and which are closer to the described ideal, researchers of professions have defined a range of criteria, by which they can be recognized.

 

In the first place, a clearly circumscribed area of expertise, a body of specialized knowledge based on the developed theoretical foundation, commonly used within a professional community, underlie a profession.

In the second place, professions have a system of certification confirming that a particular individual possesses knowledge, and allowing its practical application after passing a qualification exam.

In the third place, professionals should use their knowledge and skills for the public good; it is supposed that the same doctors and lawyers, though they work with private customers, contribute to public health or manage the functioning of the system of justice, i.e. the public good, which everybody is in need of.

Finally, in the fourth place, professions have a code of ethics aimed at the monitoring and control of consistency of individual profession representatives’ conduct with the norms adopted in the community, and a system of sanctions to punish those who breach these norms.

 

History Brief of Business Education

 

 

Management has always striven for being a profession. Since the first business schools appeared in the United States at the turn of the 19th and 20th centuries, university administrators and corporate management have strived for the legitimization of the management activity in the public’s eye. The emergence of major corporations as a result of a spate of mergers and acquisitions of American companies within 1895-1904, which entered the history as the Great Merger Movement, became the historical background of those processes. Consolidation of the economic activity within major public corporations and division of labour between an owner and an executive have created demand for training of managers, whose job duties should be to administer newly established entities. However, that raised a question as to on what basis this new group would carry out its management activity: what principles and incentives should the people, who controlled a significant proportion of the country’s wealth, be guided with? With the emergence of major corporations, the old ideal of an independent owner, resting upon the liberal political philosophy of John Locke, began to be construed as obsolete and irrelevant. The most important social institutions of the progressivism epoch in the United States: sciences, professions and university, were intended to serve as legitimacy sources for an executive. According to this vision, the research universities began to deploy the first business schools; Frederick Taylor’s doctrine of ‘scientific management’ has become a key part of the curriculum; the training of future managers initially focused on the bona fide professions of law and medicine, whose representatives act, first of all, for the public’s good. Since the major corporation became one of the central institutions of the American capitalism and an intersection point of numerous interests of shareholding owners, trade unions, the State, investors, it should have been managed for the benefit of society. Founders of the first American business schools were reasoning in this way. However, the project for the management professionalization formulated by them could not be implemented.

 

The major problem consisted in the indeterminacy of that expertise area, to which monopoly control of the new profession would pretend. Frederick Winston Taylor’s doctrine of ‘scientific management’, based on the application of engineering methods to control the manual work process, had a tremendous impact during the early decades of the twentieth century. The implementation of the Taylorism in the Soviets was a clear testament to its international success: as far back as 1913 Vladimir Lenin called Taylor’s methods a ‘scientific’ system of sweating’; however, eight years later he approved the establishment of the Central Institute of Labour which was headed by Aleksey Gastev, the main Soviet propagandist of Taylorism. In the United States, the Taylorists’ approach to management constituted the basis of business education since it provided for the possibility of applying the scientific approach to a wide range of business issues going beyond the control over the labour process. Appeal to an authority in science, in turn, justified the inclusion of business schools in the university organizational structure. However, it has proved to be extremely complex to determine what exactly is the subject of ‘science’ in ‘scientific management’.

 

 

The American social scientist Rakesh Khurana has thoroughly explored the history of business education in the United States as the history of a failed professionalization project. He showed in his book that in the early days of existence of business schools in the United States there were proposed three rival models of the educational process. According to the first model, future managers were trained in subjects that were studied at other faculties and had immediate practical usefulness, for example, accounting or commercial law. The second model was hinged on specific economic sectors, such as banking, trade or extraction of mineral resources, etc. At last, the third model which prevailed in the 1930s and substantially remains to date, was based on the functional approach: teaching at the courses was built according to the basic functions of a firm: administration, finances, operating management and marketing. In other words, business

education took the contemporary form not because of its intrinsic logic and specific contents of its subject in contrast to medicine and law, but it was developed by imitating the organizational structure of a business enterprise, in other words, a workplace of future graduates.

 

A search for a ‘common business theory’ continued by selective adoption of specific theories, methods and models from branches of knowledge such as psychology, law and sociology; in the 1970s, the central place in the business education was given to economics of the new institutional school in which the theory of a firm, i.e. the application point of an executive’s managerial competence, has been established by that time. Nevertheless, though management became an academic discipline, its theoretical core, which could have been a basis for transforming it into a full-fledged profession, was never formed, and institutional success of business schools, whose prestige began to grow in the 1970s, was achieved owing to the fact that they were practically ‘colonized’ by economists. This is also the case with other characteristics of professions. Despite the fact that the MBA degree is de facto a prerequisite for taking up a position in senior management of major international companies, it is hardly possible to argue that this education is absolutely required for success in business. That was exemplified by Moshe Alafi’s story told at the beginning of the article. An additional point is that executives even holding a business school diploma are not obliged to pass a qualification exam, entitling to practice, or to undergo further training constantly as contrasted with doctors or lawyers. As a consequence, in the face of challenges going beyond their competence, for example, innovative financial instruments, managers are not in position to assess the consequences of decisions taken by them as was the case with the 2008 financial crisis.  

 

 

So, management is not a profession, at least, in the sense that law, medicine or financial audit are professions. Nevertheless, this is not to say that the professionalization of management is impossible in principle. Last time, this matter was the most intensively discussed during the financial crisis of 2008-2013. It may well be that the likelihood of a new ‘Enron case’ would be reduced by implementing strict ethical standards which are characteristic of bona fide professions, as well as qualification exams entitling to practice. For instance, implementation of a new qualification grade will make it possible to establish more stringent requirements to candidates for especially critical positions in the corporate hierarchies, for example, public funds and retirement savings may be managed solely by ‘professional managers’, who have passed the qualification exam and undertook certain ethical obligations. These obligations could be codified by analogy with the oath of Hippocrates, as proposed by some experts. In any event, the professionalization of management would mean the creation of a community of professionals, bound by the generally accepted ethics, informal norms of which would supplement the regulatory control of the State and limit the possibilities for irresponsible decisions where the formal law does not work. It is apparent that transformations of this sort would lead to the adjustments to the corporate labour market and to changes in the hierarchy of firms and positions, however, the crisis of business legitimacy undermined by each next ‘golden parachute’ will cost much more.

 

Dmitriy Zhikharevich