The Evolution of Management Theory

Management theory evolves as societies and technologies change. Of course the evolution of the theories relies on the theoreticians recognizing when their ideas are out of sync with a changing environment.

It often happens that theoreticians get too invested in the explanations they learned in church or in college. The first time a fundamentalist Christian begins to understand Adam Smith’s notion of the “invisible hand” of the market economy, it can be tempting to associate that notion with his or her belief in the “hand of God”. Once that happens, it can be very difficult for the theoretician to adapt to a changing world, since their economic theory is too closely tied to a perceived “fundamental religious truth”.

While Milton Friedman was a brilliant economist, he eventually succumbed to the beauty of his own ideas. In the early 1980s, he and his wife Rose (an economist in her own right) made a ten-part television series for America’s PBS network called “Free to Choose” that advocated free market principles. The thrust of the series is that the free market works best for all members of society. It provides examples of how the free market engenders prosperity and maintains that it can solve problems where other approaches have failed.

What the Friedmans fail to acknowledge is that successful capitalists are usually the main architects of regulations ostensibly designed to protect the public interest. Somehow, these inevitably seem to result in higher profits.

For the rest of us – the great unwashed who aren’t theoreticians – we studied economics and management theories when we were studying
business administration, accounting, marketing, or engineering. We were usually too busy trying to prepare for careers, and had no experience managing or being managed. We weren’t thinking critically, just learning business school orthodoxy.

Reasons for Skepticism

For my part I found myself doubting much of what I learned in college for a couple of reasons:

  1. My management and cost accounting courses used case studies more relevant to large, public companies than the companies I generally work with on a day to day basis. There is simply no comparison between the needs and capabilities of these large or mid-sized manufacturing companies and those of the small freelancers and teams of 4 to 20 people that I actually worked with.
  2. The state – and cost – of technology available when I studied at college, bore no resemblance to what is available today.

Just as important, it was becoming clear that many of the assumptions that society had with respect to business were simply wrong:

  1. My clients – and the community at large – seemed to glamorize risk-taking as a kind of “badge of honour” for entrepreneurs. It didn’t make sense to me that small businesses should embrace risk-taking, while large businesses did everything they could to manage and reduce risk.
  2. Today’s technology is powerful. However, embracing and adapting new technologies to traditional businesses takes time and creativity. It isn’t always immediately apparent how to use these capabilities effectively.
  3. Social media is everywhere. A great many businesses are pressured to believe that they should embrace social media as a fundamental piece in their marketing strategy. For many service businesses in particular, an online presence may not warrant the investment to make it work.
  4. Angel investors and venture capitalists are seen by many as risk-taking cowboys in a brave new world. I’m concerned that they spend too much time looking for unicorns. When someone believes in fairy tales, I take their judgement in other matters with a grain of salt. Just because someone made a lot of money doing something before, doesn’t mean that we should hang on every word. They could have been lucky – or they may simply be trying to pump third rate investments before dumping them on an unsuspecting and gullible public.

Missing Elements in our Timeline

In the timeline shown above, I’m afraid I’ve missed out a number of very important societal developments:

  1. the settlement of western North America – referred to as “colonization” by our first peoples
  2. the industrial revolution
  3. urbanization
  4. the Russian revolution
  5. the “baby boom”
  6. globalization

…and of course I’ve ignored the incredible technological advancements in the past one hundred years, that appears to be accelerating as I write this. Each of those 6 societal developments could easily be added somewhere in the middle of our timeline.

However our interest should instead be focused on the last 4 data points on our timeline.


Toyota’s “Just-In-Time” inventory and their agile approach to development have been studied and embraced more than one subsequent generation.


The Enron & Worldcom financial scandals that lead to the economic meltdown in 2008 also continue to have relevance.


The importance of the lean startup movement is in my view, that the emphasis was placed on startups. While small business has always been the engine of our economy, management theory in universities has always focused on large companies. In fact the larger the company, the more interest and attention paid to them by both academics and governments.

Perhaps this is because the people who create
management theory invariably work for larger companies and/or universities. You
don’t spend 8 years earning an MBA, a law degree, or a CPA designation to get a
job in a fast-food joint. In a similar vein, government bureaucrats generally prefer
to deal with larger businesses. It strokes their egos and makes them feel more

Consider a tax auditor meeting with the CFO of Shopify or the tax director at CIBC in Toronto. You would expect him or her to be better prepared – and more deferential – than when meeting the bookkeeper at a corner grocery store.


The reason older founders are ignored by the ecosystem is the same reason why women and other minorities struggle in the Valley: It’s really not about what you build, but what you look like while building it. 

Danny Crichton (TechCrunch 2018)

These days we’re enamored with “entrepreneurs” and risk taking. As a society, we seem intent on reverse engineering the success of “great” men. Perhaps we’re hoping to discover the secret path to success. While the risk-taking CEO might make for a good series on NetFlix, in reality most successful companies manage risk. For the most part, people who take too many risks fail and we don’t hear from them again.