Rethinking Managerial Economics

By Bush, Katherine; Pepitone, James | Management Services, Autumn 2017 | Go to article overview

Rethinking Managerial Economics


Bush, Katherine, Pepitone, James, Management Services


Business leaders face increasing uncertainty from geopolitics and policy, to regulations and labour market fluctuations1. As a fiduciary to stakeholders, executives are under continuous pressure to deliver earnings growth.

Among the 500 business leaders surveyed worldwide by the Conference Board in 2017, their top goal was 'creating more agile, aligned, transparent, and responsive companies'. Rather than seek disruptive analytics or business model changes, these executives planned to emphasise 'fiscal discipline, an engaged and resilient workforce, strong and inclusive leadership, and [sought to] develop and nurture talent with expanded 21st century skills' to achieve this goal2.

Their practical approach reflects the stakes of their cause. Executives and managers are charged with driving value for shareholders throughout their organisation, while minimising its exposure to risk. These dual goals often conflict and faltering productivity persists. Conventional management wisdom suggests a structural change to reflect the growing complexity of the organisation and its operations. Since a company creates profit only when it invests capital at returns that exceed the cost of capital, it is crucial that all kinds of capital - and particularly intellectual (and human) capital - is managed to achieve maximum economic value from its investments.

Furthermore, developing strong organisation talent is crucial for success in a global market environment with fewer barriers to entry. Business leaders realise that 20th century, top-down approaches are insufficient in current advanced economies. Humans have remarkable potential for creating economic value under the right circumstances. To build a 21st century workforce, managers require better methods to foster skills development in their workers that will enhance productivity over the long term. To better understand why the old models no longer work and, more importantly, the opportunity at hand for managers who adapt, let's examine the forces of change reshaping markets and workplaces.

Factors of organisational growth and productivity

The productivity of physical work grew steadily throughout the last century, reducing the opportunity for further productivity gains and increasing their respective costs. Technological advances dramatically reshaped the input capital requirements for the developed market economies and, as a result, positions required less physical work and more 'knowledge work'.

Such modern economy jobs that require creative thought are not readily standardised, mechanised, or automated; therefore, productivity gains are elusive. For this reason, managers need a new tact. After all, engineering this type of knowledge work can have unintended consequences and often inadvertently decreases productivity.

Fortunately, increases in the productivity of knowledge work are readily accessible. Achieving them requires a new technology of principles, processes, and methods that reflect the complex nature of human beings3. Let's now examine the underlying cause of lagging performance. Figure 1

Outdated management principles: The root of poor performance

Most positions, including those requiring knowledge work, have been standardised to suit repetitive, non-discretionary labour seldom found today. Others are unsophisticated in their design and misaligned to human nature. As such, employees are unable to contribute to their fullest potential and quickly become disengaged from their work and the mission of the organisation.

This is because a majority of management principles and processes currently in use were developed at the start of the Second Industrial Revolution, a time when more than 80% of US workers were performing manual work. The remaining sector of the workforce, those using information as capital, were limited to business owners and their close associates.

A century later, technology has reversed in an unshakable trend toward knowledge work in the developed market economies. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Rethinking Managerial Economics
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.