Business Management and SE

Yesterday I was bored and uninspired. To make up for it, I went to Makati today with a simple plan in mind: find a good book and read a couple of chapters over a large cup of green tea latte.

There were a couple of good books in National Bookstore Glorietta 5 and Powerbooks Greenbelt 4, but Fully Booked Greenbelt 5 had both a 20% off on all books and a Starbucks bar(?) inside their store so I ended up with FB. The problem with FB was that they didn’t have the books I wanted to read, How to Win Friends and Influence People and The Millionaire Next Door, both Personal MBA books (with so many flashy business books in bookstores nowadays, that list serves as an easy way to separate the chaff from the wheat).

I was supposed to go for some random “bestseller” business book when I saw hidden in a corner (literally) The Halo Effect. The first thing that popped into my head was:

Personal MBA tells me that this is the only book worth buying here, so I might as well buy it.

And so I picked up the book, and immediately brought it to the counter to pay for it. Then I went over to Starbucks, ordered my latte, and started reading the book. A few chapters later, I was telling myself:

Good thing I trusted Personal MBA.

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The Halo Effect has a simple message, namely, be skeptical about management bestsellers. But the reasons the book presents as well as the implications of the message covers a broad range of issues, and so I can’t talk about all of them in a single post. Now that’s good for me because I have enough material from a single book for at least 5 more posts. :D

Anyway, I won’t be tackling the book’s message in this post. I’ll just talk about something interesting from the first few pages of the book.

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Even before I was a bum and had to read up on management alongside software engineering and marketable programming languages, I have been interested in business management as evidenced by my bookmarking of Personal MBA. I’ve always attributed this interest on the topic to management’s natural relationship with software engineering: the success of any software development project relies more on the management side than on the actual coding of the system. In other words, a company is more likely to crash due to crappy managers than crappy coders. Thus, familiarity with management issues is still important even if you’re just a rank and file developer.

The Halo Effect gives me another reason why I should study management: they share a common but rarely understood problem, namely, it is very difficult (if not impossible) to use the scientific method to both business management and software engineering to find a set of rules or guidelines that will guarantee success. Here’s an excerpt from the book regarding the issue:

Our inability to capture the full complexity of the business world through scientific experiments has provided fodder for some critics of business schools. Management gurus Warren Bennis and James O’Toole, in a 2005 Harvard Business Review article, criticized business schools for their reliance on the scientific method. They wrote: “This scientific model is predicated on the faulty assumption that business is an academic discipline like chemistry or geology when, in fact, business is a profession and business schools are professional schools — or should be.” The notion seems to be that since business will never be understood with the precision of the natural sciences, it’s best understood as a sort of humanity, a realm where the logic of scientific inquiry doesn’t apply. Well, yes and no. It may be true that business cannot be studied with the rigor of chemistry or geology, but that doesn’t mean that all we have is intuition and gut feel. There’s no need to veer from one extreme to the other. There’s plenty of room between the natural sciences and the humanities, after all. We might not be able to buy 100 companies and run an experiment, but we can study acquisitions that have already taken place and look for patterns. We can examine some key variables like company size, industry, and the integration process, and then see what leads to better or worse results. That approach — called quasi-experimentation — is a staple of social science. It may never reach the ideal of the natural sciences, but it comes about as close as we can get to applying the spirit of scientific inquiry to some key business decisions.

In fact, there’s a great deal of very good social science research about company performance, and I’ll review some of it in future chapters. But much of it, precisely because it’s done carefully and is circumspect in its findings, tends not to provide clear and definitive guidelines for action. It’s just not very appealing to read that a given action has a measurable but small impact on company success. Managers don’t usually care to wade through discussions about data validity and methodology and statistical models and probabilities. We prefer explanations that are definitive and offer clear implications for action. We want to explain Lego’s fortunes quickly, simply, and with an appealing logic. We like stories.

The full excerpt of chapter 1 can be read here.

Anyway, the point here is that, trying to “scientificize” either business management or software engineering for the goal I mentioned above (finding the formula for success) is problematic. More often than not, you have “gurus” or “experts” in both fields laying down oversimplified guidelines based on their “rigorous” research and you have gullible managers applying them in their businesses/software projects without even questioning if they are really applicable to their environment.

More on this and other stuff from The Halo Effect in future posts.