Is the American Model of Management Effective?

With the financial crisis still raging, the American model of management has come under greater scrutiny. The financial crisis was preceded by several corporate scandals (Enron, WorldCom, etc.) and the bankruptcy of the American auto industry. In contrast, many companies from developing countries succeeded in sustaining successful international growth while having little conformity with the doctrines of management in force across the Atlantic. Is this the end of the American model of management? Is it the birth of alternative models? Or is it a sign of the critical decline and need for innovation in management?

The history of management is inseparable from the American model, and the doctrines of management from the United States are attractive. But the realities in the business world often lag behind those doctrines.

After World War II, American firms were used to the techniques of support planning and bureaucratic management. But during 1970s this model was challenged by the success of Japanese companies, which revolutionized the methods of industrial production by introducing lean management and a participatory organization of work.

In the early 1990s, the United States came back on scene with the Silicon Valley model, which combined entrepreneurial dynamism, innovation, venture capital and strong public investment in research. The example was no longer General Motors, but rather a company like Intel or Google. This success through cooperative innovation allowed the United States to spread a vision throughout the financial and shareholder world, a mix of flexible technical and commercial competencies intended to provide a short-term competitive advantage.

This approach contributed to the current financial crisis. It also masked the patterns of growth and globalization of companies from developing countries which, however, did not have competitive advantages compared to major Western companies (Mauro F.Guillen and Esteban Garcia-Canal, “The American model of the multinational firm and the “new” multinationals from emerging economies,” Academy of Management Perspectives 3/2, May 2009). The new multinational corporations of Latin America (Embraer, Natura Cosméticos, Tenaris, etc.), China (Haier, Huawei, Lenovo), South Korea (Hyundai, LG, Samsung) and India (Infosys, Tata, Wipro, etc.) developed despite “lower management,” knowing that they have to overcome their weaknesses as much by imitation and learning as through innovation. They then looked for rapid international expansion opportunities based on adaptation to local markets, especially in developing countries. They emphasized alliances with more technologically advanced partners, while trying to find original management methods.

Is the American model of management in decline? It would be more plausible to believe that such a model has never really existed and that in the United States, as elsewhere, many designs have been developed and tested.

However, the doctrinal primacy of American management served better the reputations of “business schools” than the American companies which have succumbed to this delusion. Because in management, past knowledge is only useful if one is aware that future challenges will require the invention of new models. It is therefore necessary for management science not to disseminate false universal doctrines. Instead, it must become a scientific field which illuminates the variety of models, while helping to repair the broken ones.