From rover to nowhere: a case study of a management fad

After defining what a management fad is, and its consequences in business practice, a business case will be presented. The destiny of the British car producer ‘Rover’, as a first declared learning organization, is the perfect business case for documenting a management fad. From the stance of a critical realist, the authors have a qualitative approach, in order to understand and explain in depth the phenomena around Rover and the learning organization concept. The critical assessment of a leading organization theory the authors grouped in accordance with the epistemological approach of cited authors.

Problems dealing with management fads

Fads do not survive because they usually do not satisfy a strong need. Fads attract those consumers who are longing to be different from the others, but they quickly forget an old fad, as soon as some new and unusual fad arises. Hula-hoop is an example of a fad, a product that came suddenly and became very popular, and then it quickly disappeared.

Distinctions should be made between management fads and management fashions because these are quite different social processes (Abrahamson & Eisenman, 2008). Management fashions occur due to supply and demand in a knowledge market; management fads do not occur out of necessity, but by accident. Fads usually tend to have a little or short-term impact, both on the language of management techniques and on organizations. However, fads can sometimes have a huge and even damaging impact. For instance, the idea of ‘downsizing’, as a pillar of business process re-engineering, gave rise to often unnecessary and disruptive layoffs. Today one will never hear a consultant using the word downsizing, the term ‘rightsizing’ is used now. Nevertheless, management fashion has to appear as rational and progressive (Flory, 2005). New fashion access and process management topics in a new way, which could be more effective than the old way.

In any case, managers, who are always eager for something new and innovative, are the target audience.

Obviously, a problem exists in defining exactly what the management fashion is and what a management fad is, and in identifying the actual differences between them. I shall argue, as some other authors did (Hislop, 2010), that the problem mainly occurs due to the confusion that emanates from their inconsistent usage in much of the academic literature. The aim of new academics is not just to check the old theories, but also to produce new discoveries and theories. It is easy to understand that some theories would be more popular than the other and that this popularity would represent the fashion. Therefore, it is not possible to dismiss all those popular and fashionable theories just because of the public interest in them. New discoveries and theories are good for science since they push the boundaries of our knowledge further. However, I would also argue that just because of novelty, new and fashionable discoveries are not of the highest importance. How fast will the academic community recognize a particular theory as a fad is another question, but I strongly believe that it is possible to discover that some theories are fads even during the fashionable stage.

The decline of a management fad is usually associated with the development and popularity of a new one. The life cycle of a fad can be displayed in a bell-shaped curve and in five stages (Jung & Kieser, 2012). The first stage is the invention stage; the second stage, the dissemination, is the wild-acceptance stage, the stage when the fad becomes very popular. In stage three, with acceptance at the top of the bell-shaped curve, a fad reaches its peak, but at this point, critics appear and argue that the fad cannot be a universal panacea. The fourth stage is the disenchantment stage when large audiences realize that problems exist with the fad. The decline is in the last stage when the fad disappears from wide use and retains only a few staunch supporters still loyal to the fad. Other authors (Näslund, 2008) suggest that fads follow a life cycle best understood in seven stages: (1) An academic article is written on a new discovery or theory; (2) The study is discussed, summarized and repeated; (3) The concept is popularized in a bestseller book; (4) Management consultants carry the new techniques to their client base; (5) Managers embrace the fad and become champions of the concept; (6) Time passes and enthusiasm dims; and (7) New discoveries occur and consultants are turning to them. In reality, the shapes of the lifecycle curves for different management fads are not identical nor symmetrical and vary from country to country (Clark, 2004).

Scholars have discovered fads not only in the social sciences, but also in some disciplines of the natural sciences (Abrahamson, 2009), but some authors (Bort & Kieser, 2011) argue that in organization theory fads are prevalent. The last decade of the 20th century saw the arrival of a plethora of management tools and theories, often conflicting, and the question arises (Naidoo, 2004): Is modern management theory nothing more than an accumulation of contradictory fads? That accumulation of fads forces practicing managers to check through trial-and-error the value and application of some management theories. More and more, fads seem to be getting a negative reputation and it is a common view that the fads are a waste of time with little or no quantifiable benefit.

Fads will always be present in the management research community, not only because memetic evolutionary understanding (Williams, 2004) that successful International management ideas will survive not just because of their economic capacity, which only generates the profit to organizations but instead because of their interpersonal reproductive capacity. The main reason is that nobody can make a perfect evaluation of each idea ex-ante . There is no such phenomenon as a ‘meta-consensus’ among scholars (Abrahamson, 2009) on how to judge the scientific knowledge and how to eliminate the faddish ones. Of urgent importance, would be a higher degree of criticism, both among academics and among practicing managers. What is critical is not that the ideas actually work but that they are perceived to be of practical benefit and relevance (Clark, 2004).

How many fads or fashions are harmful to organizations? Abrahamson (1991) questions the popular claims that fads and fashions are processes that diffused technically inefficient and rejected technically efficient innovations. He claims that the cost of numerous tried, tested, and rejected fads and fashions in organizations may be significantly lower than the returns from effective innovations because there is not conclusive evidence that fads and fashions necessarily harm organizations. Learning organizations, for instance, may have focused attention in organizations on organizational learning, and organizational learning is hardly harmful. Trial and error method indeed can result in creating the more efficient innovations in organizations, but it is not a guaranty that output will always be the better or efficient one.

Rover case

The study of the learning organization concept has long been associated with the case study of British car producer ‘Rover’ (Adžić, 2018). ‘Rover’ has served as the learning organization par excellence, as the exemplary learning organization and it has been referred as the very first true learning organization in the world and is the most often cited of British business examples (Simm, 2005). Rover was established in 1861. The Rover Group Ltd. was the UK's leading car manufacturer and exporter, producing more than half a million cars annually and over half of them were exported (History of Rover Group Ltd. – FundingUniverse, 2017). In the 1970s, various problems in business led the company into bankruptcy, which caused the company's takeover by the UK Government and nationalization of the company. After unsuccessful attempts to sell Rover to U.S. carmakers Ford and General Motors (Whiteley, 2012), the UK Government, under the leadership of Margaret Thatcher, sold Rover in 1985 to the also likewise state-owned company the British Aerospace (BAe) for £150 million. The story of Rover as a learning organization begins exactly at that time. The company established the Rover Learning Business (RLB) and invested substantial amounts of money in training, with an annual budget of £30 million (Simm, 2005). RLB was an organization within an organization, whose primary objective, based on the personnel mission statement from 1990, was that success in business had to be achieved through the success of employees in a manner to provide quality learning and development to all employees by the emphasis from training to learning (Bower, 1993). The system of rewarding employees was changed and participation in learning programs had a direct impact on salaries. By 1994, when BAe sold Rover to the German company BMW for £800 million, Rover had already gained a reputation as a successful and respected company. It was not only a highly productive company but also the company where the satisfaction of employees was at a very high level. The merits of such a turnaround were attributed to the fact that Rover had become a learning organization. Consultants and academics raced to glamorize the company and many other companies and organizations visited Rover, including the United Nations to familiarize themselves with the practice of the learning organization (Simm, 2005).

There was much discussion about the great performance of that learning organization, about the great financial indicators, and about the growth of several hundred percents. Unfortunately, for all the talk, none of it was close to being true. Revenue per car, revenue per employee, and break-even level per car remained nearly unchanged before and during RLB’s existence, while sales volume was in constant decline (Simm, 2005). On top of that, as often is the case in state-owned companies, strong unions resisted any improvements to efficiency when it might cost jobs. So Rover really did not have a ‘learning culture’ at all (Whiteley, 2012). The only change was a profit of the main and only shareholder, the Government of Margaret Thatcher, which earned £650 million capital gains upon the privatization of Rover.

After only six years, BMW sold Rover to the company Phoenix Consortium for only £10. While owned by BMW, Rover piled up losses at a rate of £2 million a day (Whiteley, 2012). BMW’s purchase and sale of Rover in such a short period of time intrigued analysts and many various reasons were put forward (Button, 2012), but the truth was that BMW bought Rover as a learning organization. When BMW realized that it had bought something ‘virtual’ which only generated huge debts, they decided that the faster they got rid of it the better. The future of that learning organization could perhaps have been foreseen even then, but Rover and its 6,000 workforces finally went into bankruptcy and disappeared from the market five years later in 2005, after unsuccessful takeover negotiations with the Chinese company Shanghai Automotive Industry Corp. (BBC, 2005). Such was an inglorious end of the prime example of the learning organization.

Critical assessment of a leading organization theory

The criticism of learning organization from the perspective of postmodernism and from the perspective of critical realism will be discussed, excluding the perspective of positivism as disadvantageous in this case (and in many others). Whilst a positivist tends to conclude his final judgment on just one phenomenon, even though the reality may be a result of interaction of many phenomena, a social constructivist does not see the reality, he constructs the reality in his mind, and therefore it is possible that there are as many realities in social constructivism as there are researchers. Unlike them, for a critical realist, the reality is important, and he believes that there is only one reality. A critical realist does not seek the quantification of the reality, but the understanding of it, and he selects those phenomena, which best explained and best decode that one reality (Adžić et al., 2022). Postmodernists perspective is twofold (Driver, 2002), either the studying of a learning organization as a Utopian sunshine or a Foucauldian gloom. For the first postmodernist, a learning organization is an ideal that is close to a dream, for the second one, it is a nightmare for its members. This split is particularly apparent with regard to the following dimensions (Driver, 2002): (1) control, (2) ideology, and (3) potentially painful employee experience. The first community presents learning organization as a new workplace paradise, while the second community presents learning organization as a negative ideology, as another way to exploit workers, locking them into „physic prison“ to serve the interests of those in power. Knowledge is power. Foucault argues that governance was achieved by knowledge, the knowledge that came from subjugation and surveillance (Symon, 2003). The basis of governance and management processes is the maximum utilization of company resources in the quest to competitive advantage. That utilization asks for control of company’s resources and the workforce is one of the main resources of each company. Therefore, the role of knowledge in companies is problematic. Empirical studies (Symon, 2003) has shown that the organizations where knowledge is of primary importance are far from the ideal emancipated workplace. When an employee holds the knowledge that is valuable for the organization, it is rational to use that knowledge in his own interest in order to secure a better position in the organization for himself, rather than for some rival employee in the organization, even for all employees.

Learning organization is an innovation of the post-industrial era. It's a postmodern approach to work that requires a paradigm change in the organization, but all postmodernist theses based on the paradigm change are problematic (Symon, 2003). The emergence of this concept occurs on the moment when Britain’s companies show a lack of competitiveness, lack of skills and poor industrial relations, and as the panacea aroused learning organization, as an idealistic image of cooperation, harmony, and flexibility of the satisfied and fulfilled employees. Learning organization is a state of humanistic unitarism, in which the charismatic leader empowers followers, giving them power and reduce its own. It is simply a not possible state; the charismatic leader certainly has no aspiration to minimize his power (Adžić, 2021). Indeed, economists on both sides of the

Atlantic concluded (Symon, 2003) that better economic performance is the direct result of the leaders’ success, along with sophisticated organizational restructuring. It is also important to understand that the present era in which we are living, without going into a debate how the postmodern can exist in modern time, does not make a fundamental shift in the political economy. Most work is still happening in a context of selling the labour to employers whose primary goal is to make a profit, certainly not to make an ideal organization for labour.

From the perspective of critical realism, the idea of a learning organization should be abandoned, because this imaginative idea has not even "run of steam", but it never had any (Grieves, 2008). Learning organization has failed to meet three objectives which are essential for any well-founded theory (Grieves, 2008): (1) a clear definition, (2) practical operational advice which managers can use, and (3) tools and assessment instruments to measure their achievements. The concept of learning organization ignores the ways of rewarding and punishing in the organization because it does not recognize the fact that management rewards those who contribute to the success and punishes those who make the damage, the terms measurable in financial form. How to quantify in financial terms the rewarding of those who learn more and the punishing vice versa ; if it were possible to quantify these behaviours, the best companies would imply only Ph.D. staff, and companies like that are extremely rare, if there are any.

Learning organization did not last very long due to the way in which learning in learning organization was understood and enacted (Elkjaer, 2001). The emphasis was on individual learning and individual change, but the organization itself, its management structure and business practices have remained unchanged. Learning in learning organization has been studied as an epistemological process, while the situational and social context was not the issue, and the learning process cannot be seen outside the situational and social context. A key argument against, in this context, is a democratic deficit in today's organizations (Coopey, 1995). The concept of a learning organization is naively apolitical (Grieves, 2008). The political question is related to the fundamental question: for whose interest does the business organization exist, whether the interest of workers or the interest of capital? The answer is very straightforward. The legitimacy of managerial authority is a function of maximizing efficiency and effectiveness in the interests of capital. Imagine a potential scenario: if the manager needs to lower labour costs, would he start to build a learning organization, which is expensive, or would he start to release the redundant workers? The interest of capital demands the second option. In a contemporary social context where capital dominates, a learning organization is pleading for a fluid, flexible, and adaptable postmodern future-oriented organization. That is simply impossible in the modern business environment. Therefore, we can point that this postmodern theory fails to recognize the limitations of its own paradigm (Grieves, 2008).

One of the detected management fad in the English-language academic journals is the learning organization, with a typical peak in publishing in the year 1995 (Loermans, 2002). Using the scientometrics analysis, Adžić (2020) compared two small academic communities, Serbia and Austria that are similar in size with a sharing fact that the main academic language is not the English language. The aim of this scientometrics research was to test the time discrepancies in publishing of an academic discovery between the world leading and in English language published journals and those from peripheries on the learning organization phenomenon. Scientometrics is quantitative study of science, a methodological approach in which the scientific literature itself becomes the subject of analysis, in a sense as a science of science. In this scientometrics research, the peak was discovered in the Austrian journals in the year 1997 and 15 years later in the Serbian ones (Adžić, 2020). Why is Serbia lagging in the academic research more than Austria? The critics of the learning organization concept in the English language journals are present for more than two decades, but Serbian authors still glorify that concept. It is discovered that not even one article from Serbia had a critical attitude toward the learning organization. Is Serbian academic research a waste of time? Even the most skeptics would be convinced by a brief review of Serbian academic publications' publishing output that their contribution is incalculable.

Conclusion

Learning organization has failed to meet three objectives which are essential for any well-founded theory: a clear definition, practical operational advice for managers, and tools and instruments for measuring. The concept of learning organization ignores the fact that management rewards those who contribute to the success and punishes those who make the damage, the terms measurable purely in a financial form. The legitimacy of managerial authority is a function of maximizing efficiency and effectiveness in the interests of capital. In a contemporary social context where capital dominates, the concept of a learning organization is naively apolitical.

Business organizations are complex and intricate systems, very vulnerable to impacts of uncertain and unpredictable changes in today’s turbulent environment. Simplified recipes, as management fads, are not relevant for modern organizations. Rover business case is an excellent example how management fads could ruin the prosperity and future of the business organizations. The authors also caution against worthless journals on the fringes of academic publishing that still promote the concept of the learning organization.