session iv_american & british systems

8/7/2019 Session IV_American & British Systems

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Session IVAmerican and British

Management Systems

Prof. Sushil

Department of Management Studies

Indian Institute of Technology DelhiHauz Khas, New Delhi 110 016

[email protected]


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Sushil/IIT Delhi/2009

Cluster of American Values

Competitive achievement and success Activity and work

Efficiency and practicality

Science and rationality

Individual personality and value of self Freedom

Equality

Democracy

Progress Material comfort

Humanitarianism

Moral orientation Nationalism and Patriotism

Racism and group superiority


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Central Values of Japanese Culture

High value of work

High value of education High status of business persons

Importance of collectivity

Emphasis on cooperation and harmony

Emphasis on family

De-emphasis on individual Accommodation to existing realities

Patience

Respect for authority

Long time frame for success


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Differences in Corporate Strategies

American Japanese

Short time frame y Long time frame

Competition y Cooperation

y Zaibatsu

y Keiretsu


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Organisation Oriented

Japanese Success of organization oriented system

English Electric - bought the skills that were readily available

Hitachi - bought the capacity to acquire skills

Historically - American - Organization oriented capacity to acquireskills confined to managerial structure not extendedto shop floor

Organization Oriented Labor from a marketed commodity to a corporate asset:

Collective and cumulative learning

Organizational control as opposed to market control - owe its revenuesFinancial commitment


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American Corporate Systems

Late nineteenth and early twentieth Century Managerial revolution

i. Creation of teams of salaried personnel to plan and coordinate

production and distributeii. Separation of legal ownership of corporate assets from control overthe allocation of corporate resource and revenues

Technological Advances Metal working

Chemistry Electronics

Economies of scale and scope

Investment in R&D facilities

Marketing capabilities


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American Corporate SystemsContd.

First Industrial Revolution Machine based - shop floor experience important

Second industrial revolution systematic formal education a virtual necessity

Separation of ownership from control

fragmentation of ownership among hundreds/thousands of shareholders Eliminate craft control

Taking skills off the shop floor and vesting all skill formation inmanagerial personnel

Separated future manager from future workers

Mass production - by high wages

Great depression - 1930 Massive layoff of shop floor works

Post war Cooperation of government and industry


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American Corporate SystemsContd.

1960s Foreign Competition Weaken financial commitment individual investors to institutional

investors gave way to market control

1960 -Wall street - trading in securities integration ofstock and bond markets

1970- Financial liquidity than financial commitment

Stock options to Top management - stock based incentivesweakened their incentive to choose innovative investmentstrategies boosting short term profits

reduced the retained earnings

Integration of ownership and control top managers - separate from rest of organisation structure

1990 average US $ 3.1 millionsalary Germany $ 0.8 million

Japan $ 0.5 million

1990s compete by downsizing value extraction rather thanvalue creation


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British Corporate System

1990s American - financially driven basis - resemblance to the British

Managerial capitalism

Craft control

skilled workers specialized division of labour

Automobile industry almost complete neglect of R&D

control of family ownership

Financiers based in the city of London

New Aristocracy wealth was based on financial activities

social connections and acquired reputation


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British Corporate SystemContd.

Valued study of science - no interest in application toindustry

Anti industry bias of British elite educational system

Head offices in London far away from industrial production Aristocracy that was anti-technology

Integration of ownership and control

Organizational barrier strategic decision makers and technology specialists (provincial

universities) Relied more on market coordination than management

coordination


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1920s - Recession

Compelled debt-ridden firms to combine through amalgamation into

larger enterprises under centralized management control Shared ownership divorced from management control

Public shareholders -exercise market control

Reap the returns of past rather than reinvest for the future


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1980 - international competition and capital movements

advanced the power of market control and eroded financialcommitment

stock exchange dominated culture

Extract value rather than create value

Centrality of organizational learning to sustained economicdevelopment

Organistion-oriented measures of performance modern accounting

systems do not provide


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Market Orientation

Regard investment in people as well the returns - as currentexpenses that adversely affect current profits

Era - prefer downsizing to investing

Market oriented A/C systems measure economic failures as eco success

eco success as eco failure

Theory of market economy Neo-classical economics

session iv_american & british systems

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