Dust Off Your Psychology Text Book

Economic development can afford to take a note or two from the fields of psychology and management. Read this fascinating article.

The “science” of management is largely derivative: a mix of military strategy, the economics of the firm and the engineering of processes. Less frequently than it should, it takes ideas from the field of psychology, and some of them have had considerable influence. The idea that there are two distinct management styles, the authoritarian style and the participative style—“Theory X” and “Theory Y”—developed by Douglas McGregor in “The Human Side of Enterprise” 40 years ago was influential in corporate America long after the author's early death. A decade ago McGregor still featured as one of the most popular management writers of all time.

Today, management again seems eager to borrow from the field of psychology. After a decade in which its prime focus was first the re-engineering of business processes and then the measurement of “value added”, the science has turned its attention to the humans at the heart of the corporate machine. In that, it may be taking a lead from economics, which two years ago awarded its Nobel prize to Daniel Kahneman, a psychologist. Turning his back on neoclassical economists, who assume humans are crisply rational consumers, Mr Kahneman studied the fuzzy way in which people in their daily economic lives perceive things like risk.

Two other influences may lie behind management's new-found enthusiasm for the science of Freud and Jung. The turmoil at the turn of the century, when stockmarkets' and businesses' fortunes rose and fell like boats in a force eight gale, increased managers' awareness that they live in a world that is not just ever-changing, but is changing ever more quickly too. “Change” is a buzzword in management literature today. Among other things, companies realise that they have to change, frequently and radically, the attitudes and practices of much of their workforce. For help they are turning to psychology.

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