Value Competition

A Supply Chain Lens for Public Policy

Listening to my colleague Dale Rogers present at today's meeting of the Rutgers Center for Supply Chain Management Advisory Board on Megatrends in Supply Chain--he had good supply chain finance data on accounts payable, accounts receivable, and inventory in a variety of key sectors, as well as points to make on overall economic trends and their implications-- got me interested in the idea of evaluating public policy in major areas like health care reform, education reform, and financial regulation through a supply chain lens.  It strikes me that the discipline may have the right blend of terms, efficiency/optimization concepts, and human factor/relationship concepts to be a salient part of the public policy discussion in a way that it's not now. 

Currently, SCM might come up in the public policy arena in the non-normative, background context of an ISM study of  purchasing--but the discipline is not, it seems to me, in the forefront of public policy discussion the way that finance/economics, law, and, to some degree, management are.  How would it work to analyze public policy through a supply chain lens?   Well...I don't claim to have a clear line, not least because I'm a business law/business ethics person rather than a true SCM person.  My guess is that the right way to think about it is to consider a particular policy area, so let me take a very preliminary stab at that, using health care as the policy area. 

A few potential ways to relate SCM concepts to health care policy:

1.  The mega-debate the US will be having over the next several years or possibly decades on the merits of Medicare as it now is versus the Ryan plan or some other proposal for vouchers strikes me as having interesting analogies to a make or buy decision, with the government having to decide how much to "make" the good of health for an individual internally though something like the U.K.'s NHS versus sourcing or "buying" that good through individual voucherization or through private insurers.

2.  The question of how much to uphold the "pay for everything, with deductibles" employer health insurance system that now prevails in the US health care system compared to "catastropic only" insurance provided by the government or by private firms strikes me as having analogies to inventory size and turn time issues in SCM.  Just as Just In Time, etc. changed inventory practices, reforms might change "inventory" in the health care supply system for the better.

3.  The question of how sustainable the health care system (or a specific health care public policy such as that in Massachusetts or at a particular company) is/isn't over time strikes me as possibly analyzable through an approach parallel to what my colleague Prof. Rogers was doing today with accounts receivables, accounts payables, and inventories.  How bad (or relatively not so bad) are the comparative situations of different countries, or state programs, or individual health insurance plans?--the supply chain finance tools I was hearing about today seem potentially applicable to these policy issues.

 

 

 

 

Predicting the Recent Past

If Barley and Kunda (1992) are right in hypothesizing that management theory cycles between rational and normative poles according to broad economic trends, with better times for American business corresponding to the ascendance of rational theory, it would have been reasonable to expect a turn away from the cultural theory of the 1980s to a renascent rational theory in the 1990s and 2000s, given the generally though not unrelievedly good times for the American version of capitalism from the fall of the Nikkei and the Berlin Wall in 1989 to the financial crisis of 2008. As a prediction, that looks reasonably good, especially if we give Barley and Kunda credit for calling the turning of the American economic wheel from the nervous 1970s and 1980s of malaise and Japan as #1 that preceded their article. Even if we do not credit them with being economic seers and focus solely on management theory of the last two decades with the economy as an exogenous factor, their hypothesis is quite defensible. The rise of agency theory as not simply a finance model but as a major stream within the management academy itself; the reinvention of OR and OM in the rising field of supply chain management; the increasing financialization of management consulting theory and practice, at the same time that consulting replaced medicine and law as the most desired destination for Ivy League graduates; the popular success of Moneyball, Freakonomics and other books selling rationality and incentives rather than culture and teamwork: These phenomena can all be cited as support for the case that the recent, apparently ended good times did indeed go along with a wave of rational theory.

If Eastman and Bailey (1998) are right in hypothesizing that management theory has entered into a long-term period of value partisanship associated with the breakdown of earlier formalist and consensualist approaches to mediating the fact-value dichotomy, it would have been reasonable to expect that the 1990s and 2000s would have been a period of intensified surfacing of value disputation in management, along the lines already prevalent in law. Some evidence can be cited in support of that proposition: Compared to twenty years before, the division structure of the Academy of Management in 2009 shows an increased number and proportion of divisions—Critical Management, Organizations and the Natural Environment, Management and Spirituality—whose missions reflect a clear value-orientation; the rise of the Moneyball/Freakonomics genre has gone along with the rise of a counter-genre, epitomized by Irrational Exuberance and Predictably Irrational, that emphasizes how human beings deviate from rational choice; and the rise of agency theory has gone along with a vigorous counter-movement arguing that agency theory itself is a major problem for American business and American society. On the other side of the ledger, though, one can cite a diminution of the culture-oriented academic and popular 1980s literature related to flattening hierarchy and liberatory management, as well as a less self-critical tone in 1990s and 2000s theoretical and practitioner literature compared to that of the more anxiety-ridden, less self-confident preceding period, with its concerns about managerial myopia and American decline.

It is interesting to note that law, which Eastman and Bailey rely upon as offering a kind of leading indicator for management, has been characterized over the last twenty years not so much by the rise of value disputes—much as divisions between liberals and conservatives remain central to academic law as well as to the practitioner literature produced by Supreme Court justices--but by the consolidation of law and economics as an ideologically mixed utilitarian alternative to the "rules and principles" mainstream in the legal academy. The result has been a legal academy divided more along the calculation-culture lines that have long prevailed in business schools with their division between more normatively-oriented and more rationally-oriented disciplines. That calculation-culture value split in both its management and legal incarnations lacks the moral intensity of the left-right split, which raises a question about whether the Eastman and Bailey hypothesis of heightened value partisanship holds true in law, and also about whether they were right in seeing law as a leading indicator of trends in management. Perhaps it is management education with its longstanding calculation-culture split that has shown the way for legal education, rather than the reverse.

Improvement, Not the Right Answer

An agent who is properly aligned with social welfare by calculative and cultural values that cross-cut self and other values is not necessarily going to get the right answer to business, legal, or ethical issues, assuming that the concept of the right answer in these domains is an intelligible one.   What the agent has instead of the right answer is a better chance of coming up with a twist small or big that makes things better or avoids making things worse.   That twist—the idea that is helped into existence by the cross-cutting values—is not necessarily the perfect twist, either.  But it is likely an improvement on what would result without well-aligned agents.

Practitioners and Professors

A conjecture: Academics in normative disciplines like law, management, engineering, accounting, pharmacy, applied psychology, etc. are hampered by ambivalence.  is one seeking the truth or trying to promote the good on behalf of one's charges?   One is doing both, and that ambivalence in one's motives makes one less efficacious than one might be in pursuit of either goal, and rightly suspect by academic colleagues with a more single-minded commitment to truth.  On the other hand, practitioners seeking the good may be helped by training in normative disciplines compared to training in disciplines with a single-minded commitment to truth.