Theories are predictive statements of what causes what, and why. Many managers view themselves as practical men and women and don’t view their actions as being guided by theory. But every plan that a manager makes and every action that a manager takes are, in fact, predicated on some theory in his or her mind—a belief that certain events or actions will result in particular outcomes. “If we cut price, more people will buy more” is an action predicated on a theory. “If I give her a performance-based financial incentive, she will work harder and more productively” is another. “If I out source this subsystem to a supplier that does the job more cost-effectively than we can do it in-house, we’ll be more competitive” is a third. These theories ...

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