As governments search for solutions to the current finanial crisis others are looking for who to blame and business schools are getting their share of the blame.
A colleague – who also holds and MBA – sent me the article “Harvard’s Masters of the apocalypse” in early May. Which discusses the accolades given and the business cases written by business schools at the heart of this and earlier crises and says;
Business schools have shown a remarkable ability to miss the economic catastrophes unfolding before their eyes.
The debate is being played out on the Harvard site, where Harvard defends itself saying that those responsible for the companies and organisations involved in the current crisis graduated some years ago and the courses have changed since then. Yet the Harvard graduate writing in the Times article above points out that both Enron and RBS were studied as best practice up to the time of their respective falls. Granted RBS was studied from the perspective its successful acquistion and integration of NatWest, but still the company has fallen a long way in a year, and the CEO is now labelled as the “world’s worst banker“. So the defence offered by Harvard doesn’t really hold.
Some commentators predict that the age of the MBA is over, I don’t think so – and not just because I happen to have one. But there need to be some changes.
- Conflict of Interest
The first thing that needs to be addressed is that there is a fundamental conflict of interest; students pay a lot of money to join courses – making it difficult for school’s to kick students out for either bad performance or unethical behaviour. At my school, in my year, there was one student who cheated and one who did not perform, taking a second attempt at every exam. The exam retakes were legal but both guys have the same degree as me, effectively undercutting the value of my degree. But they paid the same as me.
- Silo Thinking
During the degree subjects are studied separately; finance, accounting, organisational development, HR, marketing are all kept separate. Business ethics and shareholder management come far down the list. But the subjects affect each other and need to be integrated. A friend who went to IMD told me of one case study they did where each group recommended strategy changes to grow the business. At the end the professor of organisational development criticised them all saying “this is a family business – why did you all assume that the right thing to do was to grow big? why did none of you think of the current culture of the company?”
By getting out of the silo thinking students would be required to integrate finance, marketing, growth, organisational culture and ethics in developing their strategy.
- Subjects studied
Beyond the risk and return ration and the discussion of WACC I don’t remember much about risk management. Judging by the current fall out it’s been missing from some other school curricula.
- Underlying assumptions
The underlying premise of almost all of MBA teaching is that the company should grow. That you measure the success of the company by market capitalisation, or by market share, or by any other simple numeric measure relating to size – one company director boasted of headcount.
But companies can define other measures of success particularly if they’re private companies and not driven by the shareholders’ expectations.
There are other changes suggested, doctors and lawyers have to register each year, ship’s captains and pilots have to update their training regularly. Perhaps it’s time for this level or professionalisation to occur in the business world. Afterall the accounting is regulated and audited, internal processes are now guided by SOX. Certifying business leaders might be the only thing left.
POST SCRIPT: Bob Sutton is even more specific, he doesn’t just blame MBA training – but suggest that economics and the economists are too blame. Well, there’s enough blame to go around I’m sure the ecomomists can take their share.