Is It Time to Retrain B-Schools?

Interesting article in the NY Times this past Sunday here (free subscription required).  Relating to the economic crisis and the training that many of the CEOs had in business school, the article postulates that there is too much emphasis on theory and method in b-schools, while neglecting real-world practicalities and ethical training.  Being a fairly newly-minted MBA myself, and seeing as how my alma mater’s President is mentioned within the article (in a positive light), this premise drew my interest.  I agree with the thoughts presented in the article and am glad to hear that some changes are being proposed to the fundamental premises behind business education.

From the article:

“It is so obvious that something big has failed,” said Ángel Cabrera, dean of the Thunderbird School of Global Management in Glendale, Ariz. “We can look the other way, but come on. The C.E.O.’s of those companies, those are people we used to brag about. We cannot say, ‘Well, it wasn’t our fault’ when there is such a systemic, widespread failure of leadership.”

I appreciate this quote from Dr. Cabrera, since he’s taking some of the responsibility for the type of curriculum present in b-schools today.  When I attended Thunderbird, there was an effort by most of the business faculty to insert a focus on “sustainability” into the course work.  However, there was no  requirement for a “Business Ethics” course to complete my degree.  In my opinion, this is an enormous oversight. 

The article notes that many critics of business education state that the schools have become too scientific and detached from what is going on in the real world, losing focus on much of anything other than the bottom line.  The reasoning behind this is presented later on in the article:

In the late 1950s, reports that the Ford and Carnegie foundations commissioned found mediocre faculty, and curriculums narrowly focused on vocational skills.  One of their recommendations was for business schools to become much more analytical and rigorous in their approach.

This reproach caused the business schools to shift from more of a “technical” or “professional” school approach (such as is found in law or medical school) to a more academic one.  Consequently, a lot of emphasis is placed on case studies, complex options valuation formulas, and other information that have a very narrow application in the real world. 

Broad based topics, such as ethical practices, have not been pushed out of the curriculum totally, but are definitely not a primary focus (at least in my experience).  Perhaps not totally unconnected to this evolution are the findings of a study published in 2006 in the journal Academy of Management Learing & Education, which found that 56% of all M.B.A. students cheated regularly (not just once or twice).  This level of unethical behavior was higher than any other discipline in the study.

Another quote from the article:

Instead of being viewed as long-term economic stewards,… managers came to be seen as mainly as the agents of the owners — the shareholders — and responsible for maximizing shareholder wealth.

This is what we’re taught in business school: as managers, the value of the firm should be our first priority.  Adherence to the letter of the law is taught, but so is capitalizing on any and all opportunities to function just at the edge of legality.  Sustainable business practices are seen as yet another tool in the belt of the manager to increase “brand value”, not necessarily as an end in themselves.  The premise of increasing shareholder wealth is the correct one, but is it right?  Does that end provide more value long-term (not just to shareholders, but to society) than foregoing a certain amount of profit to make more responsible decisions?  I’m sure you can tell which side of the fence I come down on, but it’s a decision everyone has to make on their own. 

I believe in long-term thinking and sustainability as ends rather than means because of the ethical instruction I received outside of business school.  If we were to offer more cross disciplinary training (philosophy, sociology, psychology) to our business school graduates, would it change the way the “value” of a business is perceived?  David A. Garvin, a professor of business administration at Harvard Business School, states, “There is a need to broaden from the analytical focus of M.B.A. programs for more emphasis on skills and a sense of purpose and identity”. 

Business isn’t a science, it comes down to relationships.  There is a relationship established between a buyer and a seller, and a certain level of trust must be maintained in order for that (or any) relationship to function.  Public companies rely on people who have faith enough in these enterprises to invest hard-earned money.  Once that trust is betrayed, as it has been in recent times, consumer confidence is destroyed.  And not only the investors lose.  All of human society is suffering from this shortfall of integrity, from those directly responsible to others who haven’t ever invested a cent in a public firm.  This plea for a return of sanity, sustainability, and integrity certainly hasn’t come a moment too soon.  Let’s hope that more and more of our future business leaders receive a solid grounding in these so-called “soft skills” going forward.

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