Fri, Mar 13, 2009 page9

• MBA programs under scrutiny

  The financial crisis has shaken business schools, many of which are now devising courses to examine what went wrong

  • By Peter Walker / THE GUARDIAN
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  When the former bosses of HBOS and Royal Bank of Scotland were called before the British House of Commons Treasury select committee a month ago to explain exactly how their institutions got into the current mess, one question concerned formal banking qualifications. Just one of the four possessed anything remotely relevant: the Harvard MBA earned by Andy Hornby, the deposed HBOS chief executive.

  Harvard MBAs are usually worn as a badge of pride, especially when, as with Hornby, you graduate as the top student in your year. But as the debris settles from the worldwide collapse in credit and banking confidence and the reckoning begins on who exactly led the financial system into chaos, an increasing number of fingers are being pointed at leading business schools.

  Similar arguments have been made before, most recently when US energy giant Enron imploded amid a mountain of concealed debt, a scandal stewarded by another Harvard alumnus, Jeffrey Skilling. Too many MBA programs, the simplified version goes, draw in young, greedy types with little business experience and indoctrinate them with half-baked management and finance theories, along with an unshakeable belief in their own talents, before sending them out to earn ill-deserved fortunes in investment banking and consulting.

  This is, of course, a gross caricature. But the turmoil has shaken business schools, many of which are devising courses to examine what went wrong. Professors are pondering whether the theories they taught played a role.

  Mauro Guillen, a management professor at the University of Pennsylvania’s Wharton school, organized a hastily arranged program of lectures examining the economic woes, which started in January. More than 250 students swiftly signed up.

  “I think we are trying to come to terms with this reality that almost nobody predicted,” he said.

  While Guillen believes corporate leadership failures were principally to blame, he concedes regret: “We didn’t ring the bell. It’s very easy for me to say in hindsight, ‘I wish I’d emphasized the idea that leadership and compensation systems can produce these perverse and negative effects.’ But I don’t think this has been an ethical issue. The problem was people were on auto-pilot, taking on enormous risks to meet certain targets.”

  Others argue for nothing short of a complete re-evaluation of how business schools teach and the values they impart. Last October Ken Starkey, a professor at Nottingham University’s business school, wrote a letter to the Financial Times calling for courses to take a broader view and end their current “fixation on markets and individualism (i.e., greed and selfishness).”

  Simon Learmount, deputy head of the MBA at Cambridge University’s Judge school, has just returned from a gathering of school leaders and MBA program directors in San Francisco. Many discussions, he said, centred on how schools can focus on social accountability and collaboration.

  “It’s probably too early to say schools are having a fundamental rethink, but it’s absolutely in the air,” he said. “I won’t mention them by name, but certain other business schools have very strongly fostered that kind of individualistic ethos, the heroic business person going out and slashing costs, increasing value for shareholders. It’s a possibly unfair caricature, but it’s out there.”

  Chris McKenna, director of the MBA program at Oxford University’s Said business school, says it is hard to blame students for taking lucrative finance jobs, not least when they face debts from courses costing as much as £45,000 (US$62,400).

  “There were so many jobs and they were so lucrative that when people took an MBA it felt sort of ridiculous not to take a banking job. Why do anything else when there was so much money on the table? I think we’re now seeing a shift to people asking what it is they really want to do. They’re going back to their dreams — at least I hope they are,” he said.

  One professor with a particular insight into the internal musings of MBA students is Srikumar Rao, who has taught an MBA elective at London Business School, as well as schools in the US, with the grand title of Creativity and Personal Mastery. It requires students to plow through a reading list ranging from PG Wodehouse to books on Zen and quantum physics before addressing whether they even want to spend their lives working 15-hour days in the pursuit of riches.

  Rao says he is now encountering people “more ready to speak their minds. They are much more reflective. In fact, many have turned down offers at high-prestige firms in favor of asking, ‘What can I do that really brings meaning to my life?’”

  Unusually for a business school professor, Rao expresses serious misgivings about the fundamental ethos of such institutions.

  “Our top business schools are really not education institutions; they are indoctrination institutions. There are certain things which are so much dogma that you don’t even want to encourage any challenge to them — the primacy and efficiency of markets, maximizing shareholder value. These things are not in question,” he said.

  He believes that notions developed in business schools such as agency theory, which argues that the managers’ interests and those of their shareholders need to be aligned through devices such as stock options, have created a world of short-term profits in which executives gorge on bonuses.

  Someone else with a broad perspective is Derek Walker, new head of recruitment at the Said school, who formerly sat on the other side of the fence employing business school graduates for Barclays Capital and others. He believes that sweeping condemnations are unhelpful.

  “There’s no doubt the current environment will make everybody sit up and think carefully about how they go about doing what they do in the future,” he said. “But it would be naive if not inaccurate to say, ‘Well, it’s all the fault of the business schools because they’re the people who teach business theories.’”

  Where it all started

  The first business school in the modern sense was Wharton, founded in 1881, with the first MBAs awarded around 30 years later at Harvard. The US still dominates the field , though a handful of overseas institutions are chasing hard. This year’s edition of the Financial Times MBA league table, generally seen as the most authoritative, placed London Business School (LBS) joint top with Wharton, a first for a non-US school. Perhaps more significantly, a Chinese school, the Shanghai-based Ceibs, made it into the top 10.

  Many MBA programs are broadly similar, the uniform flavor increased by the global intake; at LBS, 90 percent of the MBA intake can typically come from outside the UK. While many British MBA courses contain a smattering of people from public administration or government, in the US these tend to study separately at places like Harvard’s Kennedy center for government.
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