The economic crisis has thrown business schools into disarray. Deans and professors are suffering a crisis of confidence and are seriously questioning the structure and content of a twenty-first century management education. At the same time, business schools are searching for a way to contribute to global economic recovery. How can trust be rebuilt in business schools in general and the MBA programme in particular?
Do you think that the business schools have to share the responsibility for the problems associated with education of business leaders, who made the fatal mistakes during the introduction of wrong state policies and were unable to execute corporate strategies? What can the business schools do to teach the next generation of business leaders to deal with the problems at an early stage to prevent the systemic failures in many industries in the USA and in Europe?
Viktor O. Ledenyov, Ukraine
Frank Brown: We (business schools, shareholders, bankers, consumers, investors, recruiters) can all share the responsibility for the decisions today’s business leaders have made but our priority must be to accept responsibility do to everything we can to avoid a similar crisis in the future. *The crisis has presented business schools and academic institutions with a unique opportunity to rethink important aspects of our research and programmes. We are all questioning how we can instill a healthy scepticism which encourages people to question their work more and not take risks to meet targets without thinking about them before. *Business schools must continually revamp their curriculum to keep abreast of societal, technological and economic changes. We should perhaps also develop content for continuing education post MBA which would reunite alumni and help them to draw inspiration from one another.
Della Bradshaw: Yes, I think business schools have to share the responsibility, but I think to focus the blame on MBA students is simplistic for two reasons.
First, most managers and business people in the world do not hold MBA degrees - MBAs are for a very small subset of managers, some of whom reach global visibility and the majority of whom do not.
Second, MBA graduates are bright young people who make good decisions and bad decisions like everybody else; who spend one or two years at business school and then move on.
The real brains in business schools are the faculty, who spend years conducting business and financial research. Where was the research that predicted this financial meltdown? Why did the business schools not stand up and shout about what was happening?
I think there is a real irony in the fact that US business schools claim to be the ones that do the highest quality research, but failed to predict the current situation.
Yash Gupta: It's difficult to point with any degree of certainty to the business schools as the cause of the current economic crisis, in spite of a recent survey that indicated two-thirds of respondents hold business schools partly responsible for it. To be sure, many captains of industry have MBAs, but an equally large number of business leaders do not. Also, a significant number of undergraduates from leading universities' arts and sciences programs end up on Wall Street.
Of course, business schools inform the business practice and, equally, the practice influences schools' research and learning processes. Therefore, we have an opportunity to learn and change our educational processes in light of the current crisis. One lesson we can learn from current events is that we must teach students how to challenge the existing dogma and to view issues from multiple perspectives.
This means looking at issues within the contexts of history, politics, geography, culture, and science. The schools must teach leadership as it relates to civic, moral, and intellectual capabilities. Currently, many schools tend to teach students by way of functional specialization and an enhanced understanding of tools and techniques, yet an understanding of a holistic view of an organization and how organizations interact beyond the competitive environment is critical. We should provide students with the ability to think critically; to act ethically within organizations and as individuals; to contribute to the local community and society at large; and to develop adaptability and flexibility.
Santiago Iñiguez: Yes, business schools have their share of responsibility along with the major stakeholders including regulators, rating agencies, managers, opinion markers and analysts, as well as some customers themselves. We live in a brave new world where business schools are challenged to prepare not just good financial engineers or accomplished management technicians but also global citizens. Our purpose here is therefore to identify a number of initiatives that business schools deans, directors and faculty can implement in order to prepare better managers.
For example we should revisit the purpose and contents of management education. It is not enough to adapt or update programmes curricula. The challenge is deep reinventing capitalism- and the revision of programmes should be guided by the ideals of manager and entrepreneur that we aim at developing. Ideally, different stakeholder groups, including faculty, alumni and recruiters should engage in this debate. Discussions should cover basic suppositions, including what are the major responsibilities of managers.
Furthermore we should also instill a critical approach in students along with a new set of values, skills and attitudes. Equipped with their solid management preparation and criteria to evaluate the fairness of business decisions, MBA graduates should be able to reject and denounce malpractices and unethical behaviour.
As per my recent comments for the Financial Times Soapbox I believe that new frameworks are being researched by Business schools to look at how to manage a broader array of stakeholders and create competitive advantage through these relationships. At IE and other institutions one such area of research is described as Non market strategy. This calls for corporations to look beyond the traditional confines of the market (competitors, price etc) and find opportunities through interaction with groups such as government, regulators, NGO's, the media, and reshape markets in their favour. A number of corporations do this well with a strong ability to manage these interactions, but many others are going to have to develop these attributes very quickly.
Yet Business Schools must not only research and teach these new approaches but practice them as well, as the management education sector faces greater scrutiny from a wider group of stakeholders than at any time in its history!
Ethical decision-making has turned out to be a perennial challenge in MBA programs. Where would you recommend MBA programs put more effort into teaching ethics themselves or teaching students how to broach ethical subjects with co-workers, higher-level managers and clients?
Frank Brown: Both are important and MBA programmes are developing accordingly to take this into consideration. Just in the last decade, business schools have reviewed course content to make sure that we cover social responsibility, ethical thinking and ecological content. Good ethics is good business and companies that do the right thing often do better as a result. Also, getting practical experience and exposure to situations is key.
At INSEAD, our MBAs have the opportunity to get practical field experience in Africa to enhance their business understanding in different environments.
Today, ethics is key to business. Companies are focusing on social issues to distinguish themselves (i.e. Vodafone and Danone). Firms that strategically integrate CSR into their company culture and operations may find themselves with a sustainable competitive advantage and the power to lead an industry through positive change.
No two individuals will ever share the exact same ethical values but each employee should understand that when they sign a contract with a company, they become ethically bound to work in the interest of the company’s shareholders (to the extent permitted within the limits of the law).
When it comes to corporate responsibility, innovation is vital for companies that want to improve effectiveness and become better corporate citizens. Management educators must incorporate innovation into their own business programmes. At INSEAD, the Social Innovation Centre helps students learn about the business opportunities social innovation can bring.
Business schools must fully support faculty who act as champions of ethics and corporate responsibility. They can make a huge impact on tomorrow’s leaders all over the world.
Della Bradshaw: I think the question of ethics is an utter minefield......
What I find particularly difficult is the way in which ethics has become intrinsically linked with MBA studies. Why is it that MBA students need to be taught ethics when other students do not? I work with people who are making judgement calls every day without ever having the benefit of an MBA education, but we work within a business where there are accepted parameters of behaviour. Clearly in professions such as law, accountancy and medicine the parameters are much more clearly and legally defined.
So my answer would be that business schools should try and help managers instill clearly-defined frameworks for behaviour in their organisations. One trend that I find particularly disturbing is the move towards MBA pledges and oaths - Harvard students launched a graduation pledge last month, pledging that they would behave ethically. Perhaps I am unduly cynical, but these pledges strike me as acts of sentimentality rather than considered action.
The other area where I feel disquiet is that of alumni networking, which becomes so prevalent in difficult economic times. I think a very basic ethical question everyone working in a corporation has to ask themselves at some point is: How far are you prepared to go to help a friend? Or indeed, a fellow alumnus....
Yash Gupta: Business schools must teach ethics as a concept and enhance the understanding of the ethical conflicts that students might face in an organization. Such knowledge will enable them to better understand their co-workers, managers, and clients. Choosing a curriculum that puts individual ethics above organizational ethics, or vice versa, misses the point. You must have both, especially in the absence of a formal institutional ethical infrastructure as in the disciplines of law and medicine.
Traditionally, business schools have paid more attention to individual ethics, but one cannot build an ethical organization without an understanding of personal ethics as well as institutional ethics - in the sense of doing no harm.
Santiago Iñiguez: I believe we should emphasize management deontology, best practices and business ethics in MBA programmes. Experience shows that the best approach is dealing with business ethics across all management disciplines, from finance to marketing, rather than confining it to a single course.
Business schools must be propagators of ethical management encouraging all participants to embrace and engage in a community of best practices
Could you please give examples of strategic innovations, which are or to be introduced in MBA/ EMBA education programmes in leading business schools in the USA, Europe and Asia with the purpose to change the present difficult situation in the field of business education in 2009?
Viktor O. Ledenyov, Ukraine
Della Bradshaw: One of the most interesting moves we have seen here in the UK in recent days is the decision by the US Apollo Group to bid for BPP, the for-profit law, accountancy and business school, which has its own degree-awarding powers. You might not classify either of these as traditional business schools, but the growth in the for-profit sector is something that will certainly give all but the top university-based business schools a run for their money.
Yash Gupta: Business schools need to clearly articulate the difference between the purpose of business and the purpose of business schools. The schools’ purpose is not for the students exclusively to land jobs or to network. They shouldn’t expect to measure success of the program in the form of a return on investment. The schools must inculcate in students the idea of learning and developing skills that will make them successful as leaders and contributors to society. We must emphasize competencies as opposed to course work. Schools must build their strengths on the distinctive features that will provide a special experience to the students - the features that may leverage opportunities within in the broader community or the university.
Equally important, the business schools must have a meaningful student-recruitment process that goes beyond GPAs and GMAT scores. The curriculum needs to deal with real business problems and how leaders solve them, as opposed to tools and techniques. For example, at the Johns Hopkins Carey Business School, we leverage the university’s strengths in the fields of medicine and public health, as well as its physical presence in countries from Bangladesh to Zambia, to provide a unique education that emphasizes innovation, global understanding, problem-based learning, and an entrepreneurial approach to bringing science to market.
Santiago Iñiguez: At IE innovation takes place on a number of different levels. Each year the programs are assessed and recalibrated with elements enhanced within the program. Our programs will adapt to the new realities of the current business environment, although we will retain our focus on our core areas such as Entrepreneurship and managing change.
Innovation is part of our DNA and every year we transform our MBA programs in order to better prepare our graduates global challenges. Some of the recent changes include a module on Sustainability and the Future of Energy, a course on design to make students think outside the box and become more reflective, and more sessions on cross-cultural management.
The inclusion of Humanities in the MBA curriculum has also made an impact in the preparation of management leaders who at the same time are responsible global citizens. The best antidote for most of the world´s problems is good business and responsible management.
Could you please explain your vision on the proposal that the leading business schools worldwide have to focus their education programs on the creation of new business processes by students rather than on the evaluation of traded assets and extreme financial engineering, with the goal to educate a new generation of thoughtful business leaders, who will be capable to contribute to global economic recovery?
Viktor O. Ledenyov, Ukraine
Frank Brown: Firstly, I think that we should point out that business schools already produce many thoughtful business leaders who can contribute to global economic recovery. Many genuinely want to contribute to a better society.
Business schools already teach students to challenge conventional thinking and enjoy the freedom to express their ideas, make their own conclusions and be creative.
Today, because of the current crisis, we must focus on the importance of new business processes and business in tomorrow’s world. But for some time now, schools have been trying to further enhance the diversity of the MBA experience by offering a wider range of subjects and encourage students to be socially responsible.
Business schools will continue to teach finance because traded assets and profits are important for businesses to be sustainable but the focus should be on long term rather than short term profit. We also need to remind managers that they must focus on shareholder value, not managing share price.
Yash Gupta: Business leaders will be called on to address the problems of society on a global scale. The changing demographics in the world and the evolution of new economies will force us to change the paradigm of business education. Future economic success will depend upon how we address the issues of health, poverty, education, and environment as we encounter them around the world. It is expected that global warming will create more human displacement than any other phenomenon in history. The business curriculum, therefore, must find ways to enhance our students' understanding of how to solve this and other crucial problems.
Santiago Iñiguez: The challenge is actually re inventing Capitalism. This formidable effort requires the participation of all stakeholders. Business Schools can play a key role as a bridge between the generation of knowledge and its application, between the design of new financial models and the real needs of companies and investors.
The link with academic research with the needs of the real business world should be reinforced. Since the activities of business schools focus on a clinical subject, a substantial proportion of academic research should deal with real business problems, jointly with top managers. Investment banks created entire in-house universities that developed huge research on markets and companies but lacked the soundness and independence of academic research. On the other hand, academics have sometimes neglected the practical relevance of their research.
There is a lot of hype about the quality of MBA graduates and whether the MBA as a qualification itself delivers value or not. Where is the information which supports the fact that largely all wrongful decision making were implemented by individuals of MBA calibre? In my opinion a lot of Senior Managers do not possess management qualifications and are from the old school of thought especially in a lot of blue chip companies?
Mohsin Baig, Glasgow
Paul Danos: Of course most of the parties to the current crisis, many of whom have MBA’s, graduated twenty or thirty years ago and are not the products of today’s programs. I believe that the programs at the best schools give a very good coverage of the basics of business and allow students to sample some depth in various important fields. Ethics and social impact of business are covered at most schools and students do get quite a lot of strategic thinking. What may be lacking is coverage of the real scepticism and questioning attitude that great faculty actually bring to the discovery process. The way teaching is done in most MBA courses may lead to overconfidence among students. At Tuck we try to give students opportunities to “take a deep dive” with the faculty in small scale settings. By viewing close up how the theories and concepts are created, the students go away with a more balance view of their status.
Frank Brown: I think it is naïve to pretend that all MBA alumni are the same and are to blame for making wrong decisions. Business schools do not turn out one type of student who follows one set of ideas or one philosophy and reacts to business in one unique way.
As I said before, many business leaders who have an MBA are holistic, credible managers who set a good example to their teams and want to develop sustainable business.
If we can do anything to help our MBAs, it is it to help them to expect the unexpected and be better prepared for the unforeseen. We need to underline the fact that they must question and challenge logic and be sceptical about conventional thinking. Today’s business leader must change jobs from time to time to make sure they are constantly challenged and creating opportunities for innovation and entrepreneurship.
Della Bradshaw: I largely agree with you - most managers have never been anywhere near a business school. However the number of key players in the crisis who hold MBA degrees is alarming - particularly for Harvard. They include Hank Paulson, former US Treasury secretary, Christopher Cox, former chairman of the Securities and Exchange Commission, and Stan O’Neal and John Thain, the last two heads of Merrill Lynch in the US and in Europe Andy Hornby, former chief executive of HBOS.
Yash Gupta: As in anything in life, there are likely to be variations in the quality of MBA graduates and the value that MBA programs deliver. However, in general, the MBAs have served our economic institutions well. I'm not sure it is true that all wrongful decision-making was implemented by individuals with MBAs. There are many MBA graduates who are working hard to clean up the current economic mess and make their organizations very successful. On the other hand, many wrongful decisions were made by people who had no formal business education. An example is the former leadership of Bear Stearns, Fannie Mae and AIG, who had no MBAs among them. It is the lifelong learning that is critical to keeping oneself in tune with new developments and environmental changes.
It is an interesting topic and I thank you all for this opportunity. I have two questions. Do you see a trend in the future for more specialized MBAs or General MBAs? Do you view Professor Henry Mintzberg’s theory in his book “Managers Not MBAs” as being more applicable in today's world? Do you think business schools will place more emphasis on the duration and quality of work experience?
Kenan Aljazairi, Saudi Arabia
Frank Brown: Yes business schools are already placing more emphasis on the duration and quality of work experience and as I said before, we are updating course content to move with the times. The average work experience at INSEAD is six years and we do not anticipate reducing this.
In reference to Henry Mintzberg, the problem is that humanity and quantitative analysis are treated separately, when it is in fact the interplay between them that has caused the crisis. Professors working in the area of organisational behaviour should start addressing figures and more importantly, the statistical economists in finance should start to focus more on human behaviour, as well as numbers.
Paul Danos: I believe that both will live side-by-side. In the classic, two-year program at a school like Tuck we give the general management coverage to start and there is time for students to concentrate in the second year. In a one year program, time becomes a factor, especially for those with no previous business education.
What has made the MBA so successful over the last one hundred years or so has been, in my opinion, the opportunity for people to change the direction of their careers. At Tuck we admit people with two to ten years of experience, from every conceivable background, many with no formal business education, and they get a fresh start and often in completely new employment fields.
Yash Gupta: MBAs serve a variety of markets. Some individuals pursue MBAs to prepare themselves for PhD programs and to pursue specialized professional interests such as investments. I envision this particular segment of students continuing to seek MBA programs that specialize. However, those who are seeking general managerial jobs, which will be in larger numbers, will pursue general MBA programs.
In my opinion, business schools will put more emphasis on the quality of the work experience and not necessarily on its duration. For example, the millennial generation has a very different set of values than Generation X or the baby boomers. Therefore, managers’ previous experiences may not help them deal with this newer cohort.
Della Bradshaw: In answer to the first part of your question, I see the market fragmenting, so both types of degrees will flourish. On the second part, there is a trend in the US to enrol younger students on MBA programmes - two thirds of the most recent entering class at Harvard graduated four years previously or less, which means they had a maximum of three years work experience when they applied for the programme.
This kind of class is very different from a class where the average age is 27 or 28, and clearly has to be approached differently. There is nothing wrong with teaching younger students - it happens on undergraduate programmes all the time. And no-one doubts they can be taught functional and analytical skills. I think Prof Mintzberg’s concern, and I hope I am not representing him, is whether they can be taught MANAGEMENT skills.
The fact that most business schools are introducing more executive MBA programmes and more executive non-degree programmes, so they are teaching those with more experience. Just not through the traditional MBA vehicle.
Santiago Iñiguez: We can expect growth in both generalist and specialised Master degree programs. MBAs are by definition generalist programs whereas Masters in Management programs allow for specialisation in a number of business functions (e.g. Finance Marketing Human Resources), or industries (e.g. bio-technology or sports). Professor Mintzberg´s main contention in the referred book is that in order to make the best of business education, participants should have a certain previous managerial experience. This is certainly the case at the leading European business schools.
If, as many of us believe, the Anglo-Saxon Model of corporate governance “has failed”, what kind of courses are recommended to prepare current and future MBA candidates on “other approaches” to governance, how the present U.S. government will modify its “agency theory” approach, and how and when the European demanded international approach to governance and regulation will be adopted by sovereign nations?
John Alan James, New York
Paul Danos: I believe that what failed is a lack of “critical analysis mindset” among leaders such as regulators, CEOs and board members. Their education did not prepare them for the kind of probing that was needed in the current complex financial world. There seemed to have been a blend of acceptance of the experts opinions, an over-confidence in the models employed, and perhaps a fear to admit to a lack of understanding. I believe that an answer is very fundamental.
Leaders in business must be deep enough to have confidence in their judgment, sceptical enough to challenge assumptions, and brave enough to admit to lack of understanding. This crisis has proven to me, that no one can have enough education or experience to have mastered all the theories and practices of the global economy. What is needed is to have the right mindset when approaching one’s responsibilities. The style of governance or the rules of governance were not at the heart of the deficiencies we have witnessed. In my opinion it was more fundamental than that and resided in incomplete understanding and the wrong intellectual approach.
Santiago Iñiguez: Historically, American and European business schools have put a different emphasis on stakeholders in strategy formulation and decision-making. Two decades ago, references to stakeholders in the US were discredited as borderline communist; the only relevant constituency for managers was shareholders.
Conversely, European business schools have developed out of a very different management culture, open to a wider array of stakeholder groups beyond shareholders. I believe that business will evolve towards a convergent corporate governance system. I don´t share with you the view that the Anglo-Saxon Model is dead, in fact it is still very influential.
First of all, thank you for the opportunity! My practical experience is in design, product and market development. Through experience and wide exposure to the global marketplace, I advanced to senior management, general management and eventually to President, CEO and Founder. Additionally, the practical playing field allowed me to test and retest theoretical models, etc… Without previous practical experience combined with formal education which I have in the form of BFA, MBA, MIBA and continued as well as continual education, change does occur. I firmly believe that by simply having formal education is not enough. Leadership, intrapreneurship and entrepreneurship can be taught, yet I do believe that many levels exist like that of a visual artist. Anyone can paint by numbers, but few can render innovative and unique images through natural abilities. It was briefly mentioned in the FT on June 8, 2009, page 10, in the Harvard class of 2008, e.g., more than two-thirds of the students had graduated from undergraduate programmes in the previous four years. My question is, do you believe that these students are prepared and are they accepted by their respective counterparts in various business climates? On a final note, we are all aware of various cultural characteristics especially within domestic markets where we find most MBAs. Why is it that we do not give more attention to this vital area, especially if we are a global marketplace? Thank you for consideration.
Jim Voss, unknown
Paul Danos: I believe that the top schools today give a very broad view of business, much more so than in the past. The role of reactivity and cultural differences are certainly not off limits in the current curriculum.
Santiago Iñiguez: I firmly believe in a post-experience program. Unless participants have a relevant experience that they can bring to class, the interactive methodologies used in the program do not work. This also applies to the case-method actually invented at Harvard Business School. More than the transmission of knowledge the MBA is a learning transformational experience deeply based on the qualities of fellow participants. For example at IE Business School, the average experience of MBA participants is over five years. Diversity is also one of the key elements of the MBA experience here. We have over 80 nationalities with students having different visions of the world and one of the highest percent female participants worldwide.
Do you think that industry leaders and markets will respond positively to an increase in ethics training in MBA programmes in the wake of the global meltdown?
Abel Iyasele, Lagos, Nigeria
Paul Danos: If you look at the leaders who were at the centre of the financial crisis, I believe you would find people who have had a great deal of ethics coverage in their education and in their businesses. I believe that we have to expand the concept of ethics to include the understanding and embracing the full responsibilities of the positions leaders take on. I would guess that most of the key players did not believe that they had violated their personal ethics standards, while at the same time many may not have had the full understanding of the risk they were taking on. Why not? I would say that they did not believe that going along without true questioning was a violation of ethics.
Santiago Iñiguez: We hope so. Unfortunately in the past recruiters didn´t show a preference on ethical attitudes over other management skills in business school graduates. It seems this is now changing and more and more ethical issues are being raised during job interviews and questionnaires
Yash Gupta: Business schools have no choice but to increase their emphasis on ethics. Because business schools are an integral part of the business system, the consequences of malfeasance on the part of individuals and organizations are unavoidably severe, as exemplified by the current crisis. Lack of ethics was the root cause of the subprime mortgage lending crisis and the disconnect between the performances of organizations and the bonuses of executives. Many companies such as Lehmann Brothers, Washington Mutual, and Countrywide, once considered successful institutions, atrophied due to ethical lapses. The cost to our society has been extremely high. Therefore, industry leaders cannot ignore the increased need for ethical training in MBA programs.
What are the key advantages of business schools that are going to become important in the near future for students when choosing a place to study? Thank you!
Vladimir Pravotorov, Moscow, Russia
Paul Danos: The core asset of academic institutions is the depth of knowledge of our faculty. At Tuck we are devoted to giving students person and complete access to faculty expertise. This means for us small scale, focus and a faculty of thought leaders who open up about what they know and how they learned it. Of course, other very important assets are our campuses where sharing, networking and relationships flourish and alumni networks that support careers and friendships.
Della Bradshaw: I think potential students are going to be seriously considering cost. Without the very highly-paid jobs in investment banking, the vast costs of study are harder to justify. I think the second will be reputation, and the ability of the schools to help students get the jobs they want. And the third is how global the education is.
One of the most interesting things I have seen in the past few years is the number of US students who choose to study outside their home country. If there is one thing that has become evident in the past year it is that we live in a truly global economy.
Santiago Iñiguez: Each student is of course different and will have specific views on each institution’s key attributes and how they add value. However their will be certain aspects of the MBA experience that are increasingly important. Della mentions price, and of course the opportunity for graduates to make a reasonable return on their investment is going to be key for programs to remain viable. So functions such as careers and alumni networks are critical and become key advantages for schools. Of course the focus, specializations and learning methodologies of each institution are also critical and will to a greater extent determine a candidate’s choice of institution as these will definitely influence career opportunities on graduation.
We focus on understanding change and equipping participants with an entrepreneurial mindset as we believe this a