Global Crisis Rewrites Education Rules

A 2010 study of globally-recognised business schools in the US and Europe reported a general unwillingness to use the lessons of the global financial crisis (GFC) to rewrite their MBA programmes in a global economy where laws of business are being challenged daily.

Rethinking the MBA (Srikant M Datar, David A Garvin and Patrick G Cullen), published by Harvard University Press makes for interesting reading. The authors found that business schools had generally not adapted their curricula to suit the post-crash world.

These findings led the authors to come up with an eight-point plan of action for business schools to teach their MBA students realistic skills designed for real-life business situations. Two years on it is difficult to see if much has changed, mainly because the suggestions made in the book take time to implement and because of institutional inertia, which affects business schools as much as any other organisation.

Up to the 2008 GFC, 60 per cent of MBA graduates wanted to work in the financial sector. Given financial sectors in countries within the Middle East, Europe, China and beyond are undergoing radical changes, the rules for financial education models within the MBA curriculum should change too. Further, it is a mistake to focus an MBA programme on finance and economics because the course is intended to produce effective managers, not financial specialists.

Pre-GFC, there had been a shift in emphasis from ‘doing’ to ‘knowing’, resulting from the Ford Foundation and Carnegie Corporation reports published in 1959, and this led to the development of highly rigorous subject-based curricula which produced MBA graduates with technical knowledge but little understanding of management in practice.

Another contributing factor to the downgrading of ‘doing’ and the consequent emergence of a gap between theory and practice is the ‘two cultures’ issue, where business schools have attempted to achieve scholarly recognition using the same criteria as standard university departments. This has resulted in a perverse incentive system, i.e. incentives that are not aligned with the objectives of management education.

The authors’ eight-point plan – five of which will be discussed here – was at the core of Edinburgh Business School’s MBA design during the 1980s and still constitutes the guiding principles of the programme, two decades on. It is because of the alignment between the EBS MBA and the conclusions reached in the book that it is worth comparing the authors’ recommendations with the EBS curriculum. In Rethinking the MBA, the authors suggest the following:

Gaining a global perspective

The syllabuses of the major schools have paid little attention to the emergence of economies such as China, India, Brazil and treat the US as the cultural norm. The concern is that the major schools have produced MBAs who are not equipped to manage outside the US or Europe, whereas the EBS philosophy is that the language of business is universal.

Developing leadership skills

There is a widespread opinion in the business education industry that the major business schools do not produce leaders. There is, in fact, considerable confusion in some schools as to whether they are ‘teaching leaders’ or ‘teaching students to be leaders’. EBS’s philosophy is that leadership is situational and while it is possible to learn a great deal about leadership, it is not possible to teach MBAs to be leaders.

Honing integration skills

The focus on subject-based courses and the employment of high-powered faculty specialists have led to a situation where no one is equipped to integrate the disciplines; nor is there any interest in doing so because of the discipline-based incentive system; however this is one of the strongest aspects of the EBS MBA.

Integration problems occur when MBA students are not taught to think ‘outside of the box’. They are able to tackle any problem in finance or economics, or any other subject areas, but are at a loss when asked to handle complex issues, such as a new product launch, which involve all the disciplines.

Recognising organisational realities and implementing effectively

It is a common complaint by employers that MBA graduates do not have an understanding of how businesses work. They are also poor at implementation. Implementation has played a major role in the EBS MBA from the outset: it is an integral part of the Strategic Process Model. The fallacy in much of business education is that understanding what has to be done (after much analysis of marketing, finance, economics etc.) is sufficient. The real business problem is actually making it happen.

Acting creatively and innovatively

There is little general agreement on what this involves but the lack of it is an outcome of the focus on individual disciplines and the setting of tasks within them. The fact is that in real life management problems are never presented in terms of the single disciplines and, as noted under strategic thinking above, the MBAs produced by major schools are not equipped to deal with them.

The requirements of creative thinking and the framework of integration and evaluation outlined above are similar. The EBS philosophy is that creativity cannot be taught but MBAs can learn the principles of integration and evaluation.

The authors were right to write this book. Their eight unmet needs, coupled with the views of business executives and the changing aspirations of MBA students, suggest that change is required to prevent the MBA degree being rendered irrelevant.

Rethinking the MBA tells us that major business schools have demonstrated institutional inertia in the face of a changing market place. Because of their reputations they were able to attract large numbers of highly qualified students who were eagerly snapped up on graduation. There is nothing wrong with acting as a filter, but if the filter is no longer doing its job then it is time to think again.