American business schools, R.I.P.

Let’s not mince words: Our MBA graduates marched out and destroyed the world financial system. And if that were not bad enough, few in academe have stepped up to take responsibility. Have you heard one professor say, “I taught those people, and I’m sorry?”[i]

I’ve been a professor and administrator in business schools and engineering schools. I’m glad to be back in engineering now. MBA curriculum, taught in b-schools, has become a race to the bottom, with courses getting shorter and easier as MBA programs proliferate and compete for students.[ii] I found it harder and harder to be part of that.

Harvard professor Rakesh Khurana notes there’s no longer a consensus on what constitutes a core curriculum in business. There is nothing even resembling a unified body of management knowledge.  “It’s not clear what an MBA consists of anymore,” he says. 

Small wonder, when the b-schools lack leadership. The Dean that is selected is the candidate with the most fund-raising ability, and at least enough publications to pretend to scholarly respectability. She or he is not required to show the academic leadership that could produce a coherent, relevant curriculum. In any case the Dean will spend, on average, only three years in office before moving on to another job.

We now see simultaneous intellectual crises in the disciplines taught in b-schools. The foundations of Economics (“Economics in Crisis” - Project Syndicate), Strategy (“What Killed Michael Porter's Monitor Group?” - Forbes), Psychology (“Fraud Scandal Fuels Debate Over Practices of Social Psychology” - Chronicle of Higher Education), Finance (“Why the ‘Experts’ Failed to See How Financial Fraud Collapsed the Economy” - AlterNet) and Management (“Does Management Really Work?” - Harvard Business Review) have shaken.

Why this happened all at once is still a mystery. It is, though, one reason Khurana says “you’re not going to learn much” in the MBA program. Students take the MBA not for its irrelevant content, but simply to show potential investors and employers that they are smart, hard-working people with good personal networks. Prospective students looking at escalating tuitions are going to find cheaper ways to demonstrate these qualities.

 “The lobby was as cold and damp and empty as the soul of a Wharton MBA.”
-Corporate America (a novel by Jack Dougherty) 

Shall we accuse Dougherty of literary hyperbole? OK, but a line like that in a bestseller ain’t exactly a PR coup for Penn. Before the advent of modern b-schools, companies – even Wall Street banks – hired liberal arts graduates. There’s a lot to be said for this practice, and businesses would be wise to return to it. Those grads had a sense of history, a way with words, and some idea how their actions would affect society. Unlike, need I point out, the ones who designed collateralized debt obligations.

The AACSB is the US professional accrediting body for b-schools. One of their national meetings took place at the height of the Enron crisis. Seated in the audience, I eagerly awaited a signal from AACSB officials reaffirming the importance of ethics education in the business curriculum. To my astonishment, the word “ethics” was uttered neither by them nor by any of the academics in attendance. Instead, the luncheon speaker – the CEO of Tupperware Corp. – was the only human being in the three-day meeting who so much as mentioned ethics.

So no one on the faculty learned a thing, and naturally, students didn’t either. Ten years after the MBAs trashed Enron, its employees’ pensions, and its auditor, new MBAs inflated and popped the housing bubble.

 “I won’t hire from Wall Street any more. All those people know is how to suck value out of a company, not how to add value to it.” – An entrepreneur

Back in the day, b-schools led the business world, sending out new ideas and techniques. Now, b-schools react to the business sector, and far too slowly – especially compared to journalists, who turn around in-depth analyses very fast. Of what use is the b-school?

When [“Jones”] showed his new creation to... the university’s intellectual property arm... the people there quickly introduced him to “Smith,” a former student at [the university’s] School of Management. The two formed a partnership..., with Jones as the creative inspiration and Smith as the business head and CEO. Smith has a somewhat different definition of Bandojo than Jones’ “electronic musical instrument.” He calls it a platform or single interface for playing multiple instruments.
-Albuquerque Business Journal

Talk about sucking value out! Why pay Smith to replace the straightforward and descriptive “electronic musical instrument“ with the obfuscatory “platform or single interface for playing multiple instruments,” a phrase that only a venture capitalist could love? You can look them up here, but I’ve disguised names in this recounting. This was to avoid embarrassing the principals, though I’m not sure they deserve the courtesy. A liberal arts grad would never perpetrate “a platform for...” (Oh, I can’t bear to type that phrase again!) 

No one in the university admits responsibility for any of this. No one in the leading research universities gets tenure for redesigning curricula. The teaching colleges follow the lead of the research universities. Therefore no one will change what b-schools teach students. William Holstein is right: “Business schools are facing a crisis of global irrelevance.” I might have titled this column “A Wake-up Call” for b-schools. But how do you wake an institution from a coma?

Postscript: Not to leave you all doomy and gloomy. Stony Brook’s degree in Technological Systems Management, and a few similar programs in other engineering schools, teach students to bridge the technical and the management sides of organizations, and provide enough technical specialization to make them employable and useful at high-tech enterprises. As I say, I’m glad to be back in engineering, where I think we've found some answers to the problems plaguing the b-schools.

[i] One honest, frank exception is my Texas colleague Jamie Galbraith, an economist who after the crash testified to a Congressional committee that his is a “disgraced profession.” 

[ii] “Most management schools are reporting a decline in the number of applicants for their two-year MBA programs... students are flocking to one-year specialized degrees.”