Business Schools: Guilty or innocent?

NOTA.- Este artículo fue enviado para su publicación en un número especial a petición expresa de una escuela de negocios de India. Dado el tiempo transcurrido y al no haber recibido copia de la publicación, me tomo la libertad de publicarlo en el blog:

It is not the first time that the usefulness of business schools is questioned. Perhaps, the pioneer was McCormack and his “What they don’t teach you at Harvard Business School”. Nowadays, many people, as a consequence of the global financial crisis, is focusing mainly in ethical issues but the real old problem is at what extent an MBA can substitute years of practice.

Before dealing with the big issue, we should start with two minor ones: Case-based teaching and big companies management .vs. small companies management. The case-based teaching is often presented as a way to acquire condensed experience. A problem is presented in a few pages and the discussion in the classroom will provide the expected learning to the attendants. I cannot say that this process does not produce learning. However, a good part of the acquired learning can be about how to discuss or how to present the own reasoning in the best possible light. A few years ago, HBS published an article called “The smart talk’s trap” by Pfeffer and Sutton. They said that a particular type of talk is an especially insidious inhibitor of action: “smart talk”. The seeds of this talk are often sown in business schools and corporate life, where leadership potential is equated with the ability to speak intelligently.

Again, this is not new. In “Lord Chesterfield Letter’s”, Lord Chesterfield explains how he was asked to speak about something that he was fully ignorant. On the other side, the speaker had a deep knowledge but his “smart talk” made him win the debate, disregarding the fact of his lack of knowledge. There is a fact: Case-based teaching starts with a case written in a few pages. Many managers would like to have their common problems presented like that: A paper omitting the unnecessary, focusing on the important variables and explaining in clear terms what are the positions and the motivations of every one of the actors. Obviously, that should mean having more than a half of the problem already solved.

Corporate life implies political activity: Who can be trustable and useful allies? What are the positions? Are they rock-solid or are there divisions? Who do we have to attract to our positions? What are the rationale and the interests under every position? Hard challenge is this for any kind of training. However, case-based teaching, if its limitations are not clearly explained, can provide the self-confidence but not the abilities to navigate through these complex issues.

Another point is the management of big business and if its rules are the same for little businesses: Usually, the approach in MBAs could be defined as “If you can do something complex, for sure you can do something easier”. Therefore, programs are designed around big corporations since little companies are considered easier to manage. Unfortunately, this is not true. Big and little companies have different sets of management rules. The situation can be explained through a metaphor coming from the aviation field:

Perhaps not many people know today who Otto Lilienthal was. Lilienthal was one of the aviation pioneers and he used to build gliders that were controlled displacing his body to change the center of gravity. As he got more and more experience, he built faster and heavier gliders. His final moment arrived when he built a glider so heavy and so fast that his body weight was not enough to control it. Of course, that did not stop the progress of aviation. Simply, they learnt that heavier and faster planes required controls and indicators.

I suppose that it is already clear where the metaphor is pointing: To become bigger, we need to control through formal controls and indicators but…what if we are not or we do not plan to become bigger? What if our size is the right one for our business? Should be lacking formal controls and indicators a proof of lack of professionalism? Probably, the answer coming from many business schools and from many MBA graduates should be an emphatic “yes”. However, we do not control for the sake of control itself. Control is a cost as Fukuyama in “Trust: The Social Virtues and the Creation of Prosperity” established and, before him, Luhmann in “Vertrauen”. We cannot accept as a self-evident truth the requirement of formal controls to know what is happening in our company. Billions of little companies could say so and they are not willing to incur in an avoidable cost.

The wise behavior should be to adapt the level of control and formality to the requirements of the situation. Many little companies are unable to adapt to a situation that requires formal controls. They finish as Otto Lilienthal did. Many others can fall in love with the self-confidence of a MBA graduate and, after the insistence in formal controls, they can finish discovering that the business model that the MBA brings does not fit their necessities. These two problems are shared by many MBA programs, including the best among them. However, when someone tries to criticize business schools as a whole, there is something that could be deeply unfair and it is inside learning mechanisms themselves:

Ancient Greeks said that no pupil could be better than the master. Facts show that this is not true but facts do not show why. Actually, nobody can teach anybody. We can try to transmit contents or facts but, to be learnt, these contents have to be adapted to the mental structure of the pupil and this adaptation is far from being a mere copy. If something is very far from the mental structure, it could not be even perceived. If it is a little bit nearer, it could be rejected and, of course, if it is something very familiar or perceived like that, nothing happens. If we already know something, we cannot consider this as information.

The miracle happens when something is near to the border known-unknown. There is an adaptation of the content, of the mental structure or both. At that moment, since the new contents do not have the same value for pupil and for master, it is clear that some pupils could go far beyond their masters. Since this is a universal phenomenon linked with human beings, it does not seem fair to accuse business schools because they do not provide the creativity or, furthermore, the ethical behavior that should be expected from a top manager. Nobody, including business schools, has a recipe to create innovative and ethical people. It is true that the best of them have the possibility of recruiting people with higher potential and, since raw materials are better, no one should be surprised that the final results will be better too.

A highly-demanded B-school has a recruiting base that is not accessible for minor schools. The concept of recruiting base and its effects can be applied both, to teachers and attendants. If they have more people to choose, it can be expected that the best are going to be chosen and, hence, the results are going to be better. That can be a problem for the validity of rankings: Is the ranking validating the program contents or the recruiting process? From a scientific point of view, the variables used are not valid since the recruiting process has modified the conditions. If someone wants a valid experiment, the conditions should be very different:

  1. Select 20 candidates that you consider suitable for your MBA program.
  2. Reject 10 of them at random.
  3. Follow the 20 (rejected and accepted) over the years to know how they are doing professionally.
  4. Look for differences between both groups. If you find them, these are the differences that could be attributed to the B-school teaching.

Of course, nobody is going to perform an experiment like this because both, commercial interest and ethical behavior could be against it. However, if someone wants to validate the program avoiding the impact of the recruiting process, it is hard to find another possibility. Going back to the idea of knowledge acquisition and the value of knowledge, it should be interesting to reflect about what is the right moment for an MBA. It is common practice to convert the MBA in the “last year of college” and the results are very often disappointing. The same happens with many doctorates.

Anyone who has tried to learn a language or a new program to use in the computer knows something: We’ll never be able to learn until the moment that this language or program becomes necessary. Furthermore, the “If-I-had-know” syndrome, that happens when we suddenly find that our problem had a straight and easy solution, is a very good help for learning and to convert theory into practice. In other words, the mental structure of a brilliant student without experience could not make him suitable for an MBA. Again, the B-school cannot teach practice. The jump from theory to practice has to be made by the student and, to do so, the perception of a necessity coming from former practice could be a must.

Of course, B-schools are dealing with their own necessities as business and they try to use their knowledge as much as possible. That means accessing to segments of population wide but, perhaps, not fully suitable for a MBA program. B-schools are subject to criticism like any other thing. However, if we criticize the school because of the the distance between teaching or reality or the ethical behavior of some graduates, we could be losing the focus. Psychologists know that any general theory about how the mind works has always failed in the same point: Range of convenience. Nobody could say that behaviorism did not have a good point with the stimulus-answer theory. However, when they tried to explain the whole mind only with that mechanism, they failed. The same can be said of Gestalt, psychoanalysis, cognitive psychology and so on. All of them were good till the moment they went out of their range of convenience. The same can be applied to B-schools. They cannot provide real experience (case-teaching method is not real experience) but they can help to build knowledge over real experience of the attendants…if that experience exists. If not, the criticism about B-schools could be legitimate but it should be better if pointed to the business approach and the invitation to get out of their range of convenience as a way to grow.

Perhaps, they should narrow the focus or, alternatively, diversify their products to be adapted to different publics: Students, experienced executives, big companies, little companies, public administrations and so on. Everyone has specific requirements and the “one size fit all” policy could not be valid anymore.

Ethics is another issue. There is a book published by HBS whose title is very expressive: “Can ethics be taught?”. My personal answer should be: Not, if the teachings are against the environment. Making the B-school responsible for the ethical behavior of its graduates is a clear sign of optimism. Does someone, inside or outside a B-school, really think that the contents taught are powerful enough to alter the ethical behavior of the students? If these contents are aligned with the rewards structure that the student is going to find outside, yes; it could be. If not, any recall to ethical behavior should be considered as the product of a miscarried preacher.

There is a fact in business life: Any organization rewards something and, if it doesn’t, it does anyway. We can try to help student to understand this simple fact and why many organizations, without being conscious or worse, reward unethical behavior. Can we tell someone to manage thinking in the long term if the rewards are linked to short term results? Perhaps, it could be more useful to tell the top manager what are the unintended effects of their reward system but…what if the top manager is subject to the same short-term centered model?

One of my first assignments as a junior consultant implied to be in a team to assist to the re-organization of a company. Its managers wanted to be prepared for a free market environment coming from a monopolistic one. The project started with a president, two general managers and five functional managers. After the project, that was considered as a success, they had five general managers and 27 functional managers. It was a surprising idea about the meaning of “success” even for a junior as I was. What happened and why did they consider the results as a success? They started from the bottom and a supervisor was conscious that asking for more resources could mean to increase his level in the company. The boss could stop the process but the boss was subject to the same rationale. The process was repeated until it arrived to the top and everyone was happy with the results…everybody except the shareholders but, at that moment, it was a State-owned company and no one could foresee problems about future viability.

What should be the right advice from a B-school to a member of this company? Clearly, if that advice should have been against the rewards system, it should have been ignored. We can ask people for a behavior aligned with the interest of their company and against their own interest. However, if we have to do that, it seems quite clear that the rewards structure is wrong. Cases like Enron or others cannot be used to criticize B-school because of the behavior of their graduates. The right point to criticize should be the reward system: Who is the client of someone who has to write a report about the behavior of the one who is hiring him? That is the real problem, not the ethical teaching of the B-schools graduates.

Summarizing, criticizing B-schools can be legitimate but not all the criticisms are. A business policy driven to accept the wrong people to increase the market share can be criticized. A poor adaptation to different markets can be criticized too. Criticizing B-schools because of the ethical behavior of its graduates is unfair. The same could be said about the distance between theory and practice: It is there but, perhaps, we should have to focus more on the general learning process than in the contents of the MBA programs. The problem is deeper and wider and, even though it is a very old one, it still seems not to be fully understood.

Dr. José Sánchez-Alarcos



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