March 30, 2008

Lessons for Business Schools (3)

Lessons for Business Schoolsby Andrea Gaborfrom :

GSIA was emblematic of the ambitious goals of the day, as well as of what went wrong with the reform efforts. One thing GSIA did not focus on was the development of managers. Henry Mintzberg begins his 2004 book, Managers, Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development, with a discussion of GSIA, noting that the school never realized the promise of its academic talent and research agenda because it failed to integrate its research into the needs of real-life managers and businesses.

Of all the critiques of MBA education, Mintzberg’s indictment is the most expansive. Mintzberg attacks what MBA programs teach (functions in silos with no overarching framework), how they teach it (as analysis and decision making, divorced from context and experience), and whom they teach (largely inexperienced young people who do not have the wisdom, born of experience, to give meaning to their studies).

Mintzberg, a longtime management professor at Montreal’s McGill University and a founder of the International Masters Program in Practicing Management, is especially critical of the functional bias that dominates many business schools. But he argues that even Harvard’s case method, while resisting the most abstract theoretical extremes of GSIA, depends too heavily on analysis and talk, and not enough on context, experimentation, and the iterative learning that is essential for successful im­plementation.

The cases students study, sometimes dozens of them in quick succession, are twice removed from the actual business setting. Mintzberg complains that the em­phasis on data analysis without “the tacit knowledge of the situation” leads to facile decision making. He takes aim at such popular HBS courses as Michael Porter’s Competition and Strategy for being excessively outward-focused and devoid of a unified view of the organization and its capabilities and idiosyncrasies during the strategy-setting process. Mintzberg goes further than most critics by suggesting that a graduate program in business education is wasted on anyone but a practicing manager.

What Is Management?

In 1980, Robert H. Hayes and William J. Abernathy, in their seminal Harvard Business Review article, “Managing Our Way to Economic Decline,” charged: “What has de­veloped, in the business community as in academia, is a preoccupation with a false and shallow concept of the professional manager, a ‘pseudo professional’ really — an individual having no special expertise in any particular industry or technology who nevertheless can step into an unfamiliar company and run it successfully through strict application of financial controls, portfolio concepts, and a market-driven strategy.”

Business schools reacted by beefing up their offerings on international subjects, which exposed students to new markets and competitors, and introducing courses on quality, which were intended to plug curricular gaps in operations. Columbia University set up a center for operations in 1980 with a raft of executive seminars and guest speakers from industry. Harvard Business School began to require an operations management course in the first semester. There was even talk of reshuffling the offices of Harvard professors to promote communication among specialties.

But these reforms were already being overtaken by a powerful new idea. Beginning in 1976, a group of finance economists published what would become a series of papers on the so-called efficient market hypothesis, which in turn gave rise to agency theory, which argued that markets can align the interests of owners and managers of public companies.

The theory provided the “unified approach to organizations and corporate governance” and the conceptual framework that had so long eluded business schools, according to Rakesh Khurana in his 2007 book, From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession. But by rede­fining managers as self-interested agents, rather than as stewards, the theory undermined the authority and legitimacy of management, as well as the professional goals that business schools had been working toward for close to a century, argues Khurana.

He frames his devastating critique — that MBA programs have degenerated into a combination of credentialing institutions and exclusive social clubs — in the historical context of the business school’s long struggle for legitimacy and professional identity.

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