■ MANAGEMENT THE MBA

MASTERING THE CRISIS In den USA sind MBA-Absolventen die Sündenböcke der Finanzkrise. Doch wenn auch einige schwarze Schafe diesen Studiengang in Misskredit gebracht haben und die Inhalte neu überdacht werden müssen: Der MBA ist nach wie vor eine Tür zum Erfolg. VICKI SUSSENS-MESSERER berichtet.

J

ohn Thain, the former head of Merrill Lynch, has one. Fred Goodwin, former boss of The Royal Bank of Scotland, has one. So does George W. Bush. But the popular management qualification, the Master of Business Administration (MBA), did not help their leadership skills. Thain caused a public outcry in 2008 when he decided to furnish his offices for $1.2 million while Merrill Lynch was cutting jobs. Goodwin insisted on his £703,000-a-year pension, although his bank was saved by a £20 billion bailout from the British government. And George W. Bush was voted the worst US president since 1945 in a national poll held by Quinnipiac University in 2006. Never before have so many business schools produced so many MBA graduates — 150,000 a year in the US alone. Yet never have so many business leaders shown such greed, such short-term thinking and such a lack of social responsibility. So is it fair to say that the MBA is to blame? Business schools must share some of the blame for the crisis, says Harvard Business School (HBS) dean Jay O. Light. “There were imbalances both on campuses and in the economy during an extended period of growth, where people became less focused on systemic risk and more focused on making money. But to say that business schools and the MBA are the root cause of the global financial crisis is simplistic nonsense.”

Criticism of the MBA has been particularly strong in the US, where schools have been blamed for promoting the values and strategies that led to the financial crisis. This has caused a heated debate in the media and on business-school campuses. While it seems at times like an MBA witch-hunt, the discussions are positive. “The dialog will turn into action,” Light wrote in an online Harvard Business Review (HBR) debate earlier this year on how to fix business schools. So what are the problems? In the debate, MBA professors and alumni were brutally honest about the mistakes their schools have made. “Seduced by the success of our alumni, the remarkable quality and ambitions of our graduates, we have lost our way,” wrote Harvard Business School professors Rakesh Khurana and Scott Snook. They say the ideas and tools taught to students — the exotic financial instruments, poorly designed compensation plans and models of leadership that value leaders’ charisma over substance — are all things 56 Business Spotlight

medium

that threaten a firm’s long-term well-being as well as the legitimacy of the US capitalist system. Strong criticism also came from Joel Podolny, the dean of Apple University in Cupertino, California, and a former dean of the Yale School of Management. Podolny says the system of ranking schools according to the salaries their graduates can expect gives the idea that the MBA is, primarily, a “ticket to big bucks”. Although business schools now teach ethics, this is not enough to promote accountability, he feels. “The core courses in finance, strategy, organizational behaviour and marketing, which truly shape students’ views, are still dominated by theories and models that give an overly simplistic, at times even perverse, view of business and managers.” On the other hand, Steve Kerr, an adviser to and former chief learning officer at Goldman Sachs, says it’s absurd to believe that management education has such a massive influence upon its students that it can be blamed4 accountability [E)kaUntE(bIlEti] alumnus, pl. alumni [E(lVmnEs, E(lVmnaI] bailout [(beI&laUt] big bucks [)bIg (bVks] US ifml. billion [(bIljEn] business school [(bIznEs sku:l]

Verantwortlichkeit ehemalige(r) Student(in) Rettungsaktion das große Geld Milliarde(n) betriebswirtschaftliche Hochschule bzw. Fakultät chief learning officer [)tSi:f (l§:nIN )QfIsE] Leiter(in) der Personalentwicklungsabteilung compensation [)kQmpEn(seIS&n] Vergütung core course [)kO: (kO:s] Pflichtfach dean [di:n] Dekan(in) design sth. [di(zaIn] etw. konzipieren graduate [(grÄdZuEt] Absolvent(in) greed [gri:d] Gier legitimacy [lI(dZItEmEsi] Legitimität, Rechtmäßigkeit long-term [)lQN (t§:m] langfristig Master of Business Administration (MBA) Master of Business [)mA:stEr Ev (bIznEs EdmInI)streIS&n, Administration, ()em bi: (eI)] Postgraduierten-Abschluss in Betriebswirtschaft on the other hand [Qn Di (VDE hÄnd] andererseits outcry [(aUtkraI] lautstarker Protest, Sturm der Entrüstung perverse [pE(v§:s] abwegig, verdorben, pervers poll [pEUl] Umfrage rank sth. [rÄNk] etw. bewerten, etw. einstufen root cause [(ru:t kO:z] der eigentliche Grund seduce sb. [sI(dju:s] jmdn. verführen; hier: verleiten short-term [)SO:t (t§:m] kurzfristig simplistic [sIm(plIstIk] grob vereinfachend way: lose one’s ~ [weI] die Richtung verlieren witch-hunt [(wItS hVnt] Hexenjagd

6/2009

B. Snyder/Reuters

Yes, we can: the MBA remains popular despite recent bad publicity

“To say that business schools and the MBA are the root cause of the global financial crisis is simplistic nonsense”

■ MANAGEMENT THE MBA

The right lessons? The MBA needs a new image, say critics

Back to school

Jehnichen/laif

for the crisis. Students go to business schools long after they have learned their social values from parents, schools and peer groups, he says. David Champion, a senior editor of the Harvard Business Review, gives a more personal view. Defending his own MBA, he says those in his class were not the “soulless monsters” that the media like to present. Nor were they uncritical. His finance professor liked to say that “cash is king”, but it was obvious he was referring to accounting and not expressing a value, says Champion. And nobody really believed you can only understand the business world using simplistic models. If we want to find someone to blame for the bad behaviour of some MBAs, Champion believes we should look to the people who put them under pressure to fit in: their parents and the firms they work for. But this fact does not let business schools off the hook, he adds. The debate showed that many professors found the MBA does need some “fixing”.

So what actions are business schools taking? Dean Light of HBS explains: “We are making changes in the way we teach risk management, reconsidering the oversight responsibilities of directors, and reviewing the kinds of incentive provided by executivecompensation packages.” He says HBS is also responding to students’ growing interest in careers outside of traditional businesses, such as those in health care and science-based firms, as well as in non-profit and social enterprises. HBS also plans to give students a deeper understanding of the impact of their decisions on society. In Europe, public anger against business schools has not been as great as it is in the US. “There is discontent below the surface and that is a good thing,” says Dianne Bevelander, associate dean of MBA Pro58 Business Spotlight

hen times are tough, the tough go back to college,” notes Julia Tyler, vice-president for Europe, the Middle East and Africa at the Graduate Management Admission Council. The Council produces the GMAT test, which most business schools require applicants to take. The number of tests taken in 2008 reached a record high of 260,000, and Tyler doesn’t expect the figures to drop for 2009. Nunzio Quacquarelli, owner of QS, an education- and careersnetworking company, confirms an expected five per cent rise in MBA applicants this year. “This is less than the 20 per cent rise in 2008, but still a healthy increase,” he says. When jobs are hard to find, people with qualifications have more skills and therefore more options. For this reason, professionals in the financial sectors are also starting MBAs. Jay Barratt, a trader in credit markets, was retrenched by J. P. Morgan at the end of 2008. His decision to do an MBA at Manchester Business School was an “insurance policy”, he told the QS Top MBA Career Guide. The MBA provides a valuable network of well-connected alumni as well as contacts to employers, who often recruit directly from schools. Last year, a QS survey of 29 business schools found that over 90 per cent of their graduates had jobs within three months. This year, recruitment has slowed down and graduates need longer to find the right job, says Quacquarelli. There are fewer German graduates, however, so they have better chances. Traditional MBA employers, such as consultancies and financial firms, are employing fewer people, but they have not stopped altogether. When the economy is bad, stopping hiring is not the answer, says Stephanie Ahrens, the MBA recruiter at Morgan Stanley. “MBAs are much desired in our business as future leaders and innovators.” There has also been a growth of MBA recruiters in other sectors. And, according to the latest GMAC survey, recruiters don’t seem to be lowering salaries. However, those asked hoped that by employing MBAs, they will be able to hire fewer people and still get the same work done.

“W

Professor Danica Purg, head of the IEDC-Bled School of Management

grammes at the Rotterdam School of Management (RSM) in the Netherlands. MBA programmes will change in response to the current economic downturn, she says, adding that change is not new to business accounting [E(kaUntIN] adaptable [E(dÄptEb&l] alumnus, pl. alumni [E(lVmnEs, E(lVmnaI] applicant [(ÄplIkEnt] assets [(Äsets] associate dean [E)sEUsiEt (di:n] business school [(bIznEs sku:l] class [klA:s] compensation package [)kQmpEn(seIS&n )pÄkIdZ] consultancy [kEn(sVltEnsi] economic downturn [i:kE)nQmIk (daUnt§:n] executive [Ig(zekjUtIv] graduate [(grÄdZuEt] Graduate Management Admission Council [)grÄdZuEt )mÄnIdZmEnt Ed(mIS&n )kaUns&l] health care [(helT keE] impact [(ImpÄkt] incentive [In(sentIv] insurance policy [In(SUErEns )pQlEsi] in transition: country ~ [In trÄn(zIS&n] non-profit [)nQn (prQfIt] off the hook: let sb. ~ [)Qf DE (hUk] oversight [(EUvEsaIt] peer group [(pIE gru:p] professional [prE(feS&nEl] recruit sb. [ri(kru:t] recruiter [ri(kru:tE] recruitment [ri(kru:tmEnt] resort [ri(zO:t] retrench sb. [ri(trentS] senior editor [)si:niEr (edItE] social enterprise [)sEUS&l (entEpraIz] survey [(s§:veI]

6/2009

Buchhaltung anpassungsfähig ehemalige(r) Student(in) Bewerber(in) Anlagevermögen Prorektor betriebswirtschaftliche Hochschule bzw. Fakultät hier: Jahrgang an einer Schule/Hochschule Gesamtvergütung Beratungsfirma Konjunkturabschwung Führungskraft, TopManager(in) Absolvent(in) Verband führender Hochschulen, die MBAProgramme anbieten Gesundheitswesen Auswirkung(en) Anreiz, Motivation Versicherungspolice; hier: Garantie für die Zukunft Übergangsland gemeinnützig jmdn. aus der Verantwortung nehmen AufsichtsGruppe von Gleichaltrigen Fachkraft jmdn. anwerben Personalreferent(in) Anwerbung, Einstellung Ferienort jmdm. betriebsbedingt kündigen leitende(r) Redakteur(in) Unternehmen mit (primär) sozialen Zielen Umfrage

schools. “Business schools have among the most dynamic and adaptable graduate programmes worldwide.” European schools have already started to focus attention on the relationship of business to society. RSM’s Personal Leadership Development programme focuses on self-awareness, and particularly, the impact leaders have on others, says Bevelander. And MBAs are required to travel to countries in transition to get practical experience of the problems they face. John R. Wells, head of the Swiss business school IMD, says he is increasing his school’s efforts to promote responsible leadership, which he describes as delivering long-term profits fairly: “Fairness means you don’t steal from your firm’s long-term assets to create the impression of short-term profits that are not there.”

In the idyllic resort of Lake Bled in Slovenia, Danica Purg, dean of the IEDC-Bled School of Management, welcomes the storm around business schools. She says the focus on money in Western business schools has disadvantaged schools in central and eastern Europe (CEE). “I’m often asked where we come in the Financial Times ranking,” she says, but IEDC, for example, does not earn enough from any of its executive programmes to even be considered for ranking 4

■ MANAGEMENT THE MBA Jay Light, the head of the Harvard Business School

in executive education. And even if it did, schools are ranked according to how much a graduate earns after the MBA, and how many graduates work in multinationals. “There are few multinationals in Slovenia, and the cost of living in the CEE region is too low for salaries to be high,” she says. Ironically, this means that IEDC can pay attention to real values, says Purg. “We can focus on how managers should meet the needs of all stakeholders and not just shareholders. We were also one of the first business schools to teach ethics.” Purg doesn’t think people shouldn’t work for profit, but just that “managers must understand their broader role in the context of society”. Purg, who is regarded as one of the most important business thinkers in central and eastern Europe, has dropped the traditional post-graduate MBA in favour of the executive MBA, which is aimed at more experienced managers. She believes this experience is essential before managers learn how to lead. Purg has also learned that it’s not easy to teach ethics. In IEDC’s first ethics course 19 years ago, she invited a bishop to talk about values. But the students’ dilemmas were concerned with firing people or government corruption, and these were not part of the bishop’s world. Now IEDC gets managers to talk about the real dilemmas they have and to think about the conse-

quences of their decisions for themselves, their family and society. Any crisis will cause problems to be given more weight than is fair. Yet schools, students and recruiters remain faithful to the MBA qualification (see box on page 58). It is still seen as the best way to get top jobs. Schools don’t expect a dramatic drop in the number of applicants, and employers still regard it as a first-class qualification. “In an era of financial uncertainty and intense competition, the MBA is becoming a safe option for professionals wanting to advance their career BS chances,” says head of QS, Nunzio Quacquarelli. ■

QS World MBA Tour ■ Learn about the world’s top business schools (Munich, 26 October; Zurich, 28 October; Berlin, 29 October; Frankfurt, 31 October). For details: www.topmba.com QS World Grad School Tour ■ Learn about the world’s top graduate schools (Berlin, 29 October; Frankfurt, 31 October). For details: www.topgradschool.com Business Spotlight is a media partner for these events www For more information on MBAs and related language exercises, go to www.business-spotlight.de/mba

advance sth. [Ed(vA:ns] applicant [(ÄplIkEnt] executive MBA [Ig)zekjUtIv )em bi: (eI] graduate school [(grÄdZuEt sku:l] US post-graduate MBA [)pEUst (grÄdZuEt )em bi: )eI] recruiter [ri(kru:tE] shareholder [(SeE)hEUldE] stakeholders [(steIk)hEUldEz] uncertainty [Vn(s§:t&nti]

etw. vorwärtsbringen Bewerber(in) berufsbegleitender MBAStudiengang Hochschulabteilung für Studenten mit abgeschlossenem Studium MBA als Graduiertenstudium Personalreferent(in) Aktionär(in) am Unternehmen interessierte Kreise Unsicherheit

VICKI SUSSENS-MESSERER is a South African

journalist and editor, with a special focus on management and social issues. She is based in Munich, Germany. Contact: [email protected]

6/2009