Don’t Look at Us

After the global financial meltdown, shouldn’t business schools be taking a good hard look at their failings?

After the global financial meltdown, shouldn’t business schools be taking a good hard look at their failings?

IT IS NOT uncommon. MBA graduates have always attracted pejorative remarks and barbs, usually born of envy. After the global financial meltdown and worldwide recession, epithets like ‘Mediocre but Arrogant’, ‘Masters of Bluster and Attitude’ and ‘Managers by Accident’ are back in currency. And there seems not even an iota of sympathy for the erstwhile ‘Masters of the Universe’ who have the three letters of the coveted initials next to their names.

During boom time, top B-schools around the world prided themselves in turning out global leaders. Today, now that MBAs (masters of business administration) are routinely held responsible for destroying wealth and jeopardising the growth of economies large and small alike, shouldn’t these hallowed B-schools share some part of the blame?

On the past year’s evidence, an MBA degree is a waste of time and its holders an economic hazard. If all new bridges, dams and telecom networks built by some of our best engineers were to collectively collapse, surely we’d want to reconsider what’s being taught at the IITs and RECs. Shouldn’t we expect some introspection of B-schools on what went wrong?

The trouble is that B-schools in India, or even elsewhere, tend to consider themselves beyond reproach. Deans and professors dismiss the very notion of B-schools being in the dock. “This [collapse of America’s financial sector] had to happen,” says Pankaj Chandra, director, IIM-Bangalore, “Everybody was living beyond their means, and companies cashed in while the going was good—even if it led to their downfall. But expecting B-schools to factor in an ethics course just because people at the top are B-school products is a simplistic way of looking at it. Failure at the top has nothing to do with having an MBA. It has more to do with neo-classical economics and the world of modern finance.”

At the sprawling 100-acre campus of IIM-Bangalore, Sourav Mukherji, who teaches organisation
and strategy, says that he wasn’t awfully  shocked with the way Lehman Brothers went belly-up last September. “We knew it was coming,” he says, nonchalantly. So how did the good professor know what had eluded the best and brightest—as they were till just the other day—of Wall Street?

“Simple,” he replies, “We had our colleagues and alumni working at Lehman. So we knew there was trouble brewing, and the news as such of its collapse didn’t take us by surprise.” If that were the case, then perhaps the investment bank’s chief Richard Fuld knew what was coming even better. After all, he was a smart banker, well connected and equipped with that one asset that should have helped him sniff trouble and take pre-emptive action—an MBA from the famed Stern School of Business at New York University.

Ideally, skills picked up in B-school should have helped Fuld make sound judgment calls. But leading Lehman through its tumultuous years saw him gaining nothing more than notoriety.
From huge payouts (around Rs 2,000 crore between 1993 and 2007) to luxury homes all over America, and from winning a ‘Thief’ award for his obscene salary in the years before Lehman went bust to being featured on CNN’s 2008 list of top ten culprits, Fuld has left a trail of ‘blazing achievements’ few MBAs can ever rival.

The disgraced CEOs of AIG, General Motors and others have been equally dogged in rejecting any direct blame for what happened to the businesses under their charge. Apart from lame excuses,
they had no answers to the hard questions raised over the collapse of their empires.

So what good did all the Harvard and Wharton degrees do them? Did their strategies go beyond working out ways to wriggle out of sticky situations? “No,” says Partha Mohanram, an associate professor of business at the prestigious Columbia Business School. “Human values are not necessarily amplified in B-schools. Having said that, let me tell you that before the current financial crisis, there was the accounting crisis which took its toll on many firms, with some of them being notable names. Greed and ambition are innate characteristics, and at the same time, you don’t pick up ethics in B-school. You either have it or you don’t.”

So, there’s no Ethics 101 taught at B-schools. Does that mean that these brainbox institutions
have been busy sharpening the strategic skills of rogues and thereby helping them reach higher levels of roguery? “It’s an unfair question,” retorts Rajesh Chakrabarti, assistant professor
of finance at Indian School of Business (ISB), Hyderabad, “How do you measure honesty?
Unless there’s a flagrant violation, it’s difficult to make out who’s honest.” Could being less conscientious, perhaps, lead one to take more risks? “Life is about taking risks,” he snaps. “It’s not our job to tell people how risk averse they should be. But we try and educate them on the outcome of taking risks.”

It’s a view echoed by professionals as well. Abhay Havaldar, managing director of General Atlantic Partners India, a private equity firm, also asserts that it’s not a B-school problem. “The recent
failure of companies has more to do with lack of judgment,” he says, “That’s why we rate good judgment higher than academics. And good judgment usually comes from experience more than anything else.”

Yet, something is astir on a few B-school campuses. While most deans shrug their shoulders and carry on with their tried-and-tested teaching models, there are some like Jeffrey Pfeffer of the Graduate School of Business at Stanford University, who are calling for sweeping changes in curriculum. In his recent paper, ‘Leadership Development in Business Schools: An Agenda for Change’, he argues that although one-third of all CEOs in the US hold an MBA degree, their success isn’t guaranteed by that qualification.

Surprisingly, research shows that having an MBA doesn’t necessarily mean better salaries, and a degree from a prestigious rather than unfancied B-school does not result in better performance
at the firm level. ‘Schools need to measure not just the starting salaries of their graduates but outcomes that are proximately related to their stated mission of leadership development,’ says the paper, ‘Based on the results of such measurements, schools need to learn what seems to be working well and what is working less well and adjust their activities accordingly. They should emphasize leadership development in their marketing to prospective students and in how they brand themselves. Organizational identities matter and if leadership development is a critical part of the mission of business schools, it needs to be a more central part of the schools’ identity.’

Although India has been relatively unaffected by the global financial crisis, Indian B-school students seem almost blasé about it. At Narsee Monjee Institute of Management Studies (NMIMS), a leading B-school in Mumbai, it’s life as usual for students—classes, girlfriends and banter over endless cups of coffee. Why a management degree? We ask Hiten Shah, a final year student at NMIMS. “To get a good job!” Easy. After that? “Might end up as a CEO.” End up? Is he even aware of the global financial mess? “I know a bit about it,” he shrugs. Does he think CEOs are the culprits? “More than CEOs, the government is also to be blamed. B-schools teach you the right things, but when you move on, you make your own calls.” Indeed.

SP Jain Institute of Management, another B-school in Mumbai, is among those taking the crisis of capitalism even more seriously. It has recently started a course on business ethics, besides sending students to NGOs rather than big MNCs for their summer internships. “It helps sensitise our students to the real world,” says Pallavi Modi, associate professor at the school, “We realise the importance of imparting ethics to our students. After all, what led to the downfall of investment banks was a blend of financial engineering and leveraging. As long as the going was good, there was no end to being imaginative.”

It goes without saying that B-schools have immense influence within business circles, and they should be doing more than just running an optional course on business ethics. Maybe, for a start they could spare students those tiresome case studies and make them read The Rise and Fall of The Third Reich by William L Shirer, and House of Cards, a William Cohan book on Bear Stearns, or watch The Match King, a 1932 movie based on the rise and fall of the Swedish safety match tycoon Ivar Kreuger. Or perhaps anything relevant on George W Bush, the first MBA ever to hold the world’s most powerful office.
 

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