It’s mostly
coincidence, but the MBA degree is at something of a crossroads entering
its second century. A short list of big questions might begin as
follows:
-What is the place (pun intended) of a two-year resident MBA in a global, Internet era?
-What is the
market need for general managers versus specialists in finance, supply
chains, accounting, or HR, for example? How does market supply align
with this need?
-What is the cost and revenue structure for an MBA program outside the elite tier?
-How can business degrees prepare graduates for a highly dynamic, uncertain commercial environment?
-What do and should MBAs know about the regulatory environments in which their businesses are situated?
-What is and should be the relationship between managerial scholarship and commercial practice?
-What is the
relationship of functional silos to modern business practice? Marketers
need to know a fair bit of technology to do mobile ad targeting, for
example, as do equities traders in the age of algorithmic bots.
Navigating the aforementioned regulatory landscape, meanwhile, draws on
an entirely different range of skills generally not covered in
management or negotiation classes. Is the MBA/JD the degree of choice
here?
-How can and
should U.S. business schools teach ethics, which are highly
culture-specific, to students from many home countries who will likely
work in still another country/culture soon after graduation?
2015 is not
happening in a vacuum, of course. The first graduate school of business,
Tuck, offered the Master of Science in Commerce after its founding in
1900. (Recall that the functionally organized corporation was at the
time a fairly recent phenomenon: railroads split ownership from
management in part because of the huge capital requirements, and the
vast distances involved meant that managers often lacked direct
visibility of workers. Thus, in broad strokes, the late 19th century
began the age of policies and procedures, and the idea of a middle
manager.) Harvard launched its MBA program eight years after Dartmouth,
with significant help from such scientific management exponents as
Frederick Winslow Taylor. Enrollments surged: Harvard alone grew from 80
students to nearly 1100 in 22 years. Unsurprisingly, other universities
began offering the degree: Northwestern in 1920, Michigan in 1924,
Stanford in the late 1920s, Chicago in 1935, UNC in 1952. According to
the office of the university archivist, Penn State began offering the
MBA in 1959.
1959 was also
the year two different reports, commissioned by industrialists’
foundations — Ford and Carnegie — reoriented American graduate business
education. The more strongly worded of the two, by Robert Aaron Gordon
and James Edwin Howell, systematically attacked the entire institution
of the MBA as it then stood: students were weak, curricula were sloppily
constructed, and faculty taught with little academic rigor at many
schools.
The
Gordon-Howell report quickly influenced accreditation and related
discussions. New courses on many campuses covering strategy were at the
forefront of a larger emphasis on quantitative methods and theory. What
was not well addressed, according to many critics, was the practice of
management itself. Balancing theory and practice has never been simple
in business — as compared to medicine, companies do not conduct clinical
trials parallel to those of drugs or procedures.
Entrepreneurship
has proven particularly hard to teach: on any list of great
business-launchers, few hold the MBA. None of the following hold the
degree: Paul Allen, Jeff Bezos, Sergei Brin, Warren Buffett, Michael
Dell, Larry Ellison, Bill Gates, Jim Goodnight (SAS Institute), Bill
Hewlett and David Packard, Steve Jobs, Elon Musk, Ken Olsen (Digital
Equipment), Pierre Omidyar (eBay), Larry Page, Sam Walton, and Mark
Zuckerberg.
MBAs can of
course do quite well for themselves, as Michael Bloomberg and Nike’s
Phil Knight (a 4:10 miler at Oregon 50 years ago) prove. Still, there
appears to be a negative correlation between academic achievement,
particularly in the MBA, and entrepreneurial accomplishment. Ten of the
top sixteen richest self-made people in the world did not finish college
or dropped out of grad school: Gates, Ellison, Zuckerberg, Sheldon
Adelson (casinos), Page and Brin, Carl Icahn, Steve Ballmer, Harold Hamm
(oil and gas at Continental Resources), and Dell.
Apart from
not being able to produce mega-entrepreneurs, what of the more
real-world challenges to MBA programs noted above? In reverse order, a
few notes on each:
-Ethics has
never been an easy topic to include in a business curriculum, but as the
world’s top schools continue to get more global, trying to say anything
stringent encounters the reality of cultural diversity. Sanctions
against bribery, greed, ostentation, money-lending (with interest), and
constraints on the role of women and ethic minorities are impossible to
align; even the U.S., Canada, and England do some things very
differently despite many similarities. The ethical lapses of the early
2000s — at Waste Management, Enron, Adelphia, and HealthSouth, among
many others — put some focus on business schools (along with accounting
firms) as agents of better behavior. In light of recent scandals at
Toyota, Volkswagen, and GM, to name only the automakers, the challenge
for MBA curricula does not appear to be any less daunting than in the
crisis years of 2002 or thereabouts.
-Teaching
students to work across functions and to deal with regulatory bounds and
procedures continues to stymie MBA programs. We teach an integrative
consulting-project exercise in the 4th semester; Harvard teaches
something similar across the whole first year. Numerous programs have
moved the project-based course back and forth, with equally compelling
logic for early and late inclusion. Seeing how messy real problems are
prepares students for the functional courses, while having some base of
knowledge before being turned loose on a client also has merit. No one
approach has emerged as a winner from the many variations being used.
-Managerial
theory and practice remain difficult both to do and to convey more than a
half-century after Gordon and Howell. Scholarship that gets published
tends not to come from practitioners (Clayton Christensen is a notable
exception, having run a company before earning his doctorate at
Harvard), while managers and executives remain understandably wary of
controlled experiments on live business units. Professors’ contributions
to the semi-academic journals that practicing businesspeople might read
— Harvard Business Review, Sloan Management Review, California
Management Review, and the like — usually do not count heavily (if at
all) toward tenure or promotion. For their part, many managers tell me
they find little of value in the A-list journals held in academic
esteem. Suffice it to say there remain many opportunities to improve the
dialogue between the factory or office and the academy.
-How can MBA
programs teach resiliency, creativity, willingness to challenge
convention, and the other traits required in a particularly turbulent
business landscape? Marc Benioff, the CEO of Salesforce.com, is far from
a disinterested observer, but it is difficult to disagree with his
recent contention that essentially every industry is in the midst of or
about to confront fundamental change. Whether from fracking, Uber,
mobile platforms, Amazon, or demographics, every business (and
governmental) unit I can see is hard-pressed to do things “the way we’ve
always done it around here.”
An
entrepreneur (whose masters was in arts management) told me a cautionary
tale back in the dot-com boom. “We’re a startup,” he said. “Strategy
for us isn’t chess, it’s poker: we have to bluff because we can’t
compete with the big guys at scale, with equal playing pieces on a
defined board with agreed-upon rules. We faked features in the demo we
couldn’t deliver. We have had months where we couldn’t make payroll.
We’ve reinvented our business model three times. That’s the reality. We
hired a bunch of top-school MBAs to try to compete better, and had to
let them all go. Why? These men and women all had good grades in high
school. They cleared the next hurdle and got into a good college, then
positioned themselves to deliver the right answers, earn As, and get
into Ivy League b-schools. There it was more of the same: high achievers
got the top internships at the I-banks and consulting firms. They’ve
always been rewarded for getting the right answer. Now we have all this
chaos and instability. None of them can handle it; they keep wanting to
know the answer and there isn’t one.”
Fifteen years
later, I can’t see that the incentive structure has changed all that
much. Doing well in controlled environments seems to be
counter-intuitive preparation for radical reinvention, new rules,
unconventional insurgencies, and broken profit models.
-This
atmosphere of disruption is affecting MBA programs themselves. Getting
the costs, revenues, and rankings to acceptable levels has never been
more challenging. Last year Wake Forest shut down its two-year resident
MBA program, ranked in the top 50 in the US, as did Thunderbird, a
pioneer in the internationally-oriented masters. In the past 5 years,
however, 30 new schools earned AACSB accreditation in the U.S.; 96
others had joined the club in the preceding decade. Thus competition for
students, faculty, and resources is intense, and the international
nature of the MBA means that foreign competition is accelerating even
faster than those 126 newly-accredited U.S. institutions would suggest:
Poets & Quants states in a recent article that there are 50% more
MBAs being earned today than ten years ago, so filling those classes is a
challenging job. Marketing efforts to reach prospective MBA students
are in something of an arms race, so many schools are cheered by a
reported uptick in applications. Unfortunately, nobody can know if more
applications is a result of more applications per student or more
students jumping into the pool. Amid both increased competition and
rising costs (health care continues to outpace other expenses),
increasing tuition is a non-starter in most circumstances, so schools
are confronting the need for creative alternatives if they are to avoid
the approach taken at Wake Forest.
-An MBA is by
definition something of a generalist, even with a curricular focus area
in one or two functions. Meanwhile specialized business masters, in
finance, accounting, marketing, or whatever, are on the rise. I have
undergrads ask me about the relative merits, and each has its place. For
many mid-career professionals, having an alternative to the generalist
approach is attractive. Our supply-chain masters students, for example,
never take courses in HR, real estate, finance, or general management:
all the courses presuppose one business area rather than a variety. With
years or decades already invested in that function, these students did
the career calculus and concluded that the generalist approach did not
make sense for them. They are far from alone, given the national trends.
-Thus we end
where we began: what is the place of a 2-year, resident MBA? Each of
those variables is getting interesting. Duration: INSEAD offers a
10-month program; one-year options are not uncommon. Locus: On-line MBAs
are being offered all over the world, executive (weekend) MBAs allow
students to keep their jobs and their lodging stable, and hybrids like
the program at Carnegie Mellon combine multiple delivery methods.
Content: As we have seen, different masters degrees in business are
being offered in response to market needs, including for more depth of
coverage: if one considers the complexity of contemporary finance, or
supply chains, or accounting, having only a handful of courses within a
generalist curriculum may not provide adequate preparation for the job’s
primary duties, while the breadth of coverage has minimal compensatory
value.
Numerous
observers, including The Economist, predict major changes to the MBA
market, particularly outside the top 20 or so schools. Today’s junior
faculty joining the ranks will be in for a wild ride in the coming
decades. As with so many other areas, as Ray Kurzweil argues, the rate
of change is accelerating: the world is changing faster, faster, and
business education will likely change more in the next 20 years than in
the first century. Happy 100th birthday, indeed.