Category Archives: Business Schools

Economist on the Job Market

Several weeks ago the Economist ran a special on the job market for MBA graduates (see the first article in the series). According to the Economist, the job market for MBA graduates from the class of 2010 has been much better than feared.

I, like many others, thought that the job market for MBA grads would be worse in 2010 than 2009 (see Update on the Job Market, Visit to the FT, or Crisis for MBA Grads). But this was before the unprecedented fiscal and monetary stimulus, and the bailout of the banks.

The Economist tagline summarizes the current situation nicely:

Firms are starting to hire again, but the heady days for MBA’s are not yet back.

Viewed through the lens of MBA hiring, the unprecedented level of economic support provided by the Fed/Treasury seems to have been somewhat of a success. Students are getting jobs again, not quite at the rate that they were two years ago, …but certainly better than in 2009.

In the past, consulting and finance firms did by far the most hiring. The recession hit them both, but while recruitment by consultancies is almost back to the pre-recession level, finance positions have dried up.

So MBAs are looking for alternative employers, including unfashionable organisations that were neglected in the past.

This is consistent with my observations of the current job market for MBA grads. Finance jobs are not abundant, but some financial institutions have slowly started hiring again. With the finance industry largely (though not completely) shut, consultancies seem to be the most desired employer in the current environment. And I too have spoken with many students who have been more willing than in years past to expand their search to general management, marketing, accounting, and other non-finance fields. The MBA students I have spoken with have even been entertaining offers from governmental agencies.

And given likely regulatory changes in the finance industry, I expect this trend to continue in the coming years.

Interestingly however, while the job market for MBA grads has improved markedly from last year at this time, the market for college and high school grads remains in crisis (see Teens Suffering Most and College Grads Flood Labor Market).

From the Time article:

The job market is tough for everyone. But this recession has become a jobs disaster for 16-to-19-year-olds. “The numbers are incredible,” says Andrew Sum, head of the Center for Labor Market Studies at Northeastern University and a nationally recognized expert on teen employment. “Proportionally, more kids have lost jobs in the past few years than the entire country lost in the Great Depression.”

The retail and construction sectors, which are usually key employers of young workers, have been among the hardest hit. Manufacturing, another typical job source for those lacking a higher education or even a high school degree, is not the force in the economy it once was. The result: the teen unemployment rate neared 28% in October before falling slightly the next month. That’s the highest ever recorded since the Federal Government began tracking it, and it’s almost triple the 10% rate for all workers. Teens make up a relatively small portion of the 139 million people employed in the U.S., and by most accounts they would be better off staying in school than entering the workforce.

But things only look slightly brighter for those with an undergraduate degree. According to Bloomberg:

Schools…will soon begin sending a wave of more than 1.6 million men and women with bachelor’s degrees into a labor market with a 9.9 percent jobless rate, according to the Education and Labor departments.

The graduates’ plight has been the subject of high-level discussions within President Barack Obama’s administration, which so far has concluded the best response is to focus on reviving overall employment and bolstering assistance for higher education, said Peter Orszag, the White House budget director.

[But] Unemployment among people under 25 years old was 19.6 percent in April, the highest level since the Labor Department began tracking the data in 1948.

Taken together, I think these stylized facts speak to the gulf in economic recovery between Main Street and Wall Street.

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Research Relevance Revisited

Every couple of years, the popular press muses whether the research conducted at Business Schools has any practical relevance. It looks like it’s time again (see Value of B-School Research).

According to the Economist:

Most MBA students will never read an issue of Administrative Science Quarterly, a well-regarded business-research journal…A recent issue included “Forging an Identity: An Insider-Outsider Study of Processes Involved in the Formation of Organisational Identity” and “Socioemotional Wealth and Corporate Responses to Institutional Pressures: Do Family Firms Pollute Less?”

Don’t worry if you can’t make heads or tails of the research from the titles. Truth be told, you’re not supposed to, and sometimes, neither can I. But I’m ok with that.

Anyhow,

If vapid bestsellers like “Who Moved My Cheese?” are at one end of the spectrum of management writing, then the typical ASQ article is resolutely at the other. The task of a business-school professor is to meet students somewhere in the middle. Over the last decade, there has been a chorus of critics proclaiming that they have not done a good enough job.

This year’s Sumantra Ghoshal Conference, held at London Business School, debated whether strategy research has become irrelevant to the practice of management. The late Mr Ghoshal published a paper in 2005 castigating business schools for heaping “bad theory” on their students.

I have attended several of the Ghoshal Conferences and have written about my experiences (see On Managerial Relevance, Initial Thoughts from LBS Conference, and Final Thoughts from LBS Conference). I was unable to attend the conference this year due to scheduling conflicts, but I still think the conference is a wholly worthwhile endeavor, …and I look forward to returning in coming years.

But back to the Economist article:

…Warren Bennis and James O’Toole, both at the University of Southern California, published an article in the Harvard Business Review [similarly] criticising MBA programmes for paying too much attention to “scientific” research and not enough to what current and future managers actually needed. Business schools, they argued, would be better off acting more like their professional counterparts, such as medical or law schools, nurturing skilled practitioners as well as frequent publishers.

But since, according to Bennis and O’Toole, Business Schools don’t act like medical or law schools, the question then becomes:

…should a prospective student worry about a faculty’s research prowess when applying to a school?

I have argued YES (see Should Students Care About Research, Impractically Relevant and On Managerial Relevance).

Although I understand (and even agree with) some of the criticisms of Business School research, I believe current, and future, executives can benefit from being exposed to research emanating from Business Schools.

And it’s not only research exposure that students receive in the classroom. Many professors are imparting critical-thinking skills by applying that research to real-world problems. For example, in Impractically Relevant I wrote:

I believe that we, as professors, …play an important role in bringing current research into the classroom. It is up to us to expose students to state-of-the art research, to discuss the important questions of the field, to synthesize the existing findings, to explain those findings in an accessible way, to impart received wisdom, to identify remaining gaps and unanswered questions, and to honestly acknowledge the shortcomings of our work. If we can do all these things, we (and our students) gain a better appreciation for the complexities of the real world. In fact, I believe so strongly in this charge that I feel that if we are not bringing research into the classroom, then we are failing our students. We owe them the best education possible, and it doesn’t mean spoon-feeding them “the answers”, but rather, engaging them in intellectually stimulating discourse and debate so that they can come to their own (informed) conclusions.

In addition to our function as translators, dissemenators, and synthesizers of scientific knowledge inside the classroom:

We also impact practice in other ways too. For example, hardly a day goes by that I see a newspaper without a quote from business school faculty. We are constantly asked to give our opinions on current events. What’s more, business school faculty are often asked to inform policy – whether  by proffering opinions to politicians or testifying on business practice. In this sense then, we help shape the game and inform the agenda – helping decide which issues are important and which are not.

[Further], ask the folks from the investment community and hedge fund universe if business school professors have had any impact on their practice. Ask government employees at the Justice Department whether business school economists have had any impact on the cases they bring and/or the outcomes of those cases. Ask CPA’s whether accounting faculty have had an impact on how they practice their craft.Although the full impact of our research on practice varies depending upon the business school discipline (accounting, finance, economics, marketing, strategy, organizational behavior, operations management, etc.), I’m sure I could find an example of some profound impact that an academician from each discipline has had on practice.

So my reaction to this article is consistent with that which I’ve expressed in the past: I think the stories of our demise have been greatly exaggerated. I think we do have a profound influence on practice, although not always in ways that are widely recognized, and in ways that are often difficult to quantify.

As I concluded several years ago:

Do I believe that business schools  ought to be relevant? Absolutely. Do I believe that rigorous research serves an important role in our field? Absolutely. Do I think that we are failing in our goals to be both relevant and rigorous?

Not necessarily.

Although I will be the first to acknowledge that there is room for improvement, so far, I continue to believe that research-oriented Business Schools are providing a public good.

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MBA Under Siege

Fordham University hosted the W. Edwards Deming Memorial Conference last week at which the participants addressed the future of the MBA degree (see MBA Under Siege: Reimagining Management Education). The speakers who presented were truly impressive scholars who have been among some of the most vocal critics of the MBA degree. Given my interest in the business of Business Schools (see, for example, Op Ed on Business Schools and the Financial Crisis), I was extremely disappointed that I was not able to attend.

Thankfully, one of my colleagues, Seth Freeman, was there. He was kind enough to share his notes from the conference. They can be found below the break.

Seth has asked me to make clear that with the exception of his thoughts that appear in parentheses below, his account of the events describe the panelists’ perspectives as they were conveyed, not his own.

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The Tragedy of B-Schools and the Danger of Lost Legitimacy

The sense of the conference was that B-schools bear significant responsibility for the 2008 financial crisis by emphasizing a myopic and selfish approach to business crystallized by Agency theory.

This emphasis, and the damage it has done to the economy, has called the very legitimacy of the MBA into question, several panelists argued.

B-Schools Train Loose Individuals; the Tragedy of Toyota

Rakesh Khurana,  Professor of Leadership Development at Harvard Business School, warned that such a perspective, has bred a generation of ‘Loose Individuals’ who do not feel constrained by social norms of fairness or equity; who lack any sense of moral responsibility, and for whom the very idea of a larger duty to community and society seems alien or communistic, a sentiment most panelists (though not all) amplified.

Andrea Garbor, Chair of Business Journalism, Baruch College, noted that Toyota recently admitted the cost of this myopic and self-interested approach. Until recently, it was  a very profitable firm that made great cars led by old-school process experts who applied the systems principles of Edward Deming. But it’s become a troubled, highly criticized firm led by MBAs who myopically focused on finance and quick growth.

A Norm of Wall Street Arrogance?

Several panelists noted that an ‘MBA’ has come to mean a shallow, self-seeking, and arrogant person. Khurana reported that student-led studies at Harvard Business School found that graduating MBAs mostly felt less competent after going through the program, unless they fit into the subculture of white, male, American born New York investment bank financial types.

Kill the MBA

Henry Mintzberg, Professor of Management Studies at McGill, argued that the MBA promises something it simply cannot deliver and that it actually makes business worse by falsely encouraging 25 year-olds to think they can manage anything. Management, he said, is a practice, not a science or profession- a practice you can only nurture once someone is out there doing it.  So teaching inexperienced students is a waste of time, or worse.

Mintzberg also challenged the case method for the pretense that one can speak insightfully about a business after reading facts for a couple of hours, and that it overlooks the point that gathering facts is one of the key tasks of management.

He described a program he leads where managers largely learn by talking with each other around tables in class about how their work interacts with their training.

He argued for reform in several ways:

  1. Shift classroom teaching from a ‘sage on stage’ approach to a ‘guide on the side’ approach, and help managers learn from each other mainly
  2. Do not attempt to teach 25 year-olds how to manage.
  3. Offer different training for 25 year-olds (who know little) than you offer to 40 year-olds (who know a lot and best learn from each other)
  4. Replace the MBA with the more truthful ‘Master of Managerial Science’ and ‘Master of Science in Business’ degrees. Or keep it but stop calling it ‘management’ training, since it’s mostly about specialized training in finance and economics and not administration.
  5. Look to second tier English business schools for truly exciting, innovative programs and courses.

Authentic Leadership

Michael Jensen, Emeritus professor at HBS,  spoke about his effort to go beyond the Agency theory he championed and to teach Authentic Leadership at Harvard, an approach which emphasizes the centrality of Integrity, Personal Authenticity, and Passionate Commitment.

(Ironically, Prof. Jensen did not respond to the claim by other panelists that his past advocacy for Agency theory may have hurt our society. And he was hard-pressed to offer examples of leaders who rose to the top following the principles he advocates now.)

Beyond Agency Theory- Greater Emphasis on Community, Society, Ethics…Even Theatre Arts

Most emphasized the need to move away from a myopic and self-defeating focus on narrow personal self-interest emphasized by economics and finance, and the need to train students to see the effects of their decisions on other stakeholders. Ed Freeman, a Professor of Business Administration, at Darden, though a self-described libertarian, shared this view with other panelists.

Several emphasized the need for stronger ethics training; others challenged the idea.

Several spoke of other changes to cultivate breadth, depth, and social awareness, arguing for inter-disciplinary training, combinations of design and business, liberal art education, even teaching B-school students to produce and act in plays.

MBA as Value Creator

Though few spoke positively about MBAs and B-Schools, some noted toward the end that B-School can and sometimes does even now cultivate socially aware, value creating leaders.

Change? It Will Likely Come from Outside Pressure

Change, several argued, will have to come from the outside, because even now, schools, deans, and even the AACSB have strong incentives to maintain the status quo.  Look for pressure from for-profit schools, corporate training programs, and recruiters who stop hiring MBAs.

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Interesting. Thanks for sharing Seth!

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