[or looking at it differently, can future MBA programs protect us from the economic turmoil that we are now suffering?]
The majority of my MBA was undertaken during booming economic times, however with a constant uncertainty hanging over our heads at that time: “What do global trade imbalances mean?”.
Now, in the midst of a global economic crisis numerous commentators are asking the question “Did MBA programs develop greedy managers, who put growth ahead of stability?”, or variants on this theme. Global trade imbalances still exist (with no clearer insight into how these will be resolved), but discussion of these seems to be parked while we work our way out of the recession.
My hypothesis is that MBA programs did play a role in the recent economic development, due however to actions that were not taken (and were not foreseen by anyone in the market), rather than specific actions that were taken.
I believe that the underlying materials used in a MBA (which tend to focus on ‘value maximisation’ as a core principle) are not to blame. I will not attempt to open the discussion of the long-term success or appropriateness of such capitalist theories, since this seems to me to be the very foundation of most MBA courses, but rather the style of the teaching, and whether within an MBA type program recent emphasis has tended towards the encouragement of greed.
I also believe that it is not the structure of MBA programs themselves that encouraged greed, but rather the underlying enthusiasm and ambition of MBA candidates. MBAs themselves pooled such desire (and talent) that had the power to cause greed. Poorly regulated markets meant that (relatively) vast numbers of educated, ambitious managers entering the market would attempt to capture whatever gains their newly gained education and contacts could bring them.
Case studies often highlighted one of two scenarios – corporate success or corporate failures, where success or failure was usually defined as the result of actions taken by management, typically with a short-term focus such that such management teams could be observed and appraised on their outcomes, and correspondingly have motivation and reward linked to these outcomes. This was largely driven by the way in which markets often appraise financial performance (eg, on a quarterly reporting basis).
Ethics classes were included in most recent MBA programs (mine too), but in hindsight this sometimes seemed to be the result of ‘corporate governance’ being a hot topic than a deep desire to avoid economical downturns. Perhaps that highlights the biggest weakness of previous MBA programs, and the market in general – an underlying disbelief (arrogance?) that doing the same as before would continue to promote growth and if we learned our lessons, we’d not have to fear the future (apart from the trade imbalance question hanging over out heads, for which I have not yet heard a guaranteed long-term solution).
As we continue to learn more about financial markets, there are a number of changes that I believe could enhance MBA programs’ own governance (eg, more effective ‘ethics’ training, or coaching of ‘professors’ to adjust underlying theme of discussions, or have new classes been included in the curriculum , such as ‘Sustainable development’, ‘Understanding economic cycles’, etc.).
But the biggest challenge will likely not be implementing such steps, but rather keeping one-step ahead of the economy, and being aware of whatever trends need to be closely regulated in future to avoid future challenges (ie, knowing what you don’t know, rather than just knowing what you do know). Unless future managers are willing to ‘invest now to avoid future pain’, then we will likely suffer the same fate again. If human nature cannot be relied upon to produce such caution, then I see the only solution being increased regulation, with sufficient authority and which continually evolves to respond to new market developments. How that can be done could certainly be the topic of a lively MBA discussion.
Do you have a view on this topic, either as a current or former MBA student, or as an outside observer?