It took only a few months, and now the search for culprits behind the current economic mess has arrived on campus. What caused the recession? America’s business schools. As the New York Times points out, some of the most prominent poster children for the crisis and bailout are financial sector leaders who learned their management chops at top-ranked MBA programs. Naturally the question arises: just what are these people teaching?
As someone who’s seen quite a lot of what business school professors focus on, I’m convinced that the curriculum is part of the solution, not the problem.
It still might be true that an MBA holder is more likely to focus too narrowly on investment returns–to the detriment of the greater good–than a non-MBA would. But it’s not what they’re learning that causes this, rather it’s who they are. I say this in light of a concept that is familiar to educated managers: self-selection bias.
Why is it, after all, that aspiring managers choose to earn an MBA? Sure, they may deplore their current knowledge deficit, having gained skills in only one business function and industry.
But whether that’s true or not, they’ve certainly figured out that the MBA offers an attractive return on investment. That payback can happen in different ways. The low-risk option is to enroll in a relatively inexpensive program on a part-time basis (especially when tuition reimbursement is available from one’s employer). A higher risk, higher return option is to enroll in a top-ranked school, quit your job, move your family and pay maximum tuition for a chance to earn an elite degree.
You see where I’m headed. The type of person who has the appetite for this second kind of risk-reward equation–plus the brains to excel in a rigorous academic setting–is the same type that Wall Street firms have been so eager to hire. The financial sector hasn’t valued people for what they learned in their top-tier business schools, but for the kind of intestinal fortitude that got them there, their willingness to make huge sacrifices, and the drive they have to attain that MBA, at nearly any cost.
That’s suggests a correlation between the MBA and the financial sector meltdown, but not causation. So does that let top MBA programs off the hook? Not at all. As B-schools consider what to teach and how to teach it, they need to keep this self-selection bias in mind.
When building an MBA program, a great B-school used to ask: What does the average manager need to become a great manager? Now the B-school has to ask: What does the average manager who’s motivated to enroll in a top-ranked MBA program need to become a great manager?
Suprio Ghatak is a finance professional with more than 27 years of experience in the field and professor at a leading business school at Mumbai, India. He has taught most of the finance subjects, management controls systems and business policy and strategy. He has presented research papers at various conferences in India, he is a Fellow Member of The Institute Of Chartered Accountants Of India and dreams to become a full-time writer one day.
Image credit, Get Entrepreneurial
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{ 5 comments… read them below or add one }
Hi Suprio,
The financial crisis did not happen because of MBA degrees. It happened because of unclear and incomplete regulation and the overriding factor was greed.
If Wall Street rewards only short-termism then such behavior becomes canon, MBA or not. Those who don’t toe the line are forced out.
The biggest reason for people doing MBA is because they cap out in their present job and feel an MBA would allow them to branch out to any industry (it is true).
As someone who had final admission from several IIMs and did not join, I never regretted that decision. Finally, I am moving on to a job that one would think requires an MBA. In that I will get my practical MBA without paying a penny for it.
Cheers!
Sandeep
Hi Suprio,
The financial crisis did not happen because of MBA degrees. It happened because of unclear and incomplete regulation and the overriding factor was greed.
If Wall Street rewards only short-termism then such behavior becomes canon, MBA or not. Those who don’t toe the line are forced out.
The biggest reason for people doing MBA is because they cap out in their present job and feel an MBA would allow them to branch out to any industry (it is true).
As someone who had final admission from several IIMs and did not join, I never regretted that decision. Finally, I am moving on to a job that one would think requires an MBA. In that I will get my practical MBA without paying a penny for it.
Cheers!
Sandeep
I should have added that MBA programs are mainly for networking. In a couple of courses students would be introduced to Organizational Psychology, Interpersonal Behavior, Leadership and Conflict Resolution. What can you learn in two years? No more than a passing knowledge!
The MBA programs in the US are changing their program to include classes on ethics. So it’s not that the financial sector meltdown will have no effect. A lot of people (you included) will make sure it does :)
I should have added that MBA programs are mainly for networking. In a couple of courses students would be introduced to Organizational Psychology, Interpersonal Behavior, Leadership and Conflict Resolution. What can you learn in two years? No more than a passing knowledge!
The MBA programs in the US are changing their program to include classes on ethics. So it’s not that the financial sector meltdown will have no effect. A lot of people (you included) will make sure it does :)
This post is really great, the information given is great
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