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Ajit Balakrishnan: B-schools and their discontents

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On the face of it, times have never been as good for management schools worldwide as they are now. Their graduates command higher starting salaries than those from any other discipline; members of their faculty are asked to man government policy committees and serve on corporate boards; in media rankings of higher education institutions, they figure at the top of the list. What, then, explains the recent spate of books by management school professors, with titles like From Higher Aims to Hired Hands and Rethinking the MBA? The first book is by and the other one by Srikant Datar, and Patrick Cullen. Since all these authors were professors at Harvard Business School at the time of writing this book, they are worth a careful hearing.

Professor Khurana says top business schools, or B-schools, are “riddled with contradictions”. Professors are hired and promoted on the basis of “discipline-oriented research that ... has little or no bearing on the practice of management”. As a consequence, they have lost their “cultural authority” over students, and faculty and students no longer identify with each other. Professor Khurana traces this unfortunate situation to the 1980s, which saw the abandoning of “managerialism” — the theory that managers are “science- based professionals” whose combination of the mastery of specific knowledge and an adherence to specific codes of conduct prepares them for the role of a “general manager”.

The rise of “shareholder capitalism” in the 1980s, first in the US and the UK, which then spread to the rest of the world, changed the role assigned to managers. Under this new regime, the primary job of a corporate executive was to achieve the best possible financial results. From this followed the so-called “principal agent” theory of the firm — in which the manager, instead of being responsible to multiple stakeholders (employees, customers, society, etc), was now supposed to be an “agent” acting for one “principal”, the shareholders.

In the meantime, because of the tireless efforts of the Ford Foundation, US business school professors were driving in the opposite direction — focusing on research using disciplines such as economics, sociology and psychology, and publishing their work in journals edited and reviewed by their peers. The work they produced, in time, became so narrow and specialised that it was, Professor Khurana says, “of little value for practitioners”. The combination of these two factors – the relegation of the professional manager to being merely an agent focused on maximising shareholder value, and the faculty’s single-minded focus on research – is, he says, what riddles with contradictions, thus undermining their role.

Professor describes a similar paradox inside management schools. Faculty members, to win their professional reputations, pursue rigorous research — which often means producing narrowly-focused research, which has little relevance to the real-world problems that managers face. He points out that best-selling management books and influential management ideas nowadays come increasingly from practising managers or management consultants, and not from professors in management schools. Faculty members and business managers, he says, have become “two largely separate, independent communities”. In turn, those who graduate from B-schools possess and are adept at analysing problems, but know little about the art and craft of implementing solutions. He believes there is an urgent need to redesign business school curricula and find a breed of faculty that is comfortable and adept at teaching in a multidisciplinary curriculum framework.

Both Professor Khurana and Professor Datar point out that there may be larger factors at play. The success of B-schools worldwide has been predicated on the investment banking, private equity and management consulting industries’ willingness to offer their graduates high-paying jobs. In the world’s top B-schools, these industries account for 40 to 60 per cent of all placements. (Incidentally, this is also true of the Indian Institutes of Management.) These industries have boomed after the deregulation in the US financial services industry in the 1980s. The global financial crisis of 2008, says Professor Datar, may mark a turning point for these industries: “The large pay premiums in the financial sector are predicted to decrease ... and return to more equitable levels once financial services firms ... become more tightly regulated and institute more prudent approaches to risk management.”

The world’s top B-schools already realise this and are consequently trying to attract recruiters from a more diverse range of industries. B-schools may “no longer be able to provide guaranteed access” to secure well-paying jobs in fields like finance. This is why Professor Datar believes business schools are at a crossroads and quotes French poet Paul Valery: “The trouble with our times is that the future is not what it used to be.”


 

ajitb@rediffmail.com  

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Ajit Balakrishnan: B-schools and their discontents

On the face of it, times have never been as good for management schools worldwide as they are now. Their graduates command higher starting salaries than those from any other discipline; members of their faculty are asked to man government policy committees and serve on corporate boards; in media rankings of higher education institutions, they figure at the top of the list.

On the face of it, times have never been as good for management schools worldwide as they are now. Their graduates command higher starting salaries than those from any other discipline; members of their faculty are asked to man government policy committees and serve on corporate boards; in media rankings of higher education institutions, they figure at the top of the list. What, then, explains the recent spate of books by management school professors, with titles like From Higher Aims to Hired Hands and Rethinking the MBA? The first book is by and the other one by Srikant Datar, and Patrick Cullen. Since all these authors were professors at Harvard Business School at the time of writing this book, they are worth a careful hearing.

Professor Khurana says top business schools, or B-schools, are “riddled with contradictions”. Professors are hired and promoted on the basis of “discipline-oriented research that ... has little or no bearing on the practice of management”. As a consequence, they have lost their “cultural authority” over students, and faculty and students no longer identify with each other. Professor Khurana traces this unfortunate situation to the 1980s, which saw the abandoning of “managerialism” — the theory that managers are “science- based professionals” whose combination of the mastery of specific knowledge and an adherence to specific codes of conduct prepares them for the role of a “general manager”.

The rise of “shareholder capitalism” in the 1980s, first in the US and the UK, which then spread to the rest of the world, changed the role assigned to managers. Under this new regime, the primary job of a corporate executive was to achieve the best possible financial results. From this followed the so-called “principal agent” theory of the firm — in which the manager, instead of being responsible to multiple stakeholders (employees, customers, society, etc), was now supposed to be an “agent” acting for one “principal”, the shareholders.

In the meantime, because of the tireless efforts of the Ford Foundation, US business school professors were driving in the opposite direction — focusing on research using disciplines such as economics, sociology and psychology, and publishing their work in journals edited and reviewed by their peers. The work they produced, in time, became so narrow and specialised that it was, Professor Khurana says, “of little value for practitioners”. The combination of these two factors – the relegation of the professional manager to being merely an agent focused on maximising shareholder value, and the faculty’s single-minded focus on research – is, he says, what riddles with contradictions, thus undermining their role.

Professor describes a similar paradox inside management schools. Faculty members, to win their professional reputations, pursue rigorous research — which often means producing narrowly-focused research, which has little relevance to the real-world problems that managers face. He points out that best-selling management books and influential management ideas nowadays come increasingly from practising managers or management consultants, and not from professors in management schools. Faculty members and business managers, he says, have become “two largely separate, independent communities”. In turn, those who graduate from B-schools possess and are adept at analysing problems, but know little about the art and craft of implementing solutions. He believes there is an urgent need to redesign business school curricula and find a breed of faculty that is comfortable and adept at teaching in a multidisciplinary curriculum framework.

Both Professor Khurana and Professor Datar point out that there may be larger factors at play. The success of B-schools worldwide has been predicated on the investment banking, private equity and management consulting industries’ willingness to offer their graduates high-paying jobs. In the world’s top B-schools, these industries account for 40 to 60 per cent of all placements. (Incidentally, this is also true of the Indian Institutes of Management.) These industries have boomed after the deregulation in the US financial services industry in the 1980s. The global financial crisis of 2008, says Professor Datar, may mark a turning point for these industries: “The large pay premiums in the financial sector are predicted to decrease ... and return to more equitable levels once financial services firms ... become more tightly regulated and institute more prudent approaches to risk management.”

The world’s top B-schools already realise this and are consequently trying to attract recruiters from a more diverse range of industries. B-schools may “no longer be able to provide guaranteed access” to secure well-paying jobs in fields like finance. This is why Professor Datar believes business schools are at a crossroads and quotes French poet Paul Valery: “The trouble with our times is that the future is not what it used to be.”


 

ajitb@rediffmail.com  

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