How Business Schools Have Failed Business

Business school deans and educational thought leaders are doing a lot of soul-searching concerning the role and culpability of graduate business schools in the economic downturn. Dean Robert Bruner of Darden on April 5  wrote on Twitter Controversy over the role of B-schools in the crisis. Did they warn strongly enough about the risks of toxic assets? Probably not. Joel Podolny, formerly a professor at  Harvard Business School  and Stanford Graduate School of Business and previous dean of Yales School of Management, asks Are Business Schools to Blame? He critiques schools for 1) Dividing the challenges of management and leadership in a dysfunctional way. 2) Communicating the idea that applicants should measure the MBA degrees benefit in terms of the additional salary they can earn. 3) Lacking contrition and failing to make changes in response to fallout from the crisis. My $.02: While #1 makes sense, I disagree with #2 and #3. Applicants should expect professional advancement from a professional degree and see if the degree will pay for itself. Basic business concept. Its a little too early for the programs to make meaningful changes in response to a crisis that really blew up in September. Steve  Kerr, former Chief Learning Officer at Goldman Sachs and at GE, disagrees vehemently in Dont Blame the Business Schools. Henry Mintzburg blasts the business schools (as usual) in Americas Monumental Failure of Management. Stefan Stern defends them in Why MBA bashing is unfair   President of Thunderbird Dr. à ngel Cabrera has been vocal in saying the business schools are culpable. Additionally, there are a slew of articles in the Harvard Business Review  about the responsibility of MBA programs for the financial crisis. I would like to highlight todays excellent piece on The Wall St. Journal editorial page by Dr. Michael Jacobs of UNCs Kenan Flagler School of Business entitled How Business Schools Have Failed Business. His main points: Misaligned and dysfunctional incentive programs rewarded short-term gain instead of long-term value creation. Most business schools do not systematically address compensation systems. Corporate boards were AWOL. Schools dont require courses in board structure, composition, and processes. Courses in ethics are not enough and are not the same as governance. The investment community failed to accurately evaluate risks. Jacobs argues that as the gulf between the provider and the user of capital widens, the risks involved with selecting and monitoring the participants in the portfolio increase.