Greedy, bonus-chasing bankers, asset-inflating monetary authorities, and bubble-blowing politicians have all, with some justification, been blamed for the credit crunch. But perhaps we should pin it all on the MBAs, those impeccably trained young men and women, babbling jargon, and flashing Powerpoint presentations, who in the last decade have taken over the world’s leading banks, our biggest corporations, and increasingly government as well. Some MBA factories certainly seem to think so. Students at the most prestigious, the Harvard Business School, have launched the ‘MBA oath’, a managerial equivalent of the Hippocratic Oath, which tries to make sure the graduates don’t repeat many of the mistakes made over the past year. The mere fact the oath has been launched at all raises the question of how far the MBA can be blamed for the global economic crisis.
Certainly, many of those who steered our leading banks onto the rocks had received the best business education that money can buy. Andy Hornby, the head of HBOS when it collapsed, had been trained at Harvard Business School. Peter Wuffli, whose management of UBS was so reckless he practically bankrupted Switzerland, had been to that country’s most prestigious business school. Richard Fuld, chief of Lehman Brothers when it went pop, was another MBA. So were most of the Wall Street players who led the financial system into crisis last year. True, an MBA is just a stepping stone. But if a pilot school was resulting in that many crashes, we’d ask some tough questions about what was being taught. There’s no reason why business schools shouldn’t be subject to the same kind of criticism.
It’s not hard to see the flaws in their methods. Over the past 20 years, business schools have pushed a quasi-scientific approach to business that has turned out to be catastrophic. They have taken something that was essentially unknowable – risk – and persuaded a generation of bankers and managers that it could be easily quantified and traded away.
They failed to teach people about the whiplash of the business cycle, and bred an over-confidence in their methods that in many cases turned out to be fatal. The one thing most bankers needed to take to work was humility, but they weren’t learning that at business school. Worse, they have ramped up expectations unrealistically. Graduating from an elite business school won’t leave much change from £100,000. With those sorts of debts, students have little choice but to get on the banking bonus treadmill. There was a bubble of inflated pay-outs, private jets and lavish contracts at the top of business, and it started inside the MBA schools.
Even if it’s unfair to blame the MBA for the credit crunch, the course has become synonymous with a greedy, asset-stripping, bubble-inflating approach to management. It’s hardly surprising that at least some business schools think a re-balancing is needed. The oath is a start. You can read the whole thing at mbaoath.org, but it starts: “I will act with utmost integrity and pursue my work in an ethical manner… I will manage my enterprise in good faith, guarding against decisions and behaviour that advance my own narrow ambitions but harm the enterprise and the societies it serves.” It carries on through eight core principles.
There’s some recognition of past sins in there. Not many bankers could honestly say they’ve always put their company and the economy ahead of their own self-interest. Nor could every director say they’ve always presented their financial data with complete honesty, as the code will require them to do.
But it’s hard to escape suspicion that the pledge comes straight out of the textbook titled ‘How to Re-Brand a Tainted Product’. Most of the clauses look like the kind of guff you see in the corporate social responsibility pages of annual reports. It’s hard to take seriously a promise to “create sustainable economic, social, and environmental prosperity worldwide”. These are just words, designed to make the person reciting them feel good about themselves. The MBA courses need to change what they teach and how they teach it. There should be less emphasis on financial engineering, and more on real engineering; less focus on slick marketing, and more on building decent, good value products. They should drop the pretence that anyone with the right sort of MBA can be dropped into any company and run it properly, and put more emphasis on the enduring culture of a company that has been built up for decades. And they should cut fees so students weren’t so indebted that they have to work for an investment bank. And they should remind students that risk can never be eliminated in business, merely planned for; that the business cycle will always re-emerge, and catch out anyone who hasn’t prepared for it; that mergers and de-mergers are just a costly distraction from actually creating products; and that the best companies are built patiently over years by people who love the product, not assembled overnight according to a textbook. If a generation came out of business school equipped with some of those lessons, who knows, we might even avoid another credit crunch.