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Harvard MBA culture caused financial crisis





handfleisch
Very interesting in-depth report from Australian radio news on how the relatively new MBA culture helped cause, or is a main cause, of the financial crisis. Below is just the beginning but it is worth reading / listening to the whole thing

http://www.abc.net.au/rn/backgroundbriefing/stories/2009/2526727.htm

Quote:
Stephen Crittenden: As the unemployment queues grow and the bailouts continue, they're beginning to say that narcissists with Harvard MBAs killed Wall Street.

Hello from Stephen Crittenden, welcome to Background Briefing on ABC Radio National.

This week, we're taking a look at the business culture behind the financial meltdown and the kind of business education which shapes that culture.

This is a story that goes a lot further back than Lehman Brothers, or Fanny Mae and Freddy Mac, to the glory days when America's leading manufacturing companies were the envy of the world.

It's the story of how this great corporate heritage was squandered, and what this all has to do with the rise of a comparatively new social figure: the professional manager.

There's no doubt that American business has relied heavily on the Masters of Business Administration as a credential. Some say too heavily: 100,000 new MBAs pour out of American business schools each year, and more than 40% of them go into the financial services sector.

But now they're being called the Masters of Disaster. As you'll hear in this program, some of the leading critics of the MBA culture are actually business school professors who have been raising the alarm for some time.

The most prominent among them is Henry Mintzberg, Professor of Management Studies at McGill University in Montreal. He says there is no question that business schools like Harvard, Wharton, Stanford and MIT deserve a large part of the blame for creating and sustaining the business culture that caused the meltdown, because they have been promoting an utterly dysfunctional form of management practice for decades.

Henry Mintzberg: Look, my view is you cannot create a manager in a classroom, let alone a leader. You simply can't. Management is not a science, it's not a profession, it's a practice; you learn it by doing it. To claim that you're training people who are not managers to be managers, is a sham, pure and simple, it's a sham. You can't do it. You give completely the wrong impression and you send them out with an enormous amount of hubris which is, 'I can manage anything, even though I've never managed anything'.

Stephen Crittenden: In 1986, when Russell Ackoff, a pioneer of management education, retired as Professor at the Wharton Business School, he was asked what were the benefits of a business education. With savage irony he replied that there were three:

Ackoff Reading: The first was to equip students with a vocabulary that enabled them to talk with authority about subjects they did not understand. The second was to give students principles that would demonstrate their ability to withstand any amount of disconfirming evidence. The third was to give students a ticket of admission to a job where they could learn something about management.
deanhills
handfleisch wrote:
Very interesting in-depth report from Australian radio news on how the relatively new MBA culture helped cause, or is a main cause, of the financial crisis. Below is just the beginning but it is worth reading / listening to the whole thing

http://www.abc.net.au/rn/backgroundbriefing/stories/2009/2526727.htm

Quote:
Stephen Crittenden: As the unemployment queues grow and the bailouts continue, they're beginning to say that narcissists with Harvard MBAs killed Wall Street.

Hello from Stephen Crittenden, welcome to Background Briefing on ABC Radio National.

This week, we're taking a look at the business culture behind the financial meltdown and the kind of business education which shapes that culture.

This is a story that goes a lot further back than Lehman Brothers, or Fanny Mae and Freddy Mac, to the glory days when America's leading manufacturing companies were the envy of the world.

It's the story of how this great corporate heritage was squandered, and what this all has to do with the rise of a comparatively new social figure: the professional manager.

There's no doubt that American business has relied heavily on the Masters of Business Administration as a credential. Some say too heavily: 100,000 new MBAs pour out of American business schools each year, and more than 40% of them go into the financial services sector.

But now they're being called the Masters of Disaster. As you'll hear in this program, some of the leading critics of the MBA culture are actually business school professors who have been raising the alarm for some time.

The most prominent among them is Henry Mintzberg, Professor of Management Studies at McGill University in Montreal. He says there is no question that business schools like Harvard, Wharton, Stanford and MIT deserve a large part of the blame for creating and sustaining the business culture that caused the meltdown, because they have been promoting an utterly dysfunctional form of management practice for decades.

Henry Mintzberg: Look, my view is you cannot create a manager in a classroom, let alone a leader. You simply can't. Management is not a science, it's not a profession, it's a practice; you learn it by doing it. To claim that you're training people who are not managers to be managers, is a sham, pure and simple, it's a sham. You can't do it. You give completely the wrong impression and you send them out with an enormous amount of hubris which is, 'I can manage anything, even though I've never managed anything'.

Stephen Crittenden: In 1986, when Russell Ackoff, a pioneer of management education, retired as Professor at the Wharton Business School, he was asked what were the benefits of a business education. With savage irony he replied that there were three:

Ackoff Reading: The first was to equip students with a vocabulary that enabled them to talk with authority about subjects they did not understand. The second was to give students principles that would demonstrate their ability to withstand any amount of disconfirming evidence. The third was to give students a ticket of admission to a job where they could learn something about management.
I believe the design of the MBA was a good one. As a finishing school for managers who were already in senior positions, who have been successful, to exchange experiences, and to learn from one another. Lecturers consisted of senior managers in commerce and industry. Where it went horribly wrong is when the enrollment standards were lowered to allow anyone to do an MBA, straight from college, just so that the Universities could make money out of the whole programme. Instead of a vibrant interactive programme it started to grow into a teaching programme with lesser quality students and teaching staff. The MBA started good, but when Business Schools started to market it to make money out of it, it went horribly wrong. So this is a good article. I agree with the contents.
hunnyhiteshseth
I guess it won't be appropriate for us to blame all MBA's for this meltdown. It is actually a collapse of whole system and of ideology of capitalism that unregulated 'only for profit' business can be sustained.

And i beg to differ that management is not a science. I think it is definitely a science, albeit a soft science.
deanhills
hunnyhiteshseth wrote:
I guess it won't be appropriate for us to blame all MBA's for this meltdown. It is actually a collapse of whole system and of ideology of capitalism that unregulated 'only for profit' business can be sustained.

And i beg to differ that management is not a science. I think it is definitely a science, albeit a soft science.

Think what I was trying to say is that MBAs are not what they used to be. Previously they were taught in an innovative way by top management in commerce and industry and to MBA students who were already in senior management. With obvious good results when they exchanged their experiences. These days every Tom Dick and Harry can do an MBA. You can do it after a basic degree and don't really have to be in top management, nor are they using top management in commerce and industry to teach, but available academics, so the focus has changed from previously being innovative and practical to that of rote learning and copying what other people are thinking.
hunnyhiteshseth
deanhills wrote:

Think what I was trying to say is that MBAs are not what they used to be. Previously they were taught in an innovative way by top management in commerce and industry and to MBA students who were already in senior management. With obvious good results when they exchanged their experiences. These days every Tom Dick and Harry can do an MBA. You can do it after a basic degree and don't really have to be in top management, nor are they using top management in commerce and industry to teach, but available academics, so the focus has changed from previously being innovative and practical to that of rote learning and copying what other people are thinking.


I got your point. I think financial sector should function to support real economy & not the other way round.
But I think it isn't necessary to be in top management to appreciate an MBA. Infactthese days we have two types of MBAs- Full Time & Executive MBAs. Full Time MBA is for every graduate while Executive MBAs only cater to executives with a good experience.
I think your main objection to full time MBA in promoting mediocre and suppressing innovation. But at the same time, even you would admit that with so many layers of management in a company, you do need people trained to manage others to lower levels and these are the areas where these 'novice' MBAs fit in.
deanhills
hunnyhiteshseth wrote:
Infactthese days we have two types of MBAs- Full Time & Executive MBAs. Full Time MBA is for every graduate while Executive MBAs only cater to executives with a good experience.
I would like people to call the "Full Time MBA" something different. And have it at a much less intense level. As the waste is just so much in terms of money invested and time spent on the course. The full time MBA is definitely trading on the reputation of the Executive MBA. Why not call it "Introduction to MBA" if the person is not already in business management?
hunnyhiteshseth
deanhills wrote:
Why not call it "Introduction to MBA" if the person is not already in business management?


It is not done so because it is well, not an Introduction to MBA but instead a full time MBA. It is called so because unlike Executive MBAs, in Full-time MBA students spend more time than executive MBAs and cover more sylabus than Executive MBAs. For executive MBAs certain basic knowledge about management is assumed and hence they can have less course.
deanhills
hunnyhiteshseth wrote:
deanhills wrote:
Why not call it "Introduction to MBA" if the person is not already in business management?


It is not done so because it is well, not an Introduction to MBA but instead a full time MBA. It is called so because unlike Executive MBAs, in Full-time MBA students spend more time than executive MBAs and cover more sylabus than Executive MBAs. For executive MBAs certain basic knowledge about management is assumed and hence they can have less course.
That is exactly why MBAs have such a bad name. It is assumed that someone who has an MBA has experience in management and business administration. Instead they only have theoretical knowledge, which in practice is useless when they go out to look for a job. Much better to get into business administration first as specialists either in finance, engineering, etc. and then get an MBA. The contribution is much bigger and more meaningful in that way.
hunnyhiteshseth
deanhills wrote:
hunnyhiteshseth wrote:
deanhills wrote:
Why not call it "Introduction to MBA" if the person is not already in business management?


It is not done so because it is well, not an Introduction to MBA but instead a full time MBA. It is called so because unlike Executive MBAs, in Full-time MBA students spend more time than executive MBAs and cover more sylabus than Executive MBAs. For executive MBAs certain basic knowledge about management is assumed and hence they can have less course.
That is exactly why MBAs have such a bad name. It is assumed that someone who has an MBA has experience in management and business administration. Instead they only have theoretical knowledge, which in practice is useless when they go out to look for a job. Much better to get into business administration first as specialists either in finance, engineering, etc. and then get an MBA. The contribution is much bigger and more meaningful in that way.


The logic behind allowing students to directly do an MBA after graduation is that as a fresher you can bring in new 'ideas' to the team. It is generally beleived, and I think rightly so, that once you start working you get set in doing things in a particular way and its not easy to pick 'best practices' easily while a frsher can be easily moulded.
Hence generally even in a class of full-time MBA you will find both freshers and students with some year of experience.
deanhills
hunnyhiteshseth wrote:
deanhills wrote:
hunnyhiteshseth wrote:
deanhills wrote:
Why not call it "Introduction to MBA" if the person is not already in business management?


It is not done so because it is well, not an Introduction to MBA but instead a full time MBA. It is called so because unlike Executive MBAs, in Full-time MBA students spend more time than executive MBAs and cover more sylabus than Executive MBAs. For executive MBAs certain basic knowledge about management is assumed and hence they can have less course.
That is exactly why MBAs have such a bad name. It is assumed that someone who has an MBA has experience in management and business administration. Instead they only have theoretical knowledge, which in practice is useless when they go out to look for a job. Much better to get into business administration first as specialists either in finance, engineering, etc. and then get an MBA. The contribution is much bigger and more meaningful in that way.


The logic behind allowing students to directly do an MBA after graduation is that as a fresher you can bring in new 'ideas' to the team. It is generally beleived, and I think rightly so, that once you start working you get set in doing things in a particular way and its not easy to pick 'best practices' easily while a frsher can be easily moulded.
Hence generally even in a class of full-time MBA you will find both freshers and students with some year of experience.
To me the real logic behind including students straight from University without any prior management experience is to make the MBA more marketable, i.e. generating more income. Students do benefit, however something is lost by offering it both to students who do not have management experience and those who do have experience.
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