We hear a lot about the business shooting stars that graduate from Occidental MBA (Master of Business Administration) programs. Hell, I’m most of the way through an MBA myself and it does provide a good grounding for doing business in the larger corporation. But are business schools really doing us proud; or are they killing off the old style production managers?
Noam Schetber, senior editor on The New Republic, wrote an article several weeks ago titled Upper Mismanagement that has been sitting open in my Firefox browser awaiting some form of logical comment. As an MBA student with certain ideas about a moral obligation to other societies, the environment and to the greater good (while still turning a profit) its more than obvious from my perspective that all’s not well in shooting star land. As Schetber rightly points out, MBAs are being trained to see corporations as assets to be valued rather than as vibrant production environments. They are training financial soldiors at the cost of a depleting resource of those who can actually run industrial companies.
Let’s step back a minute… Schetber is suggesting that we’re losing the innovation opportunities that a production manager would support (such as you would see in Japanese companies) because business schools are focusing on the finance… which may not only explain the movement away from production in the United States and Australia but also our obsession with constant rationalisation as a never-ending scoop of in-house resources back into the bottom-line.
Let me put it this way… nearly every unit in an MBA program will tell the student that the purpose of a business is the maximisation of shareholder wealth. But is it? You may find one unit in there that says the purpose of business is to fulfil social needs not served by government and a motivation behind that (as well as a logical off-shoot of it) is that the business makes money, it turns a profit. Think about that for a minute. What are you in business for if you’re a company making chairs… you’re in the business of serving the needs of people who need chairs. So you specialise, innovate and look for win-win situations that provide economic benefit. That makes much more sense in the real world than the maximisation of shareholder wealth.
Get this… the vast majority of shareholders in today’s economy are speculators not Angel Investors. Are business schools trying to say that the purpose of business is to please the fickle rats that abandon ship at the first hurdle? Speculators?
Coupled with this paradigm we have almost institutionalised the short term incentive of the current management to take short term gains to improve the bottom line in the current Annual Report. At the cost of possible costly innovative strategies taken today which may provide significant future advantage and wealth. I can see a lot of sense in what Schetber was drumming on about in his article.
But yes there are complex reasons why America, the UK and Australia no longer manufacture on the scale of yesteryear and why we’ve evolved to become service economies. One of which we hardly ever talk about – the use of third world resources to do our dirty work: their rivers, their cheap labour, their dirty city atmosphere versus our cleaner first world lifestyle.
Everything is made of something from somewhere at some social cost.
I’d agree with Schetber… business schools should drop that maximisation of shareholder wealth mantra and go back to asking why we’re in business in the first place – to fulfil social needs not served by government. Our motivation and the resulting consequence – to make money.