Businesses and B schools as Large Systems

Need for the B Schools:

Since last century, businesses are looking at the reputed B schools Harvard, HEC and Stanford to cater the need of the management professionals for their businesses to grow. However the fact is, these institutions were created to propel the numbers who are willing to do business and have scientific temperament of how business should be created and grown. This was the time of industrialization. World was getting industrialized at very fast pace. The time of expanding economies of scale! Everyone was looking for processes and techniques which will shave few seconds off to what workmen were doing repetitively. B Schools came in the picture for providing solutions to these problems. Management became an exercise in getting people work faster and do exactly what they’ve been told.  Ivan Pavlov and Skinner were management psychologists who believed that if one discovers and applies right stimulus, people will behave however one wants. This mentality led to the use of financial incentives to influence behavior: salary, bonuses, stock options etc.

Other functions to perform business were developing too. Marketing was becoming key function of the company. In those days more marketing resulted in more sales and more growth. This was self-reinforcing feedback loop, resulted in few giants in the industry. Business schools became possessed with teaching and learning on how to capture market share and create more giants via mergers and acquisitions.  This gave rise to relentless mergers and acquisitions. Businesses were gutted to maximize the RIO to investors. Systems perspective of integrating two complex and gigantic systems was ignored and overlooked leading most of the companies in ruined state. Microsoft’s acquisition of Nokia is one of the examples.

At the same time finance was becoming more and more complex. Some good things happened like double entry bookkeeping which prevented potential frauds. As business grew complex statistical models were introduced. These worked well until some saw the disaster coming their way. Recession of 2008 was an eye-opener but creating short term profits using different models and widespread practice of debt as leverage remained in business world as ritual. Strategies like ‘leveraged buyouts’ which are taught in many B schools turned formerly self-sustaining into debt ridden entities.

Business schools were created to help businesses create value and deliver it to customers. B schools failed to fulfill their promise.  

  

 What happened to B school students? 

But B School students instead of creating own businesses, started renting out their skills to the businesses. On the other hand, businesses started employing management students, they thought they have employed someone who will serve them using all the scientific temperament they have learned about management in B schools and utilize it for company’s growth. For this off course the curriculum of the B schools was responsible. Curriculum of B school is developed keeping in mind that student will come C suite employee or consultant to deliver the value to businesses. Lot of sophisticated quantitative analysis is back bone of this type of curriculum. Unfortunately businessman hardly does these things while doing business. Now to keep the operations running, focus from creating and delivering value to customers was moved to creating efficiency using lot of financial models and other quick fixes to show improved productivity and growth. When this happens, long term value creation, customers and employees suffer. The only people who benefit are an MBA trained executive level officers and consultants who extract hundreds of millions of dollars as their fees and salaries destroying thousands of jobs, and billions of dollars in value which could reach to customers.

Where is it leading us to in this more complex and ever changing world?

                The world is getting more organized. But is there tendency of getting bigger? Data shows that small and mid-size enterprises are increasing. Mass marketing advertising is not working as it was working effectively before. Its great if organisations have small amount of inventories all no inventories at all. Markets are changing rapidly. Speed, flexibility and ingenuity are new norms. And guess what? Corporate giants are struggling on all of these fronts! Did B school classes taught these qualities to their students who went on to handle the big corporates? No sir! Most of B schools until recently never looked beyond teaching different models and strategies to make businesses look efficient.

When employees are looking to have greater autonomy, flexibility and security at work, traditional way of increasing efficiency has worked in opposite direction of what employees want now. How will executives manage those who don’t want to work for them? As result we are seeing the organisations waging war for talent they need. And this talent is elusive. Big corporations are in trap of not finding right talent and because of that not being efficient and effective.

What can be done?

                As companies are losing grounds the intervention can run across the industry not just businesses but the B schools too can come together to create the lost value and deliver it to customers. Instead of emphasis on complex models which can be fudged spastically, more emphasis on creating customer experience and customer value should be given at B schools. Instead of case study methodology which is very prevalent in prominent in B schools, more emphasis on teaching how systems work and what to do about those system could be one of the way!

How this can be done?

There are some important questions need to be asked. Why B schools are having only MBA aspirants as students? Why teachers at B schools are from same B schools where they have learned the same lessons? Why not include union leaders, government officials, social change agents, politicians? Why not include poorest of the poor and billionaire in the education? Why there is emphasis on case study method which is very narrow? Instead process of learning with all the stakeholders of the community which is complex system and businesses have acute impact on the system.
When every stakeholder is part of the education, MBA students will have knowledge of how system work and processes in the system are interdependent. The holistic understanding of the system is the key to create the value.