Feature of the Week

April 15, 2013 12:13 am

A disregard for business schools

Ferguson illustration©James Ferguson

It is the fourth-largest economy in the world, the largest in Europe and the second-largest exporter but there is at least one area where Germany is lagging behind the rest of Europe. The country has no world-renowned business schools or top-ranked MBA programmes.

According to Jens Wüstemann, president of Mannheim Business School, business is taught widely in Germany – just not in business schools. “Almost every university has a department for business studies,” he says. Mannheim is the only German business school with an MBA ranked in the FT’s top 100 global programmes.

The notion that education is an industry is not in the German mindset

- Michael Frenkel

The numbers support his assertions: almost 400,000 students enrol on bachelor and masters degrees in business in German universities each year, about 16 per cent of the total tertiary student population. The numbers also show that Germany has its share of MBA programmes – there were 324 MBAs taught in Germany by 140 institutions in 2012, most of which were specialised or part-time. But almost none matches international standards, says Prof Wüstemann. One reason, he says, is that German universities have very little visibility on the global stage.

“I think traditionally Germany has been very strong in general education but we do not have elite universities. There is not an Oxford or a Harvard in Germany.”

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For Udo Steffens, president at Frankfurt School of Finance and Management, an additional problem is that the top universities concentrate on engineering rather than business. “The [German] focus is on manufacturing, on making tangible ‘things’.”

The structure of the German higher-education system also compounds the problem and mitigates against change, adds Michael Frenkel, dean of WHU, the Otto Beisheim School of Management, in Vallendar, close to Koblenz in the west of the country.

“There is more autonomy for universities than 10 years ago, but there is still no financial autonomy.” Enrolling more students, he says, does not mean a higher income for the university, as education is free at undergraduate and masters level.

The result is stagnation, says Prof Steffens. There is no incentive to generate connections between business and academia and there is no interest in brand-building or accreditation.

“If you ask a [university] dean or professor [about accreditation], they will say ‘I couldn’t care less’.”

But the issue goes beyond the structure of the education system to that of business itself, says Robert Wardrop, a research fellow in sociology and finance at the Judge Business School, University of Cambridge, and a specialist in German business.

“In simple terms, it [German business] is a stakeholder-value model versus a shareholder-value model. A business school is a social institution. It’s success [depends on] how closely it aligns its values with the society in which it resides.”

Under the rankings spotlight

It is ironic that the business school located in Germany that is most frequently and most highly ranked in the Financial Times rankings is not in fact a German business school. ESCP Europe has five campuses – Paris, London, Berlin, Madrid and Turin – and it is in the Executive MBA, Masters in Management and both the open enrolment and custom executive education rankings.

And while three German schools are in the Executive MBA rankings, two of those involve joint programmes – with Essec Business School in France and the Kellogg School of Management at Northwestern University in the US.

It is in the Masters in Managenment rankings that German business schools fare best, with three schools ranked in the top 50 worldwide.

MBA 2013

Mannheim Business School (69)

EMBA 2012

WHU Beisheim, jointly with the Kellogg school at Northwestern University (18)

ESMT (40)

Mannheim, jointly with Essec (41)

Masters in Management 2012

HHL Leipzig (11)

Mannheim Business School (14)

University of Cologne (46)

Executive Education 2012

ESMT (16)

US individualism, as taught in the Anglo-Saxon business school model, “doesn’t fit with the stakeholder value concept,” he says. In particular, he points to the culture of the Mittelstand, the welter of often family-owned companies that make up Germany’s industrial backbone.

“The skills that an MBA delivers are undoubtedly useful to the Mittelstand but there are other skills that are core.”

Dr Wardrop, who graduated from Chicago Booth’s first EMBA in Europe in Barcelona in 1994, says that because German companies invest
for the long term and are less interested in individualism and short-term profit, German MBA programmes will never fare well in MBA rankings. “The ranking methodology is contrary to the way the Mittelstand think. It [the German economy] is not about maximising salary.”

Although Dr Wardrop is a fan of the German industrial system, he says there are some drawbacks, in particular the reluctance to take risk. “If you fail in Germany it is very hard to get a second chance.”

All of which means innovation is incremental rather than disruptive and Germany boasts few entrepreneurs. Prof Wüstemann defends Germany’s record on entrepreneurship, however. “I think we are a country of entrepreneurs. Siemens and Daimler are the family names of the people who founded the companies ... When you look at the backbone of the German economy it is people who own their own companies.”

Others believe this is not enough and the education system has to change. Andreas Pinkwart, dean of HHL, the Leipzig School of Management, thinks this is already afoot. In 1998 there were no professors of entrepreneurship in German universities, today there are almost 100, he says. But problems remain. “Entrepreneurship is multidisciplinary. It needs a much broader approach.”

. . .

The German business education model is unlikely to align itself with that of the US, says Prof Wüstemann. “I think we will develop a bit in the international way ... but I think it will be limited.”

Prof Frenkel is also sceptical. “It’s so difficult to establish a business school. Private institutions can charge fees, but not to a level that can cover operations.” Prof Steffens agrees. “The notion that education is an industry is not in the German mindset.”

German business is well aware of the issues. In October 2002, 25 blue-chip German companies, including Allianz, DaimlerChrysler, Deutsche Bank and Siemens, pledged funds to establish the European School for Management in Technology (ESMT). “The idea was to create a really international business school in Germany,” says Jörg Rocholl, president of ESMT, which has campuses in Berlin and Cologne.

In spite of its corporate support, even this school has had teething problems. Although it launched an MBA in 2006 and an EMBA in 2007, numbers are still low. This year the school enrolled just 51 students on its MBA programme, but Prof Rocholl is confident. “Year by year you see the increase in demand.”

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