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Are business schools going down the same path as rotary dial telephones and paper road maps? Much has been made of the downturn in demand for full-time MBA programmes, with the knock-on financial effect for some institutions.

While some question the need for business schools at all, 90 per cent of US citizens – and probably a high percentage of much of the rest of the world – feed themselves through some form of business. It stands to reason that intelligent, practical training on the ins and outs of business should make lives better and more profitable. But recently institutions have found themselves the focus of considerable criticism.

Firstly there is growing “academicisation”. Some business schools followed the advice of the influential 1959 Ford and Carnegie reports which suggested that business schools needed a more academic bent. Fearing the dreaded “vocational school” label, business schools overcompensated – to become respected research institutions.

I and other professors who began their teaching careers in the early 1990s could still find business schools supporting a great mix of practitioners and theorists. But, within a few years, the practitioners were gone; the number of PhDs in the teaching ranks mattered more in accreditation and school rankings than did teachers with real-world experience. So business school graduates received more theory and analysis and fewer execution skills so valued by employers.

The executive education drain has also played its part. In the past 15 years, business schools have grown their revenues more through executive education than any other programme.

Professors teaching on an executive education course can earn in one day as much as they would normally earn in a 10-week degree programme – and they do not even have to grade anything. The best executive education professors have been able to continue to demand high teaching fees, even as corporations have become more miserly with their payments to schools. School profits have suffered in the process.

There are currently a number of financially distressed schools. Many are safely nestled inside larger universities where the economic problems are less obvious. But for standalone business schools to succeed and thrive today they need to focus on giving students a real-world education taught by real-world practitioners, and educate the next generation of business leaders seriously.

For a school to succeed it needs to harness the marketing, sales and operational techniques of successful corporations to build on its existing size and success. Today’s standalone, not-for-profit schools need to think like a for-profit, with a heavy emphasis on growth. However, even for those schools that may serve as models of business education for decades to come, there are potential dysfunctions to guard against.

Corporations want more customers – and so do business schools of the 21st century. This leads to interesting trade-offs in the education. If a school grows rapidly, it either has to increase class sizes so that proven instructors can teach more and more students, or it has to attract new educators. The schools hope – usually in vain – that standardisation and training may bring less expert teachers up to a highly proficient level in the classroom.

But teachers tend to be great because of who they are, rather than what they do. Standardisation does not necessarily give students a great classroom experience and, in the end, tends to drive the great teachers away.

Ultimately business schools have to face a truth that most business practitioners have long known: fast-growing organisations simply cannot hire enough good people to keep up with demand. As a result, in the face of runaway growth, attention shifts away from the individual students – the human touch becomes diluted …or fades away completely.

Business schools also need to be wary of the focus on student satisfaction. More and more schools are emulating companies and are using satisfaction metrics to tie professor pay and promotion to the happiness of their students. The dysfunctional – and predictable – teacher response is to never give frank, negative feedback. Savvy professors know the rules: “flatter and never find fault”. This makes for bad teaching.

Schools that are partly in the business of attracting the next generation of students want to keep students satisfied, but what toll do these manoeuvres take on real learning? Great, effective teachers must deliver hard truths, personalised feedback and uncomfortable learnings. How can students learn that they need to improve if no one tells them? Business education that is solely focused on happy points ends up short-changing both students and their future employers.

Today’s business schools need to know when to act like corporations and when to act like schools. Employers and society should be the primary target of business school education.

Business education does not have to be a relic of the previous century. Business schools may be ripe for disruption, but they are, arguably, more critical than ever before and simply cannot continue to resemble the business schools of the 20th century.

The author is president of North Star Leadership Group and author of ‘Good vs Good: Why the 8 Great Goods Are Behind Every Good (and Bad) Decision’.

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