Lessons from school of life

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Graduate business schools are a remarkable success story and their expansion globally is unmatched.

But I must add the caveat that before returning to academia, when I sat on the employer’s side of the fence, I increasingly came to regard the top schools as executive search firms for new managers, rather than “real schools” serving their communities. Indeed, a banker analysing investments in business schools might be justified in reasoning that the success of business schools is more the result of increased global demand for the product (new managers) than of the quality of the product.

No, I am not a rogue faculty member or pundit taking a cheap shot at business schools, but as I finish my PhD in finance and teach in the faculty of finance at Cass Business School, London, I think now may be the time to step back and think about what I am trying to accomplish as a new academic.

Having worked both on Wall Street and in the City, I know that my first suggestion to anyone thinking about an MBA or executive education would be to ask prospective schools: “What percentage of your full-time faculty have experience in what they teach?”

Peter Hahn

Surely there could not be a better measure. And shouldn’t employers seeking new managers who can quickly make a contribution also be asking this question?

You would probably be scared to death if your surgeon told you she had learnt all her surgery from a book, or only read about your required surgery in a journal.

Engineering professors will have run stress tests, but business schools? The point is not that you can be an excellent business school academic only by sweating the details on a deal that has hit a last-minute glitch, but that learning about such experiences should be as important in the business school process as understanding disciplined and thorough analysis: the mix of faculty experience should be critical to both students entering and employers hiring.

Yet in all the academic journals and academic career websites I have looked at, and the thousands of tenured or full academic job postings I have seen since returning to business school, I’ve never seen a posting that asks for substantial related experience – or any experience, for that matter. Yes, of course senior academic posts should seek candidates with teaching experience, but why is there no effort to seek business PhDs with related business experience?

Intellectual curiosity

The simple answer is that prospective MBA students and employers do not ask many questions about the skills on offer. I interviewed top business school graduates for almost 20 years and when I asked candidates how they chose their MBA school, the answers were typically league table, senior colleagues had come from the school, salary scales, location and name recognition. Few, if any, knew about the academics beforehand. There was not even a passing thought about the quality of research or teaching, although those are my ambitions as I start my faculty career. A few business PhD students have intellectual curiosity, but they are now mostly trained to produce research (the money can be good) over thought and ideas.

But intellectual curiosity of MBAs themselves? Apparently not: they are investing in or perhaps registering at some of the most exclusive executive search firms. While I have the benefit of career perspective and know what would be of most value later on the job, most prospective students just do not want to make a mistake in their school selection.

Am I disappointed? Slightly, but mostly I am challenged. Business provided me with painful lessons that the world is far from perfect and you must get the deal done as best you can by the deadline.

But there are almost always opportunities for making a difference. Working on financing a large investment for a big multinational some years ago, I noticed that changing the deal structure slightly would allow the assets to be tax-deductible in two countries rather than one, saving our client 10 per cent of the investment (an amount substantially more than the endowments of all the UK’s business schools combined). I recall that, after a moment of disbelief, eyes lit up around the room at the money at stake. In the lecture hall, when I recount my experience, mixed with the theory I researched while doing my PhD, I see students’ eyes light up in the same fashion. It is rewarding to see the sparks of understanding ignited and my guess is that they will remember these discussions for much longer than pure lecture or case material.

Relevance

It is a virtuous circle, as the more topical the discussion of my experience, the more the theory becomes real and students connect to it. For example, students see me commenting in the media on the UK’s troubled and now nationalised bank, Northern Rock, then ask questions, allowing me to relate the answers to what they have just learnt in capital markets and corporate governance.

But at many an academic conference I have been told rather bluntly by other academics that experience does not matter in academia. I have been told that if I want to succeed as an academic I need to focus on how many articles I publish, and in which journals. They also stress I should not bother with relevance – yet they also suggest success in publishing can lead to lucrative consulting.

Research may appear as discovery, but for an academic without the experience it is more about establishing subject credibility. I want to do more of it to enhance and better understand my experience and to be a better teacher.

In business, no matter how voluminous the research it can never replace experience. But the academic excellence of my colleagues has convinced me that decades of experience cannot provide a theoretical underpinning. The mix is everything and we cannot all do everything. Business schools should open their eyes and take notice. Change is also easier and less painful to implement when the going is good.

I think students, employers and communities need to demand more experienced faculty from their top business schools. Witnessing the current trauma in the City and on Wall Street, I feel as if I can almost touch where theory overtook economics (dare I say “experience”?). From mortgage lending and hedge fund strategies that were based on imperfect modelling, to tick-box corporate governance that provided little value to shareholders, experience has been undervalued.

My principal research interest is on corporate governance at banks, many of which seem to be desperately seeking more experienced boards of directors as they suffer downturns – perhaps a lesson to be learnt by business school faculties before it is too late.

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