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If there is one thing that the world has learnt in the past three years, it is that financial services companies simply do not operate in the same way as other businesses.
“Financial service firms have a unique place in the economy with unique responsibilities,” he says. He should know, he worked for JPMorgan for two decades before his thoughts turned to academia.
Now at Harvard, he has designed and teaches a timely second-year elective on the MBA programme, addressing the challenges and responsibilities that face the leaders in the financial services industry. It is one of the courses introduced at Harvard over the past year that have been specifically developed as a result of the financial meltdown. “The crisis really raised the stakes here,” says Prof Rose. “It’s all about questions; I have no answers.”
Harvard is not alone in reacting actively to the economic crisis. Professors at business schools around the US have developed courses looking specifically at what caused the financial meltdown. But courses about how to do it better are less prevalent.
For Prof Rose, the course “Managing the Financial Firm” has been designed with a wide brief, covering everything from banking to insurance and loans to brokerage.
“This is an industry that is extremely broad.” The lens is focused on the client need. The course is intended for both those students who came from financial services or intend to get jobs there on graduation, and those with a healthy interest in the subject – the latter accounted for about 15 per cent of the class when it was first taught last year. The next class begins in September. The focus of the programme is on the changing challenges and responsibilities.
The course uses case studies covering all the usual suspects – Citigroup, Goldman Sachs, JPMorgan Chase, Bear Sterns and, of course, Lehman Brothers. But Prof Rose also looks at some more unusual cases, in particular that of the one-branch community bank run by Hope Harris Johnson.
The first facing financial services firms is trust, he says, something which has been badly dented over the past few years. The second topic covers the operations of the firms – everything from compensation to risk management. A third element is the strategic challenge facing financial firms, where Prof Rose draws on the teaching of some of his Harvard colleagues; Michael Porter on strategy, for example. Finally he looks at the transformation of the industry.
As chief executive of the Friend Bank in south eastern Alabama, Ms Harris Johnson had an ambitious 20-year growth plan. “This is as important and real to her as anything that Jamie Dimon [JP Morgan chief executive] does,” says Prof Rose.
He argues that the case method is valuable in these sorts of issues. “There are pluses and minuses to the case method, but the case method allows you to get to these issues in a very real way which resonates with students.”
But alongside the more technical issues there are also grey areas relating to the ethics of banking. Prof Rose ponders the differences between banks 20 years ago and how they operate today. It used to be that if a bank had a large client in one area, it would not take on another that was a direct competitor. That has changed he says and banks can justify their decisions. But he has qualms. “We [bankers] have lost sight of what our responsibilities are. The words fit together, but somehow it’s not right.”
However, many bankers do get the point, he says. “They are really thinking about this. Some are doing it thoughtfully, but others are doing it defensively.”
Although a banker by training, Prof Rose realises that criticisms levelled at investment banking have to be dealt with in the classroom, in particular the issues of the strong anti-Wall Street feeling. To help him do that he brings what he describes as the more thoughtful banking leaders into the classroom. “There are leaders who are driven by more than what’s the next trade.”
It is a philosophy he carries through the programme. “There are some leaders who get it, but there are a lot of people in firms that don’t get that the world has changed pretty dramatically now and that they have some responsibility.”
Prof Rose is clearly someone who loved his time on Wall Street and rues some of the changes. “There’s an opportunity to make money in this industry, but don’t go into it for that reason. Those people who do, fail.”