ARTICLE 2 – PART 3 A FRAMEWORK FOR RE-EVALUATING PARADIGMS OF MANAGEMENT EDUCATION - sudhanshu

ARTICLE 2 – PART 3

A FRAMEWORK FOR RE-EVALUATING PARADIGMS OF MANAGEMENT EDUCATION

BUILDING SELECTION AND DEVELOPMENT VALUE: HOW TO ENHANCE SELECTION VALUE

?

What business schools need today is to add both selection and development value in transforming human capital, especially in MBA programmes.

?

?

Selection value comes from screening and selection (and crucially de-selection) of students who apply to business schools for degree and non-degree programmes. The two most common criteria for selection, based on past research, are general intelligence and conscientiousness. Standardised tests such as SAT and GMAT or GRE and CAT – MAT in India, have proven to be good surrogates for these two personal traits.

?

While these have been historically relevant (although many critics of business education are skeptical), they are not sufficient for future selection for several reasons. With the rise of emerging markets (especially India and China) the number of undergraduate and MBA applications are destined to grow astronomically. For example, at the top ten private business schools in India, it is not uncommon to have 200,000 students apply for 1,000 places in full-time residential MBA programmes despite high tuition and living costs.

?

?

Good business schools are like a good diamond cutter, who has the experience and skill to cut a diamond and bring out its brilliance. However, a lot still depends on the quality of the rough diamond. This is also true in sport. A good coach (or scout) has a knack of identifying raw talent and then shaping and moulding that talent to become exceptional.

?

In both analogies, people recognize and admire the brilliant cut diamond and the exceptional athlete but often do not know who the diamond cutter or the coach is. It is not the ranking and reputation of a business school that matters but rather its selection process. This is most evident in India, especially for the Indian Institutes of Technology (IITs) in engineering and Indian Institutes of Management (IIMs) in management. In both cases, what differentiates them is neither their curriculum nor their research but the exceptional quality of their students. I visited one of the IIM’s for a guest lecture, I found the students were simply outstanding and more motivated than at any institution I had taught in, whether in the US or Europe and of course India.

?

?

Unfortunately, standardised tests such as SAT and GMAT suffer from both Type I and Type II statistical errors that result in inconclusive outcomes about the development of human capital. We need a selection methodology at both undergraduate and graduate level that goes beyond general intelligence and conscientiousness with several more filtering criteria to identify and select the right talent for generating future managers and scholars.

?

There are three criteria above and beyond standard assessment tests.

?

First and foremost is an applicant’s passion. We have found that without exception, what matters most in any endeavour is passion. It has been the hallmark of great political leaders, great scholars, great thought leaders, great artists and great entrepreneurs. In fact, we believe it is a universal criterion for survival and success in life. Passion is even more necessary in organizations that have hierarchy, bureaucracy and often incompetent or unpleasant bosses. Passion sustains the person despite the organizational constraints. Otherwise, it results in burn-out. In academic and other non-profit institutions we have all witnessed the ‘burn-out’ of deans, provosts and presidents.

?

A second filter is an applicant’s purpose. If the sole reason to get a degree is its earning capability measured by return on investment (ROI), it is likely that we will generate managers who will define their success only in terms of title and monetary compensation. It is even possible, as we have witnessed in recent decades, that they will manage businesses for their own personal gain at the expense of the organization and its stakeholders, including investors. This has been recently amply demonstrated in the financial services sector and especially in the hedge fund community.

What we need to identify a ‘high-quality diamond’ is to ensure that the applicant is driven by purpose and not just economic motive. In other words, is the applicant purpose-driven while he/she aspires to be a business manager or leader? We do not believe a course on business ethics can have any long-term positive impact in shaping the values of future managers unless the student applicant comes with a belief in a purpose-driven life and career.

?

Unfortunately, in recent years, with an obsessive focus on shareholder value, we have moulded many students to ignore or set aside whatever purpose-driven values they had prior to joining business schools, especially in an MBA programme.

?

?

Purpose is likely to become an increasingly necessary filter as many young people today look at an MBA as an investment whose lifetime value over the next fifteen to twenty years is astronomical. For example, a large majority of MBA graduates choose careers in strategy consulting and investment banking. This seems to be due to the higher compensation packages offered by those two industries. We believe this has also made purpose-driven careers less important in business schools. This is especially true of non-business graduates such as software engineers and liberal arts majors who do not see comparable economic returns in their own disciplines.

?

?

Purpose matters. It provides a moral compass. It generates good self-governance. It makes a person happy. We have personally mentored successful business leaders who made money without purpose and have observed that money without purpose makes life empty, meaningless and lonely. And we do not think purpose-driven values can be inculcated at an adult age and especially in the case of more mature and work-experienced MBA students.

?

?

The final filter is compassion. Does the applicant care for others? There is an increasing amount of scientific research today to validate the hypothesis that business leaders who care for others such as employees, customers, suppliers and the community deliver better performance for an organisation. This concept of a caring mindset goes back to McGregor’s observations and experiments at the Hawthorne Works (Western Electric), which demonstrated greater productivity and effectiveness of factory workers if the supervisor was caring, as compared to the old command and control (Theory X) way of managing the workforce.

?

?

The key ingredient of caring is respect for others and empathy toward their situations and belief systems. This will become increasingly necessary in the era of cultural diversity for global enterprises.

?

?

Is an augmented selection process using the three criteria of passion, purpose and compassion feasible and practical? The answer is yes. It also accommodates worldwide affirmative action initiatives including the controversial reservation system in India. Passion, purpose and compassion are universal traits and recognise no ethnic, religious or gender boundaries.

?

?

It goes without saying that paying attention to the input side – that is, admitting high-quality students – is critical. Face-to-face interviews would often be desirable, in addition to tests and, perhaps, written essays meant to throw light upon the prospective student’s motivation. In many cases interviews are often seen as both time consuming and expensive. Nevertheless, several leading business schools insist on such face-to-face admissions interviews. This is the case for the entire admitted classes at many business schools globally like IMD, the Lorange Institute and SMU (Singapore), for instance.

?

How To Augment Development Value

?

The second aspect of transforming human capital is development value. Historically, development has been partly governed by accreditation standards and partly by business school culture. Accreditation is generally treated as an exogenous variable and the business school culture is treated as endogenous.

??

A business school’s culture tends to be shaped by historical roots anchored to a discipline or pedagogy. For example, the University of Chicago, the Wharton School and University of Rochester are anchored to finance and economics. Harvard Business School is anchored to the case method. In general, most European business schools, even at the undergraduate level, are anchored to theory in social and economic sciences. However, their foci have included critical management studies and an emphasis on both humanities and public management.

?

As mentioned in Article 1 - British, German and French business schools were developed to generate specific vocational skills such as accounting and commerce, with no liberal arts education in the curriculum.

?

?

In the last century and after the Second World War, business school culture, at least in the US, shifted twice in a very significant way. The first was the development of the two-year full-time MBA following the Ford and Carnegie reports in 1959. While focused on analytical rigour and problem solving, the MBA was primarily designed for newly minted engineers to continue and broaden their education before joining a company. This replaced the traditional discipline-based progression from an undergraduate major in marketing, finance or accounting into graduate degree programmes such as masters’ and doctorates in marketing, finance and accounting.

?

Consequently, Master of Science degrees went out of favour faced with the growth of two-year full-time MBA programmes, part- time evening MBAs for working professionals and weekend Executive MBA programmes (EMBA) for more senior leaders in an organisation. Since the focus of the MBA was general management, discipline-anchored business school cultures began with a few exceptions to morph into an MBA and non-MBA academic divide. In fact, at the University of Virginia, it became necessary to break up the school of business into graduate (Darden) and undergraduate (McIntire) schools of business. At many other schools of business there is a clear caste system of graduate versus undergraduate faculty.

?

As the marketability of MBA graduates increased dramatically over time, the undergraduate programmes at many state universities became cash cows to be taught by doctoral students, resulting in an elitist MBA faculty culture. In fact, many private universities phased out or marginalised their undergraduate business degrees. The MBA degree became even more attractive in the 1980s when management consulting firms such as McKinsey and BCG began to recruit MBA graduates. This also transformed the business school culture into a market-driven? one.? It? necessitated? actively? recruiting? potential students and, more importantly, placing them in high-paying consulting and investment banking firms. Placement became more important than the management discipline itself.

?

?

A second major change that occurred in the late 1980s was the ranking of business schools by Businessweek, quickly followed by other business magazines such as US News and World Report and financial dailies. The Financial Times Global MBA Rankings have also become an important force as management education has globalised.

?

The rankings became close to an obsession for many deans. Understandably, perhaps, since renewal of their contracts often depended on enhancing their schools’ rankings. This continues even today with the added pressure for rankings of competing non-US schools from Europe, Asia and now from all over the world. Reputation ranking has driven many curriculum reforms and faculty recruiting and retention initiatives. In other words, the market economy approach to development became the norm.

?

?

This was further exacerbated by the narrow definition of scholarship specified in reputation rankings. What mattered most was faculty publishing in top-tier academic journals in each functional discipline. The esoteric nature of these journals, often with a strong focus on empirical research, resulted in a ‘publish or perish’ culture. Faculty began to behave like full-time researchers in research laboratories and began to de-emphasise development value through class- room teaching, personal coaching and counselling outside the classroom. That responsibility often fell on non-tenured adjunct faculty and some business schools invented titles such as ‘Professor of Clinical Practice’ or ‘Professor of Practice’. As a consequence, the schools created another caste system between research and teaching faculty. And, sadly, the fundamental link between research and teaching – two sides of the same coin - was lost.

?

?

In our view, based on nearly 140 combined years of academic experience at different business schools, we think this obsession with the MBA degree and with reputation rankings might have set back the value mission. What we need is to go back to an equal focus on teaching and on undergraduate degree programmes as well as rediscovering graduate degrees such as the Master of Science in different disciplines. It will require a non-linear change in faculty mindset about developing ‘deep generalists’ instead of just generalists.

?

ENABLING NON-LINEAR TRANSFORMATION

?

There are at least three dimensions on which the business school curriculum and faculty need non-linear transformation to adapt to the changing environment. The first and most critical is to incorporate an emerging markets perspective.

?

?

As pointed out in books Tectonic Shift and ?Chindia Rising the twenty-first century will be driven by emerging markets with respect to innovation and competition from emerging market multinationals such as Haier, Huawei Technologies, the Tata Group, Mittal Steel, and the Aditya Birla Group in aluminium and carbon black. Also, we might add to the list corporations from newly developed countries such as Groupo Bimbo from Mexico, InBev from Brazil and SAB from South Africa. This will also shape the geopolitics of the world especially by the new trilateral relationships between India, China and the Americas.

?

Both faculty and students need to immerse themselves to gain a deep understanding of the unique issues of emerging markets. It is not enough for students just to have an international week there. They need to do internships and study abroad – say, for a semester or a year. This might be even more vital for the faculty. We have witnessed the fastest transformation of university cultures with faculty-abroad programmes, even more so than student-abroad programmes. Our suggestion is that faculty at all ranks should be encouraged, if not mandated, to learn about emerging markets by teaching and doing research in and not on emerging markets. This is reverse learning. At one time, faculty from less-developed economies came to advanced countries for a doctoral degree or post-doctoral research and to learn the way these countries taught and researched. Now, it must be faculty from advanced countries undertaking serious visits to study and research in emerging markets.

A second dimension of transformative development is to anchor the curriculum to the three Is of learning rather than the three Rs (reading, writing and arithmetic) of learning. Learning must be interactive, integrated and individualised.

??

Research supports the hypothesis that interactive learning (as opposed to rote learning) is superior with respect to knowledge retention, problem solving, creativity and innovation. Integrated learning unleashes synergy and learning across different disciplines. Connecting existing knowledge dots often generates better inspiration than brand new ideas. More importantly, they are more readily implementable.

?

For example, it is the integration of hardware and software that has made Apple products so popular. Embedded chips and software have made many products smart. Today, a typical automobile has more than 200 sensors, memory chips and microprocessors. It is very possible to have a switch and server integrated and networked in each car. Furthermore, today’s cars can easily act as mobile base stations for broadband wireless networks.

?

?

Integrated research and learning between the disciplines of economics and behavioural sciences has generated a new area of research called behavioural economics. Similar integrated learning between finance, marketing and operations is not only possible but also desirable. At Emory University, the medical faculty is learning from Tibetan monks how meditation affects the brain; and the monks are learning about how modern drugs alter the mind and body.

?

?Finally, individualized learning is becoming increasingly necessary as the diversity of business students grows each year, especially in MBA programmes. It is also becoming prevalent in undergraduate programmes as students move from the traditional four-year graduation cycle to graduate in as few as three years or as many as seven years.

?

Fortunately, digital technology is becoming universally affordable and accessible. It makes the three Is of learning both possible and cost-effective.

??

The third aspect of transformative development is continuous lifelong education. The half-life of knowledge is getting shorter. In software, it is down to three years and declining rapidly. Our estimate for the half-life of management knowledge is that it is thirty months at present but will decline rapidly due to technology advances and the growth of emerging markets. Therefore, it will not be sufficient to provide education leading up to graduation. Just as in many certified professions such as accounting and medicine, business schools must think of lifelong education.

?

Furthermore, it is not a good idea to redefine graduating students as alumni. It changes our mindset and behaviour towards them. This notion of lifelong education will be disruptive in the way we measure faculty’s teaching requirements. It will be also disruptive in the way knowledge is generated, aggregated and disseminated. And it will be disruptive, as the classroom has to go to the students anywhere they are located instead of students coming to the classroom. Finally, the cumulative pool of students will quickly become very large. For example, if a business school graduates 2,000 students a year (1,500 undergraduates and 500 MBAs), it adds up to 20,000 students in one decade. Managing an increasingly large and geographically distributed student population will create its own challenges. Fortunately, this is already done in certified professions, and business schools can learn from them how to scale up.

?

Web-based online education is now more viable and scalable just like social media and online distribution of academic journals. Investing in online lifelong education will become a necessity.

?

While offering lifelong education will be challenging, it also represents an opportunity for annuity income on a cumulative base for business schools. A quick analysis of the lifetime value of a student suggests that it may make business schools financially sustainable without the need for endowments and, therefore, make deans

Figure 3 ?Augmenting selection and development value

?

and directors refocus on their education mission and output instead of fundraising and reputation chasing.

?

These three transformative development initiatives are also compatible with existing accreditation and reputation rankings. In fact, they may become role models; and both accreditation bodies and reputation-ranking assessors are likely to incorporate them for future accreditation and rankings respectively. The above discussion on selection and development is summarised in Figure 3.

?

?EXOGENOUS FACTORS IN SELECTION AND DEVELOPMENT

?

Business schools are influenced by several exogenous factors and the processes of selection and development are subject to changes in them. We have identified six exogenous factors that are important to understand, monitor and adjust; and, if possible, change them.

?

Accreditation

?

There are some problems with accreditation. Unfortunately, accreditation usually lags change and the process is too slow. Second, the time interval between accreditation visits is too long for a rapidly changing world. Finally, accreditation standards set benchmarks for an accept- able level of quality and not necessarily for excellence.

?

However, accreditation can be (and has been) a great agent of change. For example, the field of strategy was mandated by AACSB in the late 1970s and early 1980s. Strategy is now a well-respected discipline in business education and research. Similarly, in the 1960s, the accreditation process transformed personnel management into organizational behavior and production management into operations management. It is our hope that with the rapid growth of the digital age and global economy, the accreditation bodies can lead rather than lag in both the selection and development processes of transforming human capital in business. Indeed, a key challenge for accreditation bodies (AACSB, AMBA and EFMD) is how to stimulate innovation and encourage experimentation rather than become involved in the cementing of particular practices.

?

University governance

?

The autonomy granted to schools of business in the past may be eroding, as university governance is increasingly enforced on them. The often-renegade relationship of the business school within the university may have further pushed the university administration to bring it under university direction. Tenure and promotion decisions are increasingly brought into line with university policies and procedures. Even branding and logo decisions are now standardised to ensure that donor names of schools of business are sub-brands of the university master brand. In our view, the proposed ways for- ward for selection and development in our model are more likely to bring the business school culture into line with the university culture.

?

?

External funding

?

The use of endowed chairs as a way to attract and retain faculty in business schools is less likely to succeed in the future. There are several reasons why. First, many endowments were already commit- ted in the 1990s. Second, the price of endowed chairs has gone up significantly. Third, potential donors are finding better opportunities in emerging markets. Fourth, the donor sees less value in endowing a professorship whose research is esoteric and lacking in relevance. Instead, business school faculty will be increasingly mandated to compete for funded research from industry, large foundations and government agencies such as the Department of Commerce in the US. In fact, following the collapse of communism, many business schools were funded by the US government to start CIBER centres focused on American-type capitalistic education and research in East- ern European countries. We see a similar funding opportunity for the business schools for research and education in emerging markets. This seems to be a clear mandate in Canada and the UK, where most universities are government-funded institutions. It is clearly the message in China and India. Funded research and education will result in starting centres of excellence in different disciplines of business and potentially cross-disciplinary centres of research between business and non-business disciplines.

?

Technology advances

?

It is remarkable to think that only a decade ago there was no Google, Facebook, iPad or iPhone. The open-access press is changing the paradigm of the peer review process and the gate-keeping power of well-established academic journals and publishers. The amount of content on YouTube (often user-generated) or in the archived digital content of television networks is enormous. In our view, ‘you ain’t seen nothing yet!’ Most students will get their course syllabi and reading materials on tablets; interactive learning will be mainstream and virtual teamwork will be routine. Our proposition about the three Is of learning will be enabled by technology advances. In addition, most accredited degree education will be online. The internet’s two key characteristics (reach and richness) will transform the way we select and develop students. It will also transform the way we do research and not just the way we submit research papers for peer review and publication. RESEARCH ‘WOULD’ CHANGE ANDE ‘SHOULD’ CHANGE.

?

Growth of emerging markets

?

As pointed out earlier, the twenty-first century will be all about the growth of emerging markets, starting with China and India and rap- idly moving to Africa and many parts of Latin America. This will require a significant change in what we refer to as the colonial- imperialist mindset of Western countries including Europe, America and Japan. It will require change from ‘glocalisation’ of business education (as we do it in Executive MBA programmes in China and Singapore) to reverse innovation. It means developing innovative curricula without the legacy of the past. It will give a great competitive advantage to brand new schools of business and universities that do not inherit a culture of orthodoxy.

?

One key area to understand is the funding of business schools by large business groups or by entrepreneurs as evidenced in India and China. For example, a special act of legislation in the state of Karna- taka in India has resulted in the establishment of Azim Premji University (named after Wipro’s famous business leader), whose sole focus is to develop world-class teachers and school administrators for more than two million schools. Similarly, another act of legislation in the same state has licensed the Alliance University in India to transform from a business school to a fully fledged university. It will have ten colleges and schools in less than five years with more than 15,000 students in Bangalore. Finally, the Indira Gandhi National Open University (IGNOU), a government-established higher-education system for inclusive education, has more than 3 million college students in all parts of India who study by distance education. Its breadth of curriculum is astounding, ranging from skill-based certificate programmes to masters and doctorates in sciences and engineering.

?

Public/private partnerships

?

A major worldwide trend is the emergence of global public/private partnerships in education. There are cross-border global initiatives between governments and world bodies, foundations (such as the Ford Foundation, McArthur Foundation, Kaufman Foundation and Gates Foundation) and the private sector. While many of these initiatives are focused on poverty and public health (and more recently on science, technology, engineering and mathematics), they are likely to extend to business and management education as a way to make the discipline of business socially relevant and useful. For example, several years ago, the government of Malaysia, in partnership with Manipal University of India (the largest medical college in the world) and funded by the World Bank, set up a medical school in Malaka to ensure that the native Bhumiputras and Chinese Malays also get access to careers in medicine, which were otherwise concentrated among Indian Malays. And, we earlier discussed the effort to bring the public and private sectors more closely together at Yale.

?

These six exogenous factors will have an enormous impact on the future of business education. And their impact will occur across all internal stakeholders (students, faculty, administration). Business schools that are willing and able to change will not only survive but also thrive in this rapidly changing world of business education and business.

Figure 4 ?The model of business education

?Figure 4 summarises all the elements of our organising model of business education.

?

CONCLUSION

?

Established business schools that are both willing and able to adapt to disruptive drivers of change (especially technology and globalisation) will not only survive but also secure their future. Unfortunately, despite ample warnings and signals, many business school deans and directors will find themselves helpless in transforming their culture and governance due to denial, competency, dependence and internal turf wars among faculty and staff. It is, therefore, not surprising to find so many job openings for business deans and directors. It is much easier to start a new school than transform an existing one.

?

?

Business schools that are able to broaden their mission and market will be in a better position. The mission of shareholder value (bottom line) must broaden to that of stakeholder value (triple bottom line). In other words, the business of business is more than business. It is also to serve its other stakeholders including community, suppliers, employees and customers. Therefore, broadening the bottom line to triple bottom line (profit, people and planet) in research and education will become necessary. Similarly, business schools that broaden their markets to serve the research and education needs of both the public and private sectors as well as emerging markets will be in a better position to survive and thrive.

?

The future of business and management education remains promising. However, the future of business schools as we know them today is doubtful and in crisis. In summary, business school leaders such as Canals, Morsing and Rovira and De Meyer, who stress humanistic, stakeholder and innovative perspectives, according to me we must embrace the following in our curricula philosophies.

?

Transformational change

?

?

This involves effective innovation and the management of change; lifelong education; interactive, individualized and integrated learning; a global and emerging market focus; leverage of technology in the e-learning domain and an increasing recognition of management needs in public and non-governmental organizations.

?

A STAKEHOLDER PERSPECTIVE

?

As Howard Thomas stated, ‘business schools must radically reshape their curricula if they want to keep their edge in an age where corporations are being held to account far more in terms of social responsibility. They must also produce humanistic, ethical and morally responsible leaders who focus on the “triple bottom line.”’

?

Student selection

?

Students must be selected according to a broader set of criteria to encompass emotional as well as cognitive intelligence and to focus on personality characteristics such as purpose, passion and caring (compassion). Before outlining the philosophy of new business school models in the next article, it is interesting to re-examine an essay by Nobel Laureate Herbert Simon ?on the business school as a problem in organizational design. It provides a set of philosophical, as opposed to ?more normative, guidelines for evaluating new business school models and approaches.

?

He views the business school as a professional school that should follow the goals of the university, including both the pursuit of knowledge for its own sake and the application of knowledge to practical pursuits. It therefore must embrace the world of practice and identify the information and skills (particularly from the social and mathematical sciences) that can improve practice. In linking academic and practical management concerns, the business school must, however, be fundamentally rigorous in research and teaching.

?

Simon stresses that management is an ‘art’ and hence this requires the business school faculty to work across boundaries and disciplinary ‘walls’ to encourage better communication between discipline - and practice-oriented faculty and address solutions to management problems and issues that are interdisciplinary in character.

?

In essence, following Simon’s advice, the research and teaching capabilities of the business school must be directed towards addressing major business problems and issues in an ambiguous, complex and multi-disciplinary world in a holistic manner.

?

Some questions are appropriate in judging whether business schools understand the nature of changes in the twenty-first century. Have they kept pace with global and technological change? Do they provide multi-disciplinary perspectives in problem solving? And do they really understand the current ‘firing line’ challenge.

?

In the next article I will, therefore, examine and evaluate a number of new models and approaches to management education using the guidelines offered here as benchmarks for the evaluation process.

?