Business Schools are failing,

Not too long ago, I was caught in the midst of a storm. With howling wind, hail banging on the windows and sky putting on a lighting show. The next morning, while I was out walking in the woods, I came across a fallen tree. On the outside, the tree looked very healthy, which got me curious. Upon closer inspection, I found that termites had eaten away at the roots of the tree, hence this tree, which looked healthy and strong, fell. Most of the business schools in the world today are like that tree.

As someone who has worked in both academia and industry, I only realised that business schools were failing after leaving full-time academia nearly a decade ago. Like me, most in academia aren’t aware of this failure, which makes the situation even graver. We all see the healthy tree, which appears to be big and strong. After leaving full-time academia, I have become an entrepreneur and have been engaged in helping businesses (either through consulting, training, or mentoring). During this time, I have worked with companies from a wide variety of industries, and from countries across the globe. The course of my journey has involved me in helping companies solve their problems, or exploit business opportunities. In nearly every industry I have worked with, at all levels of management, and in every country, there is one common problem, business graduates are underperforming. MBAs, don’t have the management skills and business graduates aren’t making a big enough of a contribution, despite the big salaries. 

Earning an MBA was, and pretty much still is, considered to be a ticket to a great job with a high paying salary. However companies are finding that graduates of even top universities are not performing, and often need additional training, coaching or other assistance. Like the tree in the woods, business schools are facing storms. These tough economic times, has made a lot of companies to rethink their hiring strategies. Many of these organisations are now opting for candidates without a business degree, but with skills and/or experience. During the last financial crisis, the Dean of a leading business school said that business schools need to take some of blame. After all, it was their graduates that were working in the very companies that led to the financial crisis.

Not too long ago, for most organisations, candidates with an MBA were the first picks in the ‘employment draft’ and considered above others for promotions. So what has changed, and how did we come to this? In this article, I have identified five key problems that are eating away at the foundations of business schools.

Problem 1: The Cash Cow

To understand where we are, it’s important to look at where we began. Business schools are a relatively new concept within the lifespan of a university. Business schools took birth in a university’s cosmic collision between departments of economics, commerce and accounting. Many of Europe’s business schools are only a few decades old, with a lot of eastern Europe universities, still preferring not to open proper business schools and instead focus on commerce or economics as the dominant domain. However, business schools today are among the fastest growing schools within a university. Often business schools attract a large number of students, and provide universities with the greatest sources of tuition fees. Unfortunately, many universities see business schools as mere sources of income or cash cows. They take out more from them than they put back. With cuts in funding for higher education, universities have been resorting to using the high tuition fees, MBAs are willing to pay, to fund other schools and departments. The quality of the programmes haven’t improved along with the high growth rates.

Problem 2: The Faculty!

The young age of business schools, their fast growth, along with high ‘profitability’ has also led to a significant shortage in qualified faculty to teach in business schools. This chronic shortage in qualified faculty has led business schools to hire faculty from associated subjects. Faculty need to have a PhD in order to teach at the master’s level. There simply aren’t enough people earning their PhDs in business, to keep up with fast growing demand. Moreover, those earning PhDs in business related subjects are finding jobs working in industry or as consultants. Hence, universities have resorted to hiring faculty from associated fields, where supply seems to be much higher. For example, universities are hiring faculty with degrees in economics to teach finance, those with degrees in sociology or psychology to teach marketing or HR. I have seen universities hire people with PhDs in history, literature, sociology, mathematics, statistics and even computer engineering to teach in business schools. While having some knowledge of sociology or psychology is useful (I researched both of these for my Doctorate), business is essentially different. Even most economists fail to understand business. While most economists may focus on rational decision making, we know that customers and employees don’t make rational decisions. 

What does this mean for teaching students about business? Well, it’s like teaching people to swim. We don’t have people who know how to swim. Instead we have people who know about the physical characteristics of water, or how the human body works, but no one who has ever swam. So how can we then teach our students to swim? I know many universities say, but we teach case studies, and use management books, etc. Going back to the swimming example, it’s similar to saying we show our students swimming videos, and bring in swimmers to talk to the students. None of these activities will actually get the job done. All of them would be useful to some degree, but not enough. This is exactly what’s happening in most business schools around the world today. I have even seen this practice in some of the worlds leading universities!

Problem 3: University rankings

There seems to be a big obsession with university rankings. Rankings were useful to a certain degree, but universities seem to have put rankings as the foremost criteria for success. Boards, donor organisations, and government funding agencies use these as a yardstick (or meter stick) to decide which university to give funding to, or to measure the performance of university management. Hence, universities are forced to focus on rankings. Rankings may work in some areas, but university rankings don’t seem to work for business schools. The job of a business school is to produce managers, leaders, and entrepreneurs. None of the major rankings measure these, or give enough of an importance to these measures to have any impact. Instead they focus on things like number of research papers published, how many faculty members have PhDs, etc. These metrics, are manipulated easily by those in academia, and aren’t a good measure for business school. I have seen top professors in some non-business departments with dozens even hundreds of research publications, while you can have a top business school professor with a handful. Similarly, with shortages of faculty with PhDs, I have come across universities that have resorted to buying fake PhDs for their faculty from dodgy websites! 

Rankings of MBA programmes, and of business schools are often a better measure, as they may measure things like percentage of students getting employment, or average salary after graduation. However even these metrics are played around with by universities. For instance, I’ve seen universities in a developing country claim their graduates get higher average salaries than those from Harvard or Oxford.

Problem 4: Leadership

In an organisation, be it a for-profit or not-for-profit, we promote those who are good at their work, are team players and can help to achieve organisational objectives. The problem we have in universities is that the metrics that get faculty promoted, aren’t correlated with the qualities of a good leader. You have professors being ‘promoted’ to take charge of a business school. What is a professor? A professor, is someone who is good at doing research. A lot of professors spend many hours, away from people, locked up in offices, doing research. Often, these people lack the management, motivation, team working skills and vision needed to run business schools. Universities are promoting faculty on being a good researcher, not a good manager.

The second issue is with the people actually being promoted. I have come across one too many business schools being run by people with PhDs in the associated areas (discussed above). How do we expect an economist to lead a business school? While some make the argument that it’s okay, but what about role reversals here. What about letting a person with a PhD in Marketing run an Economist department? I was mocked at when I made this suggestion to the President of a university. ‘They know nothing about economics, how can they lead an economics department’, I was told. Then how can we expect an economist, or a sociologist to lead a business school? I have witnessed one too many business schools fall to ruin because of the wrong people running the schools. As an example, I have recently come across a university, which is ranked as one of the best in the world, but they won’t allow the business school faculty to engage with business (as consultants or trainers). How then are these faculty members to teach students about real business, if they have no experience, or aren’t updating that experience. In another example, a person with a doctorate in economics, with research focusing on a war torn country, became the dean of the business school based in one of the financial hubs of the world.

Problem 5: Useless Research

Very rarely have I come across someone working in a company that reads academic journals. Yet, these are the go to places for business school academics when publishing research. Over the course of my two decades of experiences, I have seem a lot of rubbish research being produced. Research, which is useless to business and management, and yet year after year, faculty produce a whole lot of that junk. If business school is supposed to produce graduates that can manage and lead, then the research we do should focus on that. However, we find research topics which are so far from reality, that it has no use to business at all whatsoever. Eventually, business faculty then resort to taking this research and teaching it to their students. Business schools, hence, are stuck in a downwards cycle. The interesting thing is that universities reward faculty based on the research they produce - not the usefulness of that research to business, but how many other academics will read and cite that research. So the quality of research is judged on the basis of, how many of my colleagues (who themselves are producing useless research) will say I did good work.

This poor practice is then passed onto the students. When faculty supervise students thesis, or dissertations, they ‘encourage’ students to focus on research which has no, or little relevance to business. Instead they want publishable research. They do research for the sake of doing research. This kind of makes our downwards spiral go faster, since a lot of the people who actually do have PhDs in business, have researched things that aren’t actually useful to business!

Problem 5: Focus on teaching - not learning

Last, but not least is the problem of focusing on teaching and not learning. While this appears to be a generic problem across the board, it is more evident in business schools. Business is a practice oriented subject, which needs practical hands on learning tools and techniques. Many universities today are still teaching students through text books. Others are using case studies, which are better than reading text books, but need to be supplemented with more practical tools.  For example, if we are going to teach students carpentry, wouldn’t we want them to be using a saw and hammer and making things themselves, as opposed to reading about it, or reading cases about others who’ve done it? Reading case studies may have helped a select group of universities, however, it needs to be updated now. For an MBA course I teach, I got my students to work with advertising agencies. This allowed them to work on real projects and get guidance from the professionals working in the agency. The practical experience enhanced student’s learning, and made them more attractive to companies that were hiring marketing experts. The vast majority of the universities discourage this type of learning. As an MBA director, I brought in international study tours, where students would visit companies, meet with their senior management and learn how products were made, and sold. For example, a tour to Airbus helped them gain knowledge which got them jobs at Boeing.

Finally, there are many universities that still get their business students to do a thesis. In my career, I have yet to meet a single student (and I’ve taught well over 10,000) who said the thesis helped them out in their jobs. MBAs aren’t supposed to do research, then why make them do a thesis?

All of these problems are interconnected to each other. Business schools that are engaging in these problem areas, are in effect growing the termites. While business schools may look good on the outside (rankings, high number of student intakes, large faculty with PhDs, etc), they are in effect like the tree that got uprooted. Why are we waiting for a storm?