There were two fascinating articles in Business Week some years ago from a former Harvard business professor examining the fundamental problems with MBA education and her experiences at Harvard (The Old Solutions have become the New Problems). Given the changes accelerated by COVID this piece is worth re-visiting.
The article was written by Shoshana Zuboff who spent 15 years teaching on the Harvard MBA. She says ‘I have come to believe that much of what my colleagues and I taught has caused real suffering, suppressed wealth creation, destabilized the world economy, and accelerated the demise of the 20th century capitalism in which the U.S. played the leading role’. That’s pretty strong stuff coming out of a former Harvard professor. She goes onto criticize many of the concepts espoused on the MBA under the guise of shareholder value. These concepts include downsizing, re-engineering, outsourcing, etc, which led firms to focus on ‘financialization’ as opposed to innovation and wealth creation through new products and services. I would also add new business models.
According to Zuboff:
‘old rules assumed economic value. That’s why Harvard Business School students have been trained for a century in the “administrative point of view.” The manager’s job was to oversee and control what was inside organization space, or what they were trained to view as “my company.” Everything else was a distraction. The “administrative point of view” reflects a simpler time when business was about selling a product. It teaches you to operate from the perspective of organization space—how to maximize your company’s efficiency and serve its interests. It’s a world of boundaries: who’s inside and who’s out; who’s up and who’s down. It’s a world of producers vs. consumers, my company vs. your company, us vs. them. Business is no longer just about the product. Now it’s about solutions for the individual. Economic value is hidden in consumers’ unmet needs and is released by providing people with the means to fulfill those needs. But in order to release new value, you need to get out of organization space and into the subjective space where individuals live. I call it “I-Space.” This means shedding the “us-them” mentality. Now everyone is an insider’
What she says echoes many of the sentiments of world renowned McGill professor Henry Mintzberg. He has long criticized the concept of an MBA training people to be managers when they have never managed. He also dislikes the top B schools curricula and how they focus on technical functions and skills (such as finance or strategy) and neglect the soft skills and EQ so desperately needed in management. People interested in his point of view could do much worse than to read his book: Managers, not MBAs.
Although the article does not tackle this head on, at the end of the day, you have a model that is unsustainable and even worse, detracts from the thing that any firm should be trying to accomplish: the delivery of client value and satisfaction. As firms now see people as burdens they can’t support, tens of thousands of them have been laid off in the last year or so, precisely the actions that Zuboff (above) was warning against and in the midst of much research that downsizing does not improve performance. It is funny then that as work has picked up again for some, many firms are scrambling back to hire the very people they let go. This merry go round of messing with peoples lives must end!
Now I know that most people did not get an MBA from Harvard but this article highlights insidious forces within most organizations. Firstly, who said that shareholder value was the primary objective of any firm? The well known and outspoken economist Milton Friedman was a vocal supporter of shareholder value as the primary objective of any firm. He claimed ‘the social responsibility of business is to increase profits’. That may be so and I am not here to argue the ins and outs of economics, but surely the objective of any business is to enhance client value and create economic value through innovation. Not only that, but economic value should be based on innovation and not destruction. Within most firms we are sorely lacking an alternative view of capitalism. As Zuboff points out in her article, firms have become so concerned with shareholder value that they have done anything to achieve that without worrying about customer needs, innovation, or longer term viability. What is needed in most firms is an alternative view of capitalism. That view should consider the fact that money is not just made from self interest, cost control, shedding of staff, and seeing who sits on top of toxic performance measures like quarterly results. Money should come from delivering client value.
Managers and executives need to pull their heads out of the sand and realize that customer value is where the action is at. This is a fundamental mind set change about what management is and how firms should be making money. It is a fundamental mind set change as to why firms exist and whether following now extinct paradigms of management is not only a sure fire path to demise, it is a way of life that is undermining organizations, their workers, and our society in general. Until organizations realize that economic value lies in the interconnectivity of all our actions together they are doing themselves, their people, and their customers an injustice.
Strategy & Competitiveness 