Economic crisis leads business schools to meld ethics into MBA
By Jennifer Epstein, May 5, 2010
A few years ago, any discussion of the master’s in business administration would begin with discussions of scandal and mismanagement. Look at instances of accounting fraud at Enron and WorldCom: MBAs behaving badly. A president of the United States with mixed approval ratings and plenty of opponents in his own party: an MBA whose leadership skills seemed lacking.
Business school discourse today has a new set of topical lessons, emphasizing the roles played by MBAs in precipitating the global recession and creating financial products that benefited corporations but hurt consumers. “When we bring students into business school, we narrow their vision,” says Stephen Spinelli, president of Philadelphia University and co-founder of the Jiffy Lube auto service company. “We teach them to focus with increasing blinders until they have pinpoint recognition, but that limits what they can see on the periphery.”
A much-maligned concept like mortgage-backed securities, he says, “in its construct … could be taken as being sound—a hard asset that has clear value.”
With broader perspective, they’re tougher to define and much riskier than they might seem. “You become dislocated from the person and their ability to pay that loan, the value of the property, what’s happening in the neighborhood around that property and what’s happening with the job market in that city and region.”
The financial crisis has administrators and faculty at business schools around the country rethinking that narrowing approach. Courses and curriculums are being revised to avoid building silos in business schools and students’ minds. Words—and ideas—like globalization, innovation and sustainability are taking hold.
Though he first started thinking about broadening students’ perspectives a decade ago while serving as vice provost at Babson College, Spinelli says that his ideas solidified as he watched investment banks crumble and ordinary people face foreclosure. “If we don’t teach people to sort of look around and have greater peripheral vision, then we’ve just set ourselves up for the next crisis,” he says.
In the fall of 2011, Philadelphia will roll out a revamped MBA program that will emphasize collaboration with the university’s engineering and design schools. Business students will work on hands-on projects with students in other fields, all with the aim of preparing them to collaborate once on the job.
“We used to think it was highly collaborative when marketing and finance were working together,” Spinelli says. “Now we see that partnerships need to be much broader; three-dimensional collaboration needs to be taught.”
Yash Gupta, dean of the Johns Hopkins Carey Business School, has a similar perspective. “What has happened in the last 18 months has shown that you cannot manage a complex system by dividing it into smaller pieces and optimizing those pieces without considering the whole,” he says. “You cannot build an organization by simply maximizing shareholders’ value. Customers, employees, the general public are important.”
In building a curriculum at Carey, which spun off from Hopkins’ School of Professional Studies in Business and Education in 2007, Gupta looked to industry for recommendations. Among the abilities and skills companies said they wanted from their employees: adapting to change and being flexible; critical thinking; a broad worldview; connecting invention with innovation; and linking content to context.
All of those things, Gupta says, will be interspersed throughout the global MBA program that Carey is beginning this fall. Rather than simply having one class on ethics or decision making as some other schools do, the curriculum will include those skills throughout.
“We’ll teach students about decision making—behavioral, rational, how the brain functions—in the first year, but we’ll also give them chances to make decisions,” he says. “We’ll bring in CEOs or prominent academics to talk about ethics and ethical concepts, how managers sort things out and decide which decision is the right decision.”
Carey will treat globalization similarly. Rather than taking a few classes on international business or an optional specialization, all students will work on projects in the developing world and spend time learning to work with people from different backgrounds.
The school is taking the right approach, says John J. Fernandes, president and CEO of the AACSB: Association to Advance Collegiate Schools of Business, the world’s largest business school accreditor. “You can’t look at things as compartmentalized,” he says; everything needs to be interconnected, and everything must be contextualized to everything else.
“After Enron and WorldCom, everyone said, ‘Let’s teach ethics,’ but they did it in the corner as this separate discussion,” Fernandes says. “But it is best taught across every business discipline because they all have different ethics challenges.… It’s best taught across everything we do.”
At Harvard Business School, where administrators insist that ethics has always been incorporated throughout the MBA curriculum, it became clear that there was a need for students to get a solid dose of ethics. In 2004, the school began requiring all students to take “Leadership and Corporate Accountability” during the second term of their first year.
David A. Garvin, a professor of business administration, describes the course as “a way to give students a sense of the responsibilities that they will have to all these different stakeholder groups.” With shareholders, they’ll have to worry about fiduciary responsibilities. With customers, “information asymmetries” (as Garvin explains it, “Under what circumstances do you need to disclose?”). With employees, students will be educated about treating them fairly. With the public at large, MBAs’ responsibilities may be even greater—to deal with issues like child labor and freedom of speech.
Though these were all pre-financial crisis concerns, the high-profile ethical lapses that helped precipitate the downturn have only intensified the sense that MBA programs need to do more to create ethical graduates. Students in Harvard Business School’s class of 2009 drafted and spread “The MBA Oath,” a brief code of ethics that has been signed by more than 2,500 MBAs and business students.
In conducting research for Rethinking the MBA: Business Education at a Crossroads, a book published last month, Garvin says he heard from executives and deans who, after well-publicized accounts of unfair business practices and gigantic post-bailout bonuses, hoped to see ethics education ramped up. “There was a sense of a greater need in helping students understand the roles, responsibilities and purpose of business and business leaders.”
Executives and deans also told Garvin that they saw a need for students to better understand “the limits of models and markets—risk, restraint and regulation,” he says. Before the economic crisis, they came up with an even lengthier list of near-universal needs:
Having a global perspective.
Developing leadership skills.
Improving integration skills.
Understanding organizational realities and implementing them more effectively.
The ability to act creatively and innovatively.
Thinking critically and communicating clearly.
None of the needs are too surprising, but they are tough things to teach that business schools must continue working on.
Creativity and innovation are at the core of a new report from the AACSB, in which a task force of deans, university presidents and business leaders calls on business schools to play a larger role in innovation.
Although business schools are “built to go in a lot of different directions, and we as an accrediting body don’t try to push them one way or the other,” says Fernandes, the association’s president, innovation is something administrators and faculty should be thinking about. “If the light’s not already turned on, it turns that light on for them, that they should apply an innovative intention to their strategies.”
Business schools don’t have to be hotbeds of invention, just places where students and faculty develop better processes and products. Robert S. Sullivan, dean of the Rady School of Management at the University of California at San Diego, points to Apple’s creation of devices like the iPad as the sort of thing business schools ought to be training students to do. “The technology in the iPad is not a new invention,” he says, “but Apple looked around the corner in terms of figuring out what people want without necessarily asking them.”
And the products that business schools must train students to develop aren’t just glitzy gadgets or risky financial instruments; they’re things that will benefit humanity—business schools hope.
“If the world has shrunk, then business schools must solve the world’s problems,” says Gupta, of the Carey School. People who face challenges of “poverty, education, health: these are going to be my customers and employees tomorrow, so business schools must help them, too.”