Professor Christina Ahmadjian: Business Schools after the Financial Crisis

Professor Christina Ahmadjian: Business Schools after the Financial Crisis (November 16, 2009)

The following article was originally published in The Nihon Keizai Shimbun "Keizai Kyoshitsu" in Japanese (please click here for the PDF). An English version of this article is provided below.

Business Schools after the Financial Crisis

Christina Ahmadjian
Professor, Hitotsubashi University
Graduate School of International Corporate Strategy

Are business schools to blame for the global financial crisis? After all, the bankers whose wild risk-taking almost brought down the world financial system were MBAs. The researchers who created the models that failed so dramatically were business school professors. Inflated compensation schemes, irresponsible deregulation, and excessive attention to short-term profits were all part of a system of capitalism that many business school courses promoted as the best way to organize an economy.

Even as the global economy begins to recover, the debate about how much business schools are to blame for the crisis and how much business schools must change to prevent future crises continues. Yet, even though the crisis has battered the reputation of the MBA degree, the popularity of MBA programs has not decreased. According to the Graduate Management Admissions Council, many MBA programs around the world have actually seen increases in applications. While full time programs in the U.S. have experienced declining admissions, applications to 1-year programs outside of the U.S. are rising, and the MBA degree remains extremely popular.

Business schools have reacted to the global financial crisis in a number of ways. Professors, always looking for new research topics, are studying the causes of and solutions to the crisis in areas such as behavioral decision-making, corporate governance, and regulatory systems. New courses examine the crisis in detail, and offer future business leaders lessons on how to avoid a similar disaster. Business school faculty and students are talking more about ethics and corporate social responsibility. Recently, Harvard Business School students have attracted much attention for signing a voluntary pledge to "create value responsibly and ethically."

It is difficult at this point to know if these changes are real or are simply a quick response to bad publicity. But whether or not these changes take root, too much attention to how business schools are responding to the financial crisis obscures a bigger and more important picture. Over the last decade, business school education around the world has been changing profoundly, and the financial crisis has only hastened changes that were already underway.

Probably the most important change in business school education is globalization. Business schools are no longer an American phenomenon. In 2009, 11 of the top 20 schools in the Financial Times business school rankings were located outside of the United States. According to the Economist rankings, the top two full-time MBA programs were in Europe: IESE in Spain and IMD in Switzerland. Particularly striking is the rapid growth of business schools in Asia. Governments and firms have been extremely generous in funding local business schools to develop managers who can function not only in the local economy, but also represent their companies around the world. In 2009, 3 of the top 20 schools in the Financial Times rankings were Asian: Hong Kong University of Science and Technology, China Europe International Business School, and Indian School of Business.

In fact, it is becoming increasingly difficult to categorize leading business schools as American, or Asian, or European. Professors are often born and educated in different countries and even on different continents from the universities where they teach. Chinese, Korean and Indian students increasingly dominate leading PhD programs and find teaching positions in western schools, while Asian schools compete for the top western scholars. More and more schools are offering dual degree programs, where students receive degrees from two schools. Executive MBA programs in particular are increasingly borderless, with students splitting their time between two or more business schools. For example, the world's number two executive MBA program (according to the Financial Times) is a collaboration between New York University, London School of Economics and HEC School of Management in Paris.

Another striking trend in business school education is increased attention to research and thought leadership. The top U.S. business schools such as Stanford, Columbia and the University of Chicago have long been known for cutting edge of research in economics, psychology, and sociology. Harvard has long held a reputation for creating knowledge immediately useful to business executives. Lower-ranked business schools and non-U.S. business schools, however, tended to focus on teaching and providing business skills and training but offered little in the way of new ideas. This has changed dramatically, as even these schools increasingly emphasize research productivity and quality. Business school professors are evaluated today on their ability to publish papers in top-ranked, global journals, in business and in social science disciplines.

Another trend in business education that has intensified since the financial crisis has been in social enterprise. Social enterprise is about using business skills to make a difference in the world, through addressing problems such as poverty, education, human rights, and environment. A prominent business school ranking system, the Aspen Institute's "Beyond Grey Pinstripes," rates business schools on the extent to which their programs emphasize environmental and social issues in their curriculums. Particularly striking are efforts of business schools to encourage social entrepreneurship through programs that encourage and train students to start their own enterprises that address social and environmental issues. For example, each year, students from leading global business schools submit business plans to the Global Social Ventures Competition, sponsored by a number of leading business schools including the Haas School of Business at the University of California at Berkeley and the Indian Business School. This year, the winners included a team from a business school in Indonesia for their environmentally and socially responsible business producing bricks made of cow dung, and team from a U.S. business school for a business that provides solutions to the problem of counterfeit pharmaceuticals.

Finally, the nature of business school teaching has changed significantly. While a decade ago, the case method was still the leading teaching technique, business schools now embrace a wide range of teaching methods and approaches, ranging from field study, experiential exercises, web-based simulations, games, personal assessment, and coaching. The idea behind this change is that business education is about developing the whole person-increasing their self-awareness, their interpersonal skills, and their knowledge of world issues beyond business, and also giving them opportunities to practice their skills. Stanford Business School, for example, requires first year students to attend seminars in critical thinking. Wharton sends students on leadership development exercises in places ranging from Antarctica to U.S. Marine bases.

In the face of these substantial changes, Japanese educational institutions have been striking in their absence. Japanese business schools do not feature in the global business school rankings. Japanese PhD students are few in top global PhD programs. Research by Japanese scholars rarely appears in global management journals, and research on Japanese business and economy by scholars from country is also uncommon. Whether deserved or not, the reputation of Japanese students in global MBA programs is as passive, uninterested in learning, and poor at English, especially in comparison with their Chinese and Korean counterparts.

Perhaps Japan is unique, and the trends in global business education are simply not relevant to Japan. After all, business in Japan is still done in Japanese, the permanent employment system still prevails in large companies, and entrepreneurship is still not a very viable career option for young graduates. Perhaps Japan remains an isolated island in business education for good reasons. But, in many ways, the trends observed in global MBA education make business schools more relevant to Japan than ever. As Japanese businesses compete in an increasingly interconnected world, the emphasis on global leadership seen in the curriculum of leading business schools is increasingly important. The increased emphasis of MBA programs on training the whole person, on teaching not only skills, but also interpersonal skills, values, and self-awareness is very consistent with the long-standing emphasis in Japanese management on character and relationships. Social enterprise is particularly relevant to Japanese companies, which have long subscribed to the idea that companies must serve the community and not just shareholders.

Furthermore, if Japanese firms and universities separate themselves from global trends in business education, the world loses. Japanese firms have much to teach the world-in areas such as environmental technology, customer service, quality, and supply chain management. The Japanese style of capitalism, with all of its strengths and weaknesses, may provide some new hints as world political and business leaders look for new economic models.

The globalization of business schools and the increasing popularity of the MBA in Europe and Asia and around the world also means that Japanese managers will increasingly need to work with MBAs-as employees, managers, business partners, customers, and suppliers. Japanese firms will need to negotiate with MBAs, raise money fro MBAs, pitch deals and products to MBAs. Can Japanese companies afford to not be able to speak the same language?

The Nihon Keizai Shimbun "Keizai Kyoshitsu"
Morning Edition, November 16, 2009, page 21