Business schools are the academic setting where. The current crisis has highlighted the need to redefine the role of senior managers in organizations.

Transcription

1 c r o s os r oi a d s REDISCOVERING THE ROLE OF BUSINESS SCHOOLS The current crisis has highighted the need to redefine the roe of senior managers in organizations. JORDI CANALS Professor and Dean, IESE Business Schoo Business schoos are the academic setting where management knowedge is deveoped and researched in a systematic way. The Wharton Schoo, set up in 1881 within the University of Pennsyvania, was the first business schoo founded in the United States. Severa other graduate schoos were created in the U.S., such as Harvard and Dartmouth, before Word War I. In Europe, most of today s eading schoos were estabished in the ate 1950s and the 1960s. The positive effects of business schoo programs are evident through the ives of many successfu entrepreneurs and firms. The faiures and mistakes of individuas educated at business schoos, incuding those reated to the current financia crisis, distract us from the positive effects that business schoos have had in terms of deveoping exceent professionas across many industries in new and ongstanding firms. Business schoos have contributed to job creation and innovation, both in deveoped and emerging countries. The many chaenges that businesses and society face in the 21 st century wi ony heighten the demand for highy prepared managers and entrepreneurs. Today, business schoos are being criticized by some, in particuar regarding the roe they have had in the current financia crisis. In this artice, I wi briefy review some of the major chaenges business schoos face today. I beieve that business schoos need to take a more decisive roe in shaping the concept and mission of the firm, and rethinking the roe of senior managers in organizations. The current financia crisis has generated two types of criticism against business schoos. The first is reated to factors externa to business schoos. The second type has to do with some interna gaps and deficits that business schoos shoud recognize. Some externa factors Business schoos and the crisis. Some observers who eve criticism against business schoos such as ack of reevance, unethica behavior or negative impact on peope and firms have a point, though for reasons that are different from those sometimes mentioned. It is true that many MBA graduates have gone to work for Wa St. in recent years. However, even among the schoos where the investment banking industry recruited heaviy, the tota number of MBA 42 OCTOBER DECEMBER 2009 / no. 115 Aumni Magazine IESE

2 THE POSITIVE EFFECTS OF BUSINESS SCHOOL PROGRAMS ARE EVIDENT THROUGH THE LIVES OF many SUCCESSFUL entrepreneurs AND FIRMS. graduates in important manageria positions in those firms was reativey sma and their responsibiities were probaby simiar to those of other professionas who had not attended business schoo. Moreover, there are many business schoo graduates working in many other industries and having a positive impact on companies and society. A different question is whether senior managers with a good education from a good schoo coud have done more to avoid such a disaster in the banking industry. Gobaization. Many Western companies have faied in their efforts to become more internationa and goba. Some of them have committed strategic mistakes as they sought to penetrate foreign markets. Many more have taken cutura missteps when working in foreign environments. Perhaps more compex is the fact that deveoping and transferring taent in goba companies has become a nightmare, with a feeing of frustration experienced by both companies and empoyees. Business schoos have to do a better job teaching the processes and chaenges of gobaization in their programs and activities. In fact, business schoos sti have a ong way to go in terms of taking gobaization more seriousy. Corporate reputation. The damage to many firms reputations that has taken pace in parae with the recent economic crisis is a great concern. In many countries, firms used to be admired institutions that created jobs, generated investment and signaed advancement. Unfortunatey, these perceptions have changed over the past years. Some companies have suffered severe bows to their reputations. Many firms are seen as pure profit maximizers and their roe in society seems to be in question. This perception goes beyond the crisis of investment banks and other financia institutions. At the same time, some business eaders are seen today as the viains in these deveopments because they drove them or aowed them to happen.the pubic views them as opportunists with a short-term focus on their own benefits and privieges. Many business schoos are sti stuck in traditiona financia-based modes of management and have been very sow in reacting to these chaenges. Ethics, vaues and a more humanistic view of firms are dimensions that can be found in too few business schoos. Interna factors The mission deficit. Organizations with a strong sense of mission can deveop informa mechanisms that may ead to higher performance and increased work satisfaction. A cear mission sends a signa to the whoe organization by stating why a firm exists, what vaues it stands for and what purpose it has. Many business schoos do not have a cear sense of mission and what they seek to do in society. It is cear that a of them have the goa of heping educate peope and deveoping new knowedge. The question is whether this is sti vaid enough today and, if it is, what baance business schoos shoud strike betwen the activities they want to have. In principe, there is no superior mode, but it is important to understand why a business schoo exists and what it wants to be. IESE s view since its foundation in 1958 is that it shoud aim at deveoping eaders who aspire to have a deep, positive Aumni Magazine IESE OCTOBER DECEMBER 2009 / no

3 economic vaue. Nevertheess, this is not the ony goa that a company has, nor is it an objective that can be achieved by purey economic means, for severa reasons. Companies are groups of peope working together to serve cients in a very efficient way. Profits are one of the indicators of how the company is doing, but not the ony one. At a more persona eve, individuas woud ike to get things done in the best possibe way. But this aso means that they wi have to work with others to make the things happen. In persona reationships, trust is essentia. Corporate cutures and vaues that enhance the work environment shoud be a priority for top managers. Incentives that may destroy basic attitudes and vaues shoud be removed from the firm s poicies, even though the cost may have a short-term impact on profits. Companies are not ony profit maximizers. Decisionmaking modes that overemphasize this dimension, at the expense of ignoring others, may end up creating a concept of the firm that is far from the heathy view of the organizac r o s os r oi a d s and asting impact on coeagues, their own firms and society at arge through professionaism, integrity and a spirit of service. We think that good management and eadership can change peope s ives and organizations, and hep improve societies. IESE s programs aim at advancing the practice of management and eadership and generating programs and new knowedge that can contribute to this process. The reevance deficit. Business schoos became reevant institutions after Word War II because they heped tacke a very important need: the education of professiona managers and the deveopment of a body of knowedge about the main management discipines. In the 1970s and 1980s, many business schoos became more interested in promoting the same type of research as traditiona universities. The fact is that research became increasingy ess reevant for the practice of management, even if it was adorned with an aegedy superior academic rigor. The reevance deficit aso became very cear in the schoo programs. Many top U.S. and European business schoos did not offer executive programs unti very recenty. It was, in part, a matter of choice, but it was aso attributabe to the ack of interest that facuty members had towards working with senior executives on rea business probems. This shoud not be the case: research and practice shoud be cosey connected in business education and the cassroom is a great context where ideas, hypotheses and experience shoud be discussed. The humanistic deficit. In many schoos, facuty members see firms as organizations whose socia purpose is to maximize profits for sharehoders, and aign executive pay to economic performance. Unfortunatey, these theories have dispaced some higher ideas in the business word and the force of pragmatism in getting resuts has become the dominant paradigm. The caim that peope are important is stronger than ever; but in practice, many decisions are taken without considering their impact on peope. Today, we have management modes competey void of human presence, where decision making happens in a mechanica way and incentives shape the motivations of the agents. At the beginning of the 20 th century, prominent business peope had the perception that companies had a socia purpose, beyond making money. As a matter of fact, the foundation of schoos such as Harvard and IESE is rooted in the conviction that educating business eaders in a rigorous, ethica way is important for the good of society. Towards a new notion of the firm and business eadership Reframing the view and roe of the firm and business eaders in society is a priority for business schoos. If companies and senior managers are not viewed positivey in society, business schoos may become irreevant. A new view of the firm. A firm is an organization made up of peope who work together with the purpose of producing and deivering goods and services for cients, and creating economic vaue in the process and opportunities for earning and improvement for the peope invoved in the firm. This framework is a starting point for redefining the roe of companies in society. Companies have to create 44 OCTOBER DECEMBER 2009 / no. 115 Aumni Magazine IESE

4 CORPORATE CULTURES AND VALUES THAT ENHANCE THE WORK ENVIRONMENT SHOULD BE A PRIORITY FOR TOP MANAGERS. tion that a dynamic society actuay needs. From the 1980s through the 2000s, we witnessed the unstoppabe preeminence of capita markets, investment banks, financia goas and an amost excusive view of firms as profit makers. Many of the excesses and crises that appeared over those years were in part a natura outcome of a warped view of the firm. A positive view of the firm goes beyond an effort to avoid scandas, athough it can certainy hep diminish their ikeihood. Peope in companies: A humanistic view of the firm The dominant economic and socioogica paradigms in management have put forward simpified ideas of individua behavior in organizations. In both approaches, the notion of individua freedom is repaced by determinism: Given the right incentives and the right environment, peope wi aways behave in a certain way. This assumption is at odds with one of the basic tenets of many companies and management schoars: peope do matter. Some companies tak about peope as their most important asset or piar. Unfortunatey, many manageria modes across different discipines finance, marketing and organizationa theory simpy take a ighthearted view of peope in organizations. The humanistic perspective of the firm has severa piars. The first is that each person is unique and can make a unique contribution. Second, each person has intrinsic dignity and basic rights to be respected in the workpace and in society. Third, each person has the freedom to make decisions and the right to act free from coercion to use this freedom against his or her own wi. Fourth, each person is responsibe for the use of his or her capabiities and rights, and for the externa actions for which he or she is accountabe to others and society at arge. Fifth, each person has basic materia needs, but aso has aspirations and motivations that go beyond materia and economic incentives. Sixth, each person has vaues that have to be respected as ong as they do not do any harm to other peope or to themseves. In the past, many theories made the assumption that management was a neutra entity. Management is not neutra. It invoves peope making decisions and peope receiving the infuence of those decisions. And decisions are based on choices and vaues that each person has. The isoation of the decision-making process as a pure rationa process is not a rea experience. Managers shoud bring vaues to the workpace. However, there are conditions for sustainaby carrying this out and avoiding cashes with peope with different vaues: each person respects the other person as a unique human being with intrinsic dignity that deserves respect. One s vaues have to recognize this very simpe point. Aumni Magazine IESE OCTOBER DECEMBER 2009 / no

5 c r o s os r oi a d s THE CHALLENGES FACING BUSINESS SCHOOLS ARE GREAT, BUT THEIR FUTURE VERY MUCH DEPENDS UPON THEIR ABILITY TO SERVE ENTREPRENEURS, FIRMS AND society. The roe of senior managers. A new notion of the firm has impications for the functions and roe of senior business eaders. In a cose parae with the view of the firm as profit maximizer, the roe of senior business eaders, starting with the CEO, board members and members of the top management team was seen as maximizing profits and market vaues in the short term. There is nothing intrinsicay wrong about this, except that a firm s vaue creation is the outcome of a process. If this process is not we designed and we managed, the outcome cannot be good. This perspective does not ignore financia resuts, but refects the reaity that good performance is the outcome of many decisions regarding peope, cients, products, services, operations and other factors. The chief executive s roe is to make sure that peope work in a way that is both efficient and effective, that makes them fee proud about what they do, that generates cients who are peased with what the firm offers them and sharehoders who are peased enough with the financia performance of their investment. This view of business eaders has a critica impication: business eaders are professionas whose function is to serve. Service is the key attribute in any profession worthy of its name, and this is aso true in the business word. A eader who does not serve her peope, her cients, her sharehoders, her society, is not a good professiona. He or she may hep the company make money in the short term but may create an unsustainabe organization in the ong term. This view aso reminds us that business eaders have to ead by exampe. Many successfu organizations have passed the test of time, despite manageria mistakes, because their CEOs have ed by exampe. The exampe consists of a mix of professionaism, fairness, virtue, courage, strength and generosity in thinking of others. This does not mean putting other peope ahead of us, which may not even be human, but putting other peope and their interests and ambitions at east at the same eve as ours. By taking this perspective, senior managers have the potentia to be an important force for change in society, and mangement can be a profession that serves the common good. Some fina refections Management remains an important profession in society today. The chaenges facing business schoos are great, but their future very much depends upon their abiity to serve managers, entrepreneurs, firms and the community. One important step that business schoos must now take is to redefine the view of the firm. In addition, they must redefine the meaning of the management profession, the roe of senior managers and the unique mission of companies in society by going beyond the generation of economic vaue. IESE Business Schoo has focused on these goas ever since it was founded in The strong sense of IESE s mission and vaues, aong with the entrepreneuria drive of its facuty, staff and aumni, has ed the schoo to grow successfuy, and has aso heped to create new schoos and programs around the word. IESE s fundamenta vaues are quite unique among business schoos wordwide and the current financia crisis shows us that these vaues are more important than ever. 46 OCTOBER DECEMBER 2009 / no. 115 Aumni Magazine IESE