REENGINEERING THE MBA In search of the ideal MBA, business schools are changing their courses -- and the kinds of students they admit. Quant jocks could be out, verbal types in.
(FORTUNE Magazine) – IT'S A BIT like watching a scientist develop a drug to cure a serious illness. But the patient is American business, the hoped-for cure is a new, improved MBA, and the scientist at the moment is John Hershey, professor of management at the Wharton school in Philadelphia. Hershey has drawn a diagram on a blackboard showing how Wharton professors from previously unrelated disciplines are coordinating lectures so that students learn to grapple with business problems in new, multidisciplinary ways. But Hershey, without realizing it, is frowning at his diagram. Will the MBA students understand that the solution to a case study presented by a marketing professor lies with a math formula taught a week earlier by another prof? He is not sure. Hershey is not alone in his uncertainty. These days every business school dean worth his baggy tweeds is agonizing over what exactly it is that an MBA -- or anybody else -- will need to know or do to be effective in business a decade from now. And is it teachable? Business education's current plunge into self-analysis is the deepest in 30 years, prompted by, among other things, an end to the exploding demand for the MBA degree by college grads (see chart), increasing complaints from companies about the usefulness of MBAs, and new rankings of schools that appear every few years. Every B-school dean knows what to confidently promise: The ideal executive of the future -- and every one of his school's graduates -- will be a leader, not a mere manager. Global in outlook. Facile with information systems and technology. Able to capitalize on diversity. A visionary. A master of teamwork and a coach. Walks on water too. Try poking through the rhetoric, though, and many of those terms get squishy fast. How exactly does a leader differ from a manager? What are the attributes of a globally minded executive? PROFESSORS can sometimes put their fingers on a piece of the puzzle, but there are no consistent, universally agreed-upon answers. It's not even clear that the business schools are working with the right raw material. Many have a tendency to favor students who score well on the math portion of the Graduate Management Admission Test (GMAT). But recent research at the University of Southern California suggests that students with high verbal scores may be better at coping with ambiguity and uncertainty, a crucial talent for managers moving into jobs with few ground rules and much call for improvisation. The companies seemingly so anxious for MBA messiahs don't offer much guidance, either. Research by Maury Hanigan, a New York City consultant who advises companies on recruiting MBAs, shows that few corporate recruiters pay attention to the mix of courses business schools actually teach. And the executive brass sitting on B-school advisory boards tend to be adoring alums and contributors, not searching critics. Says Lester Thurow, former dean at MIT's Sloan school: ''Business speaks with a forked tongue. Every CEO says MBAs should know a second language. But corporate recruiters won't pay $500 extra for that.'' Even if the B-schools knew what to deliver, says Mary Ann Lynch, head of recruiting for AMR, the parent of American Airlines, ''companies are changing so fast that it's hard for the schools to stay out in front.'' Schools nonetheless are trying to respond, and the upheaval at some is enormous. For example, the University of Michigan under Dean B. Joseph White has turned itself inside out, adopting a ''medical school'' model that requires students to get considerable practical experience working at corporations. Harvard, by contrast, is proceeding deliberately through a multiyear review unlikely to produce many dramatic changes. At most places, the barriers to change are formidable. B-schools are often as badly organized as the worst corporation, with tenured faculties that refuse to do anything differently. Other institutions cannot afford the high cost of developing new teaching methods. Still, the pressure on the nation's 700-plus business schools to improve their products is high. Many, especially some of the 400 or so that sprang up in response to the big demand for MBAs in the 1970s and 1980s, may eventually be forced to close for lack of students. Hanigan says corporations that once hired 100 MBAs a year now take only a few dozen, then spend weeks giving them additional training. Consulting firms like McKinsey and Gemini are recruiting more and more people without MBAs at all. SOFT corporate demand won't disappear anytime soon. A FORTUNE poll of top CEOs found that 68% expect no change in the percentage of MBAs they hire. Only 26% plan to recruit more. William Broesamle, president of the Graduate Management Admission Council, which administers the GMAT, the B-school equivalent to SATs, says even the best schools can't relax. ''The top business schools won't go away. But it's not clear if they will become marginal or an essential, vibrant part of the business scene.'' The current round of B-school soul-searching has its roots in the last great reformation of business education, which occurred in the 1960s. Then, in response to criticism that they were unchallenging ''schools of commerce'' for the cerebrally limited, business schools set out to become more rigorous and intellectual. Professor Harry Davis, who teaches marketing at the University of Chicago, says schools and businesses came to believe that the ''critical ingredient in management was knowledge -- the broader and more abstract, the better.'' It was thought that a manager's decisions would be better if he understood, say, the economists' definition and theory of self-interest. Enough of this worked to convince the academics they were on the right track. The capital asset pricing model, developed by the University of Chicago and no child's toy to understand, has had a profound and lasting effect on financial markets. But, says Davis, even the best schools fell into a trap. ''We became enamored of the notion that being an expert was enough to run things. Nobody paid much attention to effectiveness. But being smart is not enough.'' Now the search for the model MBA has begun to veer off in another direction, often emphasizing hard-to-measure attributes such as interpersonal skill, initiative, and the ability to see patterns and opportunities in apparent chaos. A crop of airheaded smoothies on the way? No, insist the deans. Traditional so-called hard skills like accounting, marketing, and finance are still essential, they aver. BUT EMBLEMATIC of the shift in focus is the addition, later this year, of two essay questions to the GMAT. Schools and employers are clamoring for students who can communicate effectively, says Broesamle. He believes that writing on a complicated topic, such as the pros and cons of censoring television and music lyrics, will test students' creativity and their ability to synthesize information, not just to analyze it. So what else do MBAs need to know, be, or appreciate to succeed? None of the qualities listed below were irrelevant before, but all have become vastly more important.
-- Cross-functional. That's jargon, but it means the ability to combine disparate skills to solve problems. It's also a polite way of saying that earlier waves of MBAs may have known tons about particular subjects but often didn't know when or how to use their knowledge. Yoram (Jerry) Wind, a marketing professor at Wharton, talked to 300 CEOs and senior executives in 1988 to determine what forces would affect the skills MBAs need to master. The CEOs cited globalization and technology but also mentioned changing lifestyles, demographics, and values. What struck Wind was that traditional B-school functional skills such as accounting and finance, each taught separately, wouldn't adequately prepare students. Business people must think outside their disciplines to identify the nature of a problem, he determined, then figure out what information they need and where to get it. Says Wind: ''It's not just skills. It's the interrelationship of skills.''
-- A visionary. John Kotter, a professor of leadership at Harvard, has asked executives to list the qualities of great managers and leaders. The reply: Managers are disciplined planners and budgeters, systematic types who plot out who should do what. In effect, ''they make organizations function as designed.'' Outstanding leaders, on the other hand, help ''create a vision of the future. They communicate the vision widely and motivate people to break through the barriers.'' Are you doomed as a leader if you're not wavy-haired, handsome, and charismatic? No, says Kotter. In the MBA students he has observed over 20 years, leadership turns out to be more substantial and less cosmetic. Leaders converted a deep understanding of a business into a vision and worked hard to persuade others of that vision. Their convictions inspired people around them to action too. As if you didn't know, leadership is in these days, and management is out, or at least relegated to people lower in the organization.
-- A team player and team leader. Working effectively on teams is the most important new skill MBAs should have, according to the CEOs polled in FORTUNE's recent survey. Ross Webber, another Wharton prof, has studied the nature of team leadership among Americans. ''Self-appointed leaders are rejected,'' he says. ''The MBA who arrives thinking he or she is a leader has the most problems with hubris and arrogance.'' The person whom others accept as a leader is the one with the best sense of the challenge confronting the group. He or she can break problems into manageable, status-neutral tasks that the group is willing to take on. (Among Japanese, says Webber, leadership emerges later in the thrashing out of a problem. It is conferred on the person who articulates the emerging consensus of the group at the proper moment.) Leadership on a team can shift. At one stage, the group may coalesce around a leader with technical expertise. At another, it may reject the techie in favor of someone who communicates particularly well.
-- Ethical. Most MBA students have to be dragged into ethics courses, observes David Messick, a professor who teaches several at Northwestern's Kellogg school. Says Messick: ''They expect it to be a 'Don't steal' remedial course for jerks like Ivan Boesky.'' But he has found that experienced managers are sometimes desperate for guidance through ethical minefields. Technology and internationalization have compounded the ethical issues of business, says Messick. Is it okay for athletic-shoe companies to sell sneakers for $120 when they are made by Asian factory workers earning $2 a day? When critics complain that a malt liquor maker is targeting ads to blacks in ghettos, is it better for the brewer to withdraw, or is it patronizing to assume that ghetto blacks can't make consumer decisions on their own? No easy answers -- and be aware that even good people can get clobbered by ethical problems when they least expect to.
-- Global. This rarely means mastering 22 ways to shake hands in Romania. More often, it's a true appreciation of how differently -- and equally well -- things get done in other parts of the world, and how you had better take steps to understand this deeply. Sounds obvious, but Americans are so accustomed to the huge and homogeneous U.S. market that they don't take differences seriously enough. American business schools have only recently begun consistently including global issues in case studies. Eventually, says George Bain, principal of the London Business School, Americans who spend time studying or working abroad realize that ''they're the ones speaking English with an accent.'' Should would-be global execs learn to speak a foreign language? That depends, says Bain dryly. ''If you're buying, you can get away with operating in your own tongue. If you're selling, it certainly helps to speak the customer's language.''
-- Computer fluent. Computers are so reliable and easy to use that there can be no excuse for ignorance of them. Computer networks are creating the new organizational structure of companies, says Richard Nolan, a professor at Harvard. It's as though the ivy growing on the outside of a building gradually penetrated and dissolved the concrete, and now the ivy is what holds everything together. ''You need to know the form of the information technology-driven network and how work is done in it,'' says Nolan.
-- Comfortable with technology. If your company makes something, you must understand how -- in detail. No excuses. No calling in the experts every time you have to make a decision. Thurow at MIT says the financial types running American steel companies a few years back didn't understand important new processes like continuous casting. They decided to wait and see how the processes worked in other countries. By the time they found out, it was too late to catch up. ''You don't have to be a scientist,'' says Thurow, ''but you must be able to read the material and know how to proceed.''
-- Smart and conscientious. Brains aren't everything. You knew that already, but researchers are proving it. If you're pretty dumb, you're in trouble. But if you're smart enough to get into a good business school, you've got all the intelligence you need to do well. Says Kotter at Harvard: ''In a study I've been doing of members of the class of '74, there is no positive correlation between their GMAT scores and how well they're doing on the job in terms of income and responsibility.'' Jennifer Chatman, a professor at Berkeley's Haas school, says personality assessments given to students beginning in 1986 are turning up some interesting results. Students who had high scores on the GMAT and who scored well in an area labeled conscientiousness, fared far better than those weak in either area, as measured by salary and promotions five years later. Conscientiousness involves more than ambition, says Chatman, who describes it as ''a composite of how hard-working, thorough, efficient, reliable, and ambitious you are.''
-- Some experience of excellence. An appreciation of excellence was mentioned, unprompted, by several venerable professors as an important quality of outstanding MBAs. It comes, says Harry Davis at Chicago, from mastering at least one thing supremely well. It can be anything -- music, mechanics, motorcycle racing. Says Davis: ''If you don't go deep into something, you don't know what extraordinary performance is. You get satisfied with ordinary performance. And if you've never experienced it yourself, it's hard to be a role model.'' Adds Kent Bowen, who teaches manufacturing at Harvard: ''Without an experience of excellence, you won't appreciate the quality in others.'' As business schools begin putting more emphasis on attributes like these, they may well be forced to admit a different kind of student. By and large, the better schools are choosing older applicants. Since 1988, their students' average age has risen by roughly three years, to about 27, and they have far more work and life experience than younger MBA candidates. Top schools also rely less on grades and test scores, operating more on the principle that the best predictor of future performance is past achievements. Northwestern's Kellogg school was among the first to recognize the importance of interpersonal skills in MBAs. Starting in 1986, it began to interview all candidates for admission. Harvard's application probes for a candidate's personality and values by asking applicants to describe a personal setback and how he or she coped with and learned from it. Sally Lannin, head of a Minneapolis firm that advises students on how to get into top B-schools, says that such schools are looking for signs that applicants can get along with people in different functions -- engineers on the job, say, and musicians on that community project for the homeless. TOO OFTEN, though, B-schools still engage in an unproductive hunt for a particular kind of brainy student. Many second-rung schools believe they can hoist themselves into the top tier of magazine ratings by seeking out applicants with high GMAT scores, thus boosting the school's average. That may do wonders for the dean's ego but little else, says Michael Driver, a professor at the University of Southern California business school. The problem is that B-schools tend to choose applicants with high math scores on the test over those with strong verbal scores. Big mistake. Those math wizards, Driver's research found, have personality and decision-making traits that work reasonably well in corporations with rigid hierarchies, but not so well in organizations operating with loosely managed teams. ''The profile that correlates with high quant/low verbal scores is appalling,'' says Driver. He recently analyzed standardized personality tests given to 1,200 business students at USC. The quant jocks, he found, were intolerant of uncertainty, surprisingly unanalytical, and uncomfortable with complex data. They weren't social, artistic, or enterprising, either. The highly verbal, Driver discovered, thrive on complexity and uncertainty. They tended to be open-minded, analytic, nonjudgmental, and better at integrative thinking -- using scattered bits of information to develop a big picture. Says Driver: ''Verbal types take in a lot of data, but instead of jumping to one conclusion, they proceed on intuition, relying on teamwork and using persuasion to involve others.'' William Broesamle, the GMAT man, says he is intrigued by Driver's work but not yet ready to alter the test in major ways to reflect such findings. ''It isn't possible to pretest people to perfection,'' he says. ''I get antsy about using personality variables for high-stakes decisions like who gets into business school.'' EVEN AS THE B-SCHOOLS tinker with finding the right raw material to bring into their factories, many are making major changes in what students do after ( they arrive. In the first week of school, the University of Michigan loads its students onto buses for half a day of Outward Bound-style exercises, followed by a day and a half of community service. Dean White admits some of that sounds faddish -- it is faddish -- but says it instantly exposes students to teamwork and makes them aware of social problems. The University of Chicago used to be famous for producing shrewd but unworldly economic analysts. These days, students get appraisals on their operating style from teammates while they work on real business problems for companies like Kraft. Frederick Sturdivant, managing director at Gemini, has noticed the difference. ''For years we only recruited at five schools, but we recently added Chicago,'' he says. Elisa Gerstel, a Chicago student who recently got a job offer from Gemini, thinks the interpersonal skills she has learned will pay off. ''The name of a good school is still important to clients, but there's a big difference out there in how MBAs are perceived. Nobody is automatically impressed. You have to sell yourself.'' Harvard, always a tempting target, has been criticized for moving too slowly in its reforms. Tim Westerbeck, a marketing consultant for several business schools, says: ''Harvard is not on the cutting edge in the timing of curriculum reforms. A lot of schools have been doing it for a long time.'' Leonard Schlesinger, a professor at work on Harvard's multiyear review, isn't predicting fireworks on the Charles: ''We're making a gentle shift away from training and development of general managers where leadership is implicit, to where leadership is explicit and general management is implicit.'' Harvard also wants students to realize that they will need to go back to school from time to time for the rest of their careers. Says Schlesinger: ''For the Harvard business school to adopt the model that we are not the be all and end all for our students is not easy for many people here to face.'' Corporations will probably never get all the leaders and visionaries they want from business schools. Many still have enormous expectations of these 29- year-olds, asking of them talents that few chief executives possess. It remains to be seen, too, whether business schools can really pull off personal transformations, or whether they will be useful mainly for their ability to screen talented and ambitious workers for employers. If business becomes frustrated with the wave of reform, it deserves some of , the blame itself. Companies generally make a poor effort to ferret out and reward innovative B-schools. They rely too much on magazine rankings like Business Week's, which, while seemingly scientific, depend almost exclusively on comments from recent grads and recruiters. Or, complains a frustrated Thomas Moore, dean of the MBA program at Babson College in Massachusetts, the companies recruit at Venerable University because that's where the boss went. VIEWED in another light, for all their glamour, B-schools are just a business, providing a service to companies. While their faculties feature pockets of genuine wisdom and insight into what students and companies need, their true value to customers has been clouded in mystique and rhetoric. As any professor knows, in the hypercompetitive world edging nervously toward the 21st century, that kind of organization can't stay in business for long.
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