The pretense of knowledge

The financial crisis re-opened a debate about the responsibilities of business schools for corporate wrong-doing. Schools were forced to respond to articles like this, which pointed out that the offending banks were full of MBAs from top schools, and to books such as What They Teach You at Harvard Business School, which revealed in colorful detail the self-referential world of the Harvard MBA program. Both the book’s author, Philip Delves Broughton, and the NYT article made much of research showing that MBA students are more likely to cheat than other graduate students.

A Harvard Business Review debate called “Are Business Schools to Blame?” captured the discussion going on within schools themselves. Not surprisingly, some participants, notably Andrew Likierman, dean of London Business School, simply batted away the question, arguing that schools could not be accountable for a few bad apples. Others said schools could do a better job of teaching ethics, and provide students with more practical advice for dealing with real-world situations. Others suggested that schools “strike off” wrong-doers the way doctors and lawyers do, or ask students to take something like the Hippocratic Oath before beginning their studies. Much of the discussion centred on the age-old question of “rigor or relevance?” – ie whether schools should chase academic integrity, or primarily train students for the world of work.

But the issue, I think, goes beyond responsibility for this or that crisis, the teaching of ethics, or whether schools should adopt certain quality control measures. Schools and companies have yet to really address more damning criticism from the likes of leadership guru Warren Bennis, the celebrated Canadian academic Henry Mintzberg, who wrote Managers not MBAs (2004), and Sumantra Ghoshal, a professor at London Business School who died in 2004.

Ghoshal’s “Bad Management Theories Are Destroying Good Management Practices“, which he wrote shortly before his death, is a particularly profound critique. Ghoshal argues that by trying to turn management into a science, schools have effectively absolved managers from responsibility for their actions. He begins by quoting Keynes (1953) on how academic theories influence even “practical men” who like to dismiss them:

The ideas of economists and political philosophers, both when they are right and they are wrong, are more powerful than is commonly understood… Indeed the world is run by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences are usually the slaves of some defunct economist… It is ideas, not vested interests, which are dangerous for good and evil.

Ghoshal’s point is that for all business academia’s worries about relevance, its theories have had a wide (and negative) impact:

These influences have been less at a level of adoption of a particular theory and more at the incorporation, within the worldview of managers, of a set of ideas and assumptions that have come to dominate much of management research. More specifically, I suggest that by propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral responsibility.

Ghoshal argues that management research has tended towards a functionalist approach that excludes “intentionality”, and thus morality. Following Hayek, he says the adoption of a “scientific approach” is a “pretense of knowledge”, which (like physics) tries to discover laws and patterns in the universe when management is really about choices. Combined with an ideology of “liberalism” – by which he means a “gloomy” vision that the purpose of social theory should be to counter human imperfection – the result has been tendentious assumptions and flawed research. Finally, he says this dim view of human character becomes a sort of self-fulfilling philosophy: “the assumption that managers cannot be trusted can make managers less trustworthy”, he says.

As an example of how the science of management has led to deleterious day-to-day effects, Ghoshal explores how maximising shareholder value has come to be seen as the primary role of executives. He argues that “agency theory” dominates corporate governance discussions – the agency problem is the number one problem to be solved – because it produces “nice mathematical models”:

Casting shareholders in the role of “principals” who are equivalent to owners or proprietors, and managers as “agents” who are self-centered and are only interested in using company resources to their own advantage is justified simply because, with this assumption, the elegant mathematics of principal-agent models can be applied to the enormously complex economic, social, and moral issues related to the governance of giant corporations that have enormous influence on the lives of thousands – often millions – of people.

Why have schools sought to make management research into a science? One answer, is that the professionalisation of management – which is a laudable aim – requires a set of rules to follow. Moving away from the shareholder value maximisation model would require “a perspective that cannot be elegantly modeled”. Therefore, it is not tried. Moreover, dividing up the task of management into bite-sized modules allows students to make sense of their subject, and ensure that they get top-to-bottom of what companies do.

The other reason, I think – and departing from Ghoshal here – is that it is in the interests of schools to present themselves as a scientific institutions. Business schools, after all, are either independent businesses, or lucrative parts of universities: there is money to be made. The coincidence of companies willing to pay for “well trained” graduates, and graduates who are willing to pay large sums to get ahead, is a profitable one. Moreover, academics themselves have a need to be seen as serious scholars.

There is more to say – but enough now. I think it’s important that we think about the role of management education in our societies, as they obviously have a wide impact, even if it’s hard to understand. Too little is written about business schooling within the mainstream press, aside from banal discussions of MBA league tables and the appointment of this or that professor. With the MBA becoming of ever greater importance around the world, following the US example, it is vital that we ensure that the qualification works to companies’ and society’s benefit. Clearly, as the financial crisis shows (though it’s impossible to blame schools explicitly), the current model isn’t always helpful.

(Image: El Chico 438)

Tagged as: Andrew Likierman, business schools, Henry Mintzberg, Philip Delves Broughton, Sumantra Ghoshal, Warren Bennis