Is the MBA Obsolete?

Today we’re sharing an excellent article from IMD business school about the role of the MBA degree in the global marketplace and its relevance in teaching students what they need to be successful on the job.

Is the MBA Obsolete? Maybe, unless it changes

By IMD Professor Martha Maznevski – February 2011

The world is more complex today than ever. Is the MBA still a good way to prepare business leaders in this new world? Much has been said about the role of greed in creating our recent financial crisis. Indeed, many managers were motivated to get the most for themselves in the short term. But most managers were simply unprepared to anticipate the impact of their decisions in a more complex world. Often overlooked, the economic downturn of the last couple of years was also a crisis of naiveté. Whether MBA programs can teach ethics and responsibility is already in doubt. Are MBA programs up to the bigger challenge of developing leaders who can manage complexity as well?

Today’s complexity comes from enormous levels of interdependence, variety and flux. Flows of financial capital and goods move relatively freely – what happens in one place increasingly impacts other locations. House prices in the US influence interest rates in Europe, which influence the price of exports and companies’ ability to invest in capital expenditure. China’s growth influences commodity prices worldwide, which re-distributes jobs and ancillary industries from Australia through Africa and into the Americas. Variety is created by advances in communications and technology. Supply chain logistics involve choosing among almost infinite combinations of manufacturing, assembling and transporting from and to different locations. Workforces are more diverse – multi-functional, cross-boundary teams increase the variety even in how we work. The combinations of interdependence and variety are constantly in flux, so even if you understand and optimize today, the best actions tomorrow might be different.

Recent findings on leadership development are discouraging for typical MBA programs in this ever more complex world. To build knowledge and skills that “stick” and lead to effective performance, experience and learning on the job are much more important than “academic” book or class learning. To create tacit knowledge – knowledge about how things work in context – you need experience. For executive development, companies are moving actively back to the old notions of apprenticeship and mentorship.

However, we must take this research with a grain of salt. If it were just about experience, then every manager with experience would be able to lead in complexity. And we know that is not the case. Formal learning processes can provide a significant multiplier for the experience effect by connecting knowledge and action in two important ways. First is to connect them in cycles, with knowledge leading to planning and action, then observation of what happened leading to reflection and more knowledge. We’ve known this classic learning cycle since the advent of cognitive and developmental psychology in the mid-20th century. The more complex the knowledge, the more important it is to go through these cycles actively and frequently. The second multiplier comes from engaging in learning cycles that are systematically different from each other in terms of context, not just the same context over and over again. Learners need to compare across contexts to develop a repertoire of knowledge and skills that are universal (work across contexts), contingent (dependent on the context), and the critical ability to differentiate what’s universal from what’s contingent.

If MBA programs are to develop judgement and the ability to manage complexity for sustainable impact, they must incorporate these two learning principles for connecting knowledge and action. Sitting in a classroom is useful only when it prepares learners for action, and action should be connected with reflection and further formal knowledge-building. From day one, MBA programs should therefore incorporate real-life experiences, such as real-impact projects with companies, integrating these experiences into the curriculum rather than having them as standalone courses (or worse, electives). Moreover, MBA programs should include many such experiences, and should structure them to cover a spectrum of company sizes and stages, industries, and economic and cultural contexts. The program should help learners to compare and contrast their different experiences, developing the ability to read situations and draw from a repertoire of responses. A real MBA should in essence mean “guided on the job leadership training.”

Incidentally, these principles are important not just for developing the ability to manage complexity, but also to address those elusive leadership attitudes and values such as ethics and responsibility. Learning to best lead with courage and integrity in tough situations occurs as a result of having faced those situations and reflected on them through dialogue. We learn to lead others effectively by working through difficult processes with people who are different from us. And we learn best how to lead change with informal influence by engaging in these processes actively and observing the results. In fact, using experiential learning principles to address these two sets of “soft skills” – leading responsibly and managing in complexity – at the same time, develops leaders who have the ability to make wise choices and implement them successfully.

These principles are not easy to implement in formal, structured learning environments. By integrating action learning throughout an MBA program, you open it up to loss of control and unpredictability. What if the company doesn’t cooperate? What if students don’t do a good job? What if our contact changes, and the new person doesn’t want to work with us? What if their timing is different from ours? Live companies and managers are notoriously more difficult to manage than textbooks and cases are, and as professors we prefer to have our knowledge tied up neatly.

If the MBA is not to become obsolete, it must be structured to match the needs of the new, complex environment. We must embrace the same level of complexity within our schools as we see in the environment, and we must learn to open ourselves up as real cases and examples. If business schools are prepared to live what we teach, then MBA programs can become even more valuable. The opportunity is enormous – if we do build these principles into our programs, we develop leaders who make a positive difference to our future. Isn’t it worth it?

IMD Professor Martha Maznevski directs IMD’s MBA program. Learn more about IMD’s re-designed MBA program.

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