Monday, May 4, 2009

Dean's Message

Financial Collapse Final Examination:

Business schools are

(a) the cause
(b) the solution
(c) both (a) and (b)
(d) neither (a) or (b)

It’s an interesting time to be a b-school dean. With the collapse of financial markets, a deep and global recession, and the destruction of portfolios and dreams, I am often asked what role business education plays in “this mess.” Sometimes I stand accused, a scapegoat for whatever irritant is on someone’s mind. At other times people look expectantly for whatever answers I can offer.

Although Bernie Madoff did not attend business school, there are a number of recently discredited and disgraced business leaders and financiers who have MBA degrees. Of course every profession can point to those who push the bounds of legality and morality, whether it is corrupt policemen, rapscallion lawyers or physicians scamming Medicare. No occupation can claim immunity from cheating, much less hubris.

The current recession cannot be traced to the fraudulent acts of a group at a company such as Enron. It is a far more pervasive, systemic problem with intermingled roots and no Sarbanes-Oxley type of legislation will fix this one. The recent turmoil in financial markets is less about illegality than poor judgment and failed systems that circle the globe. Those are much harder to legislate, although governments have and will continue to try to shore up regulations to calm citizens and anticipate areas of weakness.

At the recent annual meeting of AACSB International, the largest and most global accrediting body for business education, 1,200 attendees considered the same question I posed above. What, if anything, could we be doing differently to develop business leaders who will face more complexity than any previous generation? How could we train thoughtful leaders who would build value and enduring prosperity for a global society?

There was no agreement, although many were concerned that the deal-making culture of Wall Street, expressed as short-term gains and unbridled self-interest, undermined the creation of lasting value in human and financial resources. One dean suggested that instead of trading rooms, maybe we should put in leadership rooms.

Others were concerned that the importance placed on rankings had made us too competitive and too specialized. As a very small school, the UC Davis Graduate School of Management works hard to attract great students and faculty and provide the best possible learning experience, but I can imagine the temptation to focus narrowly to gain attention in a competitive market.

We will climb out of this recession, as we always have. But as former Yale Dean Jeffrey Gartner said, “when the pieces fall back, they will not fall back in the same place.” Too many things are changing.

What challenges lay ahead? What will be different for future business leaders? Here are some of the prognostications that I heard:

· Government-business relations will change dramatically. Governments will play more visible roles in ensuring business stability. Business needs government to create stable settings for exchange.

· Emerging markets will become more important and threaten the U.S. dominance in global trade. Collectively the impoverished and less affluent nations will be attractive markets.

· Risk management will go far beyond financial probabilities as a wide variety of sources—from terrorism to pollution—also get attention.

· Earth-business relations will take center stage. Businesses will have to—and want to—pay attention to their impact on the natural world. Carbon will be the new asset, and liability.

· Right-brain skills will gain new importance. In a world where information overflows, the ability to interpret data is more critical than ever.

· Business leaders will manage to multiple objectives. Profit will be one but not the only aim.

How do we teach all of this in a two-year MBA program? We will have to create a more integrated curriculum where problem solving and a multidimensional perspective, not functional skills, take precedence. Our collective well-being depends on it.

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