Rakesh Khurana’s Business School Mission Critique

I read an interesting piece in the WSJ this week called Business Schools Forgetting Missions.

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Business-school professors are masters at critiquing everyone else’s work. They pick apart Microsoft Corp.’s strategy; they rebuke Enron-era companies for ethics breakdowns. They are so busy gazing outward that it’s unthinkable for them to rip into their own institutions.

Now Rakesh Khurana, an associate professor at Harvard Business School, is about to break that taboo.

Next month, Prof. Khurana is publishing a critique of business schools’ evolution over the past 50 years. His book, “From Higher Aims to Hired Hands,” argues that famous B-schools, including Harvard, have lost track of their original mission to produce far-sighted leaders who can help the economy run better.

As Prof. Khurana sees it, M.B.A. training has deteriorated into a race to steer students into high-paying finance and consulting jobs without caring about the graduates’ broader roles in society. “The logic of stewardship has disappeared,” he says. Panoramic, long-term thinking has given way to an almost grotesque obsession with maximizing shareholder value over increasingly brief spans.

As a result, he declares, getting an advanced degree in business no longer amounts to entry into a full-fledged profession, like law or medicine. It’s just a badge that lets graduates latch onto situations where they can jostle the actual managers of companies and make a lot of money for themselves in the process.

If Prof. Khurana wanted to torment business-school deans, alumni and current students, he couldn’t have picked a better way. For years, the B-school community has taken great pride in repeatedly redefining its mission as job markets change. It stings to be told by anyone — let alone a fellow insider — that many of these adjustments should be a source of shame, not pride.

At the University of Michigan’s Ross School of Business, for example, swarms of graduates once headed for jobs in the car industry. Today, with auto companies locked in an unending struggle to get costs under control, that figure has sunk to just 1.5%. That doesn’t worry Dean Robert Dolan; his school now sends 66% of graduates into service-sector jobs, with consulting and finance leading the way.

At the University of Pennsylvania’s Wharton School, almost half the 800 first-year students attend career chats about what it would be like to work for hedge funds or private-equity firms. Four years ago, such formal briefings didn’t exist. But booming interest in those sectors has led the school to help students prepare for possible jobs in those areas, says Michelle Antonio, Wharton’s director of M.B.A. career management.

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First, It is encouraging to see Prof. Khurana’s guts.

We have arrived at a point in history when grooming leaders capable of creating, building, and growing sustainable enterprises is no longer the central objective of the nation’s premier business schools. Even the enterprises that have been built need to optimize short term profits by short-selling their future. Cutting R&D is a popular means of delivering on earnings forecasts, a fatal technique especially for companies in the tech world. Business Schools, however, have to teach “techniques” for short-term optimization and financial engineering to keep Wall Street happy.

Furthermore, rather than grooming a “leadership” driven value system, Business Schools today are grooming an “avarice” and “opportunism” driven value system.

The finance and consulting industry are indeed full of people with MBA degrees who have never “done it before” reaping grandiose salaries by moving money from here to there, or by dispensing high level, arm waving “advice” that is hardly actionable or rooted in practicality.

I have often wondered about the dysfunctions of the current business world. I am generally not a negative person, so when I see a problem, I tend to try to solve it, rather than digging for dirt.

In subsequent columns, I will try to facilitate some debate on the topic of leadership development and how the current system is mis-channeling what youth talent gravitates towards.

Meanwhile, I encourage you to think about the topic in question, and use this forum to contribute your suggestions.