Dr John Colley, Director of MBA Programms Nottingham University Business School
Business view: Effective leadership in competitive markets
Business schools primary role is to produce leaders who are effective in managing increasingly complex and competitive markets.
Since the financial collapse of 2008 business schools have indulged in much soul searching about their own responsibility and contribution to the crash. Some consider that if a different philosophy had been taught then, perhaps the bankers would have been less keen to devise and trade such complex and risky instruments. Many business schools may have directly benefitted through increased tax deductible donations from beneficiaries of the boom. In the UK the escalating tax take from the financial sector allowed governments to fund major expansion of the university sector. To what extent did business school teaching and influence contribute to the collapse?
Did the business schools really play such a significant part or, are they inflating the extent of their role. Perhaps claims to be a contributory influence increase their perceived importance. This is a reasonably safe manoeuvre as no one in a business school is likely to lose their job as a consequence.
In recent years we have seen the collapse of Enron, WorldCom, Lehmann Brothers, and the RBS followed by much of the banking industry. In the last year Olympus, BP, and News International have also suffered failures associated with questionable leadership values.
Business schools have certainly been guilty of extolling the virtues of some businesses and their leaders who have subsequently failed. Laudatory case studies have been written about a number of organisations who have promptly managed a precipitous decline. Academic objectivity can be clouded by apparent financial performance, which is then assessed to be a result of great leadership, strategy and culture.
However I suspect the financial collapse has been seized upon by academics wanting to change business schools for their own ends. There are a number of perspectives from eminent academics proposing modification of MBA teaching in line with their own philosophy. Some see it as a burning platform for change. One target in the firing line is the Darwinian state of organisations and the 'survival of the fittest' competitive forces within business. Some believe business schools should pursue a more 'humanistic' approach to teaching. However there may also be an impression that some criticism emanates from leading academics who simply do not like the concept of market based economies. It may not accord with their views of management education.
Clearly there is far more to life than Darwinian competition and the philosophy of what we are doing deserves much debate. However whilst business competes in market economies, the personal ability to compete will remain paramount. Those within an organisation who can contribute effectively to this outcome will flourish. Ultimately this will be a critical element in any leadership framework adopted by a business.
Business does have clear social responsibilities and providing employment is as important as any. When business fails to compete effectively then closure and redundancy follow. As a consequence the social fabric of local communities is often decimated. Effective executives are critical to the process of competition, and business schools should not lose sight of this. Business for the most part faces highly competitive markets. Whilst the threat of extinction in many may seem more remote, the ability to manage effectively in competitive markets is a principal requirement for recruits.
Contrast this with the situation of the academic who (whilst highly talented) operates in an environment in which a form of tenure ensures there are no concerns about continuing employment. This is a rather more relaxed position from which to offer views on how business should be managed, and the nature of teaching in business schools. Whilst distance promotes objectivity it can detract from understanding the circumstances of competition. Close academic engagement with business is necessary for effective management teaching.
Business schools have an important role in teaching the importance of values such as honesty, integrity, and care for the community, customers, suppliers and employees. Leaders respected for their values are much more likely to engender support, commitment and enthusiasm from their people. Employees want to support clear shared values. History informs us that pragmatism is also a reason for upholding values. We have seen a number of businesses and leaders ultimately suffer because of leadership devoid of values. The workforce ultimately pays the price for poor leadership. Ask former employees of Enron, WorldCom, Lehman Brothers, Northern Rock and the News of the World.
So what does business expect from business schools? Business needs managers who can think creatively providing innovative solutions and who can lead effectively and with humility in highly competitive markets. Business schools have a dual responsibility to provide effective leaders in competitive markets who will also actively promote and maintain sustainable values and uphold their social responsibilities.
Students choose to do an MBA for a variety of reasons. Improving career prospects and developing business acumen are near the top of the list for most. However teaching business acumen requires lecturers who have deep knowledge of practical business and close engagement with practitioners. Guest speakers and integration with the local business community is helpful but there is no real substitute for direct personal experience working in business. Universities need to attract more faculty staff with practical experience that can blend and integrate theory with the unforgiving practical world of business.
As for business schools they must assume that Darwinian markets will continue. Greater engagement with business is necessary if they are to be influential in shaping the future business environment. Business people should be invited to contribute towards taught curriculum content. In turn academics should seek greater interaction with business through non-executive roles and management consultancy. This will elevate both status and influence with business.
Ultimately business schools must teach MBA students to be effective business people and to be able to prosper in highly competitive environments. The social consequences of running businesses are important, and no more so than when businesses are run badly and fail. Both students and business expect no less.