MSc Management Assignment Sohan D. Angal UID: 8136775 Were business schools to blame for the financial crisis?

What should business schools do to help prevent similar crises in the future? The financial crunch that has been happening over the last few years has hit many industries and nations. The widespread effects of the crunch are for everyone to see. The economies of many countries across the world have been severely affected, and every country has tried to go to the root cause of the disaster, so as to rectify it and avoid such a thing in the future. Some people argue that such a thing happened because of the wrong or ineffective teachings of the business schools of today. This essay will discuss the possibility of this being really due to the teachings of business schools (directly or indirectly) or maybe some external factors, and what measures can be taken in the future to avoid such a disaster in the future. Sean Rickard, director of the full-time MBA programme at Cranfield School of Management, admitted that the business schools are partly to be blamed for the crunch.

(Green, 2009). "Some of the most successful business schools over recent years in terms of rankings which are very heavily tied to salaries have tended to be those that have recruited young people and pushed them into the financial sector," says Rickard. "This says a lot about the ways schools are ranked." This makes us think if business schools really want to educate the students so as they can go on to be successful managers, who are socially responsible at the same time, or if they want to teach them in such a way, that the students get high paying jobs when they are out of the school which will enable the schools to get a good ranking. Initially, MBAs were meant to be taught to people who had an undergraduate degree and about 5-6 years of work experience. This enabled them to think rationally and not haphazardly. However, currently the business schools do not have such a condition while admitting students to the MBA course. Most business schools require only 2-3 years of experience, whereas many schools do not require any experience for the MBA degree. Thus, when a person coming out from a business school with an MBA degree, is 24-25 years of age, has no experience at all and is handed a responsibility to manage millions, he is bound to create errors. Such a person is

highly paid by the employers and they expect returns to that effect. Thus the fresher may be pressurized to take risks on a large scale, which may pay off at times, but if unsuccessful, can cause such a catastrophe. The Economist (2009) attacks the business schools for their lack of imagination and foresight, lack of science as also the lack of skepticism and cynicism in their teachings. The issue of The Economist was published before the financial crisis broke out and is extremely relevant. Chris Bones, dean of Henley Business School, stresses that the current North American MBA model teaches too much finance and not enough economics. (The Independent, 2009) This is true to a certain extent, as most of the people doing their MBAs do not have a background in management. Many students after getting their undergraduate degree in engineering or other sciences, work in their respective fields for a while, do their MBA and then join financial institutions or big finance companies. The MBA enables them to get a good pay. A majority of people has studied only finance, but have no background or knowledge in economics whatsoever. In my undergraduate course, I had conducted a survey of a few engineers from my university regarding the kind of job

they were looking at 5 years down the line. About 80% of them were thinking of going into financial banking, in spite of having an undergraduate degree in the technical field. David Crowther, professor of Corporate Social

Responsibility (CSR) at the Leicester Business School, says that in the past few years, CSR has been integrated into the mainstream MBA courses. "[The financial crisis] was based on the behavior of people who went to business schools 15 to 20 years ago, in the time of Thatcherism and Reaganism, when greed was good. We don't teach like that now - it's changed," he says. (The Guardian, 2009) This is very important in any MBA programme as the MBAs passing out from the business schools, should not just have an aim of making big money for their employers and themselves, but also to be aware of the social effects of every decision taken by them. People with MBAs usually occupy high risk-taking positions in organisations that rely on these risks for their profits. However, these risk-taking ventures should be non-destructive. There has to be a back up plan in case the risks do not pay off. One has to be aware that a risk taken by him can backfire, and affect not only him or his company, but a large number of companies and people given how interconnected everything is these days.

The way this can be avoided in the future is by making undergraduates and graduates work in the related sector while pursuing their degree. This will get them a hang of the work environment and being with senior employees will also give them an idea of how things should work. There is no alternative to working under senior employees as it can add to ones knowledge by leaps and bounds. Such an initiative has been undertaken at the Warwick, where undergraduates are made to work in real-life CSR projects. This will make them aware of their social responsibility and can help them while they are in risktaking positions in the future. So the business schools did contribute to the downfall of the economies of many countries, as the most of the people who took the financial decisions that led to this, were from such business schools and were expected to know what they were doing. However, due to the lack of foresight or maybe lack of skepticism, they failed to foresee such a catastrophe. Hence, making students learn CSR at the very basic levels of education (undergraduate) and also make sure that people pursuing their MBAs have a certain amount of work experience in that field, can help to a great extent. Also, economics and CSR have to be

made mandatory for any course in Management, and not just an MBA. These are two topics that are often ignored by students as they do not add anything to their CVs, but will go a long way in enabling them flourish in their respective careers. References: Currie G. et al (2010) A post-crisis reflection on business schools, British Journal of Management Green C. (9 April 2009) Are business schools to blame for the credit crisis, The Independent James A. (7 April 2009) Academies of the apocalypse?, The Guardian