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Today’s Dilbert strip nails one of my principal problems with the Harvard School of Business and its MBA program.
I will never understand how Harvard managed to slip the ridiculous idea over on American business that having studied how to run an abstract ideal company on paper qualifies anyone to step straight into any company and run it competently without having any substantial in-depth understanding whatsoever of the company, its product, its processes, or its market.
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[1]I can see positions where those things would be relevant. But for most jobs? I don't think so. Employers in most other countries don't seem to do this stuff and they compete just fine.
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They're really not irrelevant, you've missed what they're there for.
They're replacing the job interview questions that you used to be asked, and most specifically, the "references".
Nowadays, no place of business will officially give out a bad reference, no matter what reason you left for.
It's a case where regulation/legislation and judicial rulings have created a consequence unintended, but obvious.
I paid a guy a few years back to equip me and train me to detail cars and airplanes, and had things (not) worked out, he was going to hire me part time to work for him. I thought if the tech field crashed enough that it would be a good skill to have. It's been somewhat handy. But part of the reason he was willing to train a potential competitor was that I was still employed, and he needed some help from time to time.
His insurance mandated that any employee he have have a 4 year college degree. (He had a $3M insurance rider, he worked on some big jets from time to time. And it's not hard to run up a big bill fast if you break avionics/antennas, scratch paint....)
Now, if all you do is look at that, it's outstandingly ridiculous.
But if you stop and ask why might they put that requirement on, and more importantly, who did you just EXCLUDE... it makes perfect sense.
They can't legally tell him "You can't go hire some random guy and pay him close to nothing, and/or pick up some 'migrant workers' from outside Home Depot." That's illegal.
But it's perfectly legal for them to put an "education requirement" on - and a 4 year degree suddenly moves a lot of those people you'd want to exclude from your risk pool out of it.
Same things, different method of getting there. But because of the external legal requirements, it gets indirect, not obvious, and inefficient.
The drug and credit checks are legal, and it's the best way from the perspective of the employer to find out what kind of personality you have. It's not as efficient as calling somebody you used to work with, but at least it's also impartial.
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Smart officers stick to what they're good at, organizational/strategic matters so large they work on paper, and defer to the "tip of the spear" for anything specific to the mission. Moreover, in any competent outfit, the newbies get trained in the particulars before given any real authority -- at any level.
I have no problem believing that HBS gets a higher rate of chickenshits than other MBA programs.
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See also http://www.youtube.com/watch?v=NcoDV0dhWPA (http://www.youtube.com/watch?v=NcoDV0dhWPA).
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To an extent I think they’re right — but only to an extent. There really are a lot of common factors in manufacturing, shipping, etc., which most people who don’t study business operations really don’t see. For instance, inspecting your product as it’s made is pretty much throwing money away. Rather than pay people to do inspections, spend the money improving your manufacturing processes. Inspection expenses only increase the quality of one batch of product; kaizen expenses (as they call manufacturing improvement) increase the quality of all future batches of product.
There’s a point of diminishing returns, of course, and various other tradeoffs to be made — but people who don’t study business typically don’t get exposed to the rather large body of knowledge that’s out there.
Where I think the MBA programs are stupid, though, is where they think this sort of knowledge can be imparted without math.
While I was at UI, I was the Hacker–in–Residence for the business school. I got to see some Operations Research guys who were scary brilliant — basically they were Ph.Ds in applied mathematics who spent their time figuring out (a) how to devise a formal and unambiguous language to describe business problems and (b) how to apply existing mathematical tools to these formally specified problems. If they couldn’t formally specify the problem, they waved the problem off: this is the realm for psychology, not for Operations Research.
I liked those guys — liked them quite a lot, really. We spoke the same language.
I cannot say the same for the MBA and BusAd undergrads, though, most of whom had severe allergies to logical thinking.
Math is hard, let's do a hostile takeover
Formal mathematical statement of business problems sounds ... difficult, but conceptually interesting.
Your point about there being an extent of applicability is taken. There are underlying business practices that have more or less universal applicability and can be learned abstractly on paper. But if you haven't taken the time to study your company, learned how it operates, learned how its market reacts to different events, learned the strengths and weaknesses of the product line and how technological change impacts it ... how can you ever possibly hope to run the company effectively?
This is the same kind of tunnel vision that says that when times are hard, it makes sense to lay off the most senior engineers first because they're paid most. ...You know, the ones who have been working on your products for fifteen and twenty years and know them inside and out. The guys who can quote the specs from memory, and who can listen to a customer describe a problem over the phone when the customer has a twenty-million-dollar machine down and is losing a quarter million every hour that it's down, and say, "That sounds like the XQ34 valve has stuck half-open. Have your field engineer swap out the XQ34. You can isolate it by closing valves TN16 and PR16 and opening valve DD23, but make sure to bleed the N15 circuit down first or you'll blow out the secondary hydraulic accumulator."
When you lay them off, all their expertise goes out the door with them — but that's never taken into account, because if you can't assign a simple numerical value to it on a spreadsheet, the MBA program says it can't be important, and assigning a specific numerical value to expertise is hard.
Re: Math is hard, let's do a hostile takeover
Old joke — you may have heard it:
A highly complicated machine breaks down at a factory and production comes to a halt. The MBA calls up an old, grizzled engineer and asks if he can fix it. “Yeah, but it’s gonna cost you a lot.” MBA can’t afford for the line to be down, so he agrees to an exorbitant price.
The engineer comes down, looks askance at the machine for a bit, then gives it a swift kick. The machine comes back to life. The engineer looks over to the MBA. “That’s twenty grand, please. I told you it was going to be expensive.”
The MBA refuses. It’s an outrageous price for the work done! And besides, it isn’t even itemized!
“One hour spent driving down here: $30,” the engineer replies without missing a beat. “Thirty years of learning how to give just the right kick: $19,970. Have a nice day.”
That was one of the jokes I told the MBAs and BusAds I came into contact with in the B–school. If they actually understood the joke and understood that it was a management lesson, I’d tell them my other favorite joke.
A man in a hot air balloon is lost. He’s crossing a city park, so he throws a sandbag over the side, drags himself on the ground to come to a halt. He looks down at a passerby. “Hello there! Can you tell me where I am?” he calls.
The guy on the ground looks up, looks at the angle the balloon is off the ground, paces out a distance until he’s right under the balloon. “You’re precisely twenty–two meters off the ground!” he calls back.
The balloonist is offended. “You must be an engineer!” The man on the ground blinks a couple of times, surprised, and nods. “I knew it!” the balloonist says. “Like all engineers, you give answers that are totally accurate and totally meaningless!”
The engineer on the ground tells the balloonist, “You must be an MBA!” The balloonist is confused, but admits that yes, yes he is. “I knew it!” the engineer calls back. “Like all MBAs, you don’t know what you’re doing, where you’ve been, where you’re going or how to get there — but the instant you ask me one vague and poorly worded question, it all becomes my fault!”
I have met only one MBA who has ever impressed me. Teresa Letlow, who had a remarkable head for people — and never lost sight of it.
Re: Math is hard, let's do a hostile takeover
"Five shillings for hitting it with a hammer. Forty-nine pounds, fifteen shillings for knowing exactly where and how hard to hit it."
Re: Math is hard, let's do a hostile takeover
Also, you may find Wikipedia’s page on OR (http://en.wikipedia.org/wiki/Operations_research) to be of interest.
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The problem comes into focus when the MBA, by virtue of his training, believes that he knows everything about running the business. It is a lack of perspective and humility that can seriously damage a company. It needs to be a team effort, superior product and industry knowledge are valuable, but you also need to know if you are making a profit, not just money. There are techniques that can amplify the effectiveness of industry specific knowledge. That is a good thing.
I worked with a Harvard MBA, JD who was scary brilliant. He understood what he knew, and he drove that knowledge into the organization to incredible effect. He also understood what he did not know, and worked with the entire management team to fill in those gaps. I know of two counter-examples with just the Harvard MBA, one of whom went from small company to small company, knowing everything, and drove them out of business by the changes he implemented. A serial value destroyer.
When the financial analysis tools of the MBA came into power, in the late 1980's, they made a significant impact on the profitability of the companies that used them. It became hard to compete against companies that used the MBA strategies. Those strategies drove depth of business experience out of the companies, and eliminated the resilience of business knowledge within the companies. Vacations became a major stress factor in departments. If a key person left, the company was screwed.
Long term, the use of those MBA techniques went too far, and is hurting the business world as we speak. They are still valuable to understand. The people that understand the impact of the MBA tools are still very angry at their use, I think it has lowered the standard of living for most Americans. Economics is not a gentle, caring science.
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I blame the CxOs, myself. It used to be the guy at the head of the company got there either by nepotism or extreme competency in the nuts and bolts of the firm. Sometimes, as in the case of the early Ford Motor Company, both. Then, as you point out, complex financial instruments became commonplace and finance professionals were brought on board. So far, so good.
Then the financiers started running the companies. That’s what a CEO is — a financier. Many CEOs have little understanding of the nuts and bolts of their companies and don't especially want to know. They just want to know cashflow: are we profitable? Can we make this buyout? What’s in it for us if we approve this merger?
There’s nothing wrong with that kind of analysis and there’s certainly nothing wrong with having answers to those questions — but the idea that business should be driven by those kinds of questions is, IMO, madness. The closest we have nowadays to a nuts and bolts guy is the Chief Operating Officer. If the COO is competent, they’ll have a strong background in the company’s operations and some math–heavy business school knowledge (Operations Research FTW!). If the COO is incompetent, well — substitute “I once led a Boy Scout troop” for nuts and bolts background and “of course I’m good at math, I’ve got an MBA, right?” for the math.
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The most destructive, IMHO, of the Harvard Business School's concepts is the idea that the most important thing is the bottom line on this quarter's balance sheet, and everything else is secondary. Short-term profit over long-term sustainability. It's all about maximizing profit RIGHT NOW, and to hell with the long term.
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