The economic crisis of late 2008 that has sent world stock markets plunging, put major financial institutions out of business, and pushed employment employment to new lows, was a boon for business schools. Registrations for the Graduate Management Admission Test - required by most business schools - rose almost immediately. Clear Admit, a blog for MBA wannabes, reported that schools were seeing not just new applicants, but recent grads returning for help after their dream jobs vanished in the crash. The Wall Street Journal, which ranks executive MBA programs, reported increased interest in those as well.
Those able to get into an MBA program will find some changes in course offerings. Today's MBA program is as likely to cover corporate social responsibility as it is to teach finance and accounting. The standard curriculum used in most business schools now supplements so-called hard subjects with some that could be labeled both soft and green. But those changes have not come easily, critics say.
The aura surrounding the MBA and the salaries and jobs it led to, kept the degree unchanged and unchallenged for decades. Like Detroit's automakers, business schools offered the same model year after year with a few embellishments but no changes that addressed changing realities. The result was that business schools were caught unprepared for shifts in the economy and for the unique expectations of a younger, more socially conscious cadre of aspiring leaders.
Debacles such as the collapse of Enron fuelled pressure on business schools to do something about the seeming lack of ethics and social responsibility at the top of many U.S. businesses. One financial and ethical scandal after another eroded the notion that the U.S.-style MBA was teaching the kinds of skills that business leaders needed in a global, interdependent economy.
The financial crisis of 2008 contributed further evidence that many business leaders lack the ability to assess and take prudent risks.
At the same time that student expectations were changing, brick-and-mortar schools faced some market challenges. Elite schools had to contend with the online MBA from institutions of lesser reputation that offered flexibility and convenience to busy working students. And so, like many providers of products that once held so much cachet they barely needed marketing, business schools found themselves having to pay attention to their customers.
MBA candidates wanted not only the convenience of learning online, but also something that was lacking in traditional MBAs - a sense of higher purpose. A growing number wanted more than preparation for a job on Wall Street or at some ruthless juggernaut of industry. They wanted MBA programs that addressed ethics and social responsibility and that were global in focus.
Social activist Mark Albion says that business schools do not lead best practices; they adapt when students and alumni clamor for more attention to such topics as ethics, corporate social responsibility, and globalization. Decades ago, Albion founded Students for Responsible Business, now known as Net Effect, to create a network of students who wanted to put more social responsibility in business.
Still crusading for social change through business, his recent book, More Than Money: Questions Every MBA Needs to Answer, advises how to have an executive career based on values and purpose.
MBA candidates and graduates are not the only pressure points for change. Executives themselves, and executive educators interested in values-based leadership, have also worked to change the focus of the MBA degree.
The Aspen Institute's Business and Society Program develops leaders who will work for a sustainable global society. Through dialogue and research, they help executives and educators explore new pathways to sustainability and values-based leadership.
Headed by Nancy McGaw, the BSP, in partnership with the World Resources Institute, produces Beyond Grey Pinstripes, a biennial survey of graduate business schools (www.beyondgreypinstripes.org). The guide profiles 130 global MBA programs and designates them as "truly extraordinary," "excellent," or "good" depending on their degree of social responsibility. The schools in the guide require courses in topics such as ethics and sustainability.
"A higher percentage of schools are requiring content in those broad areas," says McGaw. "And we're seeing many more courses that address the 'base of the pyramid' strategies for doing business in poorer regions of the world."
In 1988, seeking to de-emphasize its connection to Wall Street, the Harvard Business School changed its mission. The placement of Harvard MBAs at investment banking firms had dropped 15 percent the previous year.
"We don't want investment banking to be the be-all and end-all of a Harvard MBA," said Margaret Lang, director of placement at the time. Harvard Business School's new mission, "We educate leaders who make a difference in the world," was a broad umbrella for change.
But change was slow. It wasn't until 2006 that a significant number of business schools had begun to address corporate social responsibility, microenterprises, clean technology, social entrepreneurship, and globalization. "That was a watershed year," says Mark Albion.
Some schools played up the new content as a competitive advantage. Starting in 2007, the Daniels School at the University of Denver, included in its MBA curriculum "20 credit hours dedicated to saving the world," according to a press release at the time.
Called the MBA Compass, the five-course curriculum covers such topics as human rights, environmental leadership, world hunger, renewable energy, affordable health care, and microfinancing for social entrepreneurs. A Wall Street Journal/Harris Interactive ranking of graduate business schools places Daniels number three for producing students with strong ethical standards.
Short and to the point
Business schools also began to respond to pressure from business organizations to make the MBA experience shorter and more practical. In some businesses, a prolonged leave of absence to pursue an MBA degree is considered a questionable use of an executive's time.
David Schmittlein, recently appointed dean of MIT's Sloan School, favors shorter, more practical development for managers at all stages of their careers. Instead of focusing on expanding the MBA at Sloan, he wants to add specialized master's degree programs in such topics as finance or strategy aimed at young managers. He has already reduced the core BMA courses from a year to a single semester. The full MBA program at Sloan still requires two years to complete.
Schmittlein believes that practice and theory must be balanced in management education. "Creating and managing great projects is the best way to learn management concepts, as well as management practice," he told The Financial Times. Sloan will be adding more project-based learning to its management education offerings.
At Colorado State, students must work on a sustainability project in the first year. Executives at Ingersoll Rand go through EMBA programs in groups. Back on the job, the company's corporate university helps them apply their new skills to actual company business. At the University of Pennsylvania's Wharton School, students in the global consulting practicum are paired with students at foreign business schools to provide perspective on the global marketplace.
To determine the return-on-investment on business school tuition, which can be very high, many companies now track the performance of EMBA graduates as part of an overall talent management system.
The economic crisis that brought down so many financial institutions at the end of 2008 had an immediate effect on MBAs' job prospects. In a single day in October 2008, one troubled financial institution took back the offer of 50 jobs for MBAs. "MBAs will follow the market," says Albion, especially when the highest-paying jobs shift to other sectors. Schools where change is already underway will be better able to respond to an altered landscape in the MBA job market.
Will the economic crisis of 2008 prompt further changes in MBA programs? Aspen Institute analysts look for evidence that faculty are addressing business purpose, the context in which business decisions are made, and nonfinancial measures of success. Nancy McGaw states, "We haven't seen much effort in finance classes to look at the impact on communities of sophisticated financial engineering."
She hopes the crisis will prompt more reflection in businesses and business schools about responsible decision making. "We work with businesses to help them move away from damaging short-term focus and relentless demand for quarterly results toward a longer perspective that takes environmental and social consequences into consideration," she says.
Net Impact looked at 160 business school programs, and though all were making changes, they seemed "calculated to have a PR impact rather than a solid commitment to helping students be good business people," says Albion. "But the business world has changed, the audience for MBAs has changed, and the schools will have to keep changing."
Net Impact estimates that by 2022, the young MBAs in their network, with their interest in values, will be in 25 percent of corner offices.