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Judith Samuelson Headshot

Reinventing Residential Business Education -- Before It's Too Late

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This year's cohort of aspiring MBA students are receiving acceptance letters, soon to be followed by hefty tuition bills. The overall class will be smaller than last year's, continuing an enrollment decline that began in 2008 and prompting the usual worries whether such declines are cyclical or permanent.

Business schools themselves are in a period of self-reflection. The challenges full-time MBA programs face are significant: competing educational models, softer demand from employers for the MBA "product," and a tarnishing of the MBA brand itself. Business education leaders are at a crossroad.

If residential MBA programs are going to prove their continued relevance, radical rethinking is required. Yet there is a persistent demand at the higher echelons of business for the kinds of attitudes and skills best delivered through high-touch MBA programs -- the hallmark of quality business education. Here are three ideas to help along the creative destruction process:

Idea #1: Teach the Interdependence of Business and Society

Picture a Venn diagram with business in one circle, and society in the other, with a little bit of common ground at the intersection, and you have the mental model taught in MBA classrooms. Shareholder Primacy allows faculty to keep things simple: externalize costs, discount the future. Don't get confounded by the impact of decisions outside the gate; it is all addressed in the price of the stock.

When MBA programs teach to the ideology of maximizing "shareholder value," measured by financial profits or stock price, they contribute to a culture of short-term thinking with attendant economic, social, and environmental consequences. We need a better way forward if executives will be equipped to give weight to private incentives vs. the public welfare. That means giving students greater context and nuance for using the tools of finance.

Rather than the cartoon version of the world that sets business apart, consider the dynamic systems that feed business: human capital, natural capital and yes, financial capital. Business is a critically important player in the health of these inputs. It faces outsized risks when the classroom theory leads to decision rules that fail to internalize the real societal costs.

Idea #2: Leaders Shape Culture

Berkeley's Dean of the Haas School of Business, Rich Lyons, helps us think about the role of leaders: "Leaders set culture" he declares. What he calls the 'soft tissue' -- values and culture -- needs to be more at the fore of modern organizations. "Then you design a curriculum that helps these young people set culture when they are in leadership roles."

How does that translate in the classroom? It could start with the opportunity to consider one's own values, as a confidence builder in making decisions that balance societal needs against business requirements. It would embrace topics like organization design and governance, and the choices faced by executives and Directors responsible for clarifying mission and purpose - but who also must assure that operations and incentives follow. Faculty can teach comparative approaches to how businesses in different countries and under different structures of "ownership" interact with government and societal institutions -- to illustrate the reality that there is no one "right way" to define business success.

Idea #3: Skills to Lead Bravely

This year, the Aspen-Kellogg Forum focused on the "governance gap" that is slowing progress on the biggest global challenges -- from job creation to climate change. When government fails to lead, business fills the gap, often in partnership with nonprofits and globally focused NGOs. Business school grads who move into leadership ranks will need the skills to manage conflicting expectations from a public that is asking for business to put society first. Is the education these future leaders receive up to the task?

Sally Blount, Dean of the Kellogg School of Management, talks about the need for business to be "bravely led and passionately collaborative." Collaboration becomes a necessary skill to tackle sticky issues involving resource constraints, human rights and labor standards in markets with weak governments -- issues that if ignored, eat away at the license to operate. Sometimes, bravery is needed. That is also true today for public companies facing activist traders and investors seeking alpha, sometimes at the expense of long term stock holders, employees and host communities.

On-line education may be great at delivering technical know-how, but not the kinds of transformational experiences that allow one to challenge the assumptions in a discipline, or to encourage how personal and professional purposes can connect. Face-to-face discussions that hone skills of judgment are a key advantage of high-touch, residential programs.

The kinds of questions and case analyses that require students to "multi-task" to analyze issues from multiple perspectives -- can also leverage the mix of nationalities, backgrounds and values in the contemporary classroom. This is a great time for students who seek to move up the leadership ranks of business in a globalizing world, to practice both deep listening and giving voice to their own values.

In spite of shocks to the system, a quarter of both undergraduates and graduate students in the U.S. seek business degrees. At those numbers, business educators are influencing the knowledge, attitudes and skills of an important share of the citizenry. The stakes are high.

The world needs what business has to offer -- talent, global reach and distributions systems, and problem-solving skills to take on challenges of extraordinary depth and scale. Good judgment in our business leaders is the critical bottom line.

I believe schools that take on this question of "relevance" have a competitive advantage. But creating the room for relevance will require breaking a few rules. Future managers are not the only ones who need to lead bravely.