I recently read a business journalist lament in puzzlement that business schools have reformed themselves much less than would be required in light of the mayhem caused by the credit crisis. Such lack of atoning action is certainly puzzling. B-schools have repeatedly been taken to task, and even blamed for the whole mess, ever since the gates of financial hell opened two years ago. Loud complaints ranging from a disappointing record of ethics teaching to concentrating excessively on the production of abstruse theories have been incessantly voiced by outsiders and insiders alike. And yet, reformism does not seem to have been radically adopted around campus. This is doubly shocking, for in the years before the crisis, B-schools had already endured bouts of harsh attacks, focused on the general lack of real-world business experience by faculty. So why the persistent "no change, thanks" response from the academic apparatchiks?
There are two main reasons why B-schools don't see the need to yield to demands for reformation: 1) In many cases, the negative aspects of inexperienced professors and theoretical dominance are conveniently ignored by both students and recruiters, thus effectively becoming harmless; 2) The positive aspects presented by (good) schools continue to be attractive enough to compensate for the disappointments.
B-school professors, generally speaking, lack applied professional experience and conduct only theoretical research. "So what?" many students and administrators may reply. "We are not going to press for change to the status quo." These two groups have very few incentives to internally promote a revolution towards practical relevance. Once admission has been granted, a student has not much to gain from proclaiming that the education he is receiving is less than useful for the real world. Why diminish the value of his investment? Why voluntarily hamper his job-seeking prospects? And certainly few program directors and deans would (at least prior to undertaking some reforms) publicly admit to the absence of practicality prevailing inside their institutions.
For their part, those in charge of hiring MBAs have also traditionally had a certain interest in not questioning the academic status quo excessively. B-schools (again, the good ones) offer a very convenient way to access a reliable pool of ambitious and (usually) talented youngish things, highly-valued assets for, among others, investment banks, consulting firms, and private equity houses. Why question something which seems to have worked so well?
And, at the end of the day, the promise of juicy job offers from such elite players continues to draw students to B-school. The true paradox is that Goldman Sachs and McKinsey, by incessantly hiring MBAs, make it possible for the professors to continue to afford with impunity their cozy isolated theoretical life far away from reality. As long as students believe that an MBA will open the doors to great career opportunities, B-schools have no incentive whatsoever to change the way they operate and how they organize themselves. Why make drastic and potentially painful changes when your customers keep coming back year after year? Sure, there are occasional applications droughts, but the market always returns to normal levels.
In essence then, the deficiencies inside B-schools go internally and externally (at least by those who matter most) unchallenged because none of the parties that could push hard for a change have any real incentive to do so. Students won't rebel as long as the job market is not hopelessly nasty, administrators won't admit to having done things fatally wrong in the past, and recruiters seem to be content with the reigning system.
And even if some or all of the above parties truly pressed for change, change may not be forthcoming anyways. The dirty little secret of B-schools may be that, even if they wanted, they may not be able to unshackle themselves from practical irrelevance. For one simple reason: in order to function, B-schools naturally need faculty. Someone has to teach, someone has to churn out intellectual production. But the only people who may be willing to be a business professor may well be those who don´t work in a business. If you are a player you likely won't have the time or predisposition to lecture and write papers. Not many may want to devote their life to teaching corporate finance when instead they can be titans of corporate finance out there. It would be great if B-schools could be filled with war-scarred business warriors, but those types may be too busy with other things. So you are left with those who, for whatever reason, didn't go into business. The only kind of people who can devote all their time and energies to lecturing about business. The sad irony is that, no matter how loud we may demand practicality-delivering changes, B-schools may be condemned to being populated by business virgins.