The end of the business school?

University business schools are sometimes even better known than their parent universities. Of course everyone knows about Harvard University, but Harvard Business School is probably mentioned even more in conversation and discourse. In relative terms business schools are a recent development in higher education. Many people assume it was an American invention, but actually the United States came late to the party. The first business schools, dedicated specifically to teaching business or commerce courses, emerged in France from the early 19th century, and then spread to other European countries. It was not until 1881 that the first American Business School – the Wharton School of Pennsylvania University – opened its doors. Though Wharton declares on its website that it was the first globally, in reality it wasn’t. Britain had its first business school in 1902.

But the real surge of business schools occurred somewhat later, from the 1960s onwards, and even in the past decade new schools were still being established. Some of these were stand-alone institutions not affiliated to any bigger university; some have had a semi-autonomous status in association with a university; some are integrated Faculty units.

The rise of the business school was accompanied by the rise of its flagship educational programme, the Master of Business Administration (MBA). This was an American invention, with the first one set up by Harvard Business School in 1908. The MBA did not appear anywhere outside the United States until after the Second World War. But by the 1980s it was ubiquitous, the most common taught postgraduate degree in the world, and also a uniquely profitable programme offered at a relatively low cost. Whole universities began to rely on the revenues from business schools and their MBAs.

But from about 2000 voices began to be heard predicting the decline of the MBA, and with it the decline of business schools. By the time the downturn and recession came later in the decade, such voices became more urgent. In 2009 the New York Times ran an article by Kelley Holland suggesting that MBA programmes may actually have contributed to the economic crisis as business schools had ‘become too detached from real world issues’. And now more recently others have come forward suggesting that a significant number of business schools may actually fail. The Dean of the Haas Business School at Berkeley has predicted the ‘demise’ of half of the world’s 10,000 business schools.

There is little doubt that a number of things are potentially conspiring to make the future of business schools more uncertain: technology, demographics, economics, and changes in how companies see the career development of their managers. It is also clear that the MBA is not the gold standard of business education that it once was. However, predictions of its complete disappearance have not come true, and to some extent it is a more resilient product than some have expected.

What can be seen however is that there is no longer a single model for a business school; but maybe there never was. Some focus on postgraduate or indeed executive education, some are integrated and include all levels of formation and training. But one trend that may be emerging is the disappearance of stand-alone business schools, not associated with any larger university.

Business schools need to be part of the strategic model of a parent university, and need to share that parent’s educational, scholarly and pedagogical perspective. Business schools will always be expected to make money, but they need to have a vision that goes beyond a financial model. With that vision, business schools, in all their variety, may be with us for some time yet.

Advertisement

So what is the core business of a business school?

It has long been accepted that business schools are not like other academic units. This is often reflected in somewhat different organisational structures, and sometimes in different working conditions, funding mechanisms, institutional linkages and so forth. Business schools typically have larger numbers of postgraduate taught students, and few research students. Undergraduate students have a highly vocational outlook on what they are doing, and postgraduates mostly take courses as a direct way of moving up the corporate ladder.

Many business schools have been slow to develop a major research profile; and now one of the questions raised is whether they should be bothering with research at all. English Universities Minister David Willetts is reported in the Financial Times to have suggested that ‘Britain’s business schools should offer more practical help to companies and spend less time on academic research.’ Indeed he declared that where business schools are focusing on research they may be ‘damaging their performance’, not least because in his view research was often being published in ‘obtuse [sic] American academic business journals’ (did he mean ‘obscure’?).

Whether he is right or not will depend to a large extent on how we see business schools. If we see them as industry training organisations, he may be right. But in that case we would probably need academic ‘management’ departments or the like, a distinction which does in fact exist in some universities. On the other hand, if we believe that business schools have their greatest value when they engage in knowledge transfer of both professional best practice and relevant scholarship, then what he is saying is much less sensible. It will be important for universities and their business schools to engage with this topic explicitly. The Minister’s statement should not be left hanging in the air.

The business solution for business schools?

In higher education, one of the questions that get put occasionally is whether senior academic positions must always be filled by academics, or whether it can sometimes be appropriate to appoint someone from the business world (or indeed the voluntary sector, or the public and civil service). Indeed there have been some university heads with a background in the business world.

If it is a good idea to make such appointments in universities, you would perhaps expect business schools to be in the vanguard. And so perhaps it is, at any rate in the United States. A number of major US business schools have appointed businesspeople as Deans. For example, recently the Boston University School of Management made such an appointment for the second time.

So can this work? As far as I am concerned, yes and no. It won’t work unless the ex-businessman or woman has been well prepared, and in particular unless he or she have a very deep understanding of the academic world and its culture. Perhaps even more importantly, the academic community must be well prepared for such leadership to work, particularly as academics are liable to find it difficult to show respect to someone who does not share their teaching and research credentials. Also, the new arrval must understand and work with the cutlure of academic collegiality.

On the other hand, the arrival in a university setting of someone who does not work to the bureaucratic and committee-driven procedures that are so common in universities may well be a breath of fresh air and provide new and significant opportunities for the institution. They may have a better understanding of financial and resource management, which has become so vital. They may be able to use their networks and links to great effect.

I suspect that the time is right for some more cross-fertilisation between the academy and the world of industry, the voluntary sector and other outside communities. But like all such changes, it needs to be managed sensitively. Also, I doubt that it would work if it were introduced in too many places and positions at once. But even at the level of university presidents, there is no reason why at least in some cases a non-academic appointment might produce good results.

Mastering the business

One hundred years ago a university introduced a programme into its curriculum which was to have a profound impact on the way in which graduate education developed. The then newly established Graduate School of Business Administration at Harvard University offered the world’s first Master of Business Administration (MBA) degree. This was the beginning of the concept of the professional graduate degree programme, and more specifically of the concept of the graduate and (often) post-experience programme that was to dominate professional management education.

It took a while for the MBA concept to be adopted elsewhere, but by the 1940s it was spreading across America, and from the late 1950s is also took hold in European universities. By the 1990s it had become the dominant graduate programme in business schools worldwide, and in both strategic and financial terms it was the driver not just of business schools, but sometimes of whole universities. The demand for MBAs seemed insatiable, and as many of the students were sponsored by their employers or were already wealthy, the fees were significant and therefore the revenues critical.

The syllabus for most MBAs is superficially similar, but the nature and indeed the quality of the programme has varied widely. In most institutions it is not offered as a full-time option for those who have just graduated from an undergraduate programme, but rather as a part-time option for those with business experience. The programme usually covers instruction in key management areas, followed by a more specialised dissertation.

But increasingly the MBA has been subjected to criticism. Some have argued that its value has been eroded by its proliferation across an excessive array of institutions; others have suggested that what was once an innovative programme that helped to professionalise business functions and inject an element of analysis and insight into management has become stale and out-of-date. Others have pointed to the difficulty in maintaining MBA standards when there are so many (and in some cases questionable) bodies offering accreditation. A number of universities have been looking at alternative approaches to management education.

The question that universities should now address is whether the 20th century approach to business schools needs to be revisited, and with it the concept of the MBA. It is unlikely that the degree itself should be abandoned, but it may need to be re-thought and made relevant and important to a new generation of managers. But it should also be looked at in the context of how universities should develop a taught postgraduate portfolio. The MBA was the prototype of such courses, and right now it is likely that professional graduate programmes will become much more widespread in a number of disciplines. Business schools should be involved in, and perhaps should lead, such wider debates about graduate education.

It is my expectation that, within the next ten years, we will in this part of the world be moving closer to the US model of a general undergraduate education in all disciplines followed by a professional postgraduate programme. The experience of the MBA should be seen as an important ingredient in the debate around how the teaching and learning portfolio of universities might develop in the future.