Business Schools to Blame for Financial Crisis?

Must’ve been one of the chapters I “skimmed”

Business schools are the reason we had the financial downturn! At least that is what this blog post* assigning culpability for our country’s financial meltdown would have you believe. Presumably this is written by a reasonable person (Joel Podolny), considering that he is a former business school dean at Yale and a former business school professor at Harvard and Standford. To be clear, he is not alone in this view but given his background, this is the article that caught my attention. You can read the article in its entirety for yourself and draw your own conclusions, but there are some outrageous claims cloaked as opinions that should not have even made it onto HBR’s website that I’ll address in the following paragraphs.

First, Podolny argues that because leadership is not taught in a quantitative fashion and is discussed at such a high level that “students are convinced that nitty-gritty work can be done without consciously considering factors such as values and ethics.” While I can only speak to Kellogg’s curriculum and value system, I find it hard to believe that this is remotely true of business schools in general. In fact, not only did Kellogg have an ethics requirement to graduate but many of the courses on management and leadership revolved around the LOYALTY and INTEGRITY of people. What I didn’t come across during my time at Kellog was any course, professor, classmate, or alumni that would even consider thinking that ANYTHING worth while could be done without values AND hard work.

Podolny’s next point asserts that potential students considering earning potential as part of the business school decision  are somehow using unsound logic. He believes there exists this perception that “the MBA is, primarily, a ticket to big bucks, and doesn’t foster the fact that it is a professional degree that imposes responsibility and accountability on its holders.” The key word in that statement is professional. People obtain professional degrees to enhance their skills to enable them to excel at at their professions. I know it sounds novel but these are the facts. Professional degrees are an investment in one’s self, and I’m willing to bet that Mr Podolny does his due diligence to understand his return on investment (ROI) before buying stocks or making an offer on a home. What makes this investment any different?

The last objection that Podolny raises about business schools is their lack of contrition. The statement starts out promising:

“Look at the website of any leading business school–and you will find it basking in the achievements of its graduates. By the same logic, business schools must also accept responsibility for the harm their graduates do; express disapproval

While I don’t expect business schools to advertise the failures and missteps of its alumni, it’s not unreasonable for one to draw this conclusion. Unfortunately, I can’t say the same for what immediately follows when he implies that changes in business school curriculum can “reduce the likelihood that future graduates repeat those behaviors” exhibited by the individuals mostly closely tied to the financial crisis. I must have missed the “Taking Extreme Risks With Insufficient Reserves for Dummies” course.

So not only is Podolny’s solution to absolve students of the responsibility for their moral character, but there is not a single mention of the cultures created by the companies employing these graduates. There isn’t a single mention of compensation being tied to short-sighted corporate targets and unrealistic market expectations of infinite growth. And there is not a single mention about tightening codes of conduct for the finance professionals who haven’t suffered so much as a wrist slap after playing a key role in one of the biggest economic meltdowns in U.S. history.

Isn’t there something wrong with this picture?

*This article and many like it were written in 2009 while I was in business school, but I didn’t see this until a couple of weeks ago when it showed up in “related posts” on another article I was reading. It’s always interesting to see the conclusions people can make with limited information when there is a point they are determined to prove.