The New Republic has an interesting article on the role of business schools in the trend of dwindling talent pool for managing manufacturing firms. (“Upper mismanagement”, 2009, hat tip to Rebecca Grossman-Cohen for sending it).
The article’s secondary title is “Why can’t Americans make things?” and the answer quickly follows “Two words: business school.” Business schools became the scapegoat for everything that is bad in the American economy (and the global economy in general). So after the entire wave of “Who should we blame for the financial crisis… business schools” (Why Business Schools Are to Blame for the Crisis?”,among others), this article was not that surprising. The main claim that the article is making is that
Since 1965, the percentage of graduates of highly-ranked business schools who go into consulting and financial services has doubled, from about one-third to about two-thirds. And while some of these consultants and financiers end up in the manufacturing sector, in some respects that’s the problem.”
No surprise then that, over time, the faculty and curriculum at the Harvards and Stanfords of the world began to evolve. “If you look at the distribution of faculty at leading business schools,” says Khurana, “they’re mostly in finance. … Business schools are responsive to changes in the external environment.” Which meant that, even if a student aspired to become a top operations man (or woman) at a big industrial company, the infrastructure to teach him didn’t really exist.”
While the latter is clearly correct, this is only half the truth. The other part is that in these 40- something year’s business schools managed to significantly improve their operations management departments (at the expense of engineering schools), so as an operations professor I find the claim that infrastructure doesn’t exist quite absurd. For example: Wharton has one of the most impressive departments in operations management with the editor of the flagship journal (who is also a blogger himself), and a top-notch faculty and phd program. Students definitely have access to high-level research and teaching in this area. I hope the MBA students in Wharton take advantage of that, but I am quite sure that the minority of the student chooses to specialize in manufacturing. The same can be said about other peer schools such as Columbia, Stanford and Duke who specialize in finance and marketing yet have excellent operations management departments.
The article is making many good points, and I think it is fairly easy to understand why students choose to specialize in areas such a finance in which you can move easily from one industry to another and from investment-banking to private-equity to corporate-type jobs. It is also easy to understand why many go and work for a few years in consulting. In the modern economy, one pays a high premium for mobility, where the ability to transfer knowledge from one job to another allows you to hedge against long (and short-term) uncertainty. Even in our operations classes, where we discuss process improvement, we praise the ability to build safety networks. A consulting job allows one to build a tool-kit that can serve him/her well in multiple industries and jobs. All of these are rational choices that say more about the economy and less about the schools.
(Here it is also important to note that one can specialize in any area, including finance and operations and work at a consulting firm – so one cannot just look at jobs and infer from them the area of specialty of the graduating class).
The other part of the story that is not being mentioned in the article is that business schools looked very different 40 years ago. Even when people specialized in operations – it meant that they knew how to read production schedules but had very little knowledge about the strategic side of operations. I am not convinced that even an operation manager is not better off knowing corporate finance than knowing the nitty-gritty of production.