The financial crisis as a failure of management

Henry Mintzberg, professor of management studies at McGill University, writing on America’s monumental failure of management in the Toronto Globe and Mail:

What we have is a government that palliates: It provides geriatric medicine to its oldest, sickest enterprises in a country that requires pediatric and obstetric medicine for its young and vibrant enterprises, the ones that create the jobs, not eliminate them.

We hear now about “too big to fail.” “Too big to succeed” is more like it. General Motors has been going slowly and painfully bankrupt for decades, managerially as well as financially. The new money will only put off its demise. Americans will have to face this reality sooner or later.

From where I sit, management education appears to be a significant part of this problem. For years, the business schools have been promoting an excessively analytical, detached style of management that has been dragging down organizations.

Every decade, American business schools have been graduating more than a million MBAs, most of whom believe that, because they sat still for a couple of years, they are ready to manage anything. In fact, they have been prepared to manage nothing.

Management is a practice, learned in context. No manager, let alone leader, has ever been created in a classroom. Programs that claim to do so promote hubris instead. And that has been carried from the business schools into corporate America on a massive scale.

Harvard Business School, according to its MBA website, is “focused on one purpose – developing leaders.” At Harvard, you become such a leader by reading hundreds of brief case studies, each the day before you or your colleagues are called on to pronounce on what that company should do. Yesterday, you knew nothing about Acme Inc.; today, you’re pretending to decide its future. What kind of leader does that create?

Harvard prides itself on how many of its graduates make it to the executive suites. Learning how to present arguments in a classroom certainly helps. But how do these people perform once they get to those suites? Harvard does not ask. So we took a look.

Joseph Lampel and I found a list of Harvard Business School superstars, published in a 1990 book by a long-term insider. We tracked the performance of the 19 corporate chief executives on that list, many of them famous, across more than a decade. Ten were outright failures (the company went bankrupt, the CEO was fired, a major merger backfired etc.); another four had questionable records at best. Five out of the 19 seemed to do fine. These figures, limited as they were, sounded pretty damning. (When we published our results, there was nary a peep. No one really cared.)

How much discussion has there been at Harvard about the role it might have played in forming the management styles of graduates who, over the past eight years, have been running America and what used to be its largest company? The school is now reviewing its MBA program, but the dean has made it clear that questioning the case-study method will not be on the agenda.

In this, we have America’s problem in a nutshell: the utter absence of collective introspection, whether it be the current crisis, the relationship between the Vietnam and Iraq debacles, even what might have contributed to 9/11, as well as the way it has been compensating and educating its corporate “leaders.” The country seems incapable of learning from its own mistakes.

Put differently, the U.S. appears to be in social gridlock. Thanks to vested interests and their powerful lobbyists, as well as an economic, individualistic dogma that has been embraced so thoughtlessly, it is business as usual in America. And beyond: Our planet is becoming as sick as many of these corporations, yet we are being implored to get back to consumption. Fix the problem now; continue to forget about the future. Except this time, we may be consuming ourselves.

No country in the world has been more admired for its capacity to change, to learn with the times. This remains true of technological change; but, on the social front, America seems incapable of changing.

3 thoughts on “The financial crisis as a failure of management”

  1. What an interesting observation in this world of “Create Leaders” for the world of tomorrow. Equally interesting is the parting line on social change of America which is the real cause of all the recent and probably future problems.

    The Knowledge Society that we need today, is really a set of individual knowledge streams trying to build their own empires and then further trying to ring in cash till they survive or create another theory and hoping that the times would turn good and their theories would prove to be apparently true until such time another failure sets in.

    What they fail to realize is the Universe that they are operating in; the environmnet that they think they operate even in this era of globalisation is cross culture, cross linguistic, cross currency, cross economic, cross legal. But they fail to realize that there is one force that proves them false, time and again and that is the role of ethics and religion in the society.

    If they search for such a religion which can scientifically prove the Universe and its sub-systems, then they would get the key for astounding success. Such a religion would allow investigation in a scientific way, would also propound the philosophy in a scientific way.

    Systems Science is the only way that we can realize the interrelationship between various parts of the whole. And Religion and social behaviour are very important facts which we tend to ignore.

    Can someone predict what would happen if Global Warming reaches the forecasts and the seashores drown the major cities and then what would happen to financial markets, automobile markets, agriculture and in that scenario what would be the solution?

    No, seems difficult. It is time that we get down to basics and learn from history, and the ancient books of religion. The solution lies in there. Only if we have the aptitude and attitude to humbly accept them as Supreme Source coming from the Supreme Father.

    Organisation, Nations believe that they operate in their Universe; Mind you the Universe that you know is not the Universe that exists. Yes, it exists in You. Only if you realize that, will you know the right solutions to today’s problems and then be able to create leaders for tomorrow.

    If you are not convinced by this, then see what happens to the world in the next 25 years.

    Scientists have to believe on empirical and experiential methods of exploration. Then only will they get the complete Universe and then only will they get the real truths.

    Puneet Chowdhry
    New Delhi, INDIA

  2. There are two things they do not teach in Harvard Business School; one is how to cope when you fail, and the other is how to operate a shotgun.

    True and true.

  3. After 18 months of my reply, empirical science has started recognising that the experiential religion or consciousness is here to stay. Mr John Hopkins et al cannot discover the diversity and magnanimity of this Universe and what lies beyond.

    One will have to believe that what man knows today in regard to the creation of this Universe is an iota of what the Truth is.

    The Seers of yesterday and today (if you believe) have this answer for them, if they want to shed their ego and search for the Truth. This cannot be done by physical instruments of the scientists but through the latent faculties in your mind (if you believe)

    We shall again meet some years later and test the validity of this statement.

    Bye

    Puneet

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