The role of business schools in society

By Martin Vogel

business school
Business school lecture: a force for good or harm?

Book review: Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance by Robert R. Locke and J.-C. Spender

One of the striking characteristics of the debate about the economic crisis is the ease with which the epithet “anti-capitalist” is used to describe even the mildest critique of the status quo. Even David Cameron (a fleeting champion of “moral capitalism”) was at it last week, condemning as “anti-business” people who argue that the bosses of large corporations should restrain themselves from accepting obscene pay awards when the performance of their companies has been poor.

But compared with the likes of Lenin, Arthur Scargill or even the Labour Government of 1945, what’s most remarkable about today’s “anti-capitalists” is the extreme moderation of their aspirations. They dream only of an economic order which is more reliable in creating wealth and slightly more equitable in the distribution of spoils.

Confronting Managerialism by Robert Locke and J.-C. Spender provides both an example of and an explanation for this phenomenon. They describe how Anglo-American capitalism was hijacked by a self-serving caste who pursued their own enrichment at the expense of the broader communities of which they were a part. And they analyse how, in so doing, this managerial caste pressed home a lingua franca which restricted discussion of business decision-making to purely quantitative, financial considerations – which portrayed the closure of factories and the hollowing-out of communities, as the result of neutral, almost natural forces, and thereby obscured the pursuit of their sectional self-interest.

Confronting Managerialism is a bracing read precisely because it strips away the lingua franca of business to provide a historical account of the past thirty years in the clearest possible terms:

“Economists and management scientists explain what happened in neutral analytic terms, but in human terms the facts are that stockholders colluded with the management caste to maldistribute the diminishing wealth in their favor. The gap between rich and poor started to grow and has increased steadily for thirty years. Managers and their corporate lawyers working to achieve maldistribution of the shrinking economic pie in their favor dissolved the social pact on which the previous trust rested. The oft-told story of promises to employees and unions broken by management is legend now – of downsizing, of outsourcing in order to cut to the cost of wages and benefits, of chapter eleven bankruptcies that permitted management to set aside union contracts, of management raiding employee pension funds, etc. Management, employees and stockholders could have opted to share the pain, but the management caste in charge of American corporations squeezed powerless employees hard. Any idea of a moral order under managerialism disappeared.”

The reference to “management scientists” in that quote alerts us to the other main thrust of their critique: the role played by business schools in advancing a quantitative, free-market approach to business. This purported to meet the validity of the natural sciences but stripped out of consideration the complex, human aspects of life in organisations, which are fundamentally social institutions. Mathematic modelling fostered a focus on financial engineering to maximise profits and share values in the short term. With reference to the logic of capital and unrealised promises of a rising tide lifting all boats, it disguised the material impact – which was, as the quote above describes, the dismantling of social bonds and redistributing the lion’s share of diminishing returns to a narrow elite.

Why was it a shrinking pie? Because Anglo-American capitalism wasn’t even effective in its own terms. At times the prose in Confronting Managerialism resembles that of the first volume of Marx’s Capital or E.P. Thompson’s The Making of the English Working Class, classic works that with similar clarity of language described earlier processes of subjugation of society to a self-serving caste. But the analogies with socialist history end there. Locke and Spender advocate nothing more than the kind of inclusive capitalism practised in Germany or Japan; a capitalism which, they argue, has been more successful in sustaining growth, social cohesion and successful enterprises over the long term.

They are careful to distinguish between effective management that co-ordinates profitable enterprise in organisations and the ideology of managerialism pursued by the caste of corporate leaders. Management concerns stewardship of the firm as an entity, paying attention to the interests of the whole community in the survival of the firm. The authors’ critique of business schools is that management education aligned itself wholly with managerialism and thus contributed little to our understanding of the art of effective management nor the broader position of the firm in society:

“Business schools should not just serve a management caste but business and industrial firms as entities. Therefore, they must broaden contacts to all firm stakeholders including members of trade unions and other non-management employees (as, for example, in teaching courses to employee members of compensation committees). To justify their existence as public institutions, business schools must also be proactive in leading management back to social responsibility, or business schools (instead of arts and humanities programs in universities) should be shut down, since there is ample evidence of the harm they have done, and that other countries have prospered without them.”

Confronting Managerialism brings a sharp edge to a broader critique of business schools which has been surfacing since the financial crash. Joel Podolny in a 2009 article in Harvard Business Review, the house journal of the MBA culture, drew attention to the trend:

“The resentment against the MBA is visible everywhere. The New York Times printed several letters on March 3, 2009, reacting to a news story about the pressure these trying economic times have exerted on the teaching of the humanities. The letter writers alluded to the fact that by studying the arts, cultural history, literature, philosophy, and religion, people develop their powers of critical thinking and moral reasoning. Business schools don’t develop those skills, they argued, which is why MBAs made the shortsighted and self-serving decisions that resulted in the current financial crisis.”

Podolny argued that a systematic focus on ethics needed to be introduced into management education – not just a bolt-on module isolated from the rest of the curriculum but conscious inquiry into the ethical dimensions of every part of the MBA agenda.

In our experience, there are signs of movement in this direction. In some cases, such as at Cass Business School in London, there has been a concerted effort to ensure that all faculty and professional staff understand the ethical dimensions of their subject and engage students in considering them. Elsewhere, the pressure is coming from students themselves – aware that the generation ahead of them created an unsustainable paradigm and anxious for an alternative. There’s also growing interest from corporate clients who have seen the backlash against irresponsible capitalism and are placing social value among their top issues for executive education. These businesses know that the old corporate social responsibility agenda, which put social considerations at the periphery of firm, has been replaced by a need to understand the ways in which a firm’s core purpose creates (or destroys) social value.

Confronting Managerialism is a stimulating contribution to this debate. It puts on the agenda the social value of business schools themselves. It challenges academia to take a broader view of how it serves business. In order to do that well, management education needs to account for the role of business in society and to provide critical perspectives. Creating an echo chamber for a managerial caste will no longer do, and the smart business schools know it.

Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance by Robert R. Locke and J.-C. Spender.

Image courtesy PromoMadrid.