Deck Chairs On The Titanic: The Impoverished B-School Response To A Changing World

Our society is in crisis: even before the Covid-19 pandemic, racism was already unleashed around the world, rising seas were already flooding communities, pollution was choking cities, the AI revolution was creating major dislocations as jobs are replaced with virtual robots, progress toward gender equality has been stagnating or reversing.

All the while, society is putting larger demands on companies to be at the forefront of creating solutions. Black Lives Matter protests are causing companies to rename brands and review their inclusion strategies; “clicktivists” are creating social media storms about company missteps; consumers are boycotting irresponsible firms; the famous “Millennial” workers walk away from companies that don’t behave responsibly. Even investors are demanding adherence to ESG (environmental, social and governance) standards.

As Larry Fink, CEO of Blackrock, wrote in a recent Letter to CEOs: “We … see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose.” According to the latest Edelman Trust Barometer, fully 92% of people think that CEOs speak out on these issues, but many think today’s leaders don’t do enough.

TIME FOR B-SCHOOLS TO STEP UP

Now, some corporate executives are beginning to step up. The Business Roundtable has now repudiated the primacy of the shareholder and says that corporate leaders should “deliver value” to all stakeholders.

So far, though, business schools — the place where many future leaders are trained — are failing to respond meaningfully. Some schools are revamping their ethics courses or adding a social entrepreneurship track in their program. But we would be hard-pressed to find any school really reinventing itself to face up to the social crises and the appropriately increased expectations of leaders.

Potential students are recognizing this gap. According to the Graduate Management Admission Council, more than 50% of global full-time MBA programs report declines in application volumes. Fearful of the loss of students, many schools are launching alternative, shorter and more narrowly skills-based programs such as Masters in Management Analytics or Masters of Finance. These only exacerbate the problem, as the time devoted to leadership, ethics, or complex social problem-solving is even smaller than in a traditional MBA program.

Why so slow? Well, it’s creative destruction all over again. Incentives, processes, and mindsets are simply not aligned with change. To be fair, the governance process in universities makes it nearly impossible to drive radical change: even a small curriculum reform requires a multi-year process of horse-trading among various departments, a faculty-wide vote, and university-level approval. I’ve witnessed many of these attempts, and they all come down to embarrassingly little change in the end.

FEAR OF CHANGE AT THE TOP

Business schools are also constrained by ranking systems that rest on outdated notions of what impact should be. Those ranking systems entrench a small number of schools at the top, and these elite schools are the most likely to engage in window dressing for fear of upsetting their status by engaging in transformational change.

As a result, business schools are mainly rearranging the deck chairs on the Titanic. This means that such programs will become increasingly less salient — but it also means that we as educators are failing society just when society needs us most to come up with innovative responses to global crises.

On the other hand, given the overnight shift from in-person to online education at the start of the pandemic, we know that under certain circumstances, real change is possible.

Most leaders, and most business schools, fail to recognize that every single business decision has trade-offs across stakeholders embedded in it. We teach business students as if accounting decisions are accounting decisions, strategy decisions are strategy decisions, and finance decisions are finance decisions. But this mindset neglects the fact that selling a T-shirt for $15 means that workers in Bangladesh may be operating in underpaid or unsafe conditions; that creating algorithms to streamline medical decision-making may penalize underserved Black, Latinx, and indigenous communities; that the convenience of bottled water means that whales are dying from ingesting plastic; that AI developed for facial recognition may be used by police to suppress democratic freedoms; that next-day delivery increases pollution, fuel use, and city congestion.

B-SCHOOLS ONLY PREPARED FOR INCREMENTAL FIXES

So what’s the solution? In my own experiments, I have used my class to dwell in these trade-offs: looking at them face-on rather than compartmentalizing them, exploring innovative remedies, experiencing the discomfort of what might appear to be irreconcilable tensions. I work to co-create solutions with my students where the traditional MBA subjects such as strategy, operations, finance, accounting, marketing or HR are tools they pick up when they need them in their efforts. It is emotional work. Some students struggle because they want more structure. But, I tell them that the “real world” won’t give them more structure than my classroom. In fact, it will give them less. Most students describe it as an emotional roller coaster, one that transforms how they think about who they want to be as leaders.

Today, as the Black Lives Matter movement raises consciousness about racial discrimination globally, faculty in MBA programs are not well-equipped to rectify racial imbalances or discuss race in the classroom.

Yet students crave this kind of learning. Society demands it. Our business leaders need it. Unfortunately, faculty members are generally unprepared to have these kinds of conversations because they have worked in system that doesn’t reward them for thinking beyond their subject area. And business schools have not yet mobilized their resources to move beyond incremental fixes that will surely be inadequate to the challenges we face.


Sarah Kaplan is distinguished professor and director of the Institute for Gender and the Economy at the Rotman School of Management at the University of Toronto. She is the author of The 360º Corporation: From Stakeholder Trade-offs to Transformation, which appeared in 2019.

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