Last week we discussed how Forbes in one article asked a question on why GM and Ford aren’t competitive and then answered it in a separate article describing how MBA hiring trends are a great predictor of industry failure… with both articles on the same page. We proceeded to give MBA’s some well-deserved grief, as we’ve done in the past.
This prompted our friend Bob Emiliani to write us with some additional comments. He is the author of Shingo Prize winning Better Thinking, Better Results and president of The Center for Lean Business Management. Over the last few years he has studied MBA programs and education in general and has written several articles that recommend improvements… many based on lean enterprise concepts.
In 2004 he published Is Management Eduction Beneficial to Society? where he begins to look at waste in graduate management education. He suggests three improvements: create guiding principles, introduce the concept of waste, and root cause analysis. Later that year he expanded on that analysis with Improving Business School Courses by Applying Lean Principles and Practices. In this article he again tackles waste, but also explores unevenness, unreasonableness and suggests improvements that include the lean principles of respect for people, continuous improvement, 5S, just-in-time, load smoothing, standard work, visual controls, voice of the customer, and more root cause analysis.
In 2005 he published Using Kaizen to Improve Graduate Business School Degree Programs, and then this year he published Improving Management Education. The full text of that article is here. In it he proposes a radical restructuring of MBA programs around eleven "integrated areas of improvement" to simplify, provide focus, improve relevancy, and impart needed thematic consistency. These improvements are:
- Corporate purpose. "Academics and senior managers who faithfully insist the purpose of a corporation is to maximize shareholder value should recognize that this can be realized in more than one way. There is the literal way, i.e. purely financial or the non-literal way, i.e. financial plus many other important factors such as market share, quality, service, innovation, etc. Both interpretations are valid with regards to the fulfilment of legal responsibilities by corporate directors. However, only the latter is sensible in practice, ethical, and morally defensible."
- Business Principles. "Faculty should adopt a balanced “human-economic” approach to business using general principles that are best articulated by the Caux Round Table Principles for Business. [This] would send many unmistakable messages to students, including the existence of stakeholders, the inappropriateness of making destructive tradeoffs between key stakeholders and the purpose of business beyond creating shareholder value."
- Problem Recongnition. "Students should be taught how to recognize a problem, how to formally identify the root cause of a problem, and how to identify and implement practical countermeasures to prevent recurrence."
- Root Cause Analysis and Countermeasures. "Understanding the root cause of problems is a very good first step, but an equally important task is to identify practical countermeasures to prevent recurrence. I find that students (and managers) are capable of identifying theoretical or high-level countermeasures, but not good at identifying specific, practical countermeasures to implement at the exact point in the process where the error occurred."
- Organizational Politics and Blame. "Business leaders that establish and adhere to a ‘no-blame’ policy will encourage the detection, elimination, and prevention of errors and at the same time dampen or eliminate destructive blame and organizational politics."
- Results-Only Focus Versus Process and Results. "Understanding business processes in detail results in less variation in product or service quality, lower costs, and shorter lead-times. Ad hoc problem solving focused on symptoms rather than root causes drains resources from organizations and slowly erodes their competitiveness. A countermeasure would be to teach students – in every course – the importance of understanding all business activities as processes, and how to utilize systematic approaches for process improvement that yield tangible results. If this is not done, many students will leave school thinking activities in operations consists of processes, while those in marketing, finance, or human resources do not."
- Value-Added and Waste. "Invariably faculty, like any other person who is not aware of what waste is, will think that there is no waste in the business processes that encompass their knowledge area. Nor will they think there is waste in the design and delivery of the courses they teach or perhaps even within their own University’s operations. Evidence of such thinking can be found in the very common desire among faculty to add more material to a course, rather than eliminate material, or say: ‘Everything I do adds value.’ Of course they are mistaken on both counts, but therein lay dozens of opportunities to improve courses in ways that are more relevant to future management practitioners."
- Time-Based Competition. "The best time-based competitors know they must strive to achieve balance among mostly shared but sometimes competing stakeholder interests. While counterintuitive, organizations that do this well enjoy consistently superior long-term financial and non-financial performance. Unfortunately, faculty often treat the best time-based competitors as business oddballs whose success is largely attributable to expensive computer systems, charismatic CEOs, or a unique corporate culture. Instead, the proper focus should be on why process knowledge is important and the specific details of how people go about systematically improving processes and achieving desired results."
- Performance Metrics. "Top managers who scrutinize their metrics to ensure they do not focus employee’s activities on creating or managing waste, and also bring to life corporate purpose and business principles, are better able to balance quantitative and non-quantitative data. This leads to better business decisions because managers will avoid falling prey to the most common decision-making traps."
- Total Cost and Outsourcing. "In the context of industrial procurement, the term ‘total cost of ownership’ is used to describe all costs that are incurred, in addition to the initial purchase order price, such as: inspection, support personnel, warehousing, service, logistics, repair, maintenance, litigation, etc. Unfortunately, most senior managers do not understand or seek the ‘total cost’ of various business transactions such as the goods and services their company purchases – just purchase price. This leads to an incomplete or inaccurate understanding of current and future costs. Managers commonly use purchasing tools such as economic order quantities and online reverse auctions, as well as price-based metrics such as purchase price variance (PPV). While savings may be achieved on a unit cost basis, they often lead to higher costs on a total cost basis."
- Respect for People. "While the words “respect for people” sound simple and all managers will say they are totally committed to it, ‘respect for people’ is, in fact, very challenging to fully comprehend and put into daily practice. This is particularly true with regards to long-established business practices such as corporate policies, financial analyses, business performance metrics, and software systems, because there are facets hidden within these that are at odds with ‘respect for people.’"
Traditional MBA programs, especially those from the supposedly "best schools" such as Wharton, have a rather astounding record of failure. They should take a hard look at Emiliani’s recommendations.