A monumental failure, indeed

From the first moment of this global economic crisis that began in the United States, and well before that, I have had certain views about the business world, and a recent opinion piece has confirmed virtually every single one of my suspicions.

Henry Mintzberg, who teaches at McGill University, has published an article, America’s Monumental Failure of Management, that wipes the floor with the elites of management and business. For starters, Mintzberg calls taxpayer-funded bailouts for companies such as the Detroit Three automakers “cash for trash” : “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.”

Mintzberg’s commentary is, indeed, very apropos in light of recent revelations about how AIG, one of the first recipients of public bailout funds, has misused the tax dollars given to it. This is the very same company about which I was among the first to say, “Let them go under,” only to see my words confirmed when AIG determined that one payout was not enough and therefore returned to Washington to beg, nay, demand, even more money from the American taxpayers.

The good professor is as disillusioned as I am with the rush to pour billions and billions of tax dollars into failing enterprises, with governments all over the world falling over themselves to outspend every other government under the sun. Unfortunately, the current U.S. administration is an enthusiastic participant in that race. Instead of alleviating the situation, however, it is making things worse and worse, as Mintzberg notes : “And the new U.S. administration ? It rushes in with dramatic actions, paying out ’cash for trash,’ deeming the movement of massive amounts of money around the economy, much of it to prop up dying businesses in the short run. More quick fixes for an economy brought down by quick fixes.”

It does seem to be that way, doesn’t it ? After all the money that the U.S. government has thrown at the problem, it appears that the recession is getting worse with each tax dollar wasted. Canada, which really never faced the same disastrous circumstances as the U.S., and therefore could have easily stayed the course of providing relatively little stimulus at taxpayers’ expense, may now have become a victim of such misguided government largesse, as Prime Minister Stephen Harper’s decision to sink the country deep into deficit may well have triggered the kind of financial and fiscal disaster that could have easily been avoided if only cooler (and more conservative) heads had prevailed : By 2010, so the latest forecast goes, Canada could be facing a total deficit of well over $80 billion, about $20 billion more than expected a mere six weeks ago or so.

Mintzberg, who teaches management himself, also has harsh words for those who still believe that MBA degrees make for good managers : “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.”

No manager, let alone leader, has ever been created in a classroom.

Being able to run a business requires, first and foremost, good common sense and life experience. No school or executive MBA program can ever teach or replace that. I was once enrolled in an MBA program, and frankly, I was so distraught by how far it was removed from reality that I decided against continuing my studies. In my experience, holders of MBA degrees should usually be the last people ever to be allowed anywhere near the steering wheel of a company. They may be extremely good at math and complex formulas, but making decisions grounded in common sense is not exactly their forte.

I remember about ten to fifteen years ago, there was a trend in the business world of Europe towards hiring liberal arts graduates for management and executive positions. The reasoning at the time was that they had learned how to learn and that they were more in tune with reality and better able to apply common-sense solutions than any Ivy League MBA graduate. This is still true today, but unfortunately, that trend was swept aside sometime between then and now due to aggressive marketing campaigns by MBA schools that eventually convinced everyone that having an MBA, or better yet, an executive MBA, was simply the ultimate qualification any budding manager could ever aspire to.

There are certain skills that a manager must learn through hard study, of course, such as accounting or the fundamentals of corporate law. But nowhere does it say that a prepackaged MBA program, usually lasting no more than a year or less, can impart all those skills - and common sense ! It would be best if all MBA programs were scrapped completely, and students sent back to liberal arts courses (history, philosophy, literature, foreign languages, etc.) so as to enhance their ability of analytical, critical and common-sensical thought. Then, put them through accounting, law, marketing, etc., and then, and only then, will you have a group of skilled managers who will have a better chance of steering companies through stormy seas than any of the current MBA crop.

As Mintzberg has found, even those with an MBA from Harvard are mostly duds : “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.”

I am willing to wager a bundle that the five out of the 19 who “seemed to do fine” probably obtained a thorough education in the liberal arts before going on to business school, whereas the other fourteen are likely to be in the category of the elitist jerks whose path to the top MBA stratosphere must have been preordained by their equally elitist, and snobbish, parents from the day they were born - the kinds of people who think that all funding for liberal arts and humanities should be stopped for good.

Hopefully, something good will come of this recession, such as MBA programs being totally disgraced once and for all - that is, if our short-sighted and silly governments do not spend the world around us into total oblivion first.