Pretending it's all Rational: The MBA Goggles
Many believe business schools have become harmful to society, churning out self-interested, unethical, and overly rational graduates who are gifted leadership roles with little real-world experience.
Harvard Business School was founded in 1908, establishing the world’s first MBA programme(1) and becoming the model for business schools worldwide. In 1924, the ‘case study’ was adopted as the ‘primary method of instruction’. This was in line with the school’s aims, described in a memorandum by the Dean, Wallace Brett Donham. The aims included “giving the student training for practice in dealing with business problems”. In Dean Donham’s view, this was best done by practice in:
1. Ascertaining facts
2. Appraising and sorting facts
3. Stating business problems in a business way
4. Analysing business problems
5. Reaching definite conclusions
6. Presenting such conclusions orally and in writing
In other words, it created the illusion of understanding the past and resulted in overconfident conclusions that problems could be solved in the future. It was a perfect fit for our nonsense framework. It promised to reduce uncertainty by following a linear and logical process, swiftly leading the practitioner to the ‘root cause’ of any business problem, training them to reach a definitive solution, and equipping them with the persuasive skills to convince everybody they knew best.
It was, essentially, a branded production process for overconfident nonsense. One that was adopted by almost all the other business schools that rapidly sprang up worldwide to emulate Harvard’s stellar success in charging outrageously high fees to MBA students. Its proponents claim it “boasts a unique ability to make complex concepts accessible and develop students’ leadership skills”(2).
And so, all was well in the land of leadership, with MBA graduates becoming increasingly sought after and more likely to lead large organisations. However, after the global financial crash in 2008 and a subsequent avalanche of other corporate scandals, attention began to focus on the shortcomings of business leaders and the education system that had prepared them for spectacular failure in these cases.
The Harvard case study method came under fire with accusations of contributing to a narrow, linear, amoral and overly financially oriented management philosophy. Academic criticisms included an over-reliance on “transformational models that stress the role of charismatic individuals, usually white men, in setting compelling visions to which all organisational actors are expected to subscribe”(3). Harvard case studies described the success of Kodak in the 1980s and lauded the financial innovation at Enron. These were quickly rewritten as case studies of corporate failure when these corporations imploded.
The case study approach has also been implicated in the development of functionally centred leadership concepts that fail to foster critical thinking about business issues(4), exclude the voices of minorities(5), the poor and other stakeholders (including workers)(6) , and are fundamentally flawed by a false assumption that solutions that worked in one context are transferable to completely different contexts(7).
Perhaps the biggest problem with most MBA teaching is that it is highly rational. Like success books, it starts from a philosophical view that success comes from leadership skills. A striking amount of business success comes from serendipity—unplanned, fortunate discoveries made by chance, accident, or good luck. But that’s hard to package up and sell. It is much easier to ignore the messy realities of life to pretend leadership skills are the dominant variable and that success follows skilled strategy development.
One of Harvard’s most famous case studies was the story of Honda’s success in redefining the US motorcycle market with huge sales of small motorcycles. The basis of the case study was a 1975 report by Boston Consulting Group for the British government. The report, titled Strategy Alternatives for the British Motorcycle Industry(8), claimed that the superior strategies of Japanese motorcycle manufacturers led to a collapse in the US market share for British motorcycle exports. BCG’s report and the HBS case study that followed highlighted Honda’s strategy to market small automatic motorcycles to members of the public who were not motorcyclists and had never thought about buying a motorcycle. Honda’s success was positioned as a classic low-cost differentiator strategically entering a new market.
However, in a 1984 article entitled Perspectives on Strategy: The Real Story Behind Honda’s Success(9), researcher Richard T. Pascale describes how the true story emerged when he gathered together the six executives who had led the US expansion of Honda. What emerged was a tale of mistakes, serendipity and unexpected events that blew a hole in the post-rationalised and biased BCG report and HBS case study. The now-retired Honda executives described how they had no strategy other than to aim for an arbitrarily chosen ten per cent of the market share of European motorcycle exports to the US (a target of 6,000 units per year). They set off for the US with an inventory of motorcycles, split evenly across their four models - the 50cc Supercub and the 125cc, 250cc & 305cc motorcycles. Soichiro Honda, Honda’s founder, was particularly confident that the 250cc and 305cc motorcycles would do well, mainly because the handlebar shape of the larger models looked like the Buddha’s eyebrows, which he took as a good omen.
When they arrived in the US, they only had enough funds to rent a one-bedroom apartment and a run-down warehouse in a poor area of Los Angeles. They were unaware of the seasonal nature of motorcycle sales in the US and arrived at the end of that year’s season, finding themselves with no prospect of sales until the following year. By 1960, they had persuaded around 40 motorcycle dealers to stock some Honda motorcycles, and some of the bigger motorcycles had started to sell. But then disaster struck as dealers began to report mechanical failures. It turned out that motorcycles in the US were driven much further and faster than in Japan. Honda’s engineering teams scrambled to redesign gaskets and clutches to fix the issues.
Meanwhile, the Los Angeles Honda team hesitated to move the smaller Supercub models for fear of compromising the brand’s image with ‘real’ bikers. To conserve cash, they rode the Supercubs around LA themselves on errands and to meetings. This generated a lot of interest from bystanders who were curious about these quirky vehicles. A buyer from Sears tracked them down and tried to persuade them to sell the Supercub via the Sears catalogue, but they initially resisted. However, with sales of larger motorcycles on hold pending technical fixes, they had no choice but to push out the smaller model. Much to their surprise, the retailers who wanted to sell the Supercub were not motorcycle dealers but sporting goods retailers. Unexpectedly, the buyers were mainly ordinary non-motorcyclists, but the Honda team were reluctant to advertise to this audience in case the message impacted sales of the higher margin ‘real’ motorcycles.
In 1963, a student studying advertising at UCLA submitted a routine course assignment in which he had devised an advertising campaign for Honda with the slogan: You Meet The Nicest People on a Honda. Encouraged by the course instructor, the student showed his work to a contact at Grey Advertising who was pitching for the Honda account. Grey quickly bought the idea and showed it to Honda. The rest is history. Far from setting out with a strategy to ‘redefine’ the US motorcycle market - the Honda team reluctantly backed into the opportunity when serendipity presented it.
Despite extensive criticism, the case study method remains the primary teaching method at Harvard and most other business schools globally. Harvard even sells business cases to other business schools, with sales of over fifteen million copies per year, generating hundreds of millions of dollars. As a result, business schools worldwide churn out armies of MBA graduates wedded to the ‘heroic’ model of the individual leader who confidently guides their business to success by applying the lessons of their MBA training to the real world. Belief perseverance looks set to keep it that way.
Prominent management thinkers, including Henry Mintzberg, Professor of Management Studies at McGill University, have called for the MBA to be scrapped altogether. In Mintzberg’s view, the idea of a ‘foundational’ education at the beginning of a manager’s career is fundamentally flawed, as he believes that management is a practice that can only be learned by actually managing - not by debating case studies in a classroom. He also points out that the MBA gives graduates a falsely inflated sense of their capabilities, which can cause “tremendous harm” to organisations.
In an article titled The Buck Stops (and Starts) at Business School(10), Joel Podolny (Dean of Apple University & former Dean of Yale Business School) suggests that the problems with MBA education are such that many people now believe business schools are harmful to society, churning out self-interested, unethical and overly financially oriented graduates. He is also critical of the highly rational approach to MBA teaching, pointing out that business school faculty members who specialise in quantitative methods and spreadsheet models hugely outnumber those who focus on qualitative and inductive approaches.
Despite extensive criticism, the MBA remains a highly coveted ‘badge’- a branded endorsement that means business school graduates get more senior roles with more power, where the impact of poor thinking and bad decisions is far more costly. Research from the US Graduate Management Admission Council’s survey of corporate recruiters in the US(11) shows that the median starting salary for MBA graduates in 2024 was $120k, whereas the median starting salary for experienced industry hires without an MBA was $90k.
Organisations will pay over 30% more for the badge, but there’s no evidence that it’s worth it in terms of results. If the many criticisms of this type of education are valid, it may ultimately be detrimental to those organisations’ futures.
Excerpts from Magnetic Nonsense: A Short History of Bullshit at Work and How to Make it Go Away
Need any help sorting out nonsense in your organisation? www.disruptionspace.co
1. https://www.hbs.edu/about/history
2. Harvard Business School Website: https://www.hbs.edu/case-method-project/about/Pages/case-method-teaching.aspx
3. Collinson, David & Tourish, Dennis. (2015). Teaching Leadership Critically: New Directions for Leadership Pedagogy, Final Published Version. Academy of Management Learning and Education, The. 14. 576-594
4. Podolny, Joel. (2009). The buck stops (and starts) at business school. 87
5. Kweder, M. A. 2014. Whose welfare? A critical discourse analysis of Harvard Business Publishing cases. Paper presented at the annual meeting of the Academy of Management, Philadelphia
6. Starkey, K., & Tiratsoo, N. 2007. The business school and the bottom line. Cambridge, U.K.: Cambridge University Press
7. Grey, C. 2004. Reinventing business schools: The contribution of critical management education. Academy of Management Learning & Education, 3: 178–186
8. https://assets.publishing.service.gov.uk/media/5a7c46b940f0b6321db381b0/0532.pdf
9. Pascale, R. T. (1984). Perspectives on Strategy: The Real Story behind Honda’s Success. California Management Review, 26(3), 47-72
10. Podolny, Joel. (2009). The buck stops (and starts) at business school. Harvard Business Review, June 2009
11. 2024 Report: Corporate Recruiters Survey, Graduate Management Admission Council, USA
"Honda’s founder was particularly confident that the 250cc and 305cc motorcycles would do well, mainly because the handlebar shape of the larger models looked like the Buddha’s eyebrows, which he took as a good omen." Brilliant! And in the post-hoc rationalizing that goes on with these cases, who's to say that wasn't the reason for their success? :)