Your Business School Environment

Business schools have a culture that narrows your perceived options and can often direct your behavior as a businessperson, at least early in your career, by the values espoused. What are those values?

In the 1970s, the elite business schools were organized around the goal of producing general managers. The CEO as enlightened corporate statesman was still of interest, although it would fade in the 1980s with the emergence of investor capitalism and its takeover wave.

By 1980, business experts wrote that countries like Japan were turning out better managers. American managers needed to learn how to manage more effectively toward one goal: maximization of corporate value. Shareholder primacy became the new mantra. The New York Times duly noted that the new model of corporate “goodness… eschews loyalty to workers, products, corporate structures, businesses, factories, communities, even the nation.” The new flood of corporate takeovers meant that only “maximizing stock price can be allowed to matter.” This maxim would dominate the culture of most business schools.

These arguments led to aligning managers’ incentives with those of shareholders. The executive option market flourished, one of the most disastrous developments in the history capitalism. It exacerbated the fixation on short-term profit regardless of longer-term cost. The same ethos would dominate the culture of business schools.

The era can be summed up by an early-1990s televised comment by a large insurance company CEO who resigned soon after the interview. He had agreed to come on the show to discuss the company’s new innovative employee assistance programs for minimum-wage workers. But the interviewer focused on the just released quarterly results, which were one penny below expectations. The CEO’s comment: “Now I get it. If you want to do something that serves the interests of society, the environment, the community, or the poor, and it costs your shareholders one penny, it is immoral.”

In October 1993, Net Impact (known until 1999 as Students for Responsible Business) was created to build a community of MBAs that believed that the responsibility of a corporation is not just to shareholders but to all stakeholders. Managing Director Daniel O’Connor best expressed Net Impact’s business philosophy in a 1999 speech at the University of Michigan. Daniel explained that the purpose of business is to create value for its society. Through a mission-driven network of emerging business leaders united by a shared commitment to use the power of their careers, Net Impact would create a better world for all.

In the 1990s, the majority of business schools saw Net Impact as a fringe group primarily consisting of liberal “tree-huggers” and “do-gooders.” But as the twenty-first century dawned, the new global economy transformed the cost-benefit parameters of business through the market realities of climate change, the price of oil, and the demand for young talent who often have social and environmental interests. Net Impact began to grow rapidly as a network for emerging progressive business leaders.

As I write, Net Impact has over 190 business school and professional chapters and is growing rapidly worldwide, with its first European office and chapters in Asia, Africa, and Latin America. At many business schools, Net Impact is the largest student group. Net Impact and its local chapters have also been instrumental in changing business school curriculum while unleashing an energy best seen at the annual conference, which hosts two thousand attendees.

This decade has seen the rising prominence of Aspen Institute’s Beyond Grey Pinstripes school rankings. The biennial rankings are based on how well business schools integrate social and environmental stewardship into their curriculum and research. Students are demanding that curriculum more closely reflect their values, and business schools are accommodating those changes. Green business courses were available at nearly two-thirds of business schools surveyed in 2007, twice as many as in 2001.

Still, how much have the schools themselves really changed? Schools have opened institutes, some jointly with other university departments, and many offer elective courses in sustainable business, microfinance, corporate social responsibility, and social enterprise. Yet there remain no tenured or tenure-track professors in these fields, indicating that the values espoused by these courses are still not central to most business schools.

Business schools remain driven by rankings and fundraising (helped by higher rankings). Rankings are determined in part by the starting salaries of graduates, not whether they like their jobs or can express their values at work. Where can MBA graduates get the highest starting salaries? See your options narrowing?

For the most part, the bottom line remains the same. As reported in “A Growth Industry” in the April 14, 2008, issue of Newsweek, business schools are adopting the philosophy “make a bunch of green by going green”; indeed, the article’s subtitle states, “business schools are teaching entrepreneurs how to get rich helping to save the environment.”

Interest in a “triple bottom line” can be accommodated as long as the financial bottom line is satisfied. Like Wal-Mart and Toyota, two companies invested in “greening” their companies, environmental responsibility is a business calculation of innovative ways to save and make money.

One student at Aspen’s top-ranked school, Stanford University, said it best. A twenty-nine-year old with an engineering background, he spent two years studying environmentally sustainable business. Is he doing this because of his values? “The honest answer is no. It makes good business sense to be sustainable.” He hopes to be working at a private-equity fund upon graduation.

Whether curriculum change leads to cultural change remains to be seen. Business schools reflect the interests of the surrounding business community, particularly their alums. As green business opportunities in clean technology have grown, curricula have grown in these areas, too. There are now a handful of new schools like Presidio School of Management and Bainbridge Graduate Institute, where sustainable business practices are not a calculation but a commitment to social justice and environmental responsibility as much as financial results.

To conclude, business school remains focused on your financial growth, not personal growth. I believe you get at best only marginal help in business school at understanding your values and what is important to you in your career.

If you don’t know exactly what you want to get out of business school, then the business school’s curriculum and culture will do little to help you clarify your purpose, awaken your passion, and realize your potential. Just look at the pressures and challenges the typical MBA faces.