Summary
For 50 years, MBA-influenced management culture has been spreading, first in the U.S., then in Europe and other industrialized countries, including China and India.
This MBA management style focuses on wealth extraction, short-termism, inhibits innovation, weakens corporate cohesion, and harms the common good. Six case-studies of leadership failure by world-renowned U.S. corporations illustrate the negative systemic side of this inappropriate management culture.
MBA-Driven Management or Operations-Driven / Product-Driven Management
are the two main types of corporate management culture today. MBAs, and career changers new to management, prefer corporate strategies, business deals, cultural change and neglect the operational and technical side of business.
The MBA culture has proliferated because of the rise of business schools with their graduate and executive management courses. These schools equip graduates with supposedly superior management concepts: Portfolio Management, Shareholder Value, Reengineering, all of which focus on the demands of the capital market. For many years, the idol of many MBA managers was General Electric (GE). However, the glaring failure of GE is a salient example of the reality of MBA-style management and Managerism. For many years, GE practices were ‘copied and pasted’ by business corporations in the US and elsewhere, and were marketed by management consultants with ‘success guaranteed’, or so it was claimed: Portfolio Management, General Management Model, Market Dominance, Outsourcing, M&As and Performance Management. All these MBA concepts became obsolete after GE's financial crash of 2018.
A wise body will learn from the mistakes of others.
Therefore it is advisable to look at the recent past of renowned U.S. companies – where grossly wrong decisions were made when appointing CEOs. The following corporate failures are the consequences of MBA thinking. Boeing: James W. McNerney (2005-2015), Enron: Jeffrey K. Skilling (1990-2001), HP: Carly Fiorina (1998-2005), Intel: Robert Swan (2019-2021), Pfizer: Henry McKinnell (2001-2006), GE: Jeffrey R. Immelt (2001-2007). German case-studies are Mannesmann with Klaus Esser, Hoechst with Jürgen Dormann, Siemens with Klaus Kleinfeld and Peter Löscher, Bertelsmann with Thomas Middelhoff, and other corporate failures.
These corporate failures have things in common
First, the canon of MBA schooling. At its core, this promotes a penchant for Grand Strategies, Transactions (M&A), Controlling, and Financial Engineering and it ignores industry experience and practical operational knowledge. Other characteristics of these failures are arrogant managers (General Managers) who believe that they can "turn-around" any kind of business and can re-focus and customize “traditional” companies (Transformative Leadership) to satisfy the capital markets. They overlook that the workforce must be won-over, committed and engaged, before any realignment can succeed.
Consequences of MBA culture for business, economy and society.
The business school concepts of Outsourcing, Core Competence, Price Dominance, Asset-Light and Leveraging aim to increase the return and capitalization of the individual company. But Outsourcing instead of Re-organization and Re-orientation has contributed to the weakening of many firms, industries and regions and led to dependencies that are hard to control. Another economic consequence is de-industrialization in the U.S. and the U.K. that was hardly imaginable only twenty or thirty years ago. In contrast, China's successful role as the 'factory of the world' is now attributable to its strong technology orientation.
MBA-dominated industries and economies are over-managed. Excessive regulation, self-created complexity and advanced over-concentration, as well as a fixation on capital markets, has resulted in poor innovation and declining productivity, and also lead to a chronic impairment of the common good. In short, in the long run, the MBA culture harms everyone.
Conclusion
After fifty years, a change in the way companies are managed is on the horizon: There is need for a more entrepreneurial, innovative, value-creating, long-term oriented economy that supports social cohesion, and for company managers that live up to this mission.
This is a summary of a German essay from www.managerismus.com
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