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June 5, 2009
The MBA Oath
Adi Ignatius, Editor, Harvard Business Review opens the June edition with:
“The public’s trust in business leaders has never been weaker. According to the Edelman Trust Barometer, released in January, trust in U.S. business dropped from 58% to 38% in one year. European businesses are in nearly as much trouble with the public. Businesses in emerging markets are faring better—but not by a lot. If companies can’t address this problem, an economic turnaround may be delayed indefinitely.”
Trust in CEOs as spokespeople dropped to an all time low of 17% in the US, lower even than in the year following the Enron debacle. As many of the protagonists in the drama were classmates of mine at Harvard Business School (Rick Wagoner of GM, Stanley O’Neal of Merrill Lynch, John Thain of Merrill Lynch, Jeff Skilling of Enron), I found Harvard President Drew Faust’s comments during the 100th Anniversary of the institution last fall to be important and well-timed. She spoke about stone-cutters working on a great cathedral and concluded that of the three types of laborers, the most effective was neither the one trying to build his section most beautifully nor the one who was just doing his job and collecting a check. It was the team player devoted to success of the enterprise.
In the wake of that celebration, two professors at the school, Rakesh Khurana and Nitin Nohria, wrote an article in the Harvard Business Review, titled, “It’s Time to make Management a True Profession.” In the piece, they argued for a Hippocratic oath for business people, a higher standard than making money for yourself. As Professor Nohria told me on Wednesday, “The average person’s view of a business executive is one who is entirely self-interested, a Gordon Gekko character from the movie Wall Street, not even aiming for maximizing shareholder value but to enhance personal net worth.”
As an outgrowth of that article, the newly elected presidents of the HBS class of 2010 visited the professors and said they were willing to embrace a higher standard. A student from the class of 2009, Max Anderson, took it upon himself to draft the MBA Oath. Among the important precepts are commitment to ethical behavior, recognition of need to balance economic, social and environmental prosperity, plus a need to manage one’s career beyond self-interest by considering the needs of both the company and society. Four hundred twenty five of the 900 graduates of the class of 2009 have signed the oath, plus 100 others at business schools across the world. This is an important first step toward business regaining the public trust.
Professor Khurana told me that MBA education must also change profoundly. “We are living in a new context. If you cannot scan the environment, build alliances, shape the discourse, find the hard and soft constraints in a stakeholder society, you will not be an effective manager.” He believes that graduates of HBS cannot do this type of analysis. “They are unsettled about this knowledge gap; they believe they will have to learn it on the job. We need a coherent intellectual framework.”
Both of the professors agreed that the present MBA course teaches students to integrate across functions, from accounting to finance to marketing and production. “But the world is now much more complex,” Khurana stated. “We must teach systems thinking, with feedback loops on decisions. We are now just too linear.” Professor Nohria advocates training of MBAs in cognitive, process and emotional capacities. “We must get to enlightened self interest, beyond narrow self-interest. To do so, business leaders must think about problems using multiple intelligences.”
The challenge for business is not whether companies are entitled to make money but how they make money. Simple reliance on economic justification is not sufficient; there now needs to be social justification, or as Professor Khurana describes it, “Legitimacy earned by acting in concert with the norms of society, moving from business as an extractive to a value-creating mode.” Just as communication has evolved, from a top down set of messages delivered by the CEO to a continuous conversation among peers, the challenge to management schools is to teach functional skills and environmental analysis. It is only with complex thinking that best decisions will be taken.
Posted by Edelman at June 5, 2009 10:42 AM |
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Comments
Great blog. How many would sign the document if they knew they would lose their degree and ability to work if they engaged in inappropriate behavior -- just as a physicians and attorneys lose licenses? Ask them to put their signatures where their money is.
Posted by: Louis Tharp at June 7, 2009 5:15 AM
Are you going to take an oath to safeguard the interests of your coworkers? That means that you could never work on starting a competing company at night. Since that would be a direct violation of safeguarding the interests of your coworkers.
Are you going to take an oath to seek a course that enhances the value your enterprise can create for society over the long term? This means that you could never start an enterprise which merely creates value for society over a short period. For example, you'd be restricting yourself from purchasing a video rental store since that might cash flow in the short term but obviously won't create any value for society over the long term.
Are you going to take an oath to guard against decisions and behavior that advance your own narrow ambitions but harm the enterprise and the people it serves? This means that you need to guard against the decision to leave a company if you think the company will be harmed by your departure. The decision to leave obviously only advances your own narrow ambitions.
Are you going to take an oath to observe EVERY single law in existance? This means that you are taking an oath not to J-walk, etc. unless you also seek a means of reforming those laws. This one is probably the worse issue with this oath. This point CLEARLY pushes this oath beyone the spirit of good faith observance. This point clearly forces signers to observe all laws to the letter regardless of the spirit of ethics involved, therefore, this oath can't be signed towards the intention of merely following the "spirit" of the oath. This point makes is clear that this oath must be observed to the letter.
Are you going to take an oath to develop all managers serving under you? This means that you must continue to put time and energy into developing all or your employees (no matter how bad) if they happen to be a manager.
Are you going to take an oath to strive to create sustainable prosperity worldwide? This means that you'll be violating your oath if you are only striving to create regional or national prosperity. By the way, I don't know what exactly environmental prosperity is.
Posted by: Natasha at June 16, 2009 11:13 AM
Richard,
In the spirit of your “The MBA Oath” posting, I find the following relevant to; ethical behavior, stakeholders and self-interest, respectively:
Ethical Behavior - Warren Buffett Quote
"I look for three things in hiring people. The first is personal integrity, the second is intelligence, and the third is a high energy level. But, if you don't have the first, the other two will kill you." --- Warren Buffett
Stakeholders – Excerpts from The Unbounded Mind: Breaking the Chains of Traditional Business Thinking
Stakeholders are any individual, group, organization, institution that can affect as well as be affected by an individual's, group's, organization's, or institution's policy or policies. Figure 8.1 (omitted) shows this in a schematic way. Notice that a double line of influence extends from each stakeholder to the organization's policy or policies and back again-an organization is the entire set of relationships it has with itself and its stakeholders. An organization is not a physical "thing" per se but a series of social and institutional relationships between a wide series of parties. As these relationships change over time, the organization itself changes. It becomes a different company. The failure to grasp this has prevented many an organization from seeing that it is not the same because its environment, that is, its external stakeholders, has changed even though internally it looks the same. Since we are dealing with a system, a change in any one part potentially affects all other parts and the whole system itself.
--- Ian I. Mitroff and Harold A. Linstone, The Unbounded Mind: Breaking the Chains of Traditional Business Thinking
Self-interest - General Motors’ Success Factors, Circa 1970
• GM is in the business of making money, not cars
• Success comes not from technological leadership but from having the resources to quickly adopt innovations successfully introduced by others
• Cars are primarily status symbols. Styling is therefore more important than quality to buyers who are, after all going to trade up every other year
• The U.S. car market is isolated from the rest of the world. Foreign competitors will never gain more than 15% of the domestic market
• Energy will always be cheap and abundant
• Workers do not have an important impact on productivity or product quality
• The consumer movement does not represent the consensus of a significant portion of the U.S. population
• The government is the enemy. It must be fought tooth and nail every inch of the way
• Strict centralized financial controls are the secret to good administration
• Managers should be developed from the inside
--- Larry Wilson, Between Trapezes Thriving in Discontinuity
Posted by: Hugh Campbell at June 22, 2009 9:13 AM