October 24, 2004
ARMCHAIR M.B.A.
Asking Future M.B.A.'s to Find the Red Flags
By WILLIAM J. HOLSTEIN

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THE scandals that have rocked the business world are leading business schools to adjust how and what they teach, says Jeffrey A. Sonnenfeld, associate dean of the Yale School of Management and co-editor, with Robert Gandossy, of a new book, "Leadership and Governance From the Inside Out" (John Wiley & Sons). Following are excerpts from a conversation with Mr. Sonnenfeld:

Q. How well are business schools responding to the corporate scandals?

A. The M.B.A. world has responded very well. There's been a tremendous embrace of field learning at the M.B.A. level, and the core disciplines have come to understand the sources of the governance collapses. Unlike a law school or medical school, where most of the faculty has a common training, the challenge in business schools is that we have very strong disparate research traditions, like marketing, economics, engineering and finance.

At the executive education program level, we don't do as well. The renowned educational pioneer John Dewey would be distressed to see how often we are teaching rising executives with the same tools that we use with M.B.A.'s and undergraduates. Some of them date back to just after World War II.Q. Have business schools changed the way they teach ethics and governance?

A. Yes. Until very, very recently, educators had debates about whether ethics could be taught. There was a sense among the faculty at many schools that it was like teaching Sunday school. Values were not the job of professional educators.

What we have seen now is a growing sense that problem recognition in the business world is subtle. We can do a much better job of preparing people for that. Education is taking on much more of the feeling of detective work. Students are interested in the hidden stories behind the numbers.

Q. How can ethics really be taught?

A. We have special ethics programs, and it's part of every course as well.

In the governance arena, most schools have worked in extensive material on understanding how to design systems where the honest information rises. Whistle-blowers like Sherron Watkins from Enron regularly visit us. We want to understand how organizations are structured in ways that create deniability, not transparency, and, instead, build practices that encourage leaders to admit mistakes and listen to courageous voices from within.

Q. You want your students and executives to be whistle-blowers?

A. After all the scandals in history, various commissions and investigations usually reveal that there were people on the inside who knew what was going wrong, whether it was a waste of resources or damage being inflicted on a company's reputation. If critical people had gotten that information, things would have turned out differently.

So schools are actively looking at boards and management to counteract the pathology of group behavior. The point is that dissent is not disloyalty.

Q. What do executives returning for more education want to learn?

A. What executives want to learn about now is no longer just to do their jobs better. They want to pull together across the different disciplines and hear about how somebody in finance, say, integrates marketing and operational issues.

Q. But how do executive education programs promote ethical behavior?

A. One thing we do is bring hundreds of them together for off-the-record sessions where they can learn from each other.

Chief executives can atrophy in higher office. There's no blueprint for them to follow and very little feedback. They can't confide in their subordinates without role-conflict issues. They also can't confide in their boards because of increasingly adversarial situations. So they are looking for places to go where they can have candid peer-to-peer learning.

Q. Have the scandals reduced students' interest in big companies?

A. We have seen their interests shifting from the worlds of consulting, real estate, investment banking, entrepreneurship and advertising years ago. Cyberspace and the Internet also were of huge interest for a while.

These days, students still have a strong interest in entrepreneurship, but they're also looking for opportunities at large progressive firms. They don't want to get lost in the bureaucracy and have someone slap them on the back and say, "You'll be promoted in good time." They obviously want to move up the ladder.

With the baby boom generation now moving through the system, a lot of opportunity is opening up. This next generation is interested in major employers, like I.B.M., General Electric and U.P.S. The changes at those companies have gotten people excited. The New New Thing may be reinventing the corporation.

Q. Do students want to be chief executives?

A. Definitely. They want influence as much as affluence. There used to be a strong segment interested in the art of the deal. But these days, the chief executives being worshiped aren't the superstars of deal making. Students are interested in chief executives who have harnessed the energy of innovation to do great things for society.

Q. Is Donald Trump a hero?

A. No. A lot of people watch "The Apprentice," and I want to say that Donald Trump is a very creative person. He's done a lot for the economic development of New York.

He's a good person. But the show does represent a lot of what we don't teach.


William J. Holstein is editor in chief of Chief Executive magazine.