MBAs and Fools

I first read Peter F Drucker in 1970.  I had purchased a used copy of The Practice of Management. and was greatly impressed with its content.  Since that time I have read almost every book and article he wrote and found his thinking very sound and practical.  He had written in that first volume that a business should not hire anyone who had obtained an MBA without having worked prior to graduate school.  His assertion was that one should practice management first.  Today the practice has become the opposite.  Somehow one needs the MBA to be a first or second line manager.  Yes, times change and the old idea that the obtaining of an MBA degree was the capstone of one’s career has passed into history.

The history of management education is an interesting stroll down memory lane.  Harvard gained fame with its case study approach and its business magazine.  Like many others who wanted a career in management I read several years worth of those quarterly publications until I noticed that although the companies mentions were different the cases never seemed to change.  Each case was cast as a specific problem to be solved the problems were somewhat generic.  They usually are in the real world.  And the solutions are pretty much the same.  Sales are falling?  It could be that your product is out of date or you need to spend more money in advertising or your price is too high.  Of course no one really sees if you have reached market saturation or that your once distinctive product is now a commodity, that borders on heresy.  Harvard Business School produces leaders for business.  The Chicago Business School solved problems and produced problem solvers.  As far as Stanford Business School was concerned both approaches were wrong.  And so it goes on.  The University of Phoenix churns them out like soldiers going through boot camp and advanced infantry training school.  We now have large armies of MBA graduates and yet our corporations are still poorly run.  The only difference is that the MBA is global.  More education is the cry.

The functions of management used to be divided into practical groups.  Accounting was that group that kept tract of the money from where it came from and how it was spent.  Finance used to be a subsection of accounting.  Now it is the rock star promoting the use of debt in the most creative fashion.  Some authority has decreed that the proper debt load for any company is about 35% of its valuation.  Somehow not having debt is seen as bad financial management.  Marketing is the other great star.  A product must be glamorized and promoted as the next coming of sliced bread.  Ever wonder why that term is used?  Prior to World War Two, you bought bread in a whole loaf and sliced it yourself.  Then the war came and the demand for sliced bread grew as more men were being trained for war service.  All those mess halls created a demand for bread slicing machines.  But back at the ranch, marketing was seen as the great creative enterprise.  Who else could delight the customer?  The third great star of this business rock band is the IT people for Information is money and power. It is so powerful that we now mine it for even more information.  We employ people with knowledge of statistical analysis to inform us of every detail we can find about any customer and any buying trend.  The trend is out friend until it isn’t.  We look for the next killer technology or the next killer app that will propel us past our competitors.  And we owe all this advance in business management to those MBA programs and the graduates who now sit at the desks managing our companies.

There was a time when the heads of a company, back before president and chairman of the board of directors were combined into that dreaded but power term of Chief Operating Officer or CEO for short, were merely presidents.  Their job was to run the company and the job of the directors was to provide a little direction and oversight.  But now with the advent of the ever present computer and accounting spread sheet condensed into Excel screen shots our board members have the latest numbers crunched and can follow how each division and even department is doing.  The board of directors now micromanages everything.  Are the people in your department pulling their weight, working every minute and being super productive?  Reminds me of Frederick Taylor, father of was came to be termed Scientific Management.  Most individuals do not know that Taylor never went to Harvard and only much later in life did he take correspondence courses in engineering.  He started working a steel mill and went through an apprenticeship.  He held at one time many of the dozens of different hourly labor jobs and rose to become the chief engineer of the company.  That title meant he was responsible for the maintenance and repair of all the machinery in the plant.

It was this working experience that gave rise to his ideas that the manual labor in both the craft and general labor groups could be improved.  At a time when the current management belief was that craft labor could never be understood by the manager and thus subject to improvement, Taylor proved otherwise.  What he started would later evolve into time and motion management.  When we look back on his work one thing stands out very clearly.  The shop floor was not organized very well.  Today we call this a problem of process management.  But as engineering departments in the college and university environment paid attention to Taylor, so came the discipline of Operations Engineering.  The operations engineer needed to know something about a lot of things.  A little knowledge of material science, some mechanical engineering, some electrical engineering, and even a little chemical engineering was necessary to the operations engineer.  Of course we find our ops engineer studying statistical processes, some human management techniques, a little accounting, and maybe a smattering of finance.  The ops engineer was really a a jack of all engineers.  He has been replaced by the project manager.

Before I graduated with a degree in psychology I was required to take a history of psychology course.  That might seem like a waste of time but the course illuminated psychology as a whole to the individual student.  That field has come a long way as it developed and those who look at its history gain a perspective about the process of psychology.  I have not seen too many university courses on the history of management nor a requirement that every student take that course before graduating with a degree in management.  As Drucker pointed out in his first book, managers need to ask two questions of themselves.  Back when Alexander Bell had run his telephone company into the ground he brought back Theodore Vail to save it.  Vail called together all the heads and asked them two simple questions.  What is our business and who is our customer?  The answers he received to the first tended to be that the business existed to sell telephone.  Wrong was Vail’s response, our business is selling service.  As to the question of who is the customer Vail said that the business had two customers.  One is the user, those people who use our telephone service.  The other is the regulations agency in each state government, the FCC had not be created yet.  You can take all the MBA courses you wish and read all the current management books of today and yet that concept is seldom mentioned.  We hear and read about visions and technology but seldom does top management ever inform us what our product is and who are customers are.  And even when top management tries to inform us they bury that message in a heap of corporate marketing jargon.  If you want to solve problems in the corporate environment then Drucker has the best problem solving technique.  Define the problem.  It is that simple Socrate method that always works.  Define your problem.  True, you may need to do some statistical analysis but without defining your problem all the numbers in the world will never help you.  One does not need an MBA to do that.

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