What Will I Learn in Business School?
What students learn in business school today differs radically from what they learned in past decades. This article focuses on the updated lessons students now learn in MBA programs, including a few surprising examples recounted by recent graduates.
MBA programs have changed in remarkable ways during the past few decades. Before, they concentrated on disciplines like finance, accounting, economic statistics and operations research, but deemphasized collaborative aspects of life within organizations.
That training contributed to the pejorative stereotype that myopically data-focused MBAs were utterly out-of-touch with the daily real-world challenges managers face.
Leadership, Teamwork, Motivation, and Interpersonal Dynamics
Business schools responded by dramatically expanding their training in leadership, teamwork, and interpersonal strategies like negotiation. Deans and curriculum designers took these steps because they recognized that at some point their alumni would add greater value by leading and managing others than by their talents as individual contributors. However, effectiveness in more senior roles like these would eventually require an entirely different interpersonal skill set.
As Stanford Dean Garth Saloner told McKinsey, “the softer skill sets, the real leadership, the ability to work with others and through others, to execute, that is still in very scarce supply.” Saloner continues:
There is a set of leadership skills that can be taught. They have to be taught experientially; this is not something you can lecture about. You have to put people in small groups, give them leadership tasks, and have them work them through.
So what we’ll do is, we’ll put them in a group, we’ll give them a difficult assignment—maybe it’s a difficult conversation, maybe it’s feedback, maybe it’s execution—and we will videotape what they’re doing in these sessions. And these small teams will have coaches, leadership coaches. So this is very different from the way management education looked 15 or 20 years ago.
The clear focus today at programs like Stanford’s emphasizes how students can leverage their personalities and skills to become better leaders and motivators. In the words of Evan Reas, one of Stanford’s recent graduates:
I have heard countless alums mention that after a couple of years post-MBA, you remember very little about specific modeling techniques, financial analysis or case studies, but that they daily use what they learned about leading, managing, negotiating and persuading.
. . .for many, business school could be the most concentrated group of hyper-type A personalities they will ever be around, and one learns very quickly how to work in high-performance teams where many people want to drive the same boat. This group interaction teaches one how to lead, listen, and be very aware of actions and behavior of others and its impact on the team as a whole.
Here’s a mind-blowing example from Harvard MBA grad, Ellen Chisa. She points out that Harvard’s LEAD (Leadership and Organizational Behavior) presents a famous case study examining best practices in how managers respond to setbacks. Displaying vulnerability and candor, Chisa describes how this experience affected her in a deeply personal way:
Unfortunately, things won’t always go well in your career. How you react and recover impacts everyone around you. One of the best things I did this year was answering these two questions honestly, for myself:
What is my worst self?
When does my worst self come out?
My worst self: critical, impatient, stubborn, cynical, and sarcastic.
It comes out when I feel like I’m not in a position to make an impact, and when I feel undervalued in a situation. It also happens if I think I’m fundamentally “right” and someone disagrees. If it goes on for too long, I become incredibly apathetic and don’t do anything.
I have a hard time avoiding this, but I am better at catching it now. When I do catch it, I attempt to apologize to the group, move on, and catch it faster the next time.
The lessons Reas and Chisa describe are available not only at HBS, but also through many courses available in online MBA programs, including the University of North Carolina (developing management and leadership skills), Carnegie Mellon University (managing networks and organizations), and the University of Scranton (organizational behavior).
One quickly recognizes from such course descriptions that the overall “soft skills” emphasis characterizes the many modern MBA programs. The notable difference is that in online MBA programs, role-playing practice in interpersonal situations like negotiations usually takes place through video modalities or brief, concentrated in-person residencies and immersion programs.
Just because business schools now place tremendous emphasis on soft skills shouldn’t imply that MBA programs no longer teach quantitative courses! They still teach those subjects, but in very different ways than they did in the past.
In past decades, many business schools taught all students quantitative methods (e.g, accounting, finance, economic statistics, project management) in very similar ways. The schools offered such uniform training despite differences in the degrees awarded or their students’ career aspirations.
For example, at many schools, MBAs preparing for careers as C-level executives received the same training in accounting principles taught to accounting master’s degree candidates planning careers as CPAs. However, successful top management careers in most industries seldom require expertise in CPA-style responsibilities, like the preparation of complex financial statements.
These days, more specialized MBA accounting courses enable students to become informed users of financial statement information, such that they understand the implications of financial reporting that may relate to a firm’s future cash flows and earnings potential. In this way, astute executives can actually identify hidden competitive advantages and strategies through disclosures made by competitors in their financial statements. According to Chisa,
The most interesting thing you can do is look at financial statements to see where competitive advantages are coming from. Lower costs of production? Lower admin costs? If a firm has a low-cost strategy, do they spend a lot in one area? Which? Why might that be, and how does it play into the overall strategy? Examining a financial statement gives you way more about strategy than I ever would have guessed.
Innovation, Globalization, and Product Design
Today, top-notch business schools include topics and experiences that weren’t even conceived of as a part of management education 20 or 30 years ago. Innovation is one of them, and a closely related field, “design thinking” is another.
Design thinking involves a creative process of identifying a need, as in marketing. However, the method also involves interacting with customers to perform rapid prototyping together. In that way, the firm can best understand how to develop a product that can quickly address those customers’ needs. Design thinking offers a paradigm that can be especially useful when considering the needs of global markets. Again, according to Saloner,
As an example, I have a colleague, Jim Patel, who teaches a course called Design for Extreme Affordability. What happens in that course is, Jim will actually put the students on a plane and take them to a developing country, where they will talk to people in country about unmet needs that they have.
The role of the business students in a project like that is to figure out how to get the end product into the country, solve the supply chain and logistics problems, and get it into the country at a price that the people there could actually afford.
Gaining real-world experience with global markets in ways like that which Saloner describes has emerged as an objective for large numbers of MBA students. Almost all of the top business schools in North America and Europe offer global immersion trips to major business centers around the world for academic credit, and most (like Stanford) require these trips as graduation requirements. Trips like these serve an especially important networking function in online MBA programs; business schools intend that these immersions and residencies are “generally meant to create the kinds of bonds among students that might seem more elusive online.”
Rethinking Business Concepts
For a lot of us, understanding the stock market’s relationship to a firm’s operations seems bewildering. Consider “Unicorns.” These are the high-flyers of the new economy, like the ride-sharing services Uber and Lyft. Startups like these do not own capital assets—which in this case, largely amount to vehicles—and because they pay drivers as independent contractors, they have relatively few employees. Yet the market capitalizations of Uber and Lyft are vast, both exceeding $1 billion. How could that be? Furthermore, how could so many early dot-com firms who also benefited from enormous market capitalizations have ended up as acquisitions, or worse, as bankruptcies? And why do stock prices change considerably in response to earnings announcements, but often don’t change upon new product introductions?
Many people believe that stock prices reflect the value of companies in terms of assets like plants, equipment, and merchandise inventory. Although that notion may be partially correct, it’s not the whole story. Instead, business schools teach that it’s more useful to consider stock prices in relation to a different concept of value: the lifetime sum of all the income the firm will ever make in the future, discounted back to the present time.
Conceptualizing stock prices in this way helps to explain phenomena like the staggering market capitalizations of firms offering ride-sharing services, which are driven by the stock market’s expectations of colossal income streams in the future. Comparing a firm’s income streams using the discounted cash flow model with their market capitalization provides a way of determining whether the stock may be overvalued, undervalued, or fairly valued by the market, according to Chisa.
In Summary: What Will I Learn in Business School?
MBA students at the best business schools today learn a great deal about topics only added to the curriculum in recent years like leadership, teamwork, and global business. They also learn about quantitative concepts and methods that are appropriate to their future roles as senior executives. And all the while, they’re developing networking skills and building relationships—the advantages cited by many as the most important long-term career benefits of attending business school.