The Complexity Conundrum

Much has been said about the role of greed in creating the financial crisis. Indeed, many managers were motivated to get the maximum for themselves in the short term. But most managers were simply unprepared to anticipate the impact of their decisions in a more complex world. It is often overlooked that the economic downturn of the last couple of years was also a crisis of naiveté. Whether or not MBA programs can teach ethics and responsibility is already in doubt. Are MBA programs up to the challenge of developing leaders who can manage complexity well?

Businesses today face enormous levels of interdependence and variety. Financial capital and goods flow relatively freely—what happens in one place increasingly affects other locations. Housing prices in the U.S. influence interest rates in Europe. China's growth affects commodities globally.

Further, variety is consistently created by advances in technology, while workforces are more diverse and multifunctional than ever. These combinations of interdependence and variety are constantly in flux, so even if you understand and optimize today, the best actions tomorrow might be different.

How to Build Knowledge That "Sticks?"

Recent findings on leadership development are discouraging for the typical MBA program. Building knowledge that "sticks" for effective performance on the job is much more important than "academic" learning. And for executive development, companies are moving actively back to the old notions of apprenticeship and mentorship.

Still, take this research with a grain of salt. If it were just about experience, every manager with experience would be able to lead in complexity. We know that's not the case. Formal learning can enhance the effects of experience by connecting knowledge and action in two important ways. First is to create cycles in which knowledge leads to planning and action. Observing what happens must lead to reflection and more knowledge. Second, we must provide learning cycles that are systematically different from each other. Learners need to compare across contexts to develop a repertoire of knowledge and skills that are universal (work across contexts), and contingent (dependent on the context) and they need to develop the critical ability to differentiate what's universal from what's contingent.

In other words, sitting in a classroom is useful only when it prepares learners for action. From day one, MBA programs should incorporate real-life experiences, such as real-impact projects with companies, rather than having them as standalone courses (or worse, electives). Curriculum should include many such experiences, structured to cover a spectrum of company sizes, stages, industries, and economic and cultural contexts. Learners should be taught to compare and contrast different experiences, enabling them to develop the ability to read situations and draw from a repertoire of responses. A real MBA should present "guided on-the-job leadership training."

Ethics and Responsibility Will Follow

Incidentally, these principles are important not just in developing the ability to manage complexity, but also to address leadership attitudes and values such as ethics and responsibility. Learning to lead with courage and integrity occurs as a result of having faced—and reflected on—tough situations. We learn to lead others effectively by working through difficult processes with people who are different from us. In fact, by using experiential learning to address leading responsibly and managing in complexity, we will develop leaders with the ability to make wise choices and implement them successfully.

Yet these principles are not easy to implement in formal, structured learning environments. By integrating action learning throughout an MBA, you open it up to loss of control and unpredictability. What if the company doesn't cooperate? What if students don't do a good job? What if our contact changes and the new person doesn't want to work with us? What if their timing is different from ours? Live companies and managers are notoriously more difficult to manage than textbooks and cases are. As professors, we prefer to have our knowledge tied up neatly.

If the MBA is not to become obsolete, it must be structured to match the needs of the new, complex business environment. We must embrace the same level of complexity within our schools as we see in the environment, and we must learn to open ourselves up as cases and examples. If business schools are prepared to live what we teach, then MBA programs can become even more valuable. The opportunity is enormous: If we build these principles into our programs, we develop leaders who make a positive difference to our future. Isn't it worth it?

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