Declining U.S. Competitiveness: Blame B-Schools?

Harvard Professor Robert Simons Photograph courtesy of Harvard Business School

Harvard Business School professor’s paper that lays the blame for declining U.S. competitiveness squarely on the nation’s business schools got an immediate response from former Harvard University President Derek Bok, who asked: Where’s the hard evidence?

The academic wrangling is over The Business of Business Schools: Restoring a Focus on Competing to Win, in which Harvard’s Robert Simons argues that business school curriculum changes, including the embrace of stakeholder theory and corporate social responsibility, are responsible for making graduates ill-prepared to compete in the rough-and-tumble global economy—and are ultimately making U.S. companies less competitive.

The study, published in the latest issue of the journal Capitalism and Society, argues that there has been a fundamental shift in management education from “competing to win” to a more nuanced view that takes a company’s multiple stakeholders—shareholders, customers, employees, and society—into account.

The result, Simons says, is that the primary objective of a business school education has been lost. Instead of teaching students that “the business of business is business,” B-schools now teach them that the business of business is “balancing competing objectives” of stakeholders. Instead of teaching students how to compete and win, B-school curricula now include a host of unrelated ideas, from not-for-profit management and public policy advocacy to sustainability.

Simons calls this “mission creep” and questions whether “doing good things—what in previous eras might be described as icing on the cake—[has] now become the main agenda—the cake itself.” He thinks it has, and he holds this attitude partly responsible for the loss of competitive advantage by U.S. companies. To illustrate how, he compares two hypothetical companies: Company A, which incorporates many of the ideas that have been incorporated into the B-school curriculum by balancing the needs of employees, shareholders, and customer, and Company B, which always puts the customer first.

“If students bolted together all the [B-school] initiatives … it would be a recipe for creating Company A: an organization that is unfocused, flabby, and lacking the will to win,” he writes. “When faced off against a lean, hungry competitor—like Company B—Company A will lose every time.”

It’s already happening, he says, citing a sustainability effort at Wal-Mart and a healthy foods initiative at PepsiCo that did little to advance the competitive advantages those companies have. Since 1995, foreign competitors have increased their share of global operating earnings at the expense of the U.S. share in eight industries, including telecommunications, financial services, and industrials.

Simons argues that MBA programs should introduce courses that supply the tools needed to answer the difficult and hugely consequential questions about customers, resources, and value that lie at the heart of every business. He also recommends hiring more business faculty—not the social scientists who make up the bulk of most B-school faculty now—to teach them.

In his response to the article—published in the same issue of Capitalism and Society—Bok says that there is “considerable room for doubt” that Simons’s conclusions are correct. Some of the evidence Simons provides for declining U.S. competitiveness has resulted from the U.S. national deficit, not weaknesses on the part of U.S. companies, Bok wrote, adding that Simons offers “no hard evidence” to support the notion that focusing on multiple stakeholders can be detrimental. Bok disputes the idea that business schools have abandoned efforts to teach students how to compete.

“Simons would have us believe that American companies are losing out in global competition because CEOs care too much about their workers, their communities, and other societal concerns and that this behavior stems in large part from what students have been taught in business school,” Bok wrote. “In order to sustain such a thesis … Simons would need to make a much more carefully crafted, empirically based argument than he has presented here.”

Simons could not be reached to respond to Bok’s published comments.

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