Harvard Business School, stung by criticism that it hasn’t prepared alumni to cope with the economic meltdown, will dissect its performance using a practice it employs to examine corporations in crisis.
A task force, created in November at the direction of the dean, is writing a case study to scrutinise whether the school is failing to teach students to understand and manage risk in the current environment, according to Paul Healy, co-chair of the panel. The case study method is the technique Harvard uses to analyse decision making by executives during times of duress.
Harvard Business School’s 219 professors will tackle the case at a May 27 meeting and may use the discussion to propose curriculum changes.
“We’ll put them in the students’ seats,” Healy, a professor of business administration, said in an interview.
While officials at the business schools of Stanford University and the Massachusetts Institute of Technology say they have developed classes and projects to address the causes of the crisis, Harvard is using the collapse as an opportunity for self-reflection. The professors will ponder how the school’s reputation has been tarnished, and may debate articles critical of the institution and its graduates who helped trigger the financial crisis, Healy said.
Harvard’s alumni include Stanley O’Neal and John Thain, the former chief executive officers of Merrill Lynch & Co who presided over the New York company’s decline; Rick Wagoner, the ousted CEO of General Motors Corp; and Christopher Cox, former chairman of the US Securities and Exchange Commission.
“I’m sure the brand is damaged, at some level,” Healy, a native of New Zealand, said in his office in Boston. “People that I know well tell me to my face, ‘You guys have some culpability,’ and I think that’s fair. It’s a good time for us to reflect and think about what the right things are for us to be doing.”
Professors may spend half a day meeting in groups of about 90 in Aldrich Hall, said Healy, who added the plans weren’t final. Aldrich, in the center of the campus, was built in 1965 with classrooms designed to facilitate case discussions. The last time the school overhauled its curriculum was in 2004, when it introduced a required ethics course after the 2001 Enron Corp accounting fraud.
In 2007, even before the financial crisis, Stanford Graduate School of Business introduced a curriculum designed to develop critical thinking about leadership in small classes, replacing lectures.
‘Understanding Cheating’
The new series of seminars at the school, near Palo Alto, California, help “students discover and defend their values,” Dean Robert Joss said in an article for Stanford Business magazine’s forthcoming May/June issue. Classes include “Understanding Cheating,” which looks at why people make unethical decisions.
Yale School of Management, in New Haven, Connecticut, initiated a similar program in 2006, according to the school’s Web site.
At the MIT Sloan School of Management, in Cambridge, Massachusetts, students are taught to weigh the effects of their actions on society, not just on investors, said JoAnne Yates, the deputy dean.
“We would like our students, when they graduate, to understand not just quantitative instruments but how they fit into the whole world around finance,” she said. “We don’t want them all to think it is games with numbers.”
Schools need to consider how they teach and whether students can learn decision making based on intuition and not only numbers, said Louis Lataif, the dean of the Boston University School of Management and a 1964 graduate of Harvard Business School.
‘Scarlet Letters’
“There’s a certain self-consciousness now that we may be part of the problem,” Lataif said. “There’s a lot more to education than learning how to read balance sheets. Maybe a piece of what’s missing is not another course in ethics but the ability to think beyond the data and take action based on good instincts.”
Harvard business degrees are now “scarlet letters of shame,” wrote Philip Delves Broughton, a 2006 graduate of the school, in a March 1 column in the Sunday Times of London. “Time after time and scandal after scandal, it seems that a school that graduates just 900 students a year finds itself in the thick of it.”
Harvard Business School, founded 101 years ago, has more than 200 faculty members and almost 1,800 students seeking master’s degrees in business administration.
Thain Ousted
Under O’Neal, who graduated in 1978, Merrill Lynch lost more than $30 billion before its takeover by Charlotte, North Carolina-based Bank of America Corp. Thain, O’Neal’s successor who graduated in 1979, was ousted after spending $1.2 million to renovate his office. General Motors Corp., based in Detroit, has fallen more than 90 percent in New York trading from its peak during the tenure of Wagoner, a 1977 Harvard Business School graduate who was resigned on March 29 under pressure from U.S. President Barack Obama.
Cox headed the SEC from 2005 until January this year, as the agency failed under his watch to investigate Bernard Madoff’s fraud. Cox graduated from Harvard Business School in 1977.
While the school may bear a measure of responsibility for the graduates’ decisions, “there’s plenty of blame to spread around,” said W. Carl Kester, the deputy dean of academic affairs.
The school deserves credit for producing Jamie Dimon, CEO of New York-based JPMorgan Chase & Co.; Robert Kapito, president of BlackRock Inc., an investment company in New York, and others who are providing leadership and whose financial companies have survived, Kester said.
Errors in Judgment
Many of the graduates involved in failures attended the school 20 or 30 years ago, before classes on risk management, macroeconomics and leadership were required, Kester said.
“There are curricular changes that have taken place that I hope will inoculate students who have graduated in the last five or 10 years, and going forward,” he said. “I hope they will be a little less prone to some of the errors in judgment.”
Introduced in 1925, the case method exposes students to the details of quandaries faced by managers. There is often no single right answer, and the cases are used to stimulate debate and discussion, Kester said. A class may consider 25 to 30 cases each semester.
Hundreds of Cases
A student may study 600 cases in all, said Joseph Badaracco, chair of the MBA program. Most cases stay in the curriculum for three or four years, he said. Others, including one discussing the 1982 recall of Tylenol by Johnson & Johnson, based in New Brunswick, New Jersey, have been used for decades. Some companies, such as General Electric Co., in Fairfield, Connecticut, and Google Inc., in Mountain View, California, are popular subjects and taught repeatedly, he said.
Harvard Business School professors write about 350 cases a year, and sold 8.2 million copies of case studies in 2008 for adoption in business classes around the world, according to the school’s Web site. Case sales produced $29.2 million in 2008, or 6.4 percent of the school’s revenue, according to the annual report.
Professors have written cases being taught in this year’s courses to impart lessons about the global crisis. The subjects include JPMorgan’s acquisition of Bear Stearns Cos. and the lack of accounting controls at New Century Financial Corp., an Irvine, California-based subprime-mortgage lender that declared bankruptcy in April 2007. Other cases have been written to provoke discussion on mark-to-market accounting and on the role of credit-rating companies.
Lecture Series
Jay Light, dean of the school, formed the task force in November. The group, led by Healy and Peter Tufano, a finance professor, was charged with educating the faculty and students about the economic upheaval.
The panel already has created a series of seminars for professors and initiated a lecture series for students. The school also held a three-day alumni program, attended by 90 graduates.
In February, the group began working on the case to present to the faculty. The outcome may be recommendations for Light that could be implemented within a year, Healy said.
One change that may emerge is more emphasis on general- management and economics classes that knit together broad themes about risk and responsibilities, rather than on courses that focus on specific functions such as marketing, Healy said.
“Are there things we can do a better job of?” he said. “What do we teach? Things that come to mind might be understanding risk better, understanding risk management better. We do some, but maybe not as much as we should.”
‘Easy to Teach’
Harvard currently requires first-year master of business administration students to take “Business, Government and the International Economy” and “Leadership and Corporate Accountability.”
Until this year, those courses were viewed skeptically by some students and faculty, said Laura Alfaro, an associate professor who teaches international economics.
“They thought, this is a class you have to take but it doesn’t really matter,” she said. “Now, I don’t know if they still think that but they know they can’t say it out loud. We’re in a mode where it’s very easy to teach this course.”
