RAHUL NATH: An MBA isn't much help during the start-up stage

WHAT THEY DON'T TEACH YOU AT B-SCHOOL

"B-schools tend to focus only on the positive; they should also spend time on what to do when something goes wrong and how to contain the fallout.

"A Master's degree in business administration helps most when your company is established. Business-school training isn't much help during the start-up stage.

"I graduated from the University of Illinois in 1986 with a finance specialisation, but I learnt little about the process of establishing a new business "" finding sources of capital, recruiting and hiring employees, scrambling to make that all-important first sale, and learning how to outmanoeuvre larger competitors.

"There's a lot of grunt work involved at the start-up stage: the employee who's off sick, the broken heater... MBA classes and hours of diligently taking notes are not of much help at times like these. There is nothing a B-school can teach you that prepares you to deal with customers, invoices and managing cash-flows when there's no cash.

"MBA programmes teach you wonderful schemes for sweeping cash flow between accounts to maximise returns, but what if you don't have anything to sweep?

"And that is the most-likely scenario in the early days of most businesses. What do you do when you have to meet payroll deadlines and pay the landlord who smiles only after he has counted the greenbacks? Is there a management course that teaches you to tackle the awful feeling that you are running the business to earn profits for the landlord and not for yourself?

"In fact, you can sink an entrepreneurial venture by using some of the classic B-school tools. Take capital-cost-budgeting techniques, for example. Laborious scholastic effort went into learning to painstakingly calculate the different fiscal pressures created by a variety of capitalisation sources.

"But, for a start-up, it does not matter what the capital costs are: you are going to need what you can get. Entrepreneurs could fall victim to analysis paralysis if they waste time calculating capital costs according to the algorithms; they'd eat up what little capital they might be lucky enough to get.

"But then, most business schools recognise research and publications, not real-world experience. "Dealing with failure" should be made a compulsory subject at management institutions; the course should ideally include case studies and invite CEOs and senior executives who've been through bankruptcy or other situations of crisis in their professional lives to share their experiences "" and hindsight "" with students.

"And take a closer look at the courses on human resources: they're all about motivating employees, goal setting and things like that. No B-school teaches you to recognise a bad decision, analyse it, close it and move on. Management institutions tend to focus only on the positive; they should also spend time on what to do when something goes wrong and how to contain the fallout.

"An MBA degree has long been perceived as a fast and tough track to success. Perhaps business schools need to focus more on leadership, ethics and social responsibility. I believe management institutions should be fundamentally redefined to make them more socially responsible. Perhaps something similar to the manner in which medical schools teach their students is what is required.

"Business schools act as a filter system by identifying talent and adding to it. But, at the same time, it is also time we recognised that B-schools are increasingly churning out managers rather than entrepreneurs capable of facing the challenges in today's rapidly-changing business environment. It is critical that the curriculum be broadened: the question of ethics is raised again and again, but management schools still shy away from teaching it.

"Also, executive education is critical if managers and executives are to develop into strong leaders. In addition, business schools must be independent rather than driven by the demands of the corporate world. That's because the role of a business school is to take the lead rather than listen to people. Professionalism is paramount because the business world needs new young leaders.

"At the same time, an emphasis must be placed on teaching students to express social values. The field of public-private partnerships represents a major growth opportunity for business schools. There is a real need for management training in the not-for-profit community.

"Students should be taught awareness of the community and civil society. Importantly, business schools should also inculcate communication skills and humility in their students.

"But then, at the end of the day, the million-dollar question is: are you going to be able to make money? Understanding the tools and strategies that can be used to answer this most important question is the key benefit of a formal business education."

(Rahul Nath is the managing director of Friends Globe Travels, a company he set up.)