Have American Businesses Been Stranded By the MBAs?

theodp writes "In his new book, Car Guys vs. Bean Counters: The Battle for the Soul of American Business, legendary car-guy Bob Lutz says to get the U.S. economy growing again, we need to fire the MBAs and let engineers run the show. The auto industry, writes TIME's Rana Foroohar, is actually a terrific proxy for a trend toward short-term, myopically balance-sheet-driven management that has infected American business. In the first half of the 20th century, industrial giants like Ford, GE, AT&T and others used new technologies to create the best possible products and services with the idea that if you build it better, the customers will come. But by the late '70s, if-you-can-measure-it-you-can-manage-it MBAs were flourishing, and engineers were relegated to the geek back rooms. 'Shoemakers should be run by shoe guys,' argues Lutz, 'and software firms by software guys.' Learning that China plans to open 40 new graduate schools of business in the next few years, Lutz quipped, 'That's the best news I've heard in years.'"

Comments

Re:You need different kinds of people

[yourmommycalled]

Indeed you need many different kinds of people to manage/run any organization. In any well run organization, every one understands they have a role to play in keeping the organization working AND that they responsibility is shared. In a well run organization an engineer/programmer/scientist is not sneered at and verbally abused, nor are the sales/accounting/IT people. The problem that has occurred as Lutz keeps repeating is that because of B-schools MBA's specifically and B-school graduates in general have been told/taught that ONLY a B-school graduate knows anything about how to manage a company. They are TAUGHT that only this quarters results are important, that research and IT support is a waste of money and if you don't have an MBA you are a waste of company resources. A long time ago people started at a low level in a company and worked their way through the company learning along the way what works and what doesn't in that company Now B-school graduates learn real garbage, move into middle management and drag a company down. From my own experience as a scientist managing a successful company, I no longer hire B-school graduates. The last one I hired told me I don't know how to run my own company and that they could increase my profits several hundred fold if I would just stop wasting resources on taking care of the staff and coddling the other scientists. When he came into my lab I laughed at him and then showed him the door

Re:You need different kinds of people

[catchblue22]

I've been thinking along these lines for years. One of the original catalysts of this was reading a book called Voltaire's Bastards: The Dictatorship of Reason in the West, by John Ralston Saul, an historian. It isn't a perfect book, but it is definitely thought provoking. It is difficult to summarize, but I'll give it a shot. He argues that our modern management class is obsessed with a somewhat myopic version of reason concerned mainly with measurement. This management class lacks a sense of imagination, of history, and of human nature, preferring to retreat to a world of graphs, tables, and equations.

The example he gave that sticks with me concerns the Mad Cow Disease crisis in the UK a while ago. Mad Cow Disease is a strange phenomenon, where protein structures called prions propagate when animals eat other animals that have the prions in their flesh. The prions eventually result in brain disintegration. They cannot be destroyed by cooking and processing. Managers in the beef industry knew that Mad Cow Disease existed, knew that it was growing, but they did not take it seriously. They likely tried to measure it in terms of number of cows infected, number of people infected by its human variant, Creutzfeldt-Jakob Disease, and concluded that its rarity made it a negligible risk. They could have wiped it out by quick action, but they did not. What they didn't seem able to imagine was that this disease and the fear surrounding it would eventually result in the destruction of the entire British beef industry. Almost all of the stock of British cows was destroyed. Britain was banned from exporting beef to most of the rest of the world. The financial losses were huge for the industry. Saul argues that these losses were due in very large part to the lack of imagination of MBA type managers.

I also have first hand with these issues. A friend worked for a food manufacturer that hired as plant manager an MBA graduate whose only previous experience was in a machinery assembly plant. Predictably, food safety practices and quality control went out the window, as these things were seen as negative items on a balance sheet. Lab testing and random bacterial swabbing budgets were reduced, until predictably there was a food recall that cost the company prestige, customers and a lot of money. He managed the plant primarily from his upstairs office, and he spent most of his time staring at graphs. He would seldom come down to the plant floor, and he had little comprehension of the processes and details of the plant he was managing. In the end, he left in disgrace, after transforming a plant that had formerly been extremely profitable and efficient into a money losing albatross.