The diminishing lifespan of companies
The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today. This has had a number of consequences that have not generally been acknowledged by the leadership development community.
Conservative recruitment strategies, and the growth of business schools
A few decades ago, and certainly until the 1980s, the leaders of organisations steadily climbed a ladder that was largely internal, with selection boards being cautious to entrust the most significant roles in their firm to individuals who they had not themselves already tested out. They were concerned that newly appointed senior executives should have a good understanding of the strategic leadership of the business and also have proven their ability to engage their peers effectively within the organisation’s particular culture.
It was in this environment that we saw the number of business schools grow exponentially as a popular choice for those in employment to develop their leadership credentials and for employers to entrust their future rising stars to. The larger employers, would send their strongest potential leaders to complete an MBA, safe in the knowledge that they would return better equipped for the most senior roles.
More diverse employment patterns and less rigour in recruitment
Later, it became more common to switch jobs quite regularly and, in the 1990s especially, more appointments were being made from an external pool of candidates. These new recruits were thought to have gained more diverse experience and have a wider sphere of influence.
Individuals who saw that their career was not progressing as smoothly as they had hoped within their current employer turned to the MBA as a way of moving between firms. The larger colleges saw this influx of self-funding candidates as a mixed blessing – as corporate sponsored places reduced, these self-funded places bolstered numbers. However, they also threatening the credibility among larger employers and so the schools were careful to manage the balance between the two on programmes.
Recruiters began to assume that issues of strategic understanding were addressed by a diverse career path. The assumption was also made that the ability to lead others in a particular culture was something that a competent high flyer could do anyway.
Stagnation of many fields of business knowledge
Obviously fields are evolving. New ideas do enter the arena or, more often, new ways of describing existing phenomena are found. However, in many fields the core theories were developed in the second half of the last century.
If we take my own field, leadership, as an example. The emergence of psychological theories, especially the work of Lewin in 1935, spawned many ideas and approaches in the 1950s, 60s, and 70s. There were relatively few genuinely new ideas generated in the 80s and 90s, and virtually nothing since.
Anyone can generate a new ‘model’, and there are plenty of unsubstantiated ones in circulation that have achieved almost mythical powers. However, a genuine evidence-back approach has yet to truly influence the business community in the way that it has the medical one.
Changes in funding, the extraordinary pace of change of the business world, the focus of business schools for their income, and the substantial transition of staffing away from long-term full employment towards part-time, teaching only, hourly-paid lecturers, means that relatively little directly applicable research is ongoing in many academic environments. In recent years, in the leadership arena, most new developments have come from meta-analyses performed by freelance journalists rather than the academic community.
Stagnation of the business schools and a continuing focus on the high-paying senior executive
The programme of study for most MBAs remains largely the same as it was in the 1980s and 1990s. While efforts are made to move with the markets (typically involving study tours to the BRICs countries), the content has little changed, and the pedagogy remains substantially the same. Whereas digital delivery has improved, few schools genuinely embrace the continuing evolution of the digital world.
In the early 2010s, I was invited to apply for a role in a successful, and at the time growing, British business school. As part of the selection process, I was asked to illustrate how I would adapt their ongoing programme to a new generation of students. As part of this process, I did a simple analysis of the promotional text from the world’s ten largest business schools and compared it with the content of 20 or so interviews with half a dozen well-known, and highly regarded, entrepreneurs. There were two words that those entrepreneurs frequently cited as being key to their success – networking and luck. Neither subject was considered sufficiently important to feature in business school curricula. Needless to say, my suggestion that the school concerned should embrace them, was met with incredulity and I wasn’t offered a post. [I am still open to offers!] To the best of my knowledge, these two critical contributors to entrepreneurial success remain absent from virtually all business school trainings.
With fees in excess of £60,000, it is not surprising that the business schools largely attract students with a corporate sponsor, those who have achieved personal wealth early in their career and often see the MBA as a career break, or individuals who are gambling substantial savings (or borrowings) on a very significant return on their investment later.
The coalescence of business and entrepreneurship
Even in the ‘noughties’, the distinction was often made between ‘business’ and ‘entrepreneurship’. Serial entrepreneurs made good TV or could be relied upon to give inspiring after-dinner speeches, but they were often seen as too maverick for the established corporate to follow too closely.
Small businesses, which are largely the home of the entrepreneur, contribute roughly 50% of the GDP of the UK and the USA. It is important to see that entrepreneurship (largely delivered through SMEs) is critical to the growth of most Western economies.
While there are a few centres of excellence studying the entrepreneurial environment, they are few and far between, and their insights have little impact on the ground. This is exacerbated by the focus of business schools on the high paying students from established large firms. Few, if any, studies have looked in depth at the key fields of business and considered how they need to be different in the new era.
However, this is not the end of the story. The nature of entrepreneurs themselves has changed too.
The younging down of business education
In the 2000s, the diminishing number of employment opportunities for younger people, the popularity of programmes like The Apprentice (2005 onwards in the UK) and Dragon’s Den (2005 onwards in the UK), wider public interest in celebrity entrepreneurs, and a growing belief that entrepreneurship was a viable career choice for school-, college-, and university-leavers, led to an escalating number of micro- and small-enterprises established by individuals with little or no experience of a particular sector, little business education (whether on-the-job or more formally delivered), limited strategic awareness, and no experience or training in the practical leadership of others.
Today, business studies is taught as a subject on the curriculum at GCSE and GCE as well as at undergraduate and post .graduate levels. Fifteen years ago, this wouldn’t have been dreamt of. Today, a young person at 16 can take Business Studies at AS/A2 level and enter the workplace with a relatively wide understanding of the key issues facing business. The focus of the curriculum is on broad brush understanding, and although it is intended to distinguish between SMEs and larger enterprises between the two years of the A-level course, there is still little directly related to entrepreneurship itself and the practical challenges of being an entrepreneurial business leader.
The younging down of entrepreneurship
We can debate the use of any metric of success. For simplicity, in a business environment, generation of profit is generally accepted – and this is usually expected to be reflected in the personal wealth of the leaders of those enterprises.
Each year, Forbes magazine publishes a list of the 400 wealthiest Americans. Many inherited their wealth, however, each edition features a number of self-made billionaires. Among them, are a number who had little or no formal post-compulsory education, a few who had some higher education but dropped out of college early because it didn’t work for them, and a few who acknowledge the benefit they gained but felt that they had what they needed to succeed outside without completing their formal education.
Some well-established members of the list include;
• David Geffen (71; Dreamworks; $6.6Bn)
• Mickey Arison (65; Carnival Cruises; $6Bn)
• Les Wexner (77; retail; $6.3Bn)
• Haim Saban (69; TV & media; $3.4Bn)
• John Paul DeJoria (70; Paul Mitchell hair products; $3.2Bn)
• David Green (72; Hobby Lobby; $4.7Bn)
None of these self-made billionaires graduated from University, let alone a business school. While this has always been a phenomenon, the number of younger such billionaires is growing. Examples include;
• Mark Zuckerburg (30; Facebook; $32.2Bn)
• Dustin Moskovitz (30; Facebook / Asana; $7.6Bn)
• Elizabeth Holmes (30; blood testing; $4.5Bn)
• Travis Kalanick (38; Uber; $3Bn)
• Sean Parker (34; Facebook / Napster; $2.8Bn)
• Jack Dorsey (37; Twitter; $2.5Bn)
In addition, each year there will be many who graduated in disciplines with no business element.
Our market-based economy depends on successful enterprise. The entrepreneurial community is growing, and rapidly becoming younger – to the point that many have opted to begin their first enterprise soon after leaving school.
Our understanding of how to grow and lead successful enterprises is largely based on studies of previous generations and not the current one. Changes in the funding and infrastructure of business schools means that there is limited research ongoing into the evidence-based knowledge, skills, or attitudes, that will enable the current generation of entrepreneurs to succeed.
Business schools are largely based on financial models that serve previous generations of successful large-enterprise executives. This does not bode well for the future of business schools, nor does it look good for the future of the economy.
Secondary schools and further education colleges are currently the only source of education on business that many of the new generation of entrepreneurial leaders will be exposed to.
It would appear that there is a significant gap in the provision of support, that FE colleges especially may be in a strong position to develop and deliver in the future.
It may be, that an alternative to the current model of apprenticeship (which is focused on the development of work-related skills through a combination of one-the-job experience and in-college training and development) could be considered to support this new generation.
This article first appeared in; Ahluwahlia, JS (2014) Boards to Lead – Effective Corporate Governance and Sustainability. IOD, New Delhi.