What did the great financialmeltdown of 2008-2009 teachthe world?In my view, the fol-
lowing are the takeaways.
1. A short-term focus is counter-
productive to long-term financial
well-being. The incentive structure
for managers and for shareholders
has been heavily geared toward the
short term. If managers could show
gains over the next quarter, their
organizations rewarded them with
bonuses and the markets rewarded
the organizations with an elevated
stock price. In such an incentive
structure it should be no surprise
that both managers and organiza-
tions will seek to game the system
such that the short term looks rosy,
be this, as it may, at the expense of
the long term. The incentive struc-
ture has resulted in a mortgaging of
the future to secure temporary and
largely illusory gains.
2. A restricted focus on key financial
metrics is counterproductive to long-term financial well-being. By focusing
attention on only a handful of financial
metrics such as revenue growth, the system fostered a culture whereby managers within organizations chased revenues, or indeed even manufactured revenues as in the case of banks in the
United States and companies such as
Satyam in India, thereby mortgaging the
long term to secure a temporary and
largely illusory short term.
3. The financial well-being of the US
affects the financial well-being of the
world. All the talk of the rise of regional
powerhouses in Europe and Asia aside, it
remains the case that the US is the 800-
pound gorilla of global economies.
Where it goes, the rest of the world follows. This is especially true for a country
like India, where so much of its exports
in key sectors such as information technology depend on the health of the US
economy. Considering that 60 percent of
Infosys’s earnings come from the US,
multiply that across the IT firms in India
and you get the picture of the extent to
which India is dependent on the US.
What does all this mean for the MBA
curriculum?
In my view, the MBA curriculum needs
to unfold across three key strategic platforms.
1. Multiple Perspectives. It is imperative for students to be exposed to the
human and environmental costs/benefits of engaging in commercial activity, in
addition, of course, to the traditional
focus on the financial costs/benefits.
Consider a lending officer in a US bank
at the height of the subprime boom
where they were being pressured to give
loans to people regardless of their ability
to repay. The new MBA curriculum
would give the lending officer the tools to
reflect on the human impact of their
activities. It would force the officer to ask
the question: Am I helping this individual by giving them this loan or am I tying
them into a potential cycle of debt and
despair?
2. Stakeholder Model. In addition to
viewing opportunities/threats from mul-
tiple perspectives, the new MBA should
give students the tools to consider the
entire stakeholder network that is impli-
cated in their actions. It should enable
students to routinely inquire, what
would stakeholder x, for example,
employees, say, if the company engaged
in behavior y? By giving students the
tools to consider the impact of business
decisions across stakeholders, the quality
of decisions would improve significantly.
The twin traps of a short-term focus and
a short-range focus — in terms of range
of metrics — would be overcome through
both the multiple perspectives
approach and the adoption of
the stakeholder model of deci-
sion making.
ASHWINV JOSHI
Ashwin Joshi, right, with a student
and a colleague
Ashwin W Joshi is director of the MBA
program at the Schulich School of
Business, Toronto. July 1, he will become
executive director of the Schulich India
MBA in Mumbai.
