The Problem with MBAs




“Mamas, Don’t Let Your Babies Grow Up to Be MBAs”


clip_image004For a long time I did not know what an MBA did, and once I found out what they did, I still did not know what they did, or that is to say, I did not know of any essential service they provided. The dictionary definition of Master of Business Administration (MBA) is a master’s degree in business administration. And I am told further that the program is designed to introduce students to the various areas of business such as accounting, finance, marketing, human resources, operations management, etc. Armed with their MBAs, the young, the eager, and the ruthless have transformed the world of business in a surprisingly short time. When they first developed, they were dismissed as bean counters. Sadly, their effect on the world of business has been considerably less benign. The reason’s simple. They count and measure and squeeze every drop of juice out of an orange. They do not invent or produce or become passionate at the sheer joy of creating. They cut costs and kill dreams and often destroy businesses.


I first entered the world of business in 1967 when I was hired in one of the advertising departments for a large city newspaper. After a few years I noticed a change in management. It was a family business, and they continued to promote their own (nepotism is the word you’re groping for!), but the new breed of managers coming in didn’t know anything about the newspaper business. One of the new managers, a guy the same age as me, explained that he’d learned all that was necessary for his type of managerial style when he got his MBA. I really couldn’t see how he was going to manage something he didn’t know anything about, but that philosophy was in vogue then and they ran with it. When I left in 1982 I came away with a wariness of that kind of thinking. Any business must prosper or perish, but with the Young Turks, all the emphasis seemed to be on turning a nickel into a dime, how one got there being deemed irrelevant.


One of the more timely books I’ve read in recent months was actually published in 1986 and deals with matters one would have thought long since settled, but the hubris that created the problems described in the book, because it’s hubris, has simply multiplied like some sort of malignant corporate hydra. It’s “The Reckoning” by David Halberstam but it really should have been entitled “The Beginning of the Decline and Fall of the American Economic System.” The book itself, for those not familiar with it, deals with the problems of the automobile industry, more specifically, with the reaction of American auto makers when the Japanese first entered the fray. What makes it timeless is the persistence of the very pMamas, Don't Let Your Babies Grow Up to Be MBAs 4roblems and attitudes that so plagued Detroit at that time—and still do. These days, of course, Toyota is the Number One Auto Maker in the world, but they did not begin at that place and might never have achieved it, but for the very people Detroit thought would save them.


It was the Whiz Kids. They started in World War II as a group of young, undeniably brilliant, hand-selected junior officers who were sent to Harvard Business School for a special two-month course in the use of statistics. Thus armed, they developed a system of statistical control to bring rationality to decisions about military production. They really were a success at improving the logistics of deciding what was needed where and how best to get it there, and from that they began to think that they could run any business once the war had ended. And they went further than that. They decided they would job prospect en masse, seeking out those struggling companies most in need of their services.


They ended up at Ford Motors, having been, as they wished, hired as a group. Charles Thornton, who’d put the group together, soon went on to other things. The rest, led now by Robert McNamara (future Secretary of Defense under Lyndon Johnson) stayed on. At first they were finance people, the numbers people, bean counters, but all that counting and analyzing quickly became detrimental.


“Finance was soon a power of its own. Its principal driving force was Bob McNamara, and its basic philosophy was: Whatever the product men and the manufacturing men want, deny, delay it as long as possible. If in the end it has to be granted, cut it in half. Always make them fight the balance sheet, and always put the burden of truth on them.” David Halberstam, The Reckoning Pg. 236


Mamas, Don't Let Your Babies Grow Up to Be MBAs 5Paradoxically enough, it is a theory that both works and does not work. Yes, they could often save money for the company by simply making it more efficient, but there was that constant nagging idea that any additional cost was always detrimental to the bottom line, so a less expensive alternative, regardless of its merit, was the preferred path. That kind of thinking immediately ran up against one of the primary obstacles in competing with General Motors—the age of Ford plants. By 1949 they were in desperate condition. They were really leftover Model T Factories, and it showed. Plant people couldn’t even get a forklift into them to move materials back and forth because the aisles were too narrow. The obvious solution was to modernize, but the Whiz Kids constantly fought against it. By the time McNamara became head of the Ford Division, matters had come to a head.


“Nothing reflected the new split personality of the Ford Motor company, the clash between modern efficiency and old-time flawed reality, more than the battle of the paint ovens. Because the plants were in bad shape, inadequate to produce cars for the hungry postwar customers, there was soon a violent collision between McNamara and the manufacturing men over these facilities. The plant men wanted newer and better factories. McNamara wanted greater speed from the existing plants. The bottleneck, it quickly became clear, was the paint ovens. They were old, technologically outdated, and too small for contemporary cars. A manufacturing man, Neil Waud, told McNamara at one meeting of senior officials that there was no way that the painting could be expedited. Waud was stunned when McNamara then suggested that the chassis be built in two main parts, painted, and then welded together into one piece. Waud quickly explained why it was impractical, that the welding could not come after the painting and that even if it could, the car thus produced would be significantly weakened and vulnerable to all kinds of stress. But McNamara was insistent; there had to be a way to do this to speed up production. The more insistent he was, the blunter Waud became. ‘The problem with you,’ Waud shouted, ‘is you don’t know a goddam thing about how our cars are actually made.’ After the meeting broke up, McNamara turned to one of Waud’s superiors and said, ‘I don’t want that man at any more meetings.’” Ibid., Pg. 242


Notwithstanding the absurdity of McNamara’s position on that particular issue, he continued to prosper and eventually became President of Ford Motors, the first nonfamily member to do so. A year later McNamara left and was replaced by another numbers cruncher. Interestingly enough, McNamara went to the Defense Department and helped bring us the tragedy of the Vietnam war, no doubt something he managed most efficiently while presiding over the death of some 56,000 Americans, 1,000,000 Vietnamese and the utter devastation of a third world country for absolutely nothing. But to return this to business, the problem with not actually having a passion for making automobiles tells and tells very quickly.

Henry Ford was a tinkerer. He loved motors and having grease on his hands, loved developing new automobiles, and on the basis of that love, he eventually prospered as developer of a low-priced quality automobile. For the first few decades all who prospered at Ford Motors were also tinkerers, people who loved and died for automobile innovation. What changed all that was turning the plant over to numbers people, MBAs. Their sole objective was to squeeze a nickel till the buffalo pooped a dime.


Mamas, Don't Let Your Babies Grow Up to Be MBAs 6Nothing so illustrates the problem with numbers people running the show as the undercoating problem. One of the places on an automobile most prone to rust is the underbelly of the vehicle. They did paint it, but they were never able to get paint in all the nooks and crannies, and whatever they missed was vulnerable to rust. Finally in 1958, someone at Ford Motors came up with an idea of sheer genius. The E-coat was applied the way metalworkers plate metal with silver or chrome. The car body was completely submerged in a tank of paint and given an electrical charge, thereby adhering paint to every surface. It meant that vehicles had a much longer life because they wouldn’t rust so easily. But it meant, too, that the production people at Ford Motors were in for several decades of denials.


The MBAs running the show repeatedly pointed out that no one could put a number on a satisfied customer, and it would cost a hundred million or so to implement E-coat in all of their plants. Year after year Ford wrestled with rising loss numbers on their warranty guarantees because of rust issues, but the numbers people continued to prevail. And to add insult to injury, Ford Motors licensed that process to other automobile manufacturers, who promptly implemented it! Not until 1984, some 26 years later, did Ford finally use that method in all of their plants and only because the Japanese had long subscribed to it and used it in promoting vehicles which had, as one of their principle selling points, superior quality.


Despite the obvious quality control issues, Ford Motors actually prospered, and that, in the end became what business people are wont to describe as the “take away.” And because it was largely the culture fomented by MBAs that had produced such profits, the feeling began to develop that it was not necessary for people to actually know anything about any business they might care to manage. If they had mastered business administration, product knowledge was irrelevant.


Mamas, Don't Let Your Babies Grow Up to Be MBAs 8I was once a huge fan of college basketball, and one of the things I remember is games in which a team would get a large lead by taking chances on both offense and defense. Then they would concentrate on protecting the lead to such an extent that they would eventually lose it, at which point the announcers would be sure to point out that they had “forgotten what got them the lead.” American manufacturing used to count for something. Now it doesn’t, and I honestly believe MBAs have played a factor in that unfortunate development.


I don’t think MBAs are necessarily greedy or even that they create greed, but what I do think is that they enable greed. Part of the problem with a corporation is the many ways in which it can prosper, only some of which are beneficial. Invent a better mousetrap, and the world beats a path to your door, they say. What often goes unmentioned is the flip side of that—sell the sizzle, not the steak. Which is to say that if one can simply create the appearance of a better mousetrap, one can continue to peddle the old. And if it costs money to implement the better mousetrap, as it did with so many of the quality issues that plagued Ford Motors during the years surveyed by Halberstam and in the decades since, well, the solution seemed obvious. Sell the sizzle. So the American public is continually subjected to slogans like “Quality Goes in Before the Name Goes On” and “Have You Driven a Ford Lately,” while the deliberate inferiority of the product itself continues unabated.


MBAs did not create the type of mindset that sees only the bottom line, but they have surely contributed to it. In that sense, I suppose it’s a lot like the gun debate. One of the lines used by the NRA is, “Guns don’t kill people; people kill people.” To which the answer often is, “Yeah, and they use a gun to do it.” Paraphrasing their slogan, than, those who defend the status quo might well say something like, “MBAs don’t pervert corporations; corporate management perverts corporations.” In both instances the instrument used to accomplish those ends is obvious. Please remember that, mamas, when your children go to college.



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