Monday, February 22, 2021

Blame it on B schools!

McKinsey, the iconic consulting firm, has got embroiled in several controversies in recent years. The latest is the opioid scandal in which it advised a pharma company to offer "rebates' to pharmacies based on the number of people who died or became addicted to its opioid. The firm has had to pay nearly $600 million to settle charges brought against it by law enforcement agencies in the US.

Tom Peters, an ex McKinsey consultant and management guru, tells us who is to blame: B-schools. They focus too much on the hard issues-  finance, marketing, quant- and too little on culture and people. Businesses, he says, need to focus on the "moral responsibility of enterprise", not just on maximising shareholder profit, as Milton Friedman had urged businesses to do.

So the fault is that of B- schools or of businesses? Is there a market for the  idea of the "moral responsibility of enterprise"? Can B- schools change businesses by drilling moral responsibility into their wards? 

They certainly can't be faulted for not trying. Most top schools offer at least one course in Ethics. There are plenty of courses on leadership, including those that expatiate on the "lessons" in leadership to be learnt from Mahatma Gandhi, the classics of literature, the Gita and  the rest. I recall asking a student about the course in Ethics at IIMA. She gave me a memorably reply, "We haven't come here to take lessons in moral science".

Now 78, Tom Peters can afford the luxury of selling the 'moral responsibility to enterprise' to the credulous. Not so those trying to make it up the corporate ladder. Try preaching the 'moral responsibility of enterprise' to your boss who is looking to meet his quarterly sales or profit target. You may find you have to switch from being a manager to being a preacher. Ensuring compliance with law and regulation itself is a huge challenge in the world in which live. A manager has to be very brave to attempt anything beyond that. 

Peters talks of the good old days at McKinsey but is honest enough to mention two friends of his from those days, Jeff Skiing of Enron fame and  Rajat Gupta, ex MD of McKinsey, both of whom ended up in jail. Peters also mentions how he nearly lost his job. And it wasn’t for preaching high-minded stuff. Peters’ crime was that he had written a best-selling book that focused on organisational culture and people rather than on strategy, which was McKinsey's staple. This infuriated one of his bosses. 

Peters is right on one point. McKinsey's problem today could be its sheer size: $10 bn in revenue and 30,000 staff worldwide. Having to grow revenues on such a base would be a challenge for its bosses- and cutting corners becomes inevitable. Not much room for the ‘moral responsibility of enterprise’.

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