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Have American Businesses Been Stranded By the MBAs? 487

Posted by timothy
from the I've-got-people-skills dept.
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.'"
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Have American Businesses Been Stranded By the MBAs?

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  • Lutz is dead wrong (Score:5, Insightful)

    by brunes69 (86786) <slashdot&keirstead,org> on Sunday July 10, 2011 @09:30AM (#36710826) Homepage

    Most engineers know next to nothing about marketing and sales... to the degree that they actually despise interacting with customers. You can have the best product in the world, but if no one knows about it, your business will fail. Consistently in this world, inferior products with better marketing win over superior products. You have to know how to get your name out there, and how to get people to buy your stuff.

    • by nurb432 (527695) on Sunday July 10, 2011 @09:36AM (#36710872) Homepage Journal

      I agree your average engineer has zero business skills, but moving them to the back room and having MBAs run the show is still bad.

      Get rid of the MBAs and let the engineers have business input, but not run front office.

      Oh, and get rid of the lawyers, they are even worse than an MBA.

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        I didn't read the article, but the summary sure makes it sound to me it's more of a "a guy who KNOWS cars" should be in charge of a car company (CEO, President, something along those lines) vs someone who doesn't have a clue about cars. It's not that you'd get rid of the sales, marketing, HR and other teams, just that a HR person wouldn't be cailling all the shots.. someone who knows cars would be.

        And I agree 100%. I've worked in a variety of business sectors over my years (some part time fillers during int

      • Lawyers (Score:4, Interesting)

        by Oxford_Comma_Lover (1679530) on Sunday July 10, 2011 @11:19AM (#36711556)

        Oh, and get rid of the lawyers, they are even worse than an MBA.

        Lawyers are risk management. Getting rid of them is getting rid of insurance--opening yourself up to major downside risk in everything from employment discrimination to your lease to the agreements you make with your clients. Effectively, it's a transaction cost of doing business.

        Engineers tend to intuitively dislike lawyers because they seem to make things less efficient--transaction costs do that. When everything goes well, the lawyer was basically an expensive insurance policy that you never collected on. But when things go badly, a good lawyer can make the difference between riches and insolvency. Even having good agreements drafted can discourage people from suing you. Putting together a new corporate form can easily save millions, for example.

        Sometimes a lawyer does too much--they effectively purchase too much insurance, spending far more to achieve additional downside protection that is not worth the expenditure. Think of it like a corollary to Amdahl's law. In these cases, good lawyers can (Depending on a client's preference and the specific trade-off) advise you about the relative costs and downside risks, or make some of these decisions using his or her own judgment.

        Granted, there are a lot of fundamental problems with the legal system--good tort reform for everyone might be a better solution than limited liability conditional on legal forms, for example--but it also greatly benefits business (e.g. agreements are enforceable), so legal expenses are a cost of doing business well.

        • by DavidTC (10147)

          Indeed.

          Companies need lawyers. Companies need accountants. Companies need sales people. Companies need marketing. And, obviously, companies need people who actually make the thing they're selling.

          The lawyer department should be headed by a lawyer, the accounting department should be headed by an accountant, the sale department should headed by a salesman, the marketing department should be run by a marketeer (I hope that word catches on.), the 'build the stuff' department should be run by someone who know

    • by Bing Tsher E (943915) on Sunday July 10, 2011 @09:43AM (#36710906) Journal

      Most engineers know next to nothing about marketing and sales...

      Conversely, most marketing types know next to nothing about proper engineering design.

      And this book isn't about a 'Marketing vs. Engineering' conflict in the first place. It's about the bean counters who wedge themselves in the middle of everything.

      It's about 'cost reduction engineering' which is where purchasing gets involved in product engineering. Mature products exist, but 'cost can be driven out of them' by degrading the materials used for their construction.

      To an MBA, the fact that a product lasts on average 2 years beyond it's warranty period is a problem to be solved.

      It's also all about Taylorism taken to it's furthest degree. In the vision of the MBA dudes, everybody within a company is an expendable plug-in component. Company policy is that Work Instructions must be written, and followed for each task. Once the complete set of work instructions has been captured, the whole 'Employee Expertise' of the company is captured into a file cabinet. They can then put the cabinet on a skid and move it anywhere in the world. That's how those people think. High performing employees with unique skills are a problem, a company liability, to that form of management.

      • by vlm (69642) on Sunday July 10, 2011 @09:54AM (#36710992)

        It's about the bean counters who wedge themselves in the middle of everything.

        The word to google for here is intermediation. The opposite, disintermediation, has a tolerable wikipedia article.

        http://en.wikipedia.org/wiki/Disintermediation [wikipedia.org]

        The problem is people understand what it means WRT obscure corners of the banking industry or supply chain, but do not realize it is a general business management topic, applicable to almost all organizations and systems.

      • by gbjbaanb (229885)

        ah no. Its not about the 'bean counters' as they do a very good job counting beans and distributing them about - every business needs a good accounts department. There's also a lot to be said about running a business well, ensuring things like your production costs don't swamp the business and there's enough left in the pot to handle some lean years when you have the usual troughs in sales.

        No, the problem is the 'management' who only count the beans they can get their hands on to the detriment of everything

    • by mattcsn (1592281) on Sunday July 10, 2011 @09:47AM (#36710944)

      MBAs are useful, but not in leadership roles. Give the top jobs to engineers who understand what their company is building, and have competent accountants and marketers working as advisers to the engineers. (And no, I'm not an engineer looking out for number one. I'm actually an accounting student.)

    • by michaelmalak (91262) <michael@michaelmalak.com> on Sunday July 10, 2011 @09:49AM (#36710960) Homepage

      Most engineers know next to nothing about marketing and sales... to the degree that they actually despise interacting with customers.

      Agree. Putting the engineers in charge would just lead to gold-plating, as the reward for engineers is a "job well done" rather than maximizing profits.

      The problem with MBA's isn't that they maximize profits, it's that they maximize next quarter's profits. And that isn't the MBA's fault -- it's usually the fault of being a publicly traded corporation, which leads to separation of ownership and control [findlaw.com].

      Just as anti-corporatists bemoan the immortality and geographical reach of corporations, to add to that it is worth considering limiting the number of owners of a corporation and perhaps also setting a minimum period of ownership.

      • by jpapon (1877296)

        the reward for engineers is a "job well done" rather than maximizing profits

        It really bothers me that maximizing profits is the goal of publicly traded corporations. With privately owned companies it can be a combination of healthy profits and a job-well-done. With public companies things have become so short sighted; it's all about each shareholder "getting theirs".

        • by swalve (1980968)
          "Maximizing profits" doesn't have a time constraint. No form of company has a monopoly on short sightedness.

          The problem with business isn't that they try to maximize profits. After all, that's why we work. To get more out of something than we put in. Most "sick" companies' problem is that they aren't focused enough on profits, but instead on other more internal distractions. They get bogged down on feeding various systems and maintaining power-holds and on cheating the main business to extract someth
      • by DavidTC (10147)

        to add to that it is worth considering limiting the number of owners of a corporation and perhaps also setting a minimum period of ownership.

        That's what I've been saying for quite some time, at least the minimum period of ownership.

        I used to think the best way would be to have literally that, where you can only sell stock after six months...

        ...but I realized that was silly.

        Companies (usually) have quarterly reports. What should happen is that, about a week after each quarterly report, is 'stock day'.

    • by Jahava (946858) on Sunday July 10, 2011 @09:57AM (#36711020)

      Most engineers know next to nothing about marketing and sales... to the degree that they actually despise interacting with customers. You can have the best product in the world, but if no one knows about it, your business will fail. Consistently in this world, inferior products with better marketing win over superior products. You have to know how to get your name out there, and how to get people to buy your stuff.

      You're absolutely correct. Most engineers want to focus on ... well, engineering. Once in a while, you get an engineer with good business skills, and there's your industry leader.

      Stocks, politics, money, marketing, sales... those are all critical things in any business. The argument isn't that an engineer should be put in charge of all of those; it's that the priorities, direction, and approach a technical company makes should be entirely governed by a (suitable) technologist. They will obviously delegate to specialists as-needed.

    • by IceNinjaNine (2026774) on Sunday July 10, 2011 @10:11AM (#36711106)

      Most engineers know next to nothing about marketing and sales..

      You know, I get uncomfortable when people make assertions using words like "most". I've worked with engineers (both brilliant and mediocre) who are the worst of the worst when it comes to social skills, and I've worked with some who made it through engineering school with a paltry 3.0 and are a blast as people. Some of the most well compensated engineers I know of are sales engineers working in areas like biomedical equipment and robotics (before anybody trounces out the IT stereotype). There *are* people who can do both; I know a lot of them. I know one kid in aerospace is who very gregarious, walked into a new job, solved a vibration problem on a jet engine within his first year, and ended up with his masters (aerospace engineering) paid for by the company. He worked as an engineer for five more years, they sent him back for an MBA, and now he runs a department. Bottom line is, he's geeky, smart on both interpersonal and quantitative matters, has walked the walk, and will be CEO material by the time he's 40.

      In my line of work (yes, one of the legions of software drones) I'm a generalist who writes code and takes care of some other technical issues. When my organization needs to send out a technical liaison they send me, because I can grok the tech stuff (oh noes, he knows what Big-O is and can profile! LOL), but I know how to look good in a suit (not a good looking lad, but keeping yourself in shape along with a trip to a tailor makes all the difference), can speak publicly without issue, and I know how to generally not piss people off. There are scads of people here on Slashdot (and a few where I work) who can code rings around me, and that's fine. At the end of the day I can play both sides of the card.

      The bottom line is: there are people with both skill sets, and it's my hypothesis that they're actively excluded by MBA types from managerial roles in many cases because they are a threat. In addition, boards want profit, so those that show quarter-to-quarter myopia get the nod.

      This whole thing reminds me of a video I saw once of a smokin' hot female Phd who said "you know, I can make this widget last four times as long if they'd let me add 10% to the price".. of course that didn't happen. Said company has a mediocre reputation in its sector as a result.

    • by thomst (1640045) on Sunday July 10, 2011 @11:06AM (#36711470) Homepage

      Most engineers know next to nothing about marketing and sales... to the degree that they actually despise interacting with customers. You can have the best product in the world, but if no one knows about it, your business will fail.

      Which is true and important and entirely beside the point. MBAs aren't about marketing. They hire people for that. MBAs are all about managing, not marketing. MBAs are the guys who export American manufacturing jobs to the Third World, the guys who cook the books to pump up their employer's apparent profitability enough to raise the stock price again this quarter, the guys who, with apologies to Oscar Wilde, "know the price of everything and the value of nothing." They're the guys who have spent the last 30 years or so systematically dismantling America's industrial base while simultaneously enriching themselves. They nearly destroyed the world's economy three years ago, and yet, mysteriously enough, they're still in charge of basically everything today.

      They are the people to whom Santayana was referring, when he warned about repeating the past's mistakes. They are our leaders.

      May Chthulu have mercy on our souls.

  • But with the person, his/her creativity, technical vision, soft skills, etc

    "If you can measure you can manage" is something a geek could say. And many say it and do it (with other words, and in similar situations)

    In a related note, both Bill Gates and Ray Ozzie are geeks.

    Geeks created all those mp3 players that were forgotten in favor of iPod.

  • According to executive bios at apple (http://www.apple.com/pr/bios/) 4/10 of them have MBA's. Additionally of the top positions, legal, hardware engineering, industrial design, and software are not traditionally associated with an MBA anyway.
  • by Dyinobal (1427207) on Sunday July 10, 2011 @09:47AM (#36710948)
    I dunno about MBAs but but I agree that most businesses focus to much on short term gain, often at the cost of their long term success. It's part of the mind set, of high powered business, and perhaps even Americans in general.
    • A lot of that has to do with the quarterly reports that go to Wall Street. The stock prices of high price to earnings ratio companies are mercilessly punished on the stock market if they put out a bad quarterly report, and many types of mutual funds that actively trade stocks depend on rapid trend following so they too are punished when one of their holdings does poorly.

      CEO wealth is heavily tied to their stock option values, and with the tenure of many CEOs being relatively short it makes for a very short

  • by omar.sahal (687649) on Sunday July 10, 2011 @09:50AM (#36710970) Homepage Journal
    Its going to be very hard for the US, UK etc to be competitive. Even if you could build a factory in Europe or America and sustain a strong business (using Henry Ford principles lets say) bankers would not give you the money, you'd have to build in china to get the funding. Andrew Grove former Intel exec and John L. Hennessy, MIPS chip inventor, said the same thing. Economists are also turning against the way modern business is outsourcing to developing countries for a short term gain, Paul Craig Roberts and Michael Hudson to name but a few. Outsource to Asia, you'll impoverish us all, we'll in turn have less purchasing power, and not be able to buy the goods produced. No ones listening there is only attention paid to shareholder value, not even the customer, and who are the largest shareholders in a publicly listed company the BANKS. The MBA's may have the same problem that the economists profession, if we can call it that, has. That is to say a corrupted syllabus, designed to serve the needs of a few moneyed interests.
  • Hewlett Packard (Score:5, Informative)

    by Bloodwine77 (913355) on Sunday July 10, 2011 @09:58AM (#36711024)

    HP is a great example of a company founded by engineers and later ran in to the ground by MBAs.

    • Re:Hewlett Packard (Score:5, Insightful)

      by Anonymous Coward on Sunday July 10, 2011 @10:36AM (#36711266)

      Agreed. They had a great model, "The HP Way", which was based on the way the founders like to treat people and be treated. Bill and Dave were both engineers and built the company up to be a major international by encouraging everyone in the company to both co-operate and work for self-improvement - exactly as they had done themselves. They recognised the importance of their management in knowing the product field they were involved in and understanding the culture of creativity and job security needed for long term success. The company's slide began when they started to appoint to senior positions from outside the company - and outside the engineering field - resulting in the dilution of the HP ethic and outsourcing the engineering and manufacturing functions which had driven their innovation and growth historically. Sadly this has happened with so many western companies that we have a deficit of home-grown talent in anything other than managerialism (of which we have a surfeit). Sadly, "management" has been the real growth business of the last 30 years. The Chinese are welcome to all the MBA graduates they want.

    • Re:Hewlett Packard (Score:4, Interesting)

      by swillden (191260) <shawn-ds@willden.org> on Sunday July 10, 2011 @10:59AM (#36711432) Homepage Journal

      HP is a great example of a company founded by engineers and later ran in to the ground by MBAs.

      I think IBM is another case study in the making (again).

      IBM began as a marketing-focused company (very early) and as it moved into the computer age acquired a strong (as in world-leading) engineering component while maintaining the market focus. Through the 70s and 80s, with the strong leadership of the Watsons gone, the market and engineering focus was replaced by bean counter optimization because IBM owned an unshakable monopoly and it was the most effective way to exploit that monopoly. The combination of (primarily) the PC revolution and (to a lesser degree) anti-trust litigation broke that monopoly and left IBM drowning in red ink.

      Louis Gerstner came in and restored IBMs customer focus, increased investment in engineering and built a capable business & engineering services business. He put the company back on track and rebuilt its brand around a services-centric model that gave customers a one-stop shop for hardware, software and the services (business and technical) to make it go. When he left and Sam Palmisano took over, IBM began a long, gradual slide towards an MBA-driven company. Though IBM does still maintain one of the largest research divisions in the world, and employs a lot of brilliant people, researchers are increasingly facing demands that their work be quickly translatable into near-term profitable products, which (perhaps surprisingly to MBA types) is killing the profitability of their work. The accountants have been focused on achieving profits through cost reductions for a decade now, starting with reducing employee expenses through a wide variety of methods that have made IBM an increasingly unpleasant place to work.

      Meanwhile, IBM's approach to growing the business is increasingly one of buying successful young software companies and marketing their products hard through IBM's extensive sales network while putting minimal, if any, effort into product enhancement. What little product improvement/development effort IBM continues is increasingly being pushed offshore. As various offshore organizations gradually build up the skills to be truly competent and useful, IBM has discovered their prices also rise so the MBA response has been to push out to other, lower-cost locations. With India now "too expensive", IBM is pushing more work off to South America, Eastern Europe and lower-cost areas of Asia -- and in doing so moving right back into the the problems that early offshoring efforts into India had with the added bonus of much more significant language barriers than existed in India.

      Over and over again, the pattern of business in IBM today is micro-optimization of balance sheets, extreme focus on quarterly earnings and declining focus on the actions that are productive long-term: Developing customer relationships and creating compelling products.

      Much of the discussion here has been on the conflict between marketing and development, but that misses the mark entirely. MBAs are not marketers. They don't know how to sell. They're all about business process optimization and financial optimization. Those are good things, but they're good for eking out marginal improvements in business effectiveness. They're a useful adjunct to the business components that REALLY matter -- making stuff to sell, and selling it. But when they begin to dominate, it's a problem.

      Is IBM's current myopia going to cause it to fail? Almost certainly not. The micro-optimization and the buy-and-harvest approaches are currently working in the sense of growing revenues and profits. But the micro-optimization is just about played out, and customers are getting wise to the buy-and-harvest approach and becoming less willing to buy IBM. So IBM is heading towards a period of stagnation, at least, and serious decline at worst. The company is too big to die, though, and employes too many smart people, so what's going to happen is that

    • by yoha (249396)

      if by "into the ground", you mean a $75 billion company and one of the 100 largest in the world, then yes, you are correct, deep into the ground.

  • by Z8 (1602647) on Sunday July 10, 2011 @09:59AM (#36711034)

    Most of the posts will probably be "yeah MBAs don't contribute anything" versus "engineers are geeks who can't communicate". In reality MBAs working for companies usually know what the company does in detail, and there are plenty of engineers who can communicate.

    It's still an issue though, because the opportunity cost of learning about "business" is less learning about something else. According to this article [chronicle.com],

    Business majors spend less time preparing for class than do students in any other broad field, according to the most recent National Survey of Student Engagement: Nearly half of seniors majoring in business say they spend fewer than 11 hours a week studying outside class. In their new book, Academically Adrift: Limited Learning on College Campuses, the sociologists Richard Arum and Josipa Roksa report that on a national test of writing and reasoning skills, business majors had the weakest gains during the first two years of college. And when business students take the GMAT, the entry examination for M.B.A. programs, they score lower than do students in every other major.

    The rise of MBAs is also tied to the rise of finance. Most people agree that the US funneled too many resources into the finance sector, which then just destroyed them. Instead of designing more complicated mortgage securities, those physicists could have been doing physics. Although "managing" doesn't necessarily have to be about finance, most business schools spent a lot of time teaching their students about CAPM and Black-Scholes. (If you don't know what these mean, good for you!)

    But of course business schools are not a fixed target. Most have reacted to the financial crisis and are now, for instance, emphasizing globalization and how to work in multiple countries [economist.com]. Time will tell I guess if this path is any better.

    Personally, I think the biggest damage is done by the outlook that most MBA programs teach. Instead of thinking that your company's goal is to build the best vacuum or whatever, you learn that the goal is to maximize shareholder value, and that gaming the system is what everyone is doing. Over the long run, countries probably don't want too many of those people in charge.

    • To have a successful start-up, you need a good product, to convince people that your product is good, and to sell it for a profit.

      To have a successful industry, you need to do that repeatedly. This means realising that you must also invent the next good product, the next-next and be ready for the next big technological shift.

      This means that your engineers, are your most valuable medium-turn asset, and your research department, with engineers-scientists you most valuable long-term asset. Of course sales and

  • by methano (519830) on Sunday July 10, 2011 @10:09AM (#36711090)
    For 25 years I've watched as the same thing has happened to the pharmaceutical industry. It's just a few years behind the automobile industry. We've largely blamed the MBA's but maybe it's just the natural order of things.

    1) Start an industry
    2) Grow an industry
    3) Get rich (profit)
    4) Get greedy
    5) Collapse
  • by fooslacker (961470) on Sunday July 10, 2011 @10:18AM (#36711144)
    The idea that current management is broken is correct. It's broken because it's not focused on managing companies it's focused on managing stock prices. Unfortunately, IMO, there is so much value in the equity market that major businesses no longer care what they produce or how they produce it as long as they produce stock value along side it. This attitude is a result of a couple of things. First the short term value from investments is worth many times the actual value of the company can produce from real assets/production/sales/fees/etc. Second we've tied executive compensation to stock price through options, grants, incentives, etc. It's not a problem of who is managing the companies it's a problem of incentives and motivations.

    Fixing the problem doesn't necessarily mean putting a geek in charge but instead means altering incentives so they favor long-term profit and sustainable growth (20, 30, 50 years or more) beyond short-term stock bumps. Often engineer personalities get in the way and make them harder to incentivize than the bean counter personalities. Too often the geek only cares about the purity of a solution or the optimization of a process and that makes it difficult to incentivize him to put long-term profit first. Additionally, if the geek you select is flexible enough to not be stuck in the optimization mode then he is going to game the system just like the MBA in favor of stock indicators for his personal compensation. It's not dishonest or wrong it's human nature. You tell your manager what you care about by how you pay them. They in turn work to maximize those items to which their variable compensation is tied.

    The best thing you can do is find good managers (MBAs or Geeks not withstanding) and incentivize them to run the company with the primary goal being long-term sustainable profits. I think more often than not you're going to find this is an MBA type with a compensation package not tied to stock but a smart board will look for the right personality traits, coupled with the right skills, coupled with the right compensation package. The answer is definitely not "just give it to the engineers" however.
  • by fermion (181285) on Sunday July 10, 2011 @10:23AM (#36711178) Homepage Journal
    I think one issue is that the business people have no long term connection to the firm they hired to run. MBAs are often hired guns, there to generate profit for a few years, get compensated, and then they are off. In the best case scenario, they will be there for twenty years, which means all they have to do is push problems back, not solve them. This is what happened to the car industry. The focus, as the incentive generally create in a firm, is this quarters profit and executive pay. This means that worker pay was deferred through outrageous retirement packages. Such things were reasonable because the management that created the problem would be gone by the time the problem was realized. And future management never blames past management becuase they makes them all look incompetatnt. Better to blame the workers that have no real control over anything.

    The other is changing market conditions. In the case of ATT, consumers simply rebeled against the price they had to pay for what became a commodity. It is hard to explain to a young person how much the rate for phone service has fallen. Using a cell phone I can call from anywhere in the continental US to anywhere in the continental US basically for what my parents paid for local calls, inflation adjusted. With Skype out of country calls fell from maybe fifty cents a minute or so to a less than a dime a minute(the countries I call are not on the unlimited plan). ATT revenues has been more than decimated by market forces.

    One thing that did happen in the 70s and 80s, particularly 80s, was the concept that profit was a right and that firms when they employed a certain number of people needed to ongoing bussiness, even if the management was incompentant. This, in effect, removed the incentive for compentant MBAs. As long as a manager has a piece of paper, the firm had done due diligence, and the financial sector, backed by tax payer money, would insure that funding for the incompetent and inefficient firms would be ongoing. The primary negative consequences was that compentent and creative individuals found it harder to get funding, and employess.

  • by FatLittleMonkey (1341387) on Sunday July 10, 2011 @10:28AM (#36711216)

    David Brin put it like this in the early '90s:

    "Want to help Russia and America at the same time?
    Send half our lawyers (freedom in both countries will go up.)
    Send half our MBAs (both our economy and theirs will boom.)
    And send half of NASA's managers (America gets a great space program and Russia some good farm labor.)"

  • There are a lot of engineers out there who have business credentials too. At my company, a large aerospace company, "working level" engineers mostly have a BS in engineering/science & 2 advanced degrees -- a technical degree and an MBA.

    Engineers still know something that is no longer taught to business majors -- that you have to make decisions for the long term. When you're building systems that cost many millions & must perform for decades you must keep this in mind at every stage of the process -- both business & engineering functions.

    Decades ago this was a part of business majors' education. In management courses, accounting, every course you were taught to always make decisions assuming your firm is an on-going concern. Now business students are taught to extract as much money as possible in the least amount of time and get out. Think short term and eventually you'll destroy enough companies that that you no longer have anyplace to invest ... and the "wealth" that you have amassed is worthless. This same thinking has spread to government & investors.

  • by Opportunist (166417) on Sunday July 10, 2011 @10:35AM (#36711258)

    And the allmighty shareholder value.

    And as long as execs only have this in their mind, companies will be bled dry and wasted. I wouldn't say that engineers should run companies. I'm an engineer and I would probably not be much more successful at running a business than the locust MBAs that run them today, just for different reasons. I would probably fail to produce a profitable product, striving for the perfect tool rather than keeping my eye on the cost.

    Execs today have a different problem with the way they run a company. They don't even care what gets produced, or even whether something gets produced. Their eye is on the stock market and how to push the shareholder value up. And the perversion is that this is easiest done by doing exactly the opposite of producing: Firing people. Lay off half your staff and your SHV goes through the roof. And for good reason, it does actually push your revenue in the short term since you save on staff expenses (and for most companies this is a really big cost position). The drawback is that with fewer people you can usually also only produce less, or at least of lower quality. The times when you could save on staff by automatizing or streamlining production are past. We're automated and streamlined nearly perfectly in most areas. Firing people today means that certain work simply will not get done.

    But this will not show until later, and for now it is beneficial for the shareholder value. The perversion is that it is the sensible thing to do if you want your company to survive. Because if you don't, your stock price will drop and it will become trivial for a "slimmer" company (that did fire its staff) to swallow you. This is, btw, the way a lot of these companies survived until today. They laid off their productive staff, pumped their value and swallowed up companies that actually did produce (and hence didn't lay off stafff, and hence were "cheap" to get because their stocks accordingly dropped). And that game got repeated, the productive staff was fired, the shareholder value went up, another productive company was devoured. And so on.

    The problem is that today almost only the locusts are left over. And it's quite useless if they ate one another, since they're all just husks and shells, filled with administrative staff that don't really produce much anymore.

  • by Paul Slocum (598127) on Sunday July 10, 2011 @10:42AM (#36711304) Homepage Journal
    ...you end up with GIMP
  • by Theovon (109752) on Sunday July 10, 2011 @10:47AM (#36711338)

    I'm a computer engineer, and let me assure you, most engineers don't know dick about productization. Sadly neither do the bean counter MBAs. Perhaps people in cognitive engineering, which is a subdiscipline of industrial engineering. At least they know something about meeting needs and usability. Rely on the typical engineers for designing products and you'll end up with "clever" bullshit that useful for like three people.

  • by WindBourne (631190) on Sunday July 10, 2011 @10:49AM (#36711346) Journal
    Seriously, we should not have sold off chrysler and simply bailed out GM. The problem in America is that America's business school are in charge of far too many of our businesses. These are basically neo-cons who think short terms rather than long-term or what is good for everybody. An engineer who is in charge would keep everything local so that they can deal with issues quickly. An American MBA has no real knowledge so they trust that others will botch everything and they can pass the blame.
  • by FlyingGuy (989135) <{moc.liamg} {ta} {yuggniylf}> on Sunday July 10, 2011 @10:51AM (#36711366)

    said, "Charge me a buck more and make this part out of metal instead of fucking plastic" or words to that effect?

    Pick the product, I mean it doesn't matter what it is anything thing from your car, house, cell phone, kids bicycle, toilet paper, laptop pick the damn product.

    THAT is the MBA / Bean Counter Problem.

    They don't think in terms of high customer satisfaction they think in terms of "I can shave 0.0001 dollars per unit" and "I can predict that we will only increase our returns and warranty repair by 0.0001% and we will increase profit by .5 %".

    Huge pet peeve... I like gauges I like to see actual oil pressure in my car, actual engine temperature but these days those are rare things in cars. I know the cost difference might be 2 dollars per car and frankly I will happily pay 30 times that since 60 bucks on the cost of a new car is nothing.

    Plastic gears in assemblies... My wife drives a Mercedes C320 and there is a plastic gear someplace under the dash that is attached to a vacuum servo of some kind that has something to do with the air handling. The damn thing has some teeth missing and it chatters now and the sound is really annoying. The replacement part costs 40.00 bucks. But it will cost close to 1000.00 bucks in labor to get at the damn thing since you have to basically dis-assemble the dash to get at it.

    The above reasons are why they need to be yacked out of the chain of command.

    • by couchslug (175151)

      "Huge pet peeve... I like gauges I like to see actual oil pressure in my car, actual engine temperature but these days those are rare things in cars. I know the cost difference might be 2 dollars per car and frankly I will happily pay 30 times that since 60 bucks on the cost of a new car is nothing."

      Ah! Ford "idiot guages"! :-)

      "plastic gears in assemblies"

      Well, undersized or of too fine a pitch. Plastic timing chain sprockets last until the chain wears out and breaks the teeth off, demonstrating plastic CA

    • by xtal (49134) on Sunday July 10, 2011 @04:51PM (#36714198)

      Pick up an android anything. Pick up an iAnything.

      "Nobody will buy a $900 phone."

      The irony being a lot of these MBA types wear $3000 watches. Stupid.

    • Re: (Score:3, Funny)

      said, "Charge me a buck more and make this part out of metal instead of fucking plastic" or words to that effect?

      Pick the product, I mean it doesn't matter what it is anything thing from your car, house, cell phone, kids bicycle, toilet paper, laptop pick the damn product.

      You had me until toilet paper. Metal toilet paper -- a very bad idea.
      Given the choice of metal or plastic...plastic just sounds softer.
       

  • The geek squad used to be good and they did a good job now it's all about how much you can sell and it you don't up sell your hours get cut and they want sales men over techs any ways. Best buy used to make a big deal about how there sales men where NON commission but now they are hidden commission where if they don't sell rip off monster cables and extended warranty they get there hours cut down. I hear that at staples the easy techs are under alot of pressure and lack of sales can make it that you get kicked out of the business machines department. Also at staples they when from on of best bonuses in retail to one of worst.

    Circuit city used to have sales people who knew what they where doing and selling and then 2 times Circuit city fired the long term sales people and replaced them with new people who had no idea on what they where selling.

  • by spac (125766) on Sunday July 10, 2011 @11:26AM (#36711600) Homepage

    Reading this piece, I can comfortably say that the author is right on the money with regards to how a focus on being "data driven" is actually slowly running companies into the ground.

    I started off my career writing really low level network stack drivers. I got pretty familiar with the windows kernel, became a star in my office and got put on an MBA track because I had demonstrated some aptitude with customers and sales. Fast forward a few years and I've got an MBA under my belt and work for what was formerly a very large provider of consumer SaaS that is now trying to win in what can be loosely described as the call center space.

    My days are now spent trying to determine strategic initiatives on the basis of consumer behaviour as represented in a slew of really badly coded Cognos reports. This wouldn't be so bad except for the fact that analytics and data driven decision making is anything but in most companies. Data is used to validate a hypothesis instead of being explored to reveal patterns, associations and trends. Every executive asking a question about customer behviour is secretly asking for validation of their own theory on the business and wants to gloat about it come performance review time. Obviously, in this kind of operating model, data is bastardized to lead to really bad decisions.

    I'm all for scientific approaches to management, however they need to be undertaken following a method that is in line with the scientific method to be labelled as such. When I leave this job (which is ridiculously well paying but completely unfulfilling compared to my career in engineering) and run off to create my startup, I will probably hire an MBA at some point. However, I won't hire them to be a bean counter.

    What many companies fail to realize is that the key to having a great leader is equal focus on product and market. The MBA that I would hire would be chosen because they've demonstrated an ability to be highly technically proficient but decided to expand their horizons and take on "soft-problems" as well.

  • by blind biker (1066130) on Sunday July 10, 2011 @12:21PM (#36712028) Journal

    It is more the fact that the corporAte environment has become very friendly for corporate psychopaths, who will do a quick buck during a 6 month/1 year stint (merger, outsourcing, unnecessary reorganization, firing of random number of employees (1000, 5000 and 10,000 are common) offshoring) and then flee to the next company and management position.

    • Saw this happen about 10-15 years ago in a former American PC maker. Every six months...you would get a visit from a new hoard of VP's. Each would have millions at their disposal and "new" ideas on how to maximize profits. The results would be millions and time wasted...employees blamed for their failure and fired. The worst part is these VP's would walk down the street to another company and do exactly the same thing in another company. Seeing the writing on the wall...I got out after the fourth set of VP'
  • by PPH (736903) on Sunday July 10, 2011 @12:29PM (#36712100)

    Frequently, an MBA is obtained by an individual with a BA or BS in some other field. Engineers, for example, often go on to get an MBA to fill in the economics, budgeting and planning and resource allocation skills that they will need in addition to their basic (engineering) knowledge. In this sense, an MBA can be a useful degree.

    The problem arises when companies compartmentalize their functions, making the business management side of the house responsible for one set of decisions, engineering for another and operations for something else. Each group does 'their thing' and throws it over the fence to the next one. So the end solution is suboptimal.

    Anecdote: When I was at Boeing, we were developing a higher capacity electrical power generating system (EPGS) for the 747-400. One aspect of this was to spec relays and contactors to withstand the higher available short circuit current. And once the vendors had developed the 'heavy duty' components, it was my job to test them (blow them up). One special purpose relay incorporated some voltage sensing logic which would cause it to switch to an alternate source should the primary fail. It was a very low volume part. So we took a sample to the lab, hooked it to a 4 generator source and applied a short to its output. Bang! The magic smoke came out (not supposed to happen). Back to the manufacturer for a redesign. The next sample, less smoke came out. The next one, even less. After a number of iterations, the vendor had it down to the case just bulging a bit. Still not suitable.

    At this point, the purchasing guy called up and asked what the hell we were doing blowing up all these $7500 relays. $7500?!! If someone had told me that's what they cost, I could have easily designed the part out of the airplane. But that wasn't my job. The guy whose job it was was still adapting a WWII era design to the system. And he had no idea of parts cost. Not his job, just build the system so it works. Cost is a different department (where all the MBAs work).

  • by Required Snark (1702878) on Sunday July 10, 2011 @05:19PM (#36714432)
    A constant in big business scandals is the presence of Harvard MBAs. Here's an article http://www.timesonline.co.uk/tol/news/uk/education/article5821706.ece [timesonline.co.uk] from the London Times.

    Harvard Business School alumni include Stan O’Neal and John Thain, the last two heads of Merrill Lynch, plus Andy Hornby, former chief executive of HBOS, who graduated top of his class. And then of course, there’s George W Bush, Hank Paulson, the former US Treasury secretary, and Christopher Cox, the former chairman of the Securities and Exchange Commission (SEC), a remarkable trinity who more than fulfilled the mission of their alma mater: “To educate leaders who make a difference in the world.”

    It just wasn’t the difference the school had hoped for.

    ...

    In the late 1990s, their faculties rushed to write paeans to Enron, the firm of the future, the new economic paradigm. The admiration was mutual: Enron was stuffed with Harvard Business School alumni, from Jeff Skilling, the chief executive, down. When Enron, rotten to the core, collapsed, the old case studies were thrust in a closet and removed from the syllabus, and new ones were promptly written about the ethical and accounting issues posed by Enron’s misadventures.

    ...

    Is there a pattern here? Go back to the 1980s, and you find that Harvard MBAs played a big enough role in the insider trading scandals that washed through Wall Street for a former chairman of the SEC to consider it a good move to donate millions of dollars for the teaching of ethics at the school.

    Time after time, and scandal after scandal, it seems that a school that graduates just 900 students a year finds itself in the thick of it. Yet there is remarkably little contrition.

    To be fair, it's not just Harvard. Rajanatnam, the Galleon hedge fund founder, went to the Warton MBA program. He was just convicted on insider trading.

  • by hazem (472289) on Sunday July 10, 2011 @06:25PM (#36714876) Journal

    I took a LEAN class from a professor who had been a management accountant for a good part of his life. He wrote a few books about how companies are often driven into inefficiency and/or ruin by allowing the accounting and finance arms of the companies to be the dominant decision makers. This one, Relevance Lost is from 1991:

    http://www.amazon.com/Relevance-Lost-Rise-Management-Accounting/dp/0875842542 [amazon.com]

  • by Craig Maloney (1104) * on Sunday July 10, 2011 @09:03PM (#36715954) Homepage

    I've long said that's what was killing Ford when I was there. There was no thought about what was happening next quarter, let alone 5 years down the line. It was all about making the numbers this week. That's what lead them to cede the small cars to the foreign companies, and concentrate solely on SUVs, which pretty much tanked the company when the SUV market fell over (that and the bad press about the Explorer, but that's another story).

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