The U.S. has many business schools which are recognized on a global basis. Although these institutions claim to provide the latest theories and insight into the business world, they are lacking in many ways. For one, most graduates do not learn the practical skills they need to be effective from day one. Learn about other ways that business schools are failing students in 10 key areas.
There’s a Nobility to Honestly Obtained Profits
Most business students can tell you that capitalism gets a bad rap in higher education. This occurs despite the fact that business and entrepreneurship has been a driving force for change in the world. The current state of business, both via the internet and at brick-and-mortar shops, is helping more and more people to rise out of poverty and improve their standard of living.
The Problem With the Agency Theory
Agency theory became a predominant train of thought in the late 1970s. Since then, the theory has become one of the pillars of many business school courses. Agency theory suggests that the managers of a firm are nothing more than the agents of stockholders and debtors. In this sense, the managers act as decision-making figureheads for the company. However, the real power lies with those who have invested in the firm. The problem is that the principal-agent relationship isn’t as harmonious as it intends to be. In the real world, there is likely to be conflict between managers and stockholders. Managers may have different priorities than shareholders. Thus, there is an inherent conflict between what management wants and the results that shareholders expect. Therefore, the agency theory is really not a viable solution for modern day firms.
An Excessive Focus on Sustainability
Anyone involved with a business in contemporary times knows that sustainability is a major issue. There has been an undeniable trend towards environmental awareness and protection. Although this is a worthy societal goal, some companies take it too far. The end result is that these firms eventually lose their competitive edge. Going green comes at a cost that most companies are not in a position to foot.
The Topic of Globalization
The importance of globalization, or the issues that affect the worldwide business environment, is largely misunderstood by most schools. Many curricula continue to teach outdated subjects that don’t consider the realities of today. In the modern world, globalization is actually a crisis affecting many different communities. It presents a host of consequences that most business managers are not prepared to confront.
A Lack of the Competitive Spirit
A little competition never hurt anyone. Yet, many schools are minimizing the importance of a competitive business environment. In reality, competition is what drives companies to create better products and services for their customers. Other countries, like China, truly understand what this means. This is why businesses in the U.S. are becoming outpaced by many global competitors.
Dealing With Startup Issues
Business schools were never really created with startups in mind. Although some schools are starting to incorporate entrepreneurial material, the majority of subjects are traditional in nature. Following the tech boom, startups became an everyday thing. Yet, there is no real educational path to assist with the process. Furthermore, most business professors probably don’t have experience working for such a company. This is a big void that business schools need to fill.
Business School Doesn’t Teach Small Business
Small business concepts differ a lot from those that apply in a corporate setting. Yet, most schools assume that every student will end up being the CEO of a Fortune 500 company. However, the actual statistics say otherwise. Out of approximately 5.6 million businesses in the U.S., 89% consisted of firms with less than 20 employees. Thus, it makes more sense to focus on small business strategies. There are a lot of noteworthy aspects of running a small business. For one, you need to know how all parts of a business combine together. As a small business owner, you will be management, HR, marketing and sales all rolled in to one. Each of these essential skill sets should be taught to future business owners so that they can set realistic expectations.
It Isn’t All About the Numbers
A lot of business courses are too focused on the metrics. There is a whole other side to business that is often ignored: the human connection. Business programs should make more of an effort to address the psychological and behavioral aspects of a business transaction. This will prepare students to become skilled leaders and negotiators.
Leveraging Your Business Is Dangerous
Startup capital is a big concern for any new business. The problem is that most schools don’t teach how to deal with this issue. In most situations, a new business owner will try to rely on loans or business credit cards as support. However, this is a dangerous road to head down. Maintenance on business debt puts a huge strain on cash flow, and can even lead to bankruptcy. In the end, using the wrong type of cash flow can put you out of business. You can avoid remaining in debt by developing a five-year plan for your business. Don’t stuff profits into your pockets. Instead, use a predefined percentage of profits to pay off existing debt. Use another portion of profits to save money for future expenses. At the end of your five-year plan, your finances should be healthy enough to work on growing the business more. Of course, the best strategy is to not become inundated with debt from the start.
Human Resources Perspectives Need Change
Often, students are taught about all the technical details involved with human resources. Courses on this subject seem to forget that we are talking about humans after all. Nonetheless, employees are often treated as merely a means to the company’s ends. A more human-centered approach is needed to incentivize making capital, not treating humans as capital. An education is important, but not everything can be covered in class. Some things you have to learn by actually walking the walk. Nowhere else is this truer than in the business industry. In the end, you can’t rely on your business school professors for everything. Make sure you get a well-rounded education by learning more than what is presented in business textbooks.