MBAs. Everything went to the owners.
Put a boss with a business degree in charge and, five years later, the workforce is on 6% less. Sales, productivity and investment haven't moved. Just the wages.
THE GIST ON MBAS: "Business Degree Bosses"
What does a boss with an MBA do to wages?
Put a boss with a business degree in charge of a company and five years later the workforce is on 6% less. Sales haven't moved, productivity hasn't moved, investment hasn't moved. Just the wages.
Because someone decided that the owners were the only ones that mattered.
Where did the idea come from?
Harvard invented the MBA in 1908 to make management a proper profession, like law or medicine. Then in 1970, Milton Friedman wrote that a company had one responsibility: to make money for the owners. By 1979 it was in standard textbooks as the definition of its purpose.
What did it do to Boeing?
The best example is Boeing. In 2005 they hired an outsider to run it for the first time: Jim McNerney, Harvard Business School, then McKinsey, then General Electric. Not an engineer, a manager.
Their competitor Airbus brought out a new plane, and a new aircraft is the most expensive thing for an aerospace company. So he had them put bigger engines on the 737, designed in the 60s. Cheaper to build, cheaper to certify, and no retraining for pilots, which is what the airlines cared about. Win-win, right?
Then it crashed twice and 346 people died. Congress found a pattern of technical miscalculations and troubling management misjudgments. And every one of the decisions was the right one, if cost is the only thing you care about.
What happened to everyone else?
A company used to answer to three things at once: the people who owned it, the people who worked there, and where it lived. When the first became the only one that mattered, the other two turned into costs. And what is a cost? Something you try to reduce.
So most of the country works somewhere that is professionally and deliberately trying to spend less on them. That is known as good management. Is it?
Should companies answer to more than their owners?
Your take. One tap, then see how everyone else voted.
Quick answers
When was the MBA invented?
Harvard invented it in 1908 to make management a proper profession, like law or medicine.
What did Friedman argue?
In 1970 Milton Friedman wrote that a company had one responsibility: to make money for the owners. By 1979 it was in standard textbooks.
What did Boeing do with the 737?
Rather than design a new plane to answer Airbus, it put bigger engines on a 1960s 737, which was cheaper to build and certify. It then crashed twice, killing 346 people.
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