HBS Curriculum Adapts to Meltdown

Harvard Business School was founded in the midst of a recession in 1908. More than 100 years later, during similarly trying financial times, the Business School, its students and faculty are in the hot seat.

As failures in the financial sector took down the larger economy last year, many critics blamed the MBAs working at major financial firms for the current economic recession.

The problem, some say, is that many MBA students come to business school for the wrong reasons.

One of these critics, Philip Delves Broughton who is a 2006 graduate of HBS, says that business school students find that their experience is more geared toward networking than educating competent managers. Broughton wrote a book which was recently published in 2008 that fleshed out his criticism of his experience at the school.

Now, some HBS faculty members are introducing new courses and updating existing ones to respond to the gaps in management education that many say the crisis has revealed.

Classes at the Business School are predominantly taught by examining case studies. And according to HBS Dean Jay O. Light, a number of classes have added new cases to their curricula in response to the financial crisis.

The required first-year course “Business, Government, and the International Economy,” plans to add cases on the sudden demise of the Icelandic banking system and on the effect of this recent economic crisis in the developing world, according to course head Rawi E. Abdelal.

But several professors are making more significant changes of their own accord. Though the school’s administration had no direct role in the formation of these courses, several new second-year elective classes focusing on various aspects of the financial crisis have been introduced since 2008.

MANAGING FINANCIALS

Clayton S. Rose, a senior lecturer at the Business School, had been contemplating a course on the management of financial institutions long before the crisis. But the recession proved to be the impetus he needed to turn his thoughts into reality.

“The real work began when it became clear that things were fundamentally changing,” Rose says. “The course was shaped very fundamentally by the financial crisis.”

Rose’s second-year elective, “Managing the Financial Firm,” debuted this semester. It introduces students to many of the new challenges affecting financial organizations in today’s economic environment, including increased regulation and public scrutiny.

After spending 20 years as an executive at JP Morgan Chase, Rose saw the need to educate managers specifically in the field of finance. After the banking crisis began, Rose added cases on Citigroup and Lehman Brothers, whose collapse is widely viewed as a symbol of the current crisis.

Rose invited several Wall Street analysts and a former director of enforcement for the Securities and Exchange Commission to speak to the class.

Among the points he seeks to make to his students, Rose says, is that public opinion of a firm is important.

“It’s necessary to have the perception of confidence,” he says. “If you lose that, your firm fails.”

REPEATING HISTORY

Certain courses that were created before the crisis have taken on new meaning in the recession.

“Creating the Modern Financial System,” a course taught by Professor David A. Moss, debuted in the Spring of 2008 just as the sub-prime mortgage crisis was evolving into a larger economic meltdown.

The students, who numbered about 30 in 2008, found the material—a history of finance—pertinent to the current events of developments on Wall Street. Student discussion often drifted towards the news, Moss says.

In the Spring of 2009, Moss added two case studies relating to the current crisis to the course, which he began formulating over four years ago. He will teach those cases again when the course is offered in the Spring of 2010.

Throughout its chronology, the course focuses on bubbles and crashes, Moss says. “People have joked that this is a course on destroying the modern financial system.”

Over the past two years, that focus has attracted more students.

The course—which enrolls a maximum of 90 students—was substantially oversubscribed when offered in 2009.

Moss says financial history gives students a better perspective on how finance works in reality, in addition to explaining how various aspects of the current crisis came about.

Summer M. Nemeth, a 2009 HBS graduate who took Moss’ class last year, agrees.

“[Moss] drew comparisons between the crazy current crisis and past crises. Not everyone has a direct mirror to today, but with every historical case, he pulled out insights that will be relevant going forward.”

CONSUMER FINANCE

As the recession gripped the economy in the winter of 2009, Business School Professor Peter Tufano ’79 was beginning a new joint class on consumer finance with Law School Professor Howell E. Jackson.

According to Tufano, the course, which will be offered in spring 2010, attempts to fill an educational void by introducing business students to consumer banking. Though Tufano envisioned the course before the downturn, the lack of educational resources on the topic became more evident during the banking crisis, he says.

Through its collaboration with the Law School, the course addresses the heavy regulation of the industry, an issue that the two professors often differed on, Tufano and Jackson say.

Jon P. Swan, who took the class before graduating from HBS last year, says he feels like he has benefitted from the course. One of his favorite cases was about a couple with a sub-prime mortgage losing their home.

“What was neat was picking up the Wall Street Journal everyday and finding something directly related to what we were doing in class,” Swan says.

'TWEAKS'

The criticism and curricular changes are not limited to Harvard Business School. Several elite business schools from around the country are making “tweaks” similar to those at HBS, with individual faculty members taking the lead.

At the University of Chicago Booth School of Business, students will be able to take the new course “The Analytics of Financial Crises” as well as new courses on ethics and social responsibility. Yale School of Management has added a first-year core curriculum course entitled “The Global Macroeconomy,” as well as several electives.

“Our approach has not been monolithic change from the top down. Tons of things are bubbling up in response” to the crisis,” says JoAnne Yates, deputy dean of the MIT Sloan School of Management, which is considering implementing a required ethics course.

The Tuck School of Business at Dartmouth has taken a more robust approach, with a full curricular review and the implementation of a core leadership course and a seminar in critical analysis, according to an e-mail from Tuck Dean Paul Danos.

“Here we are aiming at honing an open and questioning mind, that is eager to probe and challenge—actions that were sorely lacking by certain officials and regulators in the financial markets.” Danos says.

Still, Broughton remains critical of the school’s response in favor of what he sees as a need for more comprehensive change.

“Anyone who doesn’t live within a mile of the Charles River sees the problem with a business school philosophy that has harmed a lot of people,” Broughton says. “They’ll have to do more than offer a handful of electives to change that.”

—Staff writer William N. White can be reached at wwhite@fas.harvard.edu.