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David Willetts is a member of the House of Lords, a former UK Minister for Universities and Science, and is president of the Resolution Foundation. His book, ‘A University Education’, is published by OUP
The long-standing poor performance ofthe British economy is partly due to the weak skills of its managers. The country’s businessschools, backed by newgovernmentincentives, need to doabetter job to help respond.
In “Why do management practices differ across firms and countries?” (2010), John van Reenen of the LSE and Nicholas Bloom of Stanford showed that managerial actions have a big impact on productivity. Up to a third of Britain’s lagging productivity performance can be attributed to poor management. Multinationals tend to dorather better, while family-owned and managed firmsdo worse. Poor management practices are in turn linked to lower levels of education among managers.
All this suggests that business education — which comprises a large part of the country’s higher education sector — should have an important role to play in boostingBritain’s economic performance.
Every year, about a quarter of a million students enter British universities for business studies — 20 per cent of all undergraduates and 30 per cent of all postgraduates. That is more than for any other subject. Many are from overseas — 30 per cent of undergraduates and 80 per cent of postgraduates. Most major UK universities now have a business school, with more than 100 in total.
With so many business studies students but such poorly educated managers, what is going wrong? Part of the explanation could be that many of these courses are pretty basic. There are many fewer studying for the prestigious MBA: perhaps 25,000 overseas students and only 10,000 from the UK who are studying in the country.
Those programmes are for the elite. But there are other ways of delivering great business courses too. Our business schools are not playing the role in the local or national economy that they should. They are not delivering useful programmes focused on Britain’s business needs. The incentive structure has gone wrong.
As universities come under financial pressure because domestic fees are too low, there are great incentives to recruit overseas students. Many of them are doing business studies. But they do not wish to be taught with examples from British business and the British economy. So courses are globalist. That is great for students headingout into the world but weakens the incentives forbusiness schools to have local links.
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There is a second, deeper factor at work. The prestige ofa business school is much more dependent on its research ranking than the quality of its teaching, which is harder to assess. There are sophisticated metrics of research performance based on field-weighted citation indices, measuring mentions relative to the average for thesubject. The journals in which articles are published are key in assessments of research performance for promotion of their authors.
However, the leading economic and business journals are not particularly focused on Britain and its problems. The best way to get published in them is often to use cutting-edge statistical techniques to generate findings from large datasets that often comprise historic data fromUS business sectors.
It is understandable that modern business studies should be global. But if publication in journals is key to the incentives for individual academics and business schools, this can pull them away from research directly relevant to the British economy — and away from a focus on teaching.
A professor at a business school who researches the problems of businesses in the local area and draws on this evidence in their courses should be a great asset for that school. The government’s pause to review how it conducts its next assessment of research excellence in British universities is an opportunity to ensure such regionally relevant research is not overlooked.
“Research excellence” in any case should not be the only measure of excellence. Not all business schools need to require a doctorate for appointments to their faculties. Deep business experience and the ability to learn from it and explain it could be another route in.
The government could also add new incentives forbusiness schools to engage with the local business community. One option is to encourage them to act as local agents to deliver government economic developmentprogrammes and grant schemes promoting innovation and skills for their area.
The evaluation of business schools by the Financial Times itself is another factor. The FT rankings and assessment are very highly regarded. They help to identify an elite of excellent global business schools. But perhaps there could also be space for a metric of contribution to the UK or local economy, and every year there could be acelebration of a different type of excellence.
It is important to apply what is already known about good business to help better train managers and boost skills and performance in businesses — particularly in the areas around each university. There are different missions and different ways of being a great business school. We should celebrate them all.
