Have bean counters and MBAs harmed American business?

Former GM Vice Chairman Bob Lutz has an intersting point of view. He thinks the increased use of accountants and MBAs has harmed American industry by focusing so definitively on the bottom line rather than the risk taking that led our industries to such heights during the middle third of the twentieth century.

The entertainment industry has complained about this since the mid-70s. Lutz says this is the case in most industries.

I tend to agree with him.

I thought Bobby Lutz withdrew his name from being taken seriously after being a primary individual responsible for driving GM into the ground.

The Wall Street Journal had an article this week about how Harvard Business wants fewer people with finance backgrounds and more with other types of experience.

Every company needs leaders who are passionate about the company and the product. That is from where your innovation and forward thinking comes. Hiring someone merely due to their technical skills or qualifications is not sufficient, but that does not mean that companies don't need people with those technical skills or qualifications. I do think a lot of MBAs and accountants are passionate about business in general (and often about finance and accounting specifically) but not necessarily about their industry.

On a bit of a side note, it bothers me how people often throw arround the word accountant indiscriminately. Accountants covers two different general groups of people. Managerial accountants (cost accountants) are the bean counters. Financial accountants are auditers and tax accountants. Very different professions. Without context, I normally take accountant to mean financial accountant since they practice public accounting. That's kind of a random rant as the context here was clear.

I'll finish with this: Bob Lutz has a MBA.

I don't think it's the focus on the bottom line that's the problem, I think the damage is caused when the accounting drives the operations (as if it's real) instead of being used as a tool to help the operations grow.

At my company, the accountants try to define our business for us without knowing anything about it. The financial guys actually argue with us about how our operations should be run. They create metrics that are supposed to improve the business and management forces compliance monthy (or less). That then forces us to change our operations. They justify it because it gives finance and management a clearer view of our operations. But most of the time it prevents us from growing the actual business or hurts it. It's absurd.

It's little different than the bank/real estate boondoggle. Many honestly thought you could use accounting and finance constructs to make real risk magically disappear....thereby creating way more risk.

The real issue is executives with little stake in the company bleeding it dry with their inflated compensation. Also, don't group accountants and finance together. Accountants are all about rules. Finance is there to help people get around them.

Wake Forest now offers a one year program to complete an MA in Business. It is designed to draw in students with non-business degrees. There seems to be a trend developing here.

Marietta Deac said:

The real issue is executives with little stake in the company bleeding it dry with their inflated compensation. Also, don't group accountants and finance together. Accountants are all about rules. Finance is there to help people get around them.

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Corporate tax accounting is often about knowing what answer you want and figuring out a way to get there under the accounting rules.

DirkTheDeac said:

Wake Forest now offers a one year program to complete an MA in Business. It is designed to draw in students with non-business degrees. There seems to be a trend developing here.

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Is this worth anything in the real world?

good point rj. our problems have been caused entirely by the fact that shareholders and investors want to be able to measure performance of executives. less accountability is undoubtedly the way to go.

ChrisL68 said:

Corporate tax accounting is often about knowing what answer you want and figuring out a way to get there under the accounting rules.

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:thumbsup: Agreed. Financial accountants and flexibility are usually mutually exclusive words.

DeacDiggler said:

good point rj. our problems have been caused entirely by the fact that shareholders and investors want to be able to measure performance of executives. less accountability is undoubtedly the way to go.

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There is so much manipulation that the true health is rarely known. You have to have an accounting or finance degree to interpret a 10-K and even then execs play games.

DeacDiggler said:

good point rj. our problems have been caused entirely by the fact that shareholders and investors want to be able to measure performance of executives. less accountability is undoubtedly the way to go.

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Way to take me saying, "I won $100 at the track in to-"you never hit the Pick 6 for $1M."

Also nice way to misunderstand the concept.

It's a combination of things. There is too much focus on the bottom line and not innovation, short term results vs long term vision, putting company goals ahead of employees.

Bottom line vs Innovation - too many bean counters are dictating how companies should run. Sure, the company being profitable is important, but way too many decisions are based on limited financial views and not the business or market as a whole. Companies don't want to invest in the future to innovate - why is that?

Short Term > Long Term - look no further than Wall St. Companies wont risk innovation failure because if they have one crappy quarter, their stock is going to tank. If you don't show significant quarter over quarter growth, you're fucked. So companies are now running their business based on their ability to execute short term.

Employees vs Company - this leads frequently to the decision to eliminate jobs. The need for short term success and expense reduction have almost all companies looking at saving money by cutting employees. It kills morale, which will start negatively impacting company performance. Sir Richard Branson said one of the 2 things he dislikes about American business culture is "American companies are too quick to eliminate jobs. They treat people like commodities."

This has created the shit economy we have because there is no reason to innovate our way out of it unless we create another fake bubble to burst.

KanhojiAngre said:

Is this worth anything in the real world?

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I don't think its worth a damn. I was an art major and did the MBA thing. Its like somebody thinks an art major or philosophy major can't handle the terrible rigors of an MBA program. What a crock.

DirkTheDeac said:

I don't think its worth a damn. I was an art major and did the MBA thing. Its like somebody thinks an art major or philosophy major can't handle the terrible rigors of an MBA program. What a crock.

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Fake degrees to make a buck are one of the worst things about education. But it's simple supply and demand.

DirkTheDeac said:

I don't think its worth a damn. I was an art major and did the MBA thing. Its like somebody thinks an art major or philosophy major can't handle the terrible rigors of an MBA program. What a crock.

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I don't think that's the motivation at all. The program was designed for people who realize they don't have marketable skills (or the connections) to get a job after graduating with a liberal arts degree so they need something quicker (and cheaper) than a MBA in order to get them in the door somewhere. Pretty sure it's essentially just the first half of the MBA program (ie: after graduating with the MA students can go another year and get a MBA).

But are employers going to care? How viable is such a degree?

It's more viable than a liberal arts degree.

OK let me bring it down.

Would this be a reasonable alternative to an MBA? Could get I get a decent job in this economy with it? (I'm fine with relocating wherever in the world I have to) I have two humanities bachelor's, and have about 3 years left in the military (or I could re-enlist...but keeping it simple). Is this worth it to me or should I just go and get an MBA at a cheaper school? I doubt I could do a full MBA while working in less than the time I have left in the military, but a program like this 1 year thing I might.

I am not a Wake Forest grad.