MBA Program keeps Pace with Changing Times: An Interview with CEU Business School Dean Paul Garrison

A slightly edited version of this interview appears in the 2009 Budapest Business Journal Book of Lists

Paul Garrison is Dean and Managing Director of Central European University Business School and the former Managing Director of Coca-Cola Hungary and Marketing Director for East Central Europe and most recently founder and Chairman of The Garrison Group, a strategic marketing consulting company based in Budapest with Coca-Cola, IKEA, T-Com, UniCredit Banks, Bayer and Sony among their clients. He is author of three books, including one on marketing and a novel about Hungary’s 1956 revolution.

Jacob Doyle:

In light of the recent changes that have gripped the global economy, the practices and expertise of leading economists and business leaders have been challenged. Many are calling for reforms in the way business is done. In your view, how should business education be altered to better equip future business leaders to face this new and challenging business environment?

Paul Garrison:

Social and political thinking must be integrated in business education. If we look at what has happened in the past few weeks, this becomes clear. Public policy people typically don’t understand enough about how business works – about how to get things done - and, conversely, business people don’t understand how public policy works. In fact, these two threads of human activity are tightly intertwined, especially in this region. So business education must prepare students for this. If you’re running a bank, you need someone who understands politics and the public sector. The public sector, meanwhile, needs people who understand banking. Finding solutions to the current crisis is greatly hindered by a lack of such cross-sector understanding. Effective solutions require a different brand of thinking. The crisis isn’t merely economic; it’s a society wide crisis. In business education, therefore, it’s not enough for a professor to include an element of sociology in her human behavior class. I prefer to see an actual sociologist, a political scientist, a philosopher teaching business students to become politically astute, to get them thinking more deeply about society and the consequent impact of their actions…or lack of action.

Historically, business schools have taught students to go broad, to understand global trends, global standards, such as global ethical standards in their international business programs. Broadly speaking, they teach cross-cultural sensitivity. Yet while this crisis is having effects across cultures, it’s also penetrating deeply within particular cultures. Such depth of understanding is required to enable an effective solution, in much the same manner that a marketer selling bottled apple juice has to understand the depth of local tastes, habits and other consumer behavior to effectively position her product.

Doyle:

What have business schools been doing wrong and what must they do differently to be on the right track?

Garrison:

For years, students have entered and graduated from purportedly top business schools thinking they’re the leaders of the world. They were indoctrinated with this kind of thinking. They joined a club, a club with rules and role models. The typical role model set the rules by his own example: making as much money as possible while running through a string of divorces was perfectly OK, as was being a workaholic or a belief that money is the most important thing. These are not the rules I would advise my own children to follow, nor ask anyone else’s children to follow. They’re neither healthy for the individual, nor for society.

At CEU, we offer MBA and undergraduate bachelor of business degree programs and we also provide executive education, as many schools do. But we’re trying to do business education very differently. At public policy schools, such as Kennedy or Fletcher, they strive to teach future politicians and diplomats ‘to do the right things’. Business schools have historically taught how ‘to get things done’, but not so much about getting the right things done. It so happens that we’re building a public policy school at CEU, which is pretty big news. It promises to be one of the best public policy schools in the world because it will tackle that fundamental gap of getting the right things done for business and society.

Doyle:

Could you specify how your institution, the CEU Business School, is taking a different approach from other business schools?

Garrison:

Business students first of all need their core subjects, which include accounting, finance, critical thinking, strategic planning, among others. An MBA demands 60 credit hours. At CEU, we’ve reduced required credits to what’s absolutely critical, exactly 28.5 credits. That gives us 31.5 credits to do something more with, to instill a deeper understanding and awareness of responsibility. CEU students have gotten involved in such areas as regional studies or in our transnational leadership course where they do boardroom exercises where students must make real time decisions that have political, social and ethical and environmental consequences and ramifications. These could include a simulation where students – in the role of management - have to tackle a contamination problem; they have to decide how to notify consumers, how – if necessary - to lay off workers; all in a responsible way.

Doyle:

You mentioned rules learned by business students at other schools that you wouldn’t advise today. Is there a new set of business rules that you could recommend?

Garrison:

We have to reassess and write new rules for the next generation, the new club if you prefer, of business leaders. And the underlining and often unchecked premise of “greed is good” shouldn’t one of them. You can see the new rules taking shape among corporations. Take the example of the international brewer Inbev, whose slogan was formerly “the best beer in the world,” now changed to “the best beer in a better world.” What the new slogan reflects is a company policy not to produce beers and advertising that encourage binge drinking, but rather quality beer to be drunk responsibly, in moderation. While beer isn’t a product essential to human life, this change in policy does reflect a new understanding, a new club rule: you have to be responsible if you want to be a successful businessperson over the long term.

The old rules that economists and business leaders used to follow suddenly don’t apply. A severe drop in the Dow follows a five percent rise in US housing prices. Or a drop in the price of oil follows a cut in OPEC production. So it isn’t effective to teach students the old rules and economic models that try and predict some sort of rational behavior. The markets, like the people who work in them, are seldom rational. Instead students need to widen their focus, learn to be nimble and to more broadly assess situations as they arise with a deeper understanding of cause and effect – and once again, the cause is broader than just business, as is the effect.

Moreover, business itself needs new rules. I have never been a big proponent of unchecked capitalism. Unchecked greed is a problem and we have all seen how that has driven the irresponsible mortgage lending practices that precipitated this latest crisis. I think we need to have much more regulation. The Paulson team is busy trying to fix problems that – to many - did not come completely by surprise. A lot of people knew the bubble was there, but the lack of regulation allowed it to grow unchecked and eventually burst resulting in a credit crises, that became an economic crises, then a political crisis, and ultimately a social crisis that we are only beginning to see. It is this final step that most concerns me

Doyle:

Today we hear a lot about corporate social responsibility (CSR) being a positive trend in business. What is your view of CSR and is it something today’s business students should focus on?

Garrison:

Ultimately what businesses are about is providing consumer value. Customers care about useful, healthy products. They also care about such issues as carbon footprint. Good products and a lower carbon footprint are both expressions of customer value. When you create customer value, you create economic value and as a result, drive shareholder value. This should be the guiding light, the north star of business decision-making. If it becomes distorted with personal interest, then companies go off-track. When a business school alum is running a company and wishes to authorize a company contribution to his alma mater, I would advise him against that. If he wants to contribute his own money, that’s fine. He was educated there and received benefit and he’s free to give his own money. But I wouldn’t approve if he were to give shareholder money unless of course that gift was transparent and supported by the shareholders. Company money used for sponsorships, community relations and the like should be to benefit the reputation and goals of the company, not the personal goals, reputation and ego of the managing director.

An example of corporate social responsibility is when Coca-Cola used its clean water technology to clean up Lake Balaton or more recently the water in the national forests. Consumers care about clean water and it’s related to Coke’s mission. They source water and sell water. Naturaqua is one of their products. In other markets, in time of disaster, Coke has flown in and set up water treatment facilities. They’re the best in the world at water treatment and it’s a social responsibility role they can and should play. It’s an example of CSR, but it allows the company to stay true to its mission without getting distracted. Distractions can throw a company out of balance and make it very difficult to measure success.

Doyle:

After the Holocaust, German soldiers were taught to question the orders of their commanding officers; this to avoid carrying out any future misguided campaigns. Could a similar method be applied to business education today whereby students are taught to “self-regulate” their activities when they encounter what they regard to be questionable directions from their superiors?

Garrison:

We’ve got to have people coming out of business school with a greater understanding of business and social responsibility. We can teach 200 people in a class about social responsibility, about social interaction, the subtleties of politics, and about how to do what is right. But I doubt it will stick to all 200. Maybe just 175 and we hope these business leaders will exercise the good judgment required for self-regulation. It’s for the 25 to whom it didn’t stick that we need intervention and stronger regulations. We need to approach the problem from both ends. I don’t favor laissez faire capitalism, where businesses are expected to self-regulate. I don’t think we’re grown up enough for that. At the same time, I wouldn’t leave it to the government to do it all either. It’s clear to me we need both. That will take us to a better place.

Doyle:

Can responsibility in business really be taught? How do you teach it?

Garrison:

You try to put students in those situations where they have to take responsibility. At CEU, we’re using case studies, particularly case studies from this part of the world. Instead of just lecturing to students, our aim is to get them to walk in the shoes of decision-makers. In my marketing class, I present students with ten or eleven different sectors ranging from IT to entertainment to recreation to FMCG, etc. Then they pick a product, a new product, like a new type of mobile phone. Not always a real product, but, say, a new organic food product from Frito-Lay. They have to launch this product - develop goals and objectives, strategies, recognize and foster consumer understanding – and in the end, 50% of their grade is based on how that team presents that comprehensive business plan. And that’s just my marketing class. We apply the same case study and action learning approach across the curriculum.

We also put the students through a leadership camp at the opening of their MBA studies. One exercise is put them out in the woods where they’ve got four sets of three-man teams. The four groups of three are scattered throughout the woods, but only one group has a reliable map. In order to rendezvous, they have to overcome to real challenges using walkie-talkies and compasses to reach their destination. This exposes them to a host of leadership and teamwork stresses. The idea came from the Tenth Mountain Division that trained in WWII in how to survive Alpine combat conditions. While we’re not preparing our students for war, we can apply the same teamwork and leadership skills that led the Tenth Mountain Division alumni to such post-war achievements as creating the world famous Vail ski resort in Colorado or founding the Sierra Club, an environmental advocacy group. Ideas and ventures that have had a very positive effect on both business and society.

Doyle:

As a career business manager and a business educator, do you have any insights you would share with business students into the central problems facing business today and how these problems could be solved?

Garrison:

It’s clear that many businesses have lost their north star and have become disoriented on what is truly important. It has fallen off course in pursuit of short-term measurements and perceptions that often reward executives for making decisions that may in fact erode both customer and shareholder value over the long term. The perception demands placed on publicly-traded companies have a lot to do with this short-term versus long term focus that has led many of us astray. Family-owned or privately held companies don’t have this burden and can more readily plan for the long-term. As a result, their products and practices tend to reflect a more responsible approach. The Artois Brewery in Belgium, the genesis of today’s InBev, was a family-owned brewery for more than five centuries. Their emphasis was on quality rather than low costs and high sales. They recognized they were in the game for the long haul, so it would go against their interests to produce an inferior product they could sell cheaply. Just as public servants should serve the common good, so too should businesses – the common good is usually good for customers and that is usually good for business. But if the focus continues to be on short-term results as it is on Wall Street and other places in the financial trading world, this will continue to undermine long-term success planning and companies’ ability to produce quality products over the long term.