It is now five years since the depths of the global credit crunch. The rot may have been checked but world prosperity seems to still be a long way off.
In the aftermath of the global credit crunch the business environment has been subject to substantial reform across a very broad spectrum. And with this change business schools and particularly the Masters in Business Administration or MBA have had to adapt to the new order of business. Some call it ‘business unusual.’
Perhaps the worldwide emergence of business schools came from the great macho lines of Milton Friedman, ‘ the social responsibility of business is to increase its profits.’ (New York Times, 1970). T hat just sounds so good, doesn’t it? Real dog-eat-dog stuff!
In the world that existed prior to the global credit crunch there was a huge demand for post-graduate study programs that concentrated on maximizing profits and climbing the corporate ladder, regardless of the consequences to people and planet.
Prior to 2009, the triple bottom line approach to business ‘3BL’, People, Planet and Profit, did not exactly feature in business school programs. Then came the King report on governance in South Africa ‘King III’ and the business world changed forever.
The Rhodes Business School may have been amongst the first to adopt the ‘Leadership for sustainability’ theme. Now there are many.
Promoting a theme is very different to making it a reality. The challenge presented to business schools by King III is enormous. Nearly every course has had to undergo substantial change to come in line with the new order of business. Everything has changed from philosophy, morality and ethics to laws, guidelines and ideals.
Selling 3BL to prospective students trying to elevate their careers is another challenge. 3BL perhaps sounds a bit insipid compared to the public perspective of the business schools promoting pure capitalism and not much else.
King III is a magnum opus. Perhaps, unfortunately, King III is driven on a ‘apply or explain’ basis. And it is all too easy for business to delegate the requirements of King III to risk committees, audit committees, remuneration committees and more. One can almost feel the corporate order ‘let the nerds get on with dealing with King III while we get on with making profits.’
But it is not that simple. Almost daily the media reports on the shortfalls in the stewardship and governance of companies, government and even non-profit organisations. Corporate images and careers are shattered overnight, no matter how profitable or successful they may have been.
But there is even more. Getting to grips with the far-reaching implications of King III is not something that can be bought in a casual morning of lectures. King III represents a new business order that should carry a health warning ‘ignore at your peril’ rather than ‘apply or explain.’
Today’s Business Schools are the perfect environment to get to grips with the challenges of King III. But there are other problems in the pursuit of the modern MBA that are not readily apparent to the prospective student.
Gone are the days of the 9-to-5 job in a luxury office assisted by a private secretary, with coffee and a sticky bun for breakfast and a 3 martini business lunch. All of this has become unsustainable. More is expected from today’s employees than ever before. This detracts from the time available for continuing education on a part time basis.
The challenges in time and costs of raising a family while continuing studies on a part-time basis are greater than ever. Certainly if students have got what it takes to enroll on an MBA it is going to take everything they have got to graduate.
Confronted with the above many prospective MBA students shy away and concentrate on their existing challenges of family and career. One cannot blame them. But in the long term this carries the consequence of progressing in the business world with insufficient knowledge of what the new business order is all about. This can substantially undermine long-term career prospects.
Tax incentive for part-time MBA students?
If all the above is not enough, the all-in costs of an MBA are now in the order of R50 000 per annum and can easily exceed R150 000 over the duration of the program. Paid out of after-tax earnings this can represent far more.
Some say that there should be some form of income tax deduction or subsidy to encourage post-graduate part-time study. Surely the student who elects to invest the time and effort associated with continuing post-graduate education deserves some financial incentive.
The truth of the matter is that there is a tax incentive. But it has a history and requires the involvement of the employer to get it right.
Prior to 2008 there was substantial abuse of employer bursary schemes in South Africa. This led to the promulgation of s10(1)q of the Income Tax Act which now imposes strict controls over the granting of bursaries to employees and their families. Many employers simply discontinued their employee bursary programs post s10(1)q implementation.
S10(1)q places strict limitations on bursaries granted to the family of the employee. But when it comes to an employee’s continuing education on a part-time basis it actually encourages employers to legally structure their employees’ further studies by way of an employer bursary included in the employment package.
There are checks and balances involved in the correct implementation of an employer/employee bursary arrangement. But the incentive is substantial and can lead to a tax saving of between 25 and 40% of the total cost of an employee’s further education, at no additional cost to the employer.
Here’s a video tutorial covering the basics of tax structuring continuing education while employed.
Conclusions and recommendations
The aftermath of the global credit crunch was often described as ‘business unusual.’ Perhaps this created the expectation that business had experienced a major speed wobble and business life would sooner or later recover to more or less what it used to be. Forget it.
Business life has fundamentally changed to a new order. The extent of change is as profound as it is far reaching. And understanding the extent of change should now be the first order of priorities.
Confronted with business unusual many businesses have expected even more from their employees. Unfortunately the collateral damage has been the neglect of continuing education in what modern business principles are all about.
So what are the answers to the questions ‘ are business schools and MBA’s still relevant? Who should enroll on an MBA?’
Ignorance of modern business philosophy is as much a threat to business today as trading losses and poor cashflow. Business schools and MBA programs are virtually the only mechanism for teaching the full extent of modern business philosophy. Thus they are more relevant than ever.
Caption: Matthew Lester: Rhodes Business School professor, tax and financial planning specialist
By Matthew Lester