Dialogue: Paper-shufflers don't add value

By JOHN SCARRY*

The proposed $100 million relocation and upgrade of Auckland University's business school is depressing to any intelligent person who wants New Zealand's slide down to the economic and social level of Argentina reversed.

It is not the lack of "world-standard business education" and standard business practices that is holding back the country's economic development, but the presence of them.

New Zealand needs more people who can produce valuable goods and services, and far less "management".

Since 1960, the proportion of the workforce in management has more than quadrupled. This increase has closely paralleled our slide down the economic ranking of OECD countries.

The sort of business that New Zealand desperately needs is that which generates real (and not paper) wealth, increases export earnings, replaces imports, and regains control of foreign-owned assets.

Unfortunately, what passes for "business" and "the economy" in New Zealand is usually trading in property, a cargo-cult mentality of borrowing overseas to pay for imports of basic and luxury consumer items, trading in money and all its "derivatives", and the buying of existing businesses with debt, so that they can be bled dry.

The practitioners and advocates of such worthlessness are those who have charted New Zealand's economic and social course for the past 17 years.

Business schools will only make this appalling situation worse.

Great companies are founded and run brilliantly by people such as Marriott, Ford, Chrysler, Hewlett, Packard, Jobs and Wozniak, who have a passion for producing great goods and services. A New Zealand example is Peter Thomson of Plinius Audio.

Unfortunately, great and good companies - particularly in New Zealand - invariably get run into the ground by the usual cabal of lawyers, accountants and MBAs who serve as management and directors.

The people who are most important to a business are those who conceive, research, develop, design and manufacture its products (or provide its services).

The middle-sized manufacturing companies that make Germany the world's biggest exporter are typically specialised firms of long standing, usually run by people who have gone through apprenticeships then undergraduate and postgraduate university training in the technical fields related to their business. There's not an MBA in sight.

Management as a specialisation or a profession is a waste of time. One can't manage real, productive processes and services one doesn't understand.

Similarly, people who somewhat understand such processes and services (which covers most MBA candidates), and are then put into removed management positions, quickly lose touch.

Management is a skill that all a company's talent should have to some degree.

One only has to compare the performance of the New Zealand and Scandinavian forest-products industries to see the damage that "professional business management" causes.

The all-too-common practice of finance/MBA types running companies for short-term profit (and, usually, self-enrichment) doesn't cut it in the industries we need.

In the Fortune 500 companies, the ones which perform best long-term are those that pay their senior management the least, and where the senior management fully understands the real physical processes of the company.

Training in basic accountancy, business plans, contract law, letters of credit and international insurance can be provided in simple courses run by university science/engineering/design schools and profession/trade associations, and advice on exporting can come from Government and business organisations.

To judge the real worth of a business school, look at the loudest advocates for it. You won't find many productive wealth-creators among them.

It is ironic that the advocates for the business school who believe "world-standard business education" will lead to economic excellence and success include big, international accounting firms.

These self-styled management and economic experts should stick to (non-creative) accounting, and sort out the problems in their own line of business first.

One only has to look at Enron and Air New Zealand (each controlled by professional "businessmen" and "managers") to see that.

* North Shore structural engineer John Scarry describes himself as a GST-registered businessman and long-suffering victim of New Zealand management.