January 10th, 2018
Indication of MBA’s Inefficiency by Its Graduates’ Performance in Corporate World
A good metric for assessing the value of education would probably be the performance of its products in achieving better outcomes for the profession. With respect to MBAs, such better outcomes would be evident in good managerial skills that foster the growth of the business that one is charged with. In the past, such skills were effectively imparted with business schools being designed as trade schools where students learnt their trade from experienced managers (Bennie and O’Toole 98). Subsequently, however the nature of education in business schools has been diluted, with the outcomes being graduates with poor management skills leading, otherwise strong corporations, into bankruptcy. Cohan for instance notes of such a scenario in the case of General motors, where its Harvard-educated, MBA holders could not effectively lead a corporation that had a sound foundation, leading to its collapse in 2008 (1).
Perhaps more indicative that MBAs may not offer necessarily leadership skills to overcome challenges such as those faced in depression, is the profiles of CEOs who have led successful organizations over the decades. Mintzberg and Lampel provided such an analysis through a survey that aimed to highlight whether MBA holders were good candidates for CEO position. Firstly, the survey asked people with knowledge about American corporations to identify CEOs they considered to have made great achievements over their careers. Among the most identified CEOs were two who did not complete their undergraduate degrees (Bill Gates of Microsoft and Bob Galvin of Motorola) and two whose degrees were not related to management (Jack Welnch of General Electric and Andy Grove of Intel) (Mintzberg and Lampel 1). A more recent example of a successful manager non-MBA CEO is the founder of Facebook, Mark Zuckerberg.
Secondly, Mintzberg and Lampel evaluated characteristics of CEOs who were considered to have failed in their management roles, as highlighted in various literature. One of the literature they evaluated was a Fortune report on “Why CEOs Fail” by Ram Charan, published in 1999. The report indicated that most CEOs failed due to poor people-management skills and poor execution of strategies (Charan 7). Mintzberg and Lampel, examining 33 CEOs of U.S companies that had made to Charan’s list of failures, noted that 40% of the failed corporations were led by CEOs who had MBAs (1). Among these, Continental Airlines’ Frank Lorenzo and American express’ James Robinson, were recognized in a list (of 19 individuals) of Harvard’s stars of the time, a list presented in a book by David Ewing, an insider of Harvard Business School (Mintzberg and Lampel 1). On further examination of the other candidates that made it to Ewing’s list, Mintzberg and Lampel noted that nine (for instance Lou Gerstner of IBM) were doing fine in their managerial roles, but the remaining ten had major challenges running their corporations, including William Agee, whose company, Morrison Knudsen, was declared bankrupt soon after his departure (1).
Contrary to such observations, MBA holders have been shown to perform better in some settings. For instance, evaluating the link between manager education and performance of funds, Gottesman and Morey found out that fund performance was positively associated with holding an MBA degree (153). Further, differences in support of MBA programs were noted in the fact that performance differed with respect to whether the manager of the fund held an MBA from a ranked or unranked school, with ranked schools’ graduates performing better (Gottesman and Morey 178). However, as noted by the authors, the study’s results could have been confounded by factors such as resources controlled by the fund (178).