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An MBA is no ticket to success February 1, 2010

Posted by Alan Yu in Career, Management.
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An article in the latest issue of the Harvard Business Review (http://tinyurl.com/y9k9tkq) lists what it considers to be the best-performing CEOs in the world. 

 

One of the observations the article makes is that insider CEOs – those promoted from within the organisation – tend to do better.  Of the top 50 best-performing CEOs, only about a quarter are outsiders.  This stands to reason, as critical to a CEO’s performance are such factors as understanding subtleties of the industry that enables laser-sharp judgment, ability to navigate the web of regulatory constraints, familiarity with the culture and rapport with staff to get things done.  All of these qualities tend to accrue to someone who has been in an organisation for some time. 

 

The authors of the article claim that “32% of CEOs who had an MBA ranked, on average, 40 places better than the CEOs without an MBA”, going on to conclude that “the finding suggests that MBA CEOs have not destroyed value.”  That may be so, but the fact remains that less than one third of the top 50 CEOs have an MBA.  While business education may not be a destroyer of value, it is not a good predictor of success either. 

 

In the past few decades, business education has mushroomed into a highly profitable industry.  Graduate business courses draw from a larger pool of target customers willing to pay higher fees.  Many an up-and-coming executive aspire to the qualification as a passport to higher echelons of management. 

  

As a practising manager with an education in liberal arts, I was somewhat suspicious of the real value of an MBA.  Having also been immersed in the empiricist school of philosophy, however, I nevertheless endured three years of gruelling part-time study and a monotonous Ronald McDonald diet to gather evidence for my suspicion.  While I learned a lot in the MBA programme, I concluded that it really didn’t teach me the important things I needed to do well. 

  

At about the same time as I was undergoing my torture, Mark McCormack, founder of the highly successful sports management and marketing agency the International Management Group (IMG), published What They Don’t Teach You at Harvard Business School.  Here was my salvation.  I didn’t need my MBA after all, but having done it I was now qualified to say how inadequate it was, and I had Mark McCormack to prove it! 

  

Truthfully, an MBA is very helpful, as long as we appreciate its limitations.  For a start, it gives skeptical employers at the start of our career some assurance that we know the basics.  We also learn the “lingo” – DCF, learning curve and multivariate analysis.  Above all, we learn to model.  Modelling is no easy feat, and I’m not talking about the catwalk activity either.  It’s trying to predict an outcome using complicated formulas linking a large number of variables in a dense spreadsheet. 

 

The snag about models is that they prove the old axiom about computers – garbage in, garbage out.  I remember lambasting an investment banking executive for building a perfect model but using assumptions that didn’t make sense, therefore coming up with the most ridiculous conclusions.  MBA courses don’t teach business sense, which is often gained through experience, in other words, making mistakes.  They are great for learning all the techniques of option analysis and negotiation tactics, but it is no substitute for keen observation of human signals and managing emotions.  Nor does it help develop passion and diligence.  Deals are often won or lost on the basis of personal chemistry, understanding of emotional needs and how much people care.  

 

Daniel Goleman popularised the idea of “emotional intelligence” in the 90s to help a large number of hard-charging alpha-type MBAs to understand themselves, others and everyone together in groups.  MBA courses are famous for the lack of emphasis on how to work with people to get things done. 

 

McCormack talks about the three phrases most people find hard to use: “I don’t know”; “I need help” and “I was wrong”.  Ability to use these expressions judiciously goes a long way towards winning support from others, because they show that we are humble, vulnerable and fallible – that we are human. 

 

Many corporate failures in the last decade have also shown that MBA courses need to place more emphasis on ethics.  Changes are afoot or have been implemented.  After all, no genuinely high-flying CEO can be a moral imbecile who does not stand on principles. 

 

The shortcomings of an MBA course in teaching the more subtle factors for success can be easily overcome with a little focus and adjustment in curriculum.  At its worst, it can give graduates unjustified confidence and self-importance.  Overly confident and self-important executives distance themselves from those whose help they need most to succeed.  They also lack a sense of humour, which is sorely needed to defuse tension and bounce back from adversity. 

 

In business, as in life, there are no guarantees.  An MBA alone certainly does not lead to success.  Applied with humility, forbearance and open-mindedness, however, it could go a long way. 

 

Posted via email from alanayu’s posterous 

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Comments»

1. Wally Bock - March 24, 2010

Success is an individual phenomenon. In business it means succeeding in a high velocity environment. That’s very hard to prepare for in a classroom.

In addition, leadership is an apprentice trade. You learn it on the job, not in the classroom. It’s more like dance, acting, or public speaking than it is like history or match.

One implication of that is that learning to lead is subject to Michael Polanyi’s dictum that “We never truly know something until we can apply it for a practical result.” In MBA programs you don’t learn business, instead you learn about business.

That can certainly help you succeed, but I think that the best MBA programs are either executive MBA programs, which men and women undertake while fully employed. I also like focused MBAs in fields like finance that can teach job-applicable skills.


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