The business section the Sunday New York Times had an interesting article on value of the MBA degree, called Hedge Funds and Private Equity Alter Career Calculus. The article told stories about people who went into these fields and got rich without ever getting an MBA. This article continues a series debate that has been raging in both academia and general media outlets about the value of the MBA in recent years.
My Stanford colleague Jeff Pfeffer created a lot of excitement about this topic a few years back when he (along with Christina Fong) published an article called The End of Business Schools? Less Success Than Meets The Eye. I provide a link to the article, as there is a lot in it –and in classic Pfeffer fashion — note that although most people in the debate rely only on stories, The End of Business Schools provides research to support many of the claims. Pfeffer and Fong touch on many nuances of MBA education, but two findings and the related inferences, really got a lot of play in major media outlets:
1. Unless you go to business school in the top 10 or so, getting an MBA reduces your lifetime income because, you don’t make more money when you get out, and you have lost two years in workforce. So if you can’t get into a top school, you might be better off just skipping business school — assuming the main reason you are going is to get a better paying job.
2. If you do go to a top business school, there is no relationship between your grades and how much money you end-up making. The main financial value of going to business school seems to be that you enter an elite network, not what you are taught in the classes. (Business school professors really hate this one, as it means that those students who do as little work in classes as possible, and devote all their time to networking, are acting in economically rational ways).
And as I have written here before, there is a related argument that not finishing school is
the best path to wealth and fame too (Indeed, much like the MBAs that
Pfeffer and Fong write about, many Stanford dropouts such as the guys
who started Google and Yahoo! were able –and smart — to dropout
because the elite network they entered at Stanford enabled them to
launch their companies, and they didn’t need to learn more stuff in
their classes to get rich).
The controversy about MBA education will keep swirling, which Pfeffer loves. He was once was described (I paraphrase) by MIT Professor John Van Maanen as being attracted to controversy "like a bear to honey." And Jeff can be very hard to argue with because he relies primarily on facts and logic to support his assertions.
BUT in all this debate — including in the recent New York Times article — about the "value" of degrees there is something that is rarely said that reveals a lot about the MBA degree in particular and management in general. I am also stealing this from Pfeffer, although I think I first heard it from Harvard Business School’s Rakesh Kahruna. The discussion about the "value" of the MBA always seems to end — no matter where it starts and no matter what nuances are discussed by Pfeffer and others — with a focus on how much money it puts (or doesn’t put) in the recipient’s pocket.
There is remarkably little conversation about whether it teaches people to do a better job of helping and serving clients, employees, or anyone else. Yet sociologists will tell you that a defining feature of a profession is that members are trained and socialized to put their client’s interests AHEAD of their own. That is what lawyers and doctors promise to do before they start to practice, for example.
In contrast, the societal message — and it is often quite explicit — is that the most effective managers take as much money as possible for themselves from their clients. There isn’t even the pretense of putting other’s needs ahead of your own in most talk about management education. Look at your cell phone or credit card contract if you don’t believe me, or think about what it means to succeed in a hedge fund or private equity firm — it is all about managers taking as much for themselves as possible, and leaving clients (and in some cases employees) with as little as possible. The people who run these firms will protest, but look at the financial structure.
So, although management is craft that I respect a great deal, and is one that is remarkably difficult to learn and practice, it isn’t right to call it a profession as clients seem to be viewed and treated as people you "extract value from" so you can get richer, not as people whose interests should be put ahead of your own.
Indeed, one cynic once suggested to me that if managers took an oath, rather than something like ‘first do no harm," it would be something like "Take as much as you can from as many customers as you can without driving them into the arms of your competitors."
P.S. Another interesting perspective on the value of the MBA degree comes from Henry Mintzberg. Check out his fascinating (if a bit ponderous) Managers Not MBAs, which argues that MBA education is largely wasted on people who have never managed before, but that it can be quite valuable for people who have years of management experience, as they have a much better idea of what lessons they can take away to practice their craft.
I think that Mintzberg takes this argument a bit too far as I do think that management education can help rookies do a better job. But Mintzberg’s point rings true based on my (anecdotal) experience. I’ve found that the more experienced the group of managers that I teach, the more that they appreciate — and work to apply — the "softer" stuff that I teach on innovation, turning knowledge into action, building a civilized workplace and so on. Inexperienced managers tend to believe that they are smarter than all those dumb leaders they study, or a lot smarter than any boss they have ever had, and they don’t need such soft stuff. But once they spend a few years trying to manage people, they realize that — like ice skating or making a movie — doing it well is a lot harder than it looks!
P.P.S. Don’t miss Stefan Stern’s comment below, he reprints a column that he wrote for the Financial Times that is right on target.
