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Business schools like to boast about how many of their graduates have become CEOs—Harvard especially, since it has the most. But how do these people do as CEOs: are the skills needed to perform there the same as those that get them there?
MBA students enter the prestigious business schools smart, determined, and often aggressive. There, case studies teach them how to pronounce cleverly on situations they know little about, while analytic techniques give them the impression that they can tackle any problem—no in-depth experience required. With graduation comes the confidence of having been to a proper business school, not to mention the "old boys" network that can boost them to the "top." Then what?
[...] Joseph Lampel and I studied the post-1990 records of all 19. How did they do? In a word, badly. A majority, 10, seemed clearly to have failed, meaning that their company went bankrupt, they were forced out of the CEO chair, a major merger backfired, and so on. The performance of another 4 we found to be questionable. Some of these 14 CEOs built up or turned around businesses, prominently and dramatically, only to see them weaken or collapse just as dramatically.
[...] Both sets of companies declined in performance after those cover stories—Miller commented later that "it's hard to stay on top"—but the ones headed by MBAs declined more quickly. This "performance gap remained significant even 7 years after the cover story appeared." The authors found that "the MBA degree is associated with expedients to achieve growth via acquisitions...[which showed] up in the form of reduced cash flows and inferior return on assets." Yet the compensation of the MBA CEOs increased, indeed about 15% faster than the others! Apparently they had learned how to play the "self-serving" game, which Miller referred to in a later interview as "costly rapid growth."
[...] MBA programs do well in training for the business functions, such as finance and marketing, if not for management. So why do they persist in promoting this education for management, which, according to mounting evidence, produces so much mismanagement?
The answer is unfortunately obvious: with so many of their graduates getting to the "top", why change? But there is another answer that is also becoming obvious: because at this top, too many of their graduates are corrupting the economy.
MBAs are good for you personally, but bad for companies, bad for the economy, and bad for the country.
(Score: 1) by qzm on Sunday April 02 2017, @08:11AM (3 children)
Actually no, because there 19 were selected based on MBAs who achieved high positions and were showing good results initially, then the outcomes were bad.
It is selection bias in the opposite direction to the findings, which actually greatly strengthens the findings.
Of course you are probably an MBA, hence actual statistics mean nothing to you.
The factors are of course in play here. One is the MBA 'path to success' training, and what it actually means, which is primarily being questioned.
Two is the idea of putting people in charge of a business who are experts in 'management', not experts in the field.
It doesnt take much critical thinking to see the obvious flaws in both, at least for the long term success of the company.
(Score: 0) by Anonymous Coward on Sunday April 02 2017, @11:20AM (1 child)
Whereas you think that a group of 19 picked by some "insider" from a single school in 1990 has statistical significance.
And they may also face more stress, more pressure to produce results, inflated ego from being the upper crust and on this list, have more enemies and con artists engaging with them, or any number of unknown factors. They may have taken risks that worked in the short term but not the long term.
(Score: 1) by khallow on Sunday April 02 2017, @12:39PM
(Score: 0) by Anonymous Coward on Sunday April 02 2017, @03:36PM
It's still drawing conclusions about the general case "MBAs", from 19 hand picked specific cases and calling it evidence.
There was no attempt to follow up on the group of MBAs as a whole, no attempt to look at broader group, no attempt to examine causes of failure, no attempt to compare vs other business in the same time frame.
What you really have here is several stories of eventual business failure from a group comprised of solely of Ivy League MBA Grads and then blaming the degree?
The number of factors they didn't bother to consider here is absolutely staggering.
Why only Ivy League, why not a random sampling?
What was the failure rate of businesses headed by Ivy League MBAs vs non Ivy League MBAs vs non MBA?
What was the failure rate of business overall during that time period?
What was the failure rate of comparable business historically?
What was the race and gender of the selectees?
What was the race and gender of those excluded?
How many businesses were a family or closely held concern and what were there failure rates vs the mean during the same period of time?
What was the failure rate of businesses that were started by MBAs instead of just headed by them?
Until you include a broader group with a larger sample size it doesn't matter if you select for grads with "conditions that ought to favor them".
It's a fallacy to think that favorable initial starting conditions are a significant benefit to long term success in business. In fact if anything it's probably going to be a hindrance.
If you don't have to fight for it, you don't value it nearly as much and therefore won't fight as hard to keep it.
I have a feeling this study was put on by someone with a poor grasp of how to conduct a rigorous scientific study.
OP is right, this isn't a study.
It's just 19 anecdotes.