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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: 2) by AthanasiusKircher on Sunday April 02 2017, @05:54PM
Thanks so much for your perspective on this. Just to be clear -- I wasn't claiming that my ideas explain ALL of the crap that happens with MBAs and CEOs, just noting a sometimes underappreciated issue in corporate structuring these days.
Maybe it's my internal biases coming to the surface, but when I see a CV that lists lots of education degrees, especially if they're near the top or very prominent, it's a very big warning sign, and I frequently end up grilling those applicants alive.
Good education is only a beginning, and you're absolutely right that some places are more about the credentials/money to get in in the first place, rather than what students actually learn. Or, to clarify (as someone who has actually taught some courses at some top-tier colleges): I think some students are extremely motivated at those places and really are the smartest kids you'll meet, and they'll do good work. There's also a lot of people who kinda coast a bit after they gain entrance.
But one thing I absolutely agree with you about is that experience always trumps "education." If somebody is trying to sell themselves to you just on the basis of their fancy degrees, it's either because they're really young (and inexperienced, so they only have the "theory" and "book learning," though still might be brilliant enough to learn skills quickly if they're actually smart and motivated, or they might be an idiot in the actual workplace... it's tough to tell) or because they're older but haven't done much since they got admitted to that fancy school (in which case, you're probably right to grill them about what they've been doing lately).