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How good are MBAs?
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How good are MBAs? - April 3rd, 2006

Questioning MBA Efficacy

Management is powerful stuff and without it, as Peter Drucker is
quoted as saying, the twentieth century would not have been as it
was. But how effective is the management education from the Business
Schools? A report about how a recent article has fuelled this
question.

Invented in America in 1908, the business of providing MBA course
has been a success story, say analysts citing that demand for this
product has soared not only in USA but throughout the world.
According to a survey by the Institute for International Education,
14.4% of MBA students studying in America in autumn 2000 were from
abroad. Each year about 100,000 students enroll into US universities
for MBA course. In 1956, only 3,200 MBAs were awarded; today that
number has grown about 35 fold.

But an article by Jeffrey Pfeffer, a professor at Stanford's
business school and his colleague, Christina Fong, published in the
first issue of a new journal, Academy of Management Learning and
Education, has put the institutes running MBA programmes at unease
by questioning the value of an MBA degree. They have argued, there
is little evidence that getting an MBA has much effect on a
graduate's salary or career.

Surveying decades of research, Pfeffer and Fong have argued that
barring a few exceptionally elite programmes, MBA courses teach
little of real use in the business world. The degree has little
effect on the salaries of the individual in the long run. This has
provoked counter-attack from some quarters in what is called as the
multi-billion dollars MBA industry.

In average every MBA graduate spends as much as $100,000 to get the
degree if they have done a full-time two-year course at one of the
top schools in USA. They may end up in illustrious careers: even
President George Bush is a Harvard MBA. But that is not thanks to
the course they had undergone, according to the Pfeffer thesis.

Pfeffer cites internal studies by consulting firms and investment
banks - two prime employers of MBAs - that suggest that non-MBAs do
not do worse than what MBAs do. "Usually it just makes you a couple
of years older than non-MBA peers", the author of one such study
analysed by Pfeffer is reported as saying. The Graduate Management
Admission Council is quoted as reporting that the MBA graduates were
earning an average starting salary of US $ 77,000, up from an
average of $ 50,000 that they were earning before they pursued the
degree. Though the course thus helps the graduates to improve their
starting salary, Pfeffer has questioned the efficacy of the course
in the business efficiency. He has noted in his article that 40% of
US chief executives mentioned in a Fortune magazine's article
called "Why CEOs Fail" had MBAs.

Of course the course content may not be the only reason for getting
an MBA, Pfeffer admits however. A top business school plugs students
into an invaluable network of contacts. It also screens them.
Charles O'Reilly, one of Pfeffer's colleagues at Stanford, is quoted
as saying that MBA students at a top school are "smart, ambitious,
willing to make sacrifices and keen to play the corporate game".
That makes it a good place for firms to recruit.

Earlier this year when the Aspen Institute published the results of
a survey of 2,000 MBA students, it reported that the students'
values changed during the course: by the end, they rated customer
needs and product quality lower and shareholder value higher.
Another recent study by the AACSB, which accredits American MBA
course, found that MBA graduates thought that the ability to
communicate effectively with others was the single most useful skill
in their career – but that only 6% of business schools were
even "moderately effective" in teaching that.

How to rectify these shortcomings? In another article in the new
journal, Henry Mintzberg, a professor at McGill University in Quebec
and longtime critic of MBAs, argues that management should be taught
only to people who already have management experience; and that it
must offer an opportunity for reflection as well as learning.

(Compiled by NBA Desk)


Best Regards,
Nikhil Gadodia
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