Can an MBA transform your business?

Source: Exec Digital USA

Date :11/19/2007 3:49:15 AM

An MBA is seen these days as an international currency, or rather a kind of bearer bond that can be turned into either cash or other advantages. But is that currency keeping its value?

Someone out there thinks I need an MBA. And I don’t mind betting that if I paid the altogether reasonable ‘administrative fee’ of $2,000 it wouldn’t be long before I was in possession of a finely wrought document that would put to shame my (genuine but typewritten) Cambridge degree certificate.

By John O’Hanlon

But then a lot of people who have somehow obtained my home e-mail address seem to think I need Viagra and personal enhancement as well, so what do they know? When the ‘MBA’ brand starts to be counterfeited it is a sure sign there’s value in the idea. Like a faux Rolex, it taints the brand, but it’s a compliment to the ‘real thing’.

There will always be a demand for courses as long as MBA graduates are sought in the recruitment market. Certainly, last year showed no sign of disenchantment from employers, with the Graduate Management Admission Council reporting in its USA survey for 2005-06 that job openings for MBA graduates are improving. And the director of career services at London Business School (LBS) Graham Hastie went so far as to call the employment market at the start of 2007 as ‘frenzied’.

A Magnificent Bankable Asset

97 percent of LBS’s 2006 cohort of MBA students had received a job offer within three months of graduation and all first year students secured either an internship or a project during the summer months. Most of them (42 percent) went into the financial sector, with a further 25 percent entering management consultancy as their first career move. Pharmaceuticals, technology and telecoms are increasingly recognizing the value of an MBA, according to Hastie. Wharton shows a very similar pattern, with 45 percent taking the finance route.

Across the board, American as well as European employers clearly find the MBA currency sound. The GMAC report said that two out of five of new hires in 2005 had an MBA, and in May this year it announced that its latest research shows that employers plan to boost the number of new MBAs they hire in 2007.

On the other hand they are reporting less interest in people with only an undergraduate education. Corporate recruiters expect to hire an average of 18 percent more workers with MBAs and other graduate business degrees this year than they did in 2006, according to the 2007 GMAC Corporate Recruiters Survey.

And they are paying for this policy in hard currency. In the USA the average salary for newly recruited MBAs went up to $92,000 in 2006, while in the UK the average salary for all MBA-specific jobs offered in the IT sector is currently in the region of £69,000.

Making the grade

The oldest business school in the world is Wharton, at the University of Pennsylvania. It is also the best if you go by the Financial Times MBA survey, which Wharton has headed consistently. It is probably a coincidence that Sir Paul Judge, the influential investor who gave his name and his money to the Judge Business School at Cambridge was himself a Thouron scholar at Wharton – JBS is now the highest ranking UK MBA in the Economist Intelligence Unit ranking and second only to LBS on the FT’s.

However these are overall rankings, and the individual programs vary enormously. For a start, courses in the USA tend to be two year affairs, and often attract students who have no direct business experience.

By contrast, the highest rated international MBAs are often condensed into a single year, prefer to recruit from people with substantial business experience, and assume a high degree of fundamental knowledge of micro- and macroeconomics, management and finance. The top American schools are under pressure not only from within but also from overseas schools such as the London Business School, INSEAD and CEIBS, the leading China-based international business school that has jumped ten places to come right behind Yale this year.

Many schools have concentrated too much on imparting business skills when designing their MBA courses, says Stan Garstka, Deputy Dean of another venerable American business school, Yale School of Management. They responded to the students’ expectations that an advanced understanding of finance, economics, marketing, the supply chain or corporate structure would equip them for leadership.

“That was fine 20 years ago,” Prof Garstka says, “when your chosen specialism could take you to the top: when many successful managers developed their entire career within a particular silo. But 20 years ago functional management skill had already reached a high level of maturity. The only really new things we have developed are computer programs that recognize these skills.”

Disappearing silos

Universities are wasting the time they spend teaching these programs in isolation, he believes. Today, managerial careers cross the boundaries of function, organization, and industry, as well as cultural and political borders.

Even managers in large organizations must be entrepreneurial in the sense that their success depends on their ability to synthesize. A sound knowledge base is as important as ever but an MBA should be judged on how it reacts to the real world of business today and in the future, Garstka believes. And he says the key word here is integration. “At every level of the organization, from the top floor to the shop floor, you need to understand how what you are doing relates to everything else.”

The sector, then, is buoyant. Of course many MBA students in North American and European schools come from overseas, particularly from Asia. Some stay, adding to the host country’s pool of talent and entrepreneurship, others return to take advantage of growing domestic opportunities – and of course the two are not mutually exclusive.

India and China have very different corporate requirements from the west, which traditionally employs business graduates or take up places in the schools for managers they want to develop.

While the core skills of marketing, finance, people management and the like are a common factor, the way in which these are managed in the very different cultures and fluid economies of Asia may differ radically and it is no surprise that these countries are beginning to develop indigenous programs.

Looking to Asia

In their paper Education as a Globally-Marketed Product: The MBA in China, Philip C Wright, W F Szeto and F Lam point out that in 1991 China had only nine universities and an enrollment of approximately 100 students. That figure had increase to 82,000 business students enrolled in some 90 domestic institutions by 2003.

The most prestigious universities like Beijing and Fudan (Shanghai home of CEIBS, the China Europe International Business School, the only institution from either China or India to feature in the top 100 global MBA programs as defined by the Financial Times) where exposure to international influences is at its strongest the courses have more value. “With a few exceptions, the closer a domestic MBA is aligned to the international model, the higher its reputation.”

China will continue to need to send its students abroad for some years yet, they conclude. “Considering the population base, and the rate at which the economy is growing, these numbers seem inadequate to sustain a modern, world-class business culture. With only about 3,000 graduates per year, we estimate that current graduates fill only a 20th of the need.”

The Indian Institute of Management, which has campuses at Ahmadabad, Bangalore, Kolkata, Lucknow and Kozhikode. For historical as well as cultural reasons India has been more successful than China in developing local MBA programs in collaboration with overseas schools. IIM Bangalore is adding more executive management programs to its existing list and developing an international program that will be jointly offered by IIMB with INSEAD-Singapore campus, Lancaster University in the UK and, and McGill University of Canada.

Speaking about the new initiatives, Prakash G Apte, Director of IIMB said: "We are planning some more executive MBA programs for 2008 which will be partly delivered through the distance education mode and partly through a regular campus." Apte adds that the demand for MBAs in India is being driven by the urgent need for upskilling in every sector of the Indian economy.

The global condition of business education, as reflected in MBA Programs, reflects business and entrepreneurship as a whole. The USA retains her lead – for the moment – but faces strong challenges from an increasingly confident Europe and within this decade from a truly unstoppable Asia.