LEAD FEATURE : MBAs Are they worth it?

For high-profile degree, MBAs get surprisingly bad press. The reasons, to be honest, aren’t all that obvious.
And the findings of some recent local and global research serves more to perpetuate the mystery about why MBA critics feel as they do, but also suggests maybe we need few more Kiwi MBAs.
A survey of 16 New Zealand business leaders conducted by University of Auckland Executive MBA Glen Chean, who graduated last year, suggests that unless executives already have an MBA, they don’t consider it as important to the individual or the organisation as on-the-job experience. Four of the 16 leaders surveyed had MBAs.
At the same time, research conducted by Insead Business School and University of California professor to rank the world’s top 200 chief executives, found that four of the top 10 had MBAs, prompting them to ask: “Could it be possible that this much-criticised degree helps business leader to add long-term value after all?”
A British report released by the Association of MBAs late last year seems, in turn, to support view that CEOs with MBAs performed better than the average during the 2008/09 financial crisis. The survey might, on the face of it, appear somewhat self-serving, but some of the findings should stimulate employer interest in advanced executive learning, if not whole hog MBAs.
Former University of Auckland academic and member of its original MBA establishment team Nick Marsh, believes “generational disconnect” is, at least in part, responsible for the lack of interest shown in MBAs by New Zealand’s established successful business leaders. “A local MBA simply wasn’t an option for them,” he adds.
Otago University offered New Zealand’s first full time MBA programme in the late 1970s, followed by Auckland, which introduced its part-time Executive MBA in 1984. “Business was not all that supportive of the idea at first,” says Marsh. “We felt there needed to be professional accreditation for the general management function. We decided to offer part-time option and pitched it to those already in business, providing them with the opportunity to upgrade their skills. MBAs had been running in the United States since the 1950s and the Brits picked up on them in the early ’60s. New Zealand has 20 years less history and older business leader attitudes toward the degree probably reflect that.”
Now the business schools of all six New Zealand universities including Massey, Waikato, Wellington’s Victoria and Canterbury, offer MBA programmes that are up to world standards. But, as Chean’s research found, there is still strong business-leader perception that MBAs are about quantitative analysis, financial literacy and hard management skills.
In fact, MBA programmes have changed significantly in recent years and are, says Chean, “now geared toward the soft skills including people management, high value decision making, leadership and ethics”. The leaders Chean interviewed valued these skills most and, ironically, “they are in fact key focus of today’s MBA programmes”, he adds.
Chean sees “significant disconnect” between what the majority of New Zealand’s business leaders “perceive to be the value and outcomes” of MBAs and what is in fact delivered. He ascribes some of this misunderstanding to universities’ own “lack of effective marketing of MBAs” to senior executives and, to lack of business leaders’ exposure to and interest in finding out just what happens within business schools and their MBA programmes.
Auckland University Business School’s director of academic programmes Peter Withers agrees that local business schools need to “blow their own trumpets” more. “There is poor market understanding of what we do and at what level we do it,” he adds. On the other hand, local business leader attitudes toward the MBA are, in his opinion, “eight to 10 years behind the rest of the world, though they are shifting”, he adds.
“This perception is reflection of several things. Being late into the market and, the mythology about MBAs. Few [business leaders] understand the difference between MBAs for 20 somethings and the kind of executive MBA that we provide,” he offers.
“We are still small to medium enterprise [SME] economy with lot of self-made baby boomers who constructed relatively successful businesses without MBAs. They simply don’t see that having one would have made any difference. Indeed, it may not have. But going forward, even an SME can’t avoid being inextricably interwoven with the global economy. Our business leaders will be dealing with global business people, all of whom will have MBAs. That’s today’s driver’s licence. If we are going to play the [global business] game, we will need to know how the game is played,” says Withers.
Chean’s research reinforces Withers’ comments about just what kind of MBA New Zealand business leaders have in mind when they question its value.
“The perceptions of the leaders without management education background were rooted more in the full-time US model MBA that is undertaken by younger students and seen as an extension of an undergraduate degree,” says Chean.
Despite general reluctance to rate an MBA as being as useful as experience, almost 70 percent of those surveyed by Chean thought that “as senior executive in high performance organisation” an MBA would be “good” to have.
Being equipped to lead and compete effectively on the world business stage and in difficult times is, of course, the nub of the issue. If organisational leaders don’t see MBAs as all that relevant now, will they be more relevant to New Zealand’s next generation of top executives in significantly more complex, competitive and economically challenged business landscape?
Massey University’s MBA Programme director Andrew Barney thinks so. “The MBA is as relevant today as it was before the market crash.” And, he points out, not just for business leaders. “Many of our MBA students work for Government and for other non-profit organisations,” he adds.
Withers goes little further on the importance of an MBA to executive understanding of the world in which they will increasingly operate. “The survey Trade and Enterprise did last year on offshore attitudes toward New Zealand business people basically said that while they thought we were nice business people, we are naive and underprepared,” he says.
“We must face up to the combined evils of complacency and linear, short-term thinking. If we don’t get over that and begin to think in complex, contextual ways, we won’t raise our productivity or sustain any competitive position in global economy. An MBA programme helps participants change the way they think and approach their business. It enhances an individual’s ability to make and implement high-value decisions.”
And when Chean asked his business leaders if they believed New Zealand firms were well prepared for global trading given the current business landscape, the majority – 56 percent – said no. Then, when he asked if an MBA or education on international business would better prepare New Zealand for international trade, 69 percent agreed it would. “There is an awareness that we need to be better equipped to compete globally, but not the same awareness that better business education including an MBA will help better equip us,” says Chean.
And, again somewhat ironically, “some of the leaders felt the MBA was probably of greater value to individuals planning to work overseas rather than locally. Perhaps they see the international market as more competitive,” he added. “They also said that if they were working overseas then an MBA would be more valuable to them.” These findings suggest disconnect between what management skills executives need to make good at home and what would be needed to make it abroad.
What Herminia Ibarra, professor, and Urs Peyer, an associated professor at Insead, and Morten T Hansen of Berkely found in their search for the world’s best CEOs was that over years 1995 to 2009 those CEOs with MBAs