Want to be a chief executive? Get an MBA
http://www.ft.com/cms/s/0/2eaaee4c-24d2-11df-8be0-00144feab49a.html?nclick_check=1
The global recession may be almost over but the debate rumbles on. How much were MBA-trained executives really to blame?
As MBA professors, we heard arguments that we had been teaching the wrong models, neglecting ethics, forgetting common sense, sitting in ivory towers made of spreadsheets and generally nurturing greed. We listened to the charge that business schools were guilty of short-term thinking, especially when evaluating leadership. MBA graduates, so the argument went, were looking for quick riches.
So, when we came up with the idea of a ranking of chief executives based on performance over an entire career, we also decided to check the myth of the value -destroying MBA against a large and meticulously compiled data set.
When you rank the top chief executives in the world, based on return on shareholder investment and change in market capitalisation over their entire time in the job, you get a surprising list* . Most are not household names. Conversely, many celebrity chief executives did not even make it into our top 200. What is more, four of our top 10 have the letters M, B and A after their names. Could it be possible that this much-criticised degree helps a business leader to add long-term value after all?
Our analysis of 1,109 chief executives from 1995 to 2009 found that those with MBAs performed, on average, better than those without. The difference was not large but it was statistically significant. When we drilled down one more level, we discovered that those who had reached the position of chief executive before the age of 50 benefited particularly from a business school education. In fact, on average, having an MBA sends such individuals a full 100 places higher on our list.
Of course, the term average is important. There are many high-performing chief executives without an MBA. But the overall tendency among the business leaders we analysed is for an MBA to correlate with a higher position in the ranking, especially for those who get the top job at a comparatively young age.
Our data set does not explain why this should be the case but there are some obvious benefits to going to business school: an MBA gives you better all-round skills; it buys you credibility and it allows you to build a personal power alumni network.
But then, perhaps that was never disputed. The real debate is about whether an MBA imbues you with the right values. Our study suggests that the charge of fuelling short-termism has been grossly overstated.
Nevertheless, just because chief executives with MBAs did better than their peers between 1995 and 2009, it does not follow that future leaders with MBAs will perform higher than those without. The degree and the schools in which it is taught have to adapt to a changing world.
Two things need to change. MBA programmes need to become more global. Our research shows that high performance is evenly distributed across the world. Business schools thus need to scour the globe for role models, innovative ideas and the best students. The MBA curriculum and experience needs more global cases, more discussions of multicultural issues and more comparisons of international ways of doing business.
Second, business schools, boards of directors, the press, MBA holders and chief executives need to reset the metrics of performance for leadership. Our ranking offers a long-term lens through which to see business leaders but the problem is really one of mindset. Many chief executives live by the quarter. This is wrong. Great results take time to build. And that is one thing you don't need an MBA to understand.
Herminia Ibarra is a professor of organisational behaviour and the Cora chaired professor of leadership and learning at Insead. Urs Peyer is an associate professor of leadership and learning at Insead. Morten T. Hansen is a management professor at the University of California, Berkeley, School of Information, and at Insead. * 'The best performing CEOs in the world', Harvard Business Review.
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