Blog

MBAs as CEOs: Some troubling evidence

22 February 2017

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?

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?

Some Surprising Evidence This is one question that these centers of research do not research. Some years ago, Joseph Lampel and I made an exception. A decade after its publication in 1990, I looked at a book called Inside the Harvard Business School, by David Ewing, long an insider. (The first line was “The Harvard Business School is probably the most powerful private institution in the world.”) The book listed 19 Harvard alumni who “had made it to the top”—the school’s superstars as of 1990. My attention was drawn to a few of them who would not have been on that list after 1990.

So 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.

Frank Lorenzo experienced major failures with all three airlines that he headed, while Roy Bostock, who for a decade headed up Benton & Bowles, the renowned advertising agency, saw it close down five years after he retired. Perhaps most prominent and dramatic was the story of Bill Agee, CEO of Bendix and later Morrison Knudsen. About a book written by Mary Cunningham, another Harvard MBA, who worked alongside Agee, a Fortune reviewer wrote:

What little discussion there is of actual business consists mainly of genuflecting in front of a deity called The Strategy…. Near as I can tell, it consisted of getting Bendix out of a lot of fuddy-duddy old-fashioned products and into glitzy high tech. What makes this a terribly ingenious idea, let alone a good one, she does not say.1

Another Fortune article elaborated. Agee “was facile with finance and accounting, shrewdly selling assets and investing in other companies…. [But after] Bendix’s ill-conceived effort to go high tech…a takeover attempt…backfired, leading to the sale of Bendix.” Then, at Morrison Knudsen, a construction company, Agee “made some dreadful business decisions.” According to some executives, he used questionable accounting practices to boost earnings by tens of millions of dollars. The writer concluded that “Agee’s fatal flaw was his weakness as a manager.”2

Of course, a couple of years in a classroom does not necessarily destroy someone’s potential for management—there were, after all, those 5 other CEOs who seemed to do well. But the performance of the 14 suggests either that this business school has succeeded in putting some wrong people on the track to that top, or else that its emphasis on cases may have given some right people the wrong impression of management.

More Surprising Still   These results were obviously surprising. They did not prove anything, but they certainly deserved consideration: is it possible that the most renowned business school in the world graduated a group of people who performed so dismally at the apex of managerial power?

Hence, more surprising still is what happened next. Nothing.

We hardly hid these results: an initial version appeared in a 2001 Fortune magazine article3 and a later version in my book Managers not MBAs (2004, pp 111-119), which has sold 90,000 copies (presumably to some people who read it). You might think that this would have set off alarm bells, or at least evoked a bit of curiosity. That they do not suggests as much about business schools as do these results about their graduates.

More Troubling Still   Since I first posted this lament here in late 2014, two business school professors have weighed in, one of them my first doctoral student, Danny Miller, Director of the Research Center for Business Families at the HEC business school in Montreal, the other Xiaowei Xu of the University of Rhode Island. They authored two articles with much larger samples and even more troubling results.

In “A Fleeting Glory: Self-serving Behavior among Celebrated MBA CEOs”4, they used an ingenious sample:  444 chief executives of American corporations celebrated on the covers of Business Week, Fortune, and Forbes magazines from 1970 to 2008. The research compared the subsequent performance of those companies that were headed by MBAs—one-quarter of the total—with the ones that were not.

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.”5

The second study, entitled “MBA CEOs, Short-term Management and Performance” (20176), used a wider, more recent sample: of 5004 CEOs of major U.S. public corporations from 2003 to 2013.  The results were much the same. “…we find that MBA CEOs are more apt than their non-MBA counterparts to engage in short-term strategic expedients such as positive earnings management and suppression of R&D, which in turn are followed by compromised firm market valuations.” Once again, these MBA CEOs were rewarded for this “performance.”

Why does this persist?  Business schools have become enormously successful, in some respects deservedly so. They do a great deal of significant research (Harvard now especially so). In universities, they are centers of interdisciplinary work, bringing together psychologists, sociologists, economists, historians, mathematicians, and others. And their 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.7

© 2017 Henry Mintzberg    See the last TWOG which described something  quite different: management education for practicing managers who reflect on and learn from their own experience. See also The Epidemic of Managing without Soul

Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing hereTo help disseminate these blogs, we also have a Facebook page and a LinkedIn page.


1 M. Kinsley, “A business soap opera”, Fortune, 25 June, 1984

2 B. O’Reilly, “Agee in exile,” Fortune, 29 May 1995

3  H. Mintzberg and J. Lampel, “Do MBAs make better CEOs?”, Fortune, 19 February 2001

4Journal of Management Inquiry, 30 September, 2015

5 Miller, interviewed in the Harvard Business Review (Nicole Torres, “MBAs are more self-serving than other CEOs”, December 2016)

6Journal of Business Ethics, forthcoming in 2017 (for access now: DOI :10.1007/s10551-017-3450-5.)

7 A second unfortunately obvious answer is that many of the graduates are earning fortunes in financial institutions by serving themselves and their MBA CEO clients more than the economy.

 

How about an “emba” that engages managers beyond administration

7 February 2017

There is plenty of business education, but hardly any management education. What, then, are you to do as a manager performing quite well, thank you, only to be repeatedly bypassed by MBAs who screw up? Join them by getting an EMBA and then do damage control?

Do you really want to sit in a nice neat row listening to lectures about action and engagement? Or pronounce on cases in companies that you never hear of before yesterday while your own first-hand experience is being ignored?  Is it just the administration of business that interests you, or the practice of managing?

There is plenty of business education, but hardly any management education. What, then, are you to do as a manager performing quite well, thank you, only to be repeatedly bypassed by MBAs who screw up? Join them by getting an EMBA and then do damage control?

Do you really want to sit in a nice neat row listening to lectures about action and engagement? Or pronounce on cases in companies that you never hear of before yesterday while your own first-hand experience is being ignored?  Is it just the administration of business that interests you, or the practice of managing?

For years, I went around giving talks at business schools about what’s wrong with MBA education for management: that it trains the wrong people in the wrong ways with the wrong consequences.1 The people are too young: a manager can’t be created in a classroom. This makes the ways too analytical: since the faculty can hardly address the art and craft of managing with these people (let alone by themselves), they have to rely on teaching them technique, or else use the second-hand experience of cases.  And by giving the students the impression that this has taught them to manage everything, whereas in actual fact they have learned to manage nothing, the consequences are often dire: the dirty little secret of even the best business schools is that too many of their graduates fail, even as CEOs. (Some surprising facts on this in an upcoming TWOG.)

Eventually people started asking me the question that should never be asked of an academic.  “What are you doing about it?” (We’re supposed to criticize, not do anything about anything.) Duly embarrassed, I teamed up with colleagues from leading schools around the world to create the International Masters Program for Managers (impm.org). Think of it as another kind of “emba”: engaging managers beyond administration.

While a manager cannot be created in a classroom, people who practice management can benefit enormously in a classroom that encourages them to reflect on their own experience and share their insights with each other. T.S. Eliot wrote in one of his poems that “We had the experience but missed the meaning.” This program is about managers getting the meaning of their experience.

Accordingly, the managers who participate in the impm (average age in their 40s) stay on the job—this is about doing a better job more than getting a better job—and come into the classroom for five modules of 10 days each over the course of 16 months. These focus, not on the functions of business (marketing, finance, etc.), but on the mindsets of managing: reflection (managing yourself, hosted by Lancaster University in England), analysis (managing organizations, hosted by my university, McGill, in Montreal), worldliness (managing context, hosted by the  Indian Institute of Management in Bangalore), collaboration (managing relationships, hosted by Renmin University in Beijing), and action (managing change, hosted by the FGV school in Rio de Janeiro).2

At the end of our very first module, on reflection, while everyone else was going around saying “It was great meeting you!”, Alan Whelan, a sales manager at BT, was saying: “It was great meeting myself!” We were off to a good start!

We have a 50:50 rule in our five classrooms: half the time it’s over to the managers on their agendas. Hence they sit at round tables in a flat room so they can go in and out of workshops at a moment’s notice. No need to “break out.”

These managers are not lone wolves parachuted into class to sit in selfie-silos, as shown in Model 1. They are colleagues in a community of social learning, engaged in their common development, as shown in Model 2.

This arrangement has opened the door to a variety of novel practices. 

•    “This is the best management book I ever read”, IMPM graduate Silke Lehnhardt told colleagues at Lufthansa who were about to start the program. She was holding up her Insight Book, which was empty when she first received it. Every day begins with morning reflections, first alone as everyone records in that book thoughts about the learning and their managing—on the job, in the business, in their life. Then they share these thoughts with colleagues around their table, followed by discussion in a big circle of the most compelling of their insights. Shouldn’t every manager’s best book be the one that they have written for themselves?  

•    It is intriguing what can happen in friendly consulting, where the concerns of each manager become the focus of attention of a small group of empathetic colleagues. One manager’s boss quit suddenly during the program, and she was struggling with whether to take that position. The hour of friendly consulting proved so helpful that they kept going over lunch.

•    Mayur Vova was running his jam and jelly company in Pune, India, while Françoise LeGoff was number two on the Africa desk at the Red Cross Federation in Geneva. They did the very first managerial exchange together, where the IMPM managers pair up and spend the better part of a week at each other’s workplaces. When the two of them arrived at the next module, they couldn’t wait to talk about their experience. At the start of that week, Mayur saw Françoise typing and asked: “Can’t a secretary do that?” Welcome to the worldly mindset: Geneva is not Pune! (That’s why we call it worldly, not global: the IMPM is not about becoming cookie cutter global, but about getting into other people’s worlds to better understand their own.) On the last day, Mayur told Françoise that he would be happy to meet with any of her staff. All of them lined up to convey through him their impressions of her management style. Better than a 360! Mayur “was like a mirror for me,” Françoise reported.

•    We encourage the managers to form an IMPact team back at work, to carry the learning into the company for sharing and action. In one small company that had run into a serious problem, the manager in the program, who had to pick up the pieces, formed such a team. He told us it saved the company.

The IMPM has been slow to spread to more conventional business schools, perhaps because they are too busy teaching cases about how the established companies missed the new technology. Is this the new technology? You have to see it to believe it.3 (The next IMPM class begins on May 15. Read also about the health care version, at IMHL.org.)

The MBA is fine so long as it is recognized for what it does well, namely train people for certain specialized jobs in business (such as marketing research or financial analysis). But it also has to be recognized for what it does badly, namely prepare people to manage. Beyond the MBA, it’s time for management education.

© 2014, 2017 Henry Mintzberg. This is a revision of a TWOG that first appeared on 19 December 2014. For more on all this, please see “Looking Forward to Development” (Training & Development, 13 February 2011), “From Management Development to Organization Development with Impact”  (OD Practitioner, 2011,Vol. 43 No. 3), and “Developing Naturally: from management to organization to society to selves


1 See Chapters 1-6 of my book Managers not MBAs (Berrett-Koehler, 2004).

2 See Gosling and Mintzberg, “The Five Minds of a Manager”, Harvard Business Review (November 2003).

3 Phil LeNir saw it, and took it in a different direction, out of the university. He was an engineering manager at a high tech company, concerned about developing his young managers, but with no budget for this or help from HR. He asked me what to do and I suggested that he get them together periodically for reflections and the sharing of experience. Over the course of two years, that worked so well—some of these managers started to do the same thing with their people—that we set up CoachingOurselves.com as a kind of do-it-yourself management development program. Now groups of managers in their own workplaces are downloading topics and engaging in social learning to address their common concerns. The IMPact group mentioned above made extensive use of CoachingOurselves in turning around its company.

 

Marching to Clever Campaigns

26 January 2017

Missing from the marches on Saturday was Saul Alinsky, the legendary organizer of decades ago who, beyond marching, conceived clever campaigns to drive social change in the U.S.—by driving established authorities crazy.

Here is a simple example, in the spirit of Alinsky: In the late 1960s, in San Antonio, Texas, people who were fed up with their utility company overpaid their bill by 1¢. That simple cent, multiplied many times over, tied the bureaucracy in knots. It gave in.

Missing from the marches on Saturday was Saul Alinsky, the legendary organizer of decades ago who, beyond marching, conceived clever campaigns to drive social change in the U.S.—by driving established authorities crazy.

Here is a simple example, in the spirit of Alinsky: In the late 1960s, in San Antonio, Texas, people who were fed up with their utility company overpaid their bill by 1¢. That simple cent, multiplied many times over, tied the bureaucracy in knots. It gave in.

From schoolyards to the White House to the global marketplace, it is remarkable how easily bullies can be outmaneuvered by a bit of imagination. To quote Alinsky in his book Rules for Radicals: “…the disturbance would [have to] be utterly outside the experience of the establishment, which was expecting the usual stuff of mass meetings, street demonstrations, confrontations and parades.”

David brought down Goliath with an unexpected stone. (Of course, the Bible tells us that Joshua brought down the walls of Jericho with a march. But don’t expect this to happen again.) Trump is big and boastful too—and no less vulnerable. His offensive proposals can be brought down, not by violence or the breaking of laws, but by plain old ingenuity. Hit them where it hurts, bearing in mind one of Alinsky’s basic tactics: “Ridicule is [the] most potent weapon. It is almost impossible to counterattack ridicule. Also it infuriates the opposition, who then react to your advantage.” Trump it is!

Well before Saturday, he was aware of the intense resitance to his election. Indeed, the marches may have strengthened his resolve. While millions of women were voting with their feet, on the ground, one man in the White House was consolidating a cabinet that will violate their interests. And quite the cabinet it is: Exxon and Goldman Sachs taking on the establishment! In alternate fact, there are  two establishments in America, business and government, and the stronger has just taken control of the weaker. Business no longer need merely lobby government; now it is government. Things will likely get worse before they can get better.

How, then, to get them better? Tap into the energy of Saturday’s marches. See them as the foundation on which to build a framework for action.

It is telling how many people were prepared to express their concerns publicly, no few marching for the first time. With a taste of acting together, all these people constitute a potent starting point for change—but only that. Mass action will have to follow, creatively targeted at specific proposals coming out of this administration.

Please understand that this is about more than Donald Trump. He is an extreme symptom of problems that have been festering for years, in America and, increasingly, elsewhere: income inequalities, legalized bribery (in the form of political donations), unregulated globalization run rampant, and so much more, resulting in the demise of democracy and the denigration of decency. Some voters, not knowing which way to turn, have brought into power a slew of bullies all over the world. Figuratively and almost literally, these people will be pouring oil on the fires of this planet.

It will thus fall to the concerned folks, all over the world, to do  something about this. Bear in mind what made America great in the first place: protest turned into inspired action against indecent authority.

© Henry Mintzberg 2017. Photo by Mobilus In Mobili (CC BY-SA 2.0) For more with For more on Saul Alinsky, please see:

http://www.penguinrandomhouse.com/authors/360/saul-alinsky/

 

Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing hereTo help disseminate these blogs, we also have a Facebook page and a LinkedIn page.