Stanford study blasts MBA degrees

These should be heady days
for U.S. business schools, with more than
100,000 new students arriving on campus,
eager to sit out a weak economy and
emerge from the cocoon two years later
with a fattened salary.

By Justin Pope
The Associated Press The Seattle Times

But despite the strong demand, some MBA
programs are feeling uneasy about a new
article by two researchers at Stanford’s
Graduate School of Business who call into
question the value of the degree.

Surveying decades of research, Jeffrey
Pfeffer and Christina Fong argue that, with
the possible exception of the most elite
programs, master’s degrees in business
administration teach little of real use in the
business world. They say the degree has little effect on salaries in the long run.

The article has provoked a public-relations counterattack from some in the
multibillion-dollar MBA industry who bristled at the wide-ranging critique, which
appears next month in the debut issue of the journal Academy of Management
Learning and Education.

The article lays into everything from a mollycoddling teaching culture to an
outdated curriculum. It also questions whether the explosion in the popularity of
MBAs has diluted their value. In 1956, only 3,200 MBAs were awarded; today
that number has grown more than 35-fold.

The article even notes that 40 percent of U.S. chief executives mentioned in a
Fortune magazine article called "Why CEOs Fail" had MBAs. And the
researchers cite one report that characterizes life at one top business school as
a two-year-long networking and bonding ritual revolving around alcohol.

Students can take on as much as $100,000 in debt to pay for a two-year
program.

In response, the Graduate Management Admission Council (GMAC) sent out
results of a study showing U.S. MBA graduates reported an average starting
salary of $77,000, up from an average of $50,000 before they pursued the
degree.

The GMAC also noted that global demand to take its GMAT, the admissions
test most business schools use, was up 13 percent in the first half of the year,
and officials say it’s jumped even faster in the past month. Some schools have
encouraged media interviews with officials hoping to make their case, and some
deans have chimed in with op-ed pieces in newspapers.

"The harsh reality is the demand for the MBA is incredibly strong, it’s a hundred
years old and it isn’t a fad," said Dave Wilson, president of the GMAC.

The article notes how many top executives don’t have MBAs. But critics reply
that many use an MBA to go further than they otherwise could.

And not just investment bankers and consultants who graduate from the
highest-rated schools.

"The vast majority are going to the Big Three auto manufacturers, the retail
outlets, Colgate and Clorox, and not-for-profits," Wilson said. The typical MBA
grad might "get a job at Ford Motor for $57,000. Does that compete with
Jeffrey’s (Pfeffer’s) grads? No. But now she is able to have a marketing position
at Ford, making more than she could before."

Pfeffer acknowledged some of the criticism, saying there is certainly value in the
networking that is often part of getting an MBA, and that salary is an imperfect
measurement of the degree’s value.

But, he said in an interview: "The question which I believe remains unanswered
… is do you learn anything at business school?"

The real problem, he says, is that no one in the business-education industry is
asking such tough questions.

"There is a role for truth-telling inside all organizations," said Pfeffer, who said
some of his Stanford colleagues were none too pleased with the article, but that
colleagues at other schools have asked for copies.

Even some who criticize the article’s conclusions say it raises some important
issues.

"An MBA may no longer be enough," said Louis Lataif, dean of the School of
Management at Boston University. "There are too many of them out there. …
There are lots and lots of schools in the MBA business who in fact may not be
adding value."

There are about 350 accredited MBA programs in the United States.

To counter that problem, Boston University now offers some students a more
rigorous dual master’s in business and information systems to give graduates an
edge over competitors who have only MBAs.

Dan Zambarano, 30, who has been pursuing an MBA at Babson College in
Wellesley, Mass., at nights while working as a consultant at KPMG in Boston,
said his experience so far has been mixed — some mundane core coursework
that hasn’t been helpful, but some exciting electives.

Overall, he’s pleased, and says he thinks his teachers are serious about tying
their courses to the outside world.

"Whether it’s the latest technology, or biotech, they do a good job of identifying
what’s happening in the real world," he said. "In my last class we spent a lot of
time dealing with what was really happening with these accounting scandals
and what it means for the market, what it means for investors."

And even Wilson, of GMAC — who called the article "inflammatory," "far out,"
and "not a scholarly piece" — admitted to a kind of grudging professional
admiration for the marketing that earned the article so much attention.

"If you think a scholar’s responsibility is to get people talking about issues,
Professor Pfeffer has really done a superb job," Wilson said.

Copyright © 2002 The Seattle Times Company

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