BusinessWeek published this week "Is the MBA Overrated?" For this article, BW researched the five highest-paid executives at each of the S&P 100 companies in 2004, their educational backgrounds, and the financial results for those firms. A few interesting results:
- Only 146 of the 500 had MBA’s
- Of the 146, only 71 received their MBAs from top ten programs, and 2/3 of them came from Harvard, Stanford, and Wharton.
- In examining performance for 2002-04, companies run by CEOs with MBAs have a slightly higher return on equity, but significantly lower return on shareholder equity than companies run by non-MBAs.
BW concludes that an MBA doesn’t make one a better manager. It points to the "b-schools’ carefully crafted brands" to explain the pay premium that MBAs command both when they graduate and as they move up the ladder. Furthermore, the article implies that b-schools act as a talent filter more than a knowledge or skills provider. Those who are accepted could reach the top with or without the credential.
Flaws in BW’s research:
- It doesn’t look at private concerns or those outside S&P’s top 100. Many of the people we work with want to own their own business and are not looking to run an S&P 100 corporation.
- The data reflects the results of business education 20-30 years ago. Those graduates are in the corner offices today. As a 1979 grad, I can tell you that the programs were very different then than they are today. Work experience prior to admission was much more limited. Integration of business functions was minimal. Soft skills were just coming into play.
- For an applicant, the Financial Times data provide much more info on MBA ROI and value.
I wonder what corporate recruiters think about BW’s research. Certainly the recruiters I spoke to during the recruiter chats that Accepted.com co-hosted with MIchigan Ross, value the education provided by the an MBA and not just school brand. I also am curious how this research plays against BW’s rankings, which will come out again next October and reflect student and recruiter satisfaction. Stay tuned.