What Might be Missing in MBA Courses?
The Article in the Economist comes to the conclusion that a person is better of gaining more experience working at the sharp end because the return from an investment in an MBA is no longer attractive. This may be so and the chart in the Economist shows it is so – salaries of MBA graduates are significantly lower upon graduation than their last pre-MBA salary. As the economist puts it, “The return on investment on an MBA has gone the way of Greek public debt”.My problem with this is why has the value of an MBA ‘disappeared’?
The article does not explain this at all. However there must be a cause and effect relationship between what students actually learn in an MBA program, the value of their efforts for their company when they start work again and the n investment students can expect from their investment in an MBA.
Since I completed my MBA long ago I do not know what is actually being taught in business schools. What I do have is the experience of having worked with MBAs and other graduates over the years. I therefore have some, probably imperfect, insight into the problem. What I do know is that the MBA schools around the World should look at the cause and effect chains that lead from their business programs to the valuation companies make of MBA graduates. This valuation is the cause of the poor return on investment of MBAs.
The problem cannot be the intelligence of the students. They are likely to be very intelligent and hardworking too. They are, after all, investing a big chunk of money and time to get an MBA and they are foregoing (often) a significant salary and the experience they would gain if they stayed with their business. The students have got to be motivated.
Based on the last paragraph the problem must lie with the MBA schools and what and how they teach their students. What else could it be? That was easy, but the real question where is the core problem MBA schools are facing? What is it they are missing in the way they teach?
Do MBA schools promise to teach their students the secret(s) of managing complex organisations such as the corporations we are all familiar with? Certainly complexity features among the words to describe companies and corporations and in the brochures and websites of MBA schools. Not only that, but we all have the same perception – modern organisations are complex. How can a company of a few hundred people with several divisions (production, sales etc.) making hundreds of articles with possibly thousands of customers not be complex? Certainly no single person can have a complete view of everything going on.
Could this very common perception of a company or corporation be wrong? Could MBA schools be misleading us by this talk of complexity? Could the word complex be a marketing tool to get more students to enrol, to get more companies to send their executives on training in strategy and other business topics? Certainly the perception of complexity is a very common one and easy for MBA schools to use and be convincing.
It will certainly take a very thick book to describe everything that goes on in a modern company. They certainly are complex in terms of the mass of data required to describe them. But there is another point of view!
A business is a system of interdependent entities that together produce the profit the business is there to create for its owners. Interdependent means no result if all of the components d not work together in a well-coordinated way. That anything gets produced and delivered to customers at all means there must be at least certain amount of coordination. However, to achieve their results takes a huge amount of effort on the part of managers. There is talk of burnout, 60 and 80 hours a week and have you ever tried to contact a senior manager. They are too buys and under constant pressure. To talk to a (senior) manager you must persevere!
Interdependent entities depend on each other to produce results. In such a network of entities there must be one limiting factor. One of the divisions, resources or entities has less capacity to deliver its ‘product’. That entity is the one that determines the organisations capability to produce profits. All other parts of the organisation are not working at their limit – within a system of interdependent entities, suffering from significant uncertainties, only one entity is the limiting factor.
(It might appear to the managers of a company that there are limiting factors everywhere, but this is the result of common practice and the policies of the company. Operating with the limiting factor in mind means that most resources should work at less than their limit – otherwise the constraining resource will be overwhelmed with work.)
What MBA schools do not tell their students is this inherent simplicity of organisations. Business results depend on how well the limiting factor is employed. If the limiting factor is prevented from achieving its maximum, then profits and returns are damaged. Limiting factors are very often prevented from achieving to their maximum of the policy that causes every department to seek their own optimum. Seeking their own optima causes all departments to waste the constraints capacity.
I suspect that most MBA schools do not teach this, nor do they teach the process to discover the limiting factor and then what to do with it and the other departments to get the maximum from the constraint and the best possible bottom line. Maybe it is the simplicity of the concept that prevents MBA schools from passing on this knowledge.
The concept may be simple, but deciding what to do to get the most from the limiting factor and then implementing the necessary changes is far from straightforward. A large part of the difficulty lies with people and the necessary paradigm shifts they must make; and then to sustain the changes.
The cartoon is by the son of a friend of mine. You can see the limiting factor very clearly in a drawing such as this one. However, in a (big) business individual managers of departments usually do not have this kind of visibility. They see their local problems and issues, and try to optimize their department. They usually have little knowledge of their real impact on others and often, because of their personal targets, they do not really care enough either.
"Wo ist der Engpass?" means where is the limiting factor or constraint.
Here is a website you can visit! Scroll down about 2/3 of the page to: Course Documents. Just below that you will come to the Intuition Trainer. Click on that to listen to a simple but powerful presentation that illustrates what I have said above. <http://www.wsu.edu/~engrmgmt/holt/em526/>
At the end Dr. Holt advertises his course about the subject.
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That is probably still true. However it does not change the important messages in the article - it simple says there are, at the moment, no better options.
ReplyDeleteI see every day that senior managers with and without an MBA taking decisions - implicitly or explicitly - that negatively impact their businesses results.
From a young person's point of view the 3 letters are important. I hope that more and more learn the tools of Systems Thinking and/or the Theory of Constraints so that they have the grounding and hopefully intuition to correctly focus their attention on the limiting factor of their business.
That last thing is not easy to do and maintain - excuses why someone must deviate from the path abound and very often cause a business to again in need of either of the two sets of tools. (6-sigma and Lean are excellent tools that support the two I mentioned).
Rudi