The MBA debate

To MBA or not to MBA? Two leading lights with opposing views on whether an MBA really matters
By Mary Braid Thursday, 13 October 2005 Professor Anthony Hopwood, Dean of Said Business School, Oxford This man believes the MBA works... "There's quite a bit of criticism around, but the MBA is a very good qualification," insists Professor Anthony Hopwood, dean of the Said Business School, Oxford University. The most blistering attacks on the MBA have come from Canadian management studies professor Henry Mintzberg who argues that all MBA graduates ought to have the skull and crossbones stamped on their foreheads. MBAs are dangerous, Mintzberg claims, because students are taught management theory before they have enough real-life management experience. While Mintzberg's criticisms are aimed primarily aimed at US business schools which tend to take younger students with less business experience than British schools, Mintzberg's brother-in-arms, Jeffrey Pfeffer - a professor at Stanford University's Graduate School of Business - makes the more general claim. Pfeffer argues that an MBA is useless simply because it does nothing to enhance a person's chances of business success. Hopwood claims that Pfeffer's research - which involves comparing the success of executives with and without MBAs - is so fundamentally flawed that it might make a good case study for an MBA course. Hopwood argues that the MBA provides students with three crucial things. "First, the MBA provides content and knowledge," says Hopwood. "In the old days in the City what mattered was who you knew rather than what you knew. Now both matter. There is a knowledge base in modern management that everyone is expected to have." The second MBA benefit is that the qualification gives graduates a position in the managerial marketplace. "It's an equaliser," says Hopwood. "If someone is born and bred in North Dakota and doesn't comes from a rich family, that person is generally going to

go to the University of North Dakota for their first degree. However, the person can then move onto a major business school for an MBA." Hopwood thinks Pfeffer misses this "equaliser" point. Hopwood's third MBA advantage is that it offers students a powerful business network. However, Hopwood gives a sobering qualification of the MBA's benefits. While all MBA courses provide knowledge and content, only the best provide a good position in the managerial marketplace and a strong business network. So the MBA is a powerful business qualification, but not just any old MBA. On the issue of whether business schools can teach entrepreneurship, Hopwood agrees it probably cannot be taught. "But it is possible to create an environment conducive to entrepreneurship," he argues, insisting that Said is doing just that. "We are well networked with Silicon Valley and there are many successful Oxford-based entrepreneurs. And entrepreneurs also need to know about business." The connection between entrepreneurial spirit and business knowledge is demonstrated by a recent offer from a Google executive to show Said students how to put together a pitch to venture capitalists. The fact is that the MBA is a great aid to business mobility, argues Hopwood, whether that means movement between companies, countries or business roles. Simon Woodroffe, Founder Of Yo! Sushi, left school at 16 ...and this man says that theories are no substitute for nous For the sake of debate, entrepreneur Simon Woodroffe recently made a passionately uncompromising case at the Oxford Union in favour of the motion that management education is not worth a bean. Woodroffe's true position is a touch less strident - an MBA, he concedes, is not absolutely worthless but it certainly does not guarantee business success, especially in entrepreneurial ventures. "Some of my most successful entrepreneurial friends have employed MBAs," says Woodroffe mischievously. "And that's the point. It's not the person with the MBA who is running the business. "MBAs think that if they do what business school teaches in terms of analysis, then they will be successful but it's just not true. Business is not entirely logical. It requires a plan but things don't go according to plan. I subscribe to the Alan Sugar view that business is about making things happen, about energy, drive and enthusiasm - not about analysis and theory."

Woodroffe believes MBA courses cannot help but produce over-cautious people. "The MBA focuses on risk and how to avoid it," he says. "Business schools therefore turn out people who are risk-averse. "Yet starting a business requires some kind of obsession or desperation and taking a chance. If you go to university, then on to corporate life, it's unlikely you will ever start a business because you would have to risk all you already have." It's fear that powers Woodroffe, who founded Yo! Sushi eight years ago. "It's not about making lots of money, so much as the fear of not making money that gets me up at 4am some mornings and makes me work late," he says. Woodroffe's other criticism of business schools is the deadening effect they might have on natural business instincts and their tendency to induce "paralysis by analysis". Woodroffe looks to his musical hero Bob Dylan for guidance on this issue. "Dylan is the Shakespeare of his times," he argues. "It has been a privilege to grow up in the era of one so wise." Dylan has - very cleverly, Woodroffe thinks - always refused to analyse how he writes songs. Too much analysis, Woodroffe says, stifles creativity whether it's in business or the arts. Those wishing to learn about business, the Yo! Sushi man suggests, should study successful people, but they should concentrate on what those people do more than what they say. "Listen to what successful people say about what winning in business or music or art felt like," he says. It's how Woodroffe felt his way. Woodroffe thinks MBAs appreciate the danger of analytic paralysis inherent in business courses. In the 200-strong, MBA-dominated audience at the Oxford Union, Woodroffe still secured 40 votes. His advice to those who want to be in business for themselves is do an MBA if you have the time, but don't lose your spirit. He would hire an MBA for his business if the recruit retained his or her passion and instincts. "If the MBA is 20 per cent of the package, that can be a good mix," says Woodroffe. The most beneficial MBA courses, Woodroffe concludes, are those that focus on selfdevelopment. "Business is not simply economics, but about you as a person," he says. Interesting? Click here to explore further

MBA students: Destined for high-flying careers

Where are MBA students heading after they graduate? Amy McLellan looks at three key sectors Thursday, 19 April 2007

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What are these? Change font size: A | A | A MANAGEMENT CONSULTANCY This is one of the standard destinations for MBA graduates. In fact it's possibly the career for which MBAs, with their rounded skillset, grounding in case study technique and knowledge of the latest management thinking, are most suited. Many business schools report around one-fifth of their graduates are heading into the field. "Over 20 per cent of our class of 2006 went into management consultancy," says Clare Hudson, director of Manchester Business School's career service. "The market is healthy, especially energy, pharma and high-tech consulting." Simon Tankard, careers director at Sad Business School in Oxford, sees technology consulting on the rise, particularly among firms working in the emerging markets of India and China. He adds, however, that this is still a market dominated by big names such as McKinsey, Bain, Accenture, CapGemini and Deloitte. It's also a booming market, last year generating revenues of 8bn in the UK. Business schools report that consultancies are keen to hire MBA graduates, with the big firms recruiting in volume. Ernst & Young is typical, having grown its consultancy division from 25 people to 250 people in just 18 months. "We will probably double in size again in the next two years," says Ben Castell, a partner in the group's advisory services business.

Castell says this growth is driven by the competitive pressures companies face in increasingly globalised markets. "They have cost pressures so they don't want to increase their internal head count, but they want to bring on board people who have faced similar challenges; people who have been there and done that," he says. Management consultants don't tend to get a good press. They are often brought in to make unpopular decisions and are sometimes judged to be out-of-touch or arrogant. Castell dismisses this. "If any of our hires were arrogant they wouldn't last five minutes," he says. "Our clients wouldn't put up with it." For those looking for a career in management consultancy, an MBA is well-regarded and business schools have a good track record of grooming students for the often gruelling interview and selection process. Graham Hastie, careers director at London Business School and a McKinsey consultant for seven years, says the business school has re-engineered its MBA programme to include more problem-solving to make sure its graduates can hit the ground running as fully-fledged management consultants. "We also run very detailed preparation sessions about how to get a job with particular firms, including case study interviews and thousands of mock interview sessions," says Hastie. FINANCE The good times are rolling in the Square Mile: the stock market has performed well over the past year, M&A activity is on the rise and last year bonuses paid to the City's financial elite topped 8.8bn, with 4,200 high-fliers pocketing more than 1m each. Recruitment is increasing and, given the scale of the bonus bonanza, there is no shortage of candidates. Manchester Business School has seen a significant rise in the number of its MBAs joining the industry, from 17 per cent in 2005 to 36 per cent last year. "We know from the increasing numbers of students doing internships in the financial sector that this trend will continue," says MBS careers director Clare Hudson. Around 40 per cent of the MBAs at London Business School went into the finance sector. Yet while an MBA can give candidates the edge in investment banking and corporate finance, it doesn't necessarily open doors into what have become the hottest games in town: the big money world of private equity and hedge funds. "There's a lot of activity and energy in hedge funds and private equity but they are not large recruiters of MBAs," notes Simon Tankard, head of the careers service at Sad Business School in Oxford. The careers service at Chicago GSB reports a similar story, with demand for jobs in private equity heavily outstripping supply.

Private equity and hedge funds tend to be a lot smaller than the big institutional banks: they are not recruiting in large numbers and need people who have a wealth of experience. Often a generalist MBA does not fit the bill, which is where a specialist masters qualification can come in handy. "The MSc people will have the edge on people doing the MBA," says Dr Boris Porkovich of the International University of Monaco, which offers an MSc in hedge funds and private equity. "The more specialist you can get, the better chance you have of getting a job in this niche." Within three months of graduation last year, a record 99 per cent of London Business School's full-time masters in finance students had found a job. Other institutions to offer specialist finance Masters include Sad (Masters in financial economics) and Cass Business School (a wide range, including investment management). However, those working in the alternative investment world believe it's a proven track record that counts. "Most hedge funds would be indifferent to whether or not you have an MBA," says one hedge fund insider. "If you can demonstrate you can make money you will get hired ahead of any type of degree." And the new world of alternative investment is throwing up other opportunities. As Sad Business School's Simon Tankard points out, private equity firms are looking for people to manage the ailing firms they turn around. "They see us as a source of talent for those companies," he says. ENTREPRENEURSHIP As Dragon's Den, the BBC 2 hit demonstrates, there is no shortage of aspiring entrepreneurs . It's a career destination that is also proving popular among MBAs. At Sad , for example, around 80 per cent of would-be MBA students express an interest in starting their own company. And one in 10 MBA graduates leave to start their own companies with many more launching a start-up within two to three years of leaving business school. In response to student appetite, most MBA programmes now include compulsory entrepreneurial modules plus the opportunity to take entrepreneurial electives, in subjects such as start-up finance. Business schools also run extra-curricular activities that put would-be entrepreneurs in touch with useful contacts. At Sad, for example, there is a rich cross-fertilisation between innovators in Oxford University's science and technology faculties and the business acumen of the business school students, with both sets of students regularly attending out-of-hours workshops and seminars. Fiona Reid, Sad's director of entrepreneurship, doesn't believe that entrepreneurs are born. "Entrepreneurship is a question of attitude rather than personality and the right attitudes, seeing problems as opportunities for example, can be encouraged," says Reid.

"The key starting point is the ability to evaluate a business opportunity by doing things like cash flow modelling and market research, and these are things that are taught." She adds: "A good idea is just 5 to 10 per cent of a company. The really rare skill is to operationalise the idea, and that is something the MBA gives you." This spring, however, Oxford lost to Cambridge in a Varsity Pitch competition, judged among others by Martha Lane Fox and Dragon's Den's Peter Jones. The 5,000 winning team, TouchSight, from the Judge Business School, developed a mobility aid for the blind and visually impaired. MBAs start a wide range of businesses. Consultancies are popular, as are start-ups in IT, technology and bio-tech. Social enterprises - businesses designed to make a profit and have some positive impact on society - are also on the rise. MBA graduates of HEC in Paris, for example, are behind environmental consultancies Becitizen and EcoAct. An MBA provides the skills, confidence and contacts to launch a new business. Chris Crockford had what he calls a "small hobby company" but an MBA at Lancaster University Management School took things to a different level. "The MBA exposed new opportunities and gave me the ability to see the market potential," says Crockford, whose firm, Easily LED, provides energy-efficient LED lighting for the film and TV world. He says the networks you can tap into at business school can make a real difference. "It's really useful to talk to people from different backgrounds, who have years of experience and can look at things from other industry perspectives." 'In management consultancy there are always fresh challenges' Former army officer Keith Litster is an MBA graduate of Edinburgh University Management School and now works as a management consultant with Deloitte. After 12 years in the Army, I felt I needed to do an MBA to translate my skills into the business environment. I felt the MBA would also give me credibility with employers and show them I understood business speak and the latest management thinking. I wanted to go into management consultancy because the lifestyle and type of work are quite similar to Army life in that you only spend a maximum of two years in a role before you are moved on. In management consultancy there are always fresh challenges and steep learning curves. It's a good time to join the industry. It was only a week before my dissertation was due that I thought about getting a job. I got in touch with a recruitment agency and they had an interview lined up for me within a couple of weeks. 'I wanted to set up my own hedge-fund company'

Andrew Irvine is studying for an executive MBA with Chicago GSB in London and runs Tusk Capital Management. I wanted to do an MBA because I wanted to set up my own hedge fund company. I had been working for various banks trading financial instruments, so it meant my role would be changing from a technical background to one where I would need top level and all round management skills. I also wanted to get plugged into a great base of intellectual capital and use the networks. I'm finding it very helpful. I'm on campus one week in every six. It takes me out of the market and gives me a different perspective. I can apply the case studies to real life situations as I'm building my firm. When it comes to recruiting people in the alternative investment world, I think an MBA does help because it's a form of third-party due diligence. But its credibility depends on which business school it comes from. 'Once you have worked for yourself it's very difficult to go back' Serial entrepreneur Stephan Bisse is a graduate of Sad Business School in Oxford and runs technical trading systems company Key Reversal Ltd. I worked in the City for about 10 years and then started a dotcom that went into liquidation when the bubble burst. That was when I decided to do an MBA to broaden my options rather than just going straight back into the City. I was interested in setting up my own business because once you have worked for yourself it's difficult to go back. While I was at Sad, the opportunity came up to develop a software product for the technical analysis of financial markets. The MBA was really helpful because I realised when I was running the dotcom that I was a specialist in a very narrow area but I didn't know anything about accounting or organisations. Oxford is full of entrepreneurs and Sad is something of a magnet for them. I'm now involved in two other businesses set up by Sad MBA graduates.

Qualified for entrepreneurial success

With an MBA in hand, anyone seeking to set up a business is already ahead of the game, says Steve McCormack When Bob Williamson decided to leave the corporate banking world two years ago with the aim of striking out and setting up his own business, everyone advised him that the best way to start was to do an MBA. But when he spoke to some of the leading names in the business school world, he was put off by something. When Bob Williamson decided to leave the corporate banking world two years ago with the aim of striking out and setting up his own business, everyone advised him that the

best way to start was to do an MBA. But when he spoke to some of the leading names in the business school world, he was put off by something. "All the students I saw myself mixing with were trying to get into the world that I wanted to leave," he explains. "I couldn't see myself learning much from people aspiring to senior positions in the corporate world, when that was the world I'd worked in for nearly 20 years." So he sought out an MBA attracting a more diverse mix of students, with a variety of career aims, including running a small business. And he found it, at Imperial College's Tanaka Business School. Now, nearly a year after finishing his 12-month MBA, he's set up his own business helping overseas students furnish and kit out their first living accommodation in Britain-and relishing his complete change of lifestyle. "The entrepreneurship part of the course taught me about the big picture of running a business. When I worked in banking I never had a clue what the accounting or HR did." The entrepreneurship strand is one of the recognised strengths of Imperial's MBA programme, and one the university is trying to build on. "In the field of general MBAs, it's hard to compete with the big guns," explains Dr Simon Barnes, managing director of Imperial's Entrepreneurship Centre. "But, given that we're sitting right in the middle of a campus of a leading technological university, it makes sense to develop a specialisation for maximising the value of intellectual property." From this September, entrepreneurship is being drawn into the core of the MBA programme, via a new project which all students will undertake from the first week of the course. Small groups will be given a real piece of technology from the Imperial campus and have to evaluate its business potential. Later in the year, they have the option to take three entrepreneurship modules, dealing in depth with creating technology-based ventures, understanding venture capital finance, and turning university research into profitable businesses. And there's plenty of evidence that the Tanaka School churns out entrepreneurs with just these skills. Ceres Power, a company formed by two former MBA students, grew from an idea based on fuel cell technology work at Imperial. It's now raised 9m in venture capital. Not all businesses survive, of course. Many are strangled at birth, either by the harsh realities of the competitive marketplace, or because the original idea didn't quite work in practice. Either way, new start-ups need to be nurtured, and it is with this in mind that several institutions have established "incubators" to look after new businesses. The Manchester Business School Incubator was set up in 2002 by two Manchester MBA

graduates, one of whom is Louse Pinfold, now one of the managers. "It is clear some students choose to do their MBA at Manchester because of the incubator," she says. "Lots of them would like to start up their own businesses but don't have an idea." Around 10 per cent of Manchester's MBA students choose to do modules at the incubator. These consist of 30 hours' lecture time, plus a practical element, where they get paired up with entrepreneurs from outside who've brought their fledgling businesses to the Incubator. The students' task is to use their theoretical knowledge in the areas of financing, marketability and other areas to advise and work with the entrepreneurs. Their work is assessed in large part by the degree to which they actually help the small businesses in question. Among recent successes of the incubator is a business making motorbikes for people with disabilities - the first machines are about to go on sale - and a company producing educational DVDs, which has a turnover of 500,000, 18 months after being taken on by the incubator. MBA students at Strathclyde University also have the chance to take courses specifically aimed at starting up a business. Current MBA student Mubbasher Khanzada is studying while setting up his own business, an IT system aimed at cutting waste associated with cancelled GP and hospital appointments. "The way entrepreneurship education is approached really makes a difference," he says. "It has helped me enormously in the real world of starting and setting up the business." Having an MBA is a significant advantage for anyone wanting to start up in business, says John Peters, the new chairman of the Association of MBAs. "It gives you the basic alphabet in terms of business tools," he says. "If you've got one, you're sure as hell ahead of the game." Interesting? Click here to explore further