Latest embodiment of inflated value: an MBA
40-year analysis
Heather Sokoloff
National Post
Wednesday, July 03, 2002
A business degree does not guarantee a successful career or a higher salary, a Stanford University business professor concludes in an analysis of 40 years of research on the economic value of the MBA.
Little of what is taught to students in business school prepares them for the corporate workplace, said Jeffrey Pfeffer, an expert in organizational behaviour who has taught at elite U.S. business schools for 30 years.
Rather, students are paying for prestigious names to add to their résumés and the opportunity to network with like-minded colleagues, Dr. Pfeffer said.
MBA programs in the United States can cost more than US$100,000, while tuition at the best Canadian schools ranges between $7,000 and $48,000.
"The simplest advice is that if you don't get into a leading business school, the economic value of the degree is really quite limited," said Dr. Pfeffer, whose paper, co-written by a Stanford business student, will appear in the fall edition of the journal Academy of Management Learning and Education.
"Obviously, if you get admitted to Harvard or Stanford or another elite school, the very fact of your admission is going to increase your worth in the job market," he said. "But there is not much evidence the actual education does very much."
Employers who hire brand-name MBA graduates do so on the basis of the quality of the student body at those schools, not whether students have acquired specific skills or knowledge with their degrees, Dr. Pfeffer said. He found a student's employment prospects were unrelated to grades earned.
Dr. Pfeffer's research has raised the ire of business students, especially his own at Stanford, who say they are highly satisfied with their investment.
Fellow professors, on the other hand, have voiced little objection to the findings. "To be brutally honest, everyone knows this. This is not a big surprise," he said.
Dr. Pfeffer said he has long been skeptical of the value of an MBA. He became convinced after a group of consulting firms and investment banks did their own research comparing the performance of business school graduates to those trained in two- or three-week programs teaching new employees business basics.
The internal studies found the non-MBAs did no worse, and in some cases better, than their peers with a business degree. The studies also found more education did not result in higher salaries.
For example, a study of consultants at McKinsey & Company who had been on the job for one, three and seven years found that at all three points, employees without an MBA were as successful as those with one.
"You have to question what goes on in the two years it takes to get an MBA, if someone can virtually be equivalent in two or three weeks," Dr. Pfeffer said.
"What that suggests to me is that if you take a smart person, and give them a relatively short course, a mini-MBA, if you will, they basically do as well as the MBAs."
One of the problems, Dr. Pfeffer said, is that much of the business school curriculum has remained unchanged since the 1960s. He found little evidence that business school research is influential on management practices. Many of the theories and analytical techniques imparted by the institutions "can be readily learned and imitated, at least by intelligent people."
The U.S. schools have also become slaves to magazine rankings, leading them to develop coddling devices such as professor-written lesson summaries to bolster their "student satisfaction" appraisals.
"When students are relieved of any sense of responsibility for their learning ... they learn much less," said Dr. Pfeffer, who cautioned Canadian business schools against developing a similar obsession with rankings.
Dr. Pfeffer's findings echo a recent report from the Association to Advance Collegiate Schools of Business, the primary accrediting body in North America.
That report lambasted its members for maintaining a curriculum that is out of touch with modern business practices. "Preparation for the rapid pace of business cannot be obtained from textbooks and cases," the report said.
Still, Dr. Pfeffer said he doubts the criticism will discourage a record number of students in Canada and the United States from applying to business schools this year, giving the schools little reason to change.
