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Do you need an MBA?

By Vincent Heeringa

Monday 1st July 2002

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When it comes to executive education, the MBA is still the feather in the cap. Or is it? Vincent Heeringa finds the proliferation in alternatives makes your next educational investment a harder (and easier) decision.

By all accounts, Stuart McKenzie makes the perfect MBA story. Once an engineer with ambitions to get ahead, the affable 33-year-old quit his Auckland job and moved to Dunedin to complete the one-year Otago MBA programme. He excelled. A top student and well liked, McKenzie was part of the team to earn second place in the world business case challenge in Concordia (robbed by biased French judges). Fresh out of university, and bam! He landed a $450-a-day consultant's job in Howard Paterson's venture capital business and looks set to run one of the government's new Venture Investment Funds.

Lucky guy, right? Well, without the degree, he could never have made the step up, he says. The networking, the strategic thinking, the financial acumen - it made for a career acceleration par excellence.

What McKenzie says next is a little surprising. "But actually, I don't really rate people with an MBA." Er, come again?

"I don't really rate people with MBAs," he repeats.

The way McKenzie sees it, the New Zealand MBA is a victim of its own success. Now 25 years old and on offer at nine institutions, it's possible that too many people have MBAs and too many have done the degree for the wrong reasons, he says. "The things that normally stall people's careers - lack of ambition, lack of intelligence, lack of get up and go - won't change after an MBA. They'll be the same person but with some letters after their name."

Maybe McKenzie's being a bit na´ve or perhaps even a touch superior. After all, almost 40% of US executives have MBAs. There's room for more MBA grads in New Zealand, surely?

Maybe, but McKenzie's sentiments are echoed elsewhere. Heather Kean, of executive recruitment firm Pohlen Kean, says an MBA will no longer set you apart from most senior executives. Nor will it be taken as evidence of leadership capability - especially if you've tacked the MBA onto the end of your schooling. It may not even be what the New Zealand business community is looking for. "The business scene is changing," says Kean. "There are more entrepreneurial businesses and fewer multinational corporates. That may mean a traditional MBA is of less relevance than, say, a masters in entrepreneurship and innovation."

Students seem to be picking up the vibrations. While no one accurately counts the number of MBA enrolments, estimates by Otago University suggest they are static at about 1350 a year. And where there are spikes in numbers - for example, enrolments are high at the privately owned Auckland Institute of Studies this year - it may be due to overseas students.

Indeed, ask anyone in the tertiary sector where the real growth in business education is and they'll point anywhere but the MBA. Mike Pratt, dean of the Waikato School of Management, says the excitement is around the proliferation of tailored courses for big corporations. For example, the School of Management offers a range of internet-based courses for BNZ financial planners that ends with a certificate. Papers like this can be "staircased" into a total learning programme that ends in a diploma or a degree. "The MBA won't go away, but we're offering more and more certificate and diploma programmes and tailoring courses for individuals and their companies," says Pratt.

Is the MBA an endangered beast? Is it in its twilight years? More importantly, do you really need to do one to progress your fabulous career?

Maybe, maybe not. It all depends, you see. "People say the MBA is 'a ticket to ride', but that's not the truth," says Regena Mitchell, head of Otago's Executive part-time MBA programme. Mitchell, once a colleague of iconic business educator Peter Drucker, is unflustered by the mud slung at MBAs. She's not overly bothered by the flat student numbers, either. Not everyone should do an MBA, she says, smiling confidently, and there are many reasons why people should not do an MBA, which is why Otago extensively interviews its candidates and restricts entry to just 25 per year. The way she sees it, the more the MBA is seen to be the wrong option for many, the more it's the right thing to do for some.

The question is, who is the right person, and how do you know if you are one?


Get to the top

Visit Mitchell at Otago's swanky Executive MBA centre in Auckland's Queen Street and she'll take you to her favourite wall - the one with the class photos. "Cheryl is being made chief financial officer for Elizabeth Arden in Canada, Ralph is general manager for Xtra Business, Paul is now chief executive of CHH Loadstar, Bruce was with Woolworth's and is now business development manager for Esquires Foods in Papua New Guinea ..."

Her point is obvious: Do an Otago MBA and you'll go places.

No one's done the numbers in New Zealand, but research reported in Fortune magazine suggests the MBA is the most common degree among senior American executives. In New Zealand the number is probably much lower, but there's no doubt an MBA will get you that first interview. Ian Taylor, head of executive recruitment company Sheffield, says an MBA, despite all its faults, is an excellent degree, better to have than not when seeking senior roles. "It's not a surety but it certainly is a door opener and gets you a chat."

Andy Nailyard, an Otago graduate, is a former Royal Air Force fighter pilot who knew he had the leadership skills to succeed in business, but needed the qualifications and specialist finance training to get there. As you'd expect for a pilot, his planning was immaculate. He wanted to work in Australasia, so a local MBA would give him the contacts he needed. He needed traditional finance skills, so he looked for a traditional MBA. He might leave the region one day, so the MBA needed to be internationally ranked. Oh, and it was nice to be wanted. Otago, which pampered and wooed him, got the tick.

Did it work? On graduation Nailyard was offered two "really good" jobs. He took one with broking firm JB Were as a private client adviser on European investment markets. It's a great job, he says, and the skills he's learnt, combined with the MBA, mean he could work anywhere in the world. "A number of people in my year have jumped straight into senior positions, too."

Of course, getting to the top does not mean succeeding at the top. That's a point US-based business academics and MBA sceptics Henry Mintzberg and Joseph Lampel like to make. Their interest in MBA performance began when they noticed only two out of Fortune magazine's "10 most admired CEOs" in 1998 had MBAs. That's 20% - not a great advertisement. When Fortune later ran a list of 33 failed US chief executives, they discovered 13 had MBAs. That's 40%. What's more, three of those failed chief executives had previously been celebrated by Harvard Business Review as examples of 19 Harvard graduates "who had made it to the top". Intrigued by such conspicuous failures, Mintzberg and Lampel examined the performance of these "top" Harvard graduates and discovered that more than half had failed. Yes, that's right, 10 out of the 19 graduates had either been forced out of jobs or their companies had gone bankrupt (read the story at www.henrymintzberg.com).

Their conclusion: MBAs are dangerous - or they can be. Like many critics of business education, they say MBA graduates reach for too many off-the-shelf solutions. "Looking over the tales of these 10 [failures] suggests an often fatal tendency to pursue a formula - some kind of generic solution," Mintzberg and Lampel say. The right kind of education will mix business theory with hands-on practice. "Pretending to create managers in a classroom setting is wrong-headed at best and, as our evidence suggests, dysfunctional at worst."

Ian Taylor, chief executive of Auckland-based recruiter Sheffield, couldn't agree more. "People's expectations about MBAs aren't right. The degree alone won't make you succeed. What counts is how you put that learning into practice ... By far the best MBAs are those with practical applications, ones that put students in real live business situations."

Perhaps the worst advertisement for MBAs is one of the most famous. A graduate of the prestigious Wharton Business School in Pennsylvania is Michael Milken, the notorious junk-bond king jailed for breaking securities law in 1990. Apparently his picture was taken down after his conviction.


Price of it

Let's just assume a life of white-collar crime or incompetence is not on your agenda. An MBA may still not be the best way to upskill to chief cheese. Consider the cost. It isn't worth it for this writer, or so says an MBA cost/benefit calculator on the BusinessWeek website (bwnt.businessweek.com/roi/enter.asp). This tool uses the average US improvement in earnings for MBA grads to calculate the potential to improve your salary. On my current salary, I would suffer a 26% decrease in total pay (post-MBA) due to lost earning time and course fees. Of course, that's for a US MBA. The New Zealand equation is more favourable. By doing a one-year, full-time MBA programme an average executive forks out $20,000 and forgoes his or her salary. No one collects statistics about improved earnings in New Zealand, but Mitchell guesses it's about $20,000 in the first six months with total payback for lost salary usually taking three to four years. You could get lucky - one of Mitchell's students walked straight into a $230,000-a-year job overseas.

By comparison, a short course at Auckland or Massey starts at $2000. A diploma of business costs about $9000. Given that the difference between where you are now and your next management job might be something as simple as knowing how to read a spreadsheet properly, the payback on an MBA might not justify your investment. The key is to match the size of your skill gap with the size of the educational investment. The bigger the gap, the bigger the educational requirement. Heather Kean puts it this way: "If you are already a capable sales manager and already manage staff but want to progress to chief executive, an MBA may not be necessary. Perhaps some short courses in finance might do it." However, someone with specialist knowledge in nursing or science could fast-track the rise to top management through an MBA. Keep in mind, as Stuart McKenzie suggests, that a career stalled through personality problems or a lack of ambition is not likely to be fixed by an expensive degree.

Another cost to consider is the intangible one - to relationships, to state of mind, to social life. The decision to quit work and disappear for a year under a pile of assignments is a big call. Alternatively, the typical part-time MBA programme goes for two years and involves classes every second Friday and Saturday. Students report a heavy workload, spending almost every night with their noses in books, weekly meetings with the team and assignments. One graduate I spoke to knows of a 30-year marriage that didn't survive an MBA - her own. "There were other factors, but the stress of it was enough to create a split," she says.

But that's the point, isn't it? The intensity of the MBA is part of its attraction, says graduate Jennifer McMahon. And she should know. McMahon spent 16 years as a nutritionist with the Red Cross, working in war zones and areas of extreme poverty in Africa. In addition to managing thousands of staff and multimillion-dollar budgets she also endured being held hostage in south Sudan - earning an MBE and the Red Cross' highest honour, the Florence Nightingale medal. She gave that up to come home to be with her ill mother, and decided she wanted to bone up on commerce before joining the family business, Dunedin quarry company Palmer & Son.

McMahon wanted to replicate the intensity of her work with the Red Cross - not seek some kind of balance with family and work. "I've seen my brother doing that balancing act, and it means you can't do everything to the max. I wanted to avoid the juggling act and concentrate on learning."

She got the promised "12 hours a day, seven days a week" intensity. In addition to the in-depth financial and accounting knowledge acquired through practical case studies, she points out, McMahon has aquired a terrific network of talented people and investment opportunities. Both McMahon and Nailyard say they have invested in some of their classmates' ventures, launched new businesses of their own and now sit on company boards.

Talk to any MBA graduate and there is a sense of camaraderie, like the mateship of war veterans. "It's very similar to the relationships I developed with the people I worked with," says McMahon.

Contrast that with the experience of Stephen Baugh, part-owner of photo album manufacturer Queensberry ("Picture this", August 2001). He toyed with starting an MBA but instead chose the more manageable Diploma of Business at Auckland University. It was the right decision, he says, given that he has young children, a business to run and has not engaged in academic study since he dropped out of university a decade ago. But there's also a touch of regret. The missing factor: the intensity. "I don't want to be overly critical, because I know that you get out as much as you put in, but there's an element of going through the motions in the diploma. I find the lecturers can at times be a bit academic, and as a business owner that's frustrating. The students come straight from work and leave at 8.30pm and there's an element of 'I wonder what's for dinner tonight?' about it. I have the impression that the MBA is more like bootcamp - it's more a testing ground."

Baugh might be right, but unless you're a management masochist, is a boot camp necessary when a few trips to the gym might do? Moreover, might all the theorising and fancy models of global corporate life studied in an MBA be a bit wasted on a Kiwi boss? "We're a very anti-intellectual society, and there are some employers who will not acknowledge the quality of an MBA," says Ian Taylor of Sheffield. "We still have that No.8 wire thing."

We often dismiss the "No.8" approach to New Zealand business as slap-dash. It certainly stops many businesspeople from progressing their small businesses to large. Is an MBA the best answer for these Kiwi businesses? Some critics suggest that the MBA was started by Americans early last century to create the "organisation man" - a dreary, process-driven line manager and job-for-lifer. Its often-maligned systematic approach to management fitted an age when the business metaphors were mechanical ("wheels of commerce") and militaristic. The things that we now regard as critical - innovation, talent, knowledge, teamwork - mattered less than knowing your place in the hierarchy. In the knowledge age, shouldn't we value creativity, entrepreneurialism, skill at developing talent, learning how to be a team player? Especially in New Zealand where the future is probably in innovative niche marketing, more like Burger Wisconsin than Burger King?

Could the MBA be the wrong sort of management training for a New Zealand business?


Alternative education

In a modest boardroom at the function-before-beauty headquarters of biotech firm Genesis R&D, chair David Irving is almost bouncing in his chair with the thrill of it. The thrill, that is, of the new "Owners and operators" course offered by Auckland University, through its incubator The Icehouse. The former boss of Heinz Wattie, now executive in residence at Auckland University, says the course is "just so much what I wanted to make happen".

Irving is a graduate of Stanford and no slouch in the corporate scene. The problem he sees is a bias toward "corporate learning", which may be wrong for the typical New Zealand company. Our business scene is dominated by small, owner-operated businesses for whom American models of global capitalism don't solve such basic questions as succession planning, cash-flow management, profitable growth, export growth and how to get the owner out of the way. In any case, the bosses have neither the time nor the money to go to Stanford for a week of intensive education or do an MBA.

So, the Icehouse is running a tailor-made owner-operator course over five Friday-to-Sunday weekends at Auckland's Hotel Du Vin. It's a mini-MBA, covering topics from strategic thinking to employment law. The idea is to make our business owners "disciples of learning" and not just to cram young graduates with business theory, says Irving.

Michael Parker, owner of $7 million-turnover auto accessories business Best Bars, says the course was so good it forced him to quit. "You get on a treadmill when you own your own business and you can't see your way out of it." At the urging of his bank, he reluctantly took the course and had an epiphany. For "the cost of a piece of machinery" he realised how much talent there was in the company, and how little he allowed it to flourish. After each weekend session, Parker would return full of enthusiasm and scare his staff into thinking "Oh no, here he comes with more ideas". The outcome has been hugely beneficial. He replaced himself with a general manager, got out of the office and now thinks about "radical ideas" to incentivise staff and grow the business. "I'm working on the business, not in it," he says, with the zeal of someone who has never heard that old line before.

Sparking radical change in small to medium business is key to growing the economy, says Irving - perhaps even more important than success at the big business end. And it didn't take an MBA to make it happen. How many other business owners could benefit from this more accessible approach to learning?

Quite a few, if you look at the proliferation of alternatives to MBAs. Founder of the privately owned Institute for Strategic leadership Geoff Lorigan reports similar sparks of change and "ah-ha" moments in his one-week course for senior managers. The course is designed to help senior executives move from the trying-to-be-the-best-at-everything kind of boss to being a leader - another problem identified by management academics as a key weakness in New Zealand management.

At Waikato University, Mike Pratt and colleagues are pioneering in-house learning, tailoring their Graduate Diploma of Management to executives in four different companies. The value of the approach is in the "active learning" - executives use projects from within their own companies to complete the diploma. The diploma makes up the first half of an MBA, and the number of executives completing the diploma has grown from 30 to 107 in the last 5 years.

The formalisation of companies' in-house training has meant a veritable boom for Auckland University's short course programme. Launched in 1996 with 1300 students, the university forecasts 2200 students this year. This month it celebrated its 10,000th attendee.

Incubators such as Massey's E-centre in Albany and AUT's Technology Park in Penrose are retaining tech grads for practical business building and training. Unitech's Master of Business Innovation and Entrepreneurship is now in its second year. Add to that the plethora of courses offered by professional associations like the Institute of Management and private trainers like David Forman and, well, you can see why the MBA numbers haven't grown.

Hooray for the alternatives. But don't expect those MBA letters to disappear too soon. As Nailyard, the former RAF pilot who wanted to make it in business, says: "The course met my expectations. I got the networks I wanted. The content was well taught and I gained knowledge and skills in areas I didn't know about. It was brilliant."

You can't argue with that.


How to decide

Puzzled by the MBA option? Try this "for" and "against" checklist

When not to do an MBA

I can't study: An MBA contains plenty of academic work. If you haven't written a report in a decade or read a book in a month, try a more gentle course such as a diploma in business.

I want to specialise: The MBA is a general course for general management. If the chief executive's job looks ugly and you'd rather become the best marketer, scientist, stuntman or accountant you can be, then get do a more specialist degree.

I can't afford it: MBAs cost time and money. Expect to lose your social life and your weekends. You'll need to shift to a four-day working week (on an executive part-time programme) or maybe move to another town (if you are doing a full-time course). Without organising your private life, an MBA can ruin marriages and turn friends into memories. If your partner is giving you the evils by now, don't do it!

My career has stalled: If personality, lack of ambition or plain lack of smarts have stalled your career, an MBA can't help. It suits people who are already on the upward trajectory. Here's a quick rule of thumb: will you be giving up lots of other exciting opportunities by doing an MBA? If not, sign up for a night class in the guitar - your career can't be helped.

I'm already there: Why go to boot camp when a trip to the gym will do? If you're already a successful manager with promotional opportunities ahead, why not fill gaps in your skills and knowledge with short courses and a "staircased" learning programme? Or maybe you already have investment networks and close mentors and colleagues and don't need the alumni.

When to do an MBA

I will be boss: Your career is already on the up and you aspire to be the boss. An MBA will accelerate your progress by compressing into one or two years what could take 10 to learn in the job.

But I know little about business: You're a talented and motivated manager with ambitions, but as a nurse, scientist, engineer, journalist or whatever you lack business knowledge. Not only will the MBA squeeze a ton of commercial nous into your head, it will codify and quantify your non-business management experience into a recognisable degree.

I'm sorted: Your family and work are gunning for you and will dedicate time and money to your MBA.

I want intensity: Compared to short courses and diplomas, the MBA creates "war veterans". Expect to be shocked, hurt, squeezed and tested. Expect to make strong friends, form new business partnerships and find investment opportunities. The quality of MBA students is generally higher than the alternatives.

Source: opinion based on interviews with educationalists, students and employers


The MBA web guide

The web has a ton of resources to help you choose an MBA. Try these links:

Create a checklist

An excellent place to start is at mba.com, the official site of the Graduate Management Admission Council. It has solid resources including an "action plan" questionnaire to help decide if an MBA is right for you and what to do next.
http://www.mba.com

Another site, mbainfo, has a good checklist.
http://www.mbainfo.com

The businessweek.com site also has a useful checklist.
http://www.businessweek.com/magazine/content/02_12/b3775113.htm?c=bwmbamar27

Do you qualify?

The mba.com site also has tons of info about the MBA entry exam, GMAT, including tutorials and advice.
http://www.mba.com/GMAT/index.shtml

Businessweek.com has a fun ROI calculator based on salaries before and after gaining an MBA.
http://bwnt.businessweek.com/roi/calculate.asp

Check out the local offerings

The most comprehensive list of executive education in New Zealand is by the MBA Association.
http://www.mba.org.nz/public/3_4_0_programmes.shtml

The Aussies have gone a step better and created whichmba.co.au, a useful guide to courses across the ditch.
http://www.whichmba.com.au/

Check out the rest

MBA Pathfinder is a comprehensive search engine for business schools and allows limited customisation, but it's very US centric.
http://www.mba.com/MBAPathfinder/index.html

Another comprehensive guide to tertairy education is Peterson's.
http://iiswinprd01.petersons.com/GradChannel/

Rankings

A better way to search is using rankings. Only one local, Otago, has been ranked in the Financial Times annual 100 MBA index.
http://career.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3MBN476IC&live=true

The FT ranking is the most global, though asiaweek.com has an excellent Asia-Pacific index of business schools and universities.
http://www.asiaweek.com/asiaweek/features/mba/index.html

Businessweek.com and USNews.com both do extensive reviews and rankings that are useful if considering a US programme or just looking for general success factors.
Businessweek.com: http://www.businessweek.com/bschools/00/index.html
USNews: http://www.usnews.com/usnews/edu/beyond/bcrank.htm

Do it distance

Petersons.com is the web's largest education resource, all about distance education.
http://iiswinprd03.petersons.com/distancelearning/

They also list the global accreditation rules for distance learning.
http://iiswinprd03.petersons.com/distancelearning/code/articles/accreditation.asp

You could also visit the UK-based but locally run Henley MBA.
http://www.aut.ac.nz/corp/courseinfo/business/bus_executive.shtml

Seek a sponsor

If your company won't pay, then try finding a scholarship through Petersons.com or mba.com. Again, both are US-centric, but you never know your luck.
http://petersons.wiredscholar.com/financing/loan/loan_index.jsp
http://www.mba.com/mba/financial_aid/index.shtml

Meet graduates

MBAs flock together and the local MBA Association has a good site at mba.org.nz.
http://www.mba.org.nz

UK-based global association mba.org.uk has useful advice and coordinates community activities.
http://www.mba.org.uk/

Become a contrarian

By now you may hate MBAs. Visit a fellow arch-critic at henrymintzberg.com
http://www.henrymintzberg.com/


Courses available

Skill-specific courses

VUW Centre for Continuing Education

VUW Executive Programmes

Canturbury University Centre for Continuing Education - professional short courses

Manukau Business School

Open Polytech tailor-made training

Manukau Institute of Technology customised training

Whitireia Polytechnic Employment Relations Act short course

University of Auckland School of Business Short Executive Courses

AUT short courses - business

Aoraki Polytech - HR Management

Computer training and e-learning courses

TeachMe computer training courses

Otago Polytechnic adult courses

Eastern Institute of Technology short courses


Traditional educators

MBA postgraduate courses - list of institutions

AUT Faculty of Business (click on "Programmes" tab)

Massey University postgraduate courses

University of Auckland Executive Programmes

Lincoln University Professional Masters Programme

University of Otago (look under "Commerce Postgraduate")

Auckland Business School Management & Employment Relations Programme

Auckland Business School Master of International Business

VUW Business School post-graduate programmes

VUW Master of Management Studies School of Business and Public Management

Waikato Management School

Wellington Institute of Technology Graduate Diploma in e-Commerce


Entrepreneurship

Christchurch Polytechnic Institute of Technology Bachelor of Business Innovation & Enterprise

Christchurch Polytechnic Institute of Technology Diploma in New Venture Planning

Christchurch Polytechnic Institute of Technology Innovation Incubator

Southern Institute of Technology post-graduate Diploma in Business Enterprise

Waikato Management School Graduate Diploma in Entrepreneurship and Innovation

Unitec Master of Business Innovation and Entrepreneurship (own website here)

New Zealand Centre for Innovation & Entrepreneurship (UNITEC) (own website here)


Leadership training

VUW Leadership Centre

NZIM (contact them for the nearest course)

Auckland Business School online leadership and organisation course


Tertiary providers

New Zealand universities and polytechnics

Association of Polytechnics in New Zealand


Develop a learning edge

Have you got a learning edge? No, it's not a clever way to ski, but a way to assess your educational needs. We spend so much time congratulating ourselves on our past achievements and current skills, yet almost never articulate what we plan to learn, says Polly Parker, lecturer on career development at the University of Auckland. Before even considering doing an MBA, take some time out to develop your learning edge. You may change your mind.

1. Know why

Why are you wanting to progress your career? What is it you are seeking? Balance? Power? Achievement? Wealth? Independence? It's a tough question, but even beginning to ask will help you eliminate dead ends. A desire for wealth for example, will eliminate a career in journalism, teaching or childcare.

2. Know how

How will you achieve this goal, and what must do to get there? Keep your time horizons below three years, as things change fast. To get a good sense of what's missing in your basket of skills and attitudes, get your colleagues and boss to assess your performance and management style. Use a professional to do the survey and analyse the results. It also pays to do something like a Myers-Briggs Type Indicator personality assessment to determine your basic inclinations. Line up your strengths and weaknesses against your career goals. Now, what are the gaps that need filling?

3. Know who

Who and what can provide you with the training and support you need? A mentor? An institution? Your own network or workplace? The "who" question is also relevant in answering the "why" and the "how" questions. Create a list of the people you trust to give you advice and who you must involve in your career moves.

For more advice, email Polly Parker at p.parker@auckland.ac.nz


Vincent Heeringa
vincent@unlimited.net.nz

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