The Problem With America's MBA Programs

Last October, in the throes of the Washington Redskins' worst football season since 1994, I wrote a lengthy critique of team owner Dan Snyder's highly questionable managerial skills. In essence, I likened Snyder's appalling track record to those of leaders at businesses such as AIG (NYSE: AIG  ) , Bank of America's (NYSE: BAC  ) Countrywide mortgage division, and General Motors.

Oddly enough, one major institution saw the parallel as well. According to a recent post on czabe.com, the website of sports-radio personality Steve Czaban, an MBA class at Georgetown University's McDonough School of Business has taken up the "Snyder Case" as a means to illustrate how to not run a business.

This development is great news in some sense (the validation is nice, for one thing), but definitely not in others. In fact, I'm significantly more dissatisfied now than I was before.

The pot calling the kettle black
Snyder's various NFL-related failures justify extensive public examination, but I can't help stewing over the larger irony at hand. The giant business-school machine is precisely what has spawned -- or at least helped spawn -- so many of the money-can-solve-all, greed-is-good types that brought down my favorite football team and our economy to begin with.

The McDonough case study only scratches the surface of a much larger issue. If business schools are studying the Redskins to learn how to not run a business, shouldn't the Redskins organization study business schools and learn how to not create leaders?

How about that?
Without a doubt, Dan Snyder has performed poorly as an owner, and his various tactics are precisely the things that help undermine a business. He's a perfect example from which to learn. But I wonder whether anyone at Georgetown will benefit from it.

From an academic point of view, I see the intent: Here's a failed business leader, so let's examine more closely. Snyder also dropped out of college, so the fact that he never went to business school is further fodder for the professors who are holding him up as an example. They think they can use the lessons of rogues like Snyder to effectively "educate" away behavioral problems before students have the opportunity to wield any real power. The theory seems plausible, and I certainly don't fault anyone for taking this approach, but I'm not sure it's going to do any good.

Here's the problem
For one, examining the failures of business leaders and deriving conclusions based on them is no brilliant advancement in academic theory. It's been done. Second, even though Dan Snyder never walked the halls of Harvard or Columbia Business School, the leaders of many of today's failed businesses have. Despite their advanced degrees, far too many of them still seem to embrace similarly questionable values. Something much larger needs to be addressed.

The elephant in the room
I'm interested in knowing the precise steps that business schools are taking these days to prevent the Dan Snyders of the world from being drawn into their MBA programs, jumping up the corporate ladder, making greedy and short-sighted decisions, and operating under a sense of undeserved entitlement, like Robert Nardelli at Home Depot (NYSE: HD  ) ; or, worse, acting illegally, like Joe Nacchio, Qwest's (NYSE: Q  ) former CEO, who was convicted of insider trading.

It would be impossible to filter out every bad seed coming into an entire academic field, but clearly, there's something in the way these schools market and recruit, or perhaps in the way they emphasize certain values, that has created so much problematic leadership. You can blame politicians, lawyers, and accountants for our recent problems as much as you wish, but ultimately, the buck stops with the leaders of our Fortune 500 companies, a huge percentage of which are proud graduates of big-time business schools.

As of 2006, a full 39% of all Fortune 500 CEOs held an MBA, with 62% holding some kind of advanced degree. That large number may not be particularly surprising, especially considering what the MBA is designed to do. But you may be shocked to learn that, based on a 2006 study from BusinessWeek, shareholder returns of companies led by CEOs with MBAs were significantly worse than of those led by non-MBA CEOs. Even though the study considers only a very brief time frame, and there are other, conflicting studies that offer different results, we should probably acknowledge that there is a larger, cultural problem at work here, in the wake of the economic collapse of the past three years.

Will the real leaders please stand up?
When you study business leaders such as Jeff Bezos at Amazon.com (Nasdaq: AMZN  ) , Fred Smith at FedEx (NYSE: FDX  ) , and Jim Sinegal at Costco (Nasdaq: COST  ) , you quickly realize that being an excellent CEO has almost nothing to do with having an advanced degree from a top business school. To my knowledge, there is no definitive correlation to be found anywhere between how and where you were educated and how well your company performs over the long term. But considering the amount of students currently enrolled in MBA programs, combined with the recent economic performance we've all witnessed from many companies led by business-school graduates, it makes a whole lot of sense to start by making changes within these very institutions.

In the absence of any substantive change, it seems reasonable to believe that we'll just continue to see plenty more Dan Snyders taking the reins at a time when we really can't afford it.

What are your thoughts about the state of American business education? Can we do better? Are business schools trying to do better? Head to the comments box below, and chime in.

Nick Kapur was sired by two card-carrying MBAs and has no position in any security mentioned above. Costco and Home Depot are Motley Fool Inside Value recommendations. Amazon.com, Costco, and FedEx are Motley Fool Stock Advisor selections. The Fool owns shares of Costco. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 11, 2010, at 5:08 PM, daytrader78 wrote:

    Huh? Where in this article does it talk about what's wrong with MBA programs (the title)? It concludes that "many" companies led by MBA's have performed poorly and somehow uses that weak, unsubstantiated statement to condemn business schools. This article was written way too poorly and illogically to even comment and I now regret that I even started typing this.

  • Report this Comment On March 11, 2010, at 5:12 PM, novicefool07 wrote:

    I tend to be wary of any blanket statements that lump a large body of people together, based on the actions of a few. Of the millions of MBA holders and thousands of MBA students out there, categorizing us all (I'm a current MBA student), based on the actions of a few seems inappropriate to me.

    I can tell everyone based on my experience at the University of Maryland, ethics is being stressed in every course. In addition to ethics, a strong consideration for how a business interacts with all its stakeholder not just the stockholders is stressed. I can't speak as to how the program was before, but for the last two years it has been focused on ethics and managing a business in a thoughtful, ethical AND profitable way.

  • Report this Comment On March 11, 2010, at 5:17 PM, mikecart1 wrote:

    I'm getting my MBA this August and IMO this article is 100% incorrect. I will probably be one of the greatest leaders in the next 10 years.

  • Report this Comment On March 11, 2010, at 5:19 PM, MrsCathyGF wrote:

    Well, ok, then. As it stands, may investors wind up relying on this MBAfest, dutifully respecting all that academic achievement. Enough already. Here's to all the degreeless, dashing rogues out there. Pull it off better than the sniffers, yes.

  • Report this Comment On March 11, 2010, at 5:22 PM, a65fc wrote:

    Nice thought but according to Wiki team revenues are up 100MM, ranking second in the NFL due to a number of business tie-ins, improved seat sales, whatever. So on the business side, he's making great decisions. The personnel side is where he falls flat as he makes decisions as a fan, not a businessman. Then again, as a Giants guy since YA Tittle...

  • Report this Comment On March 11, 2010, at 5:23 PM, ronb111 wrote:

    Ethics are the rock or foundation of everything that we do. A long time aga a mans word was his bond, his reputation was on the line. Now the individual has no honor and everything has to be on paper and parsed by the attorneys. We demand guaranteed payments with no ties to performance that benefit the supporters. We have lost our moral compass as both leadres and followers,

  • Report this Comment On March 11, 2010, at 5:33 PM, Coffeeman66 wrote:

    Nick,

    Sorry about your 'Skins and Snyder, but let's not take it out on the hard-working people in our business schools! I am also guessing you do not hold the MBA degree yourself either.

    From my experience, most (if not all) of my fellow classmates at B-school in the mid-90's were there for the right reasons, and have gone on to successful careers helping make money for their companies in an ethical way.

    On the other hand, I'm willing to accept that at the highest levels, the corner office is a place with extreme pressure to keep 'ringing the bell', aka growing profits, at all costs - so as to keep one's decades old reputation for success in tact. (Oh, the irony!) Without good scruples, anyone could go down the wrong path to disasterous effect, regardless of educational background.

    So continuing to make this point in B-schools is a good idea, but it comes down to personal integrity - which cannot be taught in a class.

    The final point I'll make is this: the 3 good examples you used happen to be the founders of their respective companies, struggling against huge odds to succeed. Therefore it is such a special subset that they do not belong in the general 'non-MBA' population you subjected to the analysis.

    This is a misguided statistics manipulation error that could have been avoided, if you had attended the statistics and/or market research classes I had at B-School. ;)

    Peace,

    Coffeeman66

  • Report this Comment On March 11, 2010, at 5:42 PM, ihk888 wrote:

    ethics in MBA program is close to zero." take the money and run" is a basic course and they are as close as politicians and lawyers who collectively contribute to the destruction of the American Empire. let's look at RB for an example, former secretary of Treasury under Clinton(politician), JD from Yale Law School(lawyer), graduated from London School of Economics, he was director and senior counselor of Citigroup for eight years, under his watchful eyes, Citigroup tanked more than 90% of value yet, he walked away in January 2009 with $126 million dollars!!! impeccable resume,( Harvard Yale and London School of Economics) while taxpayers get *****. Maybe we should petition to close these school for the good of the world.

  • Report this Comment On March 11, 2010, at 5:50 PM, PSU69 wrote:

    Bill Clinton, brilliant, morally rudderless. Blame his school or degree? Disclosure, I have an MBA. Loved the program, especially the Study of People and Their Behavior in Groups. My under grad was BSME. The MBA opened my eyes to what I call the dark side. What do I mean by that? Short term wall street thinking. Stock manipulation. Martha and her kind. I highly recommend the degree to anyone who enjoys business or admin. Writers can easily slant the data time frames to match goals for an article.

  • Report this Comment On March 11, 2010, at 5:55 PM, MisterRogers wrote:

    An MBA program is rather late in the game to start teaching people ethics. Our K-12 education system teaches our young people absolutely nothing about how business operates in America, and it fosters a sense of entitlement as students are passed from one grade to the next in order to artificially boost graduation rates. Meanwhile, kids grow up addicted to the "me culture" that they see on TV. By the time American children enter the real world, they have no ethics. The dumb ones buy lottery tickets while the smart ones earn MBAs, but our culture as a whole is lacking in respect for one's place in society. For every corrupt CEO, there are thousands of "corrupt" shareholders and consumers.

  • Report this Comment On March 11, 2010, at 5:56 PM, sjking2000 wrote:

    Who on earth says it's the business schools that creates these leaders. No proof whatsoever that an MBA will train / make a leader behave the way they do - versus before the MBA and the additional knowledge they gained at biz school.

    This article is unethical and utterly unprovable

  • Report this Comment On March 11, 2010, at 6:00 PM, henryking54 wrote:

    <<what may shock you is that based on a study from BusinessWeek, shareholder returns of companies led by CEOs with MBAs were significantly worse than of those led by non-MBA CEOs.>>

    What a moronic and false statement. But it is indicative of the anti-intellectual atmosphere of the Motley Fool. The company is led by two brothers, neither of which has a formal financial education. David Gardner went to a crappy southern state school and Tom Gardner went to the laughing stock of the Ivy League, Brown, where any grade under a C is stricken from your transcript and it only takes 28 total academic credits to graduate. The vast majority of Fool writers don't have advanced degrees and even if the manager of their mutual fund doesn't hold a CFA, which is the gold standard of the money management industry. It is astounding that anyone would entrust their money to these idiots.

    Maybe if Nick Kapur went to business school he would learn reading comprehension. The latest businessweek study expressly states that MBA CEOs outperform non-MBA CEOs:

    "we found a definite correlation between holding an MBA and achieving high performance as a CEO over the long term. In our list, CEOs with an MBA ranked on average a full 40 places higher than those without. Indeed, half of our top 10 went to B-school (although, admittedly, one of them dropped out before getting an MBA).

    What does that mean in terms of performance? CEOs without MBAs had average shareholder return of 81% over the course of their entire tenure, while those with MBAs averaged total returns of 93%, a substantial improvement."

    http://www.businessweek.com/bschools/content/feb2010/bs20100...

  • Report this Comment On March 11, 2010, at 6:02 PM, sapereaude1 wrote:

    The fundamental weakness in all corporate-capitalism-based economics is the fallacy that it is possible, in a finite system like Earth, to achieve economic stability by simultaneously increasing both population and per capita consumption. That philosophy also defines the life strategy of cancer cells. Fortunately, cancer kills only one host at a time. Unfortunately, Earth is the only host we have.

  • Report this Comment On March 11, 2010, at 6:10 PM, bzw51 wrote:

    Unfortunately an MBA does not come with a character transplant. If your Values are shaky to begin with no MBA makes you more ethical. So MBA or not, a crook is a crook and a saint is a saint, with or without it.

  • Report this Comment On March 11, 2010, at 6:11 PM, TMFHousel wrote:

    Henryking54,

    I'd like to offer you a hug on behalf of all of us at the Motley Fool.

  • Report this Comment On March 11, 2010, at 6:11 PM, iCon4 wrote:

    Blaming the MBA programs for CEO problems across the board is a little like blaming a very successful and prominent sculptor for occasionally bad clay. The artist wouldn't always know the clay is bad until it breaks apart in the heat of the oven.

    MBA programs don't create talent, they simply enhance the talent that already exists. It is impossible for every top MBA program to have a perfect filter for eliminating people with unethical behavior in their future.

    What changes exactly would you make to business schools to make them better, I wonder?

  • Report this Comment On March 11, 2010, at 6:18 PM, teejk wrote:

    much of the above is true (both pros and cons). I'll omit my list of where I think the blame belongs. I think the whole system would be greatly improved by not letting anybody into B School until they spend a few years "in the trenches" with that lowly BA degree (and the low pay/miserable work conditions that brings). I speak from experience but IMHO adding advanced "book smart" to basic "book smart" still only adds up to "book smart".

  • Report this Comment On March 11, 2010, at 6:46 PM, NotJesseL wrote:

    iCon4 writes:

    " Blaming the MBA programs for CEO problems across the board is a little like blaming a very successful and prominent sculptor for occasionally bad clay. The artist wouldn't always know the clay is bad until it breaks apart in the heat of the oven. "

    How do you figure the MBA programs are very successful? when the largest businesses such as Enron, Citibank, WorldCom, etc. etc. are run into the ground by crooks. When the average pay of a CEO is something like many hundreds of times that of an average worker? When companies like big tobacco cynically advertise to minors, and big energy companies cynically blow smoke about global warming science.

    Its not their primary responsibility to mold the moral character of their graduates, but crooked dealing is ultimately inefficient. Study the output of countries like England and the US post revival. It seems to me that the increase in morality leads to an increase in productivity.

  • Report this Comment On March 11, 2010, at 7:08 PM, teejk wrote:

    iCon4

    I will agree with you on executive pay but can you please cite your references when you say "big tobacco cynically advertise to minors"? I doubt you can find anything other than the same old tired lines that may have been true 35 years ago but not since then. I'll finish this post and wait for your answer.

  • Report this Comment On March 11, 2010, at 7:34 PM, cle86 wrote:

    I agree with other's who have said that this article doesn't say anything about what is wrong with business schools. The closest it comes is saying that business schools attract the kinds of students who end of committing crimes and the schools don't do anything to stop it by either not admitting them or somehow training them to be ethical. The first option is not feasible because how can you really tell whether a person is ethical or not? The things they judge on are test scores, grades, and community service usually. Even community service can't tell you much because it is pretty easy to make it look like you did a lot even if you didn't really actually get much done for or care about the organizations you worked with. I think schools market themselves just how they should. Come to our school and you will make a lot of money. There is no way to filter out who is willing to do unethical things to reach that goal and who isn't. I think business schools do try to teach ethical conduct once students are actually in their schools. Almost every one has at least one required class on ethics and they try integrate it into other parts of the curriculum as well, but how can you really teach ethical conduct to someone? Sure you can teach them what it is but making them actually want to do it is a different story. As for non MBA run companies performing better. I think someone with a degree in a different field who has taken the effort to learn the skills of running a business would most of the time have more creativity than a business school grad who just got good grades and moved up the corporate ladder.

  • Report this Comment On March 11, 2010, at 7:45 PM, magnus84 wrote:

    After the crap I had to do to get into the MBA program and the fact that despite the rigor of the information I have still been able to parlay myself from a straight B student into a straight A student by talking, I'm inclined to believe this article. I keep thinking about all the clever ways I hustle my way out of a B and I tell myself I'm a good person and I need this for the transcript, then I realize I might later use the same logic to justify unethical behavior to get by in the business world.

    Don't get me wrong, I genuinely believe I'm a good guy, and I have written my own code of ethics and signed it, and I live by it as best I can. Also there is nothing directly wrong with how I get an A. I negotiate, charm, beg, tell little white lies, but mostly take gambits and risk falling flat. But what happens when there are millions or billions on the line? And I am not in a particularly Machiavellian business school in Texas, so I can only imagine the type of hustle you learn in places like Harvard.

    ... Or maybe it's just me. I am in my last year and haven't taken notes and barely open my books. I see other people around me work their butts off for the same grade. Rather than feel special, I just feel like a dirt bag. So this whole topic really does bother me, and forces me into deep bouts of introspection.

    I hope against hope that I don't become one of 'those' business leaders. Maybe the fact that I care how I turn out is why I won't? Or maybe I am rationalizing...

  • Report this Comment On March 11, 2010, at 8:02 PM, Tiingall wrote:

    I believe bzw51, icon4, ronb111, and henryking54 have the core of the issue. Many MBA grads can certainly manipulate the business parameters to create great profits; but at what social and economic cost to the broader community? The present international financial collapse has created hundreds of thousands more child deaths every month because aid agencies no longer receive the donations of a few years ago, plus family murder/suicides because people have their backs against the wall (financially) and see no hope in the future.

    Many MBA graduates might proudly include themselves as part of the successful group of senior managers and business leaders who increased company profits and person wealth over the past ten years. But do they also recognise - or have any genuince concern about - the cost to others with whom they share this planet?

    Let's face it, these banking and financial wizzards have killed vastly more people and created far more widespread human suffering on an international scale than the despots in Bosnia and Africa. And they did it not from some misguided goal to settle an old score, or to preserve a culture, but just plain personal greed. And the evidence is they don't care that they did it.

    I have not seen any expressions of remorse, or willingness to pay back their unethically obtained wealth, or to apologise for creating the world financial disaster, or to present themselves to the World Court in the Hague for prosecution for Crimes Against Humanity.

    On the contrary, these people are asking for their big bonuses again, they are increasing bank charges for us all, and they are acting to prop up their empire so they can do it again.

    Adrian Raine - Penn Criminology - and others have conducted brain scan studies on Psychopaths in jail for murder and other heneous crimes. Studies on white collar criminals indicate a similar brain structure deformity which also prevents these people from having a conscience that would stop them from doing serious damage to other people.

    Studies show these criminals can tell you that behavour such as stelaing, murder etc is wrong; they understand the ethics, morals and social rules. But when it comes to the moment of deciding to act or not act in a destructive and anti-social manner, the feelings of concern for others, guilt, revolsion etc that might constrain people with a fully formed brain structure, simply can not happen with these Psychopaths. And afterwards, these people feel no remourse, guilt etc about their actions. And they can do it again tomorrow.

    Notice the same behavour in the bankers and financiers who presently dominate business leadership? These same guys and gals who now still expect massive salaries and bonuses despite the fact they wrecked the world finance system? And despite their leadership creating worlwide human suffereing, deaths and businesss collapses; because of their (ongoing) greed?

    MBA programmes might be teaching business ethics, but their dominant graduates - who have climbed to key leadership positions - are not practicing it.

    Perhaps it's time for MBA programmes to protect their image (and the rest of us who put our faith and trust in these people as leaders) by weeding out the bad eggs, the criminal elements; those without the physical brain structures Adrian Raine has identified will allow them to have a conscience, a sense of right and wrong, and the ability to put concerns for the broader community ahead of personal greed, exploiting the rules, and other unethical - perhaps criminal - activity.

    It could well be that people with the same physical brain deformaties which allow them to be remoursless serial killers, are also running the big business we hope we can trust. Perhaps it's time MBA schools did some brain scans as well as talk about ethics. Students with these deformaties will be able to pass exam questions about business ethics, but they lack the physical brain structure to allow such important human compassion - and long-term business ethic - values to balance against their personal human desires.

    Can we afford to have the world's financial destiny in the hands of Psychopaths?

    Can we survive another world financial crisis; which they have the remoursless ability to engineer again?

  • Report this Comment On March 11, 2010, at 8:23 PM, kasho wrote:

    Funny, all these MBA scumbags also went to high schools, junior high schools, and elementary schools. I propose that we shut all those schools down for producing all these unethical business people

  • Report this Comment On March 11, 2010, at 8:32 PM, eggman004 wrote:

    I don't know, but I think there might be a correlation between education of management and how well the business does long term...just maybe.

  • Report this Comment On March 11, 2010, at 8:36 PM, eggman004 wrote:

    I agree with kasho. There is obviously no correlation between education of management and long term success of their company.

  • Report this Comment On March 11, 2010, at 8:57 PM, KeitaiOtaku wrote:

    I wonder if the problem is built into the MBA culture. By definition, anyone who wants to lead, should absolutely not be allowed to, as they will typically have the moral compass of a snail (a light interpretation of Douglas Adam's highly entertaining novels).

    Correspondingly, MBA programs are designed to teach people how to lead. Which means that people going into the programs have a desire to lead, which means they shouldn't be leading!

    This is all a little tongue and cheek, of course, but think about it: the ambitions of the MBA student is to lead a company, skipping past the real work of making the product itself. Is getting the MBA all about getting the easy money?

  • Report this Comment On March 11, 2010, at 9:01 PM, jhh3000 wrote:

    So this article has shown a null corollary between top B schools and successful companies, but hasn't touched on causation. This is just speculation then.

  • Report this Comment On March 11, 2010, at 9:01 PM, jhh3000 wrote:

    So this article has shown a null corollary between top B schools and successful companies, but hasn't touched on causation. This is just speculation then.

  • Report this Comment On March 11, 2010, at 9:12 PM, hegibson wrote:

    It seems to me that the problem is more a character issue than education. If you educate a thief then you have a thief that is potentially more sophisticated in his thievery. Greed is a character issue. A presupposition of Western culture is that education can cure all ills. If this is the case then should we not expect to be more of a utopia than what we are? Now education can give people skills but it rarely does anything for the human heart which affects character. In fact most of Western culture now operates with a flawed anthropology whose presupposition is that people will usually do good to others. I wish that this was true but the reality is that it is not. Business schools will not turn out "better" (moral) people, they will turn out people who have been trained in a certain mindset and skills which they may use selfishly or for the good of others. As the preacher (Solomon) said, "There is nothing new under the sun." Mankind is a mixed bag and always will be until the end comes.

  • Report this Comment On March 11, 2010, at 10:45 PM, irelandsown wrote:

    Fred Smith is an "excellent CEO" and also one of the owners of the Redskins. Just saying...

  • Report this Comment On March 11, 2010, at 11:04 PM, HHComanche wrote:

    Dr. Deming long ago strongly asserted that 'one day MBAs will be a dime a dozen'! Perhaps something about the 'stability criteria of a negative feedback control system' should be included in the MBA curriculum.

  • Report this Comment On March 11, 2010, at 11:22 PM, wesevans wrote:

    The problem may be that the top students are promoted too fast and never learn what actually makes a certain industry work or a business organization function. They learn to be corporate technicians come bureaucrats not leaders or business men. Great at argumentation, staff, and politics not so good as decision makers and leaders.

  • Report this Comment On March 11, 2010, at 11:38 PM, dikrew wrote:

    I neither agree nor disagree with the article. But I sure enjoyed all the discussion it sparked. I suspect that was the author's intent. Well Done!

  • Report this Comment On March 12, 2010, at 12:02 AM, ernieslog wrote:

    if my memory serves me correctly fed x was based on a paper (maybe a thesis) that fred smith wrote as a student at yale

  • Report this Comment On March 12, 2010, at 12:07 AM, XMFRael wrote:

    there must be more to life than this.

  • Report this Comment On March 12, 2010, at 2:04 AM, ElCid16 wrote:

    If I had received this "softball pitch" essay on the Analytical Writing portion of the GMAT, I would have scored a 6.0. Talk about confusing causation with correlation...let me set up my counter argument outline.

    "Even though the study considers only a very brief time frame, we should probably acknowledge that there is a larger, cultural problem at work here..."

    Body paragraph one. If the study was brief, then we shouldn't make any sweeping acknowledgements.

    "The giant business-school machine is precisely what has spawned...so many of the money-can-solve-all, greed-is-good types"

    Body paragraph two. Precisely? You say elsewhere in this article that you'd like to know more about the current curriculums of b-schools; however, in this statement, it seems that you know what b-schools teach so well, that you can pinpoint precisely what b-schools have spawned.

    "clearly, there's something in the way these schools market and recruit...that has created so much problematic leadership."

    Body paragraph three. Now you are not only blaming b-schools for spawning bad leaders, you are basically insulting everyone who has ever been accepted to b-school, by saying b-schools seek problematic leaders. Yet another sweeping, non-factual statement.

    Too easy man...too easy.

  • Report this Comment On March 12, 2010, at 2:37 AM, ET69 wrote:

    Since when does an MBA have anything to do with honest ethics? Hell capitalism and honest ethics are an oxymoron. I'm afraid these guys don't even know who Cotton Mathers was. For every honest and decent boss I have had I can show you a dozen who were self centered scum.

  • Report this Comment On March 12, 2010, at 3:12 AM, dilhavarti wrote:

    From a CFE perspective, balance sheet fraud affects a victim company to a far greater degree than all other types of fraud combined. Irrespective of education, senior executives cause far greater damage in this area of business risk.

    As I grow in my career, I realize the importance of having CEO/budget-focussed leadership with a close-but-different CFO/accounting-focussed actualizer. Until this type of thinking, ie, two different perspectives, takes root, MBA vs non-MBA will probably have negligible differences.

    Let the shareholder decide.

  • Report this Comment On March 12, 2010, at 4:07 AM, bertrambird wrote:

    Well done! A very good article, as you certainly twisted lots of little tails.

    Of course, the angry retorts have some justification, and some of the arguments are good. I think there are problems, but you need to break them apart, as you would in an MBA class, and see what they show. I'll throw a few in.

    - An MBA is a way to impart theory and knowledge about business, quickly and intensively. It is not a substitute for experience. Every profession has an "apprenticeship" phase (doctors, lawyers, accountantss, architects, engineers...), so why should management be any different. So an MBA prepares you for management, it doesn't make you a senior manager.

    - The best managers and executives seem not to need an MBA to be the best. MBAs did not exist 50 or 100 years ago, and they had massive enterprises then. Some people just fly through the ranks. But they should do this based on results, not qualifications.

    - Appointments to senior positions should be handled with extreme care and based on track record and experience, not paper qualifications. The board of an enterprise has a responsibility to appoint really good people. Too many "bright young geniuses" were backed in the dot.com and subsequent fiascos, including the recent financial crash. Jusr because you are old and don't understand something, it doesn't mean you trust the fastest-talking, best PowerPointing young thing.

    - My experience is that pushy and self-confident wins within organizations these days. Often there is trail of destruction through the careers of people with these attributes (assumeing there are discernible career histories). The recent and next bottom lines should not be the only measures of success.

  • Report this Comment On March 12, 2010, at 4:33 AM, jfrankh57 wrote:

    I am in a MBA track now and I can say that the emphasis is on the economies of various endeavors. What can you realize as income/profit and the little covered areas are often short shifted, such as good ethics. I have been an investor since 2002 and I rail against the opulence of teh corner office, and against the boards that sign off on that opulence. The only CEO who should get the lion's share of income/profit should be the CEO who OWNS his/her own company. As long as a publically traded company has a good solid foundation, the CEO does not need to be Steve Jobs, i.e. INDISPENSIBLE nor traded at such premiums as is the current and recently past grand masters. One last thought, I have always hated the idea of a golden parachute...all that does is pay some idiot for failure...sorry, I should say the board of idiots in general pay for failure, the arrogant type A gets his/her craziest desires fulfilled.

  • Report this Comment On March 12, 2010, at 4:35 AM, mattius10 wrote:

    Nick,

    Exactly which BusinessWeek study are you referring too? Not only does the BusinesWeek study that henryking cites find "a definite correlation between holding an MBA and achieving high performance as a CEO", but the study also seeks "to judge the performance of business leaders in a new way by focusing on objective gauges of long-term performance". A time frame which is the opposite of what you suggest in your article: "Even though the study considers only a very brief time frame."

    Your statistical reference regarding the % of CEOs w/ MBAs also seems to intentionally mislead readers.

    "the buck stops with the leaders of our Fortune 500 companies, a huge percentage of which are proud graduates of big-time business schools. As of 2006, out of the 62% of Fortune 500 CEOs who hold an advanced degree, a full 39% have an MBA. That large number..."

    According to these numbers, it means less than 25% of the primary leaders of the largest companies have a Master of Business Administration degree. I find it hard to believe anyone would consider that a large number. While the statement about the "huge" percentage of Fortune 500 leaders that are "proud" graduates of big time b schools is just one example of several extremely subjective statements.

    These issues along with others raised by earlier commenter's and combined with the fact that the Fool is featuring this article as a must read on its main page causes me great concern. Please provide your explanation. Otherwise i will need to seriously reconsider whether i should continue my 2 subscription services with the Fool.

  • Report this Comment On March 12, 2010, at 8:04 AM, pric6760 wrote:

    Here's the BOTTOM LINE..............it doesn't matter who you are...are if you have an MBA or not.......just do the RIGHT thing. That's somthing that doesn't get done enough this day in time. What you do in this lifetime will echo through out eternity....so treat your people right....because if you don't.....what goes round....comes round.

  • Report this Comment On March 12, 2010, at 10:15 AM, Canadiana wrote:

    I will be completing my executive MBA program this Spring. I started in September, 2008, when all hell broke loose on Wall Street, it has been interesting to see how the professors have reacted to this. Shock and awe mostly, some misgivings and uncertainties, but such programs have a momentum all their own, and the curriculum is still business as usual.

    The first year is mainly focused on the quantitative aspects of the program, the second, mostly on strategy and finance.

    What is striking is just how the quantitative aspect has taken a beating. Seth Godin said it right when he stated in his most recent book that there is bad news for MBAs who focus on quantitative abstractions because the easier things can be quantified the less value they have. Now computers or outsourced services can too easily handle the quantitative, so business schools have attempted to shift the focus on ethics, strategy, entrepreneurship and technology as a way to rekindle value for business education.

    I went into this somewhat with the intention to learn what everyone else does, so that I may more clearly differentiate myself in business and focus on the weak points, the greatest of which is the propensity to deal with abstractions rather than reality.

    Wisdom is not knowledge, wisdom comes from understanding and properly applying the knowledge that one has gained. Wisdom is not taught in business schools. Those that rise in the corporate ranks without an MBA at least have the advantage of having been constantly exposed to reality and its ability to kill egos and pie-in-the-sky assumptions, and to give wisdom a chance to grow.

    An MBA is valuable only insofar as it is used properly, no more and no less than any other tool.

  • Report this Comment On March 12, 2010, at 10:30 AM, TMFEditorsDesk wrote:

    @magnus84,

    Enjoyed your candor. I wish you good luck in your quest to be a "good MBA."

    -Anand (TMFBomb)

  • Report this Comment On March 12, 2010, at 11:17 AM, Turfscape wrote:

    Wow...there's one thing coming off my list of "10 things I would never expect to see on Motley Fool": citing Czabe.com in an article!

  • Report this Comment On March 12, 2010, at 11:56 AM, Elmer104 wrote:

    You neglected to mention that Dan Snyder ran a business that was successful. So successsfull that it enabled him to buy the Redskins. I have been a Redskin fan since 19967. I don't like the results he has prodeced any more than any Redskin fan does. But, to label him a failed business manager is nonsense.

  • Report this Comment On March 12, 2010, at 12:12 PM, cactuscreek wrote:

    Hey Nick,

    You are comparing cowboys to indians or apples to oranges, which ever analogy you want. The issue with the Redskins loosing is based on their coach being replaced every two-three years. Look at Tony Dungee, How long did it take him to build up Tampa Bay? Then after being let go, next year they win the Superbowl. Redskins could have done (may) do better this year.

    Having an MBA does not guarantee ethical responsibility, that is the individual actions and consequences.

    As an MBA student at 46, and a business owner, as well as a retired NCO from the Army, an MBA exposes opportunities and prepares an individuals for better opportunities. How the individual utilize their education and apply their morale values is up to them. As another person (bzw51) called it, " a crook is a crook, a saint is a saint," regardless of the education.

  • Report this Comment On March 12, 2010, at 12:36 PM, jfenlon wrote:

    This is a terrific article. The responses have been illuminating. You might take a look at the programs at Notre Dame and Rockhurst (Kansas City) to see how they address the ehics issue. I do not have an MBA. I did take business administration as an under graduate and was too immature to value what was being taught. I took an economics minor and discovered why it has been termed the "dismal science". That being said I have done post graduate work in past Russian history and the former Soviet Union, including the rigorous Russian language course at the Defense Language Institute.

    I believe that Karl Marx' error was his belief that you can mitigate avaricious tendencies in human nature with an organization chart. He failed to understand that generosity of spirit cannot be instilled through reorganization.

    Ethics is now a course in many law schools. Wonder how much of it takes. The old saw anout the accountant interviewing for a job goes something like this. From the interviewer " How much is two and two?". From the successful applicant "How much do you want it to be?"

    The law school corollary would be "What does this law mean?". The answer "What do you want it to mean?" The democrats like to refer to refer to the constitution as a "living document". There's a connection here.

  • Report this Comment On March 12, 2010, at 12:58 PM, jdsuserid wrote:

    This article is titled, "The Problem with America's MBA Programs." I don't see a list of problems, just anecdotes about a few bad apples being generalized to apply to a huge group of people. And Nick - you're speaking a bit out of school, no pun intended - there's isn't much real research here aside from a few stats, the rest of what you say is speculative.

  • Report this Comment On March 12, 2010, at 1:05 PM, jonathnr wrote:

    Silly. The average bschooler is 28, and that doesn't account for executive mbas. The proportion of an individual's knowledge acquired during bschool (which is primarily a networking scene with a bunch of foundation classes-including ethics-tossed in) is tiny. People learn primarily from their environments and their experiences within them, and whatever ethical foundation they've internalized and choose to apply

    Unless you change the incentives driving behavior inside some corporations, you'll end up with good people behaving "ok to somewhat badly," and ethically challenged people "doing evil." And sometimes this is-unfortunately- called "doing your job"

    If Jesus walked into an i-bank, he'd probably get more aggressive and sharky too:-)

  • Report this Comment On March 12, 2010, at 1:54 PM, moabite wrote:

    I've been complaining for years about MBA programs -- I work as a design engnineer in the semiconductor industry and have seen many disastrous decisions over the years made by MBA's who were applying what they learned in their programs, but missed many real-world realities. Many of their decisions may have led to some short-term cost savings (and bonuses to themselves) but frequently were the types of decisions that cost their company FAR more than was ever saved due to lost opportunities for large revenues. This is not the forum in which to cite my examples, but I believe there are many who can relate to this and could then find examples of their own.

    Part of the problem with MBA programs is that they are taught by people who were taught at other MBA programs, and the same types of failed ideas keep getting transferred from one generation of "leaders" to another.

    The article above notes that one school was proposing studying a failure, but that maybe shows one way how not to fail -- it doesn't necessarily show the way to succeed. Also, studying successes may show how something worked in one situation, but it may not work in another. It's time leaders started using their brains to evaluate their own situations and see what leads to the best result for their companies, shareholders, employees, customers, etc. for the long term rather than looking to how they can gain the most for themselves personally over the short term.

    I heard the following statement from my brother who just completed an MBA program: "Businesses are in business to make money: it's neither good nor evil, it just is." Does that mean that anything a business does to make money is okay, whether it is illegal, immoral, or not? Food for thought.

  • Report this Comment On March 12, 2010, at 2:26 PM, ramisdom wrote:

    I expect the only message many CEOs are likely to respond to are those that affect their compensation-shareholder valuations. If those of us dissatisfied with the conduct of SP500 mgmnt. were to demonstrate such by selling and investing in our own businesses and other alternatives, perhaps behaviour might be modified. Short of this I expect we'll see continued dysfunctionalism through many more generations and cycles of boom-bust as history has shown.

  • Report this Comment On March 12, 2010, at 2:42 PM, Adamantane wrote:

    As someone with advanced degrees (but not an MBA), and a very successful business career finally migrating into senior management, I find it completely astounding that there is a perceived need for "business ethics" courses or any other tutoring in ethical behavior.

    It is intuitively obvious what is and what is not ethical in all but the most conflictedly obscure or lifeboat-type situations. What's more I'm not religious, so that isn't a surrogate for having an ethical sense.

    If you don't know what is the right thing to do, what is just and what is decent, then you have no business being in any role of responsibility.

    I've been to a couple websites that purport to quiz visitors about scenarios and describe an ethicist's vision of ethical behavior in a business setting. Judging from the muddy logic and fuzzy weasely rationales for certain 'approved' courses of action that I personally consider to be immoral and unjust, some of these alleged experts have no credibility whatever.

    Be honest. Be just. Be kind. Give credit. Take the long view. Have the courage to speak up. Be accountable. Never perpetuate an inequity. Admit when you're wrong. Never take any action which might make you uneasy meeting your eyes in the mirror in making your way to sleep for the night.

    This is not synthetic organic chemistry, or astrophysics. Those last two can be difficult but being ethical is not.

  • Report this Comment On March 12, 2010, at 2:45 PM, wkwoody wrote:

    If you wait until someone in is an MBA program to teach ethics or morals you are already too late. (MBA Graduate)

  • Report this Comment On March 12, 2010, at 3:56 PM, grant224 wrote:

    Here’s a fun question for all you Fools!

    After reading this (and all the comments), and since MBA's have become so common now...

    Which designation is most “useful” (MBA, CPA, CFA, CMA, MPA…..)?

    Obviously, terms like “worth” and “useful” are subjective to the individual, so for simplification purposes, lets assume that by “useful”, I am referring to a high job placement rate and a high salary. It probably should also be assumed that for this case, a person’s interests and preferences do not matter.

    In addition, and sorry to keep covering my own ass, (but I feel some may point out the more obvious flaws in my question rather than answer it), but it should probably also be assumed that the University educational component of an MBA and a CPA ( now requiring an additional 30 credits beyond a bachelors to sit for the exam) are all equivalent in both time spent, price, and level of difficulty as the curriculum(s) presented by the organizations offering the CMA, CFA and other designations.

    Now that all thats out of they way I hope the opinions begin to flow.

    Eager to hear what you all think,

    Grant

    --I think I'll post a thread about this as well under "Ask a foolish question" as well... Sorry to advertise..

    http://boards.fool.com/Message.asp?mid=28366713

  • Report this Comment On March 12, 2010, at 4:40 PM, JoyDan wrote:

    Wow! First of all, I'm impressed with the response to this topic. I have lloked hard upon MBA programs since I turned down the notion of chasing after an MBA back in 1980's after completing 2 BS degrees, 1 Finance and 1 Engineering. The MBA seemed a slick packaging deal and for only 35 hours I was sure to get one too.....Hum... Not the calibre of rationale to turn my head. I of course was very familiar with MBA content, since the business school had already taken over the main content with a BS for Finance.

    The salient point I want to get across is this. Integrity in decision making has lost out when measuring performance. This is akin to saying "those who choose for the short term, are gone when the long term comes around" It is historical now, corporations and academia have both long records of rewarding the short-term and damning our long-term outcome. Considerations about integrity have lost principal. Oh, there's a word lost from the dictionaries at both most large corporations and Schools. Principals of governance for a corporation: It's not all about the bottom line for the next quarter.

    I believe Mr Kapur stated it fairly clear with "Despite their advanced degrees, far too many of them(Graduates with MBA's and PHD's) still seem to embrace similarly questionable values. Something much larger needs to be addressed."

    Principlas of strong Integrity my friends, have all been cast aside as a good idea, when you have time. Rather than the guiding light our forefathers had to go on. The impact of decisions are seldom scrutinized to the consideration of long term consequences.

    This is a fact of life.

    This is a great forum...Thank you.

  • Report this Comment On March 12, 2010, at 4:57 PM, mpendragon wrote:

    The people drawn to run businesses they didn't help create are often too eager to treat it like a cash cow for them and their friends, betray customers, and shrug off risk when it doesn't effect them personally. Too often the rewards are short term and the costs are long term and carried by others.

    You can't teach vision and passion. There is a place for people who can turn a founder's vision and investor's capital into a thriving business and I think that is where most of the MBAs come in.

  • Report this Comment On March 12, 2010, at 5:10 PM, ernieslog wrote:

    someone wrote earlier that eithic and capitalism are an oxymorian. there is nothing wrong with the market system (capitalism), it is immoral people and every single economic has this problem, no economic system in the last hundred years has committed the genocide that has occurred in the modern comand economies, russias, china and germony are examples of such command economies. i prefer using market and command instead of capitalism and communism. it is said that some asian economies are authoritan capitalism. now that is an oxymorian. you cannot have a market economy in a dictorship, and while i am on this rant some say that the market economy is the reason why health care is a problem in this country. one of reasons health care is a problem is this country is it is so heavily regulated, for example in maryland you cannot add a bed in a hospital withour permission from the state. do tell me i cannot spell, i know it but i am too lazy to learn

  • Report this Comment On March 12, 2010, at 5:24 PM, bizwiznatalie wrote:

    Wow! What a great example of irresponsible journalism and the misuse of statistical data. The author must be very unfamiliar with the MBA curriculum to draw such inferences. Of course it wasn't corrupt company cultures and greedy investors but nefarious b-schools that influenced these bad seeds! Ah yes I remember quite fondly my first class: How to Lie Cheat and Steal from your Stakeholders 101. I also remember the 3 different statistics classes and the research methodology classes I took as an undergrad. Your "correlation" proves nothing. Another mark against Fool's credibility.

  • Report this Comment On March 12, 2010, at 6:47 PM, Daveoffv wrote:

    Since Warren Buffet is usually held up as the answer to all problems, I am surprised no one has cited his advanced degree.

  • Report this Comment On March 12, 2010, at 9:10 PM, sciencedave wrote:

    This article talks about the MBA programs out there....seems to be producing leaders who are corrupt, too intent on results at any cost.....and afflicted with too much greed. I tend to agree. I have worked with somes of these types but it was not the MBAs that made them greedy and unethical...they were already greedy and unethical...the MBA just afforded them the opportunity (thru corporate promotion and advancement) to exercise those core distasteful values on a larger scale.

  • Report this Comment On March 12, 2010, at 10:04 PM, RaiddinnRZ wrote:

    For the record, I went to business school because I really thought that my skills, ideas, and temperament would allow me to help build businesses the right way.

    Maybe a lot of people get into it for the wrong reasons, but those people are probably still the vast minority.

    The problem comes in what sorts of things are rewarded highly in the current employment system. Regardless what someone's major is, if they are rewarded for acting unethically they probably will.

    We just need to find a way to ensure that both the business and the manager are rewarded when the manager operates ethically. Business schools should devote large blocks of instructional time to this sort of subject. More than they do.

    The people who are inclined to do whatever they can to get ahead need to see it as in their best interest to act ethically.

  • Report this Comment On March 12, 2010, at 10:58 PM, fly4vino wrote:

    The fundamental problem with many MBA programs is that they are focused on "management" rather than leadership. Compounding this is an excessive focus on the paths followed by successful businessmen (and women) rather than an analysis of what caused them to make each turn in the path.

    The arrival of the laptop and allowing it to be used in class has created a whole generation of young MBA's who lack situational awareness. The results are not pretty. However, in spite of these practices and the lack of adequate emphasis on leadership, there are plenty of very bright, well trained and highly ethical young leaders. Most of them entered the program with some leadership experience and built from there.

    There are three callings where real leadership is develped - coaching, preaching and the Marines. It's not surprising that students with one or more of these experiences do well in the MBA programs and very well after graduation.

    Are there valueless MBA's of course. However the same statement can be made regarding lawyers, doctors and other professionals. The real problem occurs when valueless leadership is allowed to flourish.

  • Report this Comment On March 13, 2010, at 12:29 AM, bert111 wrote:

    Under the heading of full disclosure, I'm a management professor, teaching for a highly-ranked school.

    The business case model was popularized at Harvard, as a way to provide students with tangible examples of real-world success – efforting to span the divide between theory and practice. This migrated to cases that presented the student with un-resolved real-world challenges -- requiring them to analyze the problem (quantitatively and qualitatively). Other business schools followed in the adoption of this approach.

    Then The Halo Effect came out, which noted that there is a self-selection process at play when we study only the successes. This increased the popularity of case studies focused on the causes of failure -- providing some measure of balance --, and it appealed to business schools because it allowed faculty to meet a recognized need in industry for increased education on ethical conduct by executives.

    Ultimately, business schools provide students with a quiver full of arrows for tackling the challenges faced by executive leaders. Confront a decision of whether to expand a product line, and you should consider IRR, NPV, force-field analysis, IES factor assessments, perceptual mapping, and Norton/Kaplan's Balanced Scorecard, among others. Each is an arrow in the professional quiver.

    None, alone, is sufficient, given the complexity of market economics and organizational dynamics, and, collectively, they are imperfect. They are, however, superior to the alternative of an empty quiver, just as the investor who cannot analyze the financials of a company operates at an overwhelming disadvantage to other investors.

    Can business schools do better? Yes, but only in small ways. Most business schools teach the same materials as found in other business schools (including modules in most classes devoted to business ethics). Take a decision analysis class at any reasonably decent business school and you will learn to create models and perform sensitivity analysis, and every decent operations research course will include linear programming in its curriculum.

    Where we confront a greater challenge is with breakthroughs allowing us to address the problems identified by Taleb in the Black Swan -- the non-standard, non-Gaussian issues that arrive in complex systems.

    For example, I spoke with one of the creators of CDOs and CDO-squareds, who, during the height of their popularity, argued that they allowed more American's to achieve the dream of owning a home and reduced investor exposure to default through diversification. The problem they overlooked followed from excessive reliance on data modeling (higher-order statistics). When creating these instruments, they had to estimate default rates for new mortgage instruments lacking a sufficient prior history. To resolve this problem, they used distributions derived from systems they deemed appropriately similar to each, but, of course, had no means of verifying their un-test-able models. Consequently, they never expected that sub-prime and Alt-A would have nearly-perfectly correlated default rates. In other words, the quants fell in love with the math and checked common sense at the door.

    Now, I've know this devoted of mother of two little girls for many years, and the problem was not one of a deficient education or a poverty of ethics. Nor was the problem attributable to an insufficiency of theory -- there are enough theories to keep the world's business consultants gainfully employed. Instead, the problem was complexity.

    Of course, the pious may argue that this human failing was ethical in nature, but, for the purposes of discussing this article, inadequate ethics among executives is not a failing of modern management programs. Brutus Iscariot, who sat on Christendom’s board of directors, suffered this flaw, and he did not graduate from a top MBA program. Greed and deceit are not modern inventions, nor are they more common because MBAs walk among us.

    Regardless, the problem is not with the desire of a management professor to use a sports coach as a modern example of what not to do. He sought only to make the class materials more current and germane to his students.

  • Report this Comment On March 13, 2010, at 11:46 AM, TMFTomGardner wrote:

    Bert, you make some terrific points, and thanks for joining into the conversation.

    In my experience, the primary flaws of a business school education are squishier, more qualitative, more personality-related, et cetera.

    In that way, citing that most MBA programs teach perceptual mapping, force-field analyses, et al, is core to the problem.

    Those training tools are often used to optimize profits over a 1-5 year period. There are two problems here. 1) Organizations are not created solely to generate profit. 2) Making a priority of profit over a 1-5 year period can put an organization at serious risk over the next 5-10 years.

    MBA programs are feeding into the criteria that Wall Street firms are using to judge public companies. We can call it "quarterly earnings". It would be more reasonable to call it "annual earnings." The average holding of a public company is down to something like 6 months at this point -- so maybe we anchor there.

    The natural extension of all this shorter-term and profit-driven thinking is the active use of leverage to juice returns. That's what leads to CDO modeling, and I think your example almost perfectly captures the problem. "Hey, this looks good for everyone in the short term...my quiver of tools confirms it!"

    The tools suggest that a lot of people can get optimized results over the next five years -- and so the machine goes into action (sales, accounting, financing, marketing). The largest rewards are tagged to 4-year vesting options...which helps set the levels of risk leadership will assume (knowing that 6-10 years from now, the next generation of leaders will have to deal with the mess, the bad publicity, etc...hello, John Thain!).

    In the end, the MBA programs are just feeding into this machine. Not all programs equally. And certainly not all MBA students. But the momentum is to prepare students to optimize results in a system that overrewards profits generated over a 1-5 year period.

    What gets left out?

    How to balance the four constituents of a healthy organization -- the needs of the employee, of the customer, of the shareholder, and of society. MBA programs have bought into Uncle Milty's weakest argument -- that organizations are created to serve their shareholders. That's a very imbalanced view that is leading to very imbalanced corporations.

    I am not surprised that organizations like The Container Store and Whole Foods were founded and are still run by college dropouts (Kip Tindell and John Mackay were roomates at UT). Both are intensely focused on making sure that customers don't get more than employees....employees don't get more than shareholders...shareholders don't get more than customers...and that everyone needs to be positioned for the greatest success over the longest period of time.

    In my observation, the balanced approach to business is not being taught in MBA programs. The idea of building something that sustains itself measured in quarter centuries is not a priority. There are bankers in this world who looked at the exact modeling you describe above and who said -- Yes, that'll work very well in a bubble of optimism, but I'm building my organization to be prosperous AND stable through all environments....which will mean less rewards for everyone over the next 48 months but real rewards for everyone who stays with us for the next 48 years.

    This is not easy stuff to master. Jim Sinegal makes it look easy, but it isn't. The MBA program that taught this style of leadership thinking, people development, customer service, super long-term profit growth would be a nice feeder school for The Motley Fool. Put simply, I'd rather find an MBA student that learned how to give and receive feedback in an extremely skilled way...than one that had a dozen quant modeling arrows in their quiver. That's partially because everyone else is teaching that, but mostly because I think excellent feedback skills, for example, are a better indicator of long-term professional success (I can't say how well it help folks generate profits in the next quarter though.)

    Foolishly,

    Tom Gardner

  • Report this Comment On March 13, 2010, at 11:53 AM, jvill wrote:

    As a Columbia MBA, I'm certainly a little biased on this topic. But I will say it's pretty shocking to me the number of people posting to this thread that wrap a nice-sounding package around... well, total nonsense.

    There were many examples, but this was my favorite bertrambird:

    "- The best managers and executives seem not to need an MBA to be the best. MBAs did not exist 50 or 100 years ago, and they had massive enterprises then. Some people just fly through the ranks. But they should do this based on results, not qualifications."

    There really are a lot of logical fallacies and faulty assumptions packed into this one paragraph. But let's focus on the one supposed fact: "MBAs did not exist 50 or 100 years ago." Five minutes with Google or Wikipedia would have explained that MBA programs have been around since the early 1900s at Harvard and Dartmouth. The precursor for the MBA -- management sciences -- has been around since the 19th century. Forget all the subjective arguments and assumptions in this thread, this is simple fact, and the writer is just making things up.

    I didn't need business school to teach me ethics -- although our very first case was in fact on that subject -- and I didn't need an MBA to tell me that I should know what I'm talking about before I open my mouth. Many assumptions on this thread about why people go to business school, what they learn, and how classes are taught waver between ridiculously narrow to astoundingly and factually wrong. Just wrong.

    Following the logic of this article, should I assume that because some people are posting fantasies as fact that everyone who posts here is lazy and just flat out making things up? That Motley Fool doesn't screen their users for honesty and competence? After all, I've got handful of anecdotal data points. Clearly that's enough to smear an entire group or class of people.

    You know, a large number of our recent business problems have come from faulty regulation, weak regulators, and derelict accounting oversight. Will there be pitchforks for CPAs next week? Will the readers of Fool.com, who tend toward the economically conservative, continue to champion deregulation on some threads, and lament the lack of ethics in the other threads?

  • Report this Comment On March 13, 2010, at 3:37 PM, puritanmigrant wrote:

    My elder brother and I have published a book called THE PURITAN GIFT, which addresses this subject head on. In January of this year, Sarah Cliffe, Senior Editor of the Harvard Business School Review, described it as "astonishing," adding 'I’ve never read a business book that packed so much information, history, and insight into one compact volume."

    Manchester Business School in England has prescribed the book for all its students and made us both Visiting Fellows, as has the Drucker Institute in Claremont CA. In other words there is a growing realization in some business schools that something has been seriously wrong in the way MBA students are educated -- and that there is a need for change. In our Appendix, we lay out 25 principles on which good business education should be based.

    We are about to sign a contract with a leading Tokyo publisher for a Japanese translation. I do hope that the Japanese do not get the point before the Americans and the Brits. (My brother and co-author is a US citizen and I am a British subject.)

  • Report this Comment On March 14, 2010, at 12:41 AM, bert111 wrote:

    Nick, thank you for your openness to critique, and, Tom, I'm honored to read your response addressing my note. Without attempting to persuade you off your position, allow me to raise a small number items designed to advance the discussion further.

    First, there are an assortment of constraints preventing strategic planning beyond the five-to-ten-year range. This, of course, does not comport with standard doctrine, which asserts that CEOs should think at the 20-year mark, C-Suite execs at 10-to-15 years, VPs at 7-to-10 years, etc., and even Warren Buffett has indicated that he is loathe to invest if unable to envision the company's strategic standing 20-years hence – with Buffett noting that this constraint limits the number of firms ripe for his consideration. Given the pace of competitive, legal, and regulatory change in an international environment, five-year planning is not just short-sighted (it is, of course), but it is necessary and prudent, as well. The five year standard, however, primarily applies to breakeven, NPV, and IRR analysis with new products and service line proposals. It stands as the threshold for whether to undertake an opportunity, but it is not the expected life-cycle of that initiative.

    The story concerning CDOs served to argue that those producing them justified the exercise based on more than greed as the motive. For my friend, she strongly believed that many Americans of suspect income possessed the starch and resolve necessary to make good on their mortgages if only given the chance to exercise that compliment of American traits. Indeed, this belief was based on her upbringing, where her father found it exceedingly difficult to get a home loan on his US Postal Service salary in the 1950s and 1960s. Ultimately, he persuaded a banker to give him the loan, and he and his wife worked two jobs (each) to make ends meet. In fact, her friends describe studying at their home when she was in high school, where they had to be quiet because her father was sleeping after working through the night.

    Of course, lending standards that do precisely what you urge (i.e., giving greater credence to the character of the broader compliment of stakeholders) increases the risk of default, and she firmly believed that CDOs provided that additional margin of safety through diversification designed to limit lender exposure to the "tails" of a normal Gaussian distribution.

    Now, all of this is important when it comes to ascribing motive and intent. This was not a case of short-sightedness; otherwise, the higher-order stats would have been given less consideration. It was not a case of idiots being given command of units possessing complexities beyond their training or experience -- the best educated and brightest we produce were deployed toward this effort. It was not the modern equivalent of Eichmann, where bad people justified their actions after the fact, with spin designed to make them appear charitable or less evil. Certainly, each of these may have been present with a small compliment of actors, but the singular truth is that none could factor in the residuals (outliers) associated with complex, inter-related systems.

    In much of management, we rely on statistics based on distributions. The most common distribution is the bell-curve, but there are other distributions used in management, as well. For example, a Poisson distribution typically defines queuing (the order line at McDonalds, for example). This is why referencing average PE ratios when trying to determine if the market is over- , under-, or fairly-valued is problematic. PEs are not normally distributed (bell-curved), nor are they Poissonic. Instead, they are best described by a Weibull distribution, with a small number of outliers possessing extremely large PEs that pull the average way to the right (higher).

    Despite this, we tend to assume the presence of a normal distribution in management. Not only does this make our analysis easier, it enjoys the credibility of precedent -- extending back to the research of Walter Shewhart at Western Electric in the mid-1920s. But ease and precedent are the predicates and predictors of failure if applied inappropriately.

    This is a problem, but it extends much farther, as Taleb notes (Black Swan). Even when you have multiple, inter-related systems, where each is normally distributed, the combined result is not, itself, normally distributed. Instead, the distribution possesses exceedingly large tails.

    This is why a company can chug along, posting consistent results, and, against all odds, produce results that beat market expectations beyond all reason. It is why speculative bubbles appear with greater frequency than a normal distribution would imply -- a recognition that won Kahneman and Smith the Nobel Prize in Economics in 2002. This applies to market crashes, medical errors, the Chernobyl, Challenger, and Concorde disasters, and it is at the core of crisis management as a research discipline.

    And it is why management finds it exceedingly difficult to plan beyond 5-years into the future with anything remotely resembling accuracy or reliability.

    Of course, I don't have to tell you that. Consider the ebb and flow of the market's view of the Motley Fool and its prospects going forward. At one time, you were the golden child, then the dog, and, now, somewhere in between, and the same will hold true of Facebook and Twitter. Did you, in reality, expect this degree volatility? More importantly, did you accurately project the Fool's performance this year when creating your strategic plan five years ago? If you did, the Gods smiled the day you were born -- according to you an uncommon degree of prescience ... beyond reliable replication.

    Finally, there is one item with which I disagree strongly. It is not the case that business schools fail to teach a balanced respect for the goals of profitability, customer satisfaction, employee value, and contribution to society when it comes to the strategic imperatives of competitive-market organizations.

    First, Harvard's Michael Porter was not the first to recognize the competitive advantages associated with branding, but he is, perhaps, the most eloquent. While branding is a marketing consideration (primarily), with strong implications for strategic benefits, branding explicitly recognizes the advantages of valuing customer perceptions based on an organization's culture and the difficulty of faking a customer or societal focus. I mention this first, because it is the less well-recognized of the two items I'll describe.

    Second, as with branding, Total Quality Management, Continuous Quality Improvement, and Lean/Six-Sigma are taught in every competent MBA program world-wide. Each may be defined as a variation-narrowing, data-driven, incremental-improvement of process quality to the benefit of the customer -- with the customer defined broadly enough to encompass the organization's reputation throughout the broader society ... including the workforce.

    Of course, teaching it is appreciably different than what materializes in practice, but we do teach it, and it is a significant component of every Capstone final-presentation. In fact, a review of the leading texts on each subject indicate that it receives consistent emphasis as a component of classes seemingly unrelated to TQM -- including, finance and accounting, organizational theory, strategic management, operations research, marketing, etc.. It was when I earned my MBA, and it is part of my curriculum when teaching Org Theory, Policy, Quality Controls, Marketing, Budgeting, and Performance Psych.

    While I would like to believe that my classes are unique or that the programs for which I teach are superior, I feel confident that the other MBAs among the Fool community will confirm that this was a recurring emphasis during their studies, as well.

    Again, my thanks to you both (Nick and Tom).

  • Report this Comment On March 14, 2010, at 12:23 PM, elsimone wrote:

    I am an MBA student and I disagree with the thrust of this article for the following reasons: 1) The problem with today's leaders isn't the fault of the schools from which they came, rather they are the product of today's culture. School's were not designed to instill virtue and integrity and a moral compass in the person. That's the reponsibility of their PARENTS, their community and their church. 2) Most MBA programs today DO study intently the failings of other businesses and provide case studies where it's up to US to determine what went wrong. In the cases of Enron, World Comm, and others; the answer is quite simple - ethics, morality, and greed. Most MBA programs today DO offer ethics courses, but in the end, it comes down the the integrity and moral compass residing within the individual - NOT the school.

  • Report this Comment On March 14, 2010, at 1:58 PM, modeltim wrote:

    One of the big problems with MBA's and other nebulous certificates like PhD in Economics is that they are seen by many as a ticket because many employers use them as a screening filter to eliminate "less qualified" applicants. There are just too many mediocre or worse individuals in the real world with such credentials. MBA schools and other related graduate fields are a racket - overpriced, overrated and overvalued IMO.

  • Report this Comment On March 14, 2010, at 4:07 PM, yeehaw1234 wrote:

    Going to business school doesn't change the fact that success is based on patience, trust, and personal relationships -- none of which they teach you in MBA programs.

    That's why so many MBA students coming out into the ranks are having adjusting problems.

    However, on the topic of "Greed" being the enemy, that's not the case, and the author is taking it to the extreme. Capitalism is good. However, no system is perfect, and neither is capitalism.

    But I urge you to consider: poor fifty years ago meant not being able to eat. Poor today means having one car, living in subsidized housing, and eating off food stamps -- a significant leap, if you ask me.

    Greed is good... on the whole. Yes, I think guys going "scorched Earth" to make a few extra million need to be reigned in, but when investment banks and commercial banks make money, everyone else makes money, too, because then the banks lend.

    I guess my point is, if you don't like America and our economic system, than go somewhere else. No one's making you stay.

  • Report this Comment On March 14, 2010, at 11:51 PM, JSMBAPhD wrote:

    There is nothing wrong with an MBA degree.

    Increasingly, MBA programs stress practical problem-solving through internships in the community. The days when Gordon Gecko finance was supreme are long ago. If I have a criticism of the MBA, it is that the students are too burdened with trying to earn a living and raise a family while going to school. They get stretched thin, and cut corners.

    But the MBA is a degree in business *administration.* It is not a degree of business *leadership.*

    Being a CEO means having a vision and being willing to do anything (ideally, anything *legal and ethical*) to bring it to being. An MBA can help--lots of CEOs sabotage their own companies by administering them poorly-- but it is a tool for a craftsman to employ.

    BTW, Fred Smith is an ironic case to cite. Had his luck at the blackjack tables been just a bit different, he might have ended up making license plates.

  • Report this Comment On March 15, 2010, at 10:43 AM, jutforfun wrote:

    You have to be very careful with MBAs. An MBA degree has to be a secondary degree, primary degree has to be in the field the business is in. If you are cheif of Engineers, then you better have a degree in Engineering first and a few years of hands on experience, and then may be an MBA. In this example an MBA without engineering degree and experience will do so much harm by making wrong decisions. An MBA degree does not guarantee success, most higly successful people in business do not have MBA degree, some dont even have any degree.

  • Report this Comment On March 15, 2010, at 10:48 AM, spyderfngrs wrote:

    Most agree that when an entrepreneur develops a successful business (read takes the risks) and stimulates employment and economic growth she/he deserves to reap high rewards and rightly may feel some entitlement to those rewards. This entitlement has shifted to corporate leadership with questionable justification and consequences. Are not these executives employees rather than owners? I agree they should be well compensated for their efforts, but as we can all see something seems inordinate.Does the captain of a sea vessel own the vessel? There is a consciousness that is shared by many employed managers that they are entitled to reap the benefits of ownership and the shareholder representatives (read directors) have lost control of their employees, in some cases because they share the consciousness of entitlement. After we've given adequately generous compensation to those employee managers who have not run the ship aground let's redirect those profits to the owners (read shareholders, risk-takers). The current culture of pride, greed, and entitlement is a cancer in our market requiring a surgical solution.

  • Report this Comment On March 15, 2010, at 1:38 PM, plange01 wrote:

    for mba's no jobs at all or they wind up working for people who dont have them and hold them back for it....

  • Report this Comment On March 15, 2010, at 4:17 PM, gomdp wrote:

    Like most education institutions in the US, MBA schools are in the business of making money so they pull out all stops to attract students by promising highly financially rewarding careers and the bar for incoming students is set very high. So only the "smartest", the hard-working, the very ambitious and ones motivated / driven by big pay-offs will apply and get in.

    After spending 100K+ on tuition, burning midnight oil, giving up personal life and the opportunity cost (lost wages, promotions, etc), what do you think someone with MBA degree is going to do ?

    Go wherever s/he can to make the biggest bucks and in the fastest possible way. That means bending some rules, compromising ethics and morals, etc. It's about maximizing ROI, isn't that what they teach in Business schools ?

    Character and Ethics is not something that can be taught overnight by having / teaching a class or two. It starts as a child and has to be hammered in by parents, teachers, media, leaders (public and business), politicians, community and society as a whole, both by education and by being role models and setting examples.

    The root causes are greed, instant gratification, win-lose instead of win-win mentality i.e. winning is everything and at any cost, attitude of privilege and entitlement rather than duties and responsibilities, etc.

  • Report this Comment On March 15, 2010, at 4:26 PM, gomdp wrote:

    Totally agree withe "elsimone".

    B schools are merely a reflection of our society and culture.

  • Report this Comment On March 15, 2010, at 7:29 PM, teejk wrote:

    ...one of the longest threads I've ever seen...a lot of talk about "ethics" above (and I even saw some references to the legal profession that gave me a laugh). In modern BSchool I suspect the subject is fairly new (post Enron/WorldCom) but it probably doesn't matter. Learn what you will but MBA or BBA, you still have to take orders from somebody that may or may not require you to throw ethics away. Fact of life. And not relative to anything other than I always thought it funny..."study of ethics is not so much a road-map of how to do things right but rather a road-map of how to get around it and not get caught".

  • Report this Comment On March 16, 2010, at 1:28 AM, bert111 wrote:

    The cynicism is palpable in this thread, and that is a shame because it is reasonably applied to just a small percentage of business school graduates.

    I teach healthcare management at the master's and undergrad levels for a top-three school, with my students earning their MHA’s (the MBA of healthcare). The tuition is as significant as for most upper-tier MBA programs, and the curriculum is largely the same -- except my students take a small number of classes that are focused on the industry.

    Over the last three summers, alone, I advised four students who were working with non-profits on humanitarian efforts in various African nations on projects related to HIV, kidney disease, and youth education; contributed to a team that combined the resources of my university, Shanghai Normal University, and Eaton Corporation to finance and logistically support dietary/K-12-educational efforts in Himalayan Asia; undertook a turn-around management initiative for an orthopedic trauma center outside of Shanghai; consulted on operational and financial planning for the new hospital at Fort Benning; advised Veterans Administration leaders on laboratory logistic challenges; worked on a successful non-profit marketing campaign focused on funding cancer research for children in my home state; worked on a quality improvement initiative for the people of Portugal in collaboration with non-profit MAI, Soa Joa Hospital in Porto, and the government of Portugal; wrote four chapters and supporting materials for a year-long seminar on budgeting and finance for non-profit initiatives; and am presently involved with 15 projects designed to improve healthcare quality across the US ... for which I earned a grand total of $4,700 gross. Best of all, with the exception of the budgeting chapters, each of these was in support of initiatives by current or former students, and the budgeting project was funded entirely by Dennis Gillings (the founder of Quintiles).

    Now, you may suppose that this interest on bettering the world is a function of the link to healthcare. While many of my students are physicians and nurses, a significant portion are enrolled in the MBA program, while others are working executives in the pharmaceutical, medical device, healthcare insurance, and for-profit hospital industries. CEO, CFO, COO, and CPA are common titles among my students. One COO is undertaking an intitiative that collects donated, unused pharmaceutical equipment from the US and ships and establishes operations in Africa to produce generic medications for an assortment of third-world illnesses – including those that are waterborne (such as malaria). That project got its start in one of my classes, as did a successful start-up that produces high-quality, low-cost wheel chairs, walkers, and other durable medical devices for the fixed-income elderly in the US.

    Yep, the whole lot of us are just money-grubbing jerks whose parents never taught us right from wrong. For every Ken Lay or Jeff Skilling, I can point to 30 former students who are making a difference – often as not in rural settings in the US.

    Years ago, when I was studying international relations in Munich, I became friends with a US Special Forces captain, who told me that one trained and knowledgeable SF soldier, dressed in a suit and carrying nothing more than a well-equipped briefcase, could bring down the electrical grid and IT infrastructure of an entire metropolitan city. Folks, Bernie Madoff was an aberration that proves the damage a single, ill-intentioned perpetrator can produce.

    Of course, it is natural that, during times of uncertainty, our fears dominate our focus, and we errantly conclude that the world is ending because it is populated by incompetents and the despicable. Fear of the unknown prompts us to flinch and form the conviction that the motives of others are suspect, secret, and self-serving. “Be afraid … be very afraid” is the recurring mantra, and, if believing it and becoming seduced by it, it might seem a miracle that the internet, flat-panel TVs, microwave ovens, or hybrid cars would have been invented. Our fears and failures feel twice as bad as our successes feel good, research indicates, but entropy and the second law of thermo-dynamics (which contends that everything degrades or falls apart over time) is no match for human creativity and drive.

    Sam Ervin was my Great Uncle – the fellow who all but brought down President Richard Nixon over Watergate when I was a teen --, but it was Richard Nixon who declared war on cancer. Today, we are able to cure an assortment of early- and mid-stage cancers – breast, prostate, skin, testicular … which, combined, are diagnosed in something approaching one-fifth of us. We are even curing up to 80% of stage-one lung cancers – the leading cause of cancer death for, both, men and women. Life expectancy was just 47 years of age in 1900. Today it is 80, and, with bio-med and nano-tech, average life expectancy will approach 120 for my son’s generation (he is in college today).

    The only thing we have to fear is death. Until then, we have a fighting chance, and the totality of human history suggests it is folly to wager against the human drive to advance and improve. But those who argue that MBAs, as a definable class of humans, are the cause of our ills and traumas have fallen prey to the dark-side of loathing and despair – views that tend to herald the next advance. Wallow in finger-pointing and fear if that makes you feel better, but, regardless of your momentary angst, the rest of us have better things to do with the limited time available between that first slap on the butt and the Irish wake that celebrates a productive and purposeful life.

  • Report this Comment On March 16, 2010, at 1:41 AM, muddlinthrough wrote:

    On March 11, 2010, at 5:17 PM, mikecart1 wrote:

    "I'm getting my MBA this August and IMO this article is 100% incorrect. I will probably be one of the greatest leaders in the next 10 years."

    @mikecart1

    Mikey,

    This is exactly the the the article is discussing.

    Google 'hubris.' :)

  • Report this Comment On March 16, 2010, at 1:46 AM, muddlinthrough wrote:

    "BTW, Fred Smith is an ironic case to cite. Had his luck at the blackjack tables been just a bit different, he might have ended up making license plates. "

    I've always wondered about that myself. You fly to Vegas back then with that much cash and go gambling.

    Much better to make a deal with the Gambino family, or whoever was running things, that for a 5% stake in what might be a TERRIBLY lucrative shipping enterprise, could I please, please win enough to make payroll?

    A much more rational, if diabolical bet...and much easier explained than being incredibly lucky.

    And lucky for us the mob has NO history or association with extortion through interstate shipping routes.

  • Report this Comment On March 16, 2010, at 1:49 AM, muddlinthrough wrote:

    Obviously I'm gonna win LOTS of grammar awards whilst educating the about to graduate...

    'This is exactly the _thing_ the article is discussing.'

  • Report this Comment On March 16, 2010, at 12:08 PM, TMFTomGardner wrote:

    Bert, I hope you will come visit us at Fool HQ someday. We'd happily host your students. And I have no doubt you are setting a great example every day.

    I'm optimistic. I'm not sure I believe we're on the cusp of 120-year lifespans (virtually all of the move in life expectancy over the past century has come on the side of reducing infant mortality). However, I am an optimist.

    My comments above are about wanting to refine approaches to capitalism -- which I think have been ridiculously too focused on capital, and not enough focused on building, sustaining, developing, and leading. I'd like to change the word "capitalism" to something like "challengism", where we recognize what compensation experts like Dr Steve Kerr have been saying for many, many years....that high pay isn't as important in surveys of Americans..as are the combination of an inspiring purpose and a compelling set of personal challenges. The projects you cite in your response confirm that!

    What I have seen, though, at business schools (admittedly, the ones primarily focused in the Northease) is an incredible focus on left-brain analytics, profit mapping, competitor research, et cetera. I think the focus on profits for shareholders measured in the short term (five years or less) dominates the curriculum versus the three other constituents...which I believe should get equal time to the shareholder.

    The Customer. The Employee. And, Society. My ideal MBA program would spend 1/4th on how to generate sustainable cashflow. 1/4th on how to listen to, understand and meet the present and future needs of customers. 1/4th on how to work effectively in teams, give and receive feedback, develop others, expand on talents, sideline weaknesses and increase self-awareness. And 1/4th on how to make the world a better place for the existence of your organization (in a class at our own internal university at The Fool, one of our colleagues made an eloquent case for Netflix making the world a better place by teaching us how to innovate and how to develop a productive, ambitious and supportive culture).

    When I see MBA programs giving equal weight to customers, employees, and society...equal to the analysis of how to generate profit...I will become a huge believer. At present, I think the outweighted emphasis is on profits...and particularly those coming in the next few years.

    Fool on! - Tom

  • Report this Comment On March 16, 2010, at 3:44 PM, jslug54 wrote:

    I agree with many of the other commentors. You're holding 10's of thousands of business school graduates accountable for what a few people have done wrong.

    I saw 3 guys who happened to have communication degrees robbed a bank in the last 3 years - should I assume everyone with a communication degree going into a bank is going to rob it?

  • Report this Comment On March 16, 2010, at 7:24 PM, Netteligent09 wrote:

    Wall Street and management are more interested in short terms. Like doctors, as MBA employees, we do whatever it takes to make money, more money, maximize bonus, collect profits and stock options, and incentives.

    If you do not perform, time to look jobs somewhere else. Then leave the rest to someone else to worry. Everybody is for themselves. We love Wall Street, capitalism, and finance market.

  • Report this Comment On March 17, 2010, at 4:08 AM, RNML wrote:

    MBA degrees are not especially academically rigorous and they most certainly do not create management ability or visionary CEOs. They are useful adjuncts to real world experience and technical skill sets and are helpful in broadening understanding. Ethical standards in American businesses are most profoundly undermined by stock options and incentive schemes which lead CEOs into temptation to manipulate company performance for short term gain.

  • Report this Comment On March 17, 2010, at 5:01 PM, MBA09 wrote:

    Common sense does not require a degree and I’ll be extremely happy when people realize that.

  • Report this Comment On March 19, 2010, at 11:54 AM, questfordollars wrote:

    A while back Warren Buffett and Bill Gates spoke together at Columbia's business school. When asked about ethics in business school Buffett responded that ethics and values are best taught at home. He did not think it was a bad thing to teach at business schools, but not necessarily the place for it. There's a YouTube video of the talk out there somewhere if anyone is interested.

    Business schools teach fundamentals, tools, and frameworks. Shame on the Board of Directors for hiring someone without ethics.

  • Report this Comment On March 19, 2010, at 11:54 AM, questfordollars wrote:

    A while back Warren Buffett and Bill Gates spoke together at Columbia's business school. When asked about ethics in business school Buffett responded that ethics and values are best taught at home. He did not think it was a bad thing to teach at business schools, but not necessarily the place for it. There's a YouTube video of the talk out there somewhere if anyone is interested.

    Business schools teach fundamentals, tools, and frameworks. Shame on the Board of Directors for hiring someone without ethics.

  • Report this Comment On March 19, 2010, at 12:07 PM, Idahosehead wrote:

    MBA? BFD!

  • Report this Comment On March 19, 2010, at 12:26 PM, clemski wrote:

    Most universities are training and educating excellent employees not excellent leaders.

  • Report this Comment On March 19, 2010, at 12:34 PM, FoolJerryJo wrote:

    I used to work for a bank that, under new management, started hiring a bunch of MBA's and putting them in top positions. They immediately started making changes to justify themselves, before waiting to understand the business. I saw the writing on the wall, even though I was in the property department, and I'm not a banker, so I got out a few years before they went under. The fault here was not the MBA programs, but the cut-throat business culture that expected immediate changes/results.

  • Report this Comment On March 19, 2010, at 12:36 PM, FoolJerryJo wrote:

    I used to work for a bank that, under new management, started hiring a bunch of MBA's and putting them in top positions. They immediately started making changes to justify themselves, before waiting to understand the business. I saw the writing on the wall, even though I was in the property department, and I'm not a banker, so I got out a few years before they went under. The fault here was not the MBA programs, but the cut-throat business culture that expected immediate changes/results.

  • Report this Comment On March 19, 2010, at 12:37 PM, DGrimes75 wrote:

    I can fully understand that we need to find people to blame for our economic woes and it is easy to pick on the MBAs (yes, I have one). Ethics are taught in most MBA programs, but that won't solve the problems created by the "greedy" executives discussed above.

    The issue is the incentive programs that reward the employees and the incentives created by Wall Street (or should we say punishment from WS) to get the job done.

    Everyone here wants their stock price to go up, yet how many of you have dumped your shares after hearing an executive say they are investing in price or said thei profit margins are going down? How many of you have purchased a stock based on 30+ straight quarters of earnings growth? If so, YOU are the problem....

    It is not easy to buck the trend and most CEOs aren't like Jim Sinegal from Costco. He is one of the rare leaders that has enough company/board support to tell Wall Street where to stick it. For most leaders, if the stock doesn't go up, they get shipped out.

    I own a P&L and I have a number to hit...that number wasn't created by me (who knows what is possible/realistic...or the correct number to grow long term value. That number was created in order to hit an earnings target that was created to keep the analysts happy. It is wrong, but until the leader of my company (no MBA) can grow a sack large enoguh to tell off Wall Street, I will often have bad targets.

    I have voiced concern over bad targets and we do everything possible to keep from bad decisions... but I was oncee told "You have to be here to cycle."

    If I don't hit my number, someone else will. I have a good conscience knowung that I have always been able to do the job without sacrificing my ethics, but many don't have the luxury of putting their ethics against a bottom line picked by Wall Street.

    Fix investors, fix Wall Street, fix the incentives to hit those numbers and no one will cheat. Won't happen, but teaching ethics won't fix a thing either.

  • Report this Comment On March 19, 2010, at 1:25 PM, scrivener1 wrote:

    I have an undergrad finance degree and a JD. I completed half of an MBA degree. I stopped because I felt it was a waste of my time. Perhaps this article should have detailed some of the problems with the MBA curriculum, but it still makes an excellent point. An MBA will not make a person successful in business. Experience is probably most important, followed by marketing/sales skills, and knowledge of the law, i.e., how to keep out of trouble!

  • Report this Comment On March 19, 2010, at 1:39 PM, Cranchview wrote:

    In the recent book "Drive", a survey is mentioned that reported 56% of MBA students in the survey admitted to regular cheating. The original article was published in the September 2006 issue of the Academy of Management Learning and Education. The survey contacted over 5300 students at 32 institutions.

    Years ago I read a Peter Drucker book that included a different idea on the purpose of business than is usually heard. The purpose of business is to provide goods and services to its community. That community may be a neighborhood or the world. Profit is necessary to continue offering those goods and services. In a surprising (to me) addition, he included that the greatest disservice to American business is done by business leaders who continually espouse that the purpose of business is to make money.

  • Report this Comment On March 19, 2010, at 2:14 PM, MrMalaprop48 wrote:

    To err in business is human. It takes a couple of MBAs to really louse things up!

    My experience has almost uniformly been that once someone has an MBA, they begin to believe that they know enough about business, any business, that every one of their ideas is golden. Yet, if they are right 50% of the time, they are lucky indeed.

    Sadly many of the ones I have worked with did not ask others around them, especially their subordinates, for critical information that might help them make their decisions.

    This is not to say that there are not some stellar managers with advanced degrees, but many of the worst decisions in companies I have worked for have come from people with the MBA chip on their shoulder.

  • Report this Comment On March 19, 2010, at 2:26 PM, elf123 wrote:

    I am disappointed to see this article on the Motley Fool website, and as a subscriber to the Motley Fool, I was even more disappointed to find it in my email. It provides no new or useful information--unless you count the fact that Nick Kapur is "more dissatisfied than before." What's more, it lacks a well-reasoned argument. Kapur seems to use anecdotes (not well analyzed data) to take down a straw man of his own creation.

    How did such an article make it through Motley Fool's editorial process?

    Receiving drivel of this sort makes me less likely to renew my subscription.

  • Report this Comment On March 19, 2010, at 3:50 PM, VegetableFool wrote:

    This is an article that goes right to what I've been thinking for a very long time. I'm not against people with MBAs but the use of MBAs in business is edging on absurd.

    MBAs are not dumb people but their experience tends to be limited. They (from top schools) walk into highly paid seemingly responsible positions but they don't have what I consider the experience for the job.

    I know thats vague, but to me, its the MBAs who missed Enron, who ran the housing bubble, who failed to identify some basic weakness in the way things work. So what difference does experience make. Well over time you learn the truth of "if its too good to be true, its not true". If you gamble eventually you lose. Older people who have been through the mill tend to be more conservative with how they operate, more skeptical and discerning. What I think I continually see is people looking around and finding the action. When you are essentially given sucess in busines by virtue of a few classes and a survival of the fittest weeding out in your first job you end up with extreme people.

  • Report this Comment On March 19, 2010, at 5:32 PM, TC118 wrote:

    The ethics of people going into our business schools, law schools, and med schools reflect the ethics of our society at large. As a country we have shifted away from a sense of communal responsibility and toward glorification of the individual based on his or her financial status. Is it any wonder that MBAs most of whom go to business school solely for the bump in pay and status (rather than the love of learning) act the way they do?

  • Report this Comment On March 19, 2010, at 8:44 PM, bert111 wrote:

    Tom, thanks for the note, and my apologies for the delay responding. Interestingly, I was preparing a lecture on the 10,000 hours rule, the value of experience, the role of intuition (when it is superior to education alone and when not), the importance of mentorship, and, given all of this, the composition of teams. The reason this is interesting, beyond the obvious link to the merits and deficiencies of a management education, is that this lecture is one of several on the qualitative side of management for a class in the quantitative sequence.

    Please know that I appreciate the invitation to visit the Motley headquarters and may well take you up on such a generous offer. While I doubt seriously that it would benefit you or the organization you lead, please do not hesitate to let me if there is anything I can do in support of your efforts. http://www.sph.unc.edu/?option=com_profiles&Itemid=5650&...

    Robert (bert111)

  • Report this Comment On March 20, 2010, at 12:31 PM, gman5556 wrote:

    Stephen Colbert had an excellent bit on this. Look at most of the world's richest people. Most of them dropped out of their MBA programs. How to get rich he says? Get into a top ivey league school and then drop out like most of America's billionaires have done.

    All jokes aside, MBA's are about teaching strategic and critical thinking as far as I know. I am a firm believer that neither of these qualities are teachable. They are in born and are developed depending on how each one of us was raised. You either have it or you don't, it can't be taught. Look at the game of chess. Just because you are taught by the world's greatest chess player is no guarantee that will you will be any good at all. In fact most good players were never taught by anyone, they just played and learned themselves. Same goes in business.

  • Report this Comment On March 20, 2010, at 12:39 PM, gman5556 wrote:

    Also about teaching ethics in an MBA program...

    That statement is an oxymoron. Ethical standards are developed during childhood. It depends on the values of your family. You can't "teach" ethics in a school. "Ethics" courses simply teach you how to cover your tracks and sign off on required paperwork in case trouble comes up in the future.

    Ethics comes from things like being encouraged to share during your life, not to steal candy from the jar, to return a wallet if you find it on the ground, not to cheat on an assignment way back in grade school, not to lie etc etc etc.

    Mr. W.B. made some good comments on the issue of ethics in business programs during his dual interview with B.G. at Columbia late last year.

  • Report this Comment On March 20, 2010, at 12:46 PM, gman5556 wrote:

    Also about teaching ethics in an MBA program...

    That statement is an oxymoron. Ethical standards are developed during childhood. It depends on the values of your family. You can't "teach" ethics in a school. "Ethics" courses simply teach you how to cover your tracks and sign off on required paperwork in case trouble comes up in the future.

    Ethics comes from things like being encouraged to share during your life, not to steal candy from the jar, to return a wallet if you find it on the ground, not to cheat on an assignment way back in grade school, not to lie etc etc etc.

    Mr. W.B. made some good comments on the issue of ethics in business programs during his dual interview with B.G. at Columbia late last year.

  • Report this Comment On March 20, 2010, at 9:20 PM, TexanSooner wrote:

    I saw several comments about 'leadership' as taught in B schools - I submit that leadership is not something easily taught in school. Management is, but there is a tremendous difference between leadership and management. I see too many 'leaders' in high places in the government and in business who are very poor leaders - they may be great at bullying to get their way, or taking credit for others work to get ahead in the organization, but they lack the ethical structure necessary to be a great leader. Leaders understand what their folks have to do to accomplish a difficult task and 'how' is probably more important than 'what' gets accomplished. People who simply 'manage' fundamentally don't care how something is accomplished - language like 'the bottom line' is all that counts. Those people can be very dangerous in high office (whether government or business). They measure their effectiveness in outcomes even though there may be bodies left in the trenches along the way. Solid ethical behaviors are a framework for great leadership - without that framework the only thing that matters is next quarters results - no matter how they are achieved (or disguised to make it look like they were achieved...)

  • Report this Comment On March 20, 2010, at 10:16 PM, StoneFX wrote:

    I think this whole thread is a great resource for someone looking to enroll in business school. I'm not saying I support either side, but the posts in here are excellent, especially by TomG and bert111.

    I will say that my time spent as an undergrad at Gonzaga involved a heavy dose of ethics. I distinctly remember my business ethics class discussing shareholder responsibility and stakeholder responsibility and our duty to society as a whole. I can't speak for GU's MBA program, but I'm sure they discuss that in there also, same teacher's and all :-). I'm sure Gonzaga is not an isolated case.

  • Report this Comment On March 21, 2010, at 1:36 AM, SoccrRef wrote:

    As a current Georgetown MBA student and also one of the 60 students who actually was in Professor Casserly's class on Sports Leadership, I have to say this article was an extreme disappointment.

    First, the author missed the entire point of the exercise, which was to analyze a business organization, not Dan Snyder. If anything, the project was more about the General Manager of the Redskins and how poorly the man was doing (before being fired). At no point was Dan Snyder's academic history even mentioned.

    Second, the project was a great example (IMO) on various aspects being taught in the class on media relations, employee relations, motivation, and leadership. One of the best ways to learn in life is to fail. Just ask Benjamin Franklin, for whom we have many things do to his many failures.

    Third, and maybe most importantly, the author went on to link MBA's to all things bad. First, there are, and always will be, greedy people. It just so happened that a few MBAs turned the economy into the dumps, but that doesn't mean that all the other 99.9% of MBAs are bad. Does that make all people who drink alcohol bad because several drunk drivers kill people? It's extreme to link people together like that.

    Fourth, you can never do anything in an application or initial interview to judge the total character of anyone. That comes with time, pressure, and challenges, something admissions committees do not have the time for.

    Lastly, the author said that he was interested in knowing what was being done at MBA programs to help prevent future CEO issues (like Robert Nardelli or Joe Nacchio) from occurring in the future. Again, you can't prevent the fat tail (which will always exist with so many MBAs), but schools are trying. Most top MBA programs now have leadership and ethics classes (to which I say you can't really teach ethics, it is really instilled in you) to try and send ethical business leaders out into the working world. These classes give different perspectives and causes students to open their mind to various views.

    In the end, the best mantra when it comes to ethics, and something that every MBA student should believe in, is to do as Warren Buffett says: "I want (MBAs) to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends, with the reporting done by an informed and critical reporter.". If only you could get every MBA student to believe and live like that were the case....

    SoccrRef

  • Report this Comment On March 21, 2010, at 3:38 PM, decebalvs wrote:

    sapereaude1 said above:

    "The fundamental weakness in all corporate-capitalism-based economics is the fallacy that it is possible, in a finite system like Earth, to achieve economic stability by simultaneously increasing both population and per capita consumption. That philosophy also defines the life strategy of cancer cells. Fortunately, cancer kills only one host at a time. Unfortunately, Earth is the only host we have."

    Bravo! The best comment here by far. When talking of schools, this should be the most important topic: how to develop new ethics to avoid the tragedy of the commons. How to teach people that money means nothing when you can no longer exchange it for true quality of life, or when you need exponentially increasing amounts to obtain things which were free a few generations before.

  • Report this Comment On March 21, 2010, at 9:43 PM, Stephreg wrote:

    Nick,

    It seems that you are under a little too much pressure to churn out blogs. We would all appreciate some more though going on before you place your fingers on the keyboard.

    In my humble assessment, this blog gets an "F".

    Back to school, buddy.

  • Report this Comment On March 22, 2010, at 12:42 PM, FoolishTide wrote:

    Ethics, now that's a funny one. As a member of the IEEE, I remember leafing through the the back of the monthly IEEE Spectrum Magazine with its various business school advertisements for MBA programs and some schools touting their rank in ethics education. I have to say, in light of current events these advertisements made me chuckle and think this must be some kind of joke.

  • Report this Comment On March 22, 2010, at 12:44 PM, FoolishTide wrote:

    Ethics, now that's a funny one. As a member of the IEEE, I remember leafing through the the back of the monthly IEEE Spectrum Magazine with its various business school advertisements for MBA programs and some schools touting their rank in ethics education. I have to say, in light of current events these advertisements made me chuckle and think this must be some kind of joke.

  • Report this Comment On October 05, 2010, at 7:57 AM, businessbecause wrote:

    It's probably because all the best MBA grads studying at America's B-schools go and run companies in other countries?

    http://www.businessbecause.com/business-student-q-and-a/the-...

  • Report this Comment On February 12, 2011, at 5:35 PM, tom902 wrote:

    Why do the authors assume that everyone who wants to have an MBA wants to be a CEO or senior exec..

    Many jobs out there needs higher level analysis. Thats why they go for the MBA route. Some people like me are using an MBA to compliment our professional credentials ie: CFA. To increase job security, mobility.

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