Introduction
In the past the solution to a competitive job market is to get higher education. But for many people a bachelor’s degree is no longer enough to let them get ahead of the pack (Ozbilgin & Malach-Pines, 2007). It is also not enough to get them promoted to a position that they so desired. Thus, the answer for all of that is an MBA degree; it used to be the sure ticket to achieving all of the above. But in recent years many are questioning the importance of having an MBA degree in the 21st century. Based on a review of related literature it can be argued that a typical MBA program does not reflect market demand, especially with regards to the need of hiring an MBA graduate able to handle the impact of multicultural diversity in the workplace.
The criticism regarding the relevance of having an MBA degree stems from common sense, requiring no complicated theory. It is based on the fact that in a fast changing world rules and systems are changing in the blink of an eye (Ozbilgin & Malach-Pines, 2007). In a moment skills and competencies can be rendered obsolete. From the point of view of postgraduate students the question remains: Is it prudent to invest in a very expensive business education programmes. But for this study the more important question concerns market needs. It does not matter if postgraduate students will continue to believe in the hype that MBA graduates will be paid more because if business schools will not pay attention to what the market demands then sooner or later the MBA programme will become obsolete.
If MBA graduates will not be able to help companies deal with the problems of the real world then these firms will stop hiring MBA graduates especially if one will consider the huge salaries that business firms are supposed to pay those who are coming from business schools.
This conference paper will attempt to find out if MBA programmes reflect market demand.
The Promise
The high monetary cost of pursuing an MBA degree is indicative of its perceive value in the eyes of professionals and society as a whole. Many people, especially employers, are easily impressed by an MBA diploma. It is considered as a “high-quality qualification” and the proof of such claim can be seen in the number of MBA graduates in the UK. In 2000 alone there were 11,000 MBA degree holders in the United Kingdom (Mumford & Gold, 2004). It must also be pointed out that in the UK, there is a steady growth in the demand for an MBA (Mumford & Gold, 2004). Still there is a need to have a deeper understanding why an MBA degree is perceived to be of high value.
According to various researches conducted on the basis of the human capital theory, there are at least five distinct types of human capital that an MBA programme can bestow on the graduates and these are listed as follows (Ozbilgin & Malach-Pines, 2007):
- scholastic capital – the amount of knowledge acquired;
- social capital – personal contacts and network ties;
- cultural capital – the value society places on symbols of prestige;
- inner value capital – self-esteem, self-efficacy, confidence; and
- market value capital – significant improvements in levels of earnings.
On the other hand there are also legitimate concerns with regards to the wisdom of focusing on theory, while the real world demands practical solutions that will yield substantial results. It has been pointed out that many are willing to pay to study in a prestigious institution because they believe that they will learn something that will help them increase their proficiency in the field of management. But it does not require a rocket scientist to understand that a manager or a CEO requires more than theoretical knowledge to run a company or manage a group of individuals.
In the 1990s there was a great demand for MBA graduates. But today this is no longer the case. This can be understood by comparing the economic situation in the 90s and in the first decade of the 21st century. The impact of the financial crisis was felt in 2008 but in the decades before the recent economic recession there was an economic upswing that made many companies wealthy. These companies can afford to bolster their human capital and therefore it was prudent to hire MBA degree holders. There is no better place to look for business leaders but in business schools that have an MBA programme.
There was also a huge market demand for graduates coming from top-tier schools (Ellin, par. 13). There was this perception that graduates coming from these schools can operate at such a high level. But then there are those who began to suspect that there may be other factors that contribute to the success and not the MBA course per se that must be credited for their ability to transform lacklustre company earnings to one that investors would love to see. But during a period of slow growth it is also easy to understand why many are taking a closer look at MBA programmes because if MBA graduates are unable to bring in the results expected of a high-salaried employee then it is time to stop hiring them.
While there is general criticism for business schools and MBA degree holders in general, there are recent reports that did not spare even those coming in from prestigious institutions. In other words, there are many who are not impressed with the MBA programmes offered in top-tier schools. Henry Mintzberg, a management professor at McGill University at Montreal, tracked the performance of 19 students who graduated from the Harvard Business School in 1990 and were the top of their class academically (Ellin, par. 10). Mintzberg found out that ten out of the nineteen were utter failures and that four of the nineteen had less than average performance (Ellin par. 11). If this is true then there MBA programmes should be examined more thoroughly because it seems that it already lost its value.
In a related study conducted in 2006 where researchers looked into 482 companies listed on the New York Stock Exchange they found out that only 162 had executives with graduate degrees from business and that those who went to top-tier schools did no better than those who went to less prestigious business schools (Ellin, par. 12). At this point the argument that corporate leaders need an MBA diploma is considerably weakened. But the more interesting part is the realisation that a company does not need MBA graduates to be successful. Again the value of an MBA diploma is being devalued by these reports.
Market Demand
It is now time to probe deeper into the MBA programme and find out if the said course is reflecting market demand. It is very clear what the market demands from business schools and it is to produce skilled leaders able to lead the company in a highly complex world. They are asking for good leaders but they are barking at the wrong tree because this type of corporate leaders is not made in the classroom. According to Mintzberg, “MBA programs train the wrong people in the wrong ways with the wrong consequences” (Ellin, par. 9). Management experts and even MBA graduates will agree with Mintzberg that what is needed is hands on experience. Unfortunately this type of learning is not possible within the four walls of classrooms.
Still, this kind of reasoning should not be used as an excuse. With the kind of money that business schools are charging their students there is plenty of incentive to create programs that can truly address market demands. One of the steps suggested by some is to increase the ability of MBA students to conduct academic research (Foss, 185). It is believed that learning the intricacies of academic research will train MBA students to “learn how to learn” and to have the capability to discover knowledge relevant to goals of the companies they serve. This is simply one of the many market demands but it worth noting that there is a clamour for more academic research done students enrolled in MBA programmes.
Aside from mastering the science of conducting academic research there is also the suggestion that current MBA programmes must be updated to include risk-management-and-insurance program (Fitzpatrick, par. 2). The current financial crisis is the wake-up call for curriculum developers in business schools. They must also take heed to what Kenneth Froot – a professor at Harvard Business School – who said that, “People shouldn’t bury themselves in the mathematics, because the mathematics are only tools” and that there is a need “…to have a wide and robust vocabulary to talk about risk, simply because no mathematical formula is going to capture all of what risk is” (Fitzpatrick, par. 4). It means that the ability to reduce problems into mathematical equations is no longer able to sustain an executive in a fast-paced world where decisions are not made solely on statistics.
Cultural Diversity
According to Olivia Mitchell, chair of the Insurance and Risk Management Department at Wharton School of business, there is a need to overhaul the MBA curriculum from one with a very narrow focus to something that is integrated with education in macroeconomic issues, corporate culture and human factors (Fitzpatick, par. 8). The emergence of China as an economic powerhouse forced many to rethink how the West should deal with Chinese businessmen in particular and Asian businessmen in general. Westerners realised that the way they do business in Europe will never work in an alien culture. In other words there is a need for an MBA programme where cultural factors are considered and this can only be achieved by creating cultural diversity by allowing more foreign students and faculty coming in from abroad. This will result in the creation of a multicultural program within business schools.
It is easy to understand why UK business schools – although mindful of the need to have a global worldview – find little incentive in creating a multicultural program and this is because the United Kingdom is one of the major financial centres in the planet. Therefore UK businessmen are not really desperate to go to a particular developing country to do business there; it is the businessmen from the developing nations that needed to establish business relationships with UK financiers and UK business moguls. They are the ones who need to learn the English language and not the British who will have to learn their dialects.
Still there are UK business schools that already began to upgrade their MBA program. One of which is Warwick Business School at the University of Warwick. In their official website one can read the following, “…Warwick is one of only two UK business schools to be a member of the Program in International Management, a global network of reputed business schools that collaborate closely on exchange programmes” (Warwick, par. 10). The wisdom of this approach is not difficult to understand, a global mindset allows MBA graduates to be versatile and flexible when it comes to solving the problems of their respective organisations.
In an article written for The International Journal of Knowledge, Culture and Change Management, “It is believed that management must understand the social psychological processes that reconcile the relationship between visible social characteristics and performance outcomes” (Washah, par. 1). MBA graduates who went through a multicultural program will be able to read people better, especially when they will be assigned outside the UK. While there are only a few UK business schools that emphasize cultural diversity in their programs the market demand will force these schools to adapt and the proof that there is pressure coming from the marketplace is the fact that business schools like Warwick are leading the way.
Reflection
The investigation into a current issue in management provided the proponent of this paper to exercise her critical thinking skills. There was this assumption that no one can go wrong with an MBA diploma. There is also the assumption that an MBA degree is a sure ticket to fame, success, and financial freedom. But since the financial crisis that engulfed the world of commerce in 2008 there is a need to re-examine the value of a higher education programme that not only is very costly to finance but also means the accumulation of high-salaried employees in the workplace. There is nothing wrong with paying top money for high-performing employees but if MBA graduates are not bringing value to their respective companies then there is no longer any reason why companies must hire them. There is also a need for MBA programmes to take a closer look into their curriculum and adjust it to suit market demands.
There are experts who pointed out the necessity of team-playing, leadership skills, emotional stability and conscientiousness as equally desirable traits and that they will not hesitate to choose a less knowledgeable person to fill up a vacancy rather than hire an MBA graduate who will command a high salary and yet unable to deliver results. It is becoming more evident that good managers are not created inside the classroom. No matter how a management professor spends time discussing the qualities of an excellent manager, a mediocre leader sitting in front of the class will not miraculously transform into someone having the aptitude to lead a company to new heights.
It is unfortunate that investors and employers made the wrong assumption that hiring an MBA is a foolproof plan. For a long time the profitability of an enterprise having an MBA graduate at the helm led many to believe that one is linked to the other. But according to the previous discussion a great number of MBA graduates – even those coming from top-tier schools – could not guarantee success every step of the way. It is now easy to understand that an MBA programme does not guarantee good leaders.
Professor Mintzberg was accurate in his assessments when he said, “You can’t create a manager in a classroom. If you give people who aren’t managers the impression that you turned them into one you’ve created hubris” (Ellin, par. 9). It is not hard to understand that a person who knows so much can be rendered ineffective in a world where solutions to problems require more than the ability to solve mathematical equations and the skill to study statistical data. There is also a need for a programme that a multicultural world-view, that every nation has its set of different values which a CEO should be able to understand and incorporate in their corporate strategy.
The most persistent problem when it comes to M.B.A. graduates is the fact that theory is not the same as reality. There is a need to develop people skills, the ability to deal with people. There is a need for MBA graduates not only grasp all the necessary business strategies but also to understand that employees is not motivated by titles and diplomas but by leaders who can effectively lead them and inspire them to do the impossible. These things could not be taught in business schools. Mintzberg was of course correct when he said that managers are not created inside the “safe” walls of classrooms. A great leader emerges after tackling problems and other difficulties.
Based on the preceding discussion it can be concluded that the typical MBA program is not designed to cater to the needs of employers and therefore does not reflect market demand. What happened was that the MBA programme became so successful that it created a false idea that MBA graduates are like miracle workers able to completely transform a failing company into a sure winner. But the global economy is so complicated that it could not be solved using a limited number of theoretical models or the ability to study spreadsheets and cash flow. There is a need to have the necessary people skills and other leadership traits that can only be developed outside the classroom.
On the other hand it must also be pointed out the demand for MBA graduates will never die down completely. For centuries businesses suffered from the lacklustre performance of college graduates but this did not lead to the eradication of the higher education system. In order to solve this problem colleges and universities simply focused on addressing market demands. As a result universities and colleges are still the main suppliers of workers that are needed in important positions such as the banking sector, education, healthcare, research and development etc. The current MBA programmes, especially those that are found in top-tier schools need to do the same in order to stay relevant and increase their value in the eyes of employers and those planning to spend tens of thousands of dollars in order to acquire an MBA diploma.
References
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