If you are responsible for hiring people, someone with a master’s degree in business administration might look like an attractive hire. While, “Never Hire An MBA” might be a bit extreme, I see a lot of people who overvalue an MBA. In particular, small and medium sized businesses will often try to “hire an MBA”. Consider that statement. Wouldn’t it seem strange to say, “I want to hire a Bachelors of Science in Computer Engineering”? A Bachelors of Science in Computer Engineering isn’t a person–it is a degree. You can’t hire a degree. What you really want is a software engineer or maybe a computer scientist–a person. But when it comes to the MBA degree people talk as if you can just hire the degree. You can’t. You can only hire a person.
Ok so lets say you have to choose between hiring two people. One is a great smart person with a good personality, but without an MBA. The other is a good person with an MBA. You want someone with business skills, so do you hire the MBA or the other person? Remember, you can’t hire a degree. But you want the business skills, so who do you hire?
Lets do a thought experiment. What if you could take the person without the MBA and give them a business education and then hire them? Obviously you don’t want to wait two years for them to get a business degree. So lets say you find a way to implant all the information directly into their brain in some type of procedure that will take about a month. Would you hire the MBA or the person that will take one month to bring up to speed.
I think most people would agree that if it only took one month to give someone a business education, you should definitely hire the best person you can find and not worry about whether or not they have an MBA.
But this is all hypothetical right? There isn’t any MBA education brain implant surgery. Or is there? It turns out that some consulting firms (people who typically hire MBA graduates) have tried hiring people without business training and given them a crash cours in business. Guess what? They do just as well (and sometimes better) than their MBA educated peers.
Consulting firms who hired people without business degrees–some of them lawyers, doctors, and philosophers–obviously had to provide some training so these individuals could go out and give advice to companies using business language and business knowledge. Many of the companies started or expanded relatively short, 3-week programs in which “new hires” learned the basics of business. Apart from the fact that apparently it took only 3 or 4 weeks for people to cover what business schools take 2 years to teach, is the more interesting question: How did the hires without graduate business degrees perform? Internal studies conducted by the firms found that the non-MBAs did no worse and, in some cases, better than their business school counterparts. The London office of the Boston Consulting Group (BCG) reported that the “non-MBAs were receiving better evaluations, on average, than their peers who had gone to business school,” while a study at McKinsey of people on the job 1, 3, and 7 years found that at all three points, the people without MBAs were as successful as those with the degree. Similarly, an internal study by Monitor Consulting “had determined that the people… hired from high-end business schools were no better at integrative thinking than the undergraduates… hired from top-notch liberal-arts programs” (source)
Keep in mind that these consulting firms are generally recruiting from the top business schools in the nation.
Can an MBA be detrimental?
We’ve already talked about how you shouldn’t try to “hire an MBA” because you can’t hire a degree. Instead you need to hire the right person. The cost of hiring a less talented person is going to be much greater than the cost of teaching someone business skills, so whether or not someone has an MBA shouldn’t be a major consideration in the hiring process.
This is the part that is probably going to be seen as heresy–particularly by people who have or are pursuing an MBA:
It has been my experience that the MBA degree can sometimes be more detrimental than helpful.
In the following sections I will detail the ways I’ve seen this happen, but first a few caveats.
There are obviously exceptions to everything I’m going to say here, so read everything in the spirit of “increasing your odds of getting a good employee” and “some things you should think about”. In particular, this advice is primarily directed at smaller companies that don’t normally hire a bunch of MBAs, but are starting to see some job applicants with the degree and are considering hiring them. If your business has a strategic system to make use of people with this particular educational tool set, this likely won’t apply to you.
Why do they want to work for you?
The cost of starting a business was once very high. You had to rent office space, hire an accounting and payroll department, buy a telephone system, etc. This isn’t the case today. Someone who is good at running a business can start one on a shoestring budget and look just as big as anyone else. Computers are cheap, a lot of software is free, and you can outsource many parts of your business as you go and simply pay as you go. It wasn’t that long ago that getting a web server and email server up and running would cost you $50,000 just to get up and running. Now you can get a web server and email accounts for $6.95 per month or even free if you use something like Google apps.
If someone has a master’s degree in running a business, why are they coming to you for a job? Years ago, it made sense. It was very expensive to start your own business. That isn’t the case any more. So if someone with an MBA is coming to you there are several possibilities:
- They can’t run a business. - If they can’t make it on their own, do you want them working for you? Is it possible you can find someone better without an MBA? If you need a particular part of their skill set, maybe it is a good fit. Just be aware that if you need someone with a really good skill at running a business, you need to understand why you should trust their skills more than they do.
- Want real world experience. - This is a valid reason, but just make sure you aren’t paying someone for their MBA experience if they are coming to you because they don’t really have anything beyond their diploma. Someone with an MBA who says they want real world experience could be an excellent find and become a very passionate employee. However, as we’ll discuss later, one of the drawbacks of many MBAs is that they often over-estimate their skill set.
- No ideas of their own. – Not necessarily a bad thing if you just want someone to execute your business plan, but make sure you aren’t paying a premium for them to have good ideas. If they can’t come up with a good business idea on their own, they may not be able to come up with good ideas for you.
- Too specialized. - Someone who specialized in one specific area may not have a wide enough skill set to run their own business. If their expertise fits well with your business then it can be a great fit for both of you. However, usually the idea of an MBA is that it is a general education in all aspects of business.
Lack of Experience
Someone with a fresh MBA looking for a job, may not come with much real experience. This isn’t necessarily a bad thing if you understand that having an MBA doesn’t automatically make someone good at their job. A large number of people are going back to school to get an MBA after having worked for a number of years. On one hand, you may find someone who has a great deal of real world experience that they can apply to your business problems. On the other, you may be dealing with someone who is making a significant career change. When you look at someone’s experience make sure you aren’t throwing them into a situation that goes well beyond what they are capable of doing. It is easy to tweak a resumé to showcase skills in the past to align with the jobs they want in the future. If their resumé says they have “management experience” don’t automatically assume they possess the skills to handle having 40 people reporting to them. Make sure you understand exactly what they managed, the extent of their authority and the results the achieved.
Lack of experience seems to show up the most when you put someone in charge of managing and leading others. If their only experience with leadership is being under the leadership of others, they are likely to emulate all of the bad habits without picking up on any of the good ones. If you need a manager, don’t give someone this position based solely on their MBA. Make sure they have real experience with good results in management either before or after getting their master’s degree.
This is more of an issue with people who have had very little real work experience. While most MBA programs offer good content, simply being exposed to a lot of great ideas doesn’t say much about your ability to implement those ideas in real life. Just because someone took a class in negotiations doesn’t mean they are any good at it. Worse, they may think they are good at it and blindly cause a number of problems. Confidence is good, but not when it blinds you to your inability. A person with a bunch of confidence in their ability to fly a plane, but no actual skills is infinitely more dangerous than someone with a lack of confidence and a minimal amount of skills. Someone without confidence will double-check their results. Someone with a lot of blind unfounded confidence won’t know there is a problem until right before they crash.
I once met with a newly minted MBA who was taking a new position. I asked about what she considered her greatest strengths. She gave me a list of 5 or 6 things that she felt she was really good at. A few months later in a 360 degree evaluation (where everyone evaluates everyone else) her weakest attributes exactly matched the list she had given me a few months earlier.
If you think you are bad at something, it probably doesn’t hinder you much. When you get to a situation that requires that skill, you are extra careful, ask for help, delegate, etc. People who think they are bad at driving on ice, rarely have ice related accidents. However, when you think you are good at something its easy to overlook obvious signs that you are doing something wrong.
In looking for ways to reduce accidents, some experimenters removed all the road signs from a city and watched what happened. The number of accidents went down. It turned out that the signs made people overconfident. They paid attention to the signs instead of to other obvious clues–like the truck that doesn’t look like it is going to stop. When there weren’t any signs or lights, people had to make eye contact with the other drivers to decide whose turn it was to drive. The signs made people less careful.
I went to a college where everyone was required to pass a swimming proficiency test to graduate. It wasn’t that hard if you had ever done any type of swimming. You had to swim across the pool and tread water for five minutes. However, there was one guy named John who had no skills in swimming, but he tried to make up for it with sheer confidence. John was a nightmare for the life guards because he kept jumping in the deep end and sinking to the bottom–confidence and all.
For an MBA, the pretty piece of paper they have hanging on their wall can make them less careful. It can encourage them to jump into things that they have no preparation for. It doesn’t take too much life experience to correct this, but you may or may not want to be their employer during this learning experience. Further, the value of the MBA is quite a bit lower if their real skill set is developed on the job at your expense.
Economy and Education
A down economy is great for the educational sector. When people lose their jobs they often go back to school to improve their skills. People with just a bachelor’s degree who can’t find a job after a few months may start looking at MBA programs. Going back to school can help pause their existing educational loan payments and let them get another one at a very low rate. Both of these things will help them keep their head above water while they wait for the economy to recover. Getting a degree also helps make the gap on their resumé look less damaging and it can help give them a better shot at positions that require highly educated employees. So all in all, this isn’t a bad idea. You get laid off and can’t find a job–go back to school.
But, if you are hiring, you may want to consider a bit more how the economy works. When companies need to cut back, they generally want to get rid of the employees that have the least amount of productivity according to this formula. In many situations the highly productive employees are often many times more productive than the average–but usually they aren’t paid many times more. This means that of five employees the top two or three are probably going to still have a job. (This assumes a rational employer, which isn’t always the case, but the idea works when dealing with dealing with large statistical samples.)
So the person who gets laid off and goes back to school for an MBA is somehow a less profitable investment than the other employees. Either they weren’t as productive as the others or their pay was high enough that they were more expensive than less skilled help. However, the wildly productive employees are still working and are thus less likely to go out and get their MBA. People who have reasonably good jobs during economic uncertainty are less likely to drop $20k to $50k (or more) on a master’s degree.
So a fresh MBA right after an economic downturn may have the MBA because they weren’t an ideal employee in the first place. Obviously there are exceptions to this and there are all kinds of things that can happen on an individual level, but these are things worth considering when looking at the MBA job seekers as a whole.
You may get a better employee by hiring the guy who had a job during the downturn because his employer couldn’t afford to let him go. He may be worn out from doing the work of several people so a different job may look very attractive.
Of course with this logic, it may never be a good idea to hire someone who doesn’t currently have a job. You don’t want to hire someone else’s problem employee. Yes there are exceptions, but if you are trying to increase your odds… Just be aware of the timing of someone’s MBA. It might be a bit more complicated than an overwhelming desire for self-improvement.
The biggest takeaway from this article should be to hire people, not the degree. If you have a potential employee who you wouldn’t consider without their MBA degree, be very careful that you aren’t trying to hire the degree instead of the person. So should you avoid hiring someone with an MBA? Probably not. Some individuals who get the degree may have some of the negative side effects discussed above. However, as long as you are focused on finding the right person, you should be able to screen out any potential problems.
What if you are looking to get an MBA? I don’t want to make it sound like an MBA education isn’t valuable. There are a lot of worthwhile things you can learn getting an MBA. It can do a lot to strengthen your existing skill set–particularly if you are already practicing an on-the-job MBA approach. But, if you have no skills in running a business today, getting an MBA isn’t going to change that.
If you are looking to hire someone, don’t overlook them simply because they have an MBA, but at the same time don’t over-value their degree and let it blind you to their actual real-life skills.