Do MBA graduates matter?

Published June 28, 2022, 5:45 AM

by Benel D. Lagua

            One of this writer’s source of pride is having graduated from a Master’s degree in Business Management (MBM), now called MBA, at the Asian Institute of Management when it was considered the prime business school in Asia with its Harvard pedigree.  My class produced a good number of CEOs not just in the Philippines but in several parts of Asia, a cabinet Secretary, senior bank officials, career government officials, NGO heads, CFOs, entrepreneurs, etc.  I thought the MBA degree made a lot of difference not just in our careers but in in our combined impact to community.

            Imagine therefore, my consternation to have read in The Economist the following: “A new working paper by Daron Acemoglu, Alex He and Daniel le Maire look at newly appointed CEOs in America and Denmark.  They find those with MBAs increase returns on assets in five years after their appointment – by a total of three percentage points in America and 1.5 points in Denmark.  But that is not because they boost sales, rachet up investments or raise productivity.  Rather, the higher returns are the result of suppressing workers’ wages, which fall by 6% in America and 3% in Denmark over the five years after an MBA take charge.  In short, ushering MBAs into corner offices seems to boost shareholder value by dicing the pie in certain ways, not by making the pie bigger.”

            This research is an indictment of the MBA product.  The Economist had this blurb, “bosses with MBAs are good for profits but bad for workers”.  The root cause, according to the researches, is the business school curriculum.  MBA programs, over the years, have been “more obsessed with maximizing shareholder value and corporate leanness.  The result is that workers have increasingly been seen as costs to be reduced rather that an investment in human capital”.

            Apparently, the syllabus hypothesis is traced to MBAs who earned their degrees after 1980 as they are more likely to stint on employees than graduates of earlier classes. (As an aside, this writer is a graduate of AIM-MBM 1980).  There is a need to check on how relevant and more humanistic today’s MBA curriculum looks like.

            A rejoinder by Roger L. Martin of the Washington Post reinforces this finding – “Data-obsessed MBAs optimize anything they can analyze – as if the future will behave like the past, including employee costs.  The same numbers-driven approach hurts their ability to grow sales and profit. The notion that rigorous decision-making must always be based on data analysis is one example of a model, the result of which is rigorous stupidity.  Business leaders – not just MBA students – should avoid being captured by their models and instead cultivate new ways of thinking”.

            I did a preliminary survey of the major producers of MBAs and it is worthwhile to note that at least on paper, the Philippine graduate schools generally espouse objectives going beyond the profit angle.

            AIM’s new tag line is ‘Lead, Inspire, Transform”.  The AIM website starts off with a quote from Washington Sycip. “We must have enlightened business leaders who think of what is good for the country as a whole – not just in terms of profit for themselves.”

            The DLSU College of Business aims to deliver graduates who are technically competent, humanistic, socially responsible and sustainability-oriented business managers. (Disclaimer:  This writer teaches at the DLSU MBA program.)

            The Ateneo Graduate School of Business aims to be a leading management learning institution that develops responsible business leaders with the integrity and conviction to advance sustainable society founded on human dignity.

            Interestingly, the University of the Philippines does not have a published expanded vision with its straightforward focus on the formation of national business and education leaders, all in the pursuit of academic excellence.

            While the conclusion of the Acemoglu, et.al. study is disturbing, it cannot be overlooked.  Practices and values acquired in business education must be re-examined if we are to develop MBA graduates who will indeed make a difference in their organization and in society, in general. 

It is reassuring that the major Philippine business schools appear to recognize the need to achieve multiple bottom lines.  We just hope that the platitudes go beyond words and are translated to curriculums that develop performance driven managers who are virtuous at the same time.  We must ensure MBA graduates transform tosociety leaders who truly drive business as a force for the greater good.

(Benel Dela Paz Lagua was previouslyEVP and Chief DevelopmentOfficer at the Development Bank of the Philippines.  He is an active FINEX member and an advocate of risk-based lending for SMEs.  Today, he is independent director in progressive banks and in some NGOs. The views expressed herein are his own and does not necessarily reflect the opinion of his office as well as FINEX.Know more about #FINEXPhils through www.finex.org.ph.)

 
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