UK: A DEGREE OF UNCERTAINTY - MBA. - Chic in the '80s, MBA glamour has quickly faded in the harsh climate of the '90s. Judith Oliver, an MBA wallflower, reflects on company disenchantment and business school confusion.

Last Updated: 31 Aug 2010

Chic in the '80s, MBA glamour has quickly faded in the harsh climate of the '90s. Judith Oliver, an MBA wallflower, reflects on company disenchantment and business school confusion.

Business schools are very sensitive about the MBA at the moment, admits Roger McCormick, director-general of the Association of MBAs (AMBA). This newly-minted MBA knows why. Six months ago when the po-faced personnel director from the big City firm placed my well-presented, relatively truthful CV down on his desk, he told me it was impressive. 'Really very, very impressive,' he said. 'But I must tell you MBAs are two a penny these days and, how shall I put this, not quite all they're cracked up to be. Really, at 32, you are just a little too old, and changing career in this recessionary climate is so very, very difficult.'

Small wonder business schools are alarmed. Tales of rejection make poor advertising copy. MBAs may be jokingly dismissed as 'Masters of Bugger All' but they are not supposed to be unemployed. In the '80s, eager employers actively, even indiscriminately, courted MBA graduates. The MBA wallflower is a '90s phenomonen. MBA applications are falling: by 15% for full-time courses this year. Student acceptances are slow: 25% down on last year for some courses. AMBA forecasts a first hiccup in the smoothly rising curve of UK graduates from UK schools: a 5% drop is expected this year from 4,900 graduates in 1992 to 4,665.

For prospective MBA students who self-finance their studies (68% of European students according to a 1992 Economist Intelligence Unit survey) taking an MBA is a risky decision. Of course, with the benefit of my MBA, I know all about decision-making. Using that favourite business school teaching tool, the humble two-by-two matrix, complex investment decisions are reduced to a simple, four-box format. Plot the financial risk of the decision along the vertical axis and mark the probable return on investment along the horizontal. A cross marked in the bottom left box of the matrix indicates low financial risk and high probable return - an MBA in the '80s. A cross in the top right box marks high financial risk and low probable return. That is known as the 'wally box' and you do not need a good first degree, three year's work experience, a high graduate management admission test score and an MBA to evaluate that investment.

Five years ago, or even less, MBA course fees were low and rewards on graduation were high. Now, the wally box looms as risks both personal and financial rise. Personal costs of the MBA can be huge but are rarely counted. The MBA workload is extremely high as European schools have happily espoused the US ethos that 'if they are not up half the night studying then they won't think the course is of value'.

'It's hard work for full-time students, but it can be sheer hell for the part-timers,' reports one Bradford MBA. Jack's mixing of that dangerous cocktail of paid work plus unpaid study can leave very little time left over for play - and some highly discontented spouses.

A recent survey shows that 44% of full-time and 75% of part-time students are married. A class of 1992 graduates estimated that marital breakdowns in their year were some 20% higher than average as a result of the strains imposed by the MBA course. Not only marriages fail. Five per cent of students do not make the grade. A further 10% fall by the academic wayside. Financially, too, the course is a strain. Fees in the UK for self-financing students range from £2,800 to £20,000 and there are few grants. Rates at leading schools have risen steeply over the past four years. Warwick Business School's full-time course fees have jumped by 89% since 1989; at Manchester, by 50%.

Add to those fees living expenses and lost salary and the true size of the investment becomes clear. Opportunity cost is a favourite and easily remembered concept from the MBA economics classroom. The opportunity cost of my MBA is the 3,640 hours I could have spent doing something else and the £20,000 of salary which I opted to forego.

In the halcyon days of the '80s, 'Mediocre But Arrogant' MBAs could enjoy golden hellos, 40 or 50% salary increases and the oppportunity to change career at will. Similar rewards are no longer guaranteed.

Barclays Bank offers a preferential loan scheme service for MBA students (6% below base rate during the course, 2.5% above base rate during repayment). Barclays loan manager Melvin Comfort notes a growing number of MBAs facing financial difficulties. 'More loans are not being repaid satisfactorily and it is significantly worse this year than last,' he says. 'The length of time it takes to find a job has increased from one month to six months and many more loans are being rescheduled.'

Barclays' product manager Meurig Hughes explains the bank's recent decision to increase interest rates on MBA loans. 'The rate we offer is not as advantageous as it was when there was much demand for MBAs and high salaries predominated. We have to match the risk of the scheme with the rates we offer and the risks, in terms of job prospects, are higher now.' Total loan applications fell from a high of 1,666 in 1991 to 1,123 last year; loans fell from £21 million to £15 million over the same period.

Increased salary is not the prime motivation for taking an MBA, according to a 1992 AMBA survey. Just as well since the boost in pay attributed to gaining an MBA has dropped by more than half over the last 10 years and the drop looks set to continue. After adjustments for salary inflation, MBAs graduating in 1991 increased their salary by 16.5% compared with 40% received by those leaving courses between 1980 and 1985. The more worrying statistic for MBA providers is that 95% of respondents in that 1992 AMBA survey cited the wish to change career direction as the reason for taking an MBA. Over 85% thought it would improve their job opportunities.

Such aspirations are increasingly thwarted: an MBA is no longer the passport to a new career. Recruitment consultant Patrick Johnson of GKRS is cautionary, 'It is dangerous to go to any MBA school thinking that you will be able to change careers: you simply end up frustrated. Too many people take MBAs to change themselves. But it won't change you from being a civil engineer; it merely enhances what you have already done.' An unemployed 1992 MBA graduate believes, 'Changing career in the current job market is virtually impossible. Why should companies take the risk when there will be any number of applicants with exactly the experience they require?'

The number both of MBA courses and graduates has grown rapidly over the past 10 years. Mark Shortland of Michael Page believes, 'It is far easier to find people with MBAs now and so the value of taking an MBA is not what it was.'

The longer an MBA remains unemployed after the course finishes, the worse prospects become. 'Employers believe that the best graduates are snapped up quickly,' reports an unemployed female MBA. 'One marketing recruitment agency told me four months after the course ended that, frankly, I had passed my sell-by date.'

More MBAs are entering the job market at a time when middle management job opportunities are shrinking. The popular MBA bolt holes of management consultancy and financial services have cut back on recruitment. Nick Hawkins, director of executive outplacement company InterExec, anticipates an excess of middle and senior managers over the next five years. The number of advertised managerial positions sank to a low point of 14,000 in 1992 from 40,000 in 1989 while un-advertised vacancies remained stable at 6,200-6,800. 'Much of our business is from companies who are downsizing and one of the commonest ways is delayering management,' he says. Lloyds of London, a former mecca for MBAs, has shrunk from 15 management layers to six.

Business schools are eager to attract people who have been made redundant but Hawkins suggests that prospective, particularly older, students should be cautious before parting with their redundancy money. 'Getting an MBA aged 40 plus is not nearly as helpful as people expect it to be,' he argues. 'It comes down to whether you are selling potential or track record and, over 40, it's track record you are selling. So an MBA is of limited value.'

As the risks of a self-financed, full-time MBA have increased so the popularity of one-or two-year, full-time courses has declined. In contrast, the demand for part-time MBA options either sponsored or non-sponsored, such as evening or distance learning, has mushroomed. Most rapid growth has occurred at The Open University, which, with 4,000 students, is now the largest distance learning provider of MBA education in Britain.

The value of these proliferating courses (the number of UK institutions offering MBA courses rose by 254% to 92 between 1985 and 1992) concerns established schools who believe standards are threatened. Moreover, chill recessionary winds are whipping up storms of debate over MBA standards and course accreditation. No common European standard for the MBA exists and such a standard is overdue. The newly-formed Association of Business Schools (ABS) currently has no power over accreditation. ABS chief administrative officer Jonathan Slack comments, 'There is certainly confusion in the minds of employers and candidates because no system of general standards exists and, at present, there is no body which gives a precise description of what an MBA is.'

In the absence of standards, MBA courses have grown up which vary enormously along the spectrum of two-year, full-time to distance learning. The latter, while increasingly popular, is viewed as the poor relation. Traditionalists argue that any course which provides for such scant interaction with other students is but a very weak and watery version of the 'true' MBA experience.

Employers have established their own pecking order of MBA superiority and the source of an MBA is of paramount importance. Nick Hawkins of InterExec explains, 'Employers are very concerned now about where an MBA studied. Certain schools like Harvard and Insead we will quote on a CV, others we leave off.'

Employers views on the 'best' MBA programmes may be out of date. 'Classic' MBA programmes which emphasise academic and analytical rigour, survive often by virtue of past reputation. They are now being challenged by the new and flexible, modular, in-company or consortium programmes which place greater emphasis on interpersonal skills and the link between classroom and workplace learning. Most institutions offering these 'newer' programmes do not receive AMBA accreditation which, in the absence of European-wide standards, is the rubber stamp of MBA excellence. AMBA currently accredits only 28 of the 92 UK institutions which offer MBAs. Only students attending AMBA accredited schools are eligible for the business school loans offered by Barclays and National Westminster banks.

Unaccredited schools such as Nottingham Business School, while at a disadvantage in attracting students, disagree with the criteria for AMBA accreditation. These criteria, such as 80% assessment by examination and lack of recognition for previous learning, run counter to the approach of former polytechnics such as Nottingham. Mary Carswell, manager of its post-graduate programme, believes AMBA accredition criteria are out of date. 'We use more work-based assessment where AMBA relies on examinations; we value good management work experience, they look for degrees. AMBA fails to encompass the diversity of current MBA education. We look at things from a very different perspective and employers are very happy with our approach.'

The UK MBA lacks not only common standards and an agreed accreditation system but also any systematic form of ranking such as that published annually by Business Week for US and major European schools. The question of ranking touches another raw business school nerve for wary academics. In any case, ranking would rely heavily on the opinions of former students and how many MBAs would devalue their expensively-gained degree by open criticism of the school they attended?

With MBAs staunchly protecting their 'brand' and business schools reluctant to discuss application, acceptance and employment data, the MBA remains a degree of mysterious value and relevance, its benefits marred by misunderstanding. A shake-out is certain as employers and prospective students take a more considered view of MBA costs and benefits. To survive in this climate, schools face the harsh fact: they must do better.

Employers have been calling for schools to do better for a decade. A 1991 survey carried out by Her Majesty's Inspectorate concludes that 'a majority of employers have doubts about the quality and relevance of the MBA offered by a growing number of institutions'. Reports by employers, of disappointing experiences with MBA employees who failed to fit into the organisation, lacked interpersonal skills, proved arrogant, over-analytical, brought little benefit to the company or moved on after a short time, are legion.

Traditional MBA courses have done an excellent job in imparting business knowledge, management theory and analytical tools. But a major mismatch remains between employer wants, student expectations, and the traditional business school fare. The academic content of MBAs has been pitched way beyond the requirements of their average 28-year-old managerial customer, while ignoring his need for the more basic tools of his trade The tools and techniques which form the basis of the traditional MBA are important, but more so in the long term when a senior position has been attained. In the short term, an employer often finds himself with an inexperienced, frustrated, expensive employee. Strategy, for example, is a strong feature of the curriculum. Yet, as Vlad Stanic, development director of the Management Charter Initiative (MCI), says, 'MBA graduates do not usually go into an organisation at a level which requires strategic thinking.'

The mismatch between what employers want and what MBA students consider important is revealing. In a survey of Scottish employers by Marijke Uhlenbroek, respondents stressed the interpersonal skills of leadership (80%), communication (76%) and the ability to motivate others (73%) as the most important qualities needed for management. A 1992 AMBA survey of recent MBA graduates reported that 'the outcome valued least (from the MBA) is the development of interpersonal skills'.

Business schools, wedded to academic rigour, have heard but long ignored demands for a less theoretical and more practical MBA. Now a challenger has arrived to threaten their complacency. Management Charter Initiative, the body which sets standards for the National Council for Vocational Qualifications in management, is exploring the introduction of a senior management qualification. The NCVQ approach, according to MCI's Vlad Stanic, is 'to assess managers on the basis of competence in the workplace. It is very much outcome based'. Stanic is convinced of the validity of the MCI approach. 'Employers don't want theories,' he argues, 'They want people who can manage and achieve results through other people.'

While Stanic stresses that this 'competency' based qualification is complementary and not an alternative to the MBA, he realises that business schools feel threatened. Roger Young of the Institute of Management believes, 'If business schools followed their own teaching and asked the marketplace what it wanted, they would all adopt competency-based programmes. Some progressive schools are embracing the MCI approach, but many are trying to maintain their distance'.

The alternative offered by MCI is forcing business schools to rethink their product. Dr John Hendry, director of the MBA course at the Judge Institute in Cambridge, believes that the MBA must alter to meet the changed environment and circumstances of the '90s. 'The two-year MBA model is doomed. Case study methods of teaching merely produce glib answers.' Chief among the necessary changes is a move away from the focus on analytical skills. Business schools are 90% about analysis and only 10% about implementation.

'Management is about working together with other people to effect the business of an organisation,' he argues. 'While analysis is important, it accounts for perhaps 10% of a manager's work. The other 90% is about implementation, about making things happen. Everybody knows this yet institutions do little or nothing to address interpersonal skills and merely provide inexperienced youngsters with a two-year escape from the practical experience they need most.'

Hendry believes in a close partnership between employers and students and provides a company-sponsored 'sandwich' MBA programme at Cambridge (at a cost to the company of over £21,000 per student) in which students spend three 10-week terms and six one week visits in Cambridge over 33 months. During the rest of the time they work full-time in their companies, putting theory into practice.

Hendry is not alone in anticipating greater company involvement in the MBA product. As fewer and fewer students are willing to pay their own way, business schools are pinning their hopes on the growth of sponsored part-time, modular, in-company and consortium programmes. But increased company involvement in MBA course design, while popular with organisations worried that MBAs are 'Missing Business Acumen', threatens the entire academic foundations on which the MBA was built. With employers calling so many varied tunes, what hope is there of common standards? And when companies foot the bill, who can guarantee that academic standards will be maintained?

Can companies justify the cost of this 'new look' MBA at all? With budgets tight, companies must decide whether it is worth the cost of putting a small elite through expensive MBA programmes when the equivalent investment could provide increased management training and development for larger numbers of employees. Total Quality Management, after all, is about improving the performance of all employees, not the select few. Eighty-one per cent of managers surveyed by the Institute of Management in 1992 claimed they 'would be more effective managers if they received more training'. Yet only a small proportion of the managerial masses receive adequate training: one-third of the organisations surveyed by IM provided little or no managerial training; over half of respondents said they had 'too little' or 'far too little' training. There are currently 3.6 million managers and administrators in the UK and fewer than 30,000 MBAs. Increased training for those managers who currently receive 'too little' will surely produce greater performance improvements than adding further decoration to the top of some already well-iced cakes.

Evidence that the MBA really is a prerequisite of managerial excellence is, after all, missing. France, Germany and Japan have systems in place which, without MBAs, guarantee a supply of competent, trained managers. Most senior executives in the UK function without the benefit of the magic three letters. David Thomas, manager of the management development programme at British Telecom voices a widely held view: 'The ideal way of developing people at all levels is through a mix of controlled on-the-job experience and away-from-the-job experience which may or may not include a qualification.' David Stevens, management development co-ordinator for BAT Industries plc, endorses that view, 'We do not actively say we must have MBAs. We must have high-quality people with or without an MBA.'

The importance of the MBA must be questioned when there are many other ways, such as executive short courses, mentoring, and in-company programmes, to skin the managerial development cat. 'Suspicion has grown,' says Howard Davies, director-general of the Confederation of British Industry, 'that some hitherto highly-regarded qualifications might just perhaps not be worth the 90-100k they cost to acquire'.

When money sloshed around the corporate kitty of the 1980s, MBAs were an affordable luxury. But luxury is no longer chic in the '90s.

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