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A New MBA Program That’s “Outside the Box”

Most MBA programs fail to impart useful skills

By George Leef

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June 17, 2005

For half a century, Master of Business Administration (MBA) programs have been a growth industry in the U.S. In 1955-56, only 3,200 MBA degrees were awarded. But in the 1960s, the numbers started to climb; in 1998, more than 102,000 MBA degrees were awarded. MBA programs have sprouted up in colleges and universities great and small as administrators sought to cash in on the increasingly prevalent idea that MBA studies were very useful if not essential for success in many business fields.

The trouble is that in trying to cater to a mass market, many programs offer an education that is of little practical value. In a September 2002 article in the Academy of Management Learning & Education, authors Jeffrey Pfeffer and Christina Fong observe that “possessing an MBA neither guarantees business success nor prevents business failure” and point out that the nation’s top business consulting firms often hire people who have degrees other than an MBA. They quote a Stanford MBA who regards the curriculum as “irrelevant” and believes that students get “a pedigree rather than learning.”

A recent Harvard Business Review article by Harvard Business School professors Warren Bennis and James O’Toole, “How Business Schools Lost Their Way” (available here) is even more critical. The authors say that today, most MBA programs fail to impart useful skills or prepare students for leadership positions. That’s because, they argue, “Instead of measuring themselves in terms of the competence of their graduates, or by how well their faculties understand important drivers of business performance, they measure themselves almost solely by the rigor of their scientific research.”

What “scientific research” are they talking about? Surprisingly, a large number of business school professors have no business experience at all, but were hired because they have the ability to get published in top-tier journals. As in many other academic programs, the focus of the typical MBA program is far more on the desires of the professors to do the research they want than to teach useful knowledge and skills to the students. In that arrangement, the students benefit little. Moreover, few business executives find that the research is useful.

Bennis and O’Toole conclude with this indictment: “Business school faculties simply must rediscover the practice of business. We cannot imagine a professor of surgery who has never seen a patient…and yet today’s business schools are packed with intelligent, highly-skilled faculty with little or no managerial experience.”

Recognizing those shortcomings, in 2003 a Texas entrepreneur named Jeff Sandefer began a unique MBA program, called The Acton MBA in Entrepreneurship.” It’s very much an example of the kind of “out of the box” thinking that business success usually depends on. (Visit Acton’s website at www.actonmba.org.)

First and foremost, the faculty is composed of people who are business professionals, not academics. Sandefer isn’t interested in academic credentials or making the faculty “diverse.” All that counts is business acumen and the desire and competence to help students learn.

Second, the school runs a fast, intensive schedule. Students complete their program in a year, during which they often work 80 hours per week. Much of that time is spent in hands-on projects.

Third, there is no tenure for faculty members. Each instructor is employed on a one-year contract.

Fourth, Acton uses a very results-oriented compensation method. An instructor is paid a flat fee of $5,000 for teaching a course, which isn’t really very much for people who are already successful in business. The incentive to do well comes from the fact that the school divides up a much larger pool of money for faculty compensation based on how well each instructor does on his student evaluations. Earnings thus depend mainly on competition – just as in the business world.

But wouldn’t the instructors then butter up their students with high grades? No can do. The school imposes a forced curve in grading. Instructors have to compete with each other on the quality of their courses, not by inflating grades or lowering standards.

How well is this experiment working out? The students are evidently thrilled, judging from the comments on the website. And Princeton Review, known for its annual college rankings, placed Acton as having the third best MBA faculty in the country and said that its students were America’s “most competitive.” Strong accolades for so new a program.

Are there ideas here that could be imported into MBA – and other – programs in North Carolina? I think so.

George Leef (georgeleef@popecenter.org) is the executive director of the John W. Pope Center for Higher Education Policy in Raleigh.

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