MBAs are a popular option for many executives wanting to bolster their professional knowledge and skills. As many HR professionals turn to MBAs as a fast-track method to improve their broader business skills and understanding, Lynnette Hoffman considers the potential benefits and pitfalls
MBAs are a popular option for many executives wanting to bolster their professional knowledge and skills. As many HR professionals turn to MBAs as a fast-track method to improve their broader business skills and understanding, Lynnette Hoffman considers the potential benefits and pitfalls
In May of this year, the Harvard Business Review ran a feature by two prominent university professors who argued that MBAs had “lost their way”. The professors said the curriculum at many business schools had become “too scientific” and too theoretical, and did not focus enough on practical skills that would translate to better performance. What’s more, it pointed out that some professors and lecturers work their way up the ranks without ever gaining any “real life” on-the-job management experience to impart.
With costs that range from $20,000 to nearly $50,000 for some of the more prestigious schools, MBAs are a major investment. And they come with well-known risks.
Two years ago, Samea Maakrun had a high-flying career as a business development manager for a major international health informatics company. For the first time – and the last, as far as Maakrun knows –the company agreed to pay for her to study an MBA at University of Technology, Sydney. The endeavour cost Maakrun’s employer more than $40,000, but with a high profile promotion in the cards, the company was betting the benefits would outweigh the costs. And they may have.
Except that Maakrun left the company just shy of completing the degree. She paid for the last subject out of her own pocket and used the skills she’d gained at business school to launch Sasy-n-Savy, a web-based lifestyle company. She says well over half of her classmates at UTS changed jobs soon after completing their MBAs. Some used their new skills to land more high profile positions, others started their own businesses, but few stayed put.
A survey by the American Graduate Management Admission Council found that nearly 30 per cent of executive MBA students in 2004 planned to look for a new job once they graduated. That’s up from 17 per cent just two years ago.
Whether it’s the result of negative press, concerns about practicality or a downturn in the economy, the number of employers paying for the full costs of staff to complete their executive MBAs programs has dropped from 55 per cent in 2000 to 45 per cent last year. The number of students funding their MBAs without any support from their employer whatsoever rose by three percentage points to 28 per cent from 2003 to 2004.
Yet many organisations still see value in supporting their employees through their MBAs, although increasingly they are implementing strategies to minimise their potential loss should a student “graduate and run”, as Maakrun did. Employers are also being increasingly selective about whom they offer to support, and how much of the course they’ll pay for, with a growing number of employers offering partial and/or conditional support.
What MBAs offer
MBAs have long been highly regarded. The best programs teach students key skills such as the ability to think strategically and make decisions with imperfect information. Project management, leadership, problem-solving and communication skills are all honed.
And MBAs can offer particular benefits to HR professionals who are keen to enhance their business knowledge and skills.
“For HR, the MBA allows access to broader business acumen; it can enable HR to be a part of the business rather than a partner,” says Angela Robertson, human resources manager of employee development at GM Holden. “HR needs to be one with the business, and they need to speak the same language and have the same knowledge and understanding to do that.”
But is that enough? What are organisations getting out of MBAs? Are the improved skills enough reason for organisations to pay the hefty fees of MBA programs?
Attracting key talent and keeping employees happy
One of the objectives in Abbott Pharmaceuticals’five-year strategic plan is to “recruit the next generation of leaders”. For years the company has provided varying types of educational support for its employees and within the last five years it has begun funding some staff to complete MBAs. Currently three Abbott employees are studying for MBAs at the company’s expense.
Abbott Pharmaceuticals HR manager Kay Nicol says that while the prospect of an improved skill-set is one part of why Abbott supports employees to study, it’s not necessarily the most significant factor.
“From the company perspective, when looking at the actual percentage of our employees holding MBAs (about 25 per cent) and our positive success in the marketplace, the results and return on investment is inconclusive,” Nicol says. “But from a morale and retention strategy perspective, I think all companies are acknowledging that particularly Gen Y are looking for employers to support them academically.”
Supporting MBAs is also a way to prepare for the future. “We are currently poised to enter a significant period of growth over the next five years and will regard capabilities in strategic management, marketing and business process as of particular importance in the day to day running of the business”, Nicol says.
“Organisations are going to need the MBA education process to offer both academic and practical on-the-job skills to meet those demands.”
It’s also part of Abbott’s recruitment and attraction strategy. “An MBA is certainly the most recognised qualification, and sometimes offering the financial support in particular will be the deciding factor in a candidate’s decision to want to work for a company.”
Other benefits
GM Holden is currently assisting 28 staff to get their MBAs. In one sense the program operates as a development and talent management initiative, and in another it is a retention strategy, Robertson says.
Part of the reason GM Holden continues to sponsor employees is that HR sees the potential for them to “utilise intellectual rigour in on-job work/projects.” The degree “may assist them in their knowledge and skills and the way they do their job”.
Attending university also offers significant networking opportunities and access to benchmarking information, as well as opportunities to learn different ways of approaching problems, Robertson says. However, the actual return on investment is still hazy: “We couldn’t say that there is always 100 per cent flow back into the workplace,” she says.
Too much hype?
Both Robertson and Nicol say there’s a tendency for employees to feel an MBA is an absolute necessity on the path to success. In fact, they say, it’s only one differentiator, and whether performance at work actually improves as a result has yet to be conclusively established.
Nicol says many employees view MBAs as the recognised qualification at all levels within the organisation, and therefore feel their opportunities may be limited if they don’t have one.
“The most successful employees possess combinations of skills – an MBA will not always provide automatic success to all who possess it. It is important to look at all strengths and opportunities for development across the board, which can include inherent skills which are borne through a personality type or behavioural style,” Nicol says. “Sometimes an employee may think that an MBA is the solution to the opening of career path but we know that there are many attributes that make strong leaders. The challenge lies in having an employee understand exactly where they stand at all times within their development.”
Robertson agrees: “There’s a push to do an MBA and a lot of people think they have to have one to advance in the company, but although it’s one differentiator it’s not the only thing relevant – experience and on job performance are also just as critical to advancement opportunities.”
Managing risk
“MBAs are the most expensive program to sponsor, and so we are constantly evaluating whether we are getting return on the investment. One of the dangers is that people leave as soon as they have completed their MBA,” Robertson says.
GM Holden is in the process of reviewing its policies and as yet, it does not have any specific retention strategies in place. “We are doing some benchmarking internally and externally – some other companies and parts of GM have bonds in their sponsorship and have implemented policies such as a sliding scale of reimbursement of sponsorship,” she says.
So the company would be reimbursed based on the length of retention after the person has completed their studies.
Abbott Pharmaceuticals has a reimbursement initiative that kicks in when a person leaves the company within 12 months of completing a second degree.
Other organisations, such as PricewaterhouseCoopers, have implemented less traditional strategies. In the late nineties, PwC created a scheme whereby instead of employees reimbursing the company, the company has three years to reimburse employees, with payments made in monthly instalments.
Getting the best value for money
Employees are often interested in having the most prestigious business school on their CV for some future benefit. However, it is the learning that is important, the content and process. “Putting MBAs aside we are interested in sponsoring programs where the content is relevant to the job to current and future career path,” Robertson says.
One option might be to create a list of recommended programs. If an employee wanted to attend a university not on the list it would still be possible, but they would need to negotiate their case of why that program would be better.
Additionally, improving retention of sponsored MBA employees also increases the value.
Nicol says Abbott Pharmaceuticals has emphasised career pathing and succession planning to provide more opportunities and keep the talent they have built in the company longer.
