MBA degree and recession?

As most coaching classes are busy preparing their call-getters to convert their initial calls, into final admits, news from B-School campuses keeps pouring in. 'Placements take a hit at top B-schools'. 'IIM students look up to PSU's for their placements'. These reports have been raising doubts in the minds of the call-getters, whether it is the right time to quit a secured job and go for something as uncertain as an MBA?

The fact of the matter is that this slowdown is not a recent phenomenon. We saw it coming last year itself, the year in which the IIM's witnessed the highest number of CAT applications - more than 2.80 lakh, about 25% over the CAT 2007 numbers. A similar jump was seen in the number of applications to other institutes as well. So why is an increasing number of students looking to beat the slowdown with an MBA degree?

The reason why most people opt for an MBA is not only because it gives very generous monetary returns, but also because it is important for making a career change. Different people have different reasons for doing an MBA - knowledge, a better position, shift of career and some do it even for status.

But the big question is, what is the right time to do an MBA? With jobs not available, pay-hike being almost negligible, many people believe that this is the right time to spend 2 years doing MBA and upgrade your skills and ability to get employed. If you analyze objectively, by the time you pass out, the business cycle may be on the upturn and you would be ready on time to take advantage of the situation.

Though the atmosphere at business schools may suggest otherwise, a point to be noted here is that it is only the salaries that have taken a hit - not placements. Most of the top B-Schools have recorded 100% placements or close to that. Earlier finance companies used to recruit students in bulk at higher pay packages.

Today, due to the economic downturn, finance companies are making fewer offers with lower pay packages and this in general has plummeted the average salaries at B-schools. But on the positive side, students have garnered the opportunity to work in diversified profiles across sectors and functions, profiles that would help in their career progression.

The two intensive years that you spend at a B-School campus equip you with knowledge in areas like finance, marketing, logistics, personnel and strategy. Also, through case studies you would learn to analyze different business issues faced by the companies.

You also get an opportunity for internship and projects, which help you gain that valuable real life experience. In short, an MBA from a top B-school gives you the flexibility to switch careers and also makes you more employable because of the mental grooming to face the challenges of the real world.

Though this might be the right time to do your MBA, you need to be careful about certain things. Go for the top B-Schools only. An ordinary B-School may not offer you all the benefits that we have discussed earlier.

Since you are trading off an earning opportunity to do your MBA, you should ensure that you get a good return on your investment of time and money. Secondly, in tough times like these, you might look forward to shorter MBA programs. There are a couple of good institutes that are offering a 1-Year MBA program. So, you not only get all the advantages of a good MBA program, but your earning cycle starts a year in advance.

However, whether it is a 1-Year program or a 2-Year program, an MBA degree does have the power to bail you out of the recession.

Why Value of MBA has declined?

Few MBA or executive training programs adequately address the importance of developing leaders. For the most part programs tend to be theory oriented and use the traditional tools of conceptual learning — case studies, lectures, films and discussions — relying on the contrast between managers and leaders actions. Which may be why the value of an MBA and the salaries of MBA students appear to no longer be what they once were.

The problem with many business school leadership programs is they teach ideas, not real behaviours, and the professors are chosen by virtue of their ability to publish detailed research, not their leadership experience. Understanding something intellectually often has little to do with being able to do it. Adult learners need experiences and coaching to turn concepts into leadership behaviours.

Henry Mintzberg, a professor of management studies at McGill University in Montreal, also argues that because students spend so much time developing quick responses to packaged versions of business problems, they do not learn enough about real-world experiences. Rakesh Khurana, a professor at Harvard Business School and author of From Higher Aims to Hired Hands, a historical analysis of business education, says business schools never really taught their students that, like doctors and lawyers, they were part of a profession with professional standards. In the 1970s, he said, the idea took hold that a company’s stock price was the primary barometer of a leader’s success. Among other things, this changed business schools’ concept of proper management techniques. Instead of being viewed as long-term economic stewards, he says, managers came to be seen primarily as the agents of the owners — the shareholders — responsible for maximizing shareholder wealth.”We can’t rely on the usual structure of MBA education, which divides the management world into the discrete business functions of marketing, finance, accounting, and so on,” he says.

For universities, business schools have been a means to an end — money. They are less expensive to operate than graduate schools are with their elaborate labs and research facilities, and alumni tend to be generous with donations. About 146,000 graduate degrees in business were awarded in the U.S. in 2005-06; roughly a fourth of the 594,000 graduate degrees awarded that school year,the U.S. Education Department notes. Still, there have been signs all is not well in business education.

A study of cheating among graduate students by Linda Trevino, Ken Butterfield and Donald McCabe, published in 2006 in the journal Academy of Management Learning & Education, found 56% of all MBA students cheated regularly — more than in any other discipline. The authors attributed that to “perceived peer behaviour” — in other words, students believed everyone else was doing it.

McCabe, writing in the Harvard Business Review, contends the prevalence of cheating among MBA students is because of the “get-it-done, dam-the-torpedoes, succeed-at-all costs mentality many business students bring to he game.” He describes an MBA student mentality of getting the highest GPA possible so they can get the highest paid jobs in the pharmaceutical, high-tech and finance sectors.

Some employers are beginning to question the value of an MBA. A research project that two Harvard professors released in 2008 found that employers valued graduates’ ability to think through complex business problems, but that something was lacking. “There is a need to broaden from the analytical focus of MBA programs for more emphasis on skills and a sense of purpose and identity,” said David Garvin, a professor of business administration and one of the project’s authors.

Students themselves may welcome an emphasis on character skills and personal development. In surveys that the Aspen Institute regularly conducts, MBA candidates say they are less confident now they will be able to resolve ethical quandaries in the workplace.

In fairness, several business schools are trying to revise their model but most have yet to realize they have a credibility problem. Business schools including the University of Toronto’s Rotman School of Management, Wharton, Yale and Stanford are overhauling their MBA programs, with a focus on better problem-solving, decision-making, ethics and social responsibility through experiential opportunities.

Angel Cabrera, President of the Thunderbird School of Global Management in Arizona, says that business schools are slowly beginning to move towards accepting the broader responsibility of management, citing the example of more than 200 business schools around the world that have endorsed the Principles of Responsible Management Education, a movement sponsored by the United Nations.

The challenge for business schools now is how to develop leaders not managers — people who believe business has bottom lines beyond shareholder value.

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