Do MBAs Make Better CEOs? Sorry, Dubya, It Ain't Necessarily So
(FORTUNE Magazine) – George W. Bush, America's first President with an MBA (Harvard, '75), is settling into the White House. The nation itself thus joins the ranks of some 40% of its 100 largest companies, which are also run by MBAs. You'd think America would be in good hands. But do MBAs make effective CEOs? No one, as far as we could tell, has ever checked. So we began to snoop around.
First, we considered the success stories, asking knowledgeable people to name American CEOs who had achieved great things over long careers. The names that came up most often were Bob Galvin of Motorola, Bill Gates of Microsoft, Andy Grove of Intel, and Jack Welch of General Electric. The first two never finished their undergraduate degrees; the last two have Ph.D.s in chemical engineering.
Then we looked at the other end of the spectrum, the "failed" CEOs. A 1999 FORTUNE article, "Why CEOs Fail," examined 38 of them and found that they had flopped because of "poor people skills" or "bad execution." Of the 33 U.S. companies on the list, 40% of the CEOs--such as Frank Lorenzo of Continental Airlines (Harvard, '63) and James Robinson of American Express (Harvard, '61))--had MBAs. Quite a few! Then we noticed that both Lorenzo and Robinson appeared in a 1990 book called Inside the Harvard Business School, by HBS insider David Ewing. They were on his list of the school's stars at the time--19 graduates who had "made it to the top." Curious, we examined the subsequent performance of all the alleged stars. Nine, including Lou Gerstner of IBM (Harvard, '65), seem to be doing fine. But ten had run into major problems. A number were forced from their jobs. In some cases, like that of William Agee of Morrison Knudsen (Harvard, '63), their companies declared bankruptcy soon after their departure.
We're not arguing that the MBA is a dysfunctional degree that ruins everyone who gets it. But given how much of America's well-being is now in the hands of these degree holders, the MBA deserves the kind of scrutiny that its holders accord everything else.
Looking more closely at the CEOs who failed, we noticed that they tended to do so in similar ways: They ran their businesses according to a formula, regardless of the people involved or the dynamics of the industry in question. There's a correlation with the degree here: The MBA tends to be heavy on the "B" and light on the "A," teaching business functions, yet not developing the practice of administering. These programs give students the confidence to make decisions but not the competence to deal with the messy reality in which decisions are executed. Students learn to analyze situations and propose "implementation." Unfortunately you cannot replicate true managing in the classroom. The case study is a case in point: Students with little or no management experience are presented with 20 pages on a company they do not know and told to pronounce on its strategy the next day.
The MBA was introduced in 1908 and last seriously revised in the 1950s. It's time for a new strategy. Managing today is better served by programs designed for practicing managers who stay in their jobs as they learn from their own experience. We have found that learning occurs not in some high-pressure boot camp, but in an atmosphere of thoughtful reflection (see impm.org).
As for America's new MBA CEO, he's about to get a big dose of that messy reality. He is known for his people skills. How he handles the execution will be the real test.
For details, see www.henrymintzberg.com. Henry Mintzberg is Cleghorn Professor of Management Studies at McGill University and teaches only students who are practicing managers. Joseph Lampel is professor of strategic management at the Nottingham University Business School in Nottingham, England.