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Why do people go to business school? After all, the more MBAs there are, the weaker the competitive advantage conferred. Numerous management critics have questioned the value of the MBA in the first place. Courses are expensive and arduous, and price is no guarantee of quality. Do business schools help or hinder entrepreneurship?

Nostalgia Isn’t What it Used to Be

‘No man,’ said Heraclitus, ‘ever steps in the same river twice, for it is not the same river and he is not the same man.’ I know I’m taking a risk by referring to an ancient Greek who is not a mathematician on a site heavily patrolled by geeks, but it was a line much in my thoughts when I attended a business school reunion at Stanford this past week.

For many of us who have not done a stint in uniform, a year or two at business school is likely to provide the group of colleagues with whom we have the tightest bonds – for good or ill – of adult life, for a number of reasons. First, your personality is pretty much formed by then (most US MBAs are in their mid to late 20s, many European schools admit students a few years older) and you should find yourself among others much like yourself.

Secondly, consider the contrast with your first degree. You might have drifted into university at 19 and settled on a course of undergraduate study out of ignorance (no-one told you that an English degree does not guarantee a job at the BBC) or for tactical reasons (the entry requirements were lower to become an engineer than a vet), but given the time and cost involved in going to biz school - especially in America, which still dominates the top of the league table - you’re doing it because you really want to.

But on top of that there is also something about the ethos of business school that reinforces the sense of experience deeply shared. Schools like to emphasise how competitive they are to get into and how lucky you are to be there paying the fees; they underline small differences with competitors to ram home the sense of belonging: flags, coats-of-arms, logos, competitive team events, group photos, gruesome themed parties, alumni news and a raft of other boarding-school trappings.

Boot Camp

But above all, biz schools do boot camp, boot camp that can last 12 months or longer. Those of you familiar with the gentle pace of undergraduate life in Britain (and a recent report suggests that that pace has now slowed from a jog to an amble) will be in for shock therapy of the type even enthusiasts for national service might find OTT.

Your course director will give you a number of reasons why your first term schedule involves 80 hours of study each week. The most common excuse is that it prepares you for life at the top, though I doubt there many CEOs of Fortune 500 companies running Monte Carlo Simulations on a laptop at 2AM. If it prepares you for anything, it is for life as cannon fodder at an investment bank or strategy consultancy, which is where most newly-minted MBAs from schools in the top half of the table will end up. Pulling all-nighters on deals that often get canned at least enables you to pay off $100,000 of grad school debt.

However, I suspect that the real reason why business schools encourage the boot-camp culture is historical. B-schools are not an ancient institution (I think that the first were at Wharton and Dartmouth College and that Harvard started the first MBA just under 100 years ago) but they have quickly developed the patina of age.

In their early days, biz schools needed to look and feel as much as possible like other professional schools, such as law and medicine. Just as management consultancy firms in the 1920s and 1930s sought the right image by mimicking the white shirts and dark suits of the lawyers, so the business schools (with whom they were intimately linked) aped the classroom design, long hours (and even case method) of law and medicine.

And if as a result a strong esprit de corps and loyalty to the school is also produced – rather like Stockholm Syndrome among kidnap victims, who come to identify with their abductors - then so much the better, especially for the School’s alumni program. The psychological bond appears to be even stronger if your prison block was ivy-clad or faux gothic, as so many American campuses are.

One joke doing the rounds at last week’s reunion was: ‘It’s a pity Osama bin Laden didn’t go to Stanford – the Alumni Office would be sure to know where he is.’

Minimisers, Geeks and Entrepreneurs

Despite the national service overtones of the first term or two, one-upmanship and individualism soon reassert themselves, as you might expect with business school types. And of course such individualism can take as many forms as it did in Stephen Potter’s 1947 original Lifemanship.

By Christmas of the second year, most students have secured job offers at Goldman Sachs or McKinsey & Co or GE and are starting to coast: these are the rational minimisers. Some have the Dean’s List in their sights and continue to turn up for lectures with fully cross-referenced case-studies; they are the biz school answer to technology geeks.

But the most interesting group for me were the guys who had already crafted a start-up business plan by mid-year and by the final term had recruited the nucleus of a management team, not just from round the school but from other departments in the university. If they turned up for the graduation lunch at all, it was only because they were targeting the keynote speaker as an investor or member of their advisory board. And by the time the next year’s students turned up in the following September, these entrepreneurs had already secured an angel finance round or even a first institutional funding.

In my class of 54, two manufacturing businesses had been set up by graduation; a further two Web businesses were set up within a year or so, as were two venture funds and one private equity fund. At this year’s reunion – only two years on – I found that two or three others were working for start-ups and a couple more were about to launch independent careers.

For and Against Business Schools

Despite my tongue-in-cheek tone, I believe that business schools perform several useful tasks, but some of the arguments against them also deserve a hearing.

First, Henry Mintzberg, himself a professor at the respected Desautels Faculty of Management at McGill University, puts forward a comprehensive case that MBA programmes and their products are more of a liability than an asset. In Managers Not MBAs he criticises business schools for sending ambitious, arrogant young MBAs into the job market as if they were trained professional managers with a superior grasp of management as a science in the same way that lawyers are inducted into their profession during a 2-3 year apprenticeship or doctors suitably experienced by a long stint in hospital.

But management in his view is neither a science nor a profession. Management cannot be taught in business schools – it is a practice, something learned by doing. Mintzberg goes on to make a number of detailed suggestions for improving the training of would-be managers. Even if he exaggerates to make a point, he also puts forward a series of proposals for making business training more practical.

Much of his thinking is in line with Blimp’s view that business school should be like Staff College, taught by experienced, regularly rotating practitioners giving candidates tools to be honed in the field. The Staff College then becomes the repository of accumulated wisdom, especially for specialist subjects such as finance. But passing Staff College at age 33 you do not expect to command a battalion straightaway, even if you would expect to be a brigade chief of staff.

If Mintzberg argued that MBAs are a nuisance to others, another insider critic argued that they are a misery to themselves. Professor Jeffrey Pfeffer of Stanford, who with Christina Fong in 2003 published a much-discussed article The End of Business Schools?
Less Success Than Meets the Eye, argued that:
‘What data there are suggest that business schools are not very effective: Neither possessing an MBA degree nor grades earned in courses correlate with career success, results that question the effectiveness of schools in preparing their students. And, there is little evidence that business school research is influential on management practice, calling into question the professional relevance of management scholarship.’

The Bottom Line

Much of what both Mintzberg and Pfeffer have to say is related to how MBA programs are taught and several leading business schools, including Stanford, are now tackling this with a redesigned curriculum.

And the backwash from Enron (the complex story of which is ably and soberly summarised in Alex Gibney’s movie, Enron: The Smartest Guys in the Room) also led to a much-increased awareness among Business School Deans of the need to inculcate a sense of personal responsibility in graduates: if 'do the thing right' is management and 'do the right thing' is ethics, 'do the right thing right' is leadership, a rare quality that B-schools now seek actively to foster.

Business school also did a reasonable job in my case of balancing out quantitative, conceptual and people skills - a useful equlibrium for life in general, not just management. Many of us tend to be either quant jocks OR impractically vague with numbers. I benefited greatly from shock treatment in math, statistics and decision modeling, and I had colleagues of the quant persuasion who came to appreciate that 'soft' disciplines (marketing, team building) are not at all easy. Biz school gave them a chance to work on self-insight, motivation and communication with others in a way that is uncommon in formal adult education.

That said, before applying to B-school those of you who, like me, are 'poets' in the jargon of graduate school might want to read Snapshots from Hell: the Making of an MBA, a gripping account by Peter Robinson (President Reagan's former speechwriter) of what full, freezing quant immersion feels like.

Reviewing what had changed over the past generation for Britain Forty Years On, we concluded that business schools were one factor among several that had helped improve the flagging quality of British management after the low point of the 1950s and 1960s.

As for venture capital and entrepreneurship as opposed to big business, I know that I learned a considerable amount of technical information relating to both at business school. That said, the relatively large number of my class who have since set up their own business may in part reflect the higher age profile of the Sloan Fellows compared with MBAs, who called us, and probably anyone else over 30, ‘the old guys’.

But in both the US and UK entrepreneurship is now well-established at a wide range of business schools. What matters most now is having a further generation of success stories cycling through the system to inspire others and teach by example. And that is above all a question of time.

27 September 07