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QUICKLY, WHAT do convicted felon Jeffrey Skilling, deposed chief executive officer Stan O’Neal and struggling CEO Jeffrey Peek have in common? They all went to Harvard Business School. 

A Bloomberg News report says the alumni of this august institution have commanded the highest starting salaries among US business school attendees, a 2006 school survey found. More than 500 of them serve as CEOs worldwide, according to data compiled by Bloomberg. But quite a considerable few have “ended up disgraced, defeated or with their companies in desperate straits”.

“It’s obviously a good thing in terms of the reputation, but it’s not necessarily going to have a big impact in the long term,” said Sydney Finkelstein, a professor at Tuck School of Business at Dartmouth, in Hanover, New Hampshire to the wire service. Finkelstein wrote Why Smart Executives Fail (Portfolio, 2003).

Students often embrace the wrong material, Finkelstein said. They disdain “soft” courses in organisational behaviour, including teamwork, and focus instead on finance and accounting. “The stuff that most students find the easiest turns out to be the hardest in the real world,” he told Bloomberg.

 

Yet corporate recruiters continue to hire MBAs despite the ignominious results that some have caused in the corporate world, and that’s because the pluses of the degree and training are seen as vital to successful business operations.

Here’s what the latest GMAC (Graduate Management Admission Council) Corporate Recruiters Survey 2008 found.  Of the 139 corporate recruiters surveyed from the investment banking sector, they found “three in four participating investment firms hired MBA graduates in 2007 (76% of the respondents) and plan to continue hiring MBA graduates in 2008”.

 

 

The spreading global sub-prime crisis which has caused billion-dollar losses and trillions of dollars in write-downs of asset values has no doubt impacted corporate hiring. Yet as the survey dug deeper, “a closer look reveals that these investment-banking companies are cutting back hiring quotas for undergraduate students and experienced hires to sustain their MBA-graduate hiring levels.”

“One possible explanation for this may be that companies recognise a need to bring in specific talents associated with an MBA education during times of economic turmoil,” the report surmised.

The GMAC Recruiters Survey is no small affair. For its latest report, the council received replies from 2,307 participants representing 1,552 companies worldwide, including 173 of US Fortune 500 companies and 126 of global Fortune 500 companies. One hundred and twenty-nine business schools, 38 of which were located outside of the United States, facilitated the administration of the survey, GMAC said.

The report also reiterated long standing basic principles of what recruiters look for. Companies hired MBAs primarily for their business management knowledge (78% of respondents), and their ability to apply that knowledge along with technical skills. Secondly, employers also hire MBAs for their communication skills (persuasive, written and presentation).

Work experience is also crucial and the three to fours years of prior work serves to differentiate those that get hired to others that do not easily get placed. However, the report does note that overall hiring levels for MBAs in 2007 did fall by 6% compared to 2006 and 2005.  Furthermore, hiring projections for 2008 have been less optimistic, only 11% increase projected compared to 18% for 2007 and 155 in 2006. 

In short, the actual hiring rate for all of 2008 may be less given the continued downturn in the financial sector.

Among the values that MBAs bring, the GMAC survey found that the “ability to reach goals” was only selected by 43% of the corporate recruiter respondents, which is telling about their priorities. Perhaps it is because MBAs are seen as entry-level to middle managers and not quite senior or C-level candidates yet. According to the GMAC survey, “a typical MBA graduate is most likely to have four to five years of work experience, be hired by US consulting firms, acquire a mid-level position, and earn a salary that is almost double that of a recent graduate with a bachelor’s degree”.

 

Ultimately, the survey concluded it appears that even during the economic downturn, companies worldwide welcome “mature, analytically oriented graduates with the ability to lead teams, divisions, and organisations.”

 

As Bloomberg’s story on failed MBAs noted, discerning a school’s role in creating leaders who succeed or stumble is difficult, citing Warren Bennis, a professor at the Marshall School of Business at the University of Southern California, in Los Angeles.

 

 

“We couldn’t ever really predict their capacity to grow and learn,” said Bennis, who is also the co-author of Judgment: How Winning Leaders Make Great Calls (Portfolio, 2007). Circumstances such as “an autistic kid, a bad marriage, a bad accident” can mould executives, he said. 

The sub-prime-lending spree shows that Harvard and other elite schools fail to mould managers who look beyond self-interest, said Rakesh Khurana, an associate professor at Harvard Business School. “Business schools as an institution have not effectively addressed this issue of creating a profession that has the capacity for self-regulation,” said Khurana, author of From Higher Aims to Hired Hands (Princeton University Press, 2007), to Bloomberg news wire.

The global newswire and financial information provider’s founder, Michael Bloomberg, who is also, by the way, the Mayor of New York City, received his MBA in 1966 from the Harvard Business School.