Tag Archives: MBA

Is Getting an MBA Wasting Time and Money?

What if the “is getting an MBA worth it” question isn’t really a matter of money? What if it depends on who you are, where you are, what resources you have, and what you want?

Penelope Trunk posted Why an MBA Is a Waste of Time and Money recently on BNET. She lists seven reasons, all of which are about how much money you won’t make if you stop your career to get an MBA. A couple are sad and true (an MBA doesn’t make you an entrepreneur, and doesn’t increase your earning power unless it’s from a top-10 school), a couple of them obvious, and a couple of them whimsical and interesting (it makes you look desperate and puts off the inevitable).

Penelope Trunk is a good writer and successful entrepreneur. She has a knack for bringing up real issues and she thrives on controversy. As proof of that you can try her own list of rants, or, perhaps even more telling, the titles of this list of her BNET posts. (Anybody who can post something on BNET titled Forget the Job Hunt. Have a Baby Instead obviously understands blogging, irony, and the value of taking a contrarian position.)

Her post makes me ask: how do you determine what’s a waste of time and money? Does education pay for itself in earning power? Is that what it’s about?

How many of the best things in life are a waste of time and money? It’s just amazing when you stop to think about it. Except – whoops – no, don’t, because stopping and thinking would be a waste of time. Instead, get to work. Earn money.

And what about the chart here, my attempt to draw the relationship between education and experience as you look at entrepreneurship? Isn’t there a relationship between education and experience, some substitution, but with the ideal a mix of both? And tradeoffs between the two? And a continuum, shades of gray, rather than black or white?

My answer: don’t do it for the money. Don’t do it if it’s a horrible sacrifice. Don’t do it if you hate school. Don’t do it if you can’t afford it. Do it because you want to learn. Don’t do it if you hate school. And a few other points summarized in Read This Before You Get an MBA Degree.

{Illustration credit: my drawing on a chalkboard by Studio Aramita on Shutterstock.com)

Scary-but-Simple Formula for Value of Business Information

It was one of those eye-opening moments.

I’d gone to business school after a decade in journalism-laced-with-consulting out of Mexico City. My (meager) income doubled when I jumped from regular journalism to business writing, from United Press International (UPI) to Business International and McGraw-Hill World News. So when David Kreps asked the question “what’s the value of business information,” I raised my hand. I said:

I’m not sure, but it’s a lot. Information is worth a ton of money. Big companies paid my last employer thousands of dollars for economic projections, inflation and currency updates, and so on.

Prof. Kreps said no, that was way off. Here’s the answer: chalkboard

Information in business is worth the difference between the business’ bank account balance. Take the cash in the bank with the information, and subtract from that what it would have been without the information, and that’s the value.

Sure, that’s a bit hypothetical. But it’s also stark reality. It was hard for me to absorb, because I tend to like touchy-feely vague definitions and case-by-case answers; also, this cold hard money definition felt like a reduction. But there it is.

Why scary? Ask yourself: how much time, trouble, and money do I spend on information I don’t use? How much do I research beyond what I need to make a decision?

Business Plan Contests Leave Out Bootstrappers

I consider myself something of an expert on business plan competitions. I ran one myself for several years, I’ve judged several dozen including several of the most prestigious, my company sponsors more than a dozen a year, I’ve had students in my undergrad business classes competing in them, I’m an investor member of an angel investor group that holds an annual contest, and perhaps most important, I enjoy them.

business planSo when the National Association for Community College Entrepreneurship (NACCE) asked me to do a webinar on business plan competitions, I said yes. That’s going to happen August 18 at 1 pm PDT (and you can click here to register). And it also got me thinking about what’s right and what’s wrong with most of the business plan competitions I see. Which led to this post, about a problem I can’t solve. While it might come up in that webinar, it’s not going to be the main topic. But I do want to write about it here.

The problem is that business plan contests almost all undervalue bootstrapping. While the vast majority of startups are bootstrapped, meaning they start without venture capital or angel investment, the vast majority of business plan competitions award the best investment, not the best company.

And I’ve seen many a good-looking plan, and good-looking business, that should have been winning something but wasn’t a great investment for outsiders. It hurts to not find a prize for the startups that look really good for the owners and operators, long term, without an obvious exit, which makes them a good business but a bad investment. Why don’t they get a prize?

However, this is a hard problem to fix. How do you decide what’s a good business? High risk, low risk, change the world, maybe? It depends a lot on who you are.

Back in the late 1990s I judged some intercollegiate MBA-level contests that left the criteria for winning up to the judges. Most of the judges were investors so they leaned naturally towards awarding the top awards to the startups that seemed to offer the best investment.

I still remember a conversation we had in the judges room in 1998. One of the best businesses we’d seen said outright that they could do it without outside investment. They were there for the cash prize. They had a strong team, a good product, and a believable plan for financing themselves using early sales. Several of us thought that the best possible businesses grow themselves that way, bootstrapped; and a good shot at a $5 million business owned by its founders was, to us, a better business than a 1-in-100 shot at a $25 million business owned by investors who put in $2 million. Several others thought that a business plan competition prize should go to the best investment opportunity.

How do you compare the relatively low risk cool bootstrapped startup to the high risk, high-profile startup that might change the world? Sure, we all say the risk and return ratio, and the MBA world offers technical analyses like internal rate of return, but, as they look into the future, it’s all very subjective. It involves guesses about the future cash flows and the discount rate. There’s a lot of unequal comparisons.

But the classic business plan for investment, and the investment process, and the investment filter, are also what’s generally taught at the MBA level, a lot more than bootstrapping.

A few years ago half a dozen or so of the leaders of MBA-level business plan contests got together and, trying to solve this problem, agreed on some general standards. At that time – or so I was told; I wasn’t there – they standardized on using “the best investment” as the main criterion for determining a winner. I do sympathize. Although even this one is a complex and difficult standard to follow, it gets way worse when you drop it in favor of something even more vague.

Most of the major competitions go along with that standard. Some of them have added special channels for social entrepreneurship, with different criteria. And for the angel investment competitions, like our Willamette Angel Conference, it’s not a problem at all because we’re actually investing, so of course we want the best investment.

But in the meantime, the bootstrappers are still left out; and that’s a shame. I think it’s a problem we can’t solve easily. And it might come up in my webinar, but I won’t have a solution.  What do you think?

Is Education Missing its Target or Just Aiming at the Wrong Target?

I’d like to think that business education should be about education more than business. It should be about leadership, perspective, and vision, more than about analysis, buzzwords, jobs, and salaries. But is it? Or is that just the kind of high-sounding stuff we write when looking back, years later?

Rethinking the MBAI’ve seen two important pieces on higher education and business education in the last week, one questioning the idea of the MBA, the other questioning higher education in general. While the Harvard Business School writes about a glass half full in The Future of MBA Education, Seth Godin writes about what he calls The coming melt-down in higher education on his blog.

The Harvard post summarizes a new book called Rethinking the MBA, by David Garvin,  Srikant Datar, and Partick Cullen. It’s about six cases of well-known business schools (including Stanford, my personal favorite) revising their programs to deal with a changing world. In the interview, Garvin says:

Yet rebalancing from the current focus on “knowing” or analytical knowledge to more of what we call “doing” (skills) and “being” (a sense of purpose and identity) must occur. Business schools need to think innovatively about how best to use the resources available to them. For example, there are many exciting opportunities to engage alumni in the learning process.

Seth Godin calls his bleak picture “as seen by a marketer.” He predicts “meltdown” in higher education for five reasons:

  1. Most colleges are organized to give an average education to average students.
  2. College has gotten expensive far faster than wages have gone up.
  3. The definition of ‘best’ is under siege.
  4. The correlation between a typical college degree and success is suspect.
  5. Accreditation isn’t the solution, it’s the problem.

He makes several very good points. This observation seems all too true:

College wasn’t originally designed to merely be a continuation of high school (but with more binge drinking). In many places, though, that’s what it has become. The data I’m seeing shows that a degree (from one of those famous schools, with or without a football team) doesn’t translate into significantly better career opportunities, a better job or more happiness than a degree from a cheaper institution.

In both cases, to me, it’s about confusing education with job training and job placement. If you measure success by average salaries and job placements, then as a society you substitute job training for education. The target is growth of the person, not growth of the income.

I have to admit that I started thinking about getting an MBA degree when my dad showed me a newspaper story about MBAs getting high-paying jobs. So now years later, I write about education first; but for me it was about changing careers, from journalist to business.

That worked for me. I did change jobs. However the real value, as I look back, was in the classroom, what I learned, much more than the step up to the next job. Years later, what I expect from somebody with an MBA degree is a better view of the whole business, from finance to marketing to operations, human resources, and so forth. You might work in one functional area, but you have basic understanding of the whole, not just your specific part. And you have a sense of what business analysis is like, how and when it’s useful.

Or at least, that’s what I hope. I’ve also posted on this blog my thoughts on what business schools can teach, what they don’t teach, and questions to ask before getting an MBA.

MBA or Start My Business?

Question: I’m 35. I feel like I hit the rock bottom in my career path and I’m totally lost. Some people I know recommended getting an MBA. scales and booksOthers say it is a waste of time and money, since I am too OLD by the time I get the degree, and no one would hire me. Actually I know some unemployed MBAs around me. It is scary! So my question is, does MBA open a lot of doors? Or, should I just keep the money to start my own company?

That’s a tough one: MBA vs. start your own business.

If ever there were a good reason for business planning, this is it. Do that business plan first, to break your uncertainty down into more manageable pieces. Be honest about what you can sell, how much, and how much it will cost you. It’s not just generic start a business vs MBA, but rather, start this specific business, given this business plan, vs. MBA. That’s a huge difference. Are you hitting  the startup sweet spot or just dreaming?

If you come to me with some generalized idea of a new business, or looking for what kind of business to start, selecting from lists of interesting new businesses, then forget it. Do the MBA. Or don’t. But a vague general longing to start some business or other isn’t the same as wanting to start a specific business, based on your strengths and weaknesses and what you want to do, defined in a business plan that makes sense and indicates it is a viable business.

I suspect you emailed me because of my Read This Before You Get an MBA post on this blog earlier this month. And for your situation, I stick with some of the things I said in that post. Specifically:

  • Don’t do it for the money
  • Don’t do it if you hate school
  • Don’t do it if you can’t afford it

To your specific question, though, about an MBA opening a lot of doors: not necessarily. A lot of MBA programs include strong career resource programs that put a high priority on placing their graduates into good jobs; but some are better than others. Some times are better than others. I was 33 when I finished my MBA, and being that old was not a disadvantage at all. But times change. I had classmates at Stanford who were in their late 30s (a very few) and some thought their age was a recruiting disadvantage.

What worked for me, and might work in your case as well, was the MBA came at a time when I was bored and uninspired with the career I was in, and looking for a change.

But you also should realize that there are no guarantees. There are a lot of unemployed people with fancy degrees, and that includes MBAs. The degree is something you do for yourself, for your own personal growth, and not just to find a job. Or at least that’s what I think.

So do a business plan. Then ask yourself that question again.

(Illustration: Daria Filimonova/Shutterstock)

Read This Before Getting an MBA Degree

Here I am, father of five grown-up children, 37 to 22 years old, all of them working in small high-tech companies, all of them college grads, two of them with graduate degrees. And, while my MBA studies were exactly what I wanted, and worked great for me, not one of my five kids has a business degree, much less an MBA. Yesterday somebody asked me why that is. This post is my response.

1. Don’t do it for the money

Search Google for Is an MBA degree worth it? and you’ll find lots of people showing that the average incremental income linked to an MBA degree doesn’t compensate for the expense plus the lost income for two years. They’ll use buzzwords like opportunity cost. Ironically, I’m sure my MBA degree paid for itself in money terms many times over, but the analysis seems to indicate I’m the exception, not the rule.

So why do it (and if you have to ask, that’s a bad sign)?  You do it because you want to learn about business: entrepreneurship, marketing, finance, operations, strategy, management, planning, and so forth.

2. Don’t do it when you’re on the way up

Don’t ever quit an exciting new job to go get an MBA degree. Do quit a boring job or one you’ve mastered so much you’re not learning any more. Do use an MBA effort as a catalyst to change locations, the life you’re living, your business interests. Don’t do it when times are good.

3. Don’t do it if you hate school

If getting your undergrad degree was a long hard haul; if you don’t like school or classes or homework or teachers; then you’re going to hate the MBA program. You know who you are: some people like school, and some don’t. If you don’t like school, even if you successfully dragged yourself through it because you’ve got good discipline and you’re highly motivated, then you’re going to hate the MBA classes. And that’s hell. That wasn’t my case. I’d grown up (finally) when I went back to school.

4. Do it at the best school you can get into

Listen carefully for a while and you’ll start to hear people saying so-and-so is “Harvard MBA” or “Stanford MBA” or “Wharton MBA” and so on, in a way that changes the title to incorporate the school name. Northwestern also works for that, Duke, Babson, and for sure a few others (and I apologize for leaving them out). I have to recognize that this is easier said than done, because they are tough with admissions and expensive, but there is a difference between an MBA from one of these name schools and the MBA from one of the others. Even that return-on-investment analysis that I brought up in point 1 above looks much better when it’s an MBA from a name school.

5. Don’t do it if you can’t afford it

My wife and I worked my way through. I didn’t have scholarship or family money. I worked a lot at consulting while studying full time. We ended up with a lot of debt. But in the end, we were able to afford it. It was a lot cheaper back in 1979. If you can’t make the money side of it work, if it’s going to be two years of financial hell, don’t do it.

6. Don’t sacrifice a lifelong relationship for it

There’s a catch 22 problem here: first you have to say, if it’s a matter of either your marriage (or a lifetime couple relationship) or your MBA degree, forget the MBA. Lifetime relationships are way more important. But the catch is: in a healthy relationship each person makes the other one better. When I quit a job to get an MBA my wife encouraged me. “Let’s take the risk,” she said, “if we fail we fail together.” We’re still married. If you’re married or in a real long-term relationship, and your spouse, partner, or significant other doesn’t like the idea, it could easily destroy your relationship. That’s too big a sacrifice.

And be honest with yourself on this point too: if you really want it and the boyfriend or girlfriend doesn’t care enough about what you want, realize it’s a bad relationship anyhow, one person pulling the other down, then go get the MBA anyhow. Meet somebody new.

Yeah, I know, that last bit has too much paradox.

Are You Looking for Answers You’ll Never Find?

Are you looking for answers you think are out there somewhere, like hidden treasure, when they really aren’t? When you have to make your own answer instead of finding some theoretical right answers.

Business plans, sales forecasts, best practices, how-to steps, lists of solutions … are they like hidden treasure, waiting for you to find them? Is that how you approach them? Ask people on Twitter, find out what to do?

What if there’s really no treasure out there at all, and what really happens is that one by one, case by case, we develop our own. We either make our own treasure, or we waste our time searching.

Offering advice scares me. Sure, it’s sort of what I do, in this blog, in books, and so on. But it scares me because in the real world, general rules don’t always apply. Every case is different. The right answers are the ones you make yourself, not the ones you find. I want people to take what I say about something and think about it, compare it to other views, try it on, see if it fits, and make it their own thing.

This is related to the “I’m not qualified” syndrome. There’s a scene in a Monty Python movie where the woman in labor asks the doctor (played by John Cleese): “doctor, doctor, what do I do?” And the doctor answers, scornfully: “You? You do nothing. You’re not qualified.”

Too many people think somebody else – the MBA, the CPA, the one with the grey hair – has some magic that they don’t have. Are you like the woman in the birth scene, wondering what to do? You’re not qualified?

The obvious case that I deal with all the time is the idea of finding a business plan instead of making your own. Samples are great, sure, but don’t think any existing business plan will ever work for your business. You have a different time, place, strengths and weaknesses, resources, goals, and so on. It’s a bit like writing a novel: reading others helps, but you don’t find the novel you authored, you write it.

That’s just one example of many. Throughout the world of small business and entrepreneurship, people everywhere have the mistaken idea that there is a right answer somewhere, if only they can just find it. Do you homework. Educate your guesses. But this is your business, like it’s your life.

Don’t spend too much time finding the hidden treasure. Do it your way, not mine, not hers, or his, or theirs, or some theoretical right way. Everything is case by case. Do it your way.

(Image: James Steidl/Shutterstock)

Note to MBAs: Drop the comma MBA, Please!

imageI just got another email from somebody whose email signature is “So-and-so, MBA.” Which reminds me of the business cards, and letters, and promotional material I see where people brandish those three letters after their name.

I don’t think that “MBA” thing behind your name works out for you.

imageHave you heard the joke about how to create a small business? The answer is take a medium business and put an MBA in charge. And the magic MBA investment formula for guaranteed profit? The answer is buy MBAs for what they’re worth and sell them for what they think they’re worth. Do you know how many people blame MBAs in general for the current financial disaster?

It’s not a matter of licensing and regulation, like MD or CPA. It’s just a master’s degree. In this country alone, accredited institutions grant several hundred thousand masters degrees every year. That’s not including the fake degrees.

So that MBA you earned? Put it on your resume, put it on your blog’s “About” page, and put it in the management team section of your business plan when seeking loans or investment. Use it to know what you’re talking about. But leave it off your name.

MBA Pledge: What About the Other 80%?

Comedian Robert Klein has a routine where he grabs a consumer fruit drink that claims “contains 10% fruit juice,” and asks: “What about the other 90 percent?”
And the graduating class of Harvard MBAs last week had a special new code, A Promise to Be Ethical in an Era of Immorality that 20% of the graduating MBAs signed. The New York Times reported:

Nearly 20 percent of the graduating class have signed “The M.B.A. Oath,” a voluntary student-led pledge that the goal of a business manager is to “serve the greater good.” It promises that Harvard M.B.A.’s will act responsibly, ethically and refrain from advancing their “own narrow ambitions” at the expense of others.

And I can’t help asking: what about the other 80%?