MBAs Don’t Necessarily Make the Best CEOs, Studies Find

Apple CEO Tim Cook was glad he got his MBA, and studies show around 40% of top CEOs have one under their belt. But are MBAs really that valuable for real-world managers?

Not particularly, according to Henry Mintzberg, a management professor at McGill University (Montreal, Canada), who suggests they may even make managers worse.

Sure, MBAs teach graduates how to handle themselves in different business scenarios, school them in finance and marketing and introduce them to people from assorted backgrounds. “The people made it an incredible experience,” Cook said of his time at Duke’s Fuqua School of Business. “It was great for me to see how bright people approached solutions in different ways.”

But how do these people do as CEOs? Are the skills needed to perform well as managers the same as those that got them to the C-suite?

In a new blog post, Mintzberg cites various pieces of research, including some of his own, that indicate companies led by CEOs with MBAs don’t, on average, perform very well.

For example, when he and colleague Joseph Lampel tracked the performance of 19 CEOs listed by the Harvard Business School as alumni who had “made it to the top”, they found that 10 had clearly failed. By that they meant their company had either gone bankrupt or they were forced out as CEO. The performance of another four was found to be questionable, leaving just five of the entire group who were relatively successful.

Subsequent work has backed up the findings, Mintzberg said. Among them was a study by researchers at the HEC business school in Montreal and the University of Rhode Island. After tracking the performance of 444 companies whose CEOs were celebrated on the covers of Business Week, Fortune and Forbes magazine, they found the performance of most declined, regardless of whether the CEO had an MBA. But companies headed by MBAs declined more quickly.

An explanation was that CEOs with MBAs tended to seek growth via acquisitions, which ended up dragging on cash flows and returns on assets.

Another study by the same authors, this time focused on 5,004 American CEOs, found similar results, with MBA CEOs more likely to engage in short-term strategies, such as positive earnings management and suppression of R&D.

Mintzberg’s post, which can be read in full here, came as a former management consultant advised budding executives to consider dropping an MBA and studying philosophy instead.

Writing for the Atlantic in a story headlined “The Management Myth“, Matthew Stewart argues that much management theory isn’t based on solid science. “As I plowed through tomes on competitive strategy, business process re-engineering, and the like, not once did I catch myself thinking, ‘Damn! If only I had known this sooner!’ Instead, I found myself thinking things I never thought I’d think, like, ‘I’d rather be reading Heidegger!'”

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