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Good Article: CEOs With MBAs Outperform Non-MBAs

Management education has taken a lot of heat over the past few years. And MBA programs all across the country have been put on the hot seat. They’ve been forced to defend their value to the modern business world, they’ve been blamed for the recent economic crisis, and they’ve been crucified for all the corporate scandals that have taken place in corporate America for the past decade. But a new study finally tips the scales back in the other direction.

Three professors from INSEAD recently undertook a study to identify the world’s highest performing CEOs. The study analyzed long-term performance of more than 1,200 global companies over the “long-term” and it came up with a mega-list of  Superhuman-CEOs who led their companies to new heights and who hit home-runs when it came to driving long-term shareholder value. All my MBA readers should be thrilled to hear that, MBA CEOs significantly outperformed their non-MBA counterparts in the study, ranking on average 40 places higher on the list. The study notes that this is well beyond the range of statistical error.

Immediately after hearing how the study came out, I started thinking about of the age-old question. The question that professionals and management experts alike have debated for decades as well as wrote dozens of bestselling books and HBR articles on but failed to substantively answer.  The question you’re also probably thinking about right now. Are CEOs with MBAs better managers than CEOs without MBAs? Do they have superior technical savvy, financial ability, or people skills? And even further, are CEOs with MBA better leaders? Are they better-equipped to lead organizations to greatness? Are they more capable of rallying thousands of people behind them to achieve Olympic-level results both for the organization and for society?  My first response is that it’s probably not black-and-white. I also suspect that there are a lot of complex, competing issues that have to be considered. But all things considered, my guess is that there’s probably is a right answer, once you figure out a way around some of those issues. Based on my limited experieces, I tend to believe that CEOs with MBA training, on average, probably have a distinct edge and more refined style than the other. After all, this is what they were trained to do, and in the process they were given a resume edge to get started with a high powered network to call on in times of need.

But …..  in my opinion the MBA is not the key differentiator. If you want to truly understand how to attain success, look at firm leaders, like Steve Jobs who is #1 on the study’s CEO list.  These leaders have come from all walks of life and earned the single commander-and-chief role at world-class firms and shepherded those firms to perform at the highest imaginable level. To me, they have something that’s far better than an MBA. They have the unusually brilliant, intangible ability to influence and direct an organization. They have the ability to lead.

* Please see BusinessWeek and Harvard Business Review for more detailed posts on the study and for the actual results.

3 Comments to Good Article: CEOs With MBAs Outperform Non-MBAs

Miguel
June 16, 2010

It is an interesting study by INSEAD faculty. However, the problem that I see is that those statistics only indicate a correlation between an MBA and being great leaders. But correlation does not equal causation. Earning an MBA degree will not necessarily create a great leader.

The job of business schools is to “recruit” the best talent around. Students get a good education by interacting with equally talented people. We then have a pool of greater talent, from which a lot of leaders will emerge to lead organizations. But when we talk about non-MBA’s such as Steve Jobs or Michael Dell (outliers of the non-MBA population), they already have the “intangible ability to influence and direct an organization. They have the ability to lead.” No need to go learn outside.

Additionally, it is way too hard hard to make an objective evaluation of companies that operate in different sectors, industries, countries and market conditions.

Jeremy C Wilson
June 30, 2010

@Miguel Hi Miguel,

Thanks so much for reading and for commenting on my blog. I also think the INSEAD study was interesting, though I can’t specifically comment on the precision on the study because I haven’t read the entire thing in depth. I will say a couple of things though.

1. I agree that an MBA does not automatically make you a good leader. After all, that’s one of the biggest complaints about recent MBA graduates. On the other hand, an MBA does gives you access to certain people and exposure to certain experiences that will help you develop critical skills that leaders must have. It’s a catch 22.

2. Your point about going to “learn outside” how to lead could be a bit contentious. While some people believe that leadership can be taught, a large number of scholars and practicioners disagree.

3. I agree that it is hard to evaluate different companies, in various sectors, with diverse products and purposes. It’s like comparing apples and oranges. On the other hand, though, it’s also hard to argue against Steve Jobs’ innovative leadership and with the Apple brand today.

As you alluded to, it’s an interesting debate. Thanks again for writing.

Jeremy

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