MBA: Priceless Commodity?

A survey by Pepperdine University’s Graziadio School of Business and Management shows that while top executives find the MBA valuable, it has a way to go to be “priceless.” To turn the MBA into something extraordinary, schools need to bolster their hands-on learning and their commitment to ethics.
MBA: Priceless Commodity?

The debate over the value of an MBA degree reminds me of the long-running advertising campaign for MasterCard. Viewers are presented with items that can be purchased by the easy swipe of a credit card. The last item, typically something money can’t buy, is deemed “priceless.”

Is an MBA a priceless commodity in the eyes of executives who hire newly minted graduates? To find out, Pepperdine University’s Graziadio School of Business and Management collaborated with the market research firm Harris Interactive in a survey of Fortune 1000 senior executives. We wanted to discover if these executives believe business school graduates are ready to work in today’s world—and if their MBAs help make them invaluable employees. We also wanted to discover if our own MBA program is turning out graduates with the skills these employers need.

Our analysis of the responses suggests that employees consider the MBA a useful degree, but they don’t find it extraordinary. The research also suggests that they’re looking for MBAs who have honed their skills through experiential learning and obtained a solid grounding in ethics. In the coming years, business schools will need to place additional emphasis on these two areas of business education if they want to position the MBA as a “priceless” commodity.

“Attending business school was like going to the land of Oz. I entered as the Scarecrow hoping to find a brain, but quickly discovered I was also the Tin Man trying to find a heart. The program helped complete me as a person.”
—An alumnus of Pepperdine’s Graziadio School of Business

Major Findings

The survey was conducted in spring 2006 via telephone interviews with executives in a broad range of industries. Questions targeted four fundamental areas of business education.

How well do business schools prepare MBAs to succeed in the business world? On a “poor-fair-good-excellent” scale, 69 percent of executives said they feel business schools do a good job of preparing today’s MBA graduates. About one in five, or 21 percent, gave business schools a rating of fair. Only seven percent gave schools the highest mark of excellent.

Are MBAs better prepared to meet business challenges now than they were five years ago? Approximately one-fourth of business executives surveyed—26 percent—said yes. But the majority, 61 percent, believe recent graduates bring the same level of preparedness to today’s workplace as graduates did five years ago. I find that statistic troubling, as it indicates that business schools are only maintaining the status quo in preparing their graduates to enter the workforce.

Are recent MBAs more ethical than, less ethical than, or about as ethical as their corporate counterparts? Only 18 percent of respondents believe MBAs who have graduated in the past five years are more ethical than the typical corporate executive. The majority, 67 percent, said they believe new MBAs are about as ethical as managers in the corporate world. Considering how much attention has been given to ethics in the business school curriculum, I find this statistic rather disappointing. It indicates that business schools might not be doing as good a job at teaching ethics as we had hoped.

What are your policies on tuition reimbursement? Sixty-nine percent of executives surveyed said their company’s policies on tuition reimbursement have not changed during the past five years. Only 9 percent said their reimbursement has decreased; nearly twice as many, or 17 percent, said it has increased. By contrast, data compiled by AACSB International shows that, for 2000–2003, schools reported a 5 percent decline in tuition reimbursement amounts of 50 percent or more. While the data is somewhat in conflict, one thing is clear: Tuition reimbursement is a benefit that could be in jeopardy. This is particularly true if companies face pressure to cut costs—or begin to question the worth of the degree.

Taken altogether, these statistics suggest to me that business schools are only doing an adequate job of preparing their students for the workforce. If business schools want to make themselves indispensable to corporations and ensure that they are turning out graduates with priceless degrees, they need to do a better job of preparing graduates to work in the real and ethically complex business world.

The Real-World Challenge

I believe that schools striving to add value to the MBA should strengthen their programs in four key areas: experiential learning, community focus, global thinking, and values-based decision making. Many schools are already working to improve efforts in these areas, but more needs to be done.

Experiential learning. At the Graziadio School, our Education to Business (E2B) Applied Learning Program gives students a chance to solve real business problems as they work with executives at companies like Warner Bros., Starbucks, and Baxter Bioscience. Similar programs are under way on many campuses, including the business schools of Rutgers, the University of Texas at Austin, the University of Maryland, the University of Arkansas, and Baylor University.

Community focus. Members of Generation Y consistently show a strong interest in the social and ethical consequences of commerce, and they want to develop a deeper understanding about how global forces may affect their communities and their own success.

Our European counterparts already have begun to make headway in this area. The European Foundation for Management Development (EFMD), with the support of the United Nations Global Compact, has brought together international corporations and universities to form the Globally Responsible Leadership Initiative. This group is charged with making global responsibility a requirement within accredited business schools, while it also encourages learning opportunities that promote greater international stewardship in the workplace.

Global thinking. Countries such as China, India, and Brazil are poised to become major players in the world market; and they’re also training their professionals to participate in an open, fair, and socially responsible economy. In these countries, some reforms are already well under way, such as open doors for transcultural business education and the teaching of fair-market policy. Global issues will only get more complex as Eastern European, Latin American, and pan-Asian countries bring their own ambitions and challenges to the world market.

Values-based decision making. Since such a small percentage of survey respondents believe schools are turning out MBAs with higher ethical standards than the average executive, it’s essential that schools deepen the focus on ethics even more. Schools need to teach their students how to make hard decisions grounded in an ethical context, while also helping them develop a better understanding of their own personal values.

At the Graziadio School, we not only integrate ethics into every single class, but we also promote activities outside the classroom that challenge students to consider ethics. Early in our program, students participate in a workshop that helps them clarify their personal values and consider how those values could impact their organizations. We also have a student-initiated Values Centered Leadership Lab that recently hosted a case competition focusing on ethics and social responsibility as critical components of a balanced business strategy. In addition, business and civic leaders regularly visit campus to talk about the role ethics and social responsibility play in business. 

Many other schools also are finding ways to build a values- based curriculum, often with the help of local business leaders. For example, at Northern Illinois University, the Board of Executive Advisors directed the creation of an Ethics Task Force. The task force has produced an ethics workbook that business students are required to complete prior to their junior year. This initiative was presented at AACSB’s Teaching Business Ethics Conference in 2005.

The Priceless MBA

If we want business executives to be impressed with—not just satisfied by—our graduates, we need to work continuously to improve the experience we offer our students. When only 7 percent of executives rate our offerings as “excellent,” we know we have some work to do. We must seek out our customers’ needs and match, or exceed, the performance of the business world we serve. We must ensure that our scholarship addresses real, pressing business issues. And like any successful industry, we must look ahead and determine how to meet the needs of the customers who will come next. Tomorrow’s students will be seeking a broader, more globally and socially integrated education that encompasses more than functional competencies.

Finally, we should never lose sight of the fact that we are guiding the next generation of global business leaders—a generation that will seek to change the world through business. As one Pepperdine alumnus, an executive with British Petroleum, told me: “Attending business school was like going to the land of Oz. I entered as the Scarecrow hoping to find a brain, but quickly discovered I was also the Tin Man trying to find a heart. The program helped complete me as a person.” Perhaps that kind of personal growth can contribute to the priceless value of tomorrow’s MBA.

Linda A. Livingstone is dean of the Graziadio School of Business and Management at Pepperdine University in Los Angeles, California.