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updated 9/27/2012 9:18:08 AM ET 2012-09-27T13:18:08

It used to be that top corporations picked up MBA graduates as fast as schools could slap mortarboards on their heads. These young guns drove corporate reorganization, product innovation and marketing and implemented new styles of leadership. They were a symbol of a new culture, and anyone serious about a career in business aspired to earn those three letters.

Today, the power of the MBA is not so certain. Many in corporate America and academia say the degree that once defined bright, snappy leadership now symbolizes a discipline that has lost touch with the business world. They argue that MBA programs have become too focused on research, and that in-house training at large firms has more practical applications. They claim the programs have failed to create the types of leaders who can deal with globalization; some say they don't develop leaders at all, just functionaries. Other critics think a focus on profit and share value, rather than on ethics and sustainability, fostered the type of narrow-minded thinking that led to the fall of Enron and the last recession.

On the other hand, some academics point to an evolving curriculum that has kept pace with and even led the business community. If the MBA is useless, they argue, why do tens of thousands of people still enroll in the programs every year?

When it comes to entrepreneurship, the question of whether to invest in an MBA degree becomes even stickier. Can the necessary skills for successful entrepreneurship be taught? Can those with MBAs operate effectively only within large corporations? Are recent entrepreneurial MBA degrees worth the time and money?

We spoke with two authorities on business education about the state of the MBA and whether earning the degree is the right path for aspiring entrepreneurs.



The Case For an MBA

Thomas Robertson is dean of the Wharton School at the University of Pennsylvania, the world's first collegiate business school and one of the most prestigious. Robertson acknowledges that business schools need to continually strive to stay relevant, and he thinks the MBA is one of the best tools a businessperson can have. It not only gives an advantage in the global marketplace, he argues, but it also teaches adaptability in an economy in which career-switching and constant change are the norm.

Why should an entrepreneur consider enrolling in business school?
It can be somewhat inefficient if you venture forth on your own and have to learn everything as you go. That's an expensive learning experience. But with an MBA focused on entrepreneurship, you have formal courses that will bring you up to speed in finance, marketing, sources of capital--things you could learn on your own but that might be inefficient to do so. It might be more difficult to raise money without an MBA. It's easier if you have the imprimatur of a school behind you. That has some real symbolic value and a network for you, which might turn out to be very important.

How do you respond to criticism that MBA programs don't address current needs?
There are over 100,000 graduates per year in MBA programs. MBA programs should change constantly, and as a whole ours changes constantly. We have a curriculum launching in the fall that is a major change. In the last decade, business has become more global, and the need to be international and have a global footprint has become more and more important. It's important for us to have a diverse class where our students can learn from one another, and an important part of that is having international students. Twenty-five percent of our students will work in international environments right after graduation, and 35 to 45 percent of our students are international.

How can business schools stay relevant?
Business schools have to prove they are a force for good in the world, and that's even more important with things like Occupy Wall Street and the financial crisis. We create economic welfare by creating knowledge and disseminating it so our graduates can go work in business firms and be more effective and more efficient. We have to be constantly innovative.

Entrepreneurship is becoming more and more important in our economy and the world economy. It's a hot topic in the world, and the whole debate in Europe about austerity vs. growth keeps getting back to entrepreneurship. The U.S. has emphasized entrepreneurship for a longer period of time than Europe. You might argue that Wharton has had strong ties to entrepreneurship since it was founded.

How can MBA programs address differences of opinion about curriculum?
There was an interesting book that came out some time ago called MBA: The First Century. Even from the beginning there have been opposites. Some say the MBA has become too theoretical; some say it's too applied. Some say it's too short-term-oriented; some say too long-term-oriented. Some say MBA grads are too ambitious; some say we need more ambitious MBAs. There's a constant debate about what MBA programs should look like.

The problem is getting the right balance. There are 12,000 business schools in the world, and Wharton and a couple hundred others are in business to create new knowledge and disseminate it. We have to get the right balance between theory and practice. We have 2 million subscribers to our journal Knowledge@Wharton, which is published in multiple languages. The reason I'm mentioning that is we're in the business of creating knowledge, and there's an immediate payoff from what we do. If we don't do research that helps firms in the wider world, then we're out of business. We have to prove that the research we do is valuable to businesses.

What do you do for entrepreneurs?
In our entrepreneurship program, we run a business-plan competition with more than 400 students involved and more than $100,000 in cash and prizes awarded to those students. We have venture capital introductions and a business incubator, and we have an entrepreneur-in-residence program. Students want to learn about theory and new techniques, but they also want examples and applications of what they're learning.

What type of person should look at MBA programs?
Probably 95 percent of MBAs are going to go into either major corporations or startups. The other 5 percent will go into nonprofits or NGOs. The average work experience of our students is close to five years. That creates a much richer in-class environment. If you think about an MBA program, an awful lot of what is going on is learning in teams and working together. Students learn from one another, and they wouldn't be happy if someone with no experience were there and not bringing anything to the party. Students benefit from each other's meaningful work experience.

Some critics have said MBA candidates are motivated by greed. Is that fair?
People have a lot of motivations for pursuing an MBA. Students come in with different backgrounds, and about half of them are "poets"--that is, with backgrounds not in business, but who have very often been working in business or have meaningful experience. Over half are changing careers, and they need the experience of an MBA and they need the content of the courses and to make it onto the job market and to get interviews. For many people, the MBA is a seal of approval so they can go out and achieve their dreams of making money and contributing to the social welfare.

The Case Against an MBA

Henry Mintzberg is probably the most outspoken critic of the MBA. The Cleghorn Professor of Management Studies at McGill University in Montreal and an entrepreneur in his own right, Mintzberg argued in his 2004 book Managers Not MBAs that the entire notion of graduate business education needs reform. His opinions have only grown stronger since then. Not only do MBA programs teach an insufficient style of management, he says, but they also fall short in discussion of ethics. In fact, he has written, "conventional MBA programs train the wrong people in the wrong ways with the wrong consequences."

You say nothing has really changed in the years since your book came out.
I think some business schools are moving in new directions, but not many and not much. They're too fat and too successful and make too much money from what's destructive. I think the problem with the American economy is not economic; it's managerial. Anyone who accepts a bonus of tens or hundreds of millions of dollars while their company is failing is not a leader. Which means almost no one in the Fortune 500 is a leader.

People say, "I can't believe what is going on in my company," and a lot of it is led by MBAs. They learn management by remote control. You learn to read case studies and sit in classrooms and have to pronounce judgments on companies about which you know almost nothing.

There's also a social element. Why does the U.S. still have an electoral college? Because America's in social gridlock. It can't move forward. The country is totally unreflective, whether it comes to healthcare or the economy or the financial sector. It prides itself on technological adaptability, but it is socially unbelievably paralyzed.

I did an article for Fortune a few years ago that tracked the record of Harvard Business School's most renowned graduates. There were 19 people on the list, and 10 of them turned out to be complete disasters, four were questionable at best, and only five had clean records. These were listed as Harvard's best, and 10 were fired, their companies went bankrupt and worse. Wouldn't that be a signal that something was wrong, if your greatest graduates failed?

Do MBA programs hold any value for entrepreneurs?
Look, I'm not a fan of conventional MBA programs, but you do learn business functions like marketing, accounting and finance, and entrepreneurs do need that. Many go bankrupt because they don't manage the books well. But they don't need all the other baggage that goes with the MBA--the technocratic view of management. Those entrepreneur-focused MBA programs that are sensitive to that and are not copying the regular MBA probably can provide some help. I'm a fan of something different. I co-created a program called the International Masters Program in Practicing Management (IMPM). We have quite a few entrepreneurs who have come from our program.

How is IMPM different from an MBA?
There are two sides entrepreneurs can learn from in our program. One side is business functions. The other is a sounding board, where they can discuss common problems, like how to deal with the bank or market a program nobody has ever heard of. They're given a forum to discuss their problems with other entrepreneurs. Half the time they reflect on their own issues, and the other half they problem-solve with other students.

What should entrepreneurs do if they don't want an MBA but want more education?
They should look at CoachingOurselves.com, which is by a guy who did our master's program. In full disclosure, I'm a partner in that activity. It's a training program used by entrepreneurial companies and brings business concepts into the workplace. You get managers and entrepreneurs together in small groups, and then download discussion topics, things like dialoguing and branding. Then the managers chat among themselves. They do the whole course all for themselves, and that's really effective for entrepreneurs who need to talk to each other. They need a conceptual basis, and they use the discussion points as a stimulus to get into their own problems. It's an effective way to learn, and a bunch of entrepreneurs can create a team and use it to compare how they're doing with their banks and customers vs. other business owners.

What's the harm in getting an MBA? Doesn't it show initiative?
There's a role for MBAs for people who go into technical positions, like financial analysts, but other than that, anyone with an MBA should have a skull and crossbones on their forehead. It doesn't prepare them correctly and gives them the wrong impression of management. Instead, I think people should get smart, get educated, but mostly they should find a business or venture or activity that they really love and get immersed as deeply as possible before they try to create something.

Copyright © 2013 Entrepreneur.com, Inc.

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