Executive education: Are MBAs fit for purpose?

The business world has changed massively in the past two decades. But have MBAs kept pace?

It was 2006 when Saul Estrin, professor of management at the London School of Economics and Political Science (LSE), found himself at the centre of international controversy.

The cause of this stir? He’d simply decided, when setting up the new management department at LSE business school, not to include a full-time MBA in its portfolio and instead offer general management MScs. “We believed the world was changing,” Estrin muses. “The notion of an MBA is an American degree conceived for an American education system that is very general and broad, with the idea that people went to work and after five or so years they’d then go back to university.

“But the idea that people go and work at Tesco in a management training scheme for five years, then go and do an MBA and join McKinsey is a very ‘80s and ‘90s career aspiration. People weren’t doing that anymore so we decided to make a change.”

The figures tell a similar story. Applications and enrolments on AMBA-accredited (Association of MBAs) business schools have fallen by 14% like-for-like between 2011 and 2016, according to recent AMBA data.

The MBA or business school-provided executive education has long been a key stepping stone to developing future leaders. But a steady decline in enrolment and perceived relevance has been coupled with wayward leaders hitting headlines (think sexual harassment, bullying, financial mismanagement…), indicating that leadership development may be due a revamp.

Then there’s the introduction of the apprenticeship levy, which has rerouted businesses’ training budgets to new management and leadership apprenticeships. Add Brexit to the mix and there are difficulties on the horizon, Estrin believes, for the many international MBA students studying in London who wish to secure high-paid City jobs after graduating.

Which all poses a critical question for HR leaders recruiting from or sending their top talent to business schools: is the traditional MBA and executive education programme fit for purpose?

According to Ron Ashkenas, partner emeritus of Schaffer Consulting, no. “About $200 billion is spent every year on the leadership industry but if you go into most organisations they’ll say they don’t have enough good leaders, CEO tenure is going down, executive transitions often fail, and company lifespans are down. Look at the political realm and the corporate realm – where are all the leaders?”

Over-reliance on theory rather than practice is a particular sticking point. “There’s way too much dependence on classroom learning and case studies. You can’t read a book about skiing and go down a ski slope and do a Black Diamond,” says Ashkenas. “You have to go to a small slope, practise and fall down a few times. It’s the same for developing leaders – they need to dive in and practise.”

“I wouldn’t say the MBA is dead, but it isn’t perfect for everybody,” adds Estrin. He points to two key factors affecting its relevance today: the changing mood among prospective students and changing demands from the business world.

Further reading

A consumer world

“People, especially Millennials, want to do education sooner, faster and get out there and live their lives,” he says. “They don’t want to interrupt their work schedule to retrain and start their careers again.”

Millennials aside, the most obvious example of a demographic this traditional route doesn’t suit is women, Estrin adds. “At exactly the point women may be thinking about starting a family it’s the time when they’re meant to stop work for two years to do an MBA and restart their career,” he says, offering insight into why MBAs haven’t traditionally been famed for gender equality.

A shift to more diverse groups exploring the executive education route means the industry needs to adapt. “There’s more demand for business schools to offer flexibility to suit working needs and busy family lives,” says Will Dawes, research and insight manager at AMBA.

It’s something Dirk Buyens, professor of HR and director of open executive education at Vlerick Business School, refers to as the “and evolution ”. “People want to work and do education not or,” he explains. “Also some people like to implement learnings and put them into action immediately, so the contextualisation of putting it back into the organisational reality right away is important.”

Because they’re not worth it?

Consumer demand is just one part of the picture though; businesses too are now less convinced about the relevance of MBA students in today’s world.

“The business environment is changing faster than the traditional executive education model so it’s a mixed bag in terms of how satisfied businesses are with it,” says Gustaf Nordbäck, CEO of the Financial Times | IE Business School Corporate Learning Alliance. He cites research showing just 36% of learning and development professionals are satisfied with executive education programmes.

For some organisations this means turning instead to undergraduates, explains Nordbäck, who have skills that can be moulded to the business.

Scepticism is partly driven by the mounting costs of MBAs – costs Estrin feels “employers aren’t sure are worth it”. “The MBA is built on the idea there’s a skill called ‘management’ in the same way that there’s a skill called ‘accounting’, but firms are less convinced by this now,” he says.

After all, business leaders today must navigate increasingly volatile worlds of geopolitical risk, digitalisation and disruption. “Against the backdrop of a changing and VUCA world of work executive education needs to be able to develop and deliver executives that can work in that world,” explains Deloitte UK talent director Faye Shortland.

Which requires leaders with soft skills many agree – skills not currently for the most part taught effectively to execs. “If all you know is finance you won’t be a good manager so there needs to be a combination of the soft and hard skills,” says Buyens.

Dawes says businesses want “dynamic innovative thinkers who can think on their feet and adapt” rather than homogenous graduates. “There’s more focus on stress management of teams and understanding clients better, so more work on the soft skills not just theoretical technical aspects of business management,” he says.

From what Shortland has seen more important still is the need to develop socially-responsible leaders. “Organisations are being judged on the impact they make in society at large so being an executive is about much more than just what you build into the business and the bottom line,” she says.

It’s a sentiment shared by Claire Fox, chief people officer at Unicef UK. “CSR started off as just a small area of the organisation but we’re now in a different place. MBA programmes can bring huge value to the business world if they can develop leaders who are socially aware and who can use their skills and knowledge to drive initiatives that benefit wider communities.”

Teaching ethical behaviours

Developing ethical leaders is another area of concern. Take the charity sector, blighted by a series of leadership scandals in the past year, including sexual harassment allegations against Save the Children’s former chief executive and former director of policy.

As Fox concedes, such events have created more requirements “for managers and executives to be better leaders”.

“It’s no longer good enough to be just an expert in your function. The impact of how leaders behave is more in the spotlight and expectations of behaviours are rightly higher,” she says.

The problem, says Estrin, is that executive education has traditionally focused too much on shareholder value at the expense of teaching ethics.

“In 2008’s financial crisis what went wrong was amorality and greed.Everyone that did that had an MBA and so the question we need to ask is: how come they knew how to run algorithms to squeeze more money out but didn’t have any training on why that might not be the best thing to do morally?” he questions.

“It’s not that MBAs are immoral but perhaps many haven’t paid enough attention to what business leaders of modern corporations have to worry about relating to ethics and CSR,” Estrin says.

There’s been a tendency to teach business ethics through philosophical theories, explains Bernd Irlenbusch, professor of corporate development and business ethics at the University of Cologne. “But they don’t change behaviour, which I think has been part of the problem,” he says. (He’s shifting the way he teaches business ethics to MBA students away from theory to role-play and students bringing their own ethical dilemmas to the table.)

The number of ethical dilemmas leaders must contend with is only going to increase because of technology, with “ethics playing a big role in implementing algorithms”, says Irlenbusch.

But this is not the only way technology is disrupting executive education. For Benjamin Quaiser, programme director of executive education at ESMT Berlin, digitalisation is “the most relevant trend” affecting the industry.

Digital disruption

“Understanding and having a handle on big data is a core competence now, not just a specialist topic,” he explains, reporting that his school has introduced a programme called ‘Leading digital transformation’ to meet this need.

It’s a trend many business schools are waking up to and adapting their content to suit. Dawes points to a plethora of modules on big data, analytics and AI springing up on programmes.

So the content of MBAs is ripe for reform. But so too is the structure and delivery models through which students are taught. Despite the initial backlash around Estrin’s move not to include a full-time MBA in LSE’s portfolio there’s since been “enormous imitation” across other schools, he reports. “We also introduced modular and part-time programmes people can do alongside work,” he adds.

This brings social mobility benefits: “Our executive courses are more diverse than regular MBAs because people can stay in their jobs while learning. If you’re not from a well-off background it’s difficult to stop work for two years.”

Cost and time benefits aside, chief people officer of Lloyd’s of London Annette Andrews says that for her doing a part-time MBA meant “the applicability of learning was immediate”.

Again technology has prompted perhaps the biggest change. At the more extreme end is talk of hologram professors. More widespread though is the introduction of pure-play online programmes or blended courses (incorporating a mix of both online and face-to-face teaching).

Vlerick Business School for example introduced an online-only MBA (also made up of short learning blocks) two years ago. “Cycles in the business world have changed enormously in terms of duration as they go faster, which means we also need to go faster in MBA programmes,” says Buyens.

Open University Business School has also seen an uptake in “smaller bite-sized chunks of learning online”, reports senior lecturer in executive education Liz Moody. “Looking at the new generation of leaders working in this digital world they’re already using digital tools in their own lives, so it’s inevitable there’s growth in people learning online,” she says.

But there are some things online courses cannot offer, says Buyens. “Knowledge is available for free on the internet now so if people are going to pay around £50,000 for an MBA they expect a learning journey, and it’s much easier to create that [when they’re] on campus full time,” he explains. There’s also the matter of motivation and the all-important professional network that business schools have long opened doors to.

“If we organise a course in Brussels and 20 people subscribe you’d get about 19 coming. But if we organise a webinar and 200 people subscribe only half will watch it,” he says. “When the threshold is lowered fewer people come, so one of the problems with online courses is how to motivate people and ensure networking.”

It’s a sentiment shared by Quaiser who advocates blended but not online-only courses. “You can’t skip the face-to-face part because there’s a need to step out of your comfort zone to be challenged by new situations,” he explains.

A whole new world

That said, Quaiser is using the digital world to help bring such new experiences to life. He has been working with Exit VR to create custom virtual reality (VR) escape room games for students. Quaiser explains that it “sets the scene for leaders to experience a new and insecure unknown situation they need to deal with”.

The next step, he says, is moving from VR to augmented reality games as a way to teach students cybersecurity and compliance. “These days leaders are used to escape games so there’s no surprise element anymore, which is necessary to open their eyes. This is why we developed state-of-the-art games where they both need to deal with the new technology and with new uncertain situations.”

This is just one of a range of ways schools are providing more experiential learning for students to take them out of their comfort zones. Take Smith School of Business in Canada, where MBA students are put through a military bootcamp-style experience. “Experiential learning gets them out of the academic environment and exposes them to something different,” says Diana Drury, director of team and executive coaching.

“It’s ambiguity, it’s building resilience, and it’s exposing them to novel, complex, adverse situations, which is what business grads need to take their game to the next level and thrive in the current and future world of work.”

While this may all sound like fun and games, Patricia Hind, professor of management development and director at Ashridge Executive Education, stresses experiential learning’s power. “It’s not enough for us to simply give content – people learn through experience and experience isn’t sitting in a classroom listening to a professor,” she says. “It’s doing something where you evaluate what happened, make mistakes and go back and try again.”

She believes the natural progression on this journey will be to incorporate ‘second life experience’ “where people say ‘today I was this type of leader and it was a disaster so tomorrow I’m going to be a different leader and see what happens there’, and then the development is in the reflecting and learning from those experiences”.

Best-before dates

Another concern about traditional executive education is whether it supports lifelong learning. It’s a challenge Andrews is acutely aware of. “Development is continuous – you can’t do an MBA and say ‘I’ve got an MBA, tick’; you have to keep up to speed with changes and the latest thinking,” she says. Sharing her own experiences of doing an MBA 20 years ago she points out that “back then they weren’t talking about digital, climate change or Brexit”.

“If you live in a bubble you get out of date quickly. You need to keep stepping out of your organisation and role,” she says. “Which for some people is scary but it’s almost an executive’s responsibility to keep developing. So executive education programmes need to constantly change as it’s evolutionary.”

Buyens points to a need to “learn to unlearn”: “The paradigm is that the more you’ve studied the more you need to study.”

Some propose putting ‘best-before’ dates on MBAs. Bodo Schlegelmich, chair of AMBA, is calling for a subscription model where after graduating individuals have lifetime access to additional learning with the school and are required to top up their knowledge.

But while much can be done to adapt business schools’ content and delivery is it right to lay all responsibility at their doors? After all, if the business world is changing at such pace surely organisations themselves need to take greater responsibility for developing leaders.

Andrews thinks so. “You can’t put someone through a business school, sheep dip them, and expect them to come out magically different,” she says. “Business schools are about opening your eyes to the world in terms of strategic thinking and understanding what’s happening. But other elements such as leading through change and presenting to boards you’re not going to get from an MBA.”

Hind says businesses are actually hindering the development of leaders returning from executive education. “The issue is that people learn a lot, then when they come back into the organisation and try to use the skills they’ve picked up nothing has changed and they’re faced with a system that is inflexible,” she says. “The organisation has got to allow the learning in, make room for it, and change its structures and processes to allow it to embed. Otherwise it won’t be a success.”

What this calls for, she believes, is a complete rethink of the relationship between businesses and executive education providers. “We need to see ourselves not as supplier and buyer but as collaborators in organisational development,” she explains.

“No professor can possibly stay on top of all the myriad changes affecting all organisations. So we need to work with businesses and they need to bring us in to sit at the table when they’re working out their strategies to see what future skills they need. Otherwise by the time the strategy is embedded and they realise the skills aren’t there we’re already playing catch-up.”

A beautiful partnership

And so some firms are partnering with business schools to develop customised programmes tailored specifically to the needs of the company. “Organisations are tying the value of programmes to the needs of the organisation as opposed to just developing leaders for the sake of developing them, with a generic set of skills,” says Nordbäck.

The answer at Metro Bank has been a partnership with Cranfield School of Management to launch an MSc in retail and digital banking – the UK’s first Masters-level apprenticeship for senior banking professionals. “I think we’ve got that sweet spot where we’re developing our people but at the same time it’s something that the organisation will benefit from as well,” says chief people officer Danny Harmer. For Harmer the “icing on the cake” is that Metro’s digital and product teams have helped co-design and deliver some of the modules.

Metro Bank’s programme is an example of how the apprenticeship levy has opened up new opportunities to invest in leaders. “Being totally frank; pre-levy could I have justified spending the cost of an MSc on individuals when that could send a lot of people on smaller courses? It would have been tricky. But the levy has pushed organisations to have the right conversations around growing our leaders,” Harmer says.

So the levy has both refocused attention on leadership development and thrown more competition into the mix in an already heavily-saturated marketplace.

Lloyd’s of London has taken a different approach to exec education partnering. While the insurance specialist is working with Henley Business School on a customised leadership programme for the insurance market this is just one of many tools in its leadership development repertoire.

“Internally we’ve created the Lloyd’s University, which is an online learning management system and in it there’s the Leadership Academy,” Andrews says. All employees have an individualised development plan that aims to tackle gaps in their skills and capabilities.

“We then work with individuals using the academy to develop them, which may include the programme with Henley or it may be other things depending on what the person needs. So the Henley programme is just one offering in the academy – it’s not one magic solution.”

Clearly competition is hotting up between traditional executive education providers and businesses championing a grow-your-own mentality. Deloitte has taken this internal approach for some time. “Different organisations and sectors demand something different from leaders, so what fits one organisation and one leader may not always fit another,” Shortland says. This means the firm offering its own executive development through the Deloitte University.

Similarly to Lloyd’s, there’s a focus on the individualised needs of leaders with wraparound activities such as coaching, 360-feedback and blended solutions. Deloitte University – alongside similar models from the likes of McKinsey & Company with its McKinsey Academy – directly competes with the business schools externally, providing services to client organisations as well as internal employees.

And there are other non-traditional players now quietly moving into this space. Take the Financial Times | IE Business School Corporate Learning Alliance for example, which blends academic partnerships with business schools, business practice and journalistic experience. Nordbäck says it was formed from a need “to move beyond just a single traditional academic model”.

HR leaders and prospective students are clearly spoilt for choice. But, Quaiser adds, there will always be an ebb and flow in which type of offering takes the top spot. “There’s always a shift – in the past it was to do everything not in house, then in house, and nowadays it’s outsourcing again but in a more digital way.”

Proving ROI

Whatever the approach, an ongoing challenge for HR is proving the return on investment. As far as Shortland is concerned this is “the hard yard piece”, but HR can and absolutely should measure impact. “It comes back to what’s driving that learning requirement in the first place,” she says. “If you get the needs analysis right you can then measure any uplift in capabilities, behaviours or skills.”

Harmer has a different take. “I’m going to argue with myself here as I’m one of those people who says HR isn’t data-based enough,” she says.

“But though I’m sure lots of organisations say they do [measure it] how effective can that be? With the broader soft skills that come with executive education you just have to bet that it’s the right thing to do and crack on.”

For Fox businesses should be beyond the stage where they need data to prove the business case for good leaders. “The impact of strong capable leaders on business results is utterly indisputable now so we don’t need to waste time and energy trying to convince people of this,” she says.

Where HR does have its work cut out is balancing what Shortland calls its “duality of purpose” around executive education. “HR has two roles – to ensure we’re always looking to evolve and deliver educational learning opportunities relevant to our population, and to challenge that leadership population around some of the key trends we’re seeing,” she says.

“Leaders are under extreme pressures, so with that in mind we need to provide them with the tools to develop their skills but also hold them to account in terms of their actions, decisions and behaviours,” says Fox.

It’s the “proactive not reactive stuff”, adds Andrews. “HR has to pre-empt what the changing needs are. If you don’t develop and move things forward with your leaders then you’re not going to move the rest of the organisation forward either.”

This piece appeared in the March 2018 issue. Subscribe today to have all our latest articles delivered right to your desk