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MBA Holders Make More Effective CEOs, Researchers Find

With so many business leaders tarnished by the recent financial crisis, do you find yourself wondering if an MBA degree still enhances your personal brand? The following data point might help you respond effectively if someone – an interviewer, for instance -raises that question.

An analysis of 1,109 global chief executives over the past 15 years found that those with MBAs performed better on average than those without the degree. Four of the 10 best performing CEOs in the entire group were MBA holders, the Financial Times reports.

The study, conducted by three Insead professors, was published in the Harvard Business Review. The authors – Herminia Ibarra, Urs Peyer and Morten T. Hansen (who is also a management professor at the University of California Berkeley School of Information) – ranked CEOs based on return on shareholder investment and change in market capitalization over their entire time in the job. Summarizing their findings in an FT essay, they wrote:

When we came up with the idea of a ranking of chief executives based on performance over an entire career, we also decided to check the myth of the value -destroying MBA against a large and meticulously compiled data set…

Our analysis of 1,109 chief executives from 1995 to 2009 found that those with MBAs performed, on average, better than those without. The difference was not large but it was statistically significant. When we drilled down one more level, we discovered that those who had reached the position of chief executive before the age of 50 benefited particularly from a business school education. In fact, on average, having an MBA sends such individuals a full 100 places higher on our list.

Recommendation: Make MBA Programs More Global

While acknowledging that many high-performing CEOs don’t have an MBA, the authors observe that the “overall tendency” among the business leaders they analyzed is for an MBA to correlate with a higher position in the ranking, especially for those who get the top job at a comparatively young age…. Our study suggests that the charge of fuelling short-termism has been grossly overstated.”

Still, the Insead professors recommend raising the international content of MBA programs by adding more global case studies, discussions of multicultural issues and more comparisons of international ways of doing business. They also give a nod to the “short-termism” criticism, urging business schools, corporate boards, the media, MBA holders and chief executives to follow the authors’ example of viewing performance through a long-term lens, instead of living “by the quarter.”

Comments (1)

Comments
  1. Good Analysis But Job Markets for MBA students should be encouraged and corporates to open up more avenues

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