Why You Should Not Hire MBAs For Your Startup
Once upon a time, getting an MBA from any business school was one of the best investments professionals in any industry could ever make. An MBA did not only help them climb the corporate ladder very quickly, but most of the MBAs also went on to become successful entrepreneurs. Similarly, startups would also pay high salaries to hire graduates from premium business schools to enhance the performance of their management teams, but this is no longer the case.
What business schools teach MBA students is insufficient to meet the requirements of fast-paced startups. Similarly, the best path to entrepreneurship nowadays is to work for startups rather than corporate management. MBA students are taught to look at the already available data to predict future outcomes. But when it comes to innovation and or exploring new markets, this method does not work at all.
It is a fact that there are 74% more MBA graduates than there were at the turn of the 21st century. Every year, almost 180,000 MBAs graduate from various business schools across the country. However, the slow job market after the recession and the declining value of the degree means the salary of fresh MBAs has decreased by 4.6% over the last few years.
Still, MBAs earn twice as much as people with a regular master’s degree, finance and consulting being their favorite professions. For instance, 25% and 52% of Harvard MBA graduates accept jobs as consultants and financial advisors respectively, mostly in large corporations.
In fact, MBAs are more beneficial for established and large organizations. When it comes to startups that require their employees to be super innovative, create new business models and disrupt industries, MBAs are bound to struggle.
In this article, you will read about 1) advantages and disadvantages of getting an MBA, 2) top reasons MBAs fail at startups and why you should not hire MBAs for your startup, and 3) when getting an MBA makes sense.
ADVANTAGES AND DISADVANTAGES OF GETTING AN MBA
It is always impressive to put MBA as a credential on your resume. However, the degree has many merits and demerits, some of which are described below.
Advantages of Getting an MBA:
- Extensive Networking with MBA Alumni: Students enrolled in MBA programs have better opportunities to network, not only with MBA alumni but with other successful businessmen as well. There are many schools that allow you to work directly with business professionals who boast years of practical experience. This can greatly help you to accentuate your business management capabilities. Then internships, which provide you a chance to meet with potential employers, are an integral part of most MBA programs. This extensive network will not only help you to get a job but will also support you throughout your career.
- They Can Find Investors Easily: As an MBA graduate, it is very easy for you to find investors if you want to launch a new business, thanks to your extensive network. There might be many angel investors in your MBA alumni network who are willing to fund your business. Similarly, you can use your MBA as a tool to strongly present your case to an investor. Most investors look for a convincing business case and a strong team, and an MBA can help you to stand out from the rest.
- Superior Analytical Skills: A business professional with an MBA degree usually has superior analytical skills compared to others. You will have the basic knowledge and in some cases, firsthand experience of how the market survives, how to maintain a balance between demand and supply and what your competitors are up to. Moreover, you will have a better idea of how your respective industry works and how to formulate effective strategies in order to thrive. You will be in a better position to influence organizational goals and work toward attaining those goals.
- Higher Salaries: Against common perception, your salary will be considerably higher compared to a professional with a regular master’s degree. The average salary for an MBA ranges from $70,000 to $120,000. It is pertinent to note that employees with a regular degree usually earn half as much as an MBA graduate. There is no doubt that an MBA is an expensive degree to get ($110,000 at a top university) but you can cover that investment in 2-3 years.
- Better Career Opportunities: If you have an MBA degree, you have better chances of getting and retaining a management level job. On the flip side, you would have to handle more responsibilities and work for longer hours in order to fulfill those responsibilities. An MBA is definitely going to increase your chances of attaining your goals whether it is to get a new job or advance your career by getting a management position.
Disadvantages of an MBA:
- MBAs Have Certain Limits: Despite its benefits, there are some genuine arguments against getting an MBA degree. Some people argue that MBAs are not very creative, and it is difficult for them to adapt. Aaron Patzer, founder of Pando Daily Quotes Mint, suggests that businesses should subtract $250K for every MBA and add $500K for every engineer. Similarly, if you somehow miss the competitive environment and higher stakes of top business schools, you may find it very difficult to adjust in the real life business world occupied by the culture of entrepreneurialism and startups.
- High Cost: The cost of getting a standard two-year MBA is constantly on the rise. If you want to get MBA degree from a top business school such as Harvard, you have to spend $100,000 on average. Similarly, you can spend another $100,000 if you are going to a full-time school. Making matters worse, you will have to pay most of the bills yourself despite the fact that you may be eligible for many financial aid programs. The final payment can increase by thousands of dollars if you have taken a loan to fund your education, considering the extra cost of interest.
- Time to Complete the Degree: A typical MBA program can take one to two years to complete. On the other hand, you may take up to eight years to complete your degree if you are studying part-time. Whether you are studying full-time or part-time, it is a big time commitment. During this time period, you are missing your family, your loved ones and important time in the present. Most importantly, you may miss a lot of better career opportunities while completing your MBA as well.
- Lack of Specialization: Some industries do not want a person with special training in business administration to hold a management position. What they need is a person with specialized training in the industry. You, as a generalized MBA, may not be able to get your dream job. In this case, it is far more beneficial to get a more focused advanced degree in economics, finance or education administration. A specialized MBA can also resolve the problem but again, specializing in one industry makes it difficult to get a job in another.
- Lack of Direction: Younger professionals often find it hard to maintain their focus and this is the case with fresh MBAs. Their lack of experience and specialization make it difficult for them to adjust in a new environment and make their own goals and visions come true. Most fresh MBAs are unable to move forward in a consistent direction because they usually have no idea what the business wants from them and what they need to do to mingle with the rest of the employees.
- Narcissism: There is nothing wrong in saying that MBAs tend to be more narcissistic as compared to other graduates. While narcissism is not a bad thing, such people are overly convinced of their own abilities. An MBA is considered an extremely prestigious degree in most countries and thus, an MBA graduate finds it hard to follow the instructions or recognize the organizational boundaries. This is the reason why some people are reluctant to hire MBAs.
- Can’t Generate Their Own Ideas: Most MBA programs only cater to the academic needs of the students and offer nothing to enhance your thinking, creative and innovative skills. You may prove to be an exceptional employee in a workplace where you just have to execute some else’s business plan. However, you may find yourself at sea when you have to come up with business ideas of your own. It is a fact that most generalized MBAs struggle to offer anything new while working in a highly specialized environment.
TOP REASONS MBAs FAIL AT STARTUPS AND WHY YOU SHOULD NOT HIRE MBAs FOR YOUR STARTUP
There is a host of reasons why most MBAs fail at startups, such as:
- They Don’t Have Business Sense: Years ago, it was very expensive to start your own business but this is no longer a case. Everyone, even with limited resources and knowledge, can run a very successful business. Therefore, if an MBA desperately searches for a job, it simply means that he is not good at managing a business. In fact, it is very easy to find someone without an MBA that is more suited for a particular position. Remember that organizations mostly hire employees with certain skills which an MBA degree is unable to offer.
- They Can’t Think Creatively: As mentioned above, MBAs are not very adaptable or creative at all. On the other hand, skills imparted by most MBA programs are too narrowly focused, to say the least. People who do not have an MBA or any other advanced degree to fall back on tend to be more creative. Most MBAs tend to present the same solutions to different problems that might work perfectly for one organization but fail to produce similar results for another. MBAs tend to use only their academic knowledge to manage affairs because they are taught only a general overview of management.
- Academic Achievements Are Worthless: It sounds very harsh, but academic achievements are mostly worthless when you start your practical life. It is not very difficult to get an MBA degree, to be honest. You just have to listen to your professor, memorize lessons, read textbooks and case studies and reproduce them in the examination. What most employees want you to have is actual business exposure and experience. If you are unable to demonstrate your experience as well as passion for the job, your MBA is literally worthless.
- False Sense of Entitlement: It is not easy these days to get admission into a good business school. But it is never wise to believe that you can get any job you want just because you are an MBA graduate. An MBA does not tell anything about how good a business manager or entrepreneur you can be. Unfortunately, most fresh MBAs don’t realize that they can face hard times in startups just like people who are not MBAs.
- Limited Entrepreneurial Exposure: A typical MBA program is classroom-based and therefore, you don’t get much of a chance to get firsthand entrepreneurial experience. Things can get especially problematic for fresh MBAs working in startups that need their employees to come up with new ideas and solutions to get the business up and running. MBAs lack the experience to make a difference to any business, let alone startups.
- Actions Versus Analysis: Many schools still use the Socratic Case method to teach MBA students. This method works fine in situations where a lot of information is available to make potential decisions. However, most startups don’t have time, money or information to view the problems in historical perspective. Much of the information MBAs know comes from case studies that are totally irrelevant to startups that put greater value on execution rather than analysis.
- MBAs Mainly Use Tools Only: Startups don’t need people who can only solve problems that are already defined and solved. They need people who can define their value proposition, pricing model and target market, etc. They usually hire someone who has the experience to identify and prioritize problems. What MBAs tend to do is to apply solutions readily available from their toolkit to most problems, giving birth to more problems rather than solving them.
- Attitude Problems: There is nothing wrong in saying that most MBAs, especially from top business schools, are more concerned about building their careers instead of sharing responsibility and creating stronger teams. This can really hamper the growth of startups that require their employees to work collectively rather than individually. The startup will definitely sink if everyone is working in his own direction.
- Unqualified Professors: Most professors are great at teaching theories to MBA students, but they are simply unqualified to teach future entrepreneurs because they themselves lack practical industry experience. It sounds harsh, but most of them have no idea how to prepare students to take on future business challenges. They don’t let their students think out of the box as well as research and study outside their syllabus because according to them, only textbooks are the accurate source of information students can get.
- The Information Is Outdated: Contrary to general belief, much of the information imparted to students in the form of textbooks and case studies is simply outdated. For instance, a new case study or theoretical paper takes a long time to get accepted because it has to go through a strong peer-to-peer process involving a lot of feedback, corrections and revisions. By the time it is accepted, it has already lost its relevance to the business world. On the other hand, startups need professionals who are current in industry trends and have the relevant experience to move the company forward.
- MBAs Have Lofty Expectations: MBA graduates have lofty salary expectations because they spend a lot of money to get the degree. This is understandable but unfortunately, most startups are unable to offer even average market salary ($90,000) to MBA graduates. Similarly, a vast majority of MBAs refuse to get a below-market salary. As a result, MBAs usually avoid working in startups.
WHEN AN MBA MAKES SENSE AND WHEN IT DOESN’T
If you are interested in getting into a startup ecosystem, but you are considering getting an MBA first, here are some tips to help you determine if getting an MBA makes sense for you.
When an MBA Makes Sense:
- If you already have a certain amount of professional and personal maturity.
- If you are looking to switch your industry after working for more than 5 years in it.
- If you are able to enroll in a full-time, two-year program.
- If the curriculum offered is more practical and related to your industry.
- If you can get admission to a top business school because the more renowned the school, the more the return will be on your investment.
- If you enjoy learning and academic/classroom settings.
- If you want to get a job in a bigger startup (50 -100+ people) as a senior manager or business administrator.
When an MBA Does Not Make Sense:
- If you want to get experience and work in a new startup.
- If you just want to keep up with others who have an MBA degree.
- If you are missing valuable practical experience.
- If you can only study part-time, as it takes longer to complete the degree.
- If you have to take huge loans to fund your education.
- If you are introverted and not a team player.
- If you want to move to a new startup after spending only 2-3 years in an industry you don’t want to work in.
- If you can’t get admission to top business schools such as Harvard, Wharton or Columbia.
Finally, if you do want to hire MBAs for your startup, only select graduates from top business schools. They make the pre-selection and enroll only intelligent, confident and ambitious students who have the passion and necessary qualities to succeed as a business manager in the long run. In fact, screening performed by business schools can help you hire the most talented employees for your organization.
In Berlin, we met and interviewed the founder of Mornin' Glory, Nicolas Stoetter. In this …