> Within five years of the appointment of a business manager, wages decline by 6% and the labor share by 5 percentage points in the US, and by 3% and 3 percentage points in Denmark. Firms appointing business managers are not on differential trends and do not enjoy higher output, investment, or employment growth thereafter.
So, the company sees salary expenses reduce by 3-6% and the rest of the business is unaffected. Sounds like hiring MBAs is a great decision for them.
If they reduced the salary by 3-6% but there’s no difference in the calculated high level metrics it means that they started spending that difference somewhere else.
"The reduction in wages following the accession of a business manager leads to an increase in profits: the return on assets (ROA) increases by 3 percentage points in the US and by 1.5 percentage points in Denmark. In the US, we also find an increase of about 5% in the stock market values of companies that appoint business managers."
Unless that salary was already at market rate, in which case you're then exposed to higher turnover along with the hits to productivity (and profitability) which that entails.
If we were going to try to be scientific about it, we'd look to see what kind of people make genuinely outstanding managers and executives by analysing successful outlier organisations and looking at the composition of their management, board, etc.
I strongly suspect most companies will benefit more from training a specialist within their business than they will from trying to get a generalist in.
Keep squeezing your employees and you don't just end up with "not the best", you end up with "only people who literally can't get another job."
And by the time even a quarter of your workforce fits into this category, you've made it a miserable place to work for everybody. The bunglers are miserably bungling for bare minimum salary, the remaining competent staff are miserably trying to compensate for the bunglers, and the oxygen thieves in charge are miserably trying to get useful work make out of a staff of bunglers and burnouts.
Concur. Had the "pleasure" of working with one at the beginning of my career and he's responsible for my first and only burnout - at 22 years old. Nothing but buzzwords, ego and shiftlessness
From a few years ago, but pertinent to the topic at hand.
MBA: Mostly bloody awful
Something happened to management culture decades ago and now being a Master of Business Administration, especially from Harvard, is rather on the nose. MBA, it's being said, can also stand for 'Mediocre but Arrogant', or 'Management by Accident'.
Maybe some brave soul will set us all straight and devastate us with facts and logic. To me, the MBA is a useful creature for extracting value for investors for a product/company that is on a path to death. I mean that as a compliment actually, some companies shouldn't waste money on trying to innovate or improving product quality and should just ride out whatever wave they caught, minimizing costs and maximizing revenue while the cash flow still exists.
A plain MBA can be likened to a vulture over a late-stage dessicating corpse. Too extreme, sure, but MBAs rarely, if ever, pay off for the company hiring them. It's just that the blame and the losses get distributed. You can't avoid MBAs, they're an invented, coerced requirement like lawyers. Getting sued by another lawyer because you don't have some guy running defense for you (as long as you fill his pockets -- indeed the lawyer against you would be ready to bat FOR you if the circumstances were right) is ridiculous.
Whenever I get asked about a topic where there's clear orthodox HN groupthink, I always point to MBA discussions. MBAs get universally dunked on here, a lot of it well-deserved. But I argue that it's not the degree itself that makes people like the stereotypical "MBA bro" that everyone here hates, but rather the kinds of people who tend to go for the degree.
It's not like you're a talented, highly technical software developer, get an MBA, then suddenly forget how to code and only know how to reduce costs by 4% per year. I mean, I don't think I forgot how to code. But I did encounter classmates who boil down businesses to spreadsheets where human beings are merely "capital resources that ate lunch". I can assure you the piece of paper with "MBA" written on it didn't suddenly make them that way.
I'm not going to stop HN from dunking on MBAs but I encourage people to look a little deeper than the person's diploma before judging them.
The MBA title is useful to me as a signal of who I do not want to work with. Seriously, wouldn't life be much easier if more people declared themselves accurately?
> We establish that the proximate cause of these (relative) wage effects are changes in rent-sharing practices following the appointment of business managers
And top level metrics remain constant. So no benefits to stock owners, just rent seeking management at the expense of the firms attractiveness as an employer. Nice.
Keep reading: "The reduction in wages following the accession of a business manager leads to an increase in profits: the return on assets (ROA) increases by 3 percentage points in the US and by 1.5 percentage points in Denmark. In the US, we also find an increase of about 5% in the stock market values of companies that appoint business managers."
Oh weird, I interpreted their summary in the abstract as the opposite:
> consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities
I guess “in response to export opportunities” is somehow key there. That negates my point then, and makes me wonder why they put the above sentence in the abstract while omitting the one you quote. Sneaky.
A trend I've noticed often among "business managers" (MBAs or wannabes) is to assume they can manage something they don't understand, then simply shift to the lowest common denominator of dollars and cents (or your local equivalent).
Rather than actually manage anything, they then just demand others find ways to reduce the number of dollars in the cost line, and raise the number of dollars in the profit or revenue line.
The end result tends to be foreseeable and in line with most other comments here - short-term thinking outcomes, like asset stripping, selling things to free up capital (that isn't needed) and leasing them back (to make the business look more profitable as it spirals into the ground by burning up all that capital pile, after paying a large dividend), etc.
I wonder - is there an argument in favor of this, beyond the usual "shareholder value" or "shareholder return"? Is this something that's taught or expected as part of the doctrine? Is the idea of turning complex things you don't understand into revenue a taught principle? (As in my experience, it ends up with very obvious catastrophic issues, caused by the business manager not understanding or believing the impact that will arise from the change they make, followed by them changing job before the foreseen and inevitable negative outcome arrives).
Could companies get better business managers by releasing their bonus over a period of years, so that people's true ability to perform is factored in? Aka the principle of being around for long enough to get found out, which in theory ought to get you better managers, since those who would get "found out" will avoid the opportunity?
It feels like having management as a specialism in its own right is a result of the financialisation of business. It is inconceivable that business schools can equip people to innovate: innovation will come from founders who have technical skills, and the teams they lead. As soon as career managers are involved, the game begins to be about playing the numbers rather than focusing on the product. It seems absurd to think business schools are capable of producing anyone who would do anything else.
Playing the numbers really does seem to be the root of the issue - I've definitely seen occasions with too much focus on mantra-driven accountings practices (playing around shuffling beans from capex to opex), rather than on what actually mattered...
In one case, they wanted to just shuffle numbers between columns in Excel, and there wouldn't have been a business in a few months, as they'd have trimmed all the spend that meant there was a viable and competitive product to sell, and made the monthly outgoings higher than takings, all to make the spreadsheet look nice...
Maybe business managers need to be taught more about innovation and how to get out the way and enable it as a value creator? Or maybe we need to better condense what really matters into a single college class - cutting all the bean counting and financial tricks and focusing on the useful lessons instead?
Eh, you definitely need to understand the business aspects of a space to innovate in it. SaaS was a huge change in the business model but not really the underlying technical stuff. But I think it's a lot easier for someone technical to learn these things than for a business person to learn the tech.
> But I think it's a lot easier for someone technical to learn these things than for a business person to learn the tech.
That's the rub, people have been running businesses for millenia without requiring specialized education for it. SaaS was a huge change in the business model, but did it require an MBA to come up with the idea? Or was it someone who figured that their customers didn't want to wait for "vN" of the product?
I don't think you can just claim that MBA generated the idea of SaaS nor that MBA (or tech staff)in general generate that type of novel idea constantly. Now you different can argue that one of those two groups is absolutely required to produce a SaaS product and I think its obivous which one of the two groups is optional. I don't think MBA's are useless but its happens to be my experience. That very often where a non-technical manager is attached to the project and they are kinda useless because they lack the insight to contribute but a given more authority that the people that actually know whats going on. I've found non-manager assistants are often way more productive at getting the actual adminstrative tasks required done as well.
I can see someone trained in mediation, finance, accounting, philosophy, game theory, and some basic general technical skills (statistics, maths foundations, general tool and workshop proficiency, foundations of CS/IT) being a massive boon to any organizational structure. Technical people often lack communication skills and can lose the forest for the trees.
But their voice needs to be equal with people who specialise in what is actually done on the ground.
Basically real management specialization, not 'make line go up, you in charge everyone else is a peon to be exploited' training.
> Technical people often lack communication skills and can lose the forest for the trees.
This is definitely an issue in my experience. There's some who can communicate well. In cases where you don't have one of them though, the solution seems like it would be a same-level or one-level-junior "PR" type individual, who helps them to hone and delivery a message. It seems incongruous that in this one (?) context, we look for general enabling skills further up the chain, rather than down the chain.
isn't that the whole point of business school? it's highly tied to the idea that you can run a company without understanding what the business actually does.
I'm pretty sure you're seeing it that way because it's designed that way, unfortunately.
> it's highly tied to the idea that you can run a company without understanding what the business actually does.
I find this notion really interesting actually, as intuitively it makes no sense, yet it's clear this is what people believe.
I guess if you consider all businesses as generic machines that work the same way, you could argue it is theoretically possible, but that should always leave open a huge opportunity for the ones that ignore this practice to push on ahead and win... If your rivals all behave in a relatively predictable way, that ought to give you a usable edge.
> I'm pretty sure you're seeing it that way because it's designed that way, unfortunately.
That seems to be the case. It's an incredible situation, and one which I hope in future we will reflect on, laugh at, and chalk up as a massive long-term failure in Western business practice.
When I was younger I had a career in restaurants. One Friday I ran a sloppy joe special and a crew of construction workers ordered 15 or so of them. The next Friday they came back and asked about it again and so began a regular thing of making sloppy joes on Friday. This went on for the better part of a year until we got a new manager. When the staff was packing up the order he screamed "you are putting in way too many napkins!", the waitress objected and ended up putting a pathetic number of them in the order. The guy who picks up the order asks for more napkins, the waitstaff inform him that we can't give him more due to this new policy.
That was the last time they came in for sloppy joes. We lost a $200 a week order over fifty cents of napkins.
This plays out slower in large companies with more complicated products but I always think back to that guy when I see stuff like that.
While I completely agree the manager was an idiot, it’s also stupid to come in for almost a year and then never come in again because… you got less napkins? Reminds me of the 1-star Yelp reviews where people say “This was my favorite place for years and years, and then one time this little thing happened and now I’m never coming again. One star!”
Because the restaurant business is all about consistent good food and service. Any restaurant can be good once, but the 5-star is the one that never fails you.
I think the point is: customers aren't always rational; MBAs and economists tend to assume in rational actors in their models. Blaming customers for being "stupid" seems like a good way to deflect for one's own failures in accounting for their perceived stupidity.
Having worked retail before, encountering something like this as a customer would make me think of several things:
- same checkout/employee reluctantly saying there is a new policy: bad management, new management, other things likely going downhill
- same checkout/employee not being able to bypass this - if normal waste reduction, hand out less, and give on request? but no exceptions?
- sloppy joes are sloppy, saucy, and drip everywhere
- this is a takeaway order, and they are likely going to be eating it somewhere they do not have easy access to napkins
- new policy: why are they cost cutting? have they also changed suppliers to cheaper meat or cheese? if they are cutting corners on one of the cheapest paper products, what else has changed?
- general human pissiness if you previously did not have to pay for sauce or napkins or utensils or whatever and now you do
You are viewing the experience as purely transactional, but they may view going there as a tradition and may think they have a relationship with the place (i.e. they are a regular). In addition, it sounds like they kick-started a tradition so they may even feel a sense of ownership. In other words, it is not just business, it is personal.
That's why you see those enraged 1 star reviews and why these people never came back. These aren't people who are offended at simple business transactions, these are people who feel personally wronged, and that will always generate a lot of negative emotion.
Your comment suggests that you think people are entirely rational in their decisions and do not have emotional contamination. Think of it as having a girlfriend or boyfriend, and then one small cheating incident and it's the end of the relationship.
If you want to understand how to use an MBA just look at the syllabus
to see what skillsets you're working with. From Harvard to London
they're the same;
"Basic accounting and economics, simple finance and business law,
organisational behaviour, HR and PR, fundamentals of marketing,
technology and information systems management, risk management and
corporate strategy."
This is a highly useful broad but necessarily thin body of
knowledge. When I was at uni we had to do a basic law and business for
engineers module - and that at least taught me how much there is I
don't know and could hire expert advice on.
The problem is that people see the word "management" and then do
something dumb like put an MBA in charge of things, or worse, people
(that seldom goes with the territory). The MBA certificate became
mystified and given far too much clout in the late 90s when the weak
idea of generalised management of financialised business flourished.
Today we better understand the pitfalls of that whole way of thinking.
It's also possible for someone with existing domain skills, perhaps
even a PhD or lifetime in the MD seat, to go and do a MBA just to
learn to speak modern business language.
Again, these are useful skills, but don't just put them randomly in
charge of things because you see an Ivy League brand and the letters
M.B.A.
But the point of this article it seems, is not that CEOs with MBAs are worse managers, short sighted, greedy or foolish. The enterprise consists of assets, both tangible and intangible, also called capital, and workers who provide labor. We call returns to capital “profit” and returns to labor “wages”.
If I understand this paper correctly, MBAs in aggregate neither grow the pie nor shrink the pie compared to non-MBAs. What they do well is increase the share that goes to capital rather than labor.
I wanted to come in here and bad-mouth MBAs, but you all already did an admiral and accurate job of it.
Instead, I would claim having the view 'business owner' and 'economist' is really helpful alongside expertise in the field this business is supposed to be good in. And not just a little, but MBA-level depth there; making sales predictions for the product, running net-present-value calculation for a high-capex asset, making decisions using quantified uncertainty, etc.
The problem seems to be "only an MBA". But having an MBA or equivalent knowledge while you are deep in your business' implementation is critical.
The original title is the "Eclipse of Rent-Sharing: The Effects of Managers’ Business Education on Wages and the Labor Share in the US and Denmark," to follow this site's guidelines. The current editorialized title (though it has generated much discussion) is "Managers with MBAs are the best at taking money from workers and not much else [pdf]."
I have mixed opinions about all the MBA hate on HN.
On the one hand, as an engineer who has reported to and worked with many MBAs, I totally get it. In no way does an MBA give someone any ability to effectively work with or support teams they wouldn't have been able to lead pre-MBA. But unfortunately an MBA often gives people the _belief_ that they can do so.
On the other hand, as a Harvard MBA, I loved the material and program. It was 20 months to recover from burnout, learn from brilliant and passionate professors, and broaden my knowledge in directions I would have been hard-pressed to pursue on my own. When I grew in my career to lead organizations of hundreds and thousands, and had to navigate a larger commercial context, my MBA made me much better at that job.
The MBA was originally intended to equip high-potential, early-career contributors (specifically engineers!) with the skills and context they would need to someday become an organizational leader. And it still can be! Unfortunately though that's no longer the standard trajectory, and I don't know that that's for the best.
I have mixed opinions about all the scientology hate on HN.
On the one hand, as an engineer who has reported to and worked with many scientiologists, I totally get it. In no way do high operating thetan levels give someone any ability to effectively work with or support teams they wouldn't have been able to lead pre-scientology. But unfortunately scientology often gives people the _belief_ that they can do so.
On the other hand, as a hollywood scientologist, I _loved_ the material and program. Going into my purification program I was a reasonably experienced engineer, entrepreneur, and manager; that set me up over those 20 months to reflect, learn from brilliant and passionate teachers, and broaden my knowledge in directions I would have been hard-pressed to pursue on my own. When I grew in my career to lead organizations of hundreds and thousands, and had to work in a larger commercial context, scientology made me much better at that job.
Scientology was originally intended to equip high-potential, early-career contributors with the skills and context they would need to become a superb organizational leader. Since then it's become something else entirely.
I'm not sure what point you're trying to make, but you realize an MBA is an actual academic program and skillset? Just because your Madlib is syntactically correct doesn't mean it makes sense.
If you're trying to say that the material one studies in an MBA program isn't rigorous or relevant then say that.
I'm not sure what point _you're_ trying to make, but you realize scientology involves actual academic programs and skillsets?
If you're trying to say that the material one studies in a scientology program isn't rigorous or relevant then say that.
No matter the difficulties you may be facing in life, Scientology offers answers.
It provides an exact technology with step-by-step procedures you can use to handle problems and better your life and the lives of those around you.
Perhaps I am having a case of the Monday afternoons and some humor flag has been turned off for me, but this just comes across as disrespectful of the GP's comment.
I did not spend two years and $150,000 on my Scientology classes to end up sounding like a pompous ass completely lacking in self awareness and levity. How dare you sir.
I wonder if the MBA would fare better if it was reset, and the roots as a masters degree were revisited - limit the entry routes so it becomes a pathway for postgraduate engineering education, after 10 years of industry experience, and their MBA was "stamped" or namespaced with their industry background in some way?
It seems from your comments that the MBA is worthwhile content and experience, but that perhaps the issue is people doing MBAs without a hard engineering or science background, who want to manage "a business" rather than "their engineering business"?
I think that framing is one which makes sense (~10yr post-graduate engineering program).
I wouldn't restrict it to just engineers, but I would certainly focus it on early-career managers in any high-skill industry where the transition from IC to organizational leadership is a challenge.
The majority of my class was on the Ivy->Consulting/PE->MBA track, and though many of them were wonderful and well-meaning human beings, that did not prepare them effectively to lead in industry.
Yeah - I deliberately suggested engineering just to be controversial and test the idea, but I guess I'm thinking "any subject that isn't taught by a business school". A common pattern I've seen outside the US is a trend of doing a "generic business degree" leading to a few years of employment in a nondescript generic role, followed by an MBA.
I'm not quite sure where the market need for undergraduate business degree education comes from, or who is hiring them. It's clear the demand is there, as they're not unemployed en masse, and many do it, but I wonder if business could viably become a "postgraduate only" subject, so everyone doing it had a grounding in a subject matter area, rather then a generic undergraduate business degree?
An undergraduate business degree as a primarily academic pipeline makes some sense, similar to an undergraduate art history or econ degree. I really grew to appreciate how much real and important research is happening under the "business" umbrella (organizational behaviour, marketing, leadership, etc.).
Other than that though I totally agree, I have no idea what market value an undergraduate business degree offers.
But that kind of engineering is usually not the software engineering one. SENG vs all the others are pretty different in many ways, because the limits we deal with are more abstract mathematical vs. objects set more in hard sciences. Physical limits are mostly around information theory, the speed of light, algorithmic running time and how many people / data centers can you throw at a problem and people only really start thinking about that when the projects get big, which are not most projects. The vast majority of software is about equivalent to building single family houses, which often do not involve a single engineer at all.
Many engineers have a common core curriculum that has physics, circuits, chemistry, fluid dynamics, etc that lets them feel like they can relate to other engineers more and find software a somewhat alienating world with different personalities, requirements and cultures.
Oddly enough Harvard MBA along with Stanford are the only two worth getting in 2022. And that’s only due to school network not the actual education. It’s really the y-combinator effect at a corporate level.
IMO the alumni network is massively overrated. It might be different in services or finance, but in tech I've gotten way more mileage out of academic and open source communities.
I do agree that there's a heavy power law on program value, but I attribute it more to the scarcity of great professors and the peer learning advantage of highly selective programs.
Your ycombinator analogy still applies pretty well actually.
Thanks for sharing. I totally agree and have thought about this myself --- whenever there's this degree of resentment for another job in a community (PM, manager, politician) it's clear to me there's a lack of understanding of what that profession actually does and the constraints and incentives they face.
I'm a software engineer with a couple years' experience (and am graduating from Harvard college in a couple of months). I'm pretty familiar with the pressures of business that come from high-up, but I also understand where they come from in some cases. I'd love to learn more about business (what little I've seen I found fascinating) and I dream to someday find a balance between a happy technical team building a great product, and a healthy and profitable business.
How has getting your MBA helped you with your career growth (not getting leadership jobs, but actually thriving in them)? And how well were you able to integrate your engineering experience with the business pressures as you led a team?
> How has getting your MBA helped you with your career growth (not getting leadership jobs, but actually thriving in them)?
Honestly, the value of my MBA curriculum didn't really kick in until I had a P&L and a 100+ org. And even there, it's less a specific set of skills, and more how the case study method gives you indirect experience and context which would be prohibitively painful to learn the hard way.
When your team or scope grows to very large (1000+ person) sizes, the investment of two years of my time to avoid a single major blunder or focus a bit more efficiently becomes worth every minute invested. There's just so much leverage to fuck up so badly and impact so many people.
Dunking on MBAs, while deserved, feels like a distraction to the core problem: Short-termism.
Incentives in almost all US businesses are based around quarterly/annual outcomes, and even more so are almost legally required to for public companies. This results in a breed of manager who wants to get in, pump, and dump.
Hiring from a within via long term employees should be seen as a value signal, but instead professional traders prefer external hires because their track-record is public, and can be more easily quantified. This creates a small number of CTO-tier hires who rotate endlessly through corporate entities making ever more obscene incomes, and often leaving a mess behind them.
An interesting attempt to address this idea (albeit with not much traction and thus questionable benefit) - the long term stock exchange: https://ltse.com/about
I wonder if there's a way to structure exec level employee incentives through accruing bonuses over longer periods of time, so that you get two impacts:
1. Bad managers who get "found out" in the longer term don't apply for the role, as they won't be getting their bonus for stripping assets into a sell-and-lease-back, as their bonus will eat itself when the company starts to spiral downwards in a year or two.
2. Those who become bad managers get seen for what they are, and can't as easily "job hop" to escape the crisis they've caused. This tarnishes their reputation, warning others, and any exec jumping early will be viewed with suspicion.
In theory you could argue for stock options or similar, but those seem to deliver the short term behaviours that cause the issues in the first place (selling tangible things to raise dividends, to raise the share price, then discover you need to borrow money as you spent it all on renting the things you used to own).
It's against the HN guidelines to editorialize titles like this. Please see https://news.ycombinator.com/newsguidelines.html: "Please use the original title, unless it is misleading or linkbait; don't editorialize."
If you want to say what you think is important about an article, that's fine, but do it by adding a comment to the thread. Then your view will be on a level playing field with everyone else's: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
I did half of an MBA and then realized how much I didn’t want that title associated with my image nor needed it to succeed. I’ve worked with so many horrible MBAs both new and old. The worse were those who paid six figures so they can say they went to Wharton and be mediocre at their job.
The most important problem I find with MBAs (or wanna be) is intrinsic motivation. I often wonder why a person would ever want to just “manage” things without actually knowing things or create things? Why one would find themselves entitled to lead without actually having vision or skills? It occurs to me that people who wants to be MBA have a singular goal of making money at any cost and just become rich. It’s basically seems to be anti-thesis of being artist, hacker, engineer, scientist, doctor, teacher, and other creatives, for whom making money is likely secondary goal, if at all. I suppose this might be root cause of why MBAs are virtually despised so universally, especially on HN.
Sometimes, when you want to make something great, you cannot just be one person doing it, you need a team. You can often be a very creative person who implements their vision via a large group of people. It's essentially what a startup founder is. Many famous movie directors are similar also.
Why can't someone be the same as a manager too? When managers get rated at their annual perf review, vision is one of the things you are rated at.
I heard a quote from somewhere a long time ago but can't find the source, here it is paraphrased as best I can remember:
email to all: "Some of you are concerned about the recent change in leadership and of the changes they have enacted. Many feel that John Smith is just an MBA wielding moron who has no business running a software company. I have personally known John since we were kids and I just want to set the record straight: John does not have an MBA."
I worked as a product manager in a bank and didn't have a good answer back then. My tech peers always asked, why can't we build X instead of using vendor Y.
After self-studying what is taught in an MBA with books, blogs, podcasts, and online courses, I get the value now. Like the quote in goodwill hunting, you can do it for a little more now than the dollar fifty in late charges at the public library https://www.youtube.com/watch?v=hIdsjNGCGz4&t=7s
Here's how I look at it now.
Would you go build a mobile app, a website, cloud platform after reading a few blogs? Your friend tells you this, what would you think?
But don't we do this with business? Design? etc.
It's a trained skill like any other. You go and learn, train, practice to hit a baseball. Paint a portrait. Engineer an application. And so, you combine art with science to discover and build a business.
It shouldn't be this rare or hard to start a business. The way people think about entrepreneurship and innovation is that it's unruly, chaotic.
It's an illusion. It is a profession like all others:
1. You create new technology, a new ability to do something to invent.
2. To innovate, you:
- Discover how to apply it to the real world.
- Design a way to bring to market for a profit. Launch in the market.
The problem with all those takes on MBAs is we all start life appreciating our own craft more than other peoples'. Hey, I did too. But over time, you learn to appreciate all crafts as much as your own.
103 comments
[ 2.9 ms ] story [ 171 ms ] thread> Within five years of the appointment of a business manager, wages decline by 6% and the labor share by 5 percentage points in the US, and by 3% and 3 percentage points in Denmark. Firms appointing business managers are not on differential trends and do not enjoy higher output, investment, or employment growth thereafter.
So, the company sees salary expenses reduce by 3-6% and the rest of the business is unaffected. Sounds like hiring MBAs is a great decision for them.
We should hold people to a higher standard than “do things which benefit you at the expense of others”.
If we were going to try to be scientific about it, we'd look to see what kind of people make genuinely outstanding managers and executives by analysing successful outlier organisations and looking at the composition of their management, board, etc.
I strongly suspect most companies will benefit more from training a specialist within their business than they will from trying to get a generalist in.
The capable employees who know they're being screwed go elsewhere and take their institutional knowledge with them.
And by the time even a quarter of your workforce fits into this category, you've made it a miserable place to work for everybody. The bunglers are miserably bungling for bare minimum salary, the remaining competent staff are miserably trying to compensate for the bunglers, and the oxygen thieves in charge are miserably trying to get useful work make out of a staff of bunglers and burnouts.
It's not like you're a talented, highly technical software developer, get an MBA, then suddenly forget how to code and only know how to reduce costs by 4% per year. I mean, I don't think I forgot how to code. But I did encounter classmates who boil down businesses to spreadsheets where human beings are merely "capital resources that ate lunch". I can assure you the piece of paper with "MBA" written on it didn't suddenly make them that way.
I'm not going to stop HN from dunking on MBAs but I encourage people to look a little deeper than the person's diploma before judging them.
And top level metrics remain constant. So no benefits to stock owners, just rent seeking management at the expense of the firms attractiveness as an employer. Nice.
> consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities
I guess “in response to export opportunities” is somehow key there. That negates my point then, and makes me wonder why they put the above sentence in the abstract while omitting the one you quote. Sneaky.
Rather than actually manage anything, they then just demand others find ways to reduce the number of dollars in the cost line, and raise the number of dollars in the profit or revenue line.
The end result tends to be foreseeable and in line with most other comments here - short-term thinking outcomes, like asset stripping, selling things to free up capital (that isn't needed) and leasing them back (to make the business look more profitable as it spirals into the ground by burning up all that capital pile, after paying a large dividend), etc.
I wonder - is there an argument in favor of this, beyond the usual "shareholder value" or "shareholder return"? Is this something that's taught or expected as part of the doctrine? Is the idea of turning complex things you don't understand into revenue a taught principle? (As in my experience, it ends up with very obvious catastrophic issues, caused by the business manager not understanding or believing the impact that will arise from the change they make, followed by them changing job before the foreseen and inevitable negative outcome arrives).
Could companies get better business managers by releasing their bonus over a period of years, so that people's true ability to perform is factored in? Aka the principle of being around for long enough to get found out, which in theory ought to get you better managers, since those who would get "found out" will avoid the opportunity?
In one case, they wanted to just shuffle numbers between columns in Excel, and there wouldn't have been a business in a few months, as they'd have trimmed all the spend that meant there was a viable and competitive product to sell, and made the monthly outgoings higher than takings, all to make the spreadsheet look nice...
Maybe business managers need to be taught more about innovation and how to get out the way and enable it as a value creator? Or maybe we need to better condense what really matters into a single college class - cutting all the bean counting and financial tricks and focusing on the useful lessons instead?
That's the rub, people have been running businesses for millenia without requiring specialized education for it. SaaS was a huge change in the business model, but did it require an MBA to come up with the idea? Or was it someone who figured that their customers didn't want to wait for "vN" of the product?
But their voice needs to be equal with people who specialise in what is actually done on the ground.
Basically real management specialization, not 'make line go up, you in charge everyone else is a peon to be exploited' training.
This is definitely an issue in my experience. There's some who can communicate well. In cases where you don't have one of them though, the solution seems like it would be a same-level or one-level-junior "PR" type individual, who helps them to hone and delivery a message. It seems incongruous that in this one (?) context, we look for general enabling skills further up the chain, rather than down the chain.
They took a business dude for that role instead, I left, and the company went bankrupt.
But it was a good thing, my life got so much better when I finally quit emplyoment for good.
Tell me more...seriously
(just kidding, just kidding)
Edit: yes, "Author and Consultant" says the profile. (Hi Kay :-))
I'm just a freelancer.
But I only work 10h a week, so in relation to a 9-5 job it could be considered part time retirement.
I'm pretty sure you're seeing it that way because it's designed that way, unfortunately.
I find this notion really interesting actually, as intuitively it makes no sense, yet it's clear this is what people believe.
I guess if you consider all businesses as generic machines that work the same way, you could argue it is theoretically possible, but that should always leave open a huge opportunity for the ones that ignore this practice to push on ahead and win... If your rivals all behave in a relatively predictable way, that ought to give you a usable edge.
> I'm pretty sure you're seeing it that way because it's designed that way, unfortunately.
That seems to be the case. It's an incredible situation, and one which I hope in future we will reflect on, laugh at, and chalk up as a massive long-term failure in Western business practice.
That was the last time they came in for sloppy joes. We lost a $200 a week order over fifty cents of napkins.
This plays out slower in large companies with more complicated products but I always think back to that guy when I see stuff like that.
Apart from MBAs, politicians of today apply many of the same ideas, e.g. any kind of long-term planning is scrapped for fast results.
Not all politicians, but too many unfortunately.
Welcome to Earth. People are awful. And messy.
- same checkout/employee reluctantly saying there is a new policy: bad management, new management, other things likely going downhill
- same checkout/employee not being able to bypass this - if normal waste reduction, hand out less, and give on request? but no exceptions?
- sloppy joes are sloppy, saucy, and drip everywhere
- this is a takeaway order, and they are likely going to be eating it somewhere they do not have easy access to napkins
- new policy: why are they cost cutting? have they also changed suppliers to cheaper meat or cheese? if they are cutting corners on one of the cheapest paper products, what else has changed?
- general human pissiness if you previously did not have to pay for sauce or napkins or utensils or whatever and now you do
No, they didn’t come back again because they got fewer napkins.
That's why you see those enraged 1 star reviews and why these people never came back. These aren't people who are offended at simple business transactions, these are people who feel personally wronged, and that will always generate a lot of negative emotion.
"Basic accounting and economics, simple finance and business law, organisational behaviour, HR and PR, fundamentals of marketing, technology and information systems management, risk management and corporate strategy."
This is a highly useful broad but necessarily thin body of knowledge. When I was at uni we had to do a basic law and business for engineers module - and that at least taught me how much there is I don't know and could hire expert advice on.
The problem is that people see the word "management" and then do something dumb like put an MBA in charge of things, or worse, people (that seldom goes with the territory). The MBA certificate became mystified and given far too much clout in the late 90s when the weak idea of generalised management of financialised business flourished. Today we better understand the pitfalls of that whole way of thinking.
It's also possible for someone with existing domain skills, perhaps even a PhD or lifetime in the MD seat, to go and do a MBA just to learn to speak modern business language.
Again, these are useful skills, but don't just put them randomly in charge of things because you see an Ivy League brand and the letters M.B.A.
If I understand this paper correctly, MBAs in aggregate neither grow the pie nor shrink the pie compared to non-MBAs. What they do well is increase the share that goes to capital rather than labor.
Instead, I would claim having the view 'business owner' and 'economist' is really helpful alongside expertise in the field this business is supposed to be good in. And not just a little, but MBA-level depth there; making sales predictions for the product, running net-present-value calculation for a high-capex asset, making decisions using quantified uncertainty, etc.
The problem seems to be "only an MBA". But having an MBA or equivalent knowledge while you are deep in your business' implementation is critical.
On the one hand, as an engineer who has reported to and worked with many MBAs, I totally get it. In no way does an MBA give someone any ability to effectively work with or support teams they wouldn't have been able to lead pre-MBA. But unfortunately an MBA often gives people the _belief_ that they can do so.
On the other hand, as a Harvard MBA, I loved the material and program. It was 20 months to recover from burnout, learn from brilliant and passionate professors, and broaden my knowledge in directions I would have been hard-pressed to pursue on my own. When I grew in my career to lead organizations of hundreds and thousands, and had to navigate a larger commercial context, my MBA made me much better at that job.
The MBA was originally intended to equip high-potential, early-career contributors (specifically engineers!) with the skills and context they would need to someday become an organizational leader. And it still can be! Unfortunately though that's no longer the standard trajectory, and I don't know that that's for the best.
On the one hand, as an engineer who has reported to and worked with many scientiologists, I totally get it. In no way do high operating thetan levels give someone any ability to effectively work with or support teams they wouldn't have been able to lead pre-scientology. But unfortunately scientology often gives people the _belief_ that they can do so.
On the other hand, as a hollywood scientologist, I _loved_ the material and program. Going into my purification program I was a reasonably experienced engineer, entrepreneur, and manager; that set me up over those 20 months to reflect, learn from brilliant and passionate teachers, and broaden my knowledge in directions I would have been hard-pressed to pursue on my own. When I grew in my career to lead organizations of hundreds and thousands, and had to work in a larger commercial context, scientology made me much better at that job.
Scientology was originally intended to equip high-potential, early-career contributors with the skills and context they would need to become a superb organizational leader. Since then it's become something else entirely.
If you're trying to say that the material one studies in an MBA program isn't rigorous or relevant then say that.
If you're trying to say that the material one studies in a scientology program isn't rigorous or relevant then say that.
No matter the difficulties you may be facing in life, Scientology offers answers. It provides an exact technology with step-by-step procedures you can use to handle problems and better your life and the lives of those around you.
Whiffenpoof voice: including classes on hu-mor
It seems from your comments that the MBA is worthwhile content and experience, but that perhaps the issue is people doing MBAs without a hard engineering or science background, who want to manage "a business" rather than "their engineering business"?
I wouldn't restrict it to just engineers, but I would certainly focus it on early-career managers in any high-skill industry where the transition from IC to organizational leadership is a challenge.
The majority of my class was on the Ivy->Consulting/PE->MBA track, and though many of them were wonderful and well-meaning human beings, that did not prepare them effectively to lead in industry.
I'm not quite sure where the market need for undergraduate business degree education comes from, or who is hiring them. It's clear the demand is there, as they're not unemployed en masse, and many do it, but I wonder if business could viably become a "postgraduate only" subject, so everyone doing it had a grounding in a subject matter area, rather then a generic undergraduate business degree?
Other than that though I totally agree, I have no idea what market value an undergraduate business degree offers.
But that kind of engineering is usually not the software engineering one. SENG vs all the others are pretty different in many ways, because the limits we deal with are more abstract mathematical vs. objects set more in hard sciences. Physical limits are mostly around information theory, the speed of light, algorithmic running time and how many people / data centers can you throw at a problem and people only really start thinking about that when the projects get big, which are not most projects. The vast majority of software is about equivalent to building single family houses, which often do not involve a single engineer at all.
Many engineers have a common core curriculum that has physics, circuits, chemistry, fluid dynamics, etc that lets them feel like they can relate to other engineers more and find software a somewhat alienating world with different personalities, requirements and cultures.
I do agree that there's a heavy power law on program value, but I attribute it more to the scarcity of great professors and the peer learning advantage of highly selective programs.
Your ycombinator analogy still applies pretty well actually.
I'm a software engineer with a couple years' experience (and am graduating from Harvard college in a couple of months). I'm pretty familiar with the pressures of business that come from high-up, but I also understand where they come from in some cases. I'd love to learn more about business (what little I've seen I found fascinating) and I dream to someday find a balance between a happy technical team building a great product, and a healthy and profitable business.
How has getting your MBA helped you with your career growth (not getting leadership jobs, but actually thriving in them)? And how well were you able to integrate your engineering experience with the business pressures as you led a team?
Honestly, the value of my MBA curriculum didn't really kick in until I had a P&L and a 100+ org. And even there, it's less a specific set of skills, and more how the case study method gives you indirect experience and context which would be prohibitively painful to learn the hard way.
When your team or scope grows to very large (1000+ person) sizes, the investment of two years of my time to avoid a single major blunder or focus a bit more efficiently becomes worth every minute invested. There's just so much leverage to fuck up so badly and impact so many people.
Incentives in almost all US businesses are based around quarterly/annual outcomes, and even more so are almost legally required to for public companies. This results in a breed of manager who wants to get in, pump, and dump.
Hiring from a within via long term employees should be seen as a value signal, but instead professional traders prefer external hires because their track-record is public, and can be more easily quantified. This creates a small number of CTO-tier hires who rotate endlessly through corporate entities making ever more obscene incomes, and often leaving a mess behind them.
1. Bad managers who get "found out" in the longer term don't apply for the role, as they won't be getting their bonus for stripping assets into a sell-and-lease-back, as their bonus will eat itself when the company starts to spiral downwards in a year or two.
2. Those who become bad managers get seen for what they are, and can't as easily "job hop" to escape the crisis they've caused. This tarnishes their reputation, warning others, and any exec jumping early will be viewed with suspicion.
In theory you could argue for stock options or similar, but those seem to deliver the short term behaviours that cause the issues in the first place (selling tangible things to raise dividends, to raise the share price, then discover you need to borrow money as you spent it all on renting the things you used to own).
If you want to say what you think is important about an article, that's fine, but do it by adding a comment to the thread. Then your view will be on a level playing field with everyone else's: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
https://www.youtube.com/watch?v=MlhAkNWC1qo
Why can't someone be the same as a manager too? When managers get rated at their annual perf review, vision is one of the things you are rated at.
email to all: "Some of you are concerned about the recent change in leadership and of the changes they have enacted. Many feel that John Smith is just an MBA wielding moron who has no business running a software company. I have personally known John since we were kids and I just want to set the record straight: John does not have an MBA."
MBAs, please stop putting “MBA” after your name in your email signature.
After self-studying what is taught in an MBA with books, blogs, podcasts, and online courses, I get the value now. Like the quote in goodwill hunting, you can do it for a little more now than the dollar fifty in late charges at the public library https://www.youtube.com/watch?v=hIdsjNGCGz4&t=7s
Here's how I look at it now. Would you go build a mobile app, a website, cloud platform after reading a few blogs? Your friend tells you this, what would you think?
But don't we do this with business? Design? etc. It's a trained skill like any other. You go and learn, train, practice to hit a baseball. Paint a portrait. Engineer an application. And so, you combine art with science to discover and build a business.
I like this quote from Noubar Afeyan. An MBA is all about learning and practising how to do #2 https://www.youtube.com/watch?v=aiS-5OAWFQU&t=132s
It shouldn't be this rare or hard to start a business. The way people think about entrepreneurship and innovation is that it's unruly, chaotic.
It's an illusion. It is a profession like all others:
1. You create new technology, a new ability to do something to invent.
2. To innovate, you:
- Discover how to apply it to the real world.
- Design a way to bring to market for a profit. Launch in the market.
The problem with all those takes on MBAs is we all start life appreciating our own craft more than other peoples'. Hey, I did too. But over time, you learn to appreciate all crafts as much as your own.
What did you read / listen to?