Executive education and what MBAs can do for entrepreneurs
Do MBAs offer good value for entrepreneurs?
Alan Sugar might not give a “monkey’s” about MBAs, but universities across the country are offering courses directly aimed at entrepreneurs. GB Reports looks at whether business owners should consider going back to school.
Scepticism about the Master of Business Administration (MBA) course is well known and, in part, justified. Successful businesspeople have been around longer than the qualification, and many of the UK’s most famous entrepreneurs (Branson and Sugar, to name but two) left school in their mid-teens and never came close to attending university.
You don’t need a qualification to set up a business and, when you have millions in the bank, who can really say that you would have been better off if you had got one first? The case for MBAs has hardly been improved by the fact that so much of the teaching was initially focused on large US businesses, such as Ford and Microsoft, making both the outlook and the language seem alien when viewed by budding British companies. Charles Clark is the managing director of Rosslyn Analytics, a £2.5m business, which conducts data analysis of company spending.
He did an MBA at Cass Business School at the turn of the millennium, while he was working in the City for investment bank Panmure Gordon. Clark says he benefited from his studies and found the course useful, as it has helped him to analyse business situations.
He is suspicious, though, of the view that established entrepreneurs would gain a great deal by attending a traditional MBA course. The rapidly changing and competitive world that growing businesses inhabit does not gel with the slow, calculative methods of the management theorist, Clark argues.
“The MBA teaches you to analyse a business situation in a structured fashion,” he says. “However, entrepreneurs have to ditch the theory and keep the tools. In an MBA, it is drilled into you that you have to analyse a situation and then execute your plan. But if an entrepreneur did that every time, they would never leave their room.
“If you are to survive, then you have to make decisions on instinct, and an MBA doesn’t teach this. MBA students are very well prepared to go and work for big structures, but they are completely alien to the Luke Johnsons and Alan Sugars of the world.”
So perhaps entrepreneurs are better off trusting instincts and common sense rather than highbrow theories proposed by the bigwigs of academia. But there is another side to the story. True, Branson and Sugar would not be able to sit still in an MBA classroom, but then these remarkable men are hardly typical of entrepreneurs as a whole. Sadly, thousands of businesses fail each year, while many others stall after the initial start-up phase, caught on a plateau where the cost of expansion appears to make growth impossible.
It also seems a bit rich to suggest that all academics live in ivory towers, when most are interested in testing theory with actual experience, and are often seasoned businesspeople. The hard facts about MBAs further undermine the sceptic’s view. MBA graduates quickly find well-paid work, with placement rates for most courses between 80% and 100%, and earn far more than the norm (achieving average salaries of £66,500, according to the Association of MBAs). To suggest MBAs are worthless is to argue not only that academics are missing the point, but also that the leaders of the world’s most successful businesses are deluded too. But can an established entrepreneur benefit from an executive education?
MBA lecturers are seldom ‘just academics’, and often have experience working in business. Small companies are on their agenda and they don’t just focus on multinationals. Professor Patricia Rees lectures at Manchester Metropolitan University (MMU) and says that MBA courses and the approach of universities towards businesses has undergone a sea change since she has been working. With a background in small business, she is all too aware that there is a chasm between the working lives of an owner of a small or medium-sized company and an executive of a multinational.
“Until recently, the MBA hasn’t been geared much towards entrepreneurs and small businesses. It was more for people involved in finance. It just assumed you were going to work for a large multinational corporation,” she says. “However, we are trying to encourage more small business owners to do MBAs. The way we teach now doesn’t assume that you are going to work for a large company. There has been a realisation that the British economic future needs more small businesses to get it going. There’s also the fact that more women are starting up on their own. I came from a small business background, and it is about making sure you have a range of examples.”
Similarly, Richard Wheatcroft, who is a lecturer of finance at The Open University (OU), talks of small businesses influencing universities. As more entrepreneurs do MBAs, so the universities become more knowledgeable about smaller businesses, and refine their courses to reflect that, he argues. “Lots of schools are getting closer to the workforce; that’s a trend,” he says. “As you get more people from small businesses coming through, you get more examples from them, creating a positive feedback loop.”
What do I need to get started
An MBA is a master’s degree, making the basic entry requirement an undergraduate degree. However, those of you who left school early needn’t assume that you’ll be excluded. Universities are, in general, looking to broaden the base of their intakes, and are interested in talking to people who have experience on their side, but lack qualifications. Interestingly, the very concept of a ‘master’ comes from the old trade guilds. It is more recently that it has acquired its academic connotation.
Speak to your local university’s admissions officer, who can advise you on entry routes. Some might suggest a diploma on a specific area rather than a degree, but if you can demonstrate a good level of knowledge and suitability, then you might gain entry to the course straight away.
“If you have a lot of experience, you could get in without an undergraduate degree,” confirms Rees. “There are still people who were forced to leave school at 16, and some of my best students never went to university.”
The right course
You need to be clear about your reasons for wanting to undertake an executive education, whether it’s an MBA or another type of course. There are many available in IT, finance or business law, which you may want to consider before taking the leap to a fully-fledged MBA. The first step is to contact your local university and find out some specifics for yourself.
Universities typically have a lot of information online, and are happy to help enquiring potential students. They also hold open days, and dropping an email to a lecturer is not a bad idea either. For those who don’t want to commit to a location-based course, The OU is available from anywhere in the UK and offers MBAs, as well as many other courses aimed at entrepreneurs and professionals. Its courses are supported distance learning, where most of the work is done at home, but all students are given a personal tutor.
An MBA is not a one-size-fits-all qualification, and it may be that your local university doesn’t offer a course that suits you. Looking further afield or considering. The OU are both options in this case. But remember when you’re enquiring about MBAs that there are also Master in Business Management (MBM) and Executive MBA courses. Each has a different emphasis, so asking about business-related courses, rather than just the MBA, is advisable. Finally, there is one more barrier to cross: the fees. The courses cost in the region of £15,000, although this can normally be paid in instalments.
Why should you do it?
Entrepreneurs that undertake studies are often looking for the missing piece of the jigsaw that will help them to grasp business and turn their enterprises into the success story they dreamed about. Most business owners have a good understanding of a few key areas, but often wish they knew more, and crave a better understanding of how things work.
Clark was keen to get more than the financially focused view that his life in the City had given him, and to really get into the nitty gritty. “The principal reason for the MBA was the belief that I would get a better understanding and view of business. In the City, you get a very financially based view of life. I wanted to get into the details,” he says.
Executive education can offer this, and the MBA will cover a wide range of topics, including marketing, branding, finance and metric, IT and business planning. It will also help you to gain a greater understanding of the business world in general, providing valuable context when planning for your business or considering future enterprises.
Rob Dixon had been involved in property development while also working full-time for companies such as Iveco. However, he felt that he wanted to get up-to-date with the latest theories and trends before embarking on the next phase of his career.
“I had always wanted to work for myself, and the MBA put that into context for me,” he says. “It helped me understand what was going on in China and to look at the economy at both micro and macro scale, as well as to see where you fit into the big picture.”
When Dixon began to analyse the property market, however, he began to have doubts that his existing course would continue to bear fruit. “In 2005/06, you could almost pay the same price for property that required restoration as something that was complete,” he says. “There were so many people doing it that it almost put a premium on run-down property. I just felt that there was no money to be made in it.”
Following the completion of his MBA course at MMU in 2006, Dixon decided to move out of property development and to focus on manufacturing and installing sash windows, a niche in the market. Today, his business, Dixon & Beswick, is a growing company with a £600,000 turnover predicted for this year and 11 staff. He is now a strong advocate of executive learning.
“The MBA is about context and actual experience, and it makes you think in a more strategic way, whereas before I did the course, I might have been running up a few blind alleys,” he says. “It is good to be more focused and to get straight to the point.”
Time out of the business
The next big consideration is time. Can entrepreneurs afford to spend time away from their businesses to devote to studying? Certainly, Clark found completing his MBA particularly tough. “It was absolute murder. I was working in the middle of the dot-com boom, so it was fairly back-breaking stuff. There was an extraordinary amount of work. It was a real commitment, and some people dropped out of it fairly early on,” he says.
MBAs are tough, and for those running a business, it’s a real commitment. The Association of MBAs suggests that students will need to put in about 20 hours a week, and need the “full support and understanding of family and loved ones” if they are to be successful. So if your marriage is already struggling and your kids are greeting you with the words “Who are you?” you might want to think twice. However, before you run a mile, you should know that the universities are adapting and are constantly trying to find ways to better accommodate those who are leading already busy lives.
Part-time courses are common and increased use of the web is making learning accessible for those to whom it was once closed. “We are trying to make it as flexible as possible. It is not distance learning, but a lot of materials are available online,” assures Rees. “Block MBA students come for three days at a time for two to three months. People find it easier to do that, but students still like coming to see people.”
Dixon, who studied at MMU, agrees, saying: “They had a part-time course with 4am starts and evening sessions, so it didn’t take too much away from work.” So the MBA can be a strain and something will usually have to give, but then entrepreneurs who undertake education are looking to step back from their businesses, so they can find a new direction and clarity, and run their companies more effectively.
An MBA on your business
What entrepreneurs are looking for is advice and ideas on how to grow and develop their companies. This doesn’t necessarily mean that an MBA is the ideal choice for you – shorter or more specific courses might suit your needs better. Brett Reynes has run several businesses during his career, and after founding his existing company, Backup Direct, which offers IT support services, he felt that he was getting stuck in a rut.
“When you have been running a business for a while, you get to a certain point when you ask: ‘Where is this business going?’ We wanted to step back and take stock. Sometimes, when you do that, you need people to bounce ideas off. We didn’t have enough time to work on the business, we were just working in it,” he says.
He considered doing an MBA, but instead opted for the Business Growth & Development Programme (BGP) at Cranfield University’s School of Management. The course is billed as an “MBA on your business”, and applies the theory of the management schools directly to its students’ enterprises. Lecturers visit your company and the course culminates with students presenting their business plans or “the plan for their business” to their peers.
“I was considering an MBA, but I was advised by people that it was too basic considering what I had,” says Reynes. “The difference here was that it was specifically an MBA on my business.”
Short courses If the prospect of months of study doesn’t appeal to you, you’ll be pleased to hear that there are various short, but intensive courses available. Typically, these last just a few days, and are usually dedicated to one particular area such as finance, marketing, IT or other key business topics. For instance, the London Business School has a five-day course from next April called Financing the Entrepreneurial Business. It aims to enable entrepreneurs to learn about investment from early-stage funding rounds through to exit. At £5,600, it isn’t cheap, but then neither is equity.
Similarly, Judge Business School in Cambridge offers two-day courses in a range of areas, such as strategy and innovation, and people management, for £1,700. As with MBAs, you are still best advised to find out as much as possible before committing. Online brochures are available, but do some of your own digging, too.
Learning from others
Increasingly, UK entrepreneurs are coming round to the view that great businesses are rarely created by one person, and having some trusted advisers on board is a prerequisite for success. The concept of mentoring is well established in the US, and many of the UK’s most successful businesspeople will gladly pay homage to those who have helped them on their way.
Peers can be helpful, too. The lot of the entrepreneur is often a lonely one, and it can prove useful to talk to others in the same position. Charles Clark met his business partner Hugh Cox on his MBA course, and still keeps in touch with other fellow students. This is not uncommon. Dixon says that one of the most enjoyable things about his MBA was the chance to speak to other businesspeople.
“One of the great things about the course was the networking – discussing ideas and bouncing them off people at other companies, and finding out what they were thinking about,” he recalls.
Reynes similarly found the camaraderie and support of his fellow students at Cranfield to be very positive. “Just spending time out of the business is amazing,” he says. “There were nearly 50 owner-managers going through the BGP at the same time, and there was a whole array of businesses, ranging from haulage companies and wine importers to IT consultants and human resources firms.”
While there are exams and coursework involved in university courses, the ultimate test for you will be the impact that it has on your business and future career. Wheatcroft says that students should start seeing benefits early on. “You are able to put what you have learned directly into use,” he says. “You are a kind of reflective practitioner.”
Similarly, Rees points out that work is firmly routed in the reality of the student’s workplace, rather than in hypothetical situations. “For the MBA, you have exams, but we ask students to use their own organisations for the assessments and dissertations,” he explains.
Reynes is now reaping the benefits of his BGP course, despite the recession. He realised that he needed to re-energise his brand and to create a management team to take the business forward. He has already secured an operations director and, at the time of writing, was pursuing a sales director. Clark and Dixon are also running growing businesses, a further endorsement of executive learning.
Whether an MBA is the right route for you is a personal decision, and it will be a sacrifice of time as well as money. But remember that entrepreneurs cannot go all the way alone – they need help. “Many businesses reach a plateau where there is a lack of managerial capital, and the business can’t go forward,” says Dixon. “The MBA is about taking your small business to the next level – turning it into a medium-sized organisation, and one that is starting to understand how big businesses are thinking.”
What to look for in a course
- Relevance – Make sure the course is aimed at entrepreneurs, as some might be more tuned into corporate thinking
- Content – You might have gaps in your knowledge, but will this course plug them? Ask for reading lists and discuss areas of study with tutors
- Lecturers – Speaking to lecturers will help you gauge their experience and teaching style. Find out if they have experience in private businesses themselves
- Alumni – Has the course helped produce successful entrepreneurs before? Talk to former students about how the course helped them
- Timetable – Make sure that you find a course that fits your working life, whether it’s part-time, distance learning or a short course
- Relationship with business – This is a chance to find partners as well as to learn, and universities are increasingly working alongside business in many projects. Try to have a good look round or take a tour
- Face time – While flexibility is useful, don’t forget that others on the course might have a lot to offer. Discuss how often you will be able to meet your fellow students
MBAs in brief
The Master of Business Administration (MBA) began in US universities during the end of the 19th century, designed to find a scientific approach to business management in a similar way to how industrialists were applying unflinching logic to the running of factories. The MBA arrived in Britain in the mid-1960s, and is now offered by universities across the country. Courses are often run over two years, although there are accelerated and part-time versions, too. Similar qualifications include the Master in Business Management (MBM) and the Executive MBA, while for the particularly adept there is the Doctorate in Business Administration (DBA). Typically, students have experience in business before they undertake the course, and do so as it is seen as a ‘passport to a career in management’. However, universities stress that this can include owner-managers.
Where to go next
The international accrediting body for MBAs, MBMs and DBAs, The Association of MBAs