MBAs for entrepreneurs: A waste of your time?
Is your business in danger of out-growing your skillsets? An MBA isn’t necessarily the answer
Going back to school can work for your business, but is it worth the sacrifice?
In the first part of this feature we discussed what executive education offered and when to take a course. We looked at what’s on offer and typical course content. This month we hear from people like you who have taken the plunge.
Lacking practical application
When Graham Nicoll, founder of baby products website Smileybaby.com, looks to raise growth finance, he’s pretty sure his Warwick Business School MBA will have a part to play in making him and his business a credible proposition.
It’s a common reason for entrepreneurs seeking executive education. However, he’s not overly-enamoured with the course, saying the application of theory to real businesses and his in particular has been lacking. “For six modules I’ve got back marks of 69%. Do I believe I achieved it? No. You don’t have to work that hard to get a prestigious qualification.”
There is a bright side though. “If I raise finance in two years I will go in with a reasonably good track record and the credibility of an MBA,” he says. “And if I looked at every module critically there would probably be at least one key feature that could make a fundamental difference to my business.”
Kerry Hallard, who runs corporate PR company, Buffalo Communications, is another disappointed customer. “I found it quite superficial,” she says. “I knew how to do HR and accounts and am in the business of PR, marketing and technology. I didn’t find it easy, but don’t feel it went into the depth I expected.”
She took a part-time MBA at Kingston between 2002 and 2004 to fend off competition in her industry. Like Nicoll, she has struggled to directly link the course to her business. She claims a mere three or four out of 20 assignments have been applicable. “As a result of my own experience I wouldn’t recommend an MBA,” she says. “Take a good hard look at what you want out of it. It’s great having the qualification, but that’s all. There’s very little for small businesses on MBAs.”
But for every negative experience there’s at least one satisfied entrepreneur. Choice of course is critical. Lesley Nash, who runs recruitment firm Changework Now, took Henley Management School’s practitioner-based MBA. “It’s more beneficial to take an MBA while running a business because you can do it around your company and gear assignments to it,” she says, directly contrasting her experience with that of Hallard and Nicoll.
Finance was her own particular business blindspot. “I can now read a set of accounts and some of the different ratios that are important to look at,” she says. “I keep an eye on profit, but know enough about the state of the company to make investment decisions too.”
Because of the course’s influence, she and co-founder Lisa Astbury strategically repostitioned the company’s offering from all-sector online recruitment to focusing on retail, hospitality and leisure.
Beyond MBAs, Jamie McGrattan of engineering company McGrattan Piling claims the short courses in strategic thinking, marketing and financial management he took in Glasgow some years ago have made him more disciplined. “We were more ‘seat of your pants’ and nothing was measured,” he says. “Most entrepreneurs’ business plans are probably in a drawer and not used as a living document. Ours is now constantly updated, refreshed and reviewed. We revisit on a monthly basis. Areas are prioritised and pushed through quickly.”
The courses also encouraged him to innovate in a slowmoving industry. As a result his company can command a premium. “There’s not much differentiation in terms of price and quality in our business. So my approach is ‘if it ain’t broke, is there a way to squeeze more out of it?'”
Finding the right balance
You certainly won’t feel the benefit if you struggle to slot it into your schedule though. “It’s tough, with lots of pressure and lots of work,” warns Jeanette Purcell, chief executive of the Association of MBAs. “You need to be aware of that. You need to be able to delegate to others and restructure for a while.”
Self-discipline is a necessity for the more flexible options. For Nash and Astbury it dovetailed nicely, with Astbury commencing her course a year earlier than Nash. And they found added value in running their own company at the same time. “It made content very relevant and helped us through re-branding, re-focusing and managing a fairly steep period of growth,” says Nash.
Henley’s modular approach also suited, amounting to one week every four to six weeks. “You immerse yourself, learning is consolidated and momentum builds up. I don’t know if I’d have done it if I wasn’t running a business with someone else though,” says Nash.
For you, promotion, and to a an extent good marks, don’t matter. Instead you’ve got to justify your extra-curricular commitment. The aim will be to deploy the knowledge in your business as soon as possible.
Only a miniscule percentage of MBAs actually run a business already. So will the standard of teachers and students meet your expectations? Entrepreneurs, like you, quickly acquire general management skills out of necessity. Corporate employees on the other hand are often tunnel-visioned about their job. “Having dealt with a range of corporate clients at my previous business you have profit and loss, balance sheets and the legal jargon of contracts thrust at you,” says Smileybaby’s Nicoll. “To get the business you get used to preparing management tender documents. I’m not a finance expert, but I probably understand it better than people who know just one industry.”
Cohorts coming from management consultancy, investment banking and the public sector also proved disappointing in terms of contribution to Nicoll’s classes. He claims that of 32 students on his course only a handful were prepared to pipe up. “You judge the calibre of students on their interaction with others,” he says. “From a selfish point of view I don’t learn from them simply sitting there.”
“The first thing that put me off was the calibre of the people,” adds Hallard. “A friend had done an MBA at Harvard. He was mixing with people that had already achieved a great deal. People at Kingston hadn’t and didn’t massively inspire me.”
This affected group study, with cohorts not understanding basic business terminology, she says. “I felt like I was almost teaching, not learning. I was the only one running a business.”
Nicoll and Hallard’s experiences are not necessarily representative of the whole intake on MBA courses, but the entrepreneurial exuberance and knowledge gained from running a business can mean you come to executive education from a totally different standpoint.
Lecturers too, in many cases, do not have the first-hand experience of owning and growing their own businesses. However, there are exceptions. The likes of John Bates, director of the Foundation for Entrepreneurial Management at London Business School, and indeed six of the eight in his faculty, have run companies – in some cases more than one.
Again, Nicoll has a clear view on this. “You get the impression lecturers are used to not having someone challenge them and asking how something actually applies to a given business.”
If you opt for an alternative, such as the MSc in entrepreneurship at Bristol University, you won’t get the street-cred of an MBA, but at least your fellow students have some entrepreneurial nous, rather than select the easiest electives. Business plan competitions, seed corn funds, incubators, a venture capital fund with £9m under management run with Bath University, and a business angel fund to invest in student ventures are among the benefits, says head of the course Peter Strachan. The downside is that much of the course is geared towards those keen to set up a business rather than those already running one.
If you don’t feel you have enough time to take a course yourself, another option is to send senior managers. As well as enhancing their general skill levels, you may unnearth or help to groom your eventual successor.
The Association of MBAs’ research suggests that education won’t encourage your managers to look elsewhere – at least not immediately. Newly qualified MBAs tend to stay where they are for two to three years. “If you don’t invest in executive education the implication is that you’re happier with untrained people who will at least stay,” concludes Purcell.
Hallard wouldn’t send staff on an MBA, but would part-finance it. “If it’s something they really wanted to do I’d support it. They would get confidence, tie-in, longevity and could work on beneficial assignments for the company.”
Taking somebody fresh from an MBA course on the other hand doesn’t come cheap. Salaries for MBA graduates working in small businesses with a turnover of £1 to £4m are typically £79,000, dropping to £70,000 for the next bracket.
Cheapflights’ travel business CEO David Soskin says that ideally they will have two or three years experience post-MBA. Max Kantelia, chief executive of HR technology provider McLaren Solutions, has not taken an MBA, but mentors students on the course at London Business School. In the past he’s hired MBAs. One, a former investment banker, operated alongside him for a number of years. While he proposed ideas, he relied on her to put thought and structure into them. “She introduced new accounting practices, systems, technologies, databases and created a cost-efficient back office for the group that didn’t exist before,” he says. “Before her I’d take an idea, think about it, bat it around, hire people to turn the concept into a company. But her feasibility studies and analysis led to us not doing certain things.”
Would he have hired her had she not done an MBA? Probably not, he says. Ultimately though, he didn’t feel she was the right person to run his business. Sometimes it’s more about providing a balance for your entrepreneurial tendencies.
A cheaper option, and one to test the water with might be taking MBAs from courses on a consultancy basis. Part of the second year project at London Business School is 20 days consulting for businesses. They are pre-graduation and are supervised by individual faculty members. Operating in pairs the school charges £3,000 for the privilege. Still, if executive education’s an impossibility for you at least your business can feel the benefit of such expertise.