It will cost more than $100,000 to earn a degree at an elite business school. Just one problem: There's little real evidence that it will enhance your career. After college, Tad Glauthier didn't have much of a career plan. He knocked around for a while as a ski instructor, then as a TV sitcom stand-in. But when he decided at the age of 28 that it was time to get serious, he applied to one of the most revered career-building institutions in capitalism: Stanford's Graduate School of Business. "I thought B-school would catch me up," he says.
Ask him about his educational experience, however, and he fails to mention discounted cash-flow analysis, the chi-square test, or any other morsels of wisdom from the standard MBA curriculum. Instead he cites his role as executive producer of the 2002 GSB student musical, Spectacular, Schmectacular, and "All About Beer," a one-week elective about organizational dynamics in the brewing industry. As for his future? Glauthier hopes to start a business he describes as "a cross between Moulin Rouge, Angkor Wat, and Burning Man -- in a supper club."
Two years at Stanford and $60,000 in tuition alone to open a restaurant? Ray Kroc, who founded McDonald's without even a high school diploma, would be spinning in his McGrave. There's nothing wrong, exactly, with bright, ambitious young people spending a small fortune on an experience that, in some ways, compares favorably with summer camp. But for many of them, isn't it just a spectacular, schmectacular waste? It has long been common wisdom that gaining an MBA from any but a top-tier school was a losing proposition. Go to Harvard, it was said, and in time you'll earn back your tuition and opportunity cost in higher salary. Go to a school ranked below, say, the University of Rochester, and you probably won't recover your investment.
In this era of drum-tight hiring budgets, however, faith is flagging in even the elite institutions. Recent history -- think Global Crossing, Kozmo, Pets.com -- suggests that pouring 100,000 MBAs into the workforce annually has done little to raise the general level of business wisdom. "At the height of the bubble, our typical client wanted its CEO to be a bright, young up-and-comer with an MBA from a good school," says Scott Gordon, director of Spencer Stuart's tech-industry recruiting practice. "Today, real-world experience is far more important. An MBA alone just doesn't open the doors it once did." You don't have to tell that to John Damon (MBA, University of San Francisco, 2000). He's been living off unemployment and savings since he was laid off last August. "It's a real eye-opener for those of us who went to school and got our MBAs," Damon says, "because we never thought we'd be in this situation. When things got bad, the degree didn't seem to matter."
The most stinging criticisms, however, are emerging from within the business school establishment. In a draft report published internally this spring, the schools' own accreditation body, the St. Louis-based AACSB, roundly criticized its members. Business schools, it said, are hopelessly behind the curve on information technology, have an unhealthy obsession with their standing in magazine rankings, and, worst of all, proffer an out-of-touch, ivory-tower curriculum. "Preparation for the rapid pace of business cannot be obtained from textbooks and cases," the report scolded.
Still more pointed is an upcoming study by Jeffrey Pfeffer, a management professor at Glauthier's own business alma mater, Stanford. In it Pfeffer challenges the bedrock assumption of business school: that those who make the effort to get an MBA degree have more successful careers than those who don't. Pfeffer combs through 40 years' worth of data for evidence that this is true -- and uncovers almost none. He quotes Ronald Burt, a University of Chicago business professor and the researcher behind two of the studies in Pfeffer's paper, who says, "I have never found benefits for the MBA degree. Usually it just makes you a couple years older than non-MBA peers."
Strangely, one group that seems to have no doubts about the MBA is the one most at risk -- the students. Applications are at record levels again this year, and judging from Business 2.0's survey of the class of 2002, those who have the degree view a rich, rewarding career as all but ensured. That assumption might be due for reexamination. To those who put themselves deep into hock believing that an MBA would improve their lives, Pfeffer poses an unsettling question: "Before you did this," he asks, "did you look at any data?"