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Does MBA help you become CEO

Amidst growing discomfort about rising MBA fee across B-schools and stagnant average salaries, I was left wondering had MBA lost its sheen or is it simply the temporary phase which every industry go through in its life. With high payback periods and increasing opportunity costs, does MBA really help someone move up the corporate ladder at a much faster pace than someone who doesn’t have an MBA?

Embarking on understanding the need for MBA, I relied on two projects undertaken by reputed organizations like Harvard Business Review (HBR) and Financial Times to understand the impact on global scale and my research on Indian scenario.

HBR had undertaken a massive research project to evaluate S&P Global 1200 companies on various parameters and came out with a list of top 100 performing CEOs. Excerpts from HBR report in November 2014:

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“Twenty-four of HBR’s 100 best-performing CEOs have undergraduate or graduate degrees in engineering, compared with 29 who have MBAs. Eight CEOs have both degrees. At technology or science-based companies, it’s not a big surprise to find an engineer at the helm. But engineers thrive at the top of other kinds of firms, too: Examples include Carlos Alves de Brito of brewing giant Anheuser-Busch InBev, Jeffrey Sprecher of the financial services firm Intercontinental Exchange, and Kari Stadigh of the insurance company Sampo.

What makes an engineering degree useful to people leading a business? “Studying engineering gives someone a practical, pragmatic orientation,” says Nitin Nohria, the dean of Harvard Business School, who holds an undergraduate degree in chemical engineering from the Indian Institute of Technology, Bombay. “Engineering is about what works, and it breeds in you an ethos of building things that work—whether it’s a machine or a structure or an organization. Engineering also teaches you to try to do things efficiently and eloquently, with reliable outcomes, and with a margin of safety. It makes you think about costs versus performance. These are principles that can be deeply important when you think about organizations.”

What makes HBR report interesting is that Engineers comprise a major chunk after MBAs in terms of driving performance of top 100 companies. Combination of Engineering degree and MBA forms the largest subset with 61%. The pattern looks more or less clear that two pathways (Engg or MBA) are being followed by majority of those who reached upper echelons of corporate sector.

Financial Times (FT) in its January 31, 2015 publication remarked:

“Top business schools attach great significance to their alumni. Graduate networks are promoted as catalysts for career opportunities and the most successful graduates are lauded as role models for prospective students. Those who have climbed to the top of the largest companies are pinstriped pin-ups for the MBA.

FT analysis shows that almost a third (31 per cent) of the world’s 500 largest listed companies by market capitalisation, as featured in the most recent FT500, are led by an MBA graduate. Most of these earned their degree on one of the world’s top programmes.”

In nutshell, the number of MBAs leading top companies worldwide is around 30% as was evident from HBR and FT analysis, and majority of these MBA graduates are from US B-schools.

Indian Scenario

Coming to Indian scenario, attempt was made to understand the background of CEOs of major companies in benchmark index (BSE Sensex) as on February 28, 2016. The results were more surprising than the pattern observed across the globe.

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In Indian context, MBAs comprise the lion share with 40% among CEOs of benchmark index, BSE Sensex. In addition, 13% of CEOs have management background either in terms of bachelors in Management or having attended Advanced Management Programmes offered by reputed B-Schools like Harvard, Wharton etc. Engineers occupy the next place with 20%, CAs comprise 13% out of the remaining, leaving 14% of companies lead by candidates with law, commerce and arts backgrounds. Full details are as under:

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Conclusion

Unless you’re a founder, chances of making it to the top job without a degree are virtually non-existent. Having an MBA degree may not be the sure shot recipe for success, but if all the other conditions remain same, it will definitely provide ample opportunities for the right candidate to move up the ladder. Irrespective of education background, the characteristics that truly make a great leader are universal. If you have them, you will be successful in whichever endeavor you take. All the best.