Episode 2 The Bottom Line

phones were examined as part of that operation and that has led to these

entirely separate arrests. Do we need corporate chief

executives to study the art of business? Today we will discuss the

MBA, the degree that has taken over the world in the last few decades.

It can cost you $100,000 to do on. Is it worth it? Each week,

influential business leaders gather in London for the BBC Radio 4

programme, the Bottom Line. My three guests. One does not have

an MBA, one has an MBA and a successful career too. And one has

an MBA and now works in the MBA industry. Glenn is the associate

dean of the University of Chicago booth School of business. Tell us

about booth, and tell us about what you are doing in London. Chicago

Booth is the faculty of business. We thought that there would be an

opportunity to expand beyond our borders out of Chicago. We thought

that people would benefit from our education. The cost of coming to

Chicago, relocating, were too high. Take us through what the different

options are. You have a lot of options. There are many programmes

offering an MBA. The traditional full-time MBA which was born in the

United States and is still very much the dominant wine is a two year

programme. We offer and Executive MBA programme, a part-time

programme, taught over the course of approximately two years, yet towards

working executives. They are going back to their careers and their

family and coming to us on a regular basis. The average age is roughly

around 28. They come in with about four or five years of experience. On

the other end, the executive MBA, the average age is 36 or 38. They

are coming in with 12 or more years of experience. All of them will come

into the programme with some experience. You did do your own MBA

as well. I went to the Kellett School. It is also in Chicago. Is it

is also in Chicago. Is about arrival of the one you were working at now?

Yes. Colin Drummond. You are a business person with an MBA and the

chairman of a recycling firm. You graduated from Harvard business

School, the best in the world. Many people would say that. Tell us what

you have been up to since then. I went back to the Bank of England

after doing the MBA and got hired by the Boston Consulting Group. I got

paid much more there. After being into businesses, British heavy

industry, I went to south-west water to build up some of their

businesses. To pass at Harvard you had to stand up in front of 60 or 70

people, get your point across crisply, while they are all trying

to do the same. You learn to think on your feet. My third guest is Kim

Windsor. She is the head of her own living company but has a sequence of

top positions, turning around fashion brands. All without the help

of an MBA. You are an alumna of Marks Spencer. Did you think about

doing an MBA? No, I did not even think about doing a degree. I knew

what I want to do with a young age. I was very lucky that I got through

to Marks Spencer and their management scheme. In a way, there

was a huge proportion of that training scheme which was quite

similar to some of the things that take place in an MBA. What are some

of the core things? You picked all of that up. Yes, absolutely. I

watched who was really good in each aspect of the business. Have you

ever felt inferior to the people around you because you did not have

an MBA? No. Whatever the merits of these degrees for the individual and

the rest of us? Glenn, what is in an MBA? What are the titles of some of

the compulsory courses? There are certain foundational courses, which

include macro economics, statistics, accounting. They provide

the fundamental knowledge that people need to use in the courses

that follow. That is where you learn a little bit of everything that you

need to do business. I did a degree called an MPA, about public

administration. I did do a course on operations management while doing

that. What will you learn on that? An important piece of any business

is how you get to market and the different channels that you go to

get your products to market. Understanding supply chains, one

aspect of operations. Another aspect of operations with the production

lines. Some people do not work in a business weather is a production

line, but it is interesting to understand how you make a production

line deficient. Have you maximise output? -- how do you maximise

output? I thought that was interesting but I learned about

sequencing tasks, so that you are not wasting time. I think about that

a lot. We have a cappuccino maker at home. You put the milk in the

microwave, heat it up, get the copy out of the fridge, fill it with

water. And I think about that course every time I make a cappuccino. Am I

wasting time? Did you do a course like that? The thing that stays with

me is cash, the primacy of cash. Was a course without title? It diffused

its way through a lot of different courses and I think of one, Central

was a notorious business collapse in the US. They showed five different

accounting treatments of the company on the day before it collapsed. Four

of them were showing a terrific, well-managed company. The fifth

showed as it -- showed it as it was. What I learnt from that was the

importance of getting to the fundamental cash flows of the

business. Kim, you are listening to all of this, do you now regret as we

sit here and not doing an MBA? All of those things I have been heavily

involved in my period at each of the businesses. If you are running a

business and it is up to ?800 million and you are trying to build

it higher, the decision you are making not whether you are going to

fall with somebody get along with them, you are making decisions that

are going to affect a huge proportion of the value of a

business but also huge numbers of people that are employed by the

business. When I was at Marks Spencer, running the biggest

division, we built that business from 800 million to billions in a

few years. We were making substantial decisions. You are

talking about employing 50,000 people across the chain. This is the

same with any business I have run. I am not positive or negative. My

choice was to follow my passion. Colin, you have already said that

you have to give a presentation in front of 60 people. But talk is

through the case method. Business schools have chosen to model

themselves on law schools, which came before. There was a lot of case

study in law, where you would go through a case and learn about the

legal implications. That is effectively what you did? The

professor would walk in and point to someone and ask for their

conclusions. If you had not read the case you would look very bad. The

person who is asked to lead off would say if you words and then it

would be thrown open to discussion. I found it quite brutal in my first

semester. My mate had been in the US Navy in Vietnam and he said that

this was much more frightening. The same in Chicago? Yes. It is the

point in time when you learn to appreciate articulating a point of

view, supporting it, " that is and you get knocked down. There will be

people in that class who worked in that business and understand a lot

more about it than you do. The business is not theory. You deal

with a lot of real issues and build up a lot of resilience. If you look

at many business decisions every day, you are flogged until you fall

asleep. You build up a lot of resilience. Until you are actually

up there as a CEO, taking the actual decisions, that is really the tough

thing. Let us take an example of a business case. Let us take one of

New Kirk. It was a disaster. Coca-Cola introduced a new variant

in the 19 95. It's tested well but sold badly. Consumers did not like

it and Coca-Cola had to withdraw it. If this was a case study in a

business school, what point would you draw out of it? Colin Drummond,

I call on you. I have not studied it. Assuming you

are one of these brutal business professors, I would start thinking

with what did Coke really stand for? What did people buy it for? Could

they tell The Taste apart? Was there some mystique? You would have to be

clear on defining your brand and think how far you risk moving away

from it. Did he do well? Sitting on the outside, messing with your core

brands does not make a lot of sense. You can put a lot of people in the

room and they can convince each other to do something that now seems

very dumb. You have shown one of the advantages of the case meant that.

She think you would learn anything from a study of new Coke? -- New

Coke. There was an example I was involved with in the late 1990s.

They decided to do a consultant review of the way of buying, the

supply chain, the critical path, everything. I met six gentlemen who

came in to do the review. They were definitely coming from a background

of a theoretical management consultant style. When they talked

everything through with me I was concerned that there were two MAC

key aspects missing in what they were putting together. One was the

product and Mum was the consumer. I was puzzled, how could you read to

it? -- redo it. The product has to be the centre of the heart of any

retail business. You cannot teach people to have a passion, can you?

Kim has had this advantage in being interested in what she is doing. I

think it is worth more than the MBA, essentially, if you had to have

one or other. When I do recruitment now, I never ask if they have an

MBA. In senior level recruitment I am looking for a commendation of

passion and knowledge and what they bring to the business. --

combination. In a senior level it does not feel highly. If a Harvard

MBA rings me up, I would probably give him an interview. He has been

through the same. It is a hymn. It is still twice as many men to women.

Before we move on, some statistics. I'm happy to acknowledge The

Financial Times as my source. 29% of the world's largest companies are

led by an MBA. That is nearly a third of the top 500 companies. The

top school, which is reckoned to be Harvard, 24 of the top 500

companies, that is 5%, have chief executives from Harvard business

School. I wonder whether the big advantage of business school is not

in recruitment, it is not that you have learned anything useful, it is

that you have proved that you could get into business school. I am an

employer, a trying to choose between 500 very able people, and what I am

doing is free-riding on the screening or selection process at

the top schools have. It is something that has been thrown at

Harvard as an issue over the last 20 years. I do not know. When

recruiting, in more entry-level jobs, if someone had a good MBA that

would be a tick in the box. If they were an Irish rugby international

that would be a tick in the box. There are many different things that

set you out. When I went to Harvard I thought it would be something that

would set me out. It is about a in tuition. Then you have to allow into

that living and costs and book costs in all sorts of things. We estimate

that it would be a little less than $100,000 per year Allin. Use a

$100,000 per year for tuition and living. Possibly a little bit less

than that. You can make allowances for how you live. That is not

counting for the fact that for the EU are doing it you are not actually

earning any money. -- could be here you are. I have discussed this with

my sons. I have not encourage them to do MBAs. I have encouraged them

to get a job and establish on the career ladder. For people leaving

university, it is so much tougher than in the 1970s and 80s. It is

important to get yourself established in a company or a career

with experience behind you. A question for me it would be, with

the heavy proportion of MBAs train a big companies, how much is coming

down to the traditional headhunters who make it very easy when they are

looking to place CEOs, is it on their list? As a CEO, I look at a

balanced CV. I would not them on or take them off because of it. I would

look at what they bring. In the 1970s and 80s MBAs were much rarer

and the need was higher. If you looked at the things in Britain that

needed to be shaken up, or America where General Motors, back then

there was a clear need for better business practice. There were fewer

MBAs. Almost inevitably they have got a make-up in Korea. As time goes

on, I would not be surprised if that percentage fell back. -- career. We

need to talk about the tyranny of the top schools. Yours is in the top

ten. Maybe in the top hundred, it makes an enormous difference than in

the ones between 9000 and 10,000. We keep hearing the same names. Harvard

is top, Stamford, Wharton... I am not sure what you mean of the

tyranny of the top schools. It is the availability of the top

professors delivering courses online. One of our top finance

professors does this. In the end 37,000 people registered for his

class. They were predominantly outside of the US. This is not a

good argument, but it is interesting. The MBA is a very

Anglo-Saxon invention. It started in the United States. The proportion of

top American executives that have an MBA is considerably higher than

those in Britain, which is higher than the Japanese and the

continental European MBA rates. Have business schools contributed to the

surge in chief executive prices? No. I think what has contributed is

the complexity of the issues and problems they need to solve. The

stage in which you carry out your job is much more complex. To me it

makes perfect sense. It makes sense to give them more money. In the

Anglo-Saxon countries we are paying a much more than they seem to pay

them in other countries who had equally consecrated businesses and

challenges and often really good quality management. -- equally

complicated. There are more interesting points, their right

twice as many male to female MBAs. It is much more of a male rich than

a female route. In all the entrepreneurs I know, none have an

MBA. The heads of the corporate businesses have the MBAs. I wonder

if there is another angle. It is a little more traditional and

corporate. Does the MBA in Courage the view of business where a huge

premium is put on being sharp elbowed and being blunt and to the

point and getting your point across the other people the class? --

encourage. Maybe there are lots of good business people who are not cut

out for business School and maybe it is squeezing out different systems

and ways of doing things. There may be something in that. A positive

side is that it makes you very humble. You realise that quite a lot

of the time you are wrong. If you get into debates, it key thing you

want to get the right answer, you can we want to get that... I think

you are the exception. Humility is not the characteristic that comes of

their body. I think that is unfair. If you want to get a company to work

well, you need to involve everyone as far as possible. The best chief

executive is a lazy one because he gets everyone involved in the

thinking. Let us draw to a close. My guesswork Kim Winser, Colin

Drummond, and Glenn Sykes -- my guests were. Thank you to the three

view. Thank you for listening. I be back next week. Do not forget,

downloads of The Bottom Line are available. Details are on the

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