A Very Brief History of the MBA: Part I

[dropcap]T[/dropcap]he MBA (Masters in Business Administration) has a fascinating history. As a matter of fact, the degree itself is actually rather new. The degree has that kind of cachet – a reputation that rises above any other sort of business degree, mainly because it conjures images of investment bankers and jet-setting hedge fund managers While some of this might be true, the reality is far from the truth. It has certainly become a must-have for any student aspiring to become tomorrow’s business executive. However, many will be surprised when they hear that its history goes right back to before the beginning of the twentieth century. Yes, you heard it right, it was not that long ago that such a degree did not exist.

Its beginnings can be traced back to the first business schools in the US – Wharton in Pennsylvania in 1881, and Haas in Berkeley, California, in 1898. Although these business schools taught the basics of business, they did not offer any formal qualifications. At around this time, the US was becoming ever more industrialized, with mass production taking place in large factories owned by such companies as Ford and Chrysler. Running a business became more complicated, needing specialist skills in management, finance, strategy, and economics, and colleges began to realize that there was a need to provide a postgraduate degree program in all of these subjects.

The first school to do this was the Tuck School of Business at Dartmouth College, founded in 1900. Its MSc in Commerce was the first of its kind, and to be eligible, students had to have at least three years of prior study. Harvard University in Cambridge Massachusetts was the first institution to offer a Masters in Business Administration. Students could only enter the program at the Graduate School of Business Administration (now called the Harvard Business School or “B School”) after four years of undergraduate study. In 1940, the Booth School of Business at the University of Chicago came up with the Executive MBA (EMBA), the first degree aimed at professionals already in the business world. This was so successful that in 1943 it was duly rolled out to campuses in Barcelona and Singapore.

Such a sought-after course was soon finding its way beyond the boundaries of US universities. In 1950, Canada was the first country to offer an MBA at the University of Western Ontario, followed in 1951 by the University of Pretoria in South Africa and the University of Karachi, in Pakistan in 1955. Europe was slower to follow suit and didn’t have an MBA program until 1957 when INSEAD (Institut Européen d’Administration des Affaires) took the lead. The first year saw around 50 graduates – a good start but a small percentage compared to the 900 or so who pass through the course every year now.¹

Meanwhile, in the States, the increasing number of MBA programs was attracting a lot of criticism. In 1959, the Carnegie Foundation and the Ford Foundation carried out some studies into the structure of the MBA and found it lacking in depth, especially knowledge of theoretical elements. This led to a restructuring of the program by the participating institutions and the introduction of more research material.

The UK was very slow to embrace the MBA, but when it was persuaded what a difference its graduates could potentially make to the declining British economy, it accepted the need for change. The Manchester Business School (now known as the Alliance Manchester Business School) saw its first MBA students graduate in 1969.² Although other business schools, such as London and Birmingham also offered business degrees, their MBAs didn’t take off until the 1980s. However, there was some criticism that these programs were modeled too much on the US MBAs and therefore did not address UK-specific problems. Also, that the theory-heavy curriculum did not include enough input from businesses.³

During the 1990s, the over-concentration on business theory instead of practice was a criticism leveled against the MBA in the States as well. It seems as if, after being faulted for not having enough theory in the program, it had gone too far the other way. This bad press forced another restructuring of the course content, this time introducing more real-world management skills such as leadership and ethics, and also modules on international business.⁴

MBA programs now exist in countries around the world, enrolling thousands of students and there is enormous competition for getting into a high-ranking MBA program in the top-rated universities. With greater globalization, it seems that the MBA will keep evolving in new directions in the future, with ‘green’ MBAs, looking at sustainability in business, already making an appearance.

How Hard is it to get on an MBA?

For most MBA courses, a prospective student needs to at least have an undergraduate degree, and many also require four to five years of work experience. In addition, applicants also need to take an entrance exam. This is usually the Graduate Management Admission Test (GMAT) or the Graduate Record Examination (GRE). The tests contain questions which examine several core abilities, including analysis and problem solving, and demonstrate the participant’s level of mathematical and language proficiency. The purpose of GMAT and GRE is to predict how successful the student is likely to be in the program. An average score is around 556.04.⁵ You will need a much better score than this, and substantive work experience, if you’re looking to attend Harvard Business School.

Along with other profession-based degrees (like the JD), the MBA can be quite difficult to get in to. This becomes even more so when it comes to the highest ranked universities and programs. In addition, course fees are notoriously high, which, unless the student is well off, leads to the specter of student debt post-graduation. The workload on the MBA requires focus and dedication, something that can prove more difficult if the student is also in full-time work. Nevertheless, the program attracts many students every year, mainly due to the status it infers and the promise of a high-paying job afterward.

Course Content

When MBAs first started, the only option was to attend the course full time, on campus. This meant that many already-employed professionals wanting to take the degree needed to quit work in order to fulfill the 18 months to two years that it took to complete. These days the MBA has become more flexible and offers the program in many different forms, enabling applicants to remain at their jobs, if that is what they wish, by enrolling on a part-time or evening MBA. This obviously takes a bit longer than a campus-taught MBA and tends to be more intense. It is now even possible to complete the course online via distance learning. Other programs can be followed partly on campus and partly online, meaning that there is a method of study to suit everyone.

Whichever way a student decides to take the MBA, some things remain constant, such as needing to study the core subjects in the first year (or equivalent if part-time). These core subjects include accounting, economics, marketing management, human resources, operational management, and business ethics. Alongside the core subjects, are elective modules that allow for focusing on a specialty. For example, a student may choose elective modules in entrepreneurship, business law, international negotiations or real estate investments.

In the second year, especially for those on a full-time basis, it is common to take an internship, where students learn ‘on-the-job.’ The final subject for the course is that of business strategy, followed by a dissertation. For those students working full-time, while participating in the MBA, this usually entails looking at problems in their workplace and how to solve them. And last but not least, for the majority of MBA courses, there is an exit examination known as the Major Field Test for MBAs (MFT-MBA) which gives a final assessment of what has been learned – a sort of bookend to the GMAT.

MBA Accreditation and Ranking Status

MBA programs are accredited by several different agencies. There are three major players in the US: the Association to Advance Collegiate Schools of Business (AACSB), the Accreditation Council for Business Schools and Programs (ACBSP), and the International Assembly for Collegiate Business Education (IACBE), although the program may also be accredited by agencies that license educational institutions as well. Other countries also have their own accreditation bodies. For example, the UK has the Association of MBAs (AMBA), South Africa has the Council on Higher Education (CHE), and the majority of Europe, plus Australia, New Zealand, and Asia has the European Quality Improvement System (EQUIS).

With so many MBA programs operating internationally, there is a great deal of competition between institutions for the highest paying students. As such, each vies with the others to gain a reputation as the best place to study. This is decided by several respected business publications such as Forbes, US News & World Report, the Wall Street Journal, the Financial Times and the Economist who give rankings to each one dependent upon several factors. These factors vary from publication to publication but include surveys of students – pre and post -graduation, GMAT scores, employment and salary statistics, and the type of coursework made available on the program. There have been many critics of the ranking system as the methodologies may sometimes be flawed or biased, and smaller schools that may offer excellent MBA courses aren’t surveyed at all. Nevertheless, the ranking system, for the time being, is the main way for students to choose where they do their study.

Criticisms and Rivals

From the beginning of the global financial crisis in August 2007, fingers were pointed at business schools for being a big part of the problem. After all, for the most part, they had produced the MBA graduates involved in the high stakes risk-taking that precipitated the economic crash. Of course, it wasn’t only the fault of MBA programs, but it was noted that the old curriculum that produced the executive bankers also encouraged a mentality of gambling with funds.⁶ Even with the changes to the MBA where more modules on corporate social responsibility and business ethics were included, it seems that there was, and still is, an institutionalized attitude to squeezing as much profit as possible from a volatile market.⁷

MBA programs are slowly evolving to put more emphasis on sustainability and corporate responsibility, and with the continued uncertainty in several world markets, the UK, for example, companies and governments are becoming much more wary of investments and rash spending. However, the MBA now has a rival that threatens to take some of its applicants away. The Masters in Management (MIM) program offers a degree similar in content to the MBA but without needing work experience to get in. It is also cheaper than an MBA by around an average $30,000.⁸ The MBA still has not lost its shine, however, as MIM graduates are less likely to gain the high entry positions that those who have graduated through an MBA program do. Their long-term prospects for a top job, however, are just as good, especially as they tend to graduate at a younger age and therefore have more time to build up their portfolio.⁹

As an elite qualification, the MBA has caused much controversy, as well as attracted interest in where it will go next. For example, will it be fit for purpose to help the economists and leaders of the future bring about a world that is financially stable and sustainable? This is just one of the subjects that will be tackled in future articles.

1. ‘History of the MBA’, MBA Central, accessed at: https://www.mbacentral.org/history-of-the-mba/ 04/04/2018
2. Accessed at: https://www.mbs.ac.uk/about/our-history/, on 04/06/2018
3. ‘The MBA, Some History’, The Economist, 2003, accessed at: https://www.economist.com/node/2135907 on 04/04/2018
4. Ibid.
5. ‘What Your Percentile Ranking Means’, GMAT, accessed at: https://www.mba.com/global/the-gmat-exam/gmat-exam-scores/your-score-report/what-percentile-rankings-mean, on 04/06/2018
6. Adam James, ‘Academies of the Apocalypse,’ The Guardian, 04/07/2009, accessed at: https://www.theguardian.com/education/2009/apr/07/mba-business-schools-credit-crunch, on 04/07/2018
7. Guy Spier, ‘MBAs Need to Understand the Human Factor,’ Financial Times, 12/07/2014, accessed at: https://www.ft.com/content/4b102f8c-3762-11e4-971c-00144feabdc0, on 04/07/2018
8. ‘Masters in Management: On the Rise,’ The Economist, 05/23/2017, accessed at: https://www.economist.com/whichmba/masters-management-rise, on 04/07/2018
9. Ibid.