If your goal in getting a college business degree was simply to get a “job” with the least effort expended, stop reading now! But if you were serious about learning the fundamental skills needed to support a long-term professional career in business, including a life-long learning perspective, your passion and zeal just may not have been enough according to a number of recent articles in the popular business.
Some suggest that college in general should be questioned. Glenn Harlan Reynolds, a University of Tennessee law professor, encourages parents and students to “be skeptical” about the value of college. With average student debt exceeding $29,000 and 40 percent of college graduates taking jobs that don’t require a college degree, he suggests that:
America's higher education problem calls for both wiser choices by families and better value from schools.
It’s hard to disagree with this statement particularly when so many parents and students conduct more due diligence in a car purchase than selecting the “right” college or university.
Reynolds also notes that the value proposition for a college degree is frequently obscured by the “bait and switch” tactics increasingly used by administrators, as well their lack of budget transparency. Many schools now routinely “outsource” class instruction to low-paid adjuncts to cut costs (and let’s not even get into on-line “classroom” initiatives), and it is next to impossible to see where one’s tuition dollars actually are being spent (e.g., administration, athletics, research, or teaching).
And guess what? Surprise…surprise…many employers now are questioning the skills of today’s graduates. Richard Vedder and Christopher Denhart from Ohio University confirm that:
Declining academic standards and grade inflation add to employers' perceptions that college degrees say little about job readiness.
They argue that the numbers just don’t work when college degree benefits are questionable and college costs are increasing. And the narrowing gap between what college and high school graduates earn particularly concerns them. As an old jarhead, I found one of their statements particularly telling:
We now have more college graduates working in retail than soldiers in the U.S. Army, and more janitors with bachelor's degrees than chemists.
But what about business degrees specifically? Dan Kadlec, a journalist for TIME, believes that:
Colleges are minting money-focused graduates in a work world that increasingly values critical thinking and softer skills like the ability to communicate.
Melissa Korn of the Wall Street Journal reports that “undergraduate business majors are a dime a dozen” and “may be worth even less,” since more than 20 percent of undergraduates in the United States are business majors. And graduate business education doesn’t get a free pass either. John A. Byrne, a contributor to CNN Money, documents the case of Josh Kaufman who believes that MBA programs “teach many worthless, outdated, even outright damaging concepts and practices.”
Still not convinced that there just might be a flame or two behind all this “smoke,” then just take a look at look at Lynn O’Shaughnessy’s number one reason why NOT to get a business degree: business majors don't learn much in business school! Her conclusion was based on Academically Adrift, a bestselling book that finds that business majors are among the students who learn the least in college.
All of this negativism makes this Grumpy Old Accountant seem absolutely cheery doesn’t it? Well, I must confess that my recent interactions with experienced business graduates (both at the bachelor and master levels) employed as accountants, analysts, managers, and reporters have raised more than a few doubts in my own mind. So, I decided to create a short, five question test (no accounting included, I promise) that administrators, current students, faculty, and recent graduates may find useful for assessing the effectiveness of their B-school experience. And it’s no coincidence that the five questions mirror the major themes routinely discussed today by business academics and professionals alike. Being naturally grumpy, this exam is a closed book, closed note, essay test that should be completed with no outside assistance…what did you expect?
Question One: What is a business?
Believe it or not, many B-school graduates cannot answer this query in a clear, concise manner. Often, the response is a long-winded, rambling summary of discrete topics that parallel course requirements that fails to accurately capture the essence of today’s enterprises. To receive full credit, the answer should be close to the following:
A business is an economic entity that creates wealth (e.g., value, cash flow, etc.) by using financial, human, and physical capital to deliver products or services that the market demands.
And if you really want to wow this old prof, throw in a bit of the “nexus of contract theory” to motivate the need for information to monitor the various contracts which companies execute with shareholders, employees, suppliers, customers, debtors, and the like.
Question Two: What is business strategy?
So, once you decide on a business, what’s the strategy? The answers commonly received to this question are particular disturbing in that they refer to assorted permutations of action plans and related documents. Sorry, just not specific or good enough. To receive full credit, the answer should address two key issues:
Business strategy is how an organization creates value for its customers and differentiates itself from competitors in the marketplace.
Value creation and differentiation must be addressed in every good strategy whether it be for a company as a whole, or each individual operating unit. This short definition specifically focuses managers on their markets and customer needs. If customers don’t value a company’s product or are indifferent to it vis-a-vis that of the competition, the company is unlikely to succeed in the long-run, regardless of its stated “strategy.” If you add some verbage about Michael Porter’s Five Forces model in your differentiation discussion in the context of today’s technology dominated world, you will bring a smile to this Grumpy Old Accountant’s face.
Question Three: What is a business model?
This dot-com era buzzword can generate some very interesting definitions which provide great insight into what has been learned (or not) in the B-school. Frequent responses include a business idea, an overly-complicated financial model, or a business plan. These answers don’t even warrant partial credit! So what is it?
A business model describes how the pieces of a business fit together as a system to execute the firm’s stated strategy.
Every business model whether it be for the whole entity or each individual operating unit must address ALL of the following fundamental “value chain” activities: market analysis, product development and design, sales and marketing; procurement, production, and distribution, and after sale customer service. How do each of these activities contribute to strategy execution? Answer that and now you have a business model! And some references to “How to Design a Winning Business Model” by Ramon Casadesus-Masanell and Joan E. Ricart will likely get you some bonus points.
Question Four: How should a business evaluate its performance?
As an accounting professor, I find the answers I often receive to this question to be downright depressing: stock price appreciation, revenue growth, earnings per share, and a host of other financial statement driven metrics. These might earn some partial credit, but if you even hint at “adjusted EBITDA,” you get a zero.
Answering this question requires getting Question Three correct! To evaluate performance you must have something concrete to measure. In the case of a business, it’s how each of the five value chain activities that comprise a firm’s business model are performing.
A business should measure its performance by monitoring the implementation, execution, and effectiveness of its entire business model.
This means that managers need both financial and non-financial metrics to judge their market analysis, research and development, selling and marketing, production and distribution, and customer service activities. Unfortunately, all too often, companies rely almost exclusively on financial statement numbers to do so. The best answers to this question will be organized around Kaplan and Norton’s Balanced Scorecard framework.
Question Five: What role does innovation play in business today?
Historically, business innovation has been equated primarily with the development of new products and new technologies. But as Birkinshaw, Bouquet, and Barsoux suggest, “products and services represent just the tip of the innovation iceberg.” So, a few points might be awarded for this weak “common sense” response. But to receive full credit, respondents must have scored well on Questions 3 and 4. The following represents a more complete response:
Business innovation refers to any ideas and/or actions that can positively transform any part of the business model or its individual value chain activities, as well as the development of new products or service offerings.
The implications of this question are clear…to innovate, one must clearly understand the business model (Question 3) and how it is performing (Question 4). The best responses will refer to the work of Clayton Christensen who distinguishes between disruptive and sustaining technologies.
There you have it. Five grumpy questions that provide huge insights into the quality of one’s B-school education experience. And these questions apply to all majors at both the graduate and undergraduate levels! Students of accounting, economics, finance, information systems, and other business concentrations all must be able to address these fundamentals in order to apply their “specialized” knowledge effectively. If none of the above material sounds familiar, get a refund on your business degree, as it has indeed failed you! All of these themes should have been integrated and reinforced in every one of your classes.
But there is one other possible explanation before you file that refund claim. Maybe the blame shouldn’t be assigned exclusively to the educational institution. I tend to agree with Michael Sloan, a Wake Forest assistant professor, who concludes that our current educational predicament “is problematic for a citizenry whose attention span is as thin as the phones in our pockets.” His comments on our society’s apparent work ethic today are particularly compelling:
We forsake the mountaintop because getting there is too hard, and after time we believe all the world is a valley.