MBA’s ruining companies. True?

gearheadmb said:

alfadriver said:

The worst problem with the higher ups with MBA has been the shift to making shareholders happy.  That initiative is the worst thing that can happen to a company, as it immediately shifts focus to the short term.  Instead, we should have been following Toyota's example of selling great cars that get better every year- and the stock price will follow.

This may be the best, most true thing I've ever read on the whole internet. 

"Buy the cheap machine instead of the good one, it will make our numbers better" right up until we need to replace it five years instead of the 25 we would have got out of the good one.

"Lean manufacturing will save us so much on storage and inventory" right up until there is a hiccup in the supply chain and production comes to screeching halt 

"Keeping wages low will increase our profits" until we cant keep quality people and production and quality suffer

we are going through that now at work.  A couple of years before the pandemic, we started to modernize our big multipurpose room.  We took out all the old moving mirror lights and started to replace them with much more advanced moving head lights.  This is better for party decor and illuminating tables.

The accountants would only let us buy so many at a time.  We are about to finish the project up, we have another 30 lights to purchase and put up plus replace the ones that died.   Guess what, the company that makes them stopped production of that model.  We have 190 in the ceiling, 150 work, and we can't get more.   If they had allowed us to buy the 250 we wanted,  everything would be perfect. Instead we need to find out of the new model they are coming out with is compatable or if everything needs to be ripped out and redone... again!

In reply to mad_machine :

But you saved money........LOL

I think it's more a greed problem and it's not just in big busy or really any business. No one is happy with small growth, we must all be billionaires over night.

A small example of this from my little concrete company without MBAs in sight:

Doing a mono slab with requires a 2 foot deep trench around the sides. Equipment is needed so I told him the price of an operator with a mini excavator . 8 hours at $150

" Equipment is expensive! Can't we dig it by hand?"

I tell him yes but that requires $110 an hour of labor and it will take at least 16 hours, and that it will be billed by the hour. It takes 20 hours.

For a breakdown:

Equipment would have cost $1200

Labor cost him $2200 and he knew the minimum figure was $1760.

He was very happy we didn't have to pay the "expensive" equipment. This man was an idiot

https://www.gocomics.com/nonsequitur/2022/03/31

In reply to Antihero (Forum Supporter) :

Depending on how the rental/excavator costs are accounted for, this could be due to the fact that the labor is capitalized, whereas the rental may be OpEx. I doubt it, as leased equipment and outsourced labor is usually able to be capitalized (though it takes some more accounting work), but it could be. 

But I don't understand accounting hardly at all. It never really made sense to me. 

Robbie (Forum Supporter) said:

Wait! You all want to scapegoat all the problems onto someone else?

I think I know who the problem is...

This is a problem because we all play the victim card like we can't make an impact in todays society. 

Cost-cutting gets a dirty name because it often involves job losses, but it's often a necessary thing in big companies. If you and your competition have equal market share and sales, but they are doing it with fewer people and resources than you are, then that's more profit they have that can be put into R&D, so in the long run they're going to be better off. 

Shareholder value is another tricky area. If you make every decision based on how it will affect the stock price, you done berkeleyed up. That kind of short-term thinking will lead to long-term problems. But, at the same time, the shareholders ARE the owners of the company, and you do  have a responsibility to look after their interests. Because if you don't, they will find someone who will. Like most things, it's a balance you have to find.

I'm just about to graduate with my MBA in a few weeks. Luckily I won't be able to ruin any companies, I work for the Government. 

Through the program I have learned a few new things, but most of the course work was pretty common sense or concepts that I picked up in my BA of engineering or my career. At the end of the day I will have some more expensive letters at the end of my name and that's what counts!

bgkast said:

I'm just about to graduate with my MBA in a few weeks. Luckily I won't be able to ruin any companies, I work for the Government. 

.snip.

Don't sell yourself short.

mtn said:

But I don't understand accounting hardly at all. It never really made sense to me. 

A good financial analyst is worth their weight in gold. Pay accordingly for good results.

Paul_VR6 (Forum Supporter) said:

mtn said:

But I don't understand accounting hardly at all. It never really made sense to me. 

A good financial analyst is worth their weight in gold. Pay accordingly for good results.

Lol, my new title is "Financial Analyst Specialist", though it is the same role more or less that I've had for my last two titles here of "Business Process Management Analyst" and "Product Manager". I guess that means I'm not worth $6M.

When I say that I don't understand accounting, I mean that I don't get why things are done the way they are. Accounting in general is just overly complex methods of organizing how you have spent and received money to take advantage of an overly complex tax system. I hate all of it. Once we accept the systems that are in place, I understand what is being done and why it is being done, but since I'm not in technical accounting, I don't understand how the scenario that Antihero described would actually play out, since we don't have enough information. 

/defence of my understanding of finance and accounting practices. 

mtn said:

In reply to Antihero (Forum Supporter) :

Depending on how the rental/excavator costs are accounted for, this could be due to the fact that the labor is capitalized, whereas the rental may be OpEx. I doubt it, as leased equipment and outsourced labor is usually able to be capitalized (though it takes some more accounting work), but it could be. 

But I don't understand accounting hardly at all. It never really made sense to me. 

While that does have merit this guy just wanted to pay cash and not have the gubbermint involved

bgkast said:

I'm just about to graduate with my MBA in a few weeks. Luckily I won't be able to ruin any companies, I work for the Government. 

gearheadmb said:

alfadriver said:

The worst problem with the higher ups with MBA has been the shift to making shareholders happy.  That initiative is the worst thing that can happen to a company, as it immediately shifts focus to the short term.  Instead, we should have been following Toyota's example of selling great cars that get better every year- and the stock price will follow.

This may be the best, most true thing I've ever read on the whole internet. 

"Buy the cheap machine instead of the good one, it will make our numbers better" right up until we need to replace it five years instead of the 25 we would have got out of the good one.

That's called "YBGIBG" - "You'll be gone, I'll be gone". I mean, who hangs around at the same employer for more than five years these days when you need to change jobs more regularly to advance your career?

MBA-ism often is a shorthand for a whole bunch of business practices, most of which have been mentioned already. One of the classic ones to me is "manager" as a generic job, meaning that because you managed a candy making department yesterday qualifies you to manage an automotive production line tomorrow, business and field knowledge be damned.

I had some people like that "manage" in a software company, that went really well given that they knew berkeley all about software.

Not just MBAs.

No offense intended.

But that is a whole 'nuther thread.  And isn't there enough negativity already?

It's a combination of the buckets of money fallacy, group think, and not wanting to be the guy that ultimately makes the wrong decision. 

Buckets of money...  If we contract it out then it hits account X instead of account Y so our department looks better. Actual cost be damned. Will we develop technical expertise to advance, who cares? Lowest bidder for the double win. Yay! 

Every decision goes through multiple committees. No one wants to be the one to make the wrong decision. 

The above analysis paralysis ends up leading to scope creep. Which in turn leads to cost challenges. Which turn into major delays. Why is this project so costly? Late? Technology obsolete? Double yay!

I skimmed the first page, but here is my take,

"WELCOME TO HEALTHCARE!!!!"

I've not really seen mentioned another I encountered for years - the "trendiness" in management: Six Sigma, "Lean" whatever, etc.

Once one company found success with the management fad du jour, it spread rapidly to their competitors, then outward to other industries. Often it seemed without any actual thought about *why* it worked or whether it was relevant to what company-B was doing. 

One other observation, management wants to measure everything. They have a desire to know where every penny is spent.

I understand  it. They think that by having that measurement; they can identify and eliminate waste. All of that measurement and accounting costs more than the paper clips that are being oh so accurately counted.
 

More importantly, once they identify what they believe to be a high cost; they feel the need to reduce it even if that cost is necessary for smooth operation of the business. They will unintentionally destabilize their operations to save money on Y.  Y can be equipment, manpower, software, tools.... 

In reply to Antihero (Forum Supporter) :

And then wonder why either a.) the company isn't making money as fast or as much as it "should be" doing and b.) wondering why you can't keep employees.

The piece of equipment fixes both problems here in this example. It fixes problem a by allowing you to move to another project in one day vs maybe 3 or more. Problem b goes away when you aren't physically exhausting and breaking your employees. It wouldn't matter how much they make, nobody with a brain and now broken body will stay digging ditches. They will move on to something else.

All the standard sayings still apply:

Takes money to make money.  Work smarter not harder. You need to see the forest and not just the trees.

Now for my experience with this, when I went and got a quality control certificate from my institution of higher learning, the one thing that has stayed with me from one of my instructors is that while on the path to being lean, kaizan or whatever the new term is, is that Americans will go to make a machine that may or may not work straight out of the box to make their widget in one confined space, while the Asian countries will take a slower approach and use man power to perfect "a" machine of possibly many needed from watching the worker assemble the widget.

bgkast said:

I'm just about to graduate with my MBA in a few weeks. Luckily I won't be able to ruin any companies, I work for the Government. 

In that case, you might get the chance not to ruin any company, but to ruin all of them! 

Just to post one example of how the same mindset can flourish under very different systems than ours, there was one story I read about Communist China. This came up when somebody let a Western academic team interview the people in a small agricultural village where they had been growing rice for the past couple thousand years.  And over those thousands of years, they'd learned that you get the most rice when you plant your rice plants 15 inches apart.

Well, after the Maoists took over, somebody in the Ministry of Agriculture came in and told the peasants that they needed to plant the rice 10 inches apart - they needed to grow more rice, and having 78% more rice plants in an acre (I believe the measurement was on a grid) would mean 78% more rice! The peasants complained about "blind orders from above", but this wasn't exactly a good time to openly argue with the government, so 10" spacing it was. Naturally, the result was a massive crop failure from crowding the rice plants too closely.

Trying to increase productivity  and refusing to listen to people who do a job day in and day out about what they know about the job - this problem comes up everywhere.

I'm reminded of an article I read a few years back that dove into GM in the 70s and their troubles compared to the rise of Toyota in the domestic market, despite tariffs to protect GM. GM sent people to Toyota to see how they did it but refused to adopt the lessons. In particular, while GM was speeding up the production line Toyota had a cord that any employee could pull to stop the line. The knee jerk reaction from GM was that they couldn't do that because their employees would yank it to spite them or to go be lazy. So, instead, GM paid techs to repair production vehicles in the parking lot so that they were in a condition to be sold. Didn't slow the line, didn't empower the people who did the job all day.

I see the same attitude about employees (vs hoity toity Management) today. Not to get political, I see it with my own eyes at work in this small company. MBAs aren't the problem, it's people who walk into a room just knowing that they're better than the other people in it. The problem is a disconnected management that starts to see their employees as a herd of cats just looking for any excuse to be lazy or spiteful. That only breeds animosity and while you're busy fighting yourself, Toyota swoops in with the Best Selling Car for how many decades in a market where they're disadvantaged.

Pete Gossett (Forum Supporter) said:

I've not really seen mentioned another I encountered for years - the "trendiness" in management: Six Sigma, "Lean" whatever, etc.

Once one company found success with the management fad du jour, it spread rapidly to their competitors, then outward to other industries. Often it seemed without any actual thought about *why* it worked or whether it was relevant to what company-B was doing. 

Ugh, Six Sigma. I remember when I got out of school with an MBA and an MS-Finance (after working a couple years) in the late 2000s companies wouldn't hire you unless you knew Six Sigma already. Schools didn't teach Six Sigma since it was too new or had just started to teach it. Six Sigma worked great for companies such as GE that were production-heavy but it basically didn't anywhere else. Of course these other companies didn't know that at the time. Its principles really do work in specific situations. GE has a huge presence in Cincinnati where I was looking for work so the Sig Sigma worship was even more intense than elsewhere. Nowadays every company knows Six Sigma has its place and it is mostly in manufacturing. I wasn't primarily looking to join a manufacturing firm. Even P&G (also huge in Cincinnati) looks at itself as a marketing firm far more than manufacturing since the manufacturing side is much simpler for their products than say, cars. Six Sigma was reduced to the fad it is known as today.

To get back to the general discussion, also think about what the Ivies deal with every day: Legacy vs. Strivers. Their Legacy students are there because their parents went there and donate. Their Strivers are there because they earned it on their own volition and achievements. The Ivy schools are acutely aware of this. Companies hire tons of Legacy MBAs and not just from Ivies. Strivers might even be less likely to be hired than Legacies in many cases since the Strivers' personal networks are often vastly different than the Legacies. Strivers overwhelmingly produce better results but are foreign, from blue-collar towns, are minorities, don't know rich people, painted houses or worked as movers in the summer (since their blue-collar personal network also did that or recommended it when they were 19 years old) rather than interned in an expensive city, took a job at a "wrong company" straight out of college (such as one that is really bottom-heavy), any or all of the above. The Legacies often give MBAs a bad reputation since they aren't talented as a rule but you can get a good one if they didn't have someone else do their homework for them.

Over the past 20 years blue-collar companies have had such a sense of urgency in their hiring as opposed to white-collar companies who constantly drag their feet while paying the same or less it has been very easy for good people to get diverted to them since the blue-collar companies get almost no college-educated applicants and constantly have openings. Unfortunately the possibilities for advancement are often terrible at them. You have to wait for the one other college-educated person to retire and ope, they end up staying there until they're 75. People who worked there but get tired of waiting for the big boss at the anonymous blue-collar B2B to retire wind up having to explain where they worked over and over to disinterested HR people at big-name companies in interviews.

Also, U.S. MBAs get put into the situation of having to demonstrate results NOW, not building companies or products over the course of decades since that's not how success is measured until many years after the fact when people look back on an individual's entire career. By that point they're almost retired if not retired.

I don't really have any opinions on this, but I saw this article and thought it might belong here.

https://www.businessinsider.com/managers-business-school-cut-pay-boost-sales-productivity-mba-nber-2022-3

If your boss has an MBA, you may want to keep an eye on your paycheck. 

That's because managers with a business degree — graduate or undergraduate — are more likely to cut workers' wages, a new working paper from the National Bureau of Economic Research, or NBER, says. Using data from firms in Denmark and the United States, the NBER researchers found that wages fell within a few years at companies run by degreed managers in both countries, 6% within five years in the US and 3% in Denmark in the same amount of time. 

The paper: https://www.nber.org/system/files/working_papers/w29874/w29874.pdf