Wednesday, June 13, 2007

Private Equity Meets The MBA

Yesterday's Wall Street Journal carried a piece about private equity and MBA schools in its Career Journal section.

Where to begin? Perhaps with the question,

"Have these already questionable educational programs absolutely no shame?"

As I have written recently, here, and less recently, here, here, and here, the once-vaunted MBA is already, in my opinion, a shadow of its former self. Between more mediocre talent pools, teaching ranks stretched more thinly as more schools offer the degree, and a shift in focus to 'soft skills,' it's become a mere trade school certificate.

However, today's Journal article shocked even me. The gist of the piece is that MBA schools are angling to get more of their new grads into the lucrative private equity firms. They are trying to set up co-taught courses, using retired private equity partners. Trying to make contacts for mainlining their grads into the firms.

At this point, let's have a brief reality check. Private equity firms are, by and large, composed of very experienced, once-senior executives in publicly-held companies, who realized they could do better managing and fixing some businesses without the glare of shareholders and required SEC filings. They hire, for the most part, similarly-seasoned managers to actually work on and improve the businesses they buy. Then they spin them back out for the profit.

Where, in the model, besides ordering take-out for delivery late at night, or perhaps scheduling car services for the late-night workers on the various acquisitions, is there room for newly-minted, inexperienced young MBAs?

Didn't we all learn from the consulting sector that, ultimately, customers wise up to being read rehashed B-school platitudes from fresh-faced young things with MBAs? Last I looked, McKinsey, Booz Allen, and most of their ilk had much reduced circumstances and reputations, as their customers began to catch on.

So, now, the MBA mills are training their sights on private equity firms?

This is either about to be comical, or tragic. Comical, because PE firms are the real McCoys of smart, no-nonsense capitalists. Tragic, if some of those firms actually buy this line, and begin hiring novices to ply their ultra-profitable trade.

Not to mention, again, as in this post, that so much of what private equity does is simply better, faster implementation of the classic lessons of old-style, non-soft skill MBA and BS in BA programs. It's not so much the insights, as it is the experience of knowing just what to do, when, in which situations.

At some point, there actually are jobs that require experience, not simply a newly-minted degree from the right school.

It should be interesting to see if this story has legs, and we learn, in a year or so, that there is, indeed, an influx of newly-graduated MBAs into the sector. And what effect they are having on their employers.

On that note, one last word of warning. Back in the day, when I was a young MBA myself, a little outfit called Atari ruled the newly-digitizing world. I don't recall the exact number, but one year, something like 25% of the Harvard Business School's graduates went to work there. The next year, 1984, Atari, then a unit of Warner Brothers, and a victim of overheated expansion and loss of control over the company's strategic direction, was, in large part, sold to Jack Trarmiel. Upon this ignominious event, one wag commented that it should be a signal to the market that anytime a company begins hiring that large a portion of HBS's graduating class, it's time to dump the company's shares.

Last year, 11% of the HBS class went to work in private equity companies.

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