Battle #4 – Investment Bankers and Consultants add Little Value to the Real Economy – IIM Calcutta FOR – Counterpunch by IIM Bangalore
Institution : IIM Bangalore
Team : The Chillaxs
Team Members: Sheikh Farzyn & Nabeel Salim
We here are trying to gauge the importance of Investment Bankers and Consultants on the value addition they can make to the “Economy”.
It might be worthy to note that the opponents’ perspective on a “Cntrl+F” throws back only one instance of the word Economy, and that too was spotted just in the title. This alone shows the importance that has been given to the value addition to the “Economy” by consultants and IB’s.
We hereby present the same in terms of a dialogue between the two:
Cally: With its courses, projects and networks, the MBA experience makes young men and women substantially better prepared to start a business leadership career—better prepared not only than when they enrolled but than their peers who followed other educational or career paths.
Brats: If this were true there would not have been any degree but an MBA. You do not have to have an MBA to be a stellar CEO.A Bill Gates did not emerge after pursuing an MBA, Narayan Murthy was just another engineer before he started Infosys,. Steve Jobs of Apple, Jeff Bezos of Amazon, and Terry Leahy of Tesco don’t have MBAs, and yet are the top rated CEO’s cum founders.
Cally: It is found that despite economic difficulties in many countries, there was a 28% increase in MBA demand among global consultancy businesses.
Brats: Was this to add real value to the economy or to their own company? You may counter state that with growth in the company the economy grows. So then, how efficient was the contribution of this “increased demand for MBA” to improving the economic difficulties in these countries? Well, anyhow doesn’t this data date back to 2011,then yes, you should definitely have figures for the current economic situation in these countries.
Cally: Everyone at business school has gone through a rigorous admissions process and so the quality would be higher than that of the general public.
Brats: Well if I can recollect correctly, soon after I gave the CAT and other MBA tests my inbox was filled with messages from random MBA offering institutes in the country that needed no more than a minimum graduation mark as selection criteria. Request you to focus on the number of MBA institutes all across and thereby the perceived quality of MBA grads from the non-niche institutes. Further, those who qualify from the premier institutes again are hardly a tiny percentage of the total MBA’s who get into consulting and IB.
Cally: Internal consultants lack clout and are conflicted. Many banks have internal consulting teams. They fail since they need to provide sometimes harsh recommendations on their peers. They are also staffed by people who do not manage line-units and hence are seen to have little influence. Of the major banks, even those with internal consulting arms, all are advised by premium consulting firms.
Brats: I see that here our honourable opponents are actually just trying to mix black and white to come to a hazy shade of grey. In the first place, are the internal consultants that you have hired non MBA’s? If not, then do you mean to say that you can actually afford to siphon off your company revenue on external consultants(who may or may not be MBA’s again) and hence demeaning the choice of the work staff employed by your own firm? (Again where is the value that you have added to the economy?)
Cally: Consultants are not conflicted. They can provide impartial advice. They are also un-emotional. Provided their fees are not contingent, you can expect the correct answer.
Brats: Why this kolaveri, da??Are’nt consultants’ human beings (not conflicted, un- emotional etc).People in general can be trained. Not just consultants!!
Cally: Companies going through difficult times or potentially catastrophic change do not have the time to slowly dig themselves out of the mess. They need the best advice as soon as possible. There is only one source for this and it is worth paying for it
Brats: Strategy teams and contingency teams are potentially created within organisations to cater to such sudden changes. The situations where in firms use the help of “external advice” is very rare because in when companies face an adversity they would rather not let the news out and would prefer sorting out the issue internally.
Cally: It is clearly evident from the below link is that MBA gives a clear edge. The article draws out the top 5 investment bankers in the country out of which 4 are MBA graduates. All are from reputed I-banking firms like Standard Chartered, Citi group, Morgan Stanley
Brats: Replace “Investment Banking” with any other sector. You will find similar results where the search will throw up top 5 leaders in each arena. Oops sorry, “stars”. How does this emphasize on the importance of Investment Banking, aren’t we speaking about the essence of an MBA here?
Cally: In 2012, a group of 16 MBA students in District of Columbia were involved in devising its FIVE YEAR ECONOMIC DEVELOPMENT STRATEGY
Brats: Is this an inductive analysis? Wasn’t the topic specified for investment banking and consulting alone?
After all the 2008 crisis and the subsequent downfall in the economy, aftereffects of which we still are facing was a result of inefficient investment banking policies. All decisions always don’t result in positive value addition to the economy. Consultants offer expert opinions on financial investments and take large fees in return for their services which may be a percentage of the profits or investments. Thus credibility as impartial advisors is questionable. Thus consulting and IB don’t always add value to the economy even if there are enough number of people advocating the same profession.
Besides the above, we strongly believe that our worthy opponents haven’t considered the impact of IB and consulting on the economy. In fact they have just agreed to the first part of the stated premise (problem statement) and we haven’t seen a mention to or a strong comment with respect to the latter.