Battle #4: Investment Bankers and Consultants add Little Value to the Real Economy – IIM Calcutta – Against

Free markets are generally good at determining value, and for decades the market for young business leaders has given a strong vote of confidence to the graduates of top MBA programs.  Leading B-schools place their graduates in an amazing array of the world’s businesses. The remarkable career options of the 25-30 year olds who make up the vast majority of students in full-time programs is powerful affirmation that the market places a high value on their skills

Indeed, there is great intrinsic value to the learning that takes place in the classrooms of the best business schools. 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. Their professors’ deep knowledge of a wide array of fields, the business and cultural experiences shared among students and the mentoring of alumni in leading global companies broaden and deepen students in ways that would be hard to match in a comparable amount of time working inside a company

The latest QS Jobs and Salary Trends Report surveyed over 2,000 businesses around the world that are actively hiring MBA graduates. It is found that despite economic difficulties in many countries, there was a 28% increase in MBA demand among global consultancy businesses.

The market does not place such high value on top MBA graduates for no reason.

On Consulting…

This increase in consultancy jobs for MBAs has been forecasted to increase further still, by 17% this year

Consultancy firms thrive in periods of change – whether that is rapid growth, new market opportunities, or downsizing and consolidation – consultant firms’ work is driven by the amount of change in their client’s industry. Because of that, demand for [MBA] talent will hold out through periods of change.

There are specific reasons why consultancy firms are targeting MBAs. One of the key reasons is that the qualification is an adjudged quality: Everyone at business school has gone through a rigorous admissions process and so the quality would be higher than that of the general public.

The other reason is that MBA students will learn the ‘business basics’ – the functional knowledge that is required to achieve in business, so skills such as finance, strategy, and accounting for example.

These skills are well matched to the needs of the consultancy industry. They can draw upon the full range of their knowledge and allocate them to different types of client assignments. They have the knowledge and confidence to hit the ground running, utilizing both their hard skills and well-developed interpersonal skills, which are so important in our client-facing business.

Management consultants bring value in many ways. Some are tangible and others intangible:

–        Creating the intellectual property, knowledge bases and know-how in-house is far too expensive for even the largest corporate companies. Furthermore, they could not do it even if they tried. Management consultants come in handy frugally.

–        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.

–        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.

–       Consultants provided an educated mirror on a company. A management consulting firm working across 6 out of 10 leaders in a sector possesses knowledge and benchmarks which are impossible to find. This knowledge is valuable.

–       It is sometimes easier to have a strategy approved if it has been developed by McKinsey or Bain. Executives are willing to pay for this.

–       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.

On Investment Banking…

Investment banking, being among the global industries, continuously faces challenges to respond to the different kinds of innovation and new developments in the global markets. High margined new products are constantly manufactured so as to satisfy the clients as well as develop the trading know-how.

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

An instance to substantiate our argument further:

MBA Students Help Find Economic Solutions for the Nation’s Capital

In 2012, a group of 16 MBA students in District of Columbia were involved in devising its FIVE YEAR ECONOMIC DEVELOPMENT STRATEGY . They broke up into teams and studied the city’s seven industry sectors have drafted a report that will help in finding the economic solution for the next five years

We agree that years of experience teaches you all these but if one could shave off all those years and come to a school to better understand these concepts then I think an MBA degree is well served

Prem Anand

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