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What's So Great About an MBA?

August 01, 2008

Leadership_2(Tracy Kaufman is a library assistant in the Foundation Center's New York library. She recently reviewed Charles Halpern's memoir Making Waves and Riding Currents: Activism and the Practice of Wisdom for PND. This is her first post for PhilanTopic.)

Plenty, I suppose, if you're trying to start or build a business. But this week the Financial Times ran an article about the growing number of nonprofit employees seeking advanced business degrees. It's understandable why the FT would be upbeat about the trend, but should the rest of us?

Bill Drayton, the much-admired head of Ashoka, the pioneering social entrepreneurship nonprofit, sums up the sector's bad old days thusly: "Salaries were pathetic, smart people would avoid it, it was disorganized. That's all gone. We've been catching up and once you go from non-competitive to competitive, organizations have to join in the party or they’ll be eaten alive."

It's true that many nonprofits are operating more efficiently than they used to, but Drayton sure doesn't sound like he's giving the sector much credit if he's saying that in order to be "better," nonprofits must act more like for-profit businesses. (And that "smart people" line? Ouch!)

While the Financial Times suggests that a not-for-profit boasting a few MBAs has a distinct advantage over peer organizations without MBAs on staff, a 2007 study from Community Resource Exchange and Performance Programs, Inc. found that nonprofit leaders actually outperformed for-profit leaders in 14 out of 17 leadership practices, including things like participation, persuasiveness, openness to feedback, and demonstration of effectiveness. Could it be the typical nonprofit is every bit as well led as the typical for-profit, even without MBAs? (Click here to read a Q&A with Jean Lobell, the author of the study.)

The nonprofit and for-profit worlds serve very different purposes, so it's not a leap to suggest that they require different types of employees characterized by different modes of thinking, much in the way that psychology distinguishes between left-brained and right-brained people. In the for-profit sector, regardless of one's chosen profession, at the end of the day it all boils down to a single concern: profit. As long as the business is turning a profit, an employee really doesn't need to worry about much else.

In the nonprofit world, in contrast, that concern is all-but eliminated. As a result, nonprofits tend to be more welcoming to flexible, creative, out-of-the box thinking. A formal education in business may be vital for one sector, but whether it's really the best thing for the other is open to debate.

Don't get me wrong, higher salaries and increased professionalism in the nonprofit sector aren't bad things. But to suggest that what nonprofits really need to be effective is a couple of MBAs and more business discipline strikes this nonprofit employee as, well...beside the point.

What do the rest of you think? Do nonprofits need to think and operate more like business? Is there an MBA in your future?

-- Tracy Kaufman

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Posted by Matt  |   August 01, 2008 at 04:40 PM

I think that nonprofit boards -- which is where you often hear about the need to "act more like a business" -- need to bear in mind that nonprofit organizations and for-profit companies have different legal structures to work in. While the goals of working efficiently and effectively are obviously important and necessary, organizations should be clear about what those terms mean for them. Moreover, if an organization is on a steady decline, the board needs to determine whether it should continue at all or whether its constituencies would be better served by a different organization or model. That doesn't require an MBA, but it probably requires GUTS.

Posted by Jim Hopkins  |   August 01, 2008 at 05:14 PM

The business of business is to turn a profit. The business of a nonprofit is to address a need wherein addressing that need is unlikely to yield a profit. Professionalism and good judgment are required in both realms, and at times are sorely lacking in both. To suggest that the MBA skills that are driving what is left of the US auto industry into bankruptcy, or that gave rise to the market in securitized mortgages and the current financial melt-down, are the same skills needed in nonprofits is questionable - make that laughable (but it hurts when I laugh). Something about glass houses and stones comes to mind.

Posted by David  |   August 07, 2008 at 02:11 PM

I am a current MBA student whose life's vocation is to be a nonprofit management leader. Let me contribute my perspective:

The real issue here is not whether MBAs are the silver bullet your organization has been looking for (they're not). Rather, the issue is whether an MBA program develops a potential nonprofit leader in a more effective way than other programs for the challenges a nonprofit leader must face.

From my perspective the answer is a resounding 'YES'

The mission of my school is "To Educate Leaders for Business and Society." In its curriculum (my first-year classes are listed below), it provides more opportunities to learn the things a nonprofit leader needs to be successful, more so than any other program of which I am aware. These courses, and the ones I will take this coming year, will prepare me more than any other graduate degree to manage an organization effectively.

Many of these are also the skills, as it happens, that nonprofits are admonished for not having. As nonprofits become more responsible to respond to 'market forces' (donors), accountability and effectiveness matter. And MBAs receive more significant training in this area.

When I am in a position to hire, I will never hire an MBA blindly. I will hire based on the skills of the person.

But with all else equal? I think someone with an MBA is a better bet.
(bias acknowledged)

2008-2009 Courses
Managing Groups & Teams, Basics of Accounting, Data & Decision Analysis, Basics of Economics, Interpersonal Dynamics, Problem Framing, Careers, Intro to Negotiation, Competitor, Customer, Investor, International Experience: South Africa & Namibia, Sourcing & Managing Funds, State & Society, Employee, Innovator, Operations Engine, Integrated Leadership Perspective, Strategic Management of Nonprofit Organizations, Global Social Enterprise: Colombia, Financial Reporting I Managing Organizational Politics, Law for Executives & Managers of Nonprofits

Posted by Michael Seltzer  |   August 09, 2008 at 09:02 PM

Say It isn't so, Bill!

I know from personal experience that a journalist can spend 30 minutes or so in an interview and use one quote that makes little sense outside of a larger context. So I hope that you did not mean to say what was attributed to you in the Financial Times article.

Our sector welcomes with open arms the recent corporate emigres that have arrived in our midst. We welcome those sector-jumpers who seek to bring fresh insights, talents and energy to the social causes that our nonprofit organizations represent.

We do expect, however, that you do not deride those who foresake business careers and salaries to promote social change and justice and have accomplished much of the progress and innovation that has occurred in the USA and other countries around the globe.

Michael Seltzer
New York, New York

Posted by Kristen  |   August 15, 2008 at 11:55 AM

While I do not think a MBA is necessary to be an effective leader at a nonprofit organization, I certainly think that having one will make most a better leader. Particularly as we move into the future and younger generations, that often have not been mentored and groomed to take over the helm, are moving into leadership positions. But that gets us into a whole other topic of nonprofits needing to take part in succession planning (yes, that would be acting more like a business).

Having worked at several nonprofit organizations, I think that in some ways nonprofit organizations should act more business like. For example, while we do not turn a profit, we certainly should be budgetting for a reserve. Which technically is a profit. I have encountered too many nonprofits that do not have a reserve and lose a large grant and then have to cut a program. If you want more examples about why I think nonprofits should act more business-like, you can see my recent post at www.nonprofitsos.com.

- Kristen

Posted by william richard  |   August 22, 2008 at 12:28 AM

Both for profit and non profit organizations MBA is preferred.

I am a MBA student who knows the real meaning of business and leadership.Leading a company is also managing the employees in a good manner.We have show the ways to employees in which they should be.MBA are the teachers for the employees.

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