Managers with a business degree reduce employees' wages, do not increase profit

https://www.nber.org/papers/w29874

by jstx1 • 4 years ago

629 258 4 years ago

altell2• 4 years ago

There is a good episode(ep 517) of freakonomics radio about that

fuzzmuzzy• 4 years ago

Almost certainly the inspiration for this submission. Definitely worth a listen, a lot of points in these comments that were addressed in the episode

altell2• 4 years ago

thought the same,and yes it is really a good episode worth listen to

clavalle• 4 years ago

They have one lever, and it isn't innovation.

HardlyCurious2• 4 years ago

Sadly, there are probably businesses out there that would see this study as a argument for hiring business managers over operational business units.

eurasiantiger• 4 years ago

Owned and operated by business executives.

pella2• 4 years ago

Intel has had several CEOs with non-technology educational background. ( ~ MBA )

Entinel• 4 years ago

Intel is also reverting back to CEOs with technical backgrounds because having CEOs with non-technical backgrounds led to them getting overtaken by several competitors such as AMD who they had lapped several times over.

mrits• 4 years ago

I'm not sure the group that thinks an MBA is worthless for a CEO is as large as the group that thinks an MBA is worthless for anyone but a CEO.

Workaccount22• 4 years ago

Reducing wages by definition increases profits and the title doesn't match what the linked abstract says.

I get what the study is saying, but the crucial piece of info is whether the non-business degree managers create an increase in profits greater than the increase in profits from wage cuts/suppression.

HardlyCurious2• 4 years ago

I took the study to imply sales / revenue went down as much as salaries.

socialismisok• 4 years ago

It does only in a vacuum. Real world is not so simple. Productivity can be impacted by wages, morale too, retention.

donquichotte• 4 years ago

The time horizon is crucial here. Will it increase profit in the current fiscal year? Likely. Will it drive away the employees that have other options, which are often the ones who help building valuable products? Also likely.

7thaccount• 4 years ago

This is the part I don't understand. Are shareholders really that short-term minded? I agree with everything you've said btw.

I've come to the realization that most companies have a very small percentage of people doing the heavy lifting and important work. Somehow they're never compensated in a way to reflect that. Brain drain will eventually catch up to you.

duxup3• 4 years ago

I feel like your statement is kinda like random business drone would argue.

1. Lowers wadges.

2. Adjusts spreadsheet.

3. Declares increased profit!

But that's too simple / not how things play out and then you ask for a great deal more analysis. Kinda a weird angle to approach it from.

mhuffman3• 4 years ago

The key part is the assumption that in between step 1 and step 2 that productivity and everything related to it remains stable. This is almost certainly never true.

Workaccount22• 4 years ago

I'm not arguing any point except that the study data is incomplete.

onepointsixC• 4 years ago

Not necessarily. Are workers going to work as hard while earning less or will they just coast along doing just the minimum equilibrium to stay employed? Likewise are workers earning more going to feel more pressure to do more less they lose their position to someone who will be more motivated.

whywhywhydude• 4 years ago

Do you know how much it costs to hire a single developer? You need a team of recruiters and waste countless employee-hours on interviews. Retention is a big deal. You can probably provide a real monetary value to retention.

bobro• 4 years ago

if you reduce your wages to 0, you’ll probably lose some profit.

qikInNdOutReply• 4 years ago

It also a strong signal that you have no idea, no longterm plan and strategy and just want to micromanage and premature optimize the status quo to death.

Its a warning light going off, signaling to any competent person with a longterm career in mind to abandon ship.

peteradio2• 4 years ago

You have quite a few things backwards here, if reducing wages reduces REVENUE by more than the reduction in wages then you have a net loss. Your second sentence only continues this confusion when you compare two different definitions of profits when surely you mean comparisons of expenditures to revenue.

talideon• 4 years ago

Only if you assume that reducing wages has no secondary effects. But that's never the case. You might get a momentary bump in your balance sheet, but then you have to deal with employee morale issue, deadline slippages, &c., which eat away at that bump and then some.

boh3• 4 years ago

What is the point of this study? If we don't hire managers with business degrees we'd see increases in employee wages and profits?. A person with a business degree is hired because the business hired them, and they're likely doing the job they've been hired to do (cut costs). If a company is cutting costs it may be due to decreasing profitability.

Research like this just feels like tenure bait (the academia version of click bait).

pessimizer• 4 years ago

Because the goal isn't to cut costs, the goal is to make money. If hiring someone to cut costs doesn't make money, then it has resulted in nothing but the suffering of your employees and vendors, and possibly the quality of your product as you switched to shittier vendors and lost your best employees.

So the owners get no profit, the employees lose, the vendors lose, and the customers lose. Worth considering when deciding to hire consultants?

boh3• 4 years ago

So if you hire people without business degrees none of what you described will happen? If you hire a person to cut costs, you're looking for a person who will cut costs. That's what's being avoided conceptually in how this study is being interpreted. Going to a cancer doctor doesn't increase your chances of having cancer, it makes the likelihood of you having cancer to begin with more likely (ie I'm a company that's no longer growing and I need help to die slower).

entropi• 4 years ago

This point is actually addressed in the introduction of the study.

These checks notwithstanding, an obvious concern with our estimates is the endogeneity of the decision to appoint a business manager—perhaps firms turn to business managers when they need to cut labor costs. To bolster the argument that our results capture causal effects of business managers on wages and the labor share, we use two strategies. First, we obtain very similar estimates when we focus on manager retirements and deaths, which are arguably less endogenous than other switches from non-business to business managers. Second, we develop an instrumental variable (IV) strategy (...)

boh3• 4 years ago

Just having any methodology doesn't count, it has to actually serve to legitimize the model (which it doesn't). Pretty much every publicly traded firm has had MBA managers for the past fifty years, and yet somehow they still make a profit.

This report may arouse people's ingrained dislike of the business managers they've had to deal with but it doesn't actually offer any insight that can survive the least bit of scrutiny.

pdntspa7• 4 years ago

When I was in b-school, it was like they were trying to train us to have contempt for employees, especially the jobs where wages were low. They wanted us to treat them as fungible, replaceable cogs in the machine, not unlike this whole stupid pets-vs-cattle debate with servers.

I got my degree but left utterly disgusted with management and MBA types. I am of the opinion that business degrees and business school are a toxic influence on most companies and that, with a few exceptions, they would be better served by hiring management types from other parts of the business and giving them some light compliance training instead.

mhuffman3• 4 years ago

Basically the entire time I was getting a business degree the word "employee" was never even used! Just different forms of "human resources" or "workers".

pdntspa7• 4 years ago

Exactly. It seems that the current trend is to dehumanize folks as much as possible. Nevermind the fact that businesses are made of people, and they SERVE people, and not just their shareholders.

In fact, if anything, shareholders need to take a back seat on the list of priorities.

asdfasgasdgasdg• 4 years ago

"Worker" is not exactly a pejorative term. In some circles it would even be considered a mark of pride. Although "human resource" is ironically dehumanizing.

ElevenLathe2• 4 years ago

IMO "worker" has some dignity but "human resource" implies I'm on a spreadsheet somewhere alongside the depreciation schedule of the physical plant.

spaetzleesser• 4 years ago

At my company they lately talk about hiring “resources”, not “people”. This really bugs me. They really seem to be hellbent taking any humanity out of work.

kube-system• 4 years ago

And it may be technically correct depending on the topic. Not all workers are employees.

ericmay2• 4 years ago

When/Where did you go to school?

When I did my MBA at Fisher (Ohio State 2018-2020) this definitely wasn't the case. We actually spent considerable time talking about how to get the most out of your team and how dumb of an idea it was/is to treat employees poorly. Many of our in-class discussions that revolved around this topic focused much more on treating employees well and how dangerous bad corporate culture and out of touch leadership was. Many of my classmates came from prior working backgrounds in various fields, however, so perhaps that leads to a different culture at the b-school.

pdntspa7• 4 years ago

I went to a state school with a highly-regarded (at least locally) business program, graduated 2013

pastacacioepepe2• 4 years ago

If you learnt about cost centers, you know what OP is talking about.

clairity• 4 years ago

yah, that was my experience at b-school as well, via core courses in leadership and OB (organizational behavior) that taught us how to build effective teams, set up humane incentive structures, effect organizational change (which happens through people, not process or technology), and more. i'm sure a number of my classmates glossed over that part, but it is taught and even emphasized.

the MBA degree simply teaches you the various aspects and phases of managing businesses, and about leadership (but doesn't create leaders). selfishness and greed, the basis of bad management, is in all of us, so it's misplaced to vilify the degree rather than the bad management itself.

anotheracctfo• 4 years ago

I got both. Managing a low complexity worker and a high complexity worker requires vastly different styles. Managing a factory production line is very different (down to Left Hand and Right Hand specific tasks!) than managing infinitely configurable software.

Netflix is not a McDonalds, and a McDonalds isn't a Ford assembly plant.

The problem I see is that morons apply the wrong methodology to a business. Typically former 19 year old McDonald's Managers (TM) apply authoritative control to a scrum shop which should be decentralized and delegated by design.

jamal-kumar• 4 years ago

It's so damn hard to look at someone's resume, see an MBA on there, and have me consider them for hiring. How can I even tell if they went to a school like yours versus something like what OP mentioned? I kind of just see that on a resume instead of a bunch of actual experience managing tech teams and immediately mark it for less consideration.

I can definitely see where the kind of education you got would be an asset, it's just like how can I tell when the whole field is so incredibly polluted with people I want nothing to do with?

I have one friend who I've learned a ton about business from who got his MBA and it kind of sounded like he didn't receive the kind of bad ideas you get from the infamous reputation of MBAs. He runs his own businesses and does incredibly well for himself, though, and isn't trying to manage some highly technical team with that degree (Seems like the wrong thing entirely for that position), which is funny because I don't remember him technically even passing high school back in the day.

naikrovek2• 4 years ago

100% agree. every good technical colleague I've ever had who got an MBA completely ignores technical considerations when making technical decisions, and in general, they really seem to be on their own planet afterwards. they are no longer a part of reality.

bulatb• 4 years ago

By their own metrics, are they successful? Do they accomplish their goals?

trinsic22• 4 years ago

This is the way I see academia, which has been thoroughly institutionalized by the industrial era. I know that you only mentioned the technical aspect education (which has been impacted as well), but this is a existential problem with humanity. The system attempts to divorce human beings from true knowledge that is based on experience to create artificial and theoretical constraints on human value. This is done to create a power differential by separating people into classes. This is why studying for specific fields are largely theoretical and not experiential. When we allow ourselves to be removed from experiential knowledge, we become automatons that are easy to control.

throwaway98797• 4 years ago

but are they making more money now?

throwawaysleep2• 4 years ago

Isn't that the business model with low skill workers though? Figure out how to employ them in a way that they don't need training and all is well.

pdntspa7• 4 years ago

It's an incredibly shitty model for everyone but shareholders. Why do we have to institutionalize abuse?

willturman• 4 years ago

I would argue that a "low skill worker" doesn't exist as anything but a pejorative stereotype for large swaths of people who form and perform functions that create the foundation on which an economy runs.

AlexandrB• 4 years ago

The newer goal seems to be employing them in a way that doesn't need training, but then claiming that "flipping a burger" is a business secret and making them sign a broad non-compete anyway.

UncleMeat• 4 years ago

There is (almost) no such thing as unskilled labor. If you've ever tried to move your furniture to a new place and also paid people to move your stuff you'll see that movers are like 5x more efficient, yet it would be considered an "unskilled" job.

version_five2• 4 years ago

I think your point could be rephrased around the business model being to turn jobs into low skill jobs (basically by removing any human agency) so that labor becomes a pure commodity. Uber is the closest I've seen to that I'm practice. I suspect some warehouse jobs are like that too. Most of the time it doesn't work, which is why Uber for X never really caught on, because you can't commodify e.g. a handyman the way you can a car ride

WrtCdEvrydy• 4 years ago

| They wanted us to treat them as fungible, replaceable cogs in the machine, not unlike this whole stupid pets-vs-cattle debate with servers.

I have found that when communicating with "business degree" people, I will often use this as a common starting point but then add "but you'll spend far more replacing the knowledge that people take when they leave"

kevin_thibedeau• 4 years ago

Institutional knowledge isn't in their metrics so it obviously doesn't exist.

mindtricks• 4 years ago

When I was in business school for my MBA, the human component was absolutely covered, and I suspect that is the case with many of them. Part of the problem may be though that there are subjects (finance, operations), where I can see the concept of a human resource becomes a bit abstract in order to focus on other concepts. In this regard, schools can certainly do better to connect the people element across disciplines.

For those with a complete disdain for "business types", I'd encourage you to read Peter Drucker. Some of his opinions may feel a bit outdated, but he speaks quite a bit to the knowledge worker and their needs.

pdntspa7• 4 years ago

It's quite possible that my school wasn't that great. I am glad to hear examples highlighting these issues, but I walked out with a class of over a thousand that year and I don't think any of those folks got the perspective you speak of, and I think it's reasonable to assume lots of other folks around the world aren't getting that perspective either.

GartzenDeHaes• 4 years ago

"Human component", "human resource", and "replaceable cogs in the machine" sound the same to me.

fullshark• 4 years ago

The human component i.e. how to get the human to do what you want them to do? That doesn't seem at odds with OP's point and may even be supporting it.

joshstrange3• 4 years ago

not unlike this whole stupid pets-vs-cattle debate with servers

What am I missing here? Those are in no way whatsoever related. One is a group of humans and the other is a group of machines, the rules/expectations are 100% different. You should not treat humans are replaceable cogs for moral reasons and the very real reason that they simply aren't. Humans are not 1 to 1 comparable (not that it would be ok to dehumanize them if they weren't) so that way of thinking is not only gross but it's silly/short sighted/wrong. I've seen companies treat employees as cogs then be all surprised when they fire/layoff one of those "cogs" which causes a mass exodus (sometimes resulting in literal decades of experience walking out the door in the span of months).

Servers/computers are a whole different ball game. For all intents and purposes a server is a server is a server (blah, blah, same instance size, disk, etc).

x86x87• 4 years ago

That was the point. You should not treat humans like you treat machines but this happens all the time.

KvanteKat2• 4 years ago

Aren't you just agreeing with the post you're replying to here, or am I missing something? Both of you make the central point that humans and servers are fundamentally different and that descisions that involve humans must invariably have a moral dimaneion as far as I can see.

sam0x17• 4 years ago

My interpretation was "at least we treat servers like living things, can't say the same for how business managers treat employees"

tjr225• 4 years ago

If someone calls your idiom of choice stupid and this makes you feel any type of way at all it might be time for a breather.

lkrubner• 4 years ago

"One is a group of humans and the other is a group of machines, the rules/expectations are 100% different."

This is exactly what they were saying in the comment you are replying to.

jahsome• 4 years ago

Are you arguing or reiterating?

What am I missing here?

version_five2• 4 years ago

I did an MBA and what opened my eyes was the contempt for customers, treating them as an annuity, which maybe works if they come back because of good service, but in practice turns every interaction into a way to extract more money and get more lock-in.

trinsic22• 4 years ago

in practice turns every interaction into a way to extract more money and get more lock-in.

Which we see causing all the major problems of the world right now. I'm glad people are waking up to this. Post-covid, I see many people that work at these jobs choosing not to support institutions that are turning the human part into resource extraction.

toss1• 4 years ago

Yup, and the entire fractally meta-toxic concept of "labor is fungible, just move it offshore to where labor is cheaper", that nearly destroyed the entire set of advanced societies and still threatens to destroy democracy — that is a strategic blunder of historic proportions. Not only have the US and EU shipped off much (and in some industries effectively all) of the R&D and manufacturing know-how required to lead an industry, but we have put ourselves in a militarily weak position by relying on manufacturing in adversary nations and even subjected to espionage from uncontrolled manufacturing.

The MBA schools focusing solely on short-term optimization to extract greater superficial profits are truly toxic for society.

Worse yet, they are toxic for the businesses that rely on their "expertise". Everything is optimized away, including R&D investmentand market development, and the numbers look better and better. Until they don't. At that point, the company has zero capability to recover, because it has lost all the internal talent that knows how to develop products and markets, and the death spiral begins.

My company was once invited to bid on a large software project for GE, very cool document management system. Later in the process, we were given some astonishing terms — this was developing new-at-the-time technology, and we were to be both paying our software developers something like 3rd-world rates, and exposing all our books to GE, and could not have more than iirc 10% profit on any hour of labor. Basically, they were hiring us only to run a software sweatshop, and showed zero interest in state-of-the art development. I passed and decided that with that attitude, GE was on the road to failure. It took over another decade of the stock rising nearly 10x, and then some before all the chickens came home to roost, but it really was a true sign of MBAs rotting the company from the inside out.

FredPret4• 4 years ago

And that is why the “house that Jack (Welch) built” came tumbling down.

Decisions were made on spreadsheets instead of between ears - among other things, they did stack ranking of employees and they seemed to take pride in being oh-so-tough and hard-nosed. It worked great until it didn’t.

yourapostasy4• 4 years ago

...that is a strategic blunder of historic proportions...

That's putting it lightly. No one who made these decisions actually understood the sophisticated interlocking nature of technology and interplay of knowledge innovation.

And now that advanced techniques in weaving have to be rebuilt at the operational floor practically from the foundations on up to be re-purposed to advanced laminate manufacturing, do we realize that wholesale offshoring and dismantling our "low-margin" textile industry was perhaps a little premature...

One of but countless examples where Western financialization interests not only shot themselves in the foot, but the shot the EMT's that came to try to help them.

twobitshifter• 4 years ago

Khurana, Rakesh. “From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession.” From Higher Aims to Hired Hands, Princeton Univ. Press, 2007

I’m reading this book which talks about how business schools lost their purpose and shareholder primacy upended attempts to add professionalism to management. The success of shareholder primacy fed back into the business schools and displaced any broader social missions that exist in the professional fields such as engineering, medicine, and law. Instead, fiduciary responsibility blasts through the greater good. It’s very dense and full of jargon so it takes time to unpack, but it appears to be a very well researched book.

godelski2• 4 years ago

This is just classical first order thinking gone wrong. It seems "obvious" that if all things equal, you reduce costs (by reducing wages, your highest cost) that you should get more profit. This is true. But the premise is false that affecting this one variable will allow "all things equal."

What I've noticed is that the standard businessman MBA type believes the first order thinking and gloats about how "obvious" things are (always be wary of those that claim common sense). But the really effective ones understand the coupled nature of many elements and the complexities involved. Which there's some irony because the standard MBA types also talk about Google and companies that make their employees happy with high salaries and free food. Working with humans is a complicated solution space and should be treated as such. There are certainly no universal answers and no solution works forever because the environment is constantly changing.

darth_avocado• 4 years ago

It is very evident that most MBA “managers” don’t understand a fundamental concept that just reducing cost doesn’t necessarily mean profitability. You have people requesting small, reasonable increments to their wages as their tenure grows. Instead of giving them that, most managers would instead prefer letting them go, spend time and money hiring someone new, who most likely will be paid the same or even more (because usually your wages stay lower if you stay in a job than if you jump around), spend time training them and still not get the same level of productivity as the person who left.

Ultimately they may end up reducing wages or saving some money on paper, but it comes at a huge cost to the company in terms of productivity and profitability.

gmadsen• 4 years ago

Not that I disagree with the complicated nature, but there is a discernible difference between the amount of business value google can extract from an employee, versus someone changing a tire. I'm sure there has been analysis done that shows the extravagant benefits gets google more ROI from their employee hires. That would most likely not be true for other types of labor

Terr_• 4 years ago

That reminds me of a Pratchett quote, an exchange between a respected local witch and a visiting priest:

"[...] And sin, young man, is when you treat people like things. Including yourself. That's what sin is."
"It's a lot more complicated than that--"
"No. It ain't. When people say things are a lot more complicated than that, they means they're getting worried that they won't like the truth. People as things, that's where it starts."
"Oh, I'm sure there are worse crimes--"
"But they starts with thinking about people as things..."

-- Carpe Jugulum, by Terry Pratchett

Gibbon1• 4 years ago

My opinion is undergraduate MBA's should be banned. And you should need an degree in another field and 5000 hours of management experience to be accepted at business graduate school.

rgrieselhuber• 4 years ago

That’s because bureaucrats are threatened by people who actually know how to make things.

wahnfrieden• 4 years ago

Why do you think this is not a reflection of the macro level system? You make it sound like it’s an aberration to be remedied and set industry back on course

qwertyuiop_• 4 years ago

I am a senior manager but not an MBA. Years ago a legacy dot com wanted to hire me as a consultant. The guy I was supposed to report to asks a question on the lines of how would you handle such and such scenario. I indicated I would handle it in a collaborative nature and bring the negotiation to closure. He wanted to know if I would start the conversation with my subordinate with a “f you”. I said I can’t and walked out at that moment in the middle of the interview. They call me 2 weeks later if I can come back lol. Long story short most (caveat) MBA types are a scourge.

FrontierPsych• 4 years ago

huh...that's weird. I guess it depends on where one goes to school. This for sure is not what I got out of my business classes.

Most were how to keep employees, even low-wage employees, how to make them happy despite low wages...

I think also, just because a b-school says this, we all have our own minds. There's a lot of other stuff to learn in b-school that is helpful, at least it was to me. The stuff I don't like, I just don't pay attention to it.

Most of the classes that I took in business school were and are invaluable to me. But, I read other stuff other than what is in b-school, there are a ton of books that say how to treat employees right, how to use them as a marketing assist to help what customers want, and all that.

We go to school to hopefully learn how to learn - how to be autodidactical.

Let's all temper our expectations. Get knowledge from multiple places. Reject what you don't want, keep what is useful and ethical to you.

I never understood the hate people have for different majors. Some hate b-schools, some hate computer science majors, some hate art, some hate etc, etc, etc.

Chill, everyone, learn where you can. Accept and reject specific items as you see fit. It's all good.

cbar_tx• 4 years ago

That's a negotiation tactic that wouldn't work so well if the employees realized that a robust economy provides them opportunity to also treat their employer as replaceable.

lm284692• 4 years ago

When you put bead counters in charge, they count beads

HyperSane2• 4 years ago

The expression is bean counters.

dktoao• 4 years ago

The "beans" way of thinking is outdated! If any company is to be successful in today's environment they need to be counting beads!

triceratops6• 4 years ago

GP is still technically correct. Why would a bead counter count beans?

lm284692• 4 years ago

When I wrote the comment I had abacuses in mind. I'm not a native speaker so I didn't know about the bean counter idiom

SSJPython• 4 years ago

Business Schools specialize in churning out graduates with boomer ideology despite graduates being far removed from actual boomers. It's one of the reasons they detest WFH so much. Old school boomer mentality that still runs rampant in MBA programs.

resters• 4 years ago

Back in the early 2000s when startups were not cool, it was much less likely to find people with business degrees working in a startup. They preferred Wall St companies and big companies in general.

But once startups started to seem cool we got shows like Shark Tank and Silicon Valley is full of people for whom traditional definitions of status and hierarchy are a big part of their self identity and aspirational posture. Those who would otherwise have gone to work at Goldman or Deloitte are now bringing their status-seeking worldview to startups. While not all have business degrees, many have the same kind of high achiever / status focus. They want an impressive title and they want a team under them, etc.

The VC world is poor at discerning the correct signals, because many such employees have impressive educational pedigrees which we all know helps to sell "the team" to the next round of investors, and they are usually pretty good at making decks, etc.

atlasunshrugged• 4 years ago

I think the financial crisis was also a big part of it. Goldman et al were no longer hiring, or if they were it wasn't with the big bonuses and people hated bankers (more than usual I mean) so there was an additional incentive not to go to NYC and instead head west.

lotsofpulp• 4 years ago

It is just the pay to quality of life ratio. Apple, Microsoft, Alphabet, Meta, and even Amazon offered much better pay to quality of life at work ratios than finance and law. And still do, because they have been and continue to be far more profitable than Goldman and the other banks.

mattgreenrocks• 4 years ago

There are plenty of homes for the status-hungry, be they startups or FAANGs. I'd hoped they'd get bored of tech and leave, but there's too much money around, and status doesn't really leave professions very quickly. I do think they've changed the culture though. Primarily thinking about the weird way devs treat the FAANGs of the world: devs from there are seen as uber-geniuses without even saying anything. It's like we all need to believe that is true to ensure that those places remain high status in our mind.

duxup3• 4 years ago

I always wonder what business schools actually teach.

I worked at a company where it was decided that the tech support department had a bunch of college drop outs and nobody had a business degree so they had to hire some. A few MBA guys were hired. These guys had MBAs straight out of school with no experience outside some internships... and man it showed.

Their first job was dealing with managing a schedule for about 25 people who manned the the tech support line 24/7.

They just couldn't wrap their heads around the idea that on the spreadsheet if you schedule someone on Friday until Midnight... starting them at Midnight on Saturday doesn't make a lot of sense / they would be working 20 hours in a row.

It's was horrible working with these guys. They embodied the "I'm business guy and I made my decision for business reasons and you should follow them."

Eventually I (worker drone) took over the schedule because what became known as "the MBA team" couldn't handle it / had no idea how to balance priorities and etc.

I'm sure there's some great schools for business / MBAs but I really wonder what they teach at those schools if just understanding simple hours, math, responding to emails in a timely / professional manner isn't it. It was almost like the old FedEx advert: https://www.youtube.com/watch?v=NcoDV0dhWPA

Perhaps they should all be required to go manage a McDonalds for a year or something?

spoiler• 4 years ago

They just couldn't wrap their heads around the idea that on the spreadsheet if you schedule someone on Friday until Midnight... starting them at Midnight on Saturday doesn't make a lot of sense / they would be working 20 hours in a row.

I started my career as tech support back in highschool. My boss told me this is illegal and stupid for my health when I said I'd like to work a shift similar to this once. I'm not sure of it's actually illegal, though.

Perhaps they should all be required to go manage a McDonalds for a year or something?

Alas, I think McDonalds employees have enough to deal with; adding horrendous managers into the mix would just make their jobs more stressful lol

buscoquadnary• 4 years ago

Honestly based on a lot of the information I have gathered and problems I have seen the problem is that the managers are subpar at managing and running things, as well as lacking leadership capabilities and that's what leads to a lot of the horrendous stories from employees.

NeoTar2• 4 years ago

I think it would be illegal in the UK/EU - you are required to have at least 11 hours rest in any 24 hour period, and only 8 hours of night work in any 24 hour period.

https://en.wikipedia.org/wiki/Working_Time_Directive_2003

Scoundreller• 4 years ago

Perhaps they should all be required to go manage a McDonalds for a year or something?

I'm a middle aged man and I wish I could do a 3 month internship at a McDonalds. I'd probably learn a lot and RUN back to my current job.

throwawaysleep2• 4 years ago

In general, business types seem to think that all requirements are flexible. Granted, there can be benefits to that thinking but they apply it to laws and physics too.

llampx• 4 years ago

Except when they come up with a deadline or their own requirements.

ModernMech2• 4 years ago

I have an undergraduate business degree. My favorite classes were:

- accounting. Seems like double entry accounting is posted here from time to time as something that would interest the readership here.

- linear programming - didn’t actually get this as part of my CS curriculum.

- game theory and Bayesian statistics - staples of HN readership

- entrepreneurship - taught how to fundraise and manage a startup. Probably like a theoretical YC

- marketing - an evergreen class that comes in handy no matter what I’m doing; selling yourself and your work is a life skill

- operations management and logistics - dovetails with linear programming

In all, I’m more than happy with the school I went to. It definitely fleshed out my more technical education in CS. I know not all programs are the same, and maybe many aren’t like the one I attended, but I wouldn’t write off all “business types” based on the (in many cases earned) stereotypes.

mywittyname• 4 years ago

- linear programming - didn’t actually get this as part of my CS curriculum.

Isn't this part of a standard Linear Algebra course?

matwood• 4 years ago

Spot on. I have a CS undergrad and masters, and if I wanted to stay another semester would also have a minor in business. Accounting, finance, marketing, and economics have paid dividends in my career over and over.

dogman1442• 4 years ago

Yes, I have an undergrad that hit financial markets and financial statement accounting analysis and an advanced degree in CS.

The dual experience is invaluable, especially for maintaining a base level of sanity in a business as a technical employee. Why things work how they do will make a lot more sense.

arein3• 4 years ago

Are there any hard skills a manager should have that are not included in common sense?

duxup3• 4 years ago

I think for me the question is how these guys get out of these schools, with a masters, for a role that includes some consequential decisions, without common sense.

N1H1L2• 4 years ago

I think the conceit that exists in business schools today, and what riles up people too, is that managing people could be taught. This is why many case studies are performed in B-schools, so students can imbibe successful habits. But I have worked with successful and unsuccessful managers, and successful ones combine experience with creativity. You need both. And experience, or even creativity, cannot really be taught.

yamtaddle4• 4 years ago

You would be shocked how many people lack what one would hope is common sense when it comes, especially, to things like shift scheduling. Even ones who've been on the other side of it and get promoted!

It seems it is not common sense after all. And no, most of it's not happening because of reasonable business trade-offs or tension between business and human needs, people are just weirdly bad at making sensible schedules. They'll produce these completely fucked-up schedules that someone with a little empathy and that aforementioned common-sense can fix in five minutes flat. It's baffling.

dogman1442• 4 years ago

A mentor of mine who made MD (very senior) at a know place and a good MBA at a known school told me this:

Bob’s Business School of the South and Harvard teach basically the same thing.

You pay for the network of classmates largely.

mouzogu• 4 years ago

we show that non-business managers share profits with their workers, whereas business managers do not

I wonder why that is.

itsdrewmiller• 4 years ago

This is not the title of the working paper and (slightly) incorrectly editorializes it. They don't increase profit growth but they do increase profit (by taking it away from wages). A previous version of this work by the same authors was discussed here:

https://news.ycombinator.com/item?id=30836059

cardosof• 4 years ago

I took some business classes at NYU eons ago (2013) and most of the time we were discussing human conflicts and incentives. I think yes, many business schools, even "top" ones, may very well suck, but 90% of anything is crap anyway and there are good lessons in business classes if you know how to find them.

at_a_remove3• 4 years ago

I have often wondered if there is like a secret Stupid Manager Tricks indoctrination session that happens when someone is promoted. Perfectly reasonable people, upon org chart elevation, will suddenly think that they can make FTEs appear for nothing by screaming about multitasking hard enough.

mstipetic• 4 years ago

Read the Gervais principle

nelsondev2• 4 years ago

People respond to incentives in generally predictable ways.

If you are told you will get a substantial raise if your subordinates work harder, guess what, you are going to get your subordinates to work harder.

at_a_remove3• 4 years ago

You're going to try to get your subordinates to work harder.

But previous experience, as a grunt, ought to suggest that -- completely in line with almost all of the established research -- task-switching decreases performance. There's just so much overhead associated with it.

So it is as if elevation has caused someone to forget their experience.

uptownfunk• 4 years ago

A corporation is a capitalist device that consumes raw resources, turns them into something else of value, and earns profit for doing so - or at least promises to. It doesn’t have feelings or care about anyone or anything other than earning profit. Anything else that you see is just a means to an end, period.

alecfreudenberg2• 4 years ago

Fire all the managers

Lendal• 4 years ago

No, teach them better. Management is still needed. A manager should be able to increase revenue, or at least productivity. If all they can do is reduce wages, that's a pretty low bar. Any asshole could do that.

alecfreudenberg2• 4 years ago

Management is an often toxic mix between Strategy/SME/HR/Teacher/Therapist/Consultant/Punisher

Separate the functions out explicitly, as needed.

Often they're just corporate prison guards in organizations with bloated structures and antagonistic views of staff from an executive perspective.

Flatten your structures so the highest-level strategy is connected to your lowest paid staff. If you can't do this, then you have a toxic company that resembles prison labor and the whole thing deserves to fail.

krageon4• 4 years ago

More than two layers of management = a company that is bleeding money. More than one layer generally already means idiotic decisions are being made. I sort of hunger for an example of zero layers.

tenebrisalietum• 4 years ago

Yes but could they take the blame for that? A good portion of business decisions and activity is legal liability firewall engineering and maintenance. So promote someone you don't like to a manager and make them make cuts. Then resultant turnover and performance issues are their fault, not yours.

karaterobot• 4 years ago

I used to hold that belief. Then I went to an organization with no managers, where nothing management related got done except by people who were already doing 40 hours a week as ICs. Now I have slightly updated my beliefs: fire all the bad managers, throw parades for the good ones.

DesiLurker2• 4 years ago

Strawman much?

DoneWithAllThat• 4 years ago

As I want to scream at the top of my lungs every time this kind of junk gets posted, the true and accurate headline would be post-pended with “…claims a single study that has not been replicated”.

themitigating• 4 years ago

It's a post of study, isn't that assumed?

thenerdhead• 4 years ago

I dropped out of a MBA after they had us learning that managers and employees are separate classes of people. It's just not in my character to ever think like this.

I personally believe the best managers are those who have been at the front line and work their way up. They know the business from bottom-up and know how to treat people at each layer.

Also got super turned off when everyone just compared where they went to get their MBA at. Those who spent like 200k to go to Wharton and do the same job as me always felt weird. Those same types can get a job just about anywhere with that credential alone but also may reduce wages & profits.

importantbrian• 4 years ago

I personally believe the best managers are those who have been at the front line and work their way up. They know the business from bottom-up and know how to treat people at each layer.

I've seen good and bad managers come from both paths. The problem with the MBA and no experience path has been well tread in this thread, so I'll touch on the other a bit. The problem there is that often people who work their way up are promoted into management for reasons that are completely ancillary to their potential skill as a manager. Management is it's own skill and just because you were a really high performer as an individual contributor doesn't mean you'll be good at management. These are actually some of the worst managers I've ever seen. They also tend to lack the sort of broader business and strategy knowledge needed to really succeed in upper level management.

As an example, I have worked with hospitals a lot as an analyst and my wife is a nurse. Hospitals are almost without exception the most poorly administered organizations I've ever experienced. Part of this is there are a lot of MHA and MPHs in upper management who've never spent a single day on the floor, but it's also because a lot of the management are people who got promoted not because they might be good managers but because they were outstanding nurses or Doctors or whatever else, and these people often make really bad managers.

What organizations really should do is similar to what the military does. Have your potential managers take on small assignments and then if they show promise you send them for additional training and education, have them serve on the staff of higher level officers, etc. But this is expensive and it's an investment in training that most businesses are unwilling to make.

gnicholas• 4 years ago

Is that because the military knows they can invest in employees without worrying they’ll take the training and leave? This would be due to both their relative monopsony position, and the fact that many employees are on years-long contracts.

zerr• 4 years ago

work their way up

Or their way beside? I mean it's getting more and more expected that management and IC are parallel tracks with the same level of compensations.

atty• 4 years ago

This is pretty tangential, but my company just rolled out a new HR system. I don’t like the term Human Resources very much, because it implies a level of fungibity that isn’t really true, but the new one is simply astounding - they call it the “human capital management system”. I was awe struck that anyone thought calling employees “human capital” was at all acceptable, going from implied fungibility to full on “you are a replaceable cog in the machine”. I imagine the PM on that one got an MBA from a place that taught that management and labor need to be in a constant struggle because workers are greedy and lazy.

chris-orgmenta• 4 years ago

'HR' used to be known as 'Personnel' in my neck of the woods.

I don't know why the switch occurred - Perhaps a zeitgeist / subconscious conspiracy on a culture level.

mgkimsal2• 4 years ago

It's a strange one, because... while we actually have many physical resources - physical plants, physical equipment, etc. - I don't think 'Computer Resources' or 'Engineering Resources' or 'Cleaning Resources' are terms anyone uses. The actual equivalencing(?) of Humans with Resources is reserved just for the "HR" label, and it's ... dehumanizing.

fallingfrog• 4 years ago

I feel the same. The phrase "human capital" is one of the most loathsome I've ever encountered.

notaslave• 4 years ago

I see any one who refers to people as 'resources' or any similar terms as just a parasite. Unfortunately, I had the misfortune for working with so many of these parasitic slave traders.

dudul• 4 years ago

Give it a few more iterations and we'll get "soylent green is people".

marcosdumay3• 4 years ago

Wow. AFAIK, that's as strong a paper as you will get on the social sciences. With also as strong claims as you will get.

The title is not the same as the paper's (for obvious reasons), and it's also wrong. The paper finds that the business people increase profits. More precisely, they are able to turn about half of the salary cuts into profits in a 5 years window. (There is no analysis of anything long term, except that employee turnover skyrockets.)

Of course, the always present disclaimer applies, that this is a single work, and any kind of certainty requires replication. But well, the claims aren't any extraordinary.

Arrath2• 4 years ago

More precisely, they are able to turn about half of the salary cuts into profits in a 5 years window.

Isn't that just...how it works? If you now pay $x less, that $x doesn't leave the company accounts and is counted as pure profits?

I've not yet had a chance to get into the article, but will soon.

marcosdumay3• 4 years ago

Isn't that just...how it works?

Hum... No. They are saving $x, and getting $x/2 as extra profits.

But anyway, management is supposed to impact a company's revenue. As a rule, profits and salary should be correlated.

yamtaddle4• 4 years ago

Cutting salaries or jobs can incur other costs. Lost productivity (worse morale, you fired the person who knew the thing and now everyone else has to try to figure it out, whatever), overtime pay for those who remain, that kind of thing.

It's like if you're spending money on ineffective ads that only produce a return of 50% of what you put in. You notice this and stop the spending. You're only saving half your spending, because the other half was offset by the extra sales already.

[EDIT] Point is, it's conceivable that cutting spending could, even, reduce profit—it's not a given that spending less means greater profit, and certainly not that it means greater profit in the amount of the cut spending.

dbingham• 4 years ago

Can't read the paper, but the abstract seems to claim profits don't increase:

But consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities.

marcosdumay3• 4 years ago

Profits do not increase in response to exporting opportunities. Business people don't bring any market opportunity on average. Instead, they do increase solely as a consequence of salary cuts.

(It's also not clear where the other half of the salary cuts ends up.)

at_a_remove3• 4 years ago

If this is true, that means that any "savings" to the company by reducing employee wages is eaten by management and/or ends up costing the company due to their reduction of labor or mismanagement thereof.

dzink• 4 years ago

A degree is an education, it doesn’t turn you inhumane unless you were one already.

I was a part of a family business for years before working in a corporate environment and then getting an MBA from a great school. The MBA helps those who have not seen the big picture do so - if you’ve build a business that means knowing when it becomes unsustainable and how to refactor it to keep it alive. If you’ve been a part of a business, that means knowing how the other parts work. As an employee you vote with your feet and as a manager you trade your social capital with most of the people you work with to steer your team in whatever direction your bosses desire. An MBA helps you figure out directions at times, or at least gives you a hint that you need a compass.

sheepybloke• 4 years ago

Got to plug the associated Freakanomics episode that discusses the paper with the author: https://freakonomics.com/podcast/are-m-b-a-s-to-blame-for-wa...

kragen• 4 years ago

This is a surprisingly strong argument.

Unfortunately, considering the three groups of people involved — managers, investors, and workers — the only group with the incentive and ability to act on this argument are the managers. Investors don't care, it doesn't affect their profits. Workers care but usually the only action they can take is to go work at a company whose managers don't have business school degrees yet; they can't tell the investors which managers to hire, and it's ulikely that a union could negotiate this as part of collective bargaining. The managers' incentive to make more money can be satisfied by either getting a business school degree or, more easily, going to work at a company whose managers do have business school degrees.

jackcosgrove• 4 years ago

I read over the explanation of the IV strategy to try to capture whether appointment of a business manager was endogenous (we need to cut costs) or exogenous (the predecessor died or retired). I think there's still something missing.

Business managers seem to be more common in older businesses that have saturated their market share. If my observation is true it would confound the finding that revenue does not increase when a business manager is appointed. They may be more likely to be appointed to a role where revenue cannot be increased.

Maybe the authors could use a factor like company age normalized by the median tenure of a company in the S&P 500 at that time to identify younger, more dynamic companies?

WalterBright• 4 years ago

The best way to increase profit is to find ways to align the employees' selfish interests with the success of the company.

pella2• 4 years ago

https://mbaoath.org/ "A voluntary pledge by MBAs to create value responsibly and ethically"

ozim• 4 years ago

You go to have a fancy title on your diploma - and still they don't teach about "penny wise, pound foolish" - I am not even native speaker but I picked it up somewhere along the way.

I don't need MBA then.

HeavyStorm• 4 years ago

Well, isn't that fucking obvious? If they are doing their job right, at least.

danielmarkbruce2• 4 years ago

Bad MBAs suck, good MBAs are valuable. Bad software engineers suck, good software engineers are valuable. Bad lawyers suck, good lawyers are valuable.

Every field has good and bad. Painting everyone in a field as bad or good isn't great thinking.

danielmarkbruce2• 4 years ago

Definitely need more Jack Welch types.

Oh wait.

dboreham• 4 years ago

Long ago someone described this to me as the "putting the price of the works cafeteria chips|fries up by 2p|$0.02 syndrome".

sesellis• 4 years ago

My brother often jokes that MBAs are the reason the world has gone to garbage, they're always "optimizing" everything to get the 10% return they had burned into their heads. Anything less is insufferable.

AStellersSeaCow• 4 years ago

My perspective after five years in tech management:

Effective managers from a pure tech background tend to have happy, functional teams that get things done well and add a lot of long term value to the company. They focus on "managing down", ie making sure their reports are happy and that they are building/doing the right things.

Effective managers with MBAs tend to have miserable teams that get things done fast and add a lot of perceived short term value to the company, at the cost of lots of long term value loss. They tend to focus on "managing up", ie making sure their bosses are happy and that they are personally looking good even if they are running things full speed off a cliff.

The former managers grow careers, build systems that don't need to be replaced every two years, and are remembered positively by their peers and reports. Of course, the latter managers get promoted much more readily and inflict that style of thinking on ever-widening orgs.

The most depressing part is that the latter style of manager -sometimes slowly, sometimes quickly - inevitably take over orgs and companies. Major stockholders/board members are too focused on the short term, and managers like that focus on short term value (or the perception thereof) at any cost.

Managers with a business degree reduce employees' wages, do not increase profit

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