12 ms·

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

629 points by jstx1 4y ago

altell 4y ago
There is a good episode(ep 517) of freakonomics radio about that
- fuzzmuzzy 4y 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
  - altell 4y ago
    thought the same,and yes it is really a good episode worth listen to
clavalle 4y ago
They have one lever, and it isn't innovation.
- HardlyCurious 4y 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 4y ago
    Owned and operated by business executives.
- deleted 4y ago
  [deleted]
- pella 4y ago
  Intel has had several CEOs with non-technology educational background. ( ~ MBA )
  - Entinel 4y 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.
    - hef19898 4y ago
      And VW was almost completely engineering led, including Piech whom you could somehow consider at least the god father of Audi and VW if not a founder type, when the emissions scandal happened.
      - nalaz 4y ago
        Nothing wrong with what he did. It was a political thing.
        hef19898 4y ago
        Courts all over the world, including VWs home country, disagree with you here.
        _yb2s 4y ago
        I agree with this, I feel the regulations at the time they were cheating were unjust, as the technology didn't exist to meet them yet. Most of their competitors simply pulled diesels from the market, but the VW TDIs were still the most efficient cars on the market in terms of CO2, a more important environmental issue than the things they were cheating on (NOx). Ironically, my thoughts are that what they chose to do was the most responsible course of action environmentally and ethically, because the alternative outcome (people driving less efficient vehicles) was worse.
Workaccount2 4y 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.
- HardlyCurious 4y ago
  I took the study to imply sales / revenue went down as much as salaries.
- socialismisok 4y ago
  It does only in a vacuum. Real world is not so simple. Productivity can be impacted by wages, morale too, retention.
- donquichotte 4y 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 4y 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.
- duxup 4y 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.
boh 4y 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 4y 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?
  - boh 4y 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 4y 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 (...)
pdntspa 4y 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.
- mhuffman 4y 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".
  - pdntspa 4y 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.
    - FredPret 4y ago
      Shareholders literally own the company and thus hold all the strings. Your point regarding business = people stands though
      - atq2119 4y ago
        > Shareholders literally own the company and thus hold all the strings. This implication doesn't have to be true though - it's a political choice. There are (well developed) countries in which worker representatives have a significant amount of board vote shares by law, usually applicable to companies beyond a certain size.
lm28469 4y ago
When you put bead counters in charge, they count beads
- HyperSane 4y ago
  The expression is bean counters.
  - dktoao 4y 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!
  - triceratops 4y ago
    GP is still technically correct. Why would a bead counter count beans?
    - shepherdjerred 4y ago
      Everyone has to start somewhere
  - lm28469 4y 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
    - loonster 4y ago
      As a native English speaker, I adore your version.
    - HyperSane 4y ago
      That is actually pretty funny, you independently re-invented the expression.
SSJPython 4y 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.
- deleted 4y ago
  [deleted]
resters 4y 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 4y 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 4y 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 4y 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.
duxup 4y 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 https://www.youtube.com/watch?v=NcoDV0dhWPA Perhaps they should all be required to go manage a McDonalds for a year or something?
- spoiler 4y 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 4y 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.
5350-uiop-1130 4y ago
> we show that non-business managers share profits with their workers, whereas business managers do not I wonder why that is.
itsdrewmiller 4y 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 https://news.ycombinator.com/item?id=30836059
- sacrosancty 4y ago
cardosof 4y 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_remove 4y 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 4y ago
  Read the Gervais principle
- nelsondev 4y 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_remove 4y 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 4y 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.
- uptownfunk 4y ago
  [flagged]
  - grayscaleadam 4y ago
alecfreudenberg 4y ago
Fire all the managers
- Lendal 4y 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.
  - alecfreudenberg 4y 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.
    - goodpoint 4y ago
      In my experience less than 1 manager in 10 has some teacher / therapist qualities. Oh, you forgot Politician.
  - krageon 4y 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 4y 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.
DoneWithAllThat 4y 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 4y ago
  It's a post of study, isn't that assumed?
thenerdhead 4y 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.
- deleted 4y ago
  [deleted]
- importantbrian 4y 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.
atty 4y 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 4y 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.
  - mgkimsal 4y 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.
    - nelsondev 4y ago
      At Amazon, engineers are frequently referred to as “resources” and “head count”. For example, “Hi Priya, how much are you resourcing project z” translates to, “how many of the engineers you manage will you tell to work on project z”.
      - mgkimsal 4y ago
        I think I meant 'engineering' like... physical engineering equipment. Perhaps poor choice of words. The people who manage a physical location don't use the term 'visibility resources' to talk about lighting and windows.
marcosdumay 4y 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.
- Arrath 4y 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.
  - marcosdumay 4y 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.
  - yamtaddle 4y 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.
at_a_remove 4y 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 4y 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 4y 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-wage-stagnation/ https://freakonomics.com/podcast/are-m-b-a-s-to-blame-for-wa...
kragen 4y 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 4y 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 4y ago
The best way to increase profit is to find ways to align the employees' selfish interests with the success of the company.
pella 4y ago
https://mbaoath.org/ https://mbaoath.org/ "A voluntary pledge by MBAs to create value responsibly and ethically"
ozim 4y 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 4y ago
Well, isn't that fucking obvious? If they are doing their job right, at least.
danielmarkbruce 4y 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.
danielmarkbruce 4y ago
Definitely need more Jack Welch types. Oh wait.
dboreham 4y 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 4y 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 4y 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.

629 points by jstx1 4y ago

altell 4y ago

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

fuzzmuzzy 4y 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
- altell 4y ago
  thought the same,and yes it is really a good episode worth listen to

clavalle 4y ago

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

HardlyCurious 4y 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 4y ago
  Owned and operated by business executives.
deleted 4y ago
[deleted]
pella 4y ago
Intel has had several CEOs with non-technology educational background. ( ~ MBA )
- Entinel 4y 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.
  - hef19898 4y ago
    And VW was almost completely engineering led, including Piech whom you could somehow consider at least the god father of Audi and VW if not a founder type, when the emissions scandal happened.
    - nalaz 4y ago
      Nothing wrong with what he did. It was a political thing.
      - hef19898 4y ago
        Courts all over the world, including VWs home country, disagree with you here.
      - _yb2s 4y ago
        I agree with this, I feel the regulations at the time they were cheating were unjust, as the technology didn't exist to meet them yet. Most of their competitors simply pulled diesels from the market, but the VW TDIs were still the most efficient cars on the market in terms of CO2, a more important environmental issue than the things they were cheating on (NOx). Ironically, my thoughts are that what they chose to do was the most responsible course of action environmentally and ethically, because the alternative outcome (people driving less efficient vehicles) was worse.

Workaccount2 4y 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.

HardlyCurious 4y ago
I took the study to imply sales / revenue went down as much as salaries.
socialismisok 4y ago
It does only in a vacuum. Real world is not so simple. Productivity can be impacted by wages, morale too, retention.
donquichotte 4y 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 4y 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.
duxup 4y 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.

boh 4y 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 4y 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?
- boh 4y 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 4y 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 (...)

pdntspa 4y 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.

mhuffman 4y 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".
- pdntspa 4y 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.
  - FredPret 4y ago
    Shareholders literally own the company and thus hold all the strings. Your point regarding business = people stands though
    - atq2119 4y ago
      > Shareholders literally own the company and thus hold all the strings. This implication doesn't have to be true though - it's a political choice. There are (well developed) countries in which worker representatives have a significant amount of board vote shares by law, usually applicable to companies beyond a certain size.

lm28469 4y ago

When you put bead counters in charge, they count beads

HyperSane 4y ago
The expression is bean counters.
- dktoao 4y 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!
- triceratops 4y ago
  GP is still technically correct. Why would a bead counter count beans?
  - shepherdjerred 4y ago
    Everyone has to start somewhere
- lm28469 4y 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
  - loonster 4y ago
    As a native English speaker, I adore your version.
  - HyperSane 4y ago
    That is actually pretty funny, you independently re-invented the expression.

SSJPython 4y 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.

deleted 4y ago
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resters 4y 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 4y 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 4y 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 4y 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.

duxup 4y 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 https://www.youtube.com/watch?v=NcoDV0dhWPA Perhaps they should all be required to go manage a McDonalds for a year or something?

spoiler 4y 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 4y 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.

5350-uiop-1130 4y ago

> we show that non-business managers share profits with their workers, whereas business managers do not I wonder why that is.

itsdrewmiller 4y 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 https://news.ycombinator.com/item?id=30836059

sacrosancty 4y ago

cardosof 4y 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_remove 4y 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 4y ago
Read the Gervais principle
nelsondev 4y 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_remove 4y 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 4y 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.

uptownfunk 4y ago
[flagged]
- grayscaleadam 4y ago

alecfreudenberg 4y ago

Fire all the managers

Lendal 4y 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.
- alecfreudenberg 4y 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.
  - goodpoint 4y ago
    In my experience less than 1 manager in 10 has some teacher / therapist qualities. Oh, you forgot Politician.
- krageon 4y 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 4y 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.

DoneWithAllThat 4y 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 4y ago
It's a post of study, isn't that assumed?

thenerdhead 4y 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.

deleted 4y ago
[deleted]
importantbrian 4y 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.

atty 4y 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 4y 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.
- mgkimsal 4y 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.
  - nelsondev 4y ago
    At Amazon, engineers are frequently referred to as “resources” and “head count”. For example, “Hi Priya, how much are you resourcing project z” translates to, “how many of the engineers you manage will you tell to work on project z”.
    - mgkimsal 4y ago
      I think I meant 'engineering' like... physical engineering equipment. Perhaps poor choice of words. The people who manage a physical location don't use the term 'visibility resources' to talk about lighting and windows.

marcosdumay 4y 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.

Arrath 4y 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.
- marcosdumay 4y 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.
- yamtaddle 4y 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.

at_a_remove 4y 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 4y 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 4y 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-wage-stagnation/ https://freakonomics.com/podcast/are-m-b-a-s-to-blame-for-wa...

kragen 4y 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 4y 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 4y ago

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

pella 4y ago

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

ozim 4y 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 4y ago

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

danielmarkbruce 4y 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.

danielmarkbruce 4y ago

Definitely need more Jack Welch types. Oh wait.

dboreham 4y 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 4y 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 4y 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.