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Should Companies Invest in Babies or MBAs?

13 May 2013

I was having a heated debate with a CEO I respect and admire the other day about whether companies should be asked to stump up for paid parental leave (PPL).  Because I work in the financial markets, I could empathise with the plight of companies struggling to turn a profit during the past five or so years.  Any CEO who has successfully survived this period (male or female) could well be expected to roll their eyes at the mention of a new tax - or altruistic policy which is both disruptive and costly in the short term.  So I was not at all surprised when this particular CEO said, "Why should companies pay for PPL?  Why can't people who have families save up their money BEFORE they have children?...Why should we have to pay for them to have kids."

It's true, we SHOULD all be responsible adults and save our pennies BEFORE we have kids.  But we don't.  That's probably because if anyone told us how much we would have to invest, financially, emotionally and physically in our children we would NEVER have them!

It's a good thing that the making of babies is linked to an uncontrollable urge that many of us are incapable of withstanding, particularly in developed countries like Australia where declining birth rates and an aging population are expected to put downward pressure on government revenues and upward pressure on services.

It seems logical then to me, that governments of countries faced with an aging population  should not only support wherever possible the birthing of babies, they should also be encouraging the participation in the workforce of both sexes.

The problem is, CEO's are managing businesses for their stakeholders.  They are not rewarded by the amount their firm contributes to the economic well being of the nation - and so where is the incentive for these firms to support PPL within their own organisation?

Instead of arguing the altruistic benefits of PPL for the wider community, I asked this particular CEO to consider which was better for organisations: paying for an employee to take time off from work to study an MBA or paying for them to take PPL?

Intuitively the MBA seems the better investment.  But is it really?  Surprisingly I could not find much research out there on whether MBA managed companies are better.  But I did find a debate published by The Economist asking just this question.  One of the respondents, HENRY MINTZBERG (Cleghorn Professor of Management Studies, McGill University's Desautels Faculty of Management) referred to a1990 book published by Harvard which listed 19 of its superstar CEOs.

Mintzberg and his research team tracked the records of these CEO's to 2003 (the results of which are reprinted in his book).  According to Mintzberg, ten of the CEO's, "were total failures and four others performed questionably at best."  Mintzberg admits, "that this offers no definitive proof (sic that MBA lead firms are worse off) but is certainly worth investigating. I know of no effort to do so. "

In the debate, Mintzberg argues that the MBA, "represents a form of training that distorts rather than develops the practice of management."  His basic argument is that management is a "craft" that can not be taught to people who have never managed.   As a result, "MBA programmes mostly fall back on what they can do: rely on the science, in the form of theory—both general analysis and particular techniques. And so too, unfortunately, do many of their graduates. Those who believe they have learned management by sitting still in an MBA classroom are a menace to society. Mostly they have learned about the functions of business. But marketing + finance + accounting ≠ management."

working mum with baby
Ok, so big deal - MBA's don't necessarily translate into better business performance, but what about babies?  Surely companies that are paying for employees to go off on maternity leave can't be in a better position than those sacrificing time and money to MBA's.

It's a good question - and again one which has not been broadly researched or written about.  But let's assume (and it's a big assumption) that one of the outcomes of PPL is increased participation of women in the workforce and in particular at the upper end of management.

There have been several studies on the performance of companies with women on boards and in management positions.  A 2001 study by Pepperdine University (published in the Harvard Business Review) showed the firms which promoted women were more likely to deliver better financial performance across a range of metrics including profits, asset and shareholder equity values than those that do not.

Another study conducted by Catalyst (2007) showed that top quartile performing firms had the most female participation on boards while bottom quartile firms had the least.  Similarly, McKinsey looked at the top-listed European companies and found that greater gender diversity in management led to higher-than-average stock performance.

Quite apart from fostering gender diversity there are other reasons why I believe firms that support and encourage employees to have babies are better placed than those stacked with MBA's.   While MBA's are taught some excellent skills, the experience of having a child also delivers some important life skills that intuitively should be of high value to firms.  Off the top of my head I can think of three skills/characteristics which come with being a parent - but I'm sure there's much more:

Fosters Loyalty & Team Ethic - employees who have kids are more likely to value stability and are less likely to be looking elsewhere for a new role.  Having kids means oftentimes putting yourself last and the needs of others first.   It means being a flexible team player and not sweating the small stuff.

Managing People - any working parent will tell you that raising children provides incredible insight into how we develop as individuals and the psychology behind interpersonal relationships.  I've learned so much about how to influence and manage people just through the interactions with my own sons and I'm sure I'm not alone.

Time Management/Organisiation - I was never as organised in my life as I was when my second son was born only 18 months after the first.  Making sure we had clean bottles, nappies, wipes, clean clothes, baby food etc involved a great deal of time management and organisation.  This is why women are such great multi-taskers.

Look, I'm sure there are business leaders out there who will swear by the value MBA's bring to their business, but there is also something to be said for the life skills one learns from being a parent - and that's just as valid for women as it is for men.   At the end of the day, if PPL means both parents have the opportunity to benefit from the experience isn't everyone the winner?