Why MBAs do finance – a studs and fighters perspective

I don’t have sources here but enough people have cribbed that nowadays too many MBAs are going into finance, and banking, and not too many of them get into “real management” jobs, which is what the country/the world desires them to get into. I clearly remmeber a Mint column on this topic by Govind Sankaranarayanan. And that is surely not the exception. And I remember reading this article very recently (don’t know where) which says that the reason MBAs were taken into banking was to provide a business perspective to banking, and not to be hardcore finance people themselves.

Management roles can be broadly classified into two – functional management and coordination management (the latter is also known as “general” management). Functional management is more like “captaincy” – you essentially do similar work to what your team does, and you guide and direct them, and help them, and boss over them, and get paid a lot more for it. The best part of functional management is that you can outsource all the chutiya kaam to some underling. And there is enough “functional” interaction for you with your team in order to keep your mind fresh.

Coordination management, on the other hand is mostly about getting things done. You don’t necessarily need to have experrtise in what your team does, though some degree of comfort does help. Most of your work is in coordinating various things, talking to people, both inside the team and outside, both inside the company and outside, and making sure that things are done. No special studness is generally required for it – all it requires is to be able to follow standard operating procedures, and also to be able to get work done out of people.

Historically, functional managers have been “grown” from within the team. it is typically someone who was doing similar work at a lower level who gets promoted and hence takes on a leadership role. So in an engineering job, the functional manager is also an engineer. The sales manager is also typically a salesman. And so on.

Historically, MBAs have been generally staffed in “coordination management” roles. Typically these are multifunctional multiskilled areas for which it is not easy to pick someone from one of the existing departments, and hence MBAs are recruited. Historically, when people have talked about “management”, they have referred to this kind of a role.

So through my description above, and through your own observations in several places, you would have figured out that coordination management/general management is typically a fairly fighter process. It is about getting things done, about following processes, about delivering, etc.

This applies only to India – but there is a reasonably high “stud cutoff” that is required in order to get into the better B-schools in the country. This is because the dominant MBA entrance exam – CAT – is an uberstud exam (I would argue that it is even more stud than the JEE – which requires some preparation at least, and hence puts a reasonable fighter cutoff). So you have all these studs getting into IIMs, and then discovering that the typical general management job is too fighter and too less stud for them, and then looking for an escape route.

Finance provides that escape route. Finance provides that escape valve to all those MBAs who figure out that they may not do well in case they get into general management. Finance as it was in the last 5-10 years was reasonably stud. And thus attracted MBAs in reasonably large numbers.

The simple fact is that a large number of people who get into MBA won’t be able to fit into a general management kind of job. Hence there is no use of commentators cribbing about this fact.

If the IIMs decide that they would rather produce general managers rather than functional managers, they would do well to change admission requirements. To make admission less stud and more fighter. ISB, in that sense, seems to be doing a decent job – by having significantly lower stud cutoffs and putting more emphasis on work experience and other fighterly aspects. Hence, you are more likely to find an ISB alum going into general managementt as opposed to IIM alum.

19 thoughts on “Why MBAs do finance – a studs and fighters perspective”

  1. Actually, it is more difficult to get things done, since there are no SOPs in that area – each manager needs to use his own ideas/skills to get other functional guys to deliver the goods. Looks like good Gen Mgt is actually a stud role.

    The functional guys on the other hand tend to follow an SOP type approach to life, where you make a living off other studs’ theories in your functional area. This seems to make functional management a fighter role.

    Thus it seems to make sense why GM guys tend to eventually become CEOs, while the nerdy engineer gets to become Chief Technical Architect or some such fighter.

    1. i’m not sure this is how i intended things to be when i first defined these concepts, but now I associate studness with insight. the “aha moments” as the McKinsey fellows will tell you. i think the scope for insight is limited in a general management role.

  2. I don’t think this is true, Wimpy. MBAs prefer finance because it is quantitative/ analytical, and is skill-based. Particularly in India where most MBAs haven’t worked before, MBA students like the certainty/ tangibility of finance.

    General management is much more ambiguous, subjective and requires a combination of softer skills with more complex problem solving (e.g., having to integrate different functions). It’s hard to teach and harder to measure. I think your notion of general management is biased by the managers you saw in consulting.

    I do think there are way more bad general managers than good ones, but that doesn’t make general management easy, does it?

    1. yes my view of “general management” has been biased by the people i’ve met in consulting.

      i somehow think that more than the well-definedness of finance, it’s to do with the quantitative aptitude of a lot of MBAs – the entrance exams are designed such that the better you are at math, the better your chance of getting in. and you try to play to your strengths and end up in finance.

      though i suppose that in the US, you have lesser number of geeks doing mBAs; so you do have more diversity in choice of careers.

  3. I am not really sure if CAT is a stud exam.You can fight(and may be fight hard) your way through to those 99 odd %iles.Only about 20% of the questions may require a stud approach.The rest are repeated questions,at least concept wise.

    Also a lot(not everyone) of the people who make it to the iims have not much of an inclination towards finance.I guess they look at it as a faster way to make money.My theory is the ‘closer’ you work to money the faster you can earn it.

    1. pattern might have changed but in my time (5-6 yrs back) it was very easy to crack without preparation. yeah, you can put a lot of lot of fight and somehow sneak in but not too many people can manage that.

    1. Its more the money aspect there..
      Glamour aspect exists in toiling through the crap to get promoted and get someone else doing the crap for u

  4. Also, CAT pre selects a lot of nerds. These nerds have the social / emotional intelligence of baboons. Hence, naturally they migrate towards individual contributor roles where they get allotted some work which they can process alone. Just so happens that the well paying finance sector is full of such roles. So its a win win for both parties.

  5. I think they go for Finance because avg pay is higher.

    You’re getting the same disease that you accused Taleb of a while back – taking one funda which you like and applying to anything and everything..

    1. Following Taleb’s footsteps you should publish “Maximizing employee productivity – A stud/fighter perspective”. Bet ur thinking of that !

  6. Depends on what kind of managerial jobs you are referring to. I have done a bit of project management and program management. Project Management was full of processes, managing schedules & budget, periodic reporting etc. which you typically end up learning after being at it for a decent amount of time. Fighter-like.

    The program management roles that I have been in have required me to deal with a LOT of ambiguity. It was more like a running a business and not a project. Good Program Managers are valued for their ability to solve problems, put insight (:P) and their “knack” to get things done. You can’t get good at these by doing them a 100 times.

    Getting things done is not as easy as it sounds 🙂 It requires rallying people behind a goal, leading them, managing them (and their egos) and ultimately hitting the goal while still adhering to constraints such as time and budget. IIMs, by virtue of their admission policy, don’t produce grads who have demonstrated these abilities in a corporate environment – at least not the at the time of graduation.

    1. i’m not saying tha process is easy. all i’m saying that it’s a different and orthogonal skillset to studness. yes, getting things done requires a “knack” but again i’m not sure if it’s too “insightful”.

      thing with IIMs (ok i’m reducing this post to a line) is that their selection criterion is totally stud, while their graduates are expected to do fighter jobs. hence the graduates gravitate towards the studder of the mBA jobs which are in finance

  7. it is just the money …

    once you are rich enough, create a GM profile which gives a hell of money and you will find all the studs running after it ..

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