TWINKIE

All the news about Hostess these past few days reminded me of a close friend who purchased a dog for his daughter when she had just turned 4 years old. He told me as he drove home with the puppy that he was thinking of naming the tiny white Bichon Frise Fluffy or maybe Snowy. His wife preferred the names Casper or Snowflake. But when he walked in with the puppy under his arm, his daughter immediately ran to him jumping up and down shouting, “Can I hold Twinkie?” According to him, no other name stood a chance after that.

So when I read that the last ditch mediation session ordered by U. S. Bankruptcy Judge Robert Drain for Hostess and its Bakers’ Union had failed, that liquidation for Hostess might be imminent, and Twinkies might be history I had a brief, reflective moment about Hostess Brands the company, Twinkie, my friend’s daughter’s dog, and what it all might mean.

Well, to start with it was going to mean a high likelihood that 18,000+ Hostess jobs were going to be lost. Unfortunately, even though Hostess had $2 billion in revenues, it was suffocated with $1 billion in debt.  Hostess was also saddled with anachronistic pensions, manufacturing facilities that were significantly outdated, and a highly distrustful workforce. I remember reading this summer that Hostess had announced that without an agreement from both its major unions, The Teamsters and Bakers’ Union, it would be forced to cease operations. I wondered at the time if they were posturing or whether it was a real threat. The Teamsters did agree to meaningful wage cuts (nearly $200 million) but the bakers decided to fight. Thus, the showdown developed. It also likely means that most of the cash that’s been pumped into Hostess over the past couple of years from the outside (like $130 million) is “down the drain” (no pun intended on the Bankruptcy judge).

What are the major lessons we can learn from Hostess shutdown? Well, first and foremost, bluffing has its risks. The Bakers’ Union undoubtedly thought that Hostess wouldn’t take the drastic steps of bankruptcy and subsequent liquidation as Hostess management had backed down from the bankruptcy threat late in the summer. At the same time, Hostess management probably felt that since The Teamsters had agreed to a restructured deal, the Bakers’ Union would be close behind. Both were wrong. Second, my best guess is that the Twinkie brand will somehow survive. After all, they produced like 500 million of them last year (how many of you would have guessed that number??). Twinkies will probably look exactly the same even though someone besides Hostess is making them.

So where does that leave my friend’s daughter’s dog? Well, Twinkie passed away a few years ago but I am told he was a great family pet. Of course, this wouldn’t have been nearly as good a story if my friend’s daughter had run up and shouted, “Can I hold Ding-Dong?”

PROCESS INNOVATION

Malcolm Gladwell calls that threshold moment where an innovation boils over to mainstream The Tipping Point and he wrote a national bestselling book on the topic several years ago. Process innovation is the implementation of a new or significantly improved production or delivery method. Examples of famous process innovations are factory to consumer delivery of custom-built computers by Dell and the use of barcodes, scanners and the Internet to allow customers to track parcels in real time as they are being transported.

There are some fascinating things being introduced into the MBA admissions process that might potentially fit in the process innovation category. For example, Duke’s Fuqua School of Business has a required “25 Random Things” list that is supposed to be a numbered, top 25 inventory of an applicant’s passions, personality, quirks, hopes and fears. Admissions uses this additional “tool” to differentiate among applicants.

Wharton, because its MBA program involves multiple team interactions throughout the two years of coursework, has just recently introduced a “team interaction” exercise as part of the admissions process. The most promising Wharton applicants are invited to participate in a discussion with 5-6 other applicants who then work as a team to brainstorm a solution to a real-world business scenario. This interaction is viewed and assessed by trained facilitators from Wharton’s admissions office and becomes a part of the applicant’s admissions file – another process innovation tool to differentiate applicants.

The University of Chicago’s Booth School of Business, UCLA’s Anderson School of Management, and NYU’s Stern School of Business accept PowerPoints, multimedia, and art in an attempt to differentiate potential applicants.

What’s process innovation at UHD? To apply to our MBA program, all you need are three years of work experience after completion of your undergraduate degree, your GMAT score, and two professional references.

We think it doesn’t get any easier than that……

THE CHICKEN SANDWICH: SALAD OR “GRILLED”

My daughter was home from college last weekend and she and I went to lunch on Saturday. She's nearing the end of her undergraduate architectural degree and is considering continuing on for either an MBA or Masters in Architecture.

Not long after our sandwiches arrived (in fact, I hadn't even gotten a bite of my chicken salad), she started asking questions about our MBA program. "Dad," she began, "How many hours/classes are in the UHD MBA program?"

"Thirty-four," I sort of mumbled because I had finally taken a bite of my sandwich and my mouth was full.

"Thirty-four classes?" She was clearly shocked.

"No, no," I said crunching a salt and vinegar chip, "Not thirty-four classes -- 34 hours."

"Wait a minute," I could see her mind calculating. "Thirty-four isn't divisible by 3. Are some of the courses more than 3 hours??"

I was able to reply a bit more clearly since I had swallowed my mouthful. "No, all of our classes are 2 credit hours and you need 17 classes to complete our program."

"That's a little strange," she began. "None of the other MBA programs I'm considering or have looked into have 2 hour courses. What's the thinking behind that?"

"Pretty simple," I said. "The goal of our MBA program is probably a little different from most. We want to produce general managers not individuals who are functional specialists. For this reason, we wanted to communicate to our faculty who were delivering the MBA program that they should strip down the content within their courses to specific material of high value to general managers. Thus, 2 hours, not 3."

"Whoa, I thought you told me these were all night classes," now she was in high gear. "If that's the case, won't it take like 3 years to finish the degree?"

"Not at all. Our MBA can be attained in 2 years or less. We do 8 week classes in a hybrid format -- that's 2 hours in class and 2 hours outside of class per week per class and allows you to complete 4 courses per semester."

She was mulling that over so I thought it was time for a father/daughter moment. "Honey," I started, "if I knew you had so many questions about our MBA program, I would have ordered the grilled chicken..."

I thought it was an extremely humorous moment but she didn't even crack a smile. What do fathers know?

MBA ROI

Last week I had 3 prospective MBA students in my office asking about a quote from our MBA brochure that states “MBA graduates expect salaries more than 45% higher than candidates with an undergraduate degree alone.” They were curious about two things: (1) could they expect an immediate pay raise once they completed their MBA program; and (2) if not, what was my advice to them regarding their leveraging of their potential MBA into a higher salary?

“Well,” I started, “I hope you’re not thinking about entering our MBA program solely for the 45% pay bump!” There was some perceptible uncomfortable shifting that took place after I said this and I purposely let it sit on the table for a moment before forging ahead. “MBA programs have at least two distinct models. Model 1 is a day program where you are expected/required to be a full-time student and not be working a traditional job. Model 2 is a night or weekend program that is designed for working professionals, i.e., people who are working full-time. UHD is Model 2 all the way.”

“I will tell you this,” I continued. “Organizations don’t always immediately appreciate an educational upgrade particularly if the upgrade takes place during your employment tenure. In other words, organizations form perceptions about you based upon your qualifications and education when you are hired. These perceptions are not easily altered regardless of training and/or education you receive while on the job. Here’s some personal experience for you – when I entered my Ph.D. program, I was a “peon” graduate student. My dissertation chairman to this day still sees me as his graduate student without regard for my progress and accomplishments. It’s just human nature. My point is that new qualifications/education are usually best appreciated by those who meet you after the upgrade.”

“One last thing for you to consider,” I plowed ahead. “A couple of years ago, Robert Barro from Harvard and Jong-Wha Lee of the Asia Development Bank conducted an in-depth study on the ROI of a year of graduate school education. What they found was an average return of 17.9%. So while you’re thinking about that 45% raise, compare that 17.9% return to the ROI from investing in real estate, bonds, stocks or almost any other asset class.”

“You’re investing in yourself and the rewards of that investment will be with you for the rest of your life,” I finished.

They filed out quietly but I could see I had struck a chord….

IS AN MBA A GOOD INVESTMENT?

You might recall that a few months ago, my wife and I had dinner with two of her close friends and their husbands – a plastic surgeon and a lawyer. The conversation revolved around the plastic surgeon’s son Ross who was contemplating entering an MBA program, and whether this was a good career move (see my blog post from 1/19/2012 entitled WHY PEOPLE GO INTO AN MBA PROGRAM).

Well, I am pleased to report that we had dinner with the two couples again last weekend and we barely had our napkins in our laps before the plastic surgeon was firing away. “Well, Don,” he started, “Ross starts his MBA at Northwestern in a few weeks thanks to your comments at our last dinner. But you know what?” (He didn’t wait for an answer). “A close friend of mine told me two things I’d like your reaction to – first, he said the MBA was a dying degree; and second, he said besides that it had a negative ROI, i.e., it wasn’t worth getting from an economic standpoint.”

“How long do I have to answer,” I asked. “Until the hors d’oeuvres arrive or the main course?” Everyone laughed in a sympathetic ‘Hope you can answer those loaded questions’ way.

“Let me address the ‘dying’ degree first,” I began. “Here’s a macro perspective for you. In 1960, about 5,000 MBAs were awarded; in 2000, about 100,000 and this year nearly 160,000 will receive an MBA. Further, 300,000 people will be enrolled in MBA programs this year. More people are seeking an MBA than any other graduate field. As a reference point, the number of MBAs awarded last year was 3x the number of undergraduate engineering degrees. Hardly the statistics of the dying….”

“Now does this mean there are never any hiccups? Absolutely not. About every 10 years, there have been slowdowns/declines in the growth of graduate management education. There’s a famous Wall Street Journal article in 1985 that reported that perhaps 25% of business schools would have to close because of low application rates. In the mid-1990s, there was a New York Times article with the headline ‘Business Schools Hit Hard Times Amid Doubt Over Value of MBA (No, I’m not answering your 2^nd question yet). In 2005, Business Week reported a drop of 30% in applications to MBA programs since 1998. And so forth. So I won't argue that there have been some high profile negative reports but it's like the stock market -- you can focus on the few crashes or look at the long term picture.”

I buttered a slice of bread to let all that sink in and then continued. “As for ROI, Forbes reported just last year that the ‘investment’ one makes in an MBA (including tuition and forgone salary) is typically paid back in less than 4 years. One of the reasons for the rapid payback is that MBA graduates often receive starting salaries 50% higher than their salary prior to enrolling in their MBA program. Not exactly what I’d call either negative ROI or a bad investment.”

The plastic surgeon had a rather dazed look on his face but I didn’t miss a beat. “You know, Richard, if I could paraphrase Mark Twain ‘The rumors of the death of the MBA have been greatly exaggerated’.

When the bill came, I was about to reach for it when the plastic surgeon’s wife said, “Richard, you owe Don dinner for making him answer all those silly questions.”

Speaking of a good ROI, that steak dinner was a pretty nice return on my one hour reading investment….

TO EDUCATE OR NOT EDUCATE: THAT IS THE QUESTION

One of the popular debates these days is whether a college education is the right choice for everyone enrolled in degree granting institutions. The arguments go something like this:

PRO:

1)      College graduates earn significantly more money than high school graduates (2x);

2)      The majority of jobs today require technology and social skills – the “stuff” you learn in college;

3)      Higher education is the foundation for change in later life (i.e., it prepares you for a life where career change is increasingly likely).

CON:

1)      There are more graduates than jobs in the higher paying managerial, technical, and professional occupations to which college graduates aspire;

2)      A large percentage of full-time students (40+%) who enter four-year college programs fail to have their degrees within 6 years (there are many universities where the graduation rate is less than 30%);

3)      There is nearly $1 trillion in college debt outstanding, hanging like an albatross around the necks of would be innovators and entrepreneurs;

4)      As the proportion of Americans “expecting” to attend college rises, the value of a college education decreases (I call this the “Audi” phenomenon. Many of the early Audi owners liked their vehicle because everyone didn’t have one.  As the Audi brand became more popular and they were more visible, some of the early owners defected to less “mainstream” brands).

My personal opinion is that college is a path that every American should be able to walk down if they so choose. Evaluating the costs and benefits of this path, deciding what to do in life, and asking what knowledge and skills are required should be an individual’s choice not dictated by an outside group or individual.

If the conclusion is that higher education is overpriced, let’s work on lowering the cost of education not limiting who gets it.

INTEGRITY

Annually, Warren Buffet sends a letter out to each of his CEOs that outlines his expectations for the upcoming year. Interestingly, his letters always begin with the same message: “We can afford to lose money. We can afford to lose a lot of money. But we cannot afford to lose one shred of our reputation. Make sure everything you do can be reported on the front page of your local newspaper….”

I was talking recently with a group of UHD faculty who were lamenting the fact that it seemed some students had been able to purchase the test bank for a textbook currently utilized in a required class at UHD. “What is the world coming to?” they were asking.

I had another professor relate an incident to me that occurred during an exam in his class this past semester. He had stepped out of the room briefly. While he was gone, a student called out the answer to one of the questions on the exam. One student remained behind after the exam and reported the incident. There were 3 distinct breaches of integrity within this incident. The first, and obvious, was the calling out of the answer. Less obvious were the other two – a) those who benefitted from the information called out; and b) those who didn’t report the incident.

While this situation was a potential violation of the academic honesty policy, the professor decided there was a lesson in ethics and integrity to be taught. He therefore sent a note to each student outlining his expectations of their ethical behavior and how trustworthy behavior creates a bond. He then asked each student to own up to any breach of integrity that had occurred during the exam and outlined the penalty for each breach. The professor, of course, knew who had called out the answer and who hadn’t reported the incident. But approximately 50% of the class admitted to using the information that was called out. There were several students who exerted pressure on their classmates to “do the right thing”. The student who had called out the answer asked to speak briefly to the class and apologized to each student for putting everyone at risk with his inappropriate behavior.

Ethics is a tricky subject. The guide for “what’s right” isn’t always published in black and white. In fact, what’s right is often defined in the “eyes of the beholder” or popularity or convenience. And as the above example shows, peer pressure is often as impactful as any other influence.

Integrity isn’t something to be affirmed once and forgotten. It’s more like a marriage vow – not frequently mentioned but always there….