Tuesday, May 19, 2009

Preparing Business Professionals

My team did not win the Spring 2009 MBA Conference at UHV. I am not writing this out of bitterness, I think, but clarity and full disclosure before the rest of this article. That is, the reader should know about any reason I have for bias. This article examines the practice and assumptions of the Case Competition at UHV, and suggests improvements.

The Master of Business Administration degree (MBA) is a unique academic credential. Academic degrees verify that the student has demonstrated knowledge and comprehension of a subject material to the degree required by his college, but the MBA also certifies practical ability; the MBA holder has been authenticated as a problem-solver and business leader, a person capable of making his employer stronger and more successful. The degree was designed for the real world, not merely the one in theory. Consequently, the MBA course of study ought to include a capstone course which tests the candidates’ ability to address real-world strategic decisions.

The University of Houston system has fortunately grown up with an ingrained need to prove itself. The Houston metropolitan area offers many opportunities for college and university experience; institutions in the area include Rice University, Houston Baptist University, St. Thomas University, the University of Texas Medical Branch (UTMB), the Baylor College of Medicine, Houston Community College, Prairie View A&M, Texas Southern University, Texas Woman’s University, Tomball College, Lady of the Lake University, Sam Houston State University, a number of for-profit schools like the University of Phoenix or DeVry, and of course the University of Houston. But that’s not all. UH also has had to compete with major players at the state and regional level for attracting top students, like the University of Texas and Texas A&M. The University of Houston has done well for itself over the last few decades, especially the Bauer School of Business. UH has established itself as a solid business school, recognized for excellence in its MBA programs.

Of course, UH-Victoria cannot claim quite the same prestige as UH’s main business school, although its faculty is shared to some degree. However, UHV’s growth strategy over the past half-decade reflects an ambitious set of goals, including the school’s accreditation as a member of the AACSB, its expansion from a two-year school focusing largely on graduate students to a four-year university with dormitory space and a full-scale staff for a complete range of academic studies, and the development of three major MBA programs in six fields of concentration. UHV is well on its way to becoming a force to reckoned with among business schools in Texas. The key focus for UHV, however, is to be aware of its relative newness, which can work to its advantage or represent a threat to the school’s success. And that is where the Case Competition comes into the story.

The Strategic MBA is UH-Victoria’s mainstream MBA plan (the other programs are the Global MBA for international business, and the ‘bridge’ MBA for BBA students who want to fast-track to their MBA as well). The Strategic MBA requires a capstone course called Strategic Management. That course is designed to test the MBA candidates’ knowledge from the courses they have taken in their time at UHV, combining the knowledge and experience from class and work to research, analyze, and make strategic recommendations for a real-world company. This project is done in stages, both individually and in teams, and culminates in a formal presentation to a panel of judges at a case competition held at the end of the semester. The top three teams as voted by the judges are recognized with certificates and permanent citation on a school plaque. Since the MBA program does not recognize cum laude, magna cum laude, or summa cum laude accolades, nor is there an official class ranking for graduate students, winning the case competition is one of few ways for a student at this level to stand out. The other notable honor is selection to Gamma Beta Sigma, the business school honor society.

Having said so much to get to this point, I will try to focus on the key points from here on in to the matter. Our target company this semester was PetSmart, the leader in the Pet Supplies and Services industry. Our team did well in all aspects of our research and analysis, and our recommendations not only were effective and practical, but were also well in alignment with the strategic vision of the CEO and leadership team. Once we completed our research and analysis of the industry and company, its focus and issues were easy to determine. For example, the following points became obvious:

[] The pet supply and services industry has been growing at a faster pace each year than PetSmart
[] With the exception of long-term store leases, PetSmart has effectively no long-term debt
[] CEO Philip Francis has emphasized the reduction of capital expenditures each year, and has announced his intent that no more than 4 percent of gross revenue should be spent on any capital project, including new store openings, the reformatting of stores to emphasize services, and any additional promotions or projects
[] PetSmart maintains relatively large liquidity for its industry (33.6% of assets are current)

The combined effect of these observations means that PetSmart is very risk-averse, and the leadership team has repeatedly emphasized their intention to avoid expensive capital projects. Accordingly, any realistic recommendation to the PetSmart board would have to be paid from current expenses, and be incremental in nature to avoid significant risk. Keep that in mind, it becomes important in a little while.

My team also focused on PetSmart’s “worry list”, a 32-item list in the Annual Report which identified, in order, the top concerns for the company. Without going into too much detail here, those worries focused on the revenue from new stores, on growth for services offered at PetSmart stores, on retention and effective training of key employees, and on better control of the supply chain. This directly led to our team’s four recommendations:

1. Perform site surveys and use specific demographic data to determine specific sites for new store locations;
2. Promote services using a national campaign and the Petperks card;
3. Create the role of ‘PetStar’, for experienced and motivated employees with growth potential;
4. Expand supply lines to include local brands recommended by managers and requested by customers

What made us confident that we had a winning position, was that the recommendations neatly dove-tailed with the company’s stated goals and priorities, and were in perfect alignment with the issues identified through the analysis. We saw tremendously profitable projects, low-cost and low-risk, which could be incrementally put into practice, all of which addressed the key areas of PetSmart’s directors’ focus and aligned with the company’s vision.

The exposition of our recommendations went well, though it had a few hitches. First off, some of our team were uncomfortable with public speaking, and this diminished our presentation a bit, and also in the Q&A session. While our data was perfect and our recommendations better than anyone else’s (wait for it), this imbalance of presentation certainly cost us points. We also had a problem with one of the six panelists, a judge who all but demanded we pay for our projects with capital expenditures, even though we had determined early on that such an action was not only unnecessary for our projects, but in opposition to the clear intent of PetSmart’s directors. At the time we thought that judge’s resistance to current expense was strange, but it later revealed a more serious problem with the process.

We had to wait a week to find out the results, and even then the announcement was oddly subdued. It showed up on a school blog Friday evening, and eventually found its way to the SOBA website by Monday. As of yet, none of the teams have been told their scores, provided any detailed feedback from judges, or learned – officially anyway – what won the competition for the three recognized teams. Despite hard work which received a 99% grade from the professor for the overall project, my team did not place. There has been no announcement of how the eleven teams which did not win scored, so there is no official word on where anyone placed who was not one of the winners. All in all, a strange way to conclude the business, although both the class professor and the school’s dean had promised useful feedback from the judges. It remains to be seen what actual details will be made available to the contestants.

I have to be honest and admit that I believed my team should have taken one of the top slots, especially after we discussed the competition with members from other teams. While a comprehensive review is not possible unless the school decides to release the details from the judges’ notes and the competing teams’ presentations, informal chats with other students revealed that the chief basis for points in the competition was style far more than substance. The reason lies in two factors; the rubric used for scoring the presentation and the judges’ preparation for the competition. The rubric had six sections, with scores from 1 to 4 in each section, so each judge assigned a score ranging from 6 to 24 for each team, and with six judges that creates a range of 36-144 points total possible for a team. So far, easy to follow. A copy of the rubric can be found here.

Looking more closely at the rubric, certain additional information comes to light. For example, given the fact that the teams would have worked all semester on the project, it is unreasonable to me to imagine that any of the teams would fall into the ‘1’ grade for any of the sections except ‘audience response’, nor do I believe that even there would all of the judges be so harsh on the teams. With regard to the “Issues Definition” and “Business Analysis”, I do not even believe that any of the teams would fail to score anything but 3’s and 4’s in those areas from the judges. What this does is place heavy emphasis on the recommendations, organization, and audience response, with the strongest factor in play being style rather than function. That is, people who could speak well would have the advantage over those who were less relaxed and smooth, even if the smooth talkers presented impractical recommendations and the less relaxed team were perfect in their analysis and recommendations. The first mistake made was in constructing a rubric which counted the practicality of the recommendations to a lesser degree than the style of presentation. I certainly recognize the value of presenting your case well, but a solid recommendation presented with some rough spots should definitely be scored more highly than an unrealistic recommendation presented with flair. Otherwise, the results would be as absurd as scoring a math test on the basis of flourishes and calligraphy, discounting whether the answer is even correct. I will come back to this crucial point.

Second, the judges had not been fully briefed on PetSmart’s corporate strategy or vision. They were unaware that the company is very risk-averse, and so their board of directors would be resistant to any proposal involving increased capital expense, long-term commitment (such as buying out a rival or supplier) or significant deviation from the vision laid out by Philip Francis in 2003. The emphasis of the project was that teams would make proposals as if to the board at PetSmart, so the character and tenor of the actual board is integral to the validity of recommendations made, and the judges’ response to them. In the case competition, all of the winners made recommendations which – speaking bluntly – the real PetSmart board would have rejected because of their risk, heavy financial commitment and capital expense, that is, the need to take on debt in order to finance the projects anathema to PetSmart’s stated objectives and goals. That the judges did not challenge these recommendations for their variance from PetSmart’s position is bad enough; that these recommendations were rewarded as the best demonstrates a far more troubling consequence of the competition’s structure.

I said the need to make valid recommendations was crucial, and it is very much so. The MBA is certification that the individual, whether an employee or a consultant, is qualified to perform effective research and analysis and make recommendations which will improve a company’s strategic position and performance. This can only happen when the individual properly understands the company’s range of options, its corporate strategy and primary goals. The case competition is the final episode in the capstone course of the program of MBA certification; beyond that point the student receives their diploma and moves on to the real world, where reality is far less forgiving of an invalid recommendation, no matter how well it is delivered. The glib, the trendy, these things must have no place in the mind or focus of the true professional, and so it is the worst sort of consequence to penalize valid recommendations and reward invalid projects, no matter how polished. It may seem inconsequential, that a competition was decided more by judges’ moods and their subjective reaction to style than by the actual corporate strategy of the target company and the functional relevance of the specific recommendations, but this is an area where there is much work to be done. In future years, it would be very much to UHV’s advantage to make sure the judges were properly briefed on the nature of the target company, that actual business executives were included in the panels rather than just faculty and prior case winners, and that feedback both to and from the participating teams in the weeks following the competition should be much broader and detailed than the present practice. At the very least, the school could rest assured that their case winners would be properly equipped for the real world challenges they face so soon after graduation, and that their competition was as realistic as humanly possible to create.

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