Teaching economics to MBA Students

Introduction

The Economics LTSN invited me to write a case study discussing the challenges and rewards of teaching economics to MBA (Master of Business Administration) students. Why a case study about MBA teaching? Certainly, it is an important market and has grown rapidly. More to the point, teaching MBA students poses particular challenges, but equally can be exceptionally rewarding.

A natural place to start is with some of the myths about teaching MBA students. It is said that that MBA students do not want to learn about economics, and especially not micro! More generally, it is said that they don't like the tough subjects like economics and statistics, but prefer the more approachable subjects such as marketing and strategy. It is said that they haven't the patience for intellectual rigour, but want everything distilled to a few bullet points. Finally, it is said that they are not much concerned about the research prowess of their teachers, or even their institution. If they have any view about research, it is said that they see research as something that so preoccupies their tutors, that these do not pay enough attention to their teaching.

I believe that all of these are myths. Contrary to the myths, many MBA students can be persuaded of the huge value of studying economics (macro and micro). Some of them prefer economics to the "softer" subjects, in part because economics is rigorous. Many of them consider that the presentation which contains "bullet points", but not much else, is an insult to their intelligence. Many of them care a lot about their institution's reputation, and the research reputation is an important part of that. Moreover, they like it a lot when you can illustrate an MBA lecture by referring to research you have done on the topic - and especially if that research has had an impact on a business or policy audience.

However, the reader should be careful not to conclude from the above that teaching economics to MBA students is really just like teaching economics students. It certainly is not. Teaching MBA students brings many tough challenges, and there is a steep learning curve. A proportion of excellent undergraduate teachers, and perhaps an even higher proportion of excellent MSc and PhD teachers, has not been able to make the transition to teaching MBA students. However, the transition is possible, and I hope this note will help those making the transition to understand some of the real challenges, and not to be deterred by the myths. Experienced MBA teachers, however, will find little here that they do not know already.

In what follows, there is a lot about the difficulties and challenges of MBA teaching. But equally, I want to stress some of the reasons why teaching MBA students can be as enjoyable as any other type of university teaching - and in some ways more so.

The Learning Curve

There is no doubt that the learning curve in teaching economics to MBA students is a steep one. One of the best ways to make progress is to teach in parallel with an excellent teacher. I was very fortunate in that regard. My first experience of teaching MBA students was a decade ago, when I taught one cohort of a core economics course at London Business School, with Paul Geroski teaching another. That was a tough act to follow, because Geroski was (and is) one of the most outstanding MBA teachers anywhere. Even though he shared a lot of teaching materials and advice, I could not begin to live up to his high standards, and those students assigned to my cohort rather than Geroski's felt hard done by. While it may not have been apparent to me at the time, I was learning a lot from the experience.

Another key to making progress along the learning curve is learning from the feedback given by MBA students. Some of this feedback can be pretty discouraging. MBA students certainly do not mince their words! It is said that at least one business school employs a psychotherapist to help shell-shocked academics cope with the trauma of feedback from MBA students! But while some of the feedback is tough, and occasionally it is just plain rude, there is no doubt that the much of the criticism flags real weaknesses. If you can try to cope with it positively, and change what you do to meet some of the criticisms, then things will improve.

My impression is that the propensity of MBA students to complain is highly nonlinear. They will happily put up with a few shortcomings and small mistakes, and make little of these. But when problems cross what I shall call a "good will threshold", then the floodgates open, and some students start to criticise everything. You are criticised for not allowing enough class discussion one week, but too much discussion the next; for choosing one industry rather than another in your case studies; for not using enough slides, or using too many slides; for speaking too slowly, or speaking too fast; for your choice of tie! Some of this is nonsense and should be ignored. Some of it may reflect weaknesses that you can do nothing about. But I believe one should try to respond to the rest. The aim is not zero defects: that would be impossible. But the aim is to keep safely below the "good will threshold" described above. Then MBA students will put up with a few idiosyncrasies and mistakes, and are happy to say you are doing a good job.

The MBA Student

On reading the above, some may be thinking, "why are MBA students so demanding?" and, perhaps, "should we put up with all this, or should we not teach them to be a bit less critical?" To answer these questions, we need to understand a bit more about the MBA student.

One has to accept that MBA students see themselves as customers, even if some academics are uncomfortable with that label. They pay high fees, and they are very sensitive to the high opportunity cost of their time. (Indeed, opportunity cost is one of the micro topics that MBA students learn very quickly, and remember!) They feel entitled to expect very high standards, and entitled to get angry when standards drop. But as a corollary - and this is one of the real rewards of working with MBA students - they are highly motivated and expect to work hard.

MBA students, like any other students, vary greatly, so one should be careful to avoid stereotypes. They are often portrayed as very career driven, very market oriented, and not very idealistic, but in my opinion many do not fit this stereotype. It is true that electives on mergers and acquisitions, strategy, options, advertising and marketing tend to pull in more students than electives on business ethics or environmental issues. But equally, I have been impressed by how many of them are highly critical of cynical business practice, and do not want to see themselves developing in that way.

While MBA students have often been very successful before they take the MBA, others have chosen to take the course because their career is not progressing in the way they want. Indeed, they are not taking the MBA because they fit the stereotype of the last paragraph, but rather because they do not. People who already fit that stereotype arguably don't want and don't need to come to business school.

The diversity is one of the very rewarding things about teaching MBA students. Collectively, they have a breadth of knowledge and experience that you won't find in many other classes. Many different disciplinary backgrounds are found in an MBA class. Also, of course, full-time(note 2) MBA classes tend to be highly international. The beauty of this is that if you pick an example from a particular industry to illustrate a point, the chances are that at least one student will have experience of working in that industry, or experience as a customer of companies in that industry. Moreover, they will want to share that experience with the class. Already you have something to draw on which would be rare with many other students. Moreover, they generally show a very high degree of motivation. If you can make the most of their diverse experience, determination and motivation, then you should be able to create a great learning experience.

However, this diversity also brings some further challenges. It is difficult for an MBA teacher to be all things to all people. For one thing, experience in economics varies widely. I ask each class in the first lecture how students would categorise themselves:

• (a) have studied some economics formally at school and/or university
  (b) have not studied economics formally, but read economics articles in the Economist, Financial Times, etc.
  (c) would answer "no" to (a) and (b)

The class often divides about one third (a), one third (b) and one third (c). Almost inevitably, therefore, MBA courses in economics are limited to a basic introduction. This is OK for (b) and (c), but can be frustrating for (a).

For another thing, I doubt that there is a single teaching style that is ideal for all the many types of MBA students. Some like "dynamic" presentations with slick repartee, while others see the professor as a "sage". Furthermore, mathematical ability varies very widely. Those with a background in the arts tend to be thrown by mathematical models in an economics course, so these have to be used with caution. But the MBA class may also include students with a PhD in physics who long for a more mathematical treatment of economics.

Attention to Small Details

My view is that for most teachers, an essential component of success with MBA students is attention to small details. That may seem surprising, but the justification for my assertion comes in the non-linearity of the student complaint function, as described above. If you pay attention to all the small details, then students will forgive the odd lapse or a less than enthralling style, because you are still within the "good will threshold". But if you do not pay attention to the small details, then they will not be so forgiving of other mistakes. Only those who can win over the students with sheer style or charisma can afford to take chances with the small details.

So what are the simple things that need to be right? I shall list five. First, MBA teaching requires painstaking preparation. Students want all the slides, cases, web references, readings, assignment details, past exam papers - everything, indeed - in advance. We put all this material in a coursebook handed out in lecture 1. It may not seem like a big deal, and indeed it isn't, really, but it does make an extraordinarily big difference. One MBA student put this very succinctly on the feedback form:

"Course handouts + workbook + preparedness = excellent!"

Second, don't "teach to the textbook" - unless, of course, it is a text you have written yourself. My experience is that MBAs do not like it at all when faculty teach straight from a text. The reason is clear enough. The MBAs expect, as an absolute minimum, that faculty will bring their own experience and expertise to the classroom. This way they know they are getting something that is unique, and which they would not get anywhere else. To mimic a textbook is to add no value at all.

Of course, those who produce all their own material but use a textbook as a backup may sometimes say things that contradict what is in the textbook. MBA students, like any others, prefer not to encounter such contradictions. But this is a much lesser sin than mimicking the text.

The third detail is topicality. I remember once being gently mocked by a friend from the City of London when he found me reading a Financial Times from the previous week. For him, of course, there could be no market relevant information in yesterday's FT - let alone one that was a week old. The life cycle for materials used with MBA students is not quite so short. But a useful rule of thumb is that last year's case may now be out of date. Even if an old case illustrates your point perfectly, it is generally interpreted as a bad signal to leave old material in a coursebook. Having said that, MBA students can be surprisingly ambivalent about references to recent materials on the web. They like the "up to the minute" flavour which web references seem to imply, but MBA students still seem to work, primarily, in a paper culture.

The fourth detail concerns intellectual modesty. Some may be surprised to read this, believing that neither teacher nor student is likely to be intellectually modest in the MBA classroom. But my point is a little different.

MBA students, as we have seen, come from a diverse range of backgrounds. Those with a background in the hard sciences don't tend to be too impressed with any of the social sciences, not even economics. And those with a business background often argue that, to paraphrase, "the real world is not like your simple economic models". As a result, the MBA teacher should be very cautious about claiming too much for economic theory in this audience. In particular, it is very hazardous to make any statements like, "economic theory shows this must happen", or, "economic theory shows that can't happen". For example, if the MBA student points to a particular economic phenomenon and is met with a response from the tutor, "economic theory shows that cannot happen", then an audience of this sort can react very badly. I am reminded of Dr Johnson's angry response on hearing Bishop Berkeley's theory of the non-existence of matter. Kicking out at a stone, he shouted, "I refute it thus!"

The fifth and final point on my list of "small matters" concerns how you deal with student enquiries. Although, once again, it may seem a small point, it is hard to overestimate how much this matters to MBA students.

Let us focus on enquiries in class. MBA teaching must be more interactive than most other types of teaching. MBA students expect to have the opportunity to interact with lecturers, and with each other, in class. It has a pedagogic role, of course, but is even more important as a signal that you are responsive to their views and questions.

Some MBA students say in their feedback that lecturers should be much tougher on those who ask stupid questions or give stupid answers. This will always be a matter of personal style and preference, but my view is that such toughness can be dangerous. It is well known that Keynes' practice was to be rather gentle with students when they made foolish remarks, even if he was quite intolerant of stupidity from his colleagues. I believe that is a very sound strategy for dealing with MBA students, at any rate.

MBA students tend to be hugely impressed if you remember questions raised in one session and then come back a few lectures later and say, "as that student said in lecture 2." Does this sort of thing really matter? Yes, I think it does. It is all a part of the strategy of keeping within the "good will threshold". If you can do that, then you have a far better chance of persuading them to engage with your subject matter.

Economics within the MBA Curriculum

There is a perception in many business schools that MBA students do not want to learn about economics, and especially not micro! Sometimes this perception originates with colleagues in other fields and disciplines, rather than with the students themselves. It is true that MBA students are usually cautious at the start, and wonder why they are expected to study economics on top of everything else. A key part of the economist's strategy must be to show them very early on how economic concepts provide powerful tools to understand everyday business issues. While some MBA students will never be persuaded, I think that it should almost always be possible to overcome the initial skepticism in the class.

Moreover, several MBA students have told me that they appreciate the substance - and even the rigour - which is missing on some other courses on the MBA. The key here is to make the rigour work for you and not against you, and there is a very fundamental asymmetry in how the MBA student perceives rigour. When rigour is combined with relevance, that enhances the attraction of economics over some other fields and disciplines. But when rigour seems to be combined with irrelevance, then that just makes things worse. This relates to my earlier point about intellectual modesty. In short, rigour enhances relevance but exacerbates irrelevance.

A good strategy in teaching economics to MBA students is to show them that economics underpins many of the other fields on the curriculum - such as strategy, marketing, finance, etc. (note 3) In general this is something that we must do ourselves, because our colleagues in other fields are unlikely to make the point on our behalf. But to do this requires that one knows some marketing and strategy (and other fields), and is familiar with some of their key references. It is difficult to overstate the importance of this. MBA students sometimes wonder why they are expected to cover so many different fields when many of their teachers are only familiar with one field. There are high dividends to be gained from showing the class some of the linkages between fields and disciplines. Last year, one student said to me after studying economics and several related fields, "now I see economics in everything." It is easier to show these linkages in a convincing manner if you maintain a good dialogue with cognate disciplines and fields - and this has some implications about the sorts of economists who may flourish in business schools, which we return to at the end.

It is generally easier to convince our colleagues in other fields and disciplines of the relevance of macroeconomics than of microeconomics. I think a majority of students also find it easier to relate to macro. They refer to the fact that macroeconomics is to be found on the front page of the newspaper. But that gives us an indispensable clue. Choose micro case studies from the front pages, and students are quickly persuaded of its importance. This illustrates a more general point. Economics works best with MBA students if they can very quickly see ways in which to apply economic tools to practical business questions. A good strategy is to pick examples where students have interest and/or experience. For example, most MBA students have a good knowledge of air travel and the mobile phone market, and those two alone allow us to illustrate quite a few economic phenomena.

MBA Teaching and Research

In some business schools, there is - or perhaps was - a widespread view that we can find a negative correlation between research ability and the ability to teach MBA students. This could be interpreted in at least three ways. First, maybe the MBA student does not value research. Second, maybe the personal characteristics required to be an excellent MBA teacher are different from those required to be an excellent researcher. Third, maybe the most active researchers are so preoccupied with their research that the quality of their teaching suffers as a result.

I said at the start that I think the first of these is a myth, and the aim of this section is to comment on a virtuous circle between teaching and research. However, let me first comment briefly on the second and third hypotheses.

Concerning the second hypothesis, some writers on creativity have indicated that the very best researchers are more likely to be introverted than extroverted. By contrast, the highly interactive style of MBA teaching means that the best MBA teachers cannot be reclusive. So there is perhaps some loose justification to be found for the second hypothesis.

Concerning the third hypothesis, to the extent that all are operating on a time-budget constraint, then an extra hour spent in research must mean an hour less for something else (maybe teaching preparation). In that sense, there is some sort of trade off at work here - though it does not apply exclusively to the business school.

However, my opinion is that the virtuous circle between research and teaching probably offsets these two latter effects. First, as commented already, it is a myth to say that MBA students don't care about research. This underestimates the MBA student as a customer. This is a customer who places a high value on distinction, and if research can deliver distinction then it is of value. This may come at a general reputational level. MBA students like to go to the most prestigious schools, and if research enhances that reputation then it is valuable to the student - even if it delivers no pedagogic benefits.

More important, however, I think there is a more direct effect at work here. As I have said already, MBA students like to feel they are getting something on their programme that they could not get anywhere else. In my experience, MBA students are always eager to probe the lecturer to find out how much he or she knows. MBA students appreciate it greatly when they are taught by someone who not only knows his or her field, but also is actively engaged in research, which further develops the field. MBA students are as quick to praise the lecturer for scholarship and the ability to use it in class, as they are to complain about shortcomings.

Research projects generate distinctive insights and evidence. MBA students appreciate the lecturer who can make 'off the cuff' reference to these, especially in response to student questions in class. It helps when projects are commissioned by international organisations, government departments or companies, because this persuades students that economic principles can be put to very practical use. Moreover, active researchers will have research associates who are a very useful resource for students. This is most obvious in project work, where these researchers provide additional expertise.

To complete the virtuous circle, it is actually quite important that some teaching experiences feed into research. It matters to MBA students that this should happen. In a session on perfect competition a couple of years ago, one of the MBA students argued that, "the Internet will lead to perfect competition." This struck me as a very interesting observation, though possibly wrong, and it is a theme on which I have subsequently written.

On balance, therefore, I suspect that the plusses from research at least balance the minuses. (note 4)

Being an Economist within a Business School

I conclude with two observations about being an economist in a business school. First, some have suggested that a non-orthodox economist will fit more comfortably into a business school than a mainstream economist. There may be something in this. To take one example, I said above that a good strategy for teaching economics to MBA students is to show how it underpins other fields such as strategy and marketing. Many business school economists see an incentive to spend time developing linkages to these adjacent fields, while those in the mainstream do this less often.

Second, some have suggested that teaching MBA students compromises your thinking as an economist. I suppose it is formally impossible for a business school economist to answer this assertion. I am reminded of the well-known philosophical puzzle about the tribe whose members are all thought to be liars. The puzzle notes that if you ask a member of the tribe, "are you a liar?", you will get the answer, "no", but that neither refutes nor confirms the conjecture.

Nevertheless, my view is, "no", teaching MBA students need not compromise one's thinking as an economist, though it probably does alter one's research and teaching priorities. One leading UK business school academic argued in a recent lecture that when economists join business schools they no longer preach against monopoly, but instead teach strategies for achieving monopoly. I do not recognise that in my experience of business schools. And moreover, such an argument underestimates the MBA student. I have heard too many of them complain about the ravages of monopoly to sustain any impression that they simply want to learn the necessary tools to turn themselves into monopolists.

Notes

1. Peter Swann (pswann@man.mbs.ac.uk) is Professor of Economics and Management of Innovation at Manchester Business School. He was awarded a commendation in the 2001 Economics LTSN Annual Teaching and Learning Awards. Earlier in 2001, he won the first A. T. Kearney Award for Teaching Excellence at Manchester Business School, for his MBA course on microeconomics. This is given to the member of faculty voted as "best teacher" by graduating MBA Students.

2. Part-time MBA classes tend to be much less international. There are indeed some interesting differences between teaching full time MBA students and part-time MBAs, but there is not space to go into that here.

3. This is a good strategy when, as usually happens, core courses such as economics are scheduled towards the beginning of the MBA programme.

4. Many believe that research performance is more likely to have a positive correlation with performance in teaching specialist masters or PhD students. Moreover, it seems clear that the skills required to be an excellent MBA teacher are somewhat different from those required in other areas. Some excellent undergraduate, specialist masters and doctoral teachers are not good MBA teachers, and vice versa. Also, and perhaps surprisingly, some excellent MBA teachers are not good executive teachers, and vice versa.

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