Are business schools graduating the wrong leaders? If so, the GMAT may be to blame

August 29, 2013
This will be my new home for the next year -- Stanford University, seen here on Feb. 15, 2012. (AP Photo/Paul Sakuma, File)
Stanford University. (AP Photo/Paul Sakuma, File)

Graduate Management Admission Test (GMAT) results are an important assessment criterion for business-school applications. The higher the GMAT score, the better the odds of gaining admission. A study in the Journal of Business Ethics makes the surprising finding that high GMAT scores may be correlated to some of the negative traits of American business: lack of ethical orientation, male domination of executive ranks, uncertainty avoidance, and individualism. What’s more, GMAT scores may be inversely correlated with entrepreneurship.

The report’s authors, Raj Aggarwal, Joanne Goodell, and John Goodell, examined the GMAT scores of candidates in 25 countries over the 2004–2010 period. Using panel data analysis and other statistical procedures, including robustness tests, they examined the association of GMAT scores with cultural characteristics, controlling for demographic and economic factors (such as wealth levels) that may also influence GMAT scores. The four independent measures of culture used in this study were developed by Dutch researcher Geert Hofstede and have been used in hundreds of studies.

They found that female GMAT candidates scored lower than males, and that candidates from nations with the highest levels of ethics had the lowest GMAT scores. And they determined that GMAT scores are negatively related to masculinity and “power distance” and are positively related to uncertainty avoidance (safety-first behavior) and individualism.

Power distance is the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally. This means that people with high GMAT scores are less able to deal with the hierarchy necessary in an organization.

The findings on uncertainty avoidance and safety-first behavior suggest that the GMAT works against entrepreneurial activity. People who do well in business schools are less likely to take the risks to become entrepreneurs. At the very least, business schools have their work cut out for them to change attitudes and behavior to encourage entrepreneurship.

Considering that women achieve as much success as their male counterparts in business, the findings on women suggest that the GMAT has some other biases (such as higher individualism) that also work against female test-takers.

One could argue that the variations in GMAT scores are based on language, education, and cultural differences between nations. But the authors note that Belgium has a higher average GMAT score than the United Kingdom, even though Belgium is not an English-speaking country; and that Finland has the lowest average GMAT score despite its international reputation for outstanding student achievement scores at the secondary level. They insist that the international variations in GMAT scores cannot be explained by normal economic and demographic variables.

Aggarwal, former dean of the University of Akron’s School of Business, says that one reason for the lack of ethical orientation in business and for the lack of success of whistleblower programs may be this bias against ethical awareness engendered by the focus on high GMAT scores among corporate managers and leaders. It may also explain the common refrain from corporate leaders that business-school graduates lack team skills. Another bias promoted by the focus on high GMAT scores, Aggarwal says, is the unwillingness to make decisions that are risky and involve longer horizons.

The need to overcome the biases encouraged by the GMAT has a number of implications. First, to the extent possible, the GMAT should be changed to correct these biases. Second, MBA admissions should specifically look for traits that GMAT under-emphasizes. Third, hiring, HR, and promotion policies in business should include as an important criterion performance in areas such as ethical and long-term decision making.

Or perhaps business schools should start recruiting students with the lowest GMAT scores.

Vivek Wadhwa is a fellow at Rock Center for Corporate Governance at Stanford University, director of research at Center for Entrepreneurship and Research Commercialization at Duke, and distinguished fellow at Singularity University. His past appointments include Harvard Law School, University of California Berkeley, and Emory University.
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