The book or the street?

What do the following people have in common: Micheal Dell, Larry Ellison and Bill Gates? All founded major technology corporations – Dell, Oracle and Microsoft respectively – without so much as a university degree between them. Joining them in the category of tycoons-without-degrees are British entrepreneur Alan Sugar, Virgin maestro Richard Branson, and Wayne Huizenga, the CEO of Blockbuster.

At the same time, the list of successful business people with the standard paper qualifications will certainly be longer. Most high performers entered the workforce after first securing professional degrees, giving credence to the correlation between formal education and business success.

So which one is better? Employers and recruitment experts often say a combination of both “street smarts” and “book smarts” is ideal. However, it is not always possible to find employees with such balance. Those with both the money to study, and the time to gain meaningful leadership experience at the coalface are rare indeed.

Nigel Banister, CEO of Manchester Business School (MBS), says employers should assess the nature of the job before deciding which aspect is more important. If the role involves new situations, theoretical knowledge may be more relevant than previous experience. Product designers, for example, may need to follow strategic frameworks taught from textbooks. But for more repetitive jobs – such as sales roles where track records are high indicators of abilities – experience may carry more weight than a degree.

But there are reasons to believe that those with formal qualifications still have an edge, regardless of the job description. “A lot can be said for life experience if you’ve only learned in that way, but those with ‘book smarts’ can learn from others’ mistakes and successes,” Banister points out.

Teaching “street smarts”

CNN founder Ted Turner has proven otherwise. He was reportedly kicked out of school before working his way to the top of the media conglomerate. His story is often used to prove that street smarts prevail over book smarts, and that success depends largely on ingenuity and worldliness.

Business academics are now recognising the importance of out-of-the-box thinking and are tailoring their business degree programmes accordingly. Teachings of problem-solving skills and critical theory are paired with real-life case studies to ensure students are not restricted to working to the book. “They might have less confidence and an unsettling experience in delivering to those theories otherwise,” Banister says. Many graduate programmes in business and finance also require students to do internships for course credit to apply their theoretical knowledge to practical contexts.

Working experience is one of the acceptance requirements to most MBA programmes. The typical applicant to MBS is no younger than 27, with stellar academic performance and proven managerial skills. Exceptions are made for those who can substitute a formal degree with outstanding experience. “These are people who have run companies and carried out acquisitions for example,” says Banister.

A fine balance

Peter Baker, Regional HR Manager, Procter and Gamble, believes candidates should have a blend of different areas of knowledge but he admits that formal qualifications are a necessity. This is due in part to HR’s practice of promoting from within. Most work their way up after joining at entry level – that is, straight from university – so the emphasis is on the type of qualification attained.

However, he says employees cannot thrive on qualifications alone. Although staff eventually acquire useful skills on the job, they must already have some experiences under their belt to be hired in the first place. Part-time jobs, extra-curricular activities, leadership experiences and internships on a candidate’s transcript are solid indicators of capability.

Baker says employees with a degree are often hired over those who have experience but lack the qualification. “Academics are the base and ‘street smarts’ are the supplement,” he says, noting that both types bring important assets to the table. Academic capabilities are indications of intellect and analytical skills which make up a strong foundation of knowledge, while experience provides leadership abilities, collaboration, problem-solving and social skills.

The logistics industry has different priorities. If HR at DHL had to choose, “street smarts” would take precedence over the academic variety. Julie Jarvis, HR Vice President, DHL Supply Chain Asia Pacific, says DHL needs employees who can think on their feet, use initiative and be proactive – traits which don’t come from learning facts and taking exams.

“‘Street smarts’ give individuals the experience to know what works in a given situation: the practicalities; what challenges to expect,” she says, noting that DHL’s business needs are such that a strong customer focused delivery is crucial. It’s in this environment that the need for emotional intelligence and intuition is similarly vital.

Jarvis says the ideal candidate should provide a wider perspective to the business and have the capability to deliver to it. Those with book smarts are therefore not excluded from consideration because they present advantages as well. She says employees with academic qualifications are better able to use HR tools and techniques towards benchmark information.

By no means should employers be purists when faced with this dichotomy. Baker stresses the importance of a 360-degree assessment of a candidate’s intellect and confidence. HR should try to find a balanced mix of both areas, depending on the organisation’s needs; if it doesn’t, it might miss out on opportunities to welcome top talent onboard.

Building the bridge

As industries are constantly changing, HR departments need to find employees who can keep up with evolving business strategies and models. Whether they place more emphasis on “street smarts” or “book smarts” depends largely on the scenario, but employers should not retain their customary recruitment mindset if changes are imminent. They may have worked in the past, but the financial crisis has taught employers that re-evaluation of hiring models may be beneficial for long-term gains.