Can Standardised Test Scores (GMAT / CAT) predict Entrepreneurial Success?

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The concept of “ideas to launch”, arguably makes TES is one of its kind school in the world. So, when we were setting out to define the selection process for student seeking admission into TES’s Post Graduate Programme in Entrepreneurship, we asked ourselves the question – what criteria shall we use to admission? There were eight of us in a basement office, each coming up with different opinion. The traditional long held view in institutional set up is to select candidates on the basis of their undergrad marks, Common Admission Test Scores with some relative weight ages to different section of the score and personal interviews. In the context of intense competition, the CAT score invariably became one of the most important yardsticks for selection into MBA Programs in India. It is worth mentioning, globally, GMAT scores also have a similar importance.

That took us to the next question – Why do B Schools put so much importance to the standardised test scores? One of the essential focus for any B school is to produce graduates who excel at workplaces, which in turn helps the school build their brand.Precisely, for this reason, you find statistics such as “25% of Fortune 500 CEO are from Harvard, 24.5% from Stanford, 15% from MIT and so on”. Since good schools demand a very high standardised Test Score and high GPAs among other things, once can infer high scores mean higher chance of managerial success. Is the conclusion valid and reliable?

A quick analysis of Nifty companies clearly indicate little correlation between CAT / GMAT score and become a Nifty CEO. Less than 10% Nifty CEOs have IIM background. One could argue, that India being a relatively young modern economy and with just about half a century of business education experience, could lag developed nations in recognising value of MBA for topmost position. Google, which is often counted as a company at the front end of innovation, is essentially a data driven company. Their People Analytics team does various sort of number crunching and they found that GPAs and standardised test scores are worthless. Lazlo Bock, Vice President of People Operations at Google said, “They don’t predict anything. We have stopped asking for transcripts”.

The problem with our grading and marking system lies in the academic environments which are so protected form real world that when graduates walk into workplace, employers worry if they have got employees from the planet Earth or Portia! Traditional schools tend to reward students who often give the specific answers professors are looking for.

However, in an entrepreneurship course, where you have to deal with real life and often the answers are not there, so, how do you then select a person who could be a good choice for a course in entrepreneurship? We believe, entrepreneurship is more complex a concept than business leadership. It is characterised by an innovative idea, the hunger to make the idea real often with resources much less than desired and entrepreneur. Every entrepreneur willing to find his own unique answer to the problem. It is not just about ideation, rather taking everyone along in the journey of implementation.

Smart organisations have now moved to competency based methods of assessment. Competencies are critical behaviours needed for superior performance. These are observable and measurable behaviours displayed in several situations. To address our selection dilemma, we took the entrepreneurial competence route. TES looks for strong presence of several of the following competencies – creativity, opportunity seeking, self confidence and drive, tolerance for ambiguity, need for autonomy, achievement motivation, ability to deal with failures, action orientation, resourcefulness, perseverance, patience and persistence. The assessment process includes essays, idea pitch, entrepreneurship quotient (EQ Test) and behavioural interview, each focussing on select entrepreneurial competencies. A combination of these tests, rather than the GPAs or CAT / GMAT score help us identify the winners.

by Sanjeeva Shivesh