Back to the Drawing Board

Jeff Sandefer is reinventing the MBA

“I was working in the oilfield, earning minimum wage, watching my co-workers give minimal effort,” recalls Jeff Sandefer. It was 1977, and the summer heat in west Texas was brutal. “My co-workers spent more time goofing off than working.” But the oil field storage tanks still had to be painted, and the fields still needed to be cleared of weeds and debris.

“I could see why it wasn’t working. So my partner and I decided to leave and start a new company, with a different type of employee and different incentives,” says Sandefer. “We hired a group of high school football coaches as foremen, and they hired their players to work for them. We didn’t pay by the hour, but by the number of tanks they finished. We eliminated all the expensive capital equipment and asked the coaches to use their pickup trucks, with small trailers for the painting equipment. The coaches made more money that summer working for us than they did in their normal jobs during the school year.”

In its first three months, the business cleared $100,000 in profit. “The minimum-wage workers would paint one set of tanks every three days; our coaches would paint three sets of tanks every day,” he explains. “That’s a nine-fold productivity increase. It allowed us to charge only two-thirds as much as our competitors charged and still make an 80 percent profit margin. And all we did was change the workers’ incentives.”

In the fall, Sandefer shut down the business. It was time to start his senior year of high school.

Educating Entrepreneurs

After high school, Sandefer earned a degree in petroleum engineering from the University of Texas. While working for a pair of oil companies, he led a real estate development project on Lake Travis, near Austin. At age 26, he started a company that farmed out oil and gas leases in the Gulf of Mexico. He believed that a small, agile, independent firm could develop smaller oil properties more efficiently than could major oil companies like Exxon. Within a few years, the $1 million investment had cleared over $500 million in profits. Before he turned 30, Sandefer had launched three successful businesses.

But perhaps the most formative experience of those years occurred in the classroom. “I studied entrepreneurship at Harvard Business School in 1985,” Sandefer explains. “I was fortunate enough to have Bill Sahlman, Howard Stevenson, and Ben Shapiro as three of my teachers.” What struck Sandefer wasn’t just what he was taught. It was how he was taught. “Harvard Business School uses the Socratic Method. There are no prescribed answers. You have to learn to ask the right questions.”

In 1991, while still running his oil and gas farmout business, Sandefer started commuting to Austin to teach entrepreneurship at the University of Texas. “I had made a lot of money,” says Sandefer. “But I knew a lot of it had been luck. I wanted to step back and regroup, so I decided to teach for a year. I couldn’t take the time off because I was still running the business. Fortunately, I discovered that I love teaching. I was happy to do both at the same time.”

Sandefer developed a class on entrepreneurship, modeled on the courses he had taken at Harvard. He recruited fellow entrepreneurs—“guys from the trenches, not the ivory tower”—to join him. Together, Sandefer and his colleagues developed a new model for teaching entrepreneurship. “First, we set incredibly high standards, including force-ranking of all students,” says Sandefer. “If you weren’t willing to do the work, you weren’t welcome in class. Next, all the entrepreneur-teachers agreed to live or die by student satisfaction ratings—no tenure. If the students said they weren’t learning, it was time for that teacher to leave.”

Perhaps the most important element of the new program was a total reliance on the Socratic method. “We never gave students an answer,” he explains. “We asked questions. We made them think. Students were hungry for that.” Over the course of a decade, the program was immensely popular and consistently ranked at the top of national surveys. It was also a good deal for the University of Texas. “Eight entrepreneurs, all working part-time, were teaching almost 25 percent of all the elective hours in the school,” notes Sandefer. “And there were about 140 faculty members.”

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Acton mission statement

In 2001, Sandefer and his colleagues clashed with the school’s administration over the future of the program. Both sides decided to part ways. But, for the students who came to Texas specifically for their program, the entrepreneurship teachers decided to hold one last, semester-long class—off campus, no grade, no credit, and 40 hours of work every week. “We thought we might attract 10 or 20 students,” says Sandefer. “Well, 130 showed up. Students drove in from Baylor, Texas A&M, and Rice. We had this gigantic following we never imagined. About midway through the class, one of our entrepreneur-teachers said, ‘We ought to start our own MBA program.’ So we did.”

Turning around the MBA

Sandefer has a gift for seeing what isn’t working and fixing it. When he was 17, he discovered a better way to paint a field full of oil storage tanks. When he was 41, he decided to build a better MBA.

The Acton School of Business opened its doors in 2002. A year later, the Princeton Review ranked it one of the nation’s top three business schools in terms of student quality, teacher quality, and overall experience. “We were bumping elbows with Harvard, Stanford, and Wharton,” says Sandefer. “Year one, we were on the map. And we’ve stayed at that level ever since.”

Sandefer and his partners were determined to equip and inspire students to run real businesses. “Traditional MBA programs were designed to train middle managers, consultants, or investment bankers,” Sandefer explains. “They use a pedagogy that hasn’t changed since the 1950s. The curriculum is based on academic silos—accounting, finance, human resources, operations, marketing—that don’t say much to the experience of entrepreneurs.” Acton serves a different kind of student: one who is sharp, hungry, and determined to run a real business. The Acton MBA is geared toward teaching that student how to think like an entrepreneur.

Sales is a dirty word in a lot of business schools, even though it’s the lifeblood of an entrepreneurial business,” says Sandefer. “At Acton, we have an entire course about attracting and serving customers. Our students have to sell door-to-door; they have to learn how to sell over the phone and through a website. Entrepreneurs have to know how to close a sale.” The same overriding concern guides the rest of the curriculum. “Our courses don’t follow the traditional pattern of most business schools. We teach you to attract and satisfy customers; to run real assembly lines and supply chains; to spot opportunity and to raise money; and count the profits and free cash flows one dollar at a time. It’s business education for the real world, taught by people who have been successful.”

Acton went one step further, compressing a two-year MBA into 11 months. For deserving students, that meant cutting the tuition and opportunity costs in half. It likewise entailed ramping up the workload—students would have to put in 90 to 100 hours every week. Sandefer and his colleagues realized the relentless pace would prepare students for the physical and emotional strain of launching a new business in the real world.

Acton appealed to a different kind of faculty member, too. “If you want to teach here,” says Sandefer, “you have to be a successful business leader or you don’t get in the pit. We want teachers who’ve been there and done that.” One teacher started an engineering consulting firm in Singapore; another worked under Warren Buffett as chairman and CEO of one of the nation’s largest energy refining companies.

“But teachers at Acton don’t get up and tell their war stories,” Sandefer says. “They put the students in the shoes of a real entrepreneur. They present a situation that demands a difficult decision, and force students to make and defend their choices. Their job is to help students learn to ask the right questions, not to give the right answers.”

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Acton students assigned to turn around a floundering greeting card company.

The Acton faculty works under a different incentive structure. Teachers are paid on the basis of student satisfaction, with grading on a forced curve to eliminate grade inflation. There is no tenure. The teacher with the lowest student ratings is asked not to return. They do not lecture. Instead, Acton faculty members present more than 300 case studies and simulations. One week students are asked to design high-quality, low-cost manufacturing systems; the next week, to sell products door-to-door; a week later, to make pitches to raise real money from real investors.

But the most important aspect of an Acton MBA, says Sandefer, is the Life of Meaning curriculum. “It’s about finding your calling in life and business, discovering your greatest gifts, discovering how to use them to serve others while bringing you great joy.” Like the rest of the curriculum, the Life of Meaning classes require reflection and action. “We ask students to write their own obituary and eulogy, to struggle with difficult moral dilemmas, and to think about the proper role of money and success,” says Sandefer. “We want our graduates to ‘begin with the end in mind,’ to create a meaningful and productive life, surrounded by people they love and who love them in return. In the end, that’s far more important than how much money you have in the bank.”

“We’ve been at this for 10 years,” says Sandefer. “So we’re just now starting to see many of our graduates begin to make a lot of money. But we don’t really judge things that way. Whether our students make $1 million or $100 million, it doesn’t matter all that much to us. We would rather see them lead meaningful lives, have loving families, and run businesses that make a difference in the world. If you do that, you’ll be the richest person on earth.”

Beyond Acton

Acton has enormous ambitions. “At first,” says Sandefer, “we wanted to train entrepreneur-teachers to take our approach to other business schools. And we were more successful than we ever imagined. Students flocked to the courses led by Acton-trained entrepreneurs. Before long, however, the tenured faculty would become jealous and try to take over what we had built. In almost every case, they ruined what had made the program successful in the first place.”

As the cycle repeated itself on campus after campus, Sandefer and his colleagues soured on trying to replicate the Acton program at other schools. “There’s a reason college costs so much and delivers so little,” says Sandefer. “The model for higher education in America is broken.” Sandefer and his colleagues became increasingly convinced that there was a way for the Acton model to leapfrog traditional academia—“much like developing countries have leapfrogged over land lines and gone straight to cell phones.”

“We wanted to build a 21st-century educational model that uses the Internet to deliver real-world challenges to an aspiring entrepreneur’s doorstep,” he explains. “This isn’t sitting at a computer and answering multiple-choice questions. It’s grabbing an iPad and going into the real world to practice on real-world problems.”

“For quite some time, we had been experimenting with ways to deliver tools and skills to students before they arrived on the Acton campus, with powerful results,” adds Sandefer. “Soon we realized how powerful it can be to pair online students with entrepreneur-guides. So in March 2010, we launched a stand-alone program built around delivering Acton challenges online, while having students hold themselves accountable to others.”

The program is known as My Entrepreneurial Journey (MyEJ), and the mentorship component is a crucial aspect of the program. “It’s how we’ve created an accountability system,” says Sandefer. “First, you have to pick somebody whose opinion matters to you, and then you have to promise that person in writing that you won’t quit. This person is your guide. You keep a journal, and your guide reads it; you assemble a portfolio, your guide reviews it. You can’t contact your guide directly, but he or she can ask occasional questions or offer advice. Then you pick a “running partner”: a friend who will meet with you, face-to-face, and hold you accountable for doing what you promised. With this kind of accountability, we’re getting extremely high completion rates on some very challenging—even life-changing—material.”

Sandefer believes that innovations like MyEJ have enormous implications for higher education. “Education models that require a bricks-and-mortar campus—with highly paid professors who focus on lectures and theory—that may soon be a thing of the past,” predicts Sandefer. “It’s an outdated model. There’s a tsunami coming to education, where ‘learning to do’ and ‘learning to be’ become far more important than simply ‘learning to know.’ I believe we’ll soon see the rise of a new educational model, delivered over the Internet, drawing on advanced gaming techniques, and conducted with volunteer guides acting as role models. In the end, it will deliver a portfolio of competencies and character. It is going to be far more powerful than a flimsy college diploma. And, versus what we spend today, it will cost pennies on the dollar.”

“Our goal,” concludes Sandefer, “is for Acton to help lead the revolution.”

Christopher Levenick is editor-in-chief of Philanthropy.