Katie Schenk - May 05, 2017
The number of MBAs is on the rise, and if you don’t have one - it’s easy to believe you’re the only one who doesn’t. At the same time, there’s plenty of discussion about whether the education and experience are all they’re cracked up to be.
You won’t struggle to find sources claiming MBAs are absolutely worth it. Minted MBAs tend to concur.
According to the 2016 Alumni Perspectives Survey Report released by the Graduate Management Admission Council (GMAC), 95 percent of MBAs believe their degrees provide good, excellent, or outstanding value. Given the chance to do it again, 93 percent would go for it. Those are good stats - especially give today’s need to rate and rank nearly everything.
The marks tend to drop a little when asked whether expectations were met. Out of the surveyed 14,279 graduate business school alumni, the vast majority “are satisfied that their graduate management education met all three of these goals: personal development (95% satisfied), knowledge and skills (93%), and salary increase (81%).”
You’ll earn more money
MBA grads can expect a higher salary than most. Some sources believe it’s twice as much as you might expect with other university degrees.
According to Masters Portal, the average salaries for MBA graduates is €84,650 per annum in the US and €100,000 yearly. And, the median starting salary reached $100,000 in 2015 according to a GMAC survey. Another survey shows that 90 percent of alumni believe their MBA increased their earning capacity.
But, believe it or not, money isn’t everything. MBA hopefuls have varied expectations.
You’ll expand your career opportunities
The MBA is a recognised degree anywhere in the world. Having those letters behind your name can open plenty of doors. If you’re hoping to switch careers, the MBA makes it less likely that you’ll need to claw your way up from the bottom again. And, the chances of moving into a managerial position in your current or new career path are high. More than half of MBA grads are board directors or senior managers.
In 2017, 79 percent of employers are planning to hire MBAs. Last year, only 68 percent of the same companies hired MBAs. That number has jumped around over the past couple of years, but it’s rare to see it plummet. And, those are some big name companies that hire MBAs too. Deloitte, Ernst & Young, IBM, Apple, McKinsey, Proctor and Gamble, Boston Consulting Group, and Amazon always want top MBA talent.
Of course, not all MBAs are after corporate jobs. If you’re hoping to launch your own startup, you’ll have a better chance of success after business school. The business fail rate for MBA-founded enterprises is significantly less than those without the fancy degree. There are several reasons behind the success rate, beginning with practical skills an certainly continuing through the contacts you can call on after graduation.
The networks offer continuing benefits
Contacts aren’t just critical for entrepreneurs. Business schools flaunt the power of their networks because they’re a measure of continued success. Need a new job? You’ll be able to call on your previous classmates and alumni you’ve never even met when you need a foot in the door. Want access to new markets? Same story. And, the list goes on and on.
You don’t even need to wait until graduation to take advantage of these networks. Internships often lead to employer contacts, professor referrals might be the reason you secure a coveted summer position. And your network continues to expand every time your alma mater seats a new class of talent. You’ll still need to put in work, but MBA networks expand exponentially without much effort on your part.
Skill and personal development
Business schools are in operation because they teach skills - and the skills of MBAs are recognised just about everywhere in the world. In addition to management skills, you’ll develop practical leadership and all the soft skills needed to succeed. Indeed, it’s much faster to gain these skills in a one or two-year intensive setting than the years you’d need on the job.
And, that’s just the classroom learning. While an MBA class all have an interest in business, diversity is a big deal in the business school world. Whether you study abroad or welcome international students to your country, you’ll be asked to open your mind and development in new directions. Time and time again, MBA candidates find themselves well outside of their comfort zone and the resulting development is something you won’t easily find elsewhere.
For all the reasons calling out to MBA hopefuls, there are arguments on the other side that may make you think twice about rushing to sign up for a GMAT prep course.
How much will you really earn?
Yes, you’re likely to earn more with an MBA than without one. But, you shouldn’t expect a 200 percent increase in salary. Potential MBA candidates tend towards unrealistic expectations. Often, they plan to take home $140,000 after graduation and although the median MBA starting salary has just pushed over $100,000, there’s no reason to expect you’ll be in the six-figure range. If you’re already a top-earner before you take a spot at Wharton, your chances are good. But, if your current salary is closer to $50,000 and you aren’t accepted into the top 20 schools, you probably shouldn’t count on it.
There’s also the cost of attendance. It’s high; no one is denying that. Schools advise applicants to set aside (or rather find) as much as $200,000 and that’s before adding in opportunity costs. In addition to the salary loss, some industries move too fast to consider the one or two years out of the workplace. The investment costs have grown steadily over the years while the rate of salary increases hasn’t risen at the same speed. Put all the opportunity costs together and it’s a little too rich for some - even when there is decent financing available.
Does an MBA guarantee you the job you really want?
While individual companies may request MBA qualifications for certain positions, there isn’t a job that actually requires an MBA. It’s not like becoming a surgeon or a lawyer. Only 35 percent of American CEOs have an MBA (which is down from previous years). With such a low percentage, it’s tough to argue that you need a masters degree to reach top positions.
You don’t always need an MBA for the career you want. Some industries prefer specialised skills over the broad leadership and decision-making techniques you’ll learn with an MBA. Alternative degrees such as a Masters in Management or Masters in Finance may be more beneficial for some potential MBA candidates.
To be honest, not all companies are after MBAs. Some believe these grads may be a little high-maintenance or want to make big changes to established culture. In other cases, won’t hire MBAs into entry or lower-level positions because they’re overqualified and aren’t likely to stay long for one reason or another.
Is the network the end-all-be-all?
To be sure, networking opportunities are built into the MBA experience. Whatever business school you attend, you can count on alumni past and future. And that’s just the beginning. But it is an expensive set of networks - and the $100,000 tuition is just the beginning. The actual cost of networking and team building is huge. At schools like Harvard, the median annual spend on “extras” is over $16,000.
While you may not develop the same networks outside of business school, it’s not as if an MBA is the only way to meet people in your industry or with similar interests. There are networking events happening all the time, on every level, nearly everywhere in the world. And you don’t need to fork out the same sort of cash as an MBA requires. Some may even find platforms like LinkedIn do everything they need.
And, it’s also worth noting that some alumni networks are far more useful than others. There might not be an active chapter useful for your industry or geographic area.
Are MBA programmes the only way to develop skills?
MBA programmes are intense. But, that doesn’t mean you’ll always develop the day-to-day skills needed to do your job. You may be able to solve overarching business direction concerns, but you have to learn the job on the job. And, it’s not as if you learn all the things you’ll ever need to know about your industry in a year or two of study. You’ll still need to stay on top of the trends and develop your skills after graduation.
If it’s really the skills you’re after, you’ll find a lot of the curriculum for top schools is available for free through Massive Open Online Courses (MOOCs). And, although the quality and reputation of paid programmes vary depending on where you sit in the world, there are almost always ways to take short classes or seminars to improve specific skills that employers are after. It’s cheaper still if your employers undertakes to pay for your development.
There is a big difference between MBA programmes. A degree from Harvard is perceived as better than one from smaller, regional schools. That’s not to say it is or it isn’t, only that the perception is there. (It’s difficult to argue against the overall value of an MBA from HBS, but it doesn’t mean a candidate can’t meet or exceed their expectations at less prestigious institutions.)
It’s easy to fall into the trap of believing it’s a top-tier MBA programme or nothing at all. Elite programmes report amazing salaries and their networks open doors all over the world. But, it’s not a realistic goal for every applicant. As the number of applications continue to rise, the number of accepted students is on the decline. Last year, Stanford rejected more than 93 percent of their applicants; Harvard declined over 89 percent.
The good news is that return on investment tends to be higher in second-tier schools. If you’re looking for value for money, a shot at an amazing job, a solid network, and all sorts of new skills, you’ll find the best value for money in schools ranked between 21 and 45 on top programme lists. And, you might want to look at the pre-MBA salaries of students admitted to top schools before you look at the exit salaries, they tend to be higher on both sides.
You can’t rush into it
MBA programmes are designed for those with a few years of professional experience already under their belt. So, it’s not as if you’ll complete your undergrad and move straight into an MBA. (Other masters programmes, such as the MiF and MiM, are known for accepting students with less experience.) Most MBA hopefuls have plenty of time to assess whether an advanced degree is worth it or not. And, while some make a judgment call seemingly on the spot, applications are an extended process. It’s not unusual to spend a year crafting the perfect portfolio to present to ad comms.
Planning to take the plunge? You’re not alone - and for good reason. MBAs are valuable in any sort of job market - and indeed in any job market. There’s always a need for strong quants, analytical skills, and leadership qualities. And, if you want to be among them, you’re clearly not alone. Luckily, you don’t need to have $200,000 sitting in your own bank account to make it happen.
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