MBAs Don’t Merit the Cost

Amid the financial crisis and recession, placement rates and salaries for MBAs have taken hits, making the degree less valuable. Pro or con?

Pro: Exposure and Experience Matter More

What situation screams for an MBA? Many scenarios cry out explicitly for a doctor, engineer, firefighter, or lawyer. When exactly do you need an MBA? In our current economic climate, the MBA degree in and of itself is not valuable. Why? It often constricts imagination, producing clinical but narrow thinking and falling short of teaching intellectual flexibility. B-schools position innovation as formulaic, resulting in rigid but acceptable ideas. Experience teaches that to drive value for yourself and your company, you need to be a rebel and constantly question what’s right in front of you.

We both have advanced degrees, but formal education did not fully prepare us for careers in line management and consulting, working with venture capitalists and on the front lines of startups as well as Microsoft (MSFT), IBM (IBM), and American Express (AXP). Over the years, one truth became evident: Questions (not education) are the most powerful tool in your arsenal. Not theories or frameworks, not business plans or spreadsheets but rather, insightful questions.

According to Clayton Christensen, author of The Innovator’s DNA, a passion for inquiry counts as one of the five main drivers of success. The person who asks the best questions is often the smartest person in the room. The challenge today is not the mastery of information available but the judgment to use it. And while education trains you to dive into relevant topics, there’s no guarantee it will help you read situations, think under pressure, and ask the right questions.

In Outliers Malcolm Gladwell states that you need 10,000 hours to become an expert. While one can debate the actual number, clearly nothing can replace experience and hard work in developing the skills and perspective needed to master your profession. Consider this: Will a driver’s license mean you’ll be an excellent driver? Similarly, a business degree does not necessarily make you better suited to successfully drive, lead, or expand a business.

When we interview candidates, we ask if they play poker because leaders must bring answers that don’t fit a formula. Reactivity, insight, and ingenuity are the needed attributes. Can you drive rapid growth and deal with ambiguity? Can you respond effectively to crisis situations? A piece of paper from a B-school will not determine this.

Con: You Can’t Dispute the ROI

In this challenging job market, many have argued that advanced degrees have lost their value, citing examples of leaders who rose to the top without attending business school.

There will always be amazing individuals who achieve great things whatever educational route they take through life. For many, the MBA degree offers a wonderful springboard. It opens doors, creates opportunities, and provides critical skills and knowledge that graduates can apply throughout their careers. It’s a lifelong investment that will pay back in many different ways forever.

Still skeptical? On average, executives with MBAs earn more money than those without advanced degrees. In fact, London Business School alumni enjoy an average salary increase of 132 percent upon graduation, demonstrating the tangible return on investment of the MBA degree.

MBA degrees can also increase your chances of landing a career, crucial to keep in mind in light of still-dismal unemployment numbers. According to our recent MBA Employment Report, 91 percent of graduates in 2010 found employment after three months, despite the shaky economy.

These graduates weren’t just finding "jobs." They were securing careers at a wide range of companies such as Amazon (AMZN), American Express, Facebook, Johnson & Johnson (JNJ), GE Capital (GE), the Boston Consulting Group, Goldman Sachs (GS), and many, many others.

For some who might argue it’s not what you know, it’s who you know, the MBA (and B-school experience) comes into its own. While pursuing an MBA degree, students forge invaluable connections with those in their school community (peers, faculty, and alumni all over the globe) and leverage the brand strength of their institution across the business world. Business education is a time for reflection and exploration. Students need to be courageous and try everything they can during their time at B-school.

However, the key to this argument that MBAs are worth the investment lies in where you decide to study. There are huge numbers of courses offered by thousands of institutions; they are not equal. The lifelong return on investment pays off only if you choose wisely, selecting a school with strong global connections, great faculty, and outstanding students.

Business education gives future executives and entrepreneurs the critical skills they need for their positions. It’s the best opportunity and environment to test business ideas and in some cases, change career paths or direction. It’s a life-changing experience well worth the investment. Make sure you choose wisely and give everything you’ve got while you’re there.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Reader Comments

Kevin

I'm two years out of MBA school and not convinced that going back to school full time was the right decision. Of course it's a different scenario for each individual. My ROI will be about 10 to 12 years out and not even close to what I expected. This economy doesn't warrant the expected bonus compensation or career advancement most see after completing an MBA.

Enrique

Kevin,

Point taken, thank you.

Now, to give color to Mr. Simpson's argument, which caveats on the importance of school choice would you share with us?

Thank you.

future MBA

Interesting. I'm still too young and inexperienced for an MBA, so I'm still trying to figure out whether or not it would be worth it.

From what I've gathered, it seems like a waste to go to anything lower than a top 30 MBA program. I keep seeing Ivy League MBA holders spring to the top, while I have coworkers who have MBAs from no-name private schools that make about the same as a freshly minted undergrad like me.

Rod

Those looking for faster payback should consider high quality part-time MBA programs. I have secured a position, increased my salary by 40%, and will graduate with no debt. So in my case, the MBA definitely will merit the cost. But Mr. Frank and Magnone are also absolutely correct; business skills are best learned in the trenches. B-school is a toolbox where you pick up skills and contacts that you can use to add value to your organization. Whether you do or not is largely up to your own tenacity and creativity.

PJ

I earned an MBA in 2009. I entered the program straight out of undergraduate school. Would I modify my approach given the 20-20 hindsight? Yes, probably. That does not mean I believe that the MBA degree won't eventually do for me what I want. Experience is a necessity with or without the MBA. At this point, I am working on the experience.

MBA 2012

I've been doing alot of research to start my MBA fall 2012. Where you go to school seems to be very important and greatly influences your salary range, employer and how quickly you find employment after graduation.

I also know various people from 'no-name' schools with MBAs who are at the same or lower level than I am, just finishing my BA.

Everyone I know and have met from top-tier schools is doing much better financially, seem to be much more stable and happy with their careers despite the extra costs.

Marie Swart

Rubbish, especially PurePlay.

Thomas Huynh

An MBA means more than making more money. It's a personal achievement. Just make sure you pick a good program, not any program.

Thomas Huynh, author
Sonshi.com

l3arefoot

Wrapped up MBA in '10, directly out of undergrad. Hindsight being 20/20, I would not do it again. Everyone at my new job went to Top 5 programs and we all agree-- we learned nothing new.

I'd rather take the 2 years of cost and see how many times I could circle the globe traveling before running out of money.

Life is short.

Superfly

My B-school is among the top 3 in the UK and and top 30 in the world. I tend to agree with points from both sides of the argument. In my own experience, I must admit that one learns a lot of interesting ideas and practical knowledge that can be applied to one’s business, career, and even everyday life. MBA also opens one’s eyes to things and processes around one that one probably did not pay enough attention to which starting the MBA.

But occasionally, I feel it’s a bit overrated and here are my reasons:

MBA students are normally from different walks of life and sectors. I’ve come across a few tutors/lecturers who in my opionion, can only apply the knowledge, theories, principles, and frameworks that they are trying to pass across to students to only a very few of those sectors.

Another thing is that some of these lecturers are excellent academics but not excellent teachers. I have come across one who gets territorial and defensive when one asks questions or "too many questions."

Academics need to understand that there is a big difference between "asking questions" and "questioning them or their knowledge."

Some academics don’t seem to understand that learning is meant to be interactive, dynamic and not static. And in this day and age, learning is meant to be both ways. Academics and students should both learn from themselves. Academics need to understand and appreciate the years of work experience some of these MBA students have had before joining the MBA programs. They need to realise the that they can as well learn from the students.

In the case of some academics, if you write a paper for them about certain topics, theories, and frameworks they have taught you, applying it to an industry sector they are not familiar with, they tend to want to score you low. But if it’s an industry they like and are familiar with, they tend to be prejudiced towards such.

Academics need to understand that a lot of breakthrough knowledge and concepts come from within the industry where these students have come from, irrespecitive of race, nationality, geographical location, gender etc. Sometimes the industry standards dictate what the academic environment teaches to students. So academics need to be more open-minded. When imparting knowledge, you should also acquire knowledge.

When one encounters these kinds of situations, one tends to ask oneself if the whole MBA idea was a good move.

But overall I still believe that an MBA is a good investement. I chose and still choose to see the benefits and not the negatives, which may be a bit annoying and overwhelming when one experiences them.

Mike

"A piece of paper from a B-school will not determine this."

That's an incredible trivialization of an MBA program. It's not like (most) of these people are paying a fee and getting "a piece of paper" with no work. That's 2 years of hard work done, for many students, at night after working full time corporate jobs during the day.

If what Mr. Frank and Mr. Magnone mean to say is that "years of intensive research on a variety of business related subjects does not arm one to make critical decisions," then they should say that instead.

Vic

The real question is not whether the MBA merits the cost. But rather depends on the individual's needs--be it a sense of self-achievement or ways to make more money.

For instance, take the driver's license analogy that was used in the article. One does not merit simply by just obataining the license. If there is a need to drive, the license will definitely come in handy. There is no point getting the license if you do not have the intent to make full use of it at the first place.

Hence, if the MBA improves your standard of living or satisfies your needs, I say go for it; otherwise, don't go chasing after waterfalls.

Sharad

Let's accept that MBA is not a license. Everyone has to find a place for himself by the merits an individual brings onto the table.

Graduates from top bschools might have a better chance of being at the top, since the stringent screening process ensures that the cream of population reaches there.

So in some sense, the selection process determines the quality of output.

Besides, the polishing a person gets while in a bschool also adds value; how much depends from individual to individual.

Best,
Sharad

Pat

A Ph.D. from a top tier school in a hard science will warrant 100%+ gains in compensation in the private sector. Ph.D.s are populating upper management in lucrative fields such as tech and finance. As companies realize the importance of "big data," this trend will only increase.

I see friends with MBAs from top 5 schools and no-name schools and the latter see no competitive advantage beyond what their bachelor degree would have provided.

Bus Prof

Which MBA is a relevant question to pursue; there are pedigrees that will never fail to pay off and then there are any number of schools which offer both lesser quality and lesser access via pedigree.

Sam

Shouldn't we also ask the question, what net value the MBAs add to the society? If it is not positive, one ought to expect it to go the way of the Dodo, wreaking a lot of havoc on the society in its trail; the recent financial crisis comes to mind here. When someone suggests the alumni networks and the contacts at school as the justification for b-school, the societal value of MBAs becomes most suspicious. Also, just like for taste testing any food one asks someone besides the cook, to get an opinion on the value of the MBAs shouldn't one ask someone who is neither a b-school professor nor an MBA?

So, I have only one more question, who pays for such interviews or the article? An MBA, I'd guess!

Robert

It is a simple fact that a PhD in chemistry, computer science, or even economics is far more beneficial to a business person than an MBA. The business skills can be learned on the job. The tech skills need an extra push.

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