Business schools want MBA applicants to have a few years of work experience, but those who wait to apply incur a steep cost
Over the past few decades, work experience has increasingly been a factor in MBA admissions, with many business schools now expecting applicants to have a minimum of five years before applying. In the 1960s and 1970s, most students pursued their MBA immediately after their undergraduate program. Ten years ago, the average age of a first-year MBA was 25. Today it is 28. While this has enhanced the profile of many business school classes (in terms of higher salaries and positions), the net impact on students has not been adequately determined.
There are potentially valid arguments in favor of requiring pre-MBA work experience. Work experience may give employers more information on which to evaluate prospective hires for evidence of leadership and other personal skills. In addition, students with work experience may be more sensitive to the problems of managing a business and have practical insights that may complement material presented in class. Students sharing their work experience in the classroom may contribute to a richer discussion of business issues.
For many full-time students, however, the benefits of five years of pre-MBA work experience may not justify the costs. There is increasing awareness that dropping out of the workforce for two years at age 28 creates a large opportunity cost, not only in foregone salary but also in lost career momentum, particularly in fast-moving high-tech industries. For many full-time students, the opportunity cost of two years of foregone salary is greater than the cost of business school tuition, and that increases the longer one waits after graduation from an undergraduate program.
More Part-Time Students
This concern on the part of prospective students may be reflected in the fact that enrollments in part-time MBA programs—an alternative to leaving the workforce to attend school full time—have trended higher over the past five years despite the increased popularity of full-time programs in the economic downturn. Part-time students do not incur the high opportunity cost of foregone salary, and many have some or all of their tuition cost reimbursed by their employer. At the same time, business schools are anxious to increase the proportion of women enrolled in MBA programs from the current 35%. Many women are reluctant to wait until age 27 or 28 before entering business school because they would like to use this time in their lives to start a family. Some schools are even reducing the work experience requirement for women so they can enter at an earlier age.
Younger MBA students may also be easier to place in post-MBA jobs, as they are likely to be more flexible about moving to accept their first position. Also, without work experience, their initial post-MBA salaries are usually lower.
Business schools may have drifted toward requiring pre-MBA work experience, not so much as the result of a well-reasoned strategy, but rather because employers give preference to graduates with significant pre-MBA experience and are willing to pay the higher starting salary that these experienced graduates can command.
Recently I worked with my colleagues Keith Whittingham and Ron Yeaple to investigate the economic benefits and costs associated with choosing to delay matriculation in a full-time MBA program in order to gain work experience, rather than enrolling immediately after the completion of undergraduate studies. The research results refute the traditional implication that most students will be financially better off in the long run if they wait to acquire significant work experience prior to pursuing an MBA degree, particularly when the opportunity cost of forgone salary is considered. In fact, for many students, the opposite may be true. This result, published recently in the Journal of Education for Business, is important to MBA educators as they consider various admission criteria and to prospective MBA students, who should investigate going directly from undergraduate to graduate school.
Some leading business schools currently accept students with little or no pre-MBA work experience. Schools that are considering enrolling such students in the future, however, will likely find that some adjustments are needed. Teaching styles for classes will have to be modified. Students with less work experience have fewer anecdotes to share in class and are more skeptical that the problems under discussion are truly relevant and important. Deliberate effort needs to be made to ensure that the education is highly practical in nature, to overcome the students' inherent shortfall in experience. Furthermore, schools that compete for published rankings based in part on post-MBA starting salaries may find their average salaries for incoming students declining as they add more inexperienced students. These adjustments will be worth it, however, in terms of the long-term payoff to students.