Is An MBA Worth It?

man sitting and wondering, is an mba worth it?

For folks looking to break it big in the business world, seeking an MBA seems like an attractive option. With on-the-job training, networking opportunities, and impressive job placement statistics, pursuing a Masters of Business Administration degree almost seems like a no-brainer.

But the truth of the matter is that an MBA degree is expensive — especially from any of the top-tier programs in the country. According to Bloomberg Businessweek, elite business schools are often so expensive that it can take graduates longer to profit from their degrees than those who choose less-selective, more affordable programs.

On the flip-side, mid-level programs that don’t rank among the very best in the country may not produce expected job returns, even after you’ve spent nearly $100,000 on the degree.

That’s a lot of dough to be throwing down, and it brings up a very important question:

Is an MBA worth it?

Does the MBA have it’s doubters?

As with anything, haters are going to hate, and the MBA is no exception to this rule. An article on LinkedIn listed notable business school faculty members, industry leaders, and deans who are skeptical of the value of an MBA.

Jeffrey Pfeffer, a professor of organizational behavior at Stanford Graduate School of Business, said that “A degree has a value only if the degree is scarce, and the MBA is completely unscarce.” She went so far as to say that unless you go to an elite school, “an MBA is a complete waste of money.”

Pfeffer has a point: As the number of available MBA programs increases, things have gotten saturated. Unless a student earns a degree from a respectable program, an MBA might not be as valuable as expected. Choosing a second- or third-tier school could end up being a waste of time, money, and opportunity since they may not produce the expected job and salary returns.

Irakli Berdzenadze, CEO of I.B. Capital Management echoed Pfeffer’s remarks saying “…if you need to become successful in business remember, don’t waste your money and time on an MBA.”

An MBA degree might not open all the doors you think it may open in the job market. While your degree might get you an interview, it can’t guarantee you a job or cover up any of your obvious flaws. There are also concerns that there aren’t enough middle-management jobs for all the MBAs pouring into the workforce — another effect of the saturation of available MBA degrees.

Now I’m starting to second guess this whole MBA thing…

Not so fast — it’s never wise to make a business decision without looking at both sides of the deal.

John A. Byrne averaged three years of data (2009, 2011, and 2013) for the top 70 schools from the Forbes business school rankings. Here’s what he found:

“From the data we see a sustained total five-year gain for earning an MBA; a reduction in payback time; and a healthy increase in post-MBA starting pay over pre-MBA pay. On top of this, we also see increased average GMAT scores for the top 70 schools.

All-in-all, the value of an MBA is hardly a “waste of money.” In fact, it’s quite the opposite. But, what about Professor Pfeffer’s statement that students are wasting their money unless they’re in an “elite” program?

If we take data from the Forbes business school rankings and break down these schools beginning with the top 20; those ranked 21 through 45; and those ranked 46 through 70, it’s clear that there is huge value to be obtained in all three tiers. In fact, the best value is not at the top tier, but in the second tier!”

And what about the concern about a lack of middle-management jobs? According to Byrne, that is simply not true. His report cites the GMAC 2015 Corporate Recruiters Survey Report that found approximately 80 percent of companies surveyed are hiring recent business school graduates into middle-management level positions.

“Many of these firms are attracted to newly minted MBAs because they are skilled in business and marketing analytics, communication, and problem solving. These skill sets appeal to employers across all industries. In addition, the GMAC reports that, globally 84 percent of employers plan to hire MBA graduates this year, compared with 74 percent that hired them in 2014, and 59 percent of these companies plan to increase the number of new MBA hires they bring on board in 2015 compared with 2014.”

So, are MBA degrees worth it?

The best people to ask this question to are folks who have already made the jump and received their degree.

A recent GMAC survey of more than 14,000 business school alumni from 70 universities in 20 countries found that 93 percent of the sample rated their education as personally rewarding, 89 percent said it was professionally rewarding, and 75 percent found it financially valuable. 93 percent said they would pursue a graduate business degree again, and alumni were “extremely likely” to recommend the various master degrees currently offered to others.

It gets even more optimistic: The 2016 Alumni Perspectives Survey Report shows that graduates “generally recoup their investment in business school education within four years of earning their degree, with the payback time varying by program.

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About the Author

Max Pulcini

Max Pulcini is a Philadelphia-based writer and reporter. He has an affinity for Philly sports teams, Super Smash Bros. and cured meats and cheeses. Max has written for Philadelphia-based publications such as Spirit News, Philadelphia City Paper, and Billy Penn, as well as national news outlets like The Daily Beast.

One Comment

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    If you get an MBA from highly reputable school (top 10/top 20) and work in a traditional large company environment the MBA (along with good work performance, etc.) can serve as the differentiator between you and others to rise to the very top levels of management, or at least be included in the conversation where others aren’t.

    I know in my own career I got opportunities and looks for certain very senior level roles in part due to my MBA. I can’t exactly calculate specifically how much my MBA added to my income, but the first job change I made after completing my MBA took me from $175K mid-management to $350K executive years ago, a role where all other executives have MBA’s (so I wouldn’t have obtained that role without the MBA). Once I was in that type of career track I was on a salary trajectory that eventually surpassed $1.3 million in total compensation annually after <10 years.

    Had I not had my MBA there is no way I would have been able to get into this "fast lane", and likely would have been "stuck" in that middle management layer for years.

    The other thing I've found is that large companies like to have senior leaders with MBA's for perception purposes- it looks good to their customers, on their web sites, to their board of directors to say "We just promoted Joe Schmoe to senior C level, he has an MBA from xxxx…".

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