The average MBA students enter business school with no realistic expectations for their MBA. Instead they operate from a set of beliefs such as:
• This will help me learn how to start my own company.
• This degree will teach me how to manage people.
• The MBA will help me get a promotion.
An MBA is often seen as a panacea for all that ails a career, but the truth is a bit more complicated. The degree can cost from $40,000 to $160,000 and take from 12 to 36 months to complete. That’s a significant investment and one that can be difficult to repay. Educational loans are among the few that cannot be discharged through bankruptcy, and school debt can follow a student for the rest of his or her life. Therefore, it’s wise to see an MBA as an investment and to determine the specific return by reviewing established claims.
Business schools advertise their degrees as helping students earn more, advance faster and work smarter, but they rarely talk about concrete benefits. Instead they talk about:
• Knowledge: MBA programs do impart a lot of information. Any first-year student can discuss current economic policy. Yet, while taking classes with Nobel laureates makes for good dinner conversation, the same information often can be gleaned from their books at a far lower cost.
• Skills: Business schools claim to impart useful skills, such as analyzing a balance sheet, valuing a company and negotiating deals. But most schools only cover these areas superficially. The specialized skills one needs to become a good negotiator, a great financier or an excellent accountant are often better learned in the workplace, through experience and with invested mentors.
• Network: The strength and renown of the alumni network is held up in many an MBA brochure. However, these connections are weak and scattered over multiple industries. A diligent person who keeps up with his or her former co-workers could construct a more useful network.
So if there’s only marginal benefit to the skills, knowledge and network, what does an MBA really provide?
• Inflection points: Business school is a good point at which to make a career change. First because it’s seen as a new beginning by many recruiters, and second because it provides a basic understanding of many fields. This, along with previous experience, can help someone get a foot in the door of a new field or industry. For example, from engineering to marketing, or from high tech to retail.
• Prestige: There’s a certain amount of prestige attached to holding an MBA. At companies that value prestige, an MBA can help with career advancement. At some large companies, an MBA from a top 10 school is almost a must-have to get anywhere past the mailroom.
From these two items one can derive the MBA’s utility. An MBA or business school is a worthwhile investment if the student plans to work for large, traditional companies such as GM, Pfizer, Goldman Sachs or others that value prestige. If that’s the case, the name of the university also will have value and should be considered in school selection.
One way to identify whether a company values an MBA is to check if it has a tuition reimbursement program. Those that do probably value the MBA more than those that don’t.
An MBA is an expensive investment which can be useful under the right circumstances. A prospective student should investigate those circumstances and formulate a clear plan before submitting the first application.
Gal Josefsberg is senior director, product management for Baynote, a software company. He can be reached at editor@CLOmedia.com.