The MBA degree has long been held up as the cornerstone of executive development, providing rising stars with the business savvy they need to enter the hallowed halls of top-level leadership. But in a rapidly evolving business world where companies may not have the time or resources to send their best people to school full time for two years, is an MBA still worth the investment?
It depends on who you ask.
For individual executives, the MBA degree, or Master of Business Administration, is still seen as a valuable career development tool, according to Rich Wellins, senior research associate with Development Dimensions International in Pittsburgh. “When you have an MBA, you earn more money and you are more likely to be hired and promoted,” he said.
But Wellins is not convinced that an MBA actually makes someone a better leader, especially in the current business climate. His research suggests that executives with MBAs have better business and analytics skills but they are often weaker in interpersonal and emotional intelligence.
“Today’s business world requires people who are good at the softer side of leadership,” he said. “They aren’t getting that in business school.”
That’s not to say the MBA isn’t valuable. For global finance and consulting firms where executives are relied upon to guide clients through complex business decisions, pursuing an MBA is still an attractive path, said Bill Pelster, principal with Deloitte Consulting in Seattle.
Deloitte sees benefit in having its leaders pursue these degrees because it gives them business skills that will stay relevant throughout their careers, as opposed to specific industry knowledge that can quickly become obsolete, he said. They also develop a valuable network they can leverage throughout their career for expertise and future clients. “MBAs do incredibly well at Deloitte,” he said.
More Than the Money
Deloitte encourages rising leaders to pursue an MBA. Approved candidates take two years off to complete the program with the promise of a job when they return and tuition reimbursement over the ensuing two years.
The support goes beyond financial. Executives also provide young leaders with coaching, sponsorship and leadership opportunities that position them for success before and after returning to school. Every employee is assigned a senior mentor to help them develop a career plan and talk through their goals including whether they want to pursue an MBA or a more focused or shorter program.
The company also keeps close track of these candidates to make sure they get on an accelerated career path when they return so the company and individuals get the most benefit from the training.
Brooke McNaul, senior consultant with Deloitte in San Francisco, recently completed a two-year MBA at Stanford University and said the training helped her knit together the siloed expertise she developed as a consultant at the company.
“In a professional services organization you have to be up to date on business trends, and sometimes that means stepping away from the day-to-day work,” she said.
When she decided to pursue her MBA, she had to make a pitch to the company’s graduate school council. Once approved, she was given time to study for the GMAT, a common test for graduate business school admission, along with opportunities to lead projects and work abroad in the months before she started school.
“They wanted to make sure I had experiences to talk about in business school,” she said of her mentors who put her into those roles.
Once in school she found that education and working with a peer group gave her the business language and broad view she needed to move into higher roles.
“My classmates challenge me in how I think about business problems and it helps me arrive at better solutions,” she said.
McNaul acknowledges pursing an MBA was a large time and financial commitment for her and for Deloitte, but she believes that it made her a better leader.
Beyond the MBA
While it’s hard to argue against the value of intensive business training, MBA programs can cost $150,000 or more and deprive an organization of top performers for two years or more. That is driving many companies to pursue faster, cheaper or more targeted paths to prepare their people for long-term leadership. They have options.
“Several years ago, there was only the MBA,” Pelster said. “But now universities are offering a lot more focused programs that align more directly with the needs of the individual and the business.”
These include shorter, more intense executive MBA programs that can be completed in months rather than years or targeted master’s degrees that focus on a specific role or business challenge. There are also intensive weeks-long courses that focus on a specific industry or teach a specific skill set. “You can now identify the exact needs of the organization and individual, then find a program to match it,” Wellins said.
Jeff Merrell is associate director of an 18-month long master’s program for learning and organizational change at Northwestern University, where business leaders study organizational development, human capital management and managing disruptive change.
Merrell said students benefit from the opportunity to immerse themselves away from the workplace while focusing on the unique challenges of their profession. “It is an opportunity to go deeper into a specific set of skills versus studying all the pillars of business with an MBA,” he said.
The proliferation of custom master’s programs has led companies like Burns & McDonnell to look beyond the MBA as they hone the skills of their next generation of leaders. The global engineering, architecture and construction firm has had a tuition reimbursement program for 15 years that covers tuition and fees for up to six hours per term in a state or online school.
“We see it as a valuable way to develop and keep great people,” said Sue Madden, education and training manager.
The program can be used to complete an MBA program though employees aren’t given carte blanche to take whatever program they want. “It has to be consistent with the goals of the organization and the individual,” Madden said.
Among those pursuing master’s degrees, only one in four chooses an MBA. The rest pursue programs unique to their field, she said. “Our people are more thoughtful about MBAs today than they were 10 years ago because they have so many more options to choose from.”
Employees must have the support of a manager to apply to the program, then they meet with an education coordinator to talk through their goals and identify the right academic path. “We generally support courses over degrees but it depends on the needs of the employee,” she said.
For example, an employee who is leading projects in the power generation division may pursue an engineering management master’s degree whereas a marketing person working in that division may only take supplementary courses in marketing or industry knowledge. “The decision has to be mutually advantageous for the employee and the company so we all benefit,” Madden said.
Learning Starts at Home
Along with pursuing alternative academic paths, many companies are eschewing master’s programs altogether, relying instead on homegrown leadership development programs in which executives network with internal peers and learn from case studies and lessons designed entirely with that company in mind. But not every company has the resources to offer this level of development.
“It comes down to the level of maturity, coaching and executive development options in an organization,” Pelster said. If a company has the processes in place to identify a leader’s skills gaps and address them through training, stretch assignments, training and coaching, they may not need a master’s program.
Indeed, some companies argue their own approach might rival a traditional MBA. Nike, for example, prides itself on growing leaders from scratch.
“We like to build capabilities where we need them when we need them,” said Andre Martin, the company’s chief learning officer.
While the company regularly hires employees with MBAs, Martin said Nike is the best business school for its people. “We learn from each other and we develop through experience,” he said.
Nike’s entrepreneurial culture encourages executives to support high performers by putting them into roles that might be slightly out of their reach, then surrounding them with coaching and experts who are committed to helping them succeed. “It creates the perfect storm for talent development,” he said.
Martin points to a young executive rising through the ranks at Nike who was recently put in charge of rolling out a new product line despite her limited experience. She was given a dedicated HR person to make sure she had any necessary training to fill skill gaps and leaders with the experience and intuition to coach her through the process. “This is how we develop raw talent to create an innovative leadership pipeline,” he said.
Martin likens these high-pressure leadership opportunities to an MBA case study but instead of studying what someone else did they get to learn it in real life. “They see the impact of their decisions,” he said. “You can’t teach that in a classroom.”
It can be risky to put young leaders in these scenarios, Martin said, but that risk can be mitigated when leaders are fully committed to supporting their protégés and making sure they have what they need to thrive. To do this, companies need to create a culture of continuous learning where leaders are expected to identify and develop rising talent and have the training to support them in these challenging roles.
“You also have to be really good at assessing talent so you can match them to the right opportunity,” Martin said.
Being able to identify development needs is critical to ensuring young leaders don’t get overwhelmed in these stretch assignments. “It requires a lot more fluidity in the leadership culture, but the experience is beneficial for everyone.”
Beyond the Degree
With so many options available, companies should think carefully about whether MBA programs still deliver the most value. These programs can be valuable in the right setting but it shouldn’t be the default for every midcareer professional, Pelster said.
“If you are going to fund an MBA, make sure you know what you want to get from it,” he said.
They also need to think about what comes next. Once employees complete these programs, they need to be put in roles that allow them to use their new skills. If companies fail on this critical next step, they risk losing that high performer — and all the money they invested in their development, Pelster said.
According to a 2017 study from the Graduate Management Admission Council, 52 percent of MBA alumni work in a different industry or job function than they did before business school and 2 out of 5 work in an industry they hadn’t considered before business school.
Whether a company pays for an MBA, a master’s degree or invests in in-house development, they need to be sure those investments pay off for the business and the individual. It’s great when companies invest in developing their leaders but sending them to a program isn’t enough, Wellins said.
“Leaders need coaching, mentoring and experiences that help them form their leadership skills,” he said. A degree can play an important role but it is just one piece of the process.
Sarah Fister Gale is a writer based in Chicago. Comment below or email editor@CLOmedia.com.