From the MBA: Reports of my Death have been Greatly Exaggerated

This is the first TweetBack Thursday of the semester, but the title of this post was too long to fit it all in the header. The question comes from a new Twitter follower @Knightstu, who asked me to comment on a recent Wall Street Journal article on the declining value of the MBA. You can read that article here.

I have no doubt that the data in the article is true: that the supply of MBA grads has grown, that some of this supply is of a lower quality, that starting salaries are flat or down a bit, and that some students are dissatisfied with their post-graduation job experiences. Times have been hard for everyone. Median household income fell by two to three percent in nominal terms between 2008 and 2010. Job offers are hard to come by and competition for openings is brisk.

But it is important to note that saying MBA starting salaries are falling right now isn’t the same thing as saying you won’t benefit from getting an MBA. Let’s first understand what an MBA is and what it is not. No degree, including the MBA, has ever been a guarantee of success. A typical MBA experience is designed to give you a set of conceptual, analytic, communication, and social skills that help prepare you to compete as a business professional. When taken at an accredited institution, the degree certifies a certain level of competency in these skill sets. What you do with this new toolkit is up to you. The degree is not a substitute for motivation, perseverance, a walkabout, or your lack of relevant experience. So if your plan is to pursue an MBA so that you can find yourself and what you want to do just in time for the program’s career services people to hand you several high-paying job offers, you do not have a plan–you have a wish. Stop being stupid and get a plan.

A plan involves asking yourself what you want to accomplish and if an MBA is the best way for you to get there. Do you just want more income? If so taking on a second job to supplement your income until the economy rebounds, or you get a better primary job might be your best choice: cash now with no tuition costs. If you are just not sure what you want to be when you grow up, job shadowing, mentorships, and interning at a few places is the way to go. These methods will help you better understand what the job is like and where you need to invest to compete. If you are short on communication or social skills, a variety of non credit workshops or short-programs might get you what you need. If the greatest needs are conceptual and/or analytic, or you want to greatly expand the variety of options available to you, school is likely to be the best choice.

But if the choice is school, there are still career issues to factor in. All MBA programs are not alike. Do you want to be a CEO or an independent small business owner? The former would suggest going to a big time school with a high-priced program and high-placed alumni network. The latter goal would in all likelihood make that a bad buy–the local university seems the better choice. Think about where you want to fit on this spectrum– the cost of the right answer and therefore the size of your bet changes accordingly.

So, my main point is that you cannot evaluate the MBA or a specific MBA program in isolation like the WSJ article does. Nor should you base it on the disappointing job prospects of an MBA graduate in Louisville. You have to ask yourself what are my alternatives both in terms of costs and benefits and make your choice accordingly. MBA starting salaries may be falling, but prospects were falling everywhere over this period. It is the difference between alternatives, not the direction of the base of just one option that is important.

I would also encourage you to think long-term not short. This is difficult to do because the costs of education tend to be short-term and easy to identify (e.g, tuition, books, lost wages), while the benefits are in the future, have a distribution around a mean outcome and can change over time. Our economy and the job market may be experiencing fundamental shifts, but the best predictor of future performance is still past performance and professional masters degrees like the MBA have a very good track record when compared against the alternatives. Could the future be different? Sure, there are no certain bets, but I’m betting the MBA will continue to provide many people highly sought-after general skills at a fair price. If you think you have found a better bet for you, take it.


4 thoughts on “From the MBA: Reports of my Death have been Greatly Exaggerated

    • Thanks Grant: I could have written a lot more about this topic. There is a lot of ground to cover. If you have any specific elements from an EMBA perspective you would like to see me comment on, I’d be happy to do it.

  1. Great advice that every student getting or thinking about getting an MBA should read and consider! An MBA won’t dictate the type of job you get or success in that job any more than a degree in sociology will bar you from becoming the President of Walt Disney World. That’s up to your plan; how you execute it; and how well you apply the concepts, skills, and relationships you develop along the way!

  2. Good points, I enjoyed reading your blog on ‘ From the MBA …’
    Other – UNLV Eng college has proposed a minor in IT following recommendation by ‘IT committee’ — I thought you might like to know the answer to your “garage” analogy!

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