The MBA Today
By Richard Montauk, author of How to Get into the Top MBA Programs
In addition to developing strong technical skills, today’s managers must be able to influence people, interact with other departments, and negotiate with individuals from all walks of life. An MBA is likely to be a step in the right direction.
Today’s managers must know how each part of their company relates to others and fits within the whole, how the company competes, and how it should compete. With the disappearance of much of middle management, this sort of knowledge is becoming increasing crucial at all levels—and is even more important in smaller organizations.
Not long ago, key purchasers of MBAs criticized leading programs for turning out overly theoretical graduates who were unable to make things happen and were unaware of the increasingly international dimension of business. The response has been profound. Many schools now attempt to make their training more relevant to actual business and global realities. The new curricula increasingly seek to achieve greater course integration, offer courses in soft skills—leadership, communication, and negotiation—and develop modern teaching methods.
What an MBA offers
A good business program offers skills not ordinarily mastered on the job, such as finance, statistics, and managerial economics. In addition, an MBA program will show how different functions operate and are related, how companies in different industries compete, and how they manage in different environments. A good program does all this by being, in part, a boot camp for managers. Most programs require that students have had several years’ work experience before beginning the course, and they subsequently draw upon it in their studies.
Students are drilled in the basics, are forced to crunch through massive amounts of material, learn to cooperate and compete with a broad spectrum of colleagues, and live life at a fast pace. Of course, the graduate gains more than just a set of skills and attitudes. The reputation and connections of the school, along with a hard-working career services department, will help him or her gain an appropriate job. The school’s alumni network and any professional contacts will be long-term assets, as will the MBA qualification itself on a CV.
Several types of teaching are widely used throughout business schools:
- Computer simulations and in-company projects are relatively recent additions to most business
- The traditional lecture method, in which students listen to professors and take copious notes, remains popular.
- The case-method approach, which has long been the primary teaching vehicle at Harvard, Darden, Ivey (Western Ontario), IESE, and numerous other programs, continues to dominate business school education. Case study typically prepares students with an unstructured (and thus potentially very realistic) situation.
They are expected to determine what the critical issues facing an organization are, as well as how best to analyze and resolve them. It is particularly well suited to interdisciplinary study, which encourages formation of student teams of mixed educational and career backgrounds.
Top MBAs demand a remarkable amount of work. During the first year of a two-year program (or the first two-thirds of a one-year program), the workload is particularly heavy. This is because the schools try to teach all of the major functional areas of business, plus key skills such as communication, leadership, and teamwork.
The second year (or last third of a one-year program) is less intense, both because students have learned how to play the business school “game” and because they are permitted to take elective courses that are generally less demanding than are the core courses (and more suited to their interests and skills).
Another important reason for the time pressure in the MBA program is to stimulate the grueling workload of a senior executive or entrepreneur. The heavy workload also forces students to manage their time effectively, as they would in any senior managerial position. They learn to determine efficiently which bits of work to do, which to glance at, and which to ignore. Furthermore, the demands of the program also encourage the students to study in groups, which develops teamwork skills—another quality that programs explicitly wish to foster.
Several of the major rankings of MBA programs evaluate the financial implications of pursuing an MBA at one school rather than another. Forbes magazine, in its biannual survey, calculates the financial returns of attending various business schools around the world. It looks at how many years are required to earn back school tuition (and related expenses) and income forgone—“years to payback.” Part of this calculation depends upon the salary before and after taking an MBA. The average graduate of the 85 schools included in the survey nearly tripled his or her pre-MBA salary as of five years after graduation.
The Financial Times’ annual ranking charts the annual progress of graduates of 100 leading business schools’ full-time MBA programs. One of its criteria is the percentage increase in salary from the beginning of the MBA to three years after graduation. At 73 out of the 100 schools, the increase was 100% or more. In other words, within three years of graduation, the average graduate was earning more than double his or her pre-MBA pay.
These are by no means the only sources of useful salary data. For instance, U. S. News & World Report, which focuses on American programs, lists the average starting salary and bonus of the most recent graduating class for its annual rankings.
What’s in it for me?
The London Business School recognizes two main reasons why students pursue MBAs: some people are “verticals,” who wish to climb the career ladder in their current field, and others are “transitionals,” who wish to change fields.Breaking things down further, MBA applicants cite a host of additional motivations, including:
- An increased salary
- A desire to manage others, rather than just oneself
- Greater intellectual challenges and interesting experiences
- An improved network of contacts
- Developing the skills to start and run a business
- Learning to manage a current technical or artistic field
- Extended regional or foreign work opportunities
These three well-known rankings consider financial success from a number of perspectives: starting salary, salary three years post-MBA, salary five years post-MBA, and time required to earn back the money (and forgone income) invested in an MBA. The conclusion in each case is clear. Attending a good quality, full-time MBA program is likely to be a very sensible career move, given that typical graduates increase their earnings dramatically by attending any of dozens upon dozens of programs.
The conclusion regarding leading part-time programs is likely to be more pronounced. Even though there is less data available regarding them, the fact that students continue to work and draw a salary throughout such programs makes it inconceivable that they, too, do not pay off.
Is it all worth it?
So, is an MBA worth the substantial investment in tuition and forgone income it represents? Although not everyone will be financially better off with an MBA, most will be, particularly if they attended the top programs. It would be a mistake, however, to base a decision purely on financial considerations. The payoff also comes from increased career options, confidence, security, and status.
The MBA has become a prerequisite for many of the world’s most desirable jobs, as firms in many industries seek people with the managerial skill and understanding necessary to drive their business forward. In addition, most people feel that they have lived life more intensely at business school, met the most interesting people they have ever known, and formed their closest friendships there. So, for many ambitious people in their 20s and 30s (and even 40s), it is no longer a question of whether to get an MBA, but of which program will best serve them—and how to get in.
Still, for some people, an MBA may not be an appropriate step. For example, if you just need to learn basic financial principles, you might be better off pursuing a master’s degree in finance.
But if you want to be a better manager, progress rapidly in your current company, start your own business, change functions, give yourself better career options, or just earn more money, an MBA is likely to be a sensible investment.
Richard Montauk is the author of How to Get Into the Top MBA Programs (Prentice Hall, 4th ed. 2007, 645 pp.), a comprehensive yet in-depth examination of business school admissions. Generally considered the dean of the MBA consulting business, his book is based on both his decades of experience and exclusive interviews with admissions directors at the world's leading programs. It is available from www.amazon.com. Richard can be contacted at firstname.lastname@example.org.
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