Is an MBA worth it?

by Chloe Muller on March 30, 2021

I used to know this guy who had an MBA (Master’s in Business Administration). Okay, he’s an ex boyfriend, not that that would ever affect my journalistic objectivity. Anyway, he worked on Wall Street for a pretty big international banking firm. He got flown to London to handle some accounts, took company cars home at all hours, went to fancy downtown martini bars and always seemed to get a healthy Christmas bonus, which he usually spent  within 3 days in Miami.

At the same time, I was working for a test prep company, directing graduate school programs. I ran GMAT courses all over New York City for people looking to get into business schools. They wanted to be where the ex was, evidently. In addition to their indentured servitude to their jobs, they also put in hours of study and prep with hopes of getting into a top B school. Some of them made it, others did not. But they still had their feet in the door by working in the financial industry (and making good salaries, too).

My ex always went on about his MBA as if it set him high above his colleagues. He worked alongside people who hadn’t been to business school yet and still seemed to be making a very decent wage and gaining essential real world experience. Which begs the question, is it really worth it to get your MBA?

To find out, we need to conduct a sort of cost benefit analysis, in true B school style.

In order to get your MBA degree, or Executive MBA degree, you need to complete a 2 year program at a business school.  Right off the bat, you need to decide if you can make that commitment, which could be even longer if you go part time while continuing to work.

An MBA is only going to benefit your money wise if the job you score after B school pays enough to give you a quality standard of living and enough to pay off your B school debt. This is what is known as an ROI (Return on Investment). The field of business is not known for its altruistic intentions. Most people pursue an MBA to get ahead in their careers and make more money, from those looking to start up their own business, to those looking for a six figure investment bank job to someone happy working 9 to 5 to support a family. Some companies will encourage their workers to get their MBA, promising upward mobility or pay increases. These diverse paths are one reason why you need to think about your own ROI.

To calculate your ROI, total up the entire costs of an MBA degree for you specifically. This means everything, from tuition to transport to books and any income you may lose while studying. Next, consider what you can realistically hope to earn. Not what you will earn when you are 65, but the very first year after B school. Be cautious, and look at average or even low end salaries for the field you want to work in.

It’s a bit more difficult to calculate the intangible benefits of an MBA, those that cannot be measured in zeros in a paycheck or in corner offices. A top quality MBA program can give you the ability to actually “do business” and navigate your way through the financial sector. You’ll learn how to lead teams, organize projects, manage your time well, and communicate with colleagues in the office and with other firms. An MBA can also help to get you in the door at more lucrative firms and corporations.

As with any course of study, you’ll get out what you put in. An MBA is not a magic badge; you have to work it to make it work.

You also have to realistically examine your expectations of yourself, your MBA school, and your future potential earnings.

Studies show that most MBA students usually expect to crank up their current salaries by 40-50% by earning their degree. Take the current state of the economy into consideration too.

An MBA degree itself can cost between $12,000 to $54,00 per year. After graduation (presuming you find a good job fairly quickly), your salary may only go up by $10,000- $30,000 per year max.

There are also those who claim that an MBA only counts in your favor if you get it at a top tier school like Wharton School of Business. Having this on your resume may get your feet in the door faster, but most employers are more interested in whether you can stand on them in an actual work environment. Some schools hesitate to take anyone without at least a little work experience.

One piece of advice I encountered more than once relates again to your personal expectations regarding your MBA program. Particularly for those who’ve already been working in the field for a while, practice beats out theory in the ranking of what students want to focus on in school.  Search for MBA programs that meet your expectations, and not only will you stop yourself from throwing away tuition money, you’ll get the specific skills you need to advance your career.

GMAC(The Graduate Management Admission Council) reported in 2007 that MBAs were still leading to higher salaries. The survey also purported that most B school students were pleased with their MBA program, as long as it provided them with valuable real life experience and learning from professors who knew what they were talking about.

However, there are some reports which have shown that job prospects and salaries did not turn out as promised after finishing an MBA program. The jury is out on whose fault this is: students with unrealistic expectations, or schools failing to manage expectations ethically. Remember, education is a business too.

Look beyond school data for projected or reported salary information. Instead, you should also go to a trusted source like the Bureau of Labor Statistics  or Payscale.

For example, GMAC reported in 2010 that the starting salary for MBA grads was around $78,000, with a $15,000 bonus. Payscale, on the other hand, reported a starting salary of $61,000, bonuses included.

The charts below show some more notable statistics on MBA programs.

MBA Program Enrollment

 

    Expenses (Class of 2013)

 

Tuition

 

Health fees

Prog/Fees

Room/Util

Board/Etc.

 

Total

  $51,200 $1,186 $6,390 $10,800 $12,590 $84,000

 Career Hiring

*The following data is as of three months post graduation.

Class of

2006

2007

2008

2009

2010

2011

Accepted Offer by Graduation

90% 90% 88% 77% 77% 83%

Accepted Offer
3 Months Out

95% 94% 93% 87% 90% 93%

Median Base Salary

$105,000 $115,000 $120,000 $114,400 $110,000 $120,000

Median Signing Bonus

$20,000 $20,000 $20,000 $20,000 $20,000 $20,000

 

           

 

 

Function (Class of 2011)

 

%

 

Median Base Salary

Business   Development 6% $120,000
Consulting 25% $125,000
Finance 39% $125,000
General   Management 9% $115,000
Marketing 9% $102,500
Strategic   Planning 5% $109,000
Other 5% $102,500

 

 

Industry (Class of 2011)

 

%

 

Median Base Salary

Consulting 24% $125,000
Consumer   Products 5% $96,000
Entertainment/Media 2% $100,000
Financial   Services 39% $125,000
Healthcare 4% $110,000
Manufacturing 5% $120,000
Non-Profit/Government 3% $90,000
Services   (includes Real Estate) 4% $120,000
Retail 3% $100,000
Technology 11% $115,000

 *Compensation is not listed for categories reported by less than 1% of students seeking employment.

Search the web and the B school websites, you’ll see statistics for both sides of the fence on MBA degrees. If you have a secure job already, perhaps it would be better to hold onto it and pursue your MBA part time or later. Promotion from within your current company is also a reliable way to get ahead. Ultimately, the choice is yours.

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