Earning an MBA makes perfect sense for prospective students who want to differentiate themselves in a competitive marketplace where jobs are getting increasingly difficult to find and salary increases more tricky to negotiate. In the most recent study of MBA graduates by the Graduate Management Admission Council (GMAC), the overwhelming majority of MBA alumni were very positive about the value of the MBA, rating it outstanding or excellent.
As more and more students realise that taking an MBA is a smart move, applications to business schools are rising rapidly. In fact, global application statistics for 2007 are even stronger than last year’s, and last year saw a boom in MBA applications. Part of the reason for the surge in applications is the economy.
“At this point in my life, I realised that the economy was slowing down in Italy so I needed an MBA to help me make the jump up to a real management position,” says Andrea Delfini, who was admitted to University of Virginia’s Darden Graduate School of Business Administration in September 2007.
It is not just the Italian economy that is taking a hit. “Several shocks have hit OECD economies recently: financial turmoil, cooling housing markets, and higher prices for energy and other commodities,” says Jørgen Elmeskov, Acting Head, Economics Department of the OECD. “Fortunately, they occurred at a time when growth was being supported by high employment that boosts income and consumption.” Despite the positive jobs scenario, Jørgen Elmeskov predicts that real GDP growth for Europe will fall to 1.9 per cent in 2008, down from 2.6 per cent in 2007.
John Irons, director of research and policy at the Economic Policy Institute, a liberal think tank in the USA, says the projected salary increase worldwide for 2008 is "very mild growth." Base salaries are expected to increase about 3.9 per cent on average in 2008, matching the average pay increase in 2007, according to a Towers Perrin survey of 4,000 companies worldwide.
Wages are being held firm by solid job growth. In fact, German unemployment fell to a six-year low in December 2007, according to the Germany Federal Labour Agency. This drop was more than double the fall economists had predicted, underlying the strength of Europe’s largest economy. French unemployment figures are also falling. At the high end of the employment scale, recruiters are expecting shortages in their management ranks, as more and more burned-out baby boomers opt for lofty retirement packages. A global study found that companies which do not have succession plans in place to deal with these shortages are stepping up their MBA recruitment campaigns by going to business schools directly and making contact with MBA graduates through alumni networks.
So, against this mixed economic background, can MBA graduates expect a return on their investment? Needless to say, an MBA represents a major outlay of resources, often involving long-term loans and withdrawals from personal savings accounts. Yet, the MBA remains the most desired graduate degree in the world — the global degree of choice. The MBA opens more doors than any other graduate diploma — the magic three letters can make or break a possible career opportunity. Furthermore, the return on investment is high by most standards. By investing in an MBA now, according to a study carried out by University of Rochester's Simon Graduate School of Business, the average student with four-to-six years’ prior work experience can expect to add $170,000 in value, net of tuition, by the age of 30. With subsequent annual wage increases, the MBA becomes even more valuable with the passage of time.
According to the Wall Street Journal/Harris Interactive MBA rankings, graduates of the 10 top International MBA programmes were offered average starting salaries of between $38,840 and $120,000 in 2006. In addition, GMAC reports the typical MBA in the class of 2006 made $61,302 before earning the MBA degree and can expect a post-MBA salary of $86,350, representing a 41 per cent difference.
However, the level of increase over time in salary should never be the only measure of the value of the MBA, or otherwise why would a 50-year-old executive, for example, register for an executive MBA. The fact is that executive MBA programmes cannot keep up with demand, demonstrating that an MBA cannot, and should not, be reduced to the present value of salary calculations.
An MBA degree from a top business school offers the potential for broad improvements in:
In a recent study of MBA graduates, GMAC found that the MBA serves as a vehicle for developing career competencies, becoming the qualification of choice for those who are serious about climbing the ladder all the way to the boardroom. Specifically, MBA graduates acquire the abilities to:
For many MBAs, advancement within a chosen field that results in more challenging work is as satisfying as an increase in salary. Likewise, starting a new career path using new abilities learned on an MBA programme can be the primary goal for MBAs who want to transform their careers.
MBA graduates also realise that the notion of finding a job with a high starting salary is also changing. Bonuses and rewards are proving to be better tools to manage the hiring process. Rather than committing themselves to fixed salaries, companies are supplementing salary packages with signing-on packages and other types of incentives to attract MBAs who offer the most potential of exceeding the expectations of the companies. These variable pay schemes deliver monetary rewards without the employers having to make a long-term commitment to a fixed salary. It also has the added value of requiring newly minted MBAs to perform from day one.
An MBA prepares students for the global workplace. The rich international perspectives of fellow MBA classmates will only serve to highlight the structural, procedural, political, and cultural differences in business practice and management decision making. Furthermore, close collaboration in study groups will encourage cross-cultural and cross-industry business contacts and friendships. “For me, an MBA must have an international environment in both theory and practice,” says Mathieu Vaidis, who completed his MBA from France’s top-ranked ENPC School of International Management (Ecole Nationale des Ponts et Chaussées).
Moreover, an international MBA programme offers key management and leadership skills that prove to be strong assets in business. Those making hiring decisions often select individuals with strong professional portfolios that can be demonstrated by the MBA. While the MBA in itself does not guarantee success, it enables students to master analytical know-how, which is considered to be as vitally important as the personal, interactive and organisational skills needed to optimise strong business decision-making.
Without a doubt, the skills embedded in an MBA respond to the needs of global organisations, which are demanding more international orientation from their recruits. According to a recent GMAC study, 89 per cent of European business schools are developing international MBA programmes in the form of partnerships, or by establishing satellite schools on remote campuses. Depending on the programme, students can gain international experience by enrolling in exchange programmes with partner schools or by earning double MBA degrees in two different countries. For example, Madrid-based IE Business School offers dual-degree programmes with MIT and the Fletcher School (Tufts University), whereby students are able to complete both degrees in considerably less time than if they were to do them separately.
In addition, prospective MBAs are far more comfortable in applying to business schools beyond their national borders. GMAC reported sharp increases in applications to MBA programmes from international students in Europe compared to the USA. During the first 11 months of 2007, the number of GMAT registrations in the USA increased by eight per cent compared to the same period in 2006. But in Europe and the rest of the world, registration volume increased by more than 19 per cent compared to the same period last year.
An MBA programme offers valuable networking opportunities, which enable MBA students to engage more deeply with other MBA students and alumni who can expand their professional horizons. Because MBA students often have pre-MBA work experience, they are likely to have additional self-insight and a more realistic appraisal of their skills, values, and needs.
After earning an MBA, candidates come away with a strong skill set and an extensive network of professionals in a wide variety of industries and functions. This is especially true as MBA programmes are becoming more selective in their admissions criteria. According to a recent GMAC survey, the majority of graduate management programmes, including part-time, executive, and online MBA programmes, indicate that their applicants either match the academic profiles seen last year or are even more academically qualified based on their GMAT scores and other academic and professional achievements. The percentage of full-time MBA programmes reporting that the quality of the applicants in 2006 exceeded that of the previous year was 56 per cent! This translates into a network of highly-quality MBA classmates who can provide support to candidates during and following graduation.
The shift towards a high-quality student intake has become more pronounced, and contributes to enlarged social activities. Many MBA programmes now offer a wide range of networking opportunities through professional clubs, ethnic festivals, and sports activities. The social quality of life for MBAs has reached new dimensions, offering more diversity and greater room for the growth and development of the individual.
Internships are playing an increasingly important role in building a solid network and finding that dream job. In a recent GMAC study, 74 per cent of large international companies that hire MBA interns said that when they seek to attract new employees, they first interview candidates who have done MBA internships with them, and then open the field to those who have not done an internship. Successful internships often come about as a result of a group of MBAs teaming together on a project aimed at a particular company.
Mathieu Vaidis found his dream job after doing a six-month internship with another student as part of his required coursework at ENPC. “I was offered a fantastic job by the very company that had accepted my ENPC internship proposal six months earlier,” says Mathieu. He landed a senior position at Bristol-Myers Squibb in Paris as the EMEA Marketing Manager.
According to the Forte Foundation, an MBA gives graduates the tools and confidence they need to launch their careers, from speaking to negotiating to performing any job in any industry. MBA students with Bachelor degrees in the liberal arts may be looking to acquire the relevant skills for a move into a management role, while MBAs with technically-oriented first degrees might want to broaden their international business understanding. (MBA students from non-business backgrounds are often advised to undertake quantitative and analytical preparation to polish up their hard skills, by doing refresher courses in calculus, statistics, and economics). GMAC has found that all MBA graduates, no matter their background, acquire the necessary skills to integrate a wide variety of information:
By joining an MBA programme, students benefit from the interaction and group dynamics of their fellow classmates. A typical MBA class might include managers from consulting firms, the financial services industry, manufacturing companies, service industries, the medical and legal communities, and non-profit organisations. The entire class benefits from the experiences of accountants, attorneys, entrepreneurs, engineers, scientists, medical doctors, and marketing specialists.
Acquiring business ethics is one example where MBA students prepare themselves for their future leadership roles. The main objective of the 13-month IE International MBA programme, for example, is to cultivate directors and entrepreneurs capable of leading business organisations in competitive and dynamic global environments “without losing sight of professional ethics.”
Furthermore, a 2007 study of ethics, sustainability, and corporate social responsibility programmes from the Financial Times top 50 business schools found a 25 per cent increase in the number of stand-alone ethics courses on offer. At No. 1-ranked Tuck School of Business, for example, all MBA students are required to take ethics classes during Orientation Week, but the business ethics course is an elective, and offered several times throughout the year to make it accessible to as many students as possible. Typically, between one-half and two-thirds of the Tuck graduating class elect to take the course.
MBA students can take elective courses not only in ethics, but also in a wide range of areas. Having covered the foundation coursework, including the basic business disciplines such as accounting, finance, and marketing, together with soft-skills development and project work, MBA students are in a position to customise their MBA. To this end, Wharton has just opened Huntsman Hall, a state-of-the-art facility that will better serve students as they customise their MBA. As a result of the greater emphasis placed by business schools on the elective phase of their programmes, students are better able to focus their MBAs towards their career goals.
Overall, the MBA creates valuable opportunities for career enhancement and transformation by teaching general management skills and offering real-life, tailor-made business experience. The MBA is also open-ended. Students, who have a good idea about the direction their career paths will take can adjust and enhance their goals based on the new skills and experiences they acquire while earning their degrees. Likewise, students who want to change sectors and function completely are also enriched by the MBA experience.
MBA enrolments have shot up dramatically over the past two years, proof that young professionals and employers know the value proposition of the degree. By learning solid business skills in a real-life environment, students are building the foundation of their careers against the pitfalls of an uncertain economy where recruiters are becoming more selective in the selection process. The return on investment is high for those candidates who earn their MBA at the top business schools, where strong networks are in place to help pave the way for success in the future.