We talked about CFA vs. MBA previously, but this is more fundamental. It's one of those classic questions that always end up with "it depends".
I do get why we arrive at that conclusion, as the question is so broad and cannot be generalised for each candidate's circumstances. Yet, it' still so anti-climatic and unsatisfactory.
So, I'm just going to (wo)man-up, apply the 80/20 rule and take a more definitive stance on this controversial subject. My take? MBAs are becoming less worth it. Here's why.
To assess this question, I focused on the top 30 MBA courses in the latest 2013 FT Global MBA Rankings. It's a common goal for candidates to aim for the top courses anyway.
What's the current conditions for MBAs?
- MBA employability continues to improve, with 92% of 2012's global business school graduates (business masters and MBAs) finding employment within 3 months, up from 86% last year. Employers are increasingly interested to hire MBAs in 2013 too.
- Post MBA salary boost has declined - On average, a Harvard Business School alum's salary 3 years after graduation (1999) represents a 209% increase from pre-school salary. Now in 2013, that number is 121%. Note that this includes the impact of current economic climate, but I'd argue that it applies to everyone in the market too, MBA or not.
- Cost of top MBAs have been rising 7% per year for the past 15 years. MBA students who enrolled in 2012 paid 62 per cent more in fees – up 44 per cent in real terms – than those who began their programmes in 2005, even though the increases in post-MBA salaries remained in line with inflation.
- There seems to be too many MBA graduates already.
- On average, the total all-in costs (fees, modest living expenses, forgone salaries) of a 2 year top MBA program is around $275k to $325k.
What do you aim to get out of an MBA? Are There Better Ways to Achieve These Goals?
Getting an MBA used to be a ticket to huge and sustainable salary boost. With that promise waning and the skyrocketing costs, is MBA still a worthwhile investment?
To tackle this question, a good starting point is to think about the objectives of getting an MBA and evaluate if there are better alternatives:
#1. Credentials and credibility - with the abundance of MBAs and degree inflation, I'd argue that employers would value actual work experience more as a signal of quality. Because anyone can buy an MBA, no one can buy the work experience and knowledge from doing the job itself. This certainly applies to me when I hire a junior in my team.
#2. Improve skillset / knowledge - you learn best on the job. No amount of theory could prepare you for the practical skills needed. Plus it looks good on your CV too. Identify what skills or knowledge of a specific job you would like to obtain, then try to get a job in that area. Just like anything (even MBA applications), you need to be proactive to search and ask for the job you want experience in. At least you still get paid, practical work experiences and not end up with student debt.
#3. Change careers / career advancement - Why do an MBA, incur $300k for 2 years, only to change jobs? Why not do it now? Ask for the internship, work for free even for a short time to gain valuable experiences for your CV to diversify and land the job you want, now.
#4. Network - It's true that you have more time to meet new people, attend events and meet up for coffee when not working full time. But this shouldn't be your sole reason for taking up an MBA, as you can make time for this and start tapping and expanding your network now. Join societies, clubs or events post work or on weekends and off you go.
#5. Have a good time / find yourself - The desire of a guilt-free career break or search for new direction is a common reason (subconscious or not) for taking an MBA. Given the high cost and additional work involved in this demanding course, I'd say it's better to take at least 6 months off to travel the world, meet people or spend time with family. Not only it gives you the battery recharge you desperately need, I'm confident that you will learn more about your true likes and dislikes during that period of idleness, to give you a better sense of direction and purpose for your next phase.
Over to you
On first glance, the average payback period for an MBA of 3.5-4 years seems short, making the investment worthwhile. But does it account for the increase risk aversion in the graduates' job choice? Nope, they didn't.
With a huge student debt, it's likely that top MBA graduates would go for high-paying jobs immediately to service the debt for the next few years, and probably not get the career change they first aimed for (reason #2 above).
I'm not against the usefulness of an MBA, I think there's a lot to learn there. But the opportunity costs seems too high to warrant such investment, and there are just too alternatives to achieve the same outcome. This is a chronicle of my decision making on MBA back in 2009 based on my career objectives, before I decided to take the CFA instead.
What do you think? Did you do (or are in the midst of) an MBA? Share your thoughts and experiences with us below!