Why hire MBA associates?
This isn’t me shitting on MBA associates but a genuine question on the economics of it.
From a purely economic standpoint, it seems inefficient. MBA associates take ~1 year to ramp up and are still often less productvrive than the A2As who are younger with more stamina and already have 2–3 years experience headstart in banking.
Economically, what’s the rationale for hiring an MBA associate who will be paid the same as an A2A but be less productive and less efficient?
Why not just promote strong analysts to associate (A2A), or hire laterals from smaller banks who already know the job?
Common justifications for hiring MBAs don’t fully convince me:
1. “Maintaining relationships with top MBA programs”
This seems overstated. Investment banking prestige isn’t driven by MBA placement and isn’t a bidirectional relationship it is for the way private equity is.
PE associate programs ability to attract associate candidates is driven by how well they place into GSB / HBS; OTOH, GSB HBS need to be able to send their 2+2s into PE VP roles. It’s a bidirectional relationship that needs to be maintained.
But for IB, the banks don’t need MBA programs but rather the MBA programs need banks for employment outcomes.
2. “MBA associates have more long-term potential (partner/MD track)”
This also seems questionable. At the associate level, it’s hard to predict who will have origination potential / social managerial skills. And using an MBA as a proxy for that potential feels weak.
In fact, one could argue that A2Asmight have better networks (e.g., peers in private equity from their analyst class).
So overall, why incur higher costs and slower ramp-up for MBA hires, when experienced banking talent seems strictly more efficient?
There's too much A2A churn which explains why there is MBA hiring....
Too many people leave their firms or the industry altogether leading to a thin promotion cohort to associate. When hiring gets tighter usually MBA hiring is one of the first funnels to go...
IBs would rather not fix their shitty staffing model and the way they treat analysts who carry most of the material creation workload and just replace them with MBAs.
Yes, but wouldn’t hiring laterals from other banks be better? Even if it was smaller deals, they’re still familiar with the day to day work streams of IB and will require less training but same pay as an MBA associate
There's too much churn from A2A in the industry in general.
Lateral hires happen all the time btw. Probably the easiest jump to make.
Number 2. Most of the best senior bankers are MBAs. Partially because more MBAs stick around, and partially because the skillset of a good senior banker is totally different than what makes a good associate/VP.
If a bank hired no MBAs, there wouldn’t be a large enough senior banker pipeline.
Sorry to break it to you but most senior bankers and bank execs are MBAs. Being a great analyst might make you a great buyside recruit but rarely produces a great senior banker.
Being strong at execution obviously doesn’t translate to being a strong senior banker—I agree with that. But I don’t think MBA is a meaningful proxy for deal origination ability either.
At best, both paths are uncertain bets. You don’t really know who can originate until VP+ when they’re actually put in front of clients. The difference is that a strong A2A is already delivering clear, measurable value through execution and technical skills, whereas an MBA hire is being paid more upfront for a skillset that hasn’t been proven yet.
Untrue. The only execution you are doing is meaningless back ups, charts and pages which clients don’t even go through often. Most analysts rarely touch models unless they are at EB or in M&A product group.
you need retards to boss the arrogant AN2s around and show them how it’s done
I'll try and break down the thought process.
You already know this, but seniors are the ones who actually make the bank money so they need to protect that pipeline. There simply aren't enough A2A's to fill the need especially if you consider they need to last long enough to also become a VP and Director first, whereas you get a larger batch of MBA associates each year to try and push through the meat grinder once the largest filter has passed. You can't lateral hire to fill the need either because the same under-supply applies at scale. But you are right than an A2A is a more efficient hire in a vacuum, I've seen teams cancel their MBA internship interviews because an analyst unexpectedly opted for an Associate seat.
To your first point, the B School relationships are still important because they exist as a talent filter for people with strong quantitive and communication skills that banks don't need to spend time (money) assessing. Second, the MBA allows new bankers to come in with a semi-organic network full of industry nepo babies who could potentially convert to future business, you can't readily recreate those relationships.
To your second point, you are partially right, speaking from experience, the ideas of "long term potential" and "management skills" contain a healthy amount of cope. It's more realistic to say MBA associates have fewer exit opportunities that beat the comp they can get in an IB role relative to their analyst counterparts and are thus more likely to follow the path to completion.
So yeah, you hit the nail on the head in comparing individual A2As and MBAs, but for firms and the industry it's an issue of supply and demand.
Under appreciated fact is that A2As have options whereas MBA Asos are likely early school/career fuckups with large amounts of debt. You can’t leave your job when you have $200k in loans + often wife and kids at home.
Also MBA asos are often DEI Becky’s who pad diversity statistics
Wasn’t always the case. Last 10 years it has been mostly useless DEI Beckies though who aren’t cut for IB.
They need to stop hiring MBA Aso Asian ESL Beckys
ESL?
They hire ESL Beckies as analyst too at Canadian banks. It’s all about MD’s gender KPI and bonuses
This is a worthwhile question to ask - as PE fundraising slows and recruiting pipeline dries up, I can imagine A2A becoming a more attractive path (in relative terms). I also may have been over optimistic about AI progress - it is nowhere near close to shaving meaningful time off analysts days as of yet and so there will still continue to be a sizeable analyst pool (to the dismay of group heads betting on AI)
To me, this “soft skills” advantage MBAs have is overstated. An analyst who has more technical reps and have been in the seat longer will have equal or greater competency speaking with clients, running workstreams independently,sector knowledge, pulling together pitch materials, etc etc. although maybe banks that shut analysts off into a dark corner to arrange logos won’t get the benefit of that skill development
SB this post if you hate MBA Asos and think they’re incompetent morons
I didn’t even make this post to shit on MBA associates. It’s more like if I ran an investment bank, I couldn’t economically justify hiring an MBA associate to pay double an analysts salary for half the work quality
Not abusing / overstaffing analysts, especially AN2s would largely eliminate the need for MBA Asos but banks don’t want to do that.
I did SA MBA last year and at my school women got verbal offers prior to interviews and had team dinners before the first rounds on campus. A friend worked in a top middle market bank in NY didnt get picked for H1b which made him go for MBA for a reset and struck out even with his MM
The amount of extremely dumb female MBA ASOs who get hired is off the charts and the bar is so low.
If not completely negative value add, they provide 1/4 of the capabilities of the average white / Asian AN2 male.
Not all of them. Every once in a while you get someone who has a very unique story and is super smart / talented. But, if I had to generalize I would agree with you. Unimpressive and overpaid people, at least at GS
Because MBAs make better senior bankers, even though they are a net negative the first year or so. They’re better socially, and they usually came from “lesser” backgrounds & hustled for their MBA so they have that “dog” in them. And let’s be real, most good IB analysts leave to other opportunities.
No need for 50 pissed off analysts to offer a rebuttal
“Why am I right and all the banks are wrong?”
Yes, because that has never ever happened before
Right. Totally the same thing. This is excellent equivalence and very relevant. Good job.
You don’t need to be smart to do IB. Just need to give a fuck about the job. MBAs have life experience and usually are (sometimes) young / new parents who need to make money… they realized being an IB lifer despite the brain hemorrhage would be better off than underwriting loans in corporate banking or auditing fortune 1000 companies getting paid like shit.
You'd obviously rather retain good analysts but usually not enough that both want to stay and who have the right skillset.
Laterals have their own challenges. Those who are good have a ton of goodwill built up at their bank so if it's a peer there is no real rason to leave. Those from a few tiers lower may be hungry but often aren't used to doing work at the level required, which forces you to have to teach them to unlearn a bunch of bad habits
Laterals have a higher short term floor but lower ceiling usually. The good juniors are well regarded at their current shops so they don’t leave, so you get lateral candidates who were either fired or at lesser banks
There is no reason
MBA associates are pointless.
A2As are the only way to go. Pay them more, train them, retain them. There’s nothing an associate can do that an analyst can’t.
And if you’re screwed it up so badly you can’t retain analysts just hire laterally big 4. Better than any MBAs.
Not saying you’re wrong. But there isn’t a single reputable bank that doesn’t take MBA associates, so think you may unintentionally be making a statement about whatever random MM you’re at
My firm takes MBA associates. I just don’t hire them into my group as a matter of policy.
You’re right on the short-term point—A2As are usually more productive early on. But banks aren’t optimizing for year 1 output. The main reason is pipeline + attrition. A huge chunk of analysts leave after 2 years (PE, HF, etc.), so there simply aren’t enough strong A2As to fill all associate seats consistently. MBA recruiting becomes a reliable way to restock the class every year. Also, the job changes pretty quickly after associate. By VP, it’s much more about client interaction, judgment, and relationship building than pure modeling. MBA hires are often screened more for those traits, even if they lag technically at first. There’s also a long-term retention bet—MBAs are more likely to stay through VP, where banks actually make their money back.
So yeah:
A2As = better short-term efficiency
MBAs = solve hiring gaps + better long-term pipeline
It’s less about who’s better day-to-day, more about staffing the system over time.
OP was hoping this would turn into a MBA hate post but got uno reversed lol
A lot of their classmates are buyside.
Also MBAs from top schools don’t want to work in IB. There are much better options. Probably negative selection bias for those who go into IB because they have much better buyside, consulting, or industry options
Banks have questioned the MBA Associate program before. I've heard about a few of those times . . most recently about 4 years ago I remember a friend who's close to the hiring strategy at MS saying that leaders were thinking about a new model that heavily reduces or eliminates MBA associate hiring. For the same reasons OP stated.
Ultimately they come back to it, and the law firms and MBB also make a similar decision to invest in expensive post-graduate degree holders who don't necessarily earn back their cost in the first few years, and rarely pan out to be partners down the road.
So there's a lot of firms making this decision, something is going on that's making them decide its still worth it.
One explanation I've heard is that the option value simply works out. The small % who become rainmakers bring in enough profit over a career to more than offset the losses on everyone else in their cohort. And more so for MBAs than A2A's because the MBA's have self-selected into the path by making a decision in their late 20's to invest so heavily in it by pursuing an expensive and time-consuming degree. The A2A hasn't made the same commitment and may have worse odds of staying on board, although I share OP's skepticism on that point.
Another theory I'd like to throw out there: the Moneyball theory. Specifically the fact that Billy Beane learned to take players from college instead of high school (highly unconventional at the time), because a college player is fully formed and much less likely to have his skills change. Similarly the star 23 y/o who the bank tapped for A2A is a more speculative bet in terms of who he'll develop into, compared to the 28 y/o MBA who has come out of the ringer a bit more . . been tested via prior promotions, MBA admission etc.
It’s just a different risk. I have not seen any non-boutique bank successfully cut its MBA program. You need the pipeline because of how abruptly juniors can flame out
Instead of hiring useless MBAs, they should hire muscular twunks from German or Nordic countries.
I'm not in IB but I always find these discussions funny. It's almost invariably an analyst who probably has limited life experience, and limited context on the "why" behind the deals they're working on. They're probably good at being excel monkeys and put way too much weight on this.
The older I get the more I understand how important life experience and varied experiences become. That is what MBA hires bring even if they are not as fast. I would wager they understand the big picture a lot better, they can connect with clients and leadership a lot better, and understand the industries they serve in a much more direct way than a 22 year old spreadsheet monkey does.
The egos of some analysts are blown out of proportion by VPs who prefer them for speed vs. strategic thinking and see experienced MBAs as competition. Seen this dynamic play out several times where behind every retard Analyst is an insecure VP hoping to eliminate competition.
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