MBA vs direct promotion

OK, I said I'd try to explain my thoughts on MBA associates versus analyst promotes, so here goes:

My thinking on this has evolved over the years. As a former analyst with a slightly unconventional career path, my views are colored by my own experiences as well as the analysts I've worked with over the years.

The advantage that A2As tend to have is that they are plug-and-play. They've had three years to get used to what they're doing, and for the most part can execute like a well-oiled machine. When I was a junior associate, I would have argued that our top performing associates across the board were mostly A2A promotes.

Part of that was a strong job market, and we clearly weren't getting as high of quality out of b-school classes as we had traditionally yielded. But part of it was that the analyst promotes just knew what to do, and had had three years to work the kinks out of their system. They also had pre-existing relationships to trade on, and believe me that helps.

However, the record of A2As beyond the first few years is mixed. More than that, if you look at A2As versus the record of former analysts who return after MBAs, the wash-out rate has been significantly higher in my observation. I think this is a resutl of a couple of factors:

  • Burnout. Associate years in a hard core group are almost as bad as analyst years. Stack them up and it's easy to see why some people give up the goose, decide that industry or private equity is an easier way to go. Business school helps analysts recharge the batteries. It may not seem like it when your new title energizes you for the first year, but it's a long trek to VP without a break.

  • Role. Being a junior associate is a lot like being a senior analyst. Making the transition to being a client-facing officer can be difficult, because you're suddenly judged by completely different criteria than you were as an analyst/associate. Many people just don't make that transition well (MBAs included). But A2As sometimes struggle more than MBAs because this is what they've done for the last seven years of their life, and probably all they've ever done professionally. The leap is harder than it looks, and that chasm claims more bankers than you can imagine.

  • Authority. One day you were "one of them". The next they are supposed to report to you. How do you handle that? How do they? It's more difficult than it sounds. More than that, will your bankers ever look at you differently enough? Or will you be stuck doing some analyst things for a lot longer than an MBA associate would? Sometimes, it takes a new setting to fully reset expectations.

  • Perspective. This is the most important reason I support getting an MBA. You'll learn more than you think in business school. You already know what we do and how we do it. You may not understand why. As a former analyst, I can tell you that a lot of what I did by the end of my three years I did by rote. I didn't realize how much I'd pick up in b-school that enhanced the stuff I had learned to do in my sleep. It made me a better banker, frankly. Now when I look at some of the A2As, I can see some of them stumbling because they are partly "idiot-savants" through their experience. They can grind out the work like crazy, but their knowledge base is narrower than it would have been had they spent some time not being analysts or associates, focused solely upon banging out as near-perfect books as they can.

Obviously, some people make the transition and do it well. That's not the point. The point (at least for me) is whether you hurt your chances of going the distance by skipping the MBA. And while it's a different conclusion than I would have given you five years ago, I have to say that I think it does hurt you.

 

I'm not sure if this is right or not, but say for example you get a direct promotion. You get a job that most would need an MBA for. Then you either hate your job and want to switch or you get fired. Will you still be able to get that job that requires an MBA or will you have screwed yourself and would need to go get an MBA?

 
Best Response
yury:
I'm not sure if this is right or not, but say for example you get a direct promotion. You get a job that most would need an MBA for. Then you either hate your job and want to switch or you get fired. Will you still be able to get that job that requires an MBA or will you have screwed yourself and would need to go get an MBA?

If you make vice president, many sins are atoned for. You may be able to convince people that the lack of an MBA can be overlooked. However, up until you receive that title, you will have very little to show for yourself other than what you've been paid.

The lack of an MBA does put you at risk. Perhaps a modestly enhanced risk of losing your job in a downturn, but primarily from the fact that for the next three and a half years, you're wedded to banking and the vagarities of the market. The blade of Damocles hangs over you until you get the next promotion, and you have to live with it.

 
PoppingMyCollar:
Nothing stops you from getting an MBA later...

True, but nobody wants to head back to school at 30, after they've been making half a million dollars as a mid/senior associate.

The bigger issue is that after you finish, will anyone give you credit for the years you did as an associate? Maybe, but maybe not...

 

what about e-MBA programs? i heard you need a certain years of experience before applying, and have had a position where you managed people (associate monkey managing analyst minkies). would this still result in aforementioned blade of damocles situation? or would you be able to make the best of it by working at a easygoing, smaller firm while getting your eMBA and then jumping ship to wherever after you are done

also, would lack of MBA hurt you if you ever decide to go PE or industry (particularly industry, since perhaps they dont really understand the IB track)

thanks

 

I think this is a very good post; I also think that maybe banks would prefer its MDs to have MBAs as that is more impressive to clients. I know in consulting that one of the first questions a partner indirectly gets asked when pitching a proposal is "What business school did you go to?" It may be a little less status-conscious in IB but I also think that an MBA does give you "management skills" which are hard to pick up on the job and banks do recognize that.

I think by and large there are a select few who don't need an MBA to recharge, or to teach them how to manage their newly delegated authority and those people would be successful with or without an MBA. However for the rest of us an MBA is a tremendous tool. Besides from what I've heard, it's a great break from working. Also spending 7 straight years of modelling is probably about the most depressing thing I can think off.

 

Great post!

Quick question - Let's say you have been accepted to top b-schools such as U of Chicago, Kellogg, Wharton, Harvard etc. When deciding which school to go to, do you guys think which city you would eventually like to settle down can be one of the deciding factors? Say, if you wanna eventually end up in Chicago, would going to either U of Chicago or Kellogg give you more advantage than others on the belief that good number of people in Chicago banks have MBA degrees from schools in Chicago and that will give you an alumni network advantage?

 

Speaking honestly, I think that most people on Wall Street would tell you that there's very little benefit to getting an executive or night MBA. You don't really create the network of friends you would in a full time program, and the academic part of the degree isn't really that much of a plus - most of the perspective I referred to earlier comes from the interplay of ideas you get from a full classroom of people like you, but not like you.

I actually asked my VP that question when I was an analyst, referring specifically to the executive program at Columbia where he had gotten his MBA. He laughed and said, "Yeah, we kind of look at people who get the weekend/night MBA the same way we look at a direct promote - 'he didn't get his MBA.'"

I never forgot that reaction. In retrospect, I get it though. We don't particularly give anyone much credit for a CFA, so why should it be any different for a night/weekend MBA?

As for my opinion, it hasn't changed at all since I wrote that post.

 

Well in France for example, the students (at least those that you will find in IB) go straight to the Master level, i.e. 5 years post-high school in the very French-style Grandes Ecoles. Pretty much all of them will have majored in either Business Administration or Engineering (with sustantial amount of business administration courses into Eng. schools). Hence, MBA is not required from an academics standpoint and therefore is really not part of the companies' recruitment culture. You will then find limited to none MBAs in the BNPP, SocGen and others. More generally you will find pretty much NO MBAs at top levels of french firms.

 

Yes 3rd year analysts get the sign on bonus. There's no reason they shouldn't.

Year 0 is 100K base (august to december) Year 1 is 125K base ( december+)

You only make 100K for your first 3 months on the job (stub period)

 
newfirstyear:
Yes 3rd year analysts get the sign on bonus. There's no reason they shouldn't.

Year 0 is 100K base (august to december) Year 1 is 125K base ( december+)

You only make 100K for your first 3 months on the job (stub period)

Is this base on the street? Never heard of this structure before. Is there a stub bonus as well? Is this BB only?

Lots of questions -- thanks and sorry.

"They are all former investment bankers that were laid off in the economic collapse that Nancy Pelosi caused. They have no marketable skills, but by God they work hard."
 

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Get busy living
 

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