Why The MBA Remains An Awesome Investment

MBA value

For several decades now, we have heard lively debate about the value of an MBA. Much of the recent debate is fallout from the last economic downturn and the broader conversation about the rising costs of higher education. Today, the value of a graduate business school education is under the microscope like never before.

But, what’s surprising to me is how much the industry contributes to its own devaluation. Sometimes, I think business schools are their own worst enemy.

Notable faculty, industry leaders, and deans are jumping on the MBA bashing bandwagon. Here are just a few examples:

  • Jeffrey Pfeffer, a professor of organizational behavior at Stanford Graduate School of Business claimed, “A degree has a value only if the degree is scarce, and the MBA is completely unscarce.” Additionally, the faculty member remarked that unless you go to an elite school, “an MBA is a complete waste of money.”[i]
  • Irakli Berdzenadze, CEO of I.B. Capital Management believes, “…if you need to become successful in business remember, don’t waste your money and time on an MBA.”[ii]
  • Chris Bones, former dean of the Henley Business School believes that business schools are shortchanging students. He claims, “The core product of an MBA has hardly moved at all and the sector is failing to create new products and services that can make a real difference to business in the 21st[iii]

THE MBA CAN STILL PUT PROFESSIONALS ‘LIGHT-YEARS AHEAD OF THEIR PEERS’

Now, I’m not saying business schools shouldn’t reflect on their value and work diligently to improve it. But an MBA is, and always will be, a powerful investment to transform people and careers. It can put them light-years ahead of their peers. It seems that our challenge today is getting people to believe that getting an MBA is a worthwhile investment of time and money. To prove the point, I averaged three years of data (2009, 2011, and 2013) for the top 70 schools from the Forbes business school rankings.

From the data we see a sustained total five-year gain for earning an MBA; a reduction in payback time; and a healthy increase in post-MBA starting pay over pre-MBA pay. On top of this, we also see increased average GMAT scores for the top 70 schools (see below).

All-in-all, the value of an MBA is hardly a “waste of money.” In fact, it’s quite the opposite. But, what about Professor Pfeffer’s statement that students are wasting their money unless they’re in an “elite” program?

  • Duy N Pham

    Look at the different salary between the top program vs third tier online program , please ? Then multiple them to 10 years , or even just 7 years ?
    You see the problem of low educated people, such as you ?

  • Can’t BS a BSer

    These are such misleading statistics that inflate the pay bump.

    The “Post Graduate Salary” is not a salary figure, but a total compensation figure particularly including the signing bonus (which you should never include when calculating annual comp). Wharton’s median post-mba salary was $125K and if you look at non selective schools, it is significantly lower (e.g. Simon: $82K).

    Secondly, now just my hunch, but the Pre-MBA figure is a pure salary figure e.g. no bonuses because I can’t imagine the average matriculating MBA candidate is earning <$50K salary.

  • P Powell

    The arguments and data presented deserve praise. The Simon School dean presents a strong case in support of rising market value for the MBA degree. I think, though, that the same positive arguments that favor the residential MBA also extend to the online MBA. This is based on my experience as faculty chair of online graduate programs (known as Kelley Direct) at the Indiana University Kelley School of Business.

    Past surveys of our online graduates suggest salary acceleration that matches that of a top ranked residential MBA trajectory. Over two-thirds of students report a promotion during their average tenure of 32 months in our program. An increasing number of Fortune 500 companies call the Kelley School asking specifically for Kelley Direct talent. During the current recruiting season, we have online MBAs competitively interviewing for positions with leading consulting firms. These candidates receive top salary offers. Kelley Direct is growing 25% per year, we currently admit 325 new MBAs per year, and our average GMAT has measurably risen in the past two years.

    We teach the same cases online that we teach in the residential classroom, and by adapting pedagogy to the promise of technology (which includes both synchronous and asynchronous delivery of course material), the learning is just as effective. Kelley Direct brings the MBA to a qualified market. The top ranking of both our online and residential programs complement one another – we do not have to enforce “artificial scarcity” of the former to ensure enrollment in the latter. Our students learn in teams and student peer networks. If Fortune 500 companies make billions in profits managing virtual global teams and virtual organizations, why can top ranked business schools not deliver an MBA in the same environment?

    If we practice what we teach, then business schools must embrace the disruptive value of online education and offer a continuously improving portfolio that meets shifting and evolving needs in a dynamic marketplace. The portfolio, of course, will always have a place for solid residential program choices. As technology and preferences evolve, though, online education will strengthen instead of dilute the value of an MBA degree.

  • C. Taylor

    All the quality online programs have face-to-face / immersion components.

    EdX has done studies which show equivalent educational outcomes for students attending an online version of a course–at MIT, for instance. The vaguely targeted online addendum detracts from Ainslie’s otherwise fact-based plea.

    First rate Online MBA programs:
    IE
    Anderson
    UNC
    Marshall
    Carnegie Mellon

  • da

    try online ivy league degrees for fun

  • Francis P. Remengesau

    A smart investor would buy low and sell high. Getting MBA from a prestigious college is not a smart investment. Buying high is not the way to go. Now, getting an MBA online, perhaps a third tier college/university has a better return. Students do interact online rather doing it in an enclosed box. It has a great potential for high ROI, similar to prestigious college/universities. It all depends on a person who utilizes his/her tool – the MBA.

  • GreatScoTT

    Its a way to make profs feel like they have a job. Im sorry – the future is online but for technical skills – coding, data science, algorithms, design. But the intrinsic value that an MBA delivers IS NOT in the coursework. Its in the experience – that human factor that comes from making mistakes, from falling and learning and not being an online goody-2-shoes.

  • TechInsane

    Here we go again bashing the online MBA folk, come one please stop this nonsense, the work is just as difficult as off line schools and yes we do learn off from each other. The future is online no matter how you cut it, because the future is here and some are just not ready for it.
    Overall, it is about what one has learned and how they apply it, in the business world that counts. some people do not even have a degree to begin with and still do well in the business world.
    The debate between the Harvard elite and the group on prison (recent event) is another example of comprehension and application of what a person has learned.
    Yes elite schools are great but not all of us can go to them for various reasons we have to make due with the opportunities that are open to us, I am currently admitted to an online school and I have learned a great deal, case studies and class interaction has been brilliant to my career path.
    Thanks.