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?