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MBA's Value Endures As Recession's Impact Eases

The MBA degree is retaining its value for changing careers or turbo-charging long-term advancement prospects, notwithstanding the recent hiring hiccup and continued uncertainty over job prospects for the class of 2010.

Officials at a number of institutions report demand for summer associates is strong, in marked contrast to this time a year ago. "We're seeing more companies, more (interview) schedules, more offers," says Randy Allen, associate dean of the Johnson School, Cornell University's graduate business school.

Permanent job offers for this year's MBA class show signs of picking up too. Salaries, however, look to slip, according to Sharon Oster, dean of the Yale School of Management and a professor there.

Long-Term Value of the Degree

But starting salaries for new MBA holders might not be a useful gauge, no matter how much the media spotlight that particular measure. "The real question is, what does the arc of your career look like? What are you going to be able to do differently" after obtaining an MBA, says John Elliott, dean of the Zicklin School of Business at Baruch College. The majority of MBA students, he notes, aren't doing the program to make a linear jump along the same career path they were already on.

More important, the long-term advantages the degree can bring - a broad and deep education on management issues, and lasting friendships that can propel one's career path - are resilient to the vagaries of the business cycle. Oster refers to "option value," meaning a better chance of transferring to another field if need be.

Other MBA Program Trends

- The proportion of Executive MBA program participants whose tuition is paid for by employers continues to shrink. As a result, schools are giving EMBA participants access to career services that at one time were restricted to full-time students.

- Applications are "way up," Oster says, as the recession has reduced the perceived opportunity cost of leaving the work force to attend school.

- MBA students' average age and years of business experience prior to business school are declining. Whereas a decade ago new entrants were expected to have roughly four years' experience, today it's closer to two years.

- In emerging economies, both demand and salaries for MBA holders is on the rise.

- Both students and alumni are demanding more career services, and institutions have stepped up career services to alumni, according to Allen.

- That's helping career services avoid the brunt of university-wide budget cuts due to endowment losses and shrinking state and local resources. Yale's Oster says she's cutting back IT and marketing staff, but not career services.

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AUTHORJon Jacobs Insider Comment
  • dg
    dgalperin
    19 May 2010

    I am about to get my MBA next week and am finding it difficult to find a financial analysis position. I have 4 and a half years in security master/market data and got my MBA to pursue another sector in the finance industry. Any thoughts?

  • La
    La Kub
    25 March 2010

    Thanks Jon and Questiong for your thoughts. if a Investment Bank, Private Equity, Management Consulting, Pharma, Automobile company recruiters can look at an individual with MBA degree from top 20 business school and feel confident that here is an individual with top notch education, with some bad luck of graduating in recession and I can be confident that given his/her education , the individual can be a future leader of company then I will say MBA adds value

    Reality is company recruiters don't say and feel that. The positions you mentioned which mentions MBA as required are middle level positions and not a typical position which a recent graduate will pursue. So he is faced with positions "MBA preferred" and he/she is trumped by an individual with no MBA but experience out of undergrad.

    So if such an undergrad goes gets MBA when it becomes mandatory how does an MBA add value as its combination of exp and MBA.
    I know only two MBA's . One who got a switch during school and went to dazzling heights and other half (recession) and went no where. And if the other half graduated from top 20 school then they are worse than lower school as these grad cannot blame the caste sys

  • Jo
    Jon Jacobs
    25 March 2010

    Nice debate we have going here; thanks for that, La Kub and Questiong.

    I'll try to briefly address each point in the 2 preceding comments:

    1) Yes the only really meaningful measure for each individual is how an MBA would affect his or her own life path.

    2) "A deeper analysis is required" - Yes there are criticisms one could make of the published research linking education/degrees/credentials with income levels. But my role here is simply reporter - not researcher or analyst. The consensus of research is what it is. I'm not saying it's absolute truth, nor that (as we finance guys are trained to say) past performance necessarily predict future results. It is, however, the collective estimate of scholars who rigorously studied the available data - analogous to the market's implied estimate of the future return from any particular investment.

    3) Generally, no one will or should interrupt an upward career track in finance to get an MBA. At a certain point, however, further advancement may become impossible without one. That should be evident from the fact that mid- and senior-level job descriptions in many areas - PE, capital markets, M&A advisory, strategy consulting, research, portfolio management, internal corporate finance (did I miss any?) -
    often list an MBA as a requirement, not merely "preferred."

    4) MBAs aren't all created equal. A top-5 (or maybe only a top-2) MBA definitely opens doors. An MBA from the next 20 or 30 ranked business schools has pedigree value as well. Beyond there, brand value you get from the degree drops off, but it can still be a differentiator, depending on the nature of the opening and your prior experience.

    5) Yes experience nearly always trumps degrees or credentials. But an MBA can be a prerequisite, as noted in (3). I'm no expert, and I don't have an MBA or other business degree... but it's evident to me that employers do give importance to it. (Again, see the in-house recruiters' comments within the BusinessInsider survey story link I gave in my preceding comment.)

    6) I'm wary of mentioning the CFA here, because its value is highly controversial among eFC users too. But I can't help noting that a few years ago I dug up a list of 50 or 100 Pimco portfolio managers and looked up bios for each individual. I expected to find close to 100 percent CFA charter holders and half or more with MBAs. What I found was just the reverse: Every one of those Pimco PMs had an MBA. Roughly 2/3 had CFA charters too. But I thought it was interesting that even in asset management - the CFA's strongest suit, as it were - MBA holders handily outnumbered CFAs.

    -Jon Jacobs, eFinancialCareers News staff

  • La
    La Kub
    25 March 2010

    Thanks Jon.But isn't an analyst who does not has MBA but was promoted to Associate will exceed career goals and pay than a MBA graduate( recession), who could not break into finance. I am using this as an example.

    And if you ask any unlucky MBA graduate, he will differ from every ranking published in media about MBA value.I know a no of top schools MBA grads who don't feel that MBA added any value to their career. However publicly they have issue in accepting the fact because of alumni pressure and guilt of not being as successful as others. So they hide their feelings and business schools continue to trumpet their value to individuals career.

    True value of MBA cannot be determined by comparing MBA's with people having just High School to their credit or undergrad degree but with other MBA's graduating in boom time and whether it opens doors and whether employers give any importance to it.
    A lot of positions on efinancialcareer lists "MBA preferred" which means that if you have MBA good but if not but you have experience you are still good. A lot of recruiters mention that they look at experience only. So if there people with good experience a MBA is not going add value

  • Qu
    Questiong
    25 March 2010

    John, if you look at a random applicant or a portfolio of applicants over time then yes you are right, but you are ignoring that a person is a single sample path, life's an unrepeatable experiment, statistics aren't as useful then... Furthermore you should bear in mind that you could argue over the long run the MBA adds significant value, but you may find that might be like saying investing in CDOs has done well over the long run in 2007... We have so many statistical problems with the analysis, I don't have the energy to go into it here. It is also not apriori evident that the leverage gained from a recession MBA isn't so much less than over the long run, that it isn't worh the risk... A deeper analysis is required.

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