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MBA – Value addition or Waste of Money?

MBA - Value addition or Waste of Money

MBA - Value addition or Waste of Money

Thinking of getting an MBA? You’re in good company. Across the globe business schools turn out more than 1,00,000 MBAs a year. But is the investment of time and money (tuition fees ranges from $20,000 for two years at a lesser known institution to $100,000 at a highly ranked one) worth it?

One of the most high profile and perhaps surprising critics of MBA programs is Jeffrey Pfeffer, a professor of organizational behavior at Stanford’s Graduate School of Business. Pfeffer and Stanford doctoral student Christina Fong conducted a controversial study, which concluded thatwith the exception of the most elite programs, there is little evidence having an MBA or earning high marks in business school correlate with career success.


Other skeptics point to the many successful CEOs and entrepreneurs who never attended business school — or even finished college, for that matter. Well-known college dropouts include: Michael Dell (Dell), Larry Ellison (Oracle), Sir Richard Branson (Virgin), Steve Jobs (Apple), and Microsoft’s Bill Gates (OK, Harvard, but still a drop-out!).

True, people can succeed without an MBA, but many use it to go further than they otherwise could. A “There’s no question that the network you develop and the credential you come away with opens doors … employers assume that someone who managed to get into an elite school – and pay the tuition – is talented and motivated,” Lynn Ronchetto, a graduate of Northwestern University’s Kellogg School of Management says. “But the biggest advantages are the skills you learn and your ability to add value to the organization you work for in a number of capacities.”

“The global corporate community clearly wants the skills MBAs have to offer,” says David Wilson, CEO and president of the Graduate Management Admission Council (GMAC) in McClean, Virginia. “An MBA is recognized worldwide as a currency of intellectual capital, and its value will increase as the economy improves and businesses grow.”  According to GMAC’s 2012 survey of 10,000 business school graduates, 67 percent rate the overall value of their MBA as “excellent” or “outstanding,” 22 percent rate it “good,” 9 percent say it’s “fair,” while just 2 percent rate it “poor.”

“While MBAs can no longer expect instant gratification in terms of salaries, perks and positions that are open to them, in the long-run, an MBA still offers a terrific rate of return,” Wilson adds. There is no way to accurately measure what an MBA degree adds to a person’s earning potential or the effects it has on his or her ability to advance into upper management. However, it is widely accepted that an MBA is a must-have for industries such as consulting and that in a competitive market it can give you a leg up.

“An MBA is great, but it’s no substitute for real world experience,” says Portland-based human resources expert Lori Kocon. “While it certainly won’t hurt your chances for getting hired or for advancement, an MBA alone – even from Harvard – doesn’t open doors the way it once did.

Whether an MBA would pay off for you depends on a lot of factors including the industry, company and job you are targeting, as well as how artfully you apply what you learn. It can definitely give you an edge, but you need to go into it with realistic expectations and realize that in the end, an MBA is worth what you make of it.

The phrase “MBA preferred” gets a lot of mention in online job listings. But what does it really mean? According to the schools that educate them and employers that hire them, MBAs are sought after for their ability to think critically, deal with ambiguity and solve complex problems.

In the broadest sense, the master of business administration degree represents a way of thinking, not just a set of financial skills and business knowledge.  An MBA can evaluate a company by looking at its financials, but that’s not why employers want them, says Muhammad Abdullah, former director of the MBA program at a Middle Eastern B school and now an associate professor of business law. They also ask if the numbers make sense in terms of other realities. The process of earning the degree teaches MBAs to think critically. “That’s a vital skill that can help, no matter what happens,” says Abdullah.

Critical thinking is not a course per se. But this ability is woven into the MBA curriculum, which relies heavily on the case-study approach. This requires students to evaluate business dilemmas and formulate the best plan of action. According to Abdullah, case studies typically reflect current issues — that’s another advantage of MBA training.


Ketan Shah, VP of a startup that develops indoor global-positioning products to help hospitals keep track of patients, doctors and other medical staff, hires MBAs because they have “professional training in problem solving. They know how to frame problems, ask questions and collect data.”

To conclude, even though it has become expensive, MBA from a good institution is still worth it in the long run.

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