The decision to get an MBA is an important one, and we believe the more certain you are that pursuing an MBA is the best next step for you, the more successful you’ll be in your application process. Admissions committee members will expect you to clearly articulate why you want and need an advanced degree in business. Candidates who present a convincing case for seeking an MBA degree are ultimately more successful in their application campaigns.
In this section, we’ll talk about the primary factors you’ll want to consider when you are trying to decide if an MBA degree is right for you.
You must answer six primary questions:
- Will an MBA be worth the investment?
- Does an MBA fit with my career goals?
- Am I qualified for a top-tier school?
- Does an MBA fit in with my other life plans?
- How do I feel about being back in school?
- Is my personality a good fit with the MBA environment?
We’ll explore these six questions over the next few pages. Your answer to each of them will help you to answer the larger question of whether or not you should pursue an MBA.
Will an MBA be worth the investment?
An MBA degree is an investment in your future. In business school, they teach students to compare the costs versus the benefits, and to forecast potential returns to determine if the investment is worth making. In 2006, the Graduate Management Admission Council (GMAC) studied the cost, benefits, and return on investment for a large group of actual MBAs.
In this unit, we will share what the GMAC research discovered, beginning with what an MBA is likely to cost you.
The first costs to consider are tuition, fees, and course materials. According to GMAC, tuition and fees for a two-year MBA program ranged from $20,000 on average for programs outside of the top ten and $74,000 on average for the Top 10 Programs.
For most MBAs, however, the opportunity cost of lost wages is a more significant cost than tuition and fees. On average, MBA students who attended schools outside of the Top 10 gave up jobs that would have earned them $104,000 over two years. Their counterparts in the Top 10 programs sacrificed salaries of $124,000 for the two years they spent in a full-time MBA program.
Table 1: Average Financial Investment Required to Obtain an MBA
|Tuition, Fees, and Course Materials||$20,000 – $74,000|
|Lost wages over two years||$104,000 – $124,000|
|TOTAL INVESTMENT||$124,000 – $198,000|
Source: Holtom, B.C., & Inderrieden, E.J. (2006). Examining the Value Added by Graduate Management Education (GMAC Research Report No. RR-06-16). McLean, VA: Graduate Management Admission Council.
These figures are a helpful starting point but only reflect averages. You should run the numbers for yourself based on the tuition for the schools you’re targeting, how long you’ll be out of the work force, and the value of the paychecks you’ll be foregoing.
Moreover, there are additional costs that the GMAC study did not take into account, such as the incremental living expenses of going to business school. These could include higher rent, having to pay for your own health insurance, and needing to purchase your own computer and mobile phone.
Finally, be aware that your out-of-pocket travel expenses might increase for visits to family and friends, travel abroad, and for your job search. These incremental expenditures could easily total $40,000 over two years, so be sure to factor these into your budget.
Of course, you might be able to offset lost wages through summer employment and other expenses through scholarships and grants. Some employers offer to sponsor education expenses in exchange for a promise to return to the company once your MBA is complete. Finally, in the United States at least, an MBA is tax deductible for some taxpayers.
Even putting aside these additional variables, we’re talking about a big investment, approaching $200,000 for an MBA from one of the Top 10 schools. This is a significant amount of money – so you need to be sure that the benefits make the investment worthwhile. It’s always more fun to talk about benefits. The benefits of earning an MBA degree can be considered from both a quantitative and a qualitative standpoint.
Let’s examine the quantitative benefits first.
The quantitative benefits come in the form of the salary bump you’ll get when you graduate and then going forward. According to the GMAC study, graduates from a Top 10 School increased their salary by almost $35,000 while those from non-Top 10 MBA Schools reported a $28,000 salary bump.
Source: Holtom, B.C., & Inderrieden, E.J. (2006)
Figure 1: Base Salary Impact of Obtaining an MBA
In addition to the increase in salary, other studies have found that MBAs also enjoy accelerated compensation growth and better employment prospects. One study estimated that MBAs earn about twice what non-MBAs earn over the course of their respective careers.
Returning to the GMAC study for a moment, they found that MBAs also enjoy certain “qualitative benefits” from earning the degree.
The GMAC surveyed MBA graduates and asked them to rate their satisfaction in a number of categories from 1 “extremely satisfied” to 5 “not at all satisfied”.
It turns out that MBAs were very satisfied with their degree because, among other things, they perceived that it:
- increased their career options;
- accelerated their advancement; and
- expanded their network.
Table 2: Level of Satisfaction with Aspects of an MBA Degree
Source: Holtom, B.C., & Inderrieden, E.J. (2006)
There aren’t many businesses out there that can boast customer satisfaction stats like these – so it’s fair to say that the average MBA is very pleased with their decision to go to business school.
As a final step, let’s compare the costs and quantitative benefits, and take a look at what the GMAC determined was the return on investment or “ROI” of an MBA degree.
The GMAC study calculated the return on investment of pursuing an MBA degree and concluded that an MBA degree from a Top 10 school has a 118% return on investment.
Graduates from a non-Top 10 program did even better. They enjoyed a 185% return on their investment. So, as it turns out, people who tell you it’s not worth going to business school unless you attend a Top 10 program need to check their calculators.
Table 3: Impact of Top 10 School Ranking on Future Salary Performance
Source: Holtom, B.C., & Inderrieden, E.J. (2006)
Here’s a bonus question that might also help you decide if an MBA is right for you: Did the preceding discussion about costs, benefits, and ROIs get you excited – or are you struggling to keep your eyes open? If you were terminally bored by this kind of analysis, you don’t need an ROI calculation to determine if an MBA is right for you. You’re going to be running lots of numbers in an MBA program.
So the numbers tell us that an MBA is worth the investment. But let’s bring this closer to home. The payoff on your MBA investment has almost everything to do with your career once you finish the degree. So you need to figure out if your Career Goals are pointing you in the direction of an MBA.
Does an MBA fit with my career goals?
“What are your long-term career goals?” As we have just seen, an MBA degree is a long-term investment that could take a decade or more to truly pay off; so it’s essential to know where you want to be in the longer-term to determine whether or not the investment in an MBA degree makes sense for you.
Defining your career goals isn’t easy, and in a later unit you’ll learn a step-by-step approach to crafting your career goals. For now, you don’t need to be structured or exacting; you don’t need to have any of the details worked out – just the vision. Use your imagination. If someone asked you to describe your “dream job” what would you tell him or her? Do you think your dream job is in the business world or elsewhere? Are you fascinated by what CEOs do, or general managers, or entrepreneurs? What picture of the future inspires you?
With a vision of where you want to go in your career in the long run, the next question you want to answer is whether or not an MBA degree is required or at least highly valued in the field you would love to work in. In certain industries such as private equity, management consulting, and investment banking, an MBA is practically equivalent to what an MD is to becoming a physician.
Look at the educational backgrounds of the leaders in the field you are interested in. Do they have MBAs? If so, that’s an important signal that you’re likely to need one too.
With your career goals in mind, you can also ask yourself — Is there a better degree than an MBA given my career goals? If you aspire to be a managing partner at McKinsey, an MBA is probably essential; however, let’s say you want to be an equities trader, then a Master in Finance might be a better choice than a degree in general management. By the same token, if you want to be the CTO of a software company then going for an advanced degree in Computer Science might be the best next step on your path. Many people are attracted by the prestige of the elite MBA programs and fail to consider that a law degree, a degree in public policy, or a doctorate in economics might better prepare them for their career goals.
That brings us to the trickiest question of them all – will you learn more of what matters to your ultimate success in a 2-year MBA program or through an extra two years on the job? Going back to school isn’t always the best option – especially when the specific knowledge you will gain from two additional years in the workforce will be more valuable than the theoretical knowledge you will learn in an MBA classroom.
I realize that these are difficult questions to answer, but nobody said that making this decision was going to be easy. An MBA is a means to an end, and you want to be fairly sure about the direction you plan to take in your career so that you can determine whether or not an MBA is the best path to getting there.
If you’re fairly certain you want an MBA degree, you’re probably wondering how competitive your profile might be relative to the other candidates who will be applying. Next, we’ll summarize the qualifications for a spot in the most competitive MBA programs.
Am I qualified for a top-tier school?
Admissions officers in the most competitive programs will be looking carefully at your academic profile, career progress, and “Leadership Portfolio” to determine whether or not you qualify for an MBA at their school.
Keep in mind as you are reading about these qualifications that if you are a still a year or more from applying, you have time to build the kind of application profile that a top-tier school is going to value. In a later unit, we will provide specific prescriptions that, if followed, will materially increase your competitiveness for the top programs.
Let’s begin by examining the academic qualifications for a top-tier MBA program.
The message here is the same one your parents sent you off to college with — good grades matter. Admissions officers are going to look at your past academic performance and standardized test scores to judge if you have the intellectual ability, discipline, and drive to perform in the MBA classroom.
Top-tier programs expect to see:
- A high Grade Point Average (GPA) in your major and overall
- Outstanding performance in quantitative courses like Calculus or business-oriented courses like Economics
- An undergraduate degree from a school with a solid academic reputation
- A GMAT score at or above their median score
Outstanding academic transcripts are important, but it’s fair to say that the admissions committee expects you to have lived up to the promise you demonstrated in college. They will be paying close attention to how far you’ve progressed in your career thus far.
First off, the majority of MBA schools expect to see three to four years of work experience on your application resume. Admissions officers believe that students with prior work experience will contribute more to the MBA learning environment. Moreover, admissions officers know that the more extensive your career progress has been, the more attractive you will be to MBA recruiters when you graduate. Schools are ranked, in part, according to the ability of their graduates to land good jobs at graduation; so your future employability is something the admissions board is definitely going to consider.
Of course, the quality of your work experience matters more than time served. Name brand firms on your resume—such as McKinsey, Goldman Sachs, and General Electric—will definitely help. If your resume isn’t full of blue chip firms, you will just have to work harder to convince the admissions committee that the quality of your experience is comparable to that of candidates from the name brand firms.
The quality of your work experience is also measured in terms of how quickly you’ve progressed in your career. This means you need to be able to point to promotions, increases in responsibility, and expanded skills and relationships in your career so far. Moreover, MBA admissions officers are impressed by candidates who know where they are headed and have made progress towards those goals; so evidence of progress in the direction of your longer-range career goals will be viewed favorably.
This is also a good time to alert you that business schools will be asking for reference letters from your direct supervisors. For the competitive programs, you really need your superiors to go to bat for you and build a case in your reference letters that you are in the top 10% of your peer group.
Finally, admissions officers want to be convinced that your career progress makes this the ideal time for you to go back to school for your MBA. The best time to apply is when you’ve reached an important career milestone and are clearly ready for a new challenge.
The third qualifying area we will discuss is your Leadership Portfolio, that is – the collection of experiences you’ve had leading other people to achieve important goals.
If you were applying to art school you’d be expected to present a portfolio of your artistic work so far. Business school admissions officers are interested in your Leadership Portfolio— the achievements that provide evidence of your leadership strengths and leadership potential.
In addition to sharing your achievements as a leader, you will need to be conversant on your leadership style, leadership capabilities, and leadership development needs.
It’s important to know that not all leadership styles are valued equally. If your leadership style appears authoritarian or self-serving, you may be passed over for candidates with more team-oriented leadership styles. Admissions committees want to see evidence that you can work collaboratively as part of a team and that you put the needs of others and your organization ahead of your personal ambitions.
You might also have heard that community service is important to business schools. To be more exact, the schools value “leadership outside of work.” If you’re early in your career, leadership opportunities might be limited at work; therefore, by taking on a leadership role in a community service setting, you’ll have a chance to develop your leadership abilities. Not to mention that you’ll also have the raw materials for a great essay that will feature your leadership abilities in action.
So you’ve justified the investment, determined that an MBA will take you to the next step in your career path, and believe your profile is competitive. Let’s get more personal and explore a handful of personal considerations to think through to determine if an MBA degree is right for you.
Does an MBA fit in with my other life plans?
The first thing that you should consider is how an MBA fits with your overall life plans and how returning to school will impact your most important relationships. Studying for an MBA is extremely demanding, and it will likely put a strain on relationships that are important to you. If you’re married, your spouse might have to relocate and find a job. How will you feel about leaving friends and colleagues behind?
If you plan to start a family in the near-future and think you might want to take time off or leave the workplace entirely once you have children, then you need to consider if you’ll have enough time in the workforce to recoup the costs we talked about earlier and to reap the benefits of earning your MBA.
How do I feel about being back in school?
Another personal consideration is your attitude about being in school. Think back to your college days – not the keg parties and the spring break trips to Mexico – the hard part, when you had to sit for 4-5 hours a day in lecture halls and lock yourself in your room to study for exams. If you hated that, has anything changed? Some people love school and they’re in their element; some people couldn’t wait to graduate and get out into the real world. Which category do you fall in?
Is my personality a good fit with the MBA environment?
The last thing we’ll ask you to consider is whether or not your personality is a good fit with an MBA program. Because building new relationships is one of the central benefits of earning an MBA, people who tend to get the most out of MBA programs are those who are good at building relationships.
On a related note, MBA programs require frequent public speaking and class participation. So if you’ve been shy and unassuming in the past, then an MBA program might be a great time to come out of your shell, assuming you’re ready for that challenge. If not, then you might not benefit from the MBA experience as much as others will.
In this unit, we’ve covered the primary factors that you’ll want to consider before applying for an MBA. Let’s quickly review some of the key considerations.
Unit Review: Should You Get an MBA?
- MBA benefits justify the investment: An MBA can be as much as a $200,000 investment; however, this investment has a solid ROI over the long-term.
- Career goals get the deciding vote: You need to think about your long-term career goals and decide if an MBA is the best preparation for your future success.
- Competition is intense: Outstanding grades, career progress, and leadership potential are required to qualify for a top-tier business school.
- Pursuing an MBA is a major life change: Consider your relationships, attitude about being in school, and personality fit in the MBA environment.