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*'''Learning finance is no substitute for learning cash flow.''' [http://onstartups.com/tabid/3339/bid/9928/Startups-10-Things-MBA-Schools-Won-t-Teach-You.aspx "Startups: 10 Things MBA Schools Won't Teach You." OnStartUps.com]: "No amount of strategic planning will ever substitute for managing your cash flow. Financial statements are great. The most important one is your bank account statement." *'''Learning finance is no substitute for learning cash flow.''' [http://onstartups.com/tabid/3339/bid/9928/Startups-10-Things-MBA-Schools-Won-t-Teach-You.aspx "Startups: 10 Things MBA Schools Won't Teach You." OnStartUps.com]: "No amount of strategic planning will ever substitute for managing your cash flow. Financial statements are great. The most important one is your bank account statement."
 +
 +*'''Complex finance models and price discrimination are costly.''' [http://onstartups.com/tabid/3339/bid/9928/Startups-10-Things-MBA-Schools-Won-t-Teach-You.aspx "10 things MBA schools won't teach you." OnStartUps.com]: "Price discrimination (in an economic sense) is a wonderful thing. Except that it often ignores the real costs in terms of organizational complexity. Every time you add a new product or product option a small part of your company dies."

Revision as of 17:39, 14 July 2010

The pros and cons of seeking an MBA.

Background and context

Every year, millions of individuals around the world consider the pros and cons of getting an MBA, a Master's in Business Administration. The debate surrounds a number of key questions: Will an MBA improve one's career, or even jump start a new one?
Is it essential to higher-level management, or at least a major asset? Does it enhance leadership skills, teamwork, and the knowledge necessary to manage organizations at scale, or are these qualities more innate than anything and/or are they better learned on the job? Is the education itself stimulating, useful, challenging, and rewarding? Or, is work work better than home work? Is going back to school and academia really a good idea, or is it better to continue to create value in society through work? Is an MBA a good investment? Or, is the debt from school a significant problem, constraining the freedom to pursue opportunities, particularly ones that may be low-paying initially? Do employers really care that prospective job candidates have an MBA? Is it better to get an MBA sooner in life, rather than later? Is it important to have a specific career goal in mind when going to get an MBA, or is it OK to go into it without such targeted goals? Is an MBA program a great networking opportunity, or can those opportunities be found elsewhere? Is an MBA important for entrepreneurship? Can an MBA be useful outside of business, in government or non-profit work for example? Overall, is getting an MBA a good idea?

Contents

Career/salary: Will an MBA improve one's career/salary?

Pro

  • Hiring b/w MBA and non-MBA usually goes to MBA If an employer has two equally qualified candidates in a business, and must promote one or the other to a open position, they will almost invariably give it to the MBA over the non-MBA. The MBA offers confidence in the choice, and allows an employer to justify their decision to their boss or to share holders.
  • MBA graduates are generally paid very well. "MBA pros and cons.": "TopMBA.com, an online recruiting and education website, reports that the average M.B.A. salary went above $82,000 in 2004, up more than 9% from 2003. That will likely grow as the demand for a highly educated work force increases."
  • MBA generally offers professional credibility Thomas MacKay. "10 reasons why you should get an MBA." CIO.com. July 5th, 2007: "1. It gives you credibility with your business peers. Having an MBA demonstrates your commitment to the business because you've invested the substantial time and energy required to obtain the degree. It shows that you value the business perspective and recognize that the technology you implement, support and develop is intended to enable business activities and is not an end in itself. An MBA also indicates that you've mastered a certain level of knowledge in business management, which gives you the ability and confidence to speak on equal terms with executives outside of IT."
  • Career advancement often requires an MBA. "The Pros and Cons Revisited." To MBA or not to MBA. May 6th, 2008: "Could not have advanced satisfactorily in my career without the MBA - If my summer internship is any indication I'm coming away from the GSB with my dream job. And if I hate it - there are other opportunities to be had. Though recruiting was a miserable, humbling experience, employers who would have previously thrown my resume into the recycle bin, now take me seriously. Works for me."
  • MBA demonstrates high performance and key skills Earning an MBA means that you are not only capable of completing an undergraduate degree, but that you are capable of performing at an even higher level. To prospective employers, this credibility can be very important.
  • MBA opens doors to more jobs. An MBA means that fewer jobs are "off limits." Such greater choice is always a good thing.

Con

  • MBA is no guarantee of advancement or even a job. Many MBAs find that they are not advancing and that, even in some circumstances, that they cannot find a job at all. This can be a very unfortunate situation, and yet it is important to acknowledge as a possibility for anyone going into an MBA program. This is particularly true in a down economy. Quiting your job to get an MBA, therefore, has risks that are important to acknowledge.
  • Some of the best businessmen don't have MBAs. Francesca Di Meglio. "Save your cash." Business Week. May 15th, 2007: "Some of the best businesspeople I know don’t even have an undergraduate degree, let alone an advanced one. During the Internet boom, people dropped out of the best undergraduate and MBA programs to pursue once-in-a-lifetime career opportunities. Famous MBA dropouts include Microsoft (MSFT) CEO Steve Ballmer and filmmaker Georgia Lee, who left Harvard Business School and was discovered by Martin Scorsese."
  • MBA may not teach what you need to know for higher-up jobs. "The Pros and Cons Revisited." To MBA or not to MBA. May 6th, 2008: "I'm still unconvinced that I need to attend an academic program to learn what I need for my work - honestly, while the GSB is above its peers on academics, I was hired based on my pre-MBA knowledge and could probably function just fine in my summer internship on my work experience and CFA alone. I am learning things but not as much as a career changer would."
  • Employers prefer years of work experience over MBA Some employers prefer a person with years of work experience related to the new position, than having an MBA Degree. Indeed, they mostly want to know that you can perform this specific task at hand, not whether you can perform well on tests and in an academic setting. The two can be widely different.

Leadership: Does an MBA enhance leadership skills?

Pro

  • MBA enhances teamwork and leadership skills and confidence. Karen Kapoor. "Pros and cons of doing an MBA." Ezine: "Gain leadership Skills and confidence to excel in life."
  • Many leading managerial positions require an MBA. Many leadership positions up the chain of command in a business effectively require an MBA. Gaining leadership experience in these positions requires, therefore, that you first have an MBA.
  • MBA teaches how to operate/lead organizations at scale Thomas MacKay. "10 reasons why you should get an MBA." CIO.com. July 5th, 2007: "6. You'll learn how to read and interpret business statements. The MBA curriculum teaches you to understand and interpret financial statements, marketing plans, market analyses, audit reports and business development plans. [...] It's also helpful when trying to understand your own organization's operating environment: The better you understand the way your company is moving, the better able you'll be to position the IT department in front as opposed to being dragged along behind. Being in front, on the leading edge of change, is more fun and will make the IT department much more valuable to the company."
  • CEOs should have an MBA. Dr. Stan Stead, President and CEO of the Stead Health Group, UCLA EMBA student at age 51: "Well I was a physician who had moved through the ranks of academic medicine and had become a physician leader and then I actually moved into a Senior Leadership spot at UC Davis Health System and the CEO said the next step for you is a CEO job and these days to get that kind of position you’re going to need to get a MBA, so I’d like you to go get a MBA."[1]


Con

  • MBA will not improve x factors of leadership/business. Francesca Di Meglio. "Save your cash." Business Week. May 15th, 2007: "Business school might improve your quantitative, presentation, and communication skills. It might even get you thinking about ethics and strategy. But two years of case studies aren’t going to turn you into a leader if you weren’t born one. There’s no learning charisma, persuasiveness, elegance, or gut instinct."


Investment: Is an MBA a good investment?

Pro

  • An MBA is a great investment "The Pros and Cons Revisited." To MBA or not to MBA. May 6th, 2008: "I no longer have doubts about the ROI. I would have earned a perfectly good salary w/o an MBA but I now have far, far more options about when/where/how/why/what in the way of career. The intangible rewards are huge and make it all worthwhile for me. (The post-MBA earnings should be pretty good too.) However .... this is not true for all career paths/people ... do your own calculations."
  • MBA is valued currency in any business or organization. Dr. Ranee Kaur Banerjee. "Top 10 reasons to get an MBA." Bright Hub. June 8th, 2010: "An MBA is like the US Dollar; it is a good legal tender because every major employer anywhere in the world knows its basic value and most HR professionals recognize what the organization is likely to get in exchange for your MBA qualification. The essential elements you will be taught in any MBA program remain more or less the same and therefore, even if you apply for a job across the globe and your prospective employer is not familiar with the school you went to, your MBA will probably go in your favor. [...] It is not an accident that the MBA is the most popular post-graduate management qualification on Earth."
  • MBA very valuable if outside of previous area of study. An MBA is a particularly good investment if outside of an individual's previous area of study. This ensures that all of the skills acquired are indeed, new (or relatively new) knowledge (or knowledge that you would be unlikely to have without an MBA). For this reason, it can be especially important in convincing employers that you know the basics of business.
  • Employers pay for employee MBAs because it's a good investment. The fact that many employers are willing to pay for employees to go back to school and get their MBA demonstrates the value of the MBA. Businesses would simply not do this if they did not feel that there would be a solid return on investment.


Con

  • MBA is expensive with painful monthly payments. Depending on if you go to a state school or a private school, or if you have financial assistance or someone else paying for the degree, an MBA can vary in price. But, for most, it will cost about $20,000 - 40,000 per year. Every month during the course, and/or after, you will have to make very heavy monthly tuition/loan payments. This is real money coming out of your bank account in big chunks every month for years to come. This is no small investment. It's a hugely expensive investment, and often a risky one.
  • Total costs of MBA (including opportunity costs) is very high. "Why Achieving an MBA is No Longer My Goal." Cash Money Life. April 13th, 2009: "Achieving an MBA is an expensive endeavor – both in terms of tuition and in terms of opportunity cost. A top tier MBA program will cost anywhere from $20,000 – $40,000 per year (or more) for tuition alone. And in that time you will usually have to forgo your normal salary. The total cost of a top tier MBA program can easily run into the quarter million dollar range in terms of tuition and opportunity cost, and that can take years to pay off."
  • Debt from MBA can be a major burden. There is no solution to the likelihood that you will accumulate debt from going to get an MBA degree, unless you are a one of those full-ride/merit types or flush with cash.
  • Making money is better than paying tuition. Generally, making money instead of losing money is a very good thing. And, being loan free is superior to being over your head in debt.
  • MBA is bad investment if you have no career goal. John Baschab, executive vice president and co-founder of consulting and staffing firm Impact Innovations Group: "An MBA, like any other kind of training, is helpful, but only if the new knowledge, training, and opportunities it creates are in line with your career aspirations. The skills needed by the CIO of any sizable enterprise are definitely business-focused: budgeting, direction setting, people management, vendor management, and demand management. If your goal is senior management in IT or outside of IT, an MBA will provide the requisite point-of-view and training."[2]

Education: Does an MBA provide a stimulating education?

Pro

  • MBA provides base knowledge expected in business management Professor Anthony Hopwood, dean of the Said Business School, Oxford University said to the Independent in 2005: "The MBA provides content and knowledge. In the old days in the City what mattered was who you knew rather than what you knew. Now both matter. There is a knowledge base in modern management that everyone is expected to have."[3]
  • MBA teaches you to think like a business person Thomas MacKay. "10 reasons why you should get an MBA." CIO.com. July 5th, 2007: "2. It teaches you to think like a business person. As technologists, we're used to thinking in a linear and logical fashion: “If this, then that.” This logical mindset is essential to writing good software, troubleshooting technical problems and managing projects. Business people, on the other hand, tend to think in terms of strategies and value, and human (customers and investors) reactions. The business perspective, by its nature, tends to rely more on estimation and trial and error. The ability to think like a business person is critical for technology managers, especially those of us who wish to position IT strategically within the company."
  • MBA helps avoid losses/mistakes w/ on-the-job training. "Pros and cons of joining an MBA program school." Mumbaissez.com: "An MBA degree equips an individual with the skills and knowledge relevant to handle huge businesses and complex business situations with perfect ease. An individual without an MBA degree could acquire these skills over time but the chances of bearing losses in the initial phases are eliminated largely in the former situation."
  • MBA more quickly offers business competencies than on-job training. "Can business schools build entrepreneurs?" Technology Business bog: "Every business does need a theoretical knowledge base of accounting, finance, marketing, and public relationships; and a business school precisely provides that through a systematic process, which otherwise would take longer time."
  • MBA offers self-satisfaction at accomplishment. Completing an MBA offer great satisfaction at climbing the mountain successfully. The confidence that comes from this can translate into success throughout life.

Con

  • On-the-job training much better than MBA. "Why Achieving an MBA is No Longer My Goal." Cash Money Life. April 13th, 2009: "Seizing opportunity by growing my small business. Part of becoming an MBA is learning to recognize things like return on investment and opportunity cost. Right now I realize that my business is providing me the things I was seeking from an MBA program – in terms of increased income, a challenge, and learning new skills. I am the CEO of my company… and the CFO, chief marketing officer, secretary, technical writer, and everything in between. I wear a lot of hats around here, and it has been an incredible learning experience."
  • MBA education is very time-consuming and stressful. "Pros and cons of joining an MBA program school." Mumbaissez.com: "The time-commitments required too are strenuous and demanding. The course structure is such that one is left with very little time for the self. The pressure is immense and back to back presentations, assignment submissions, discussions and project deadlines make the course duration to be a really exhaustive drill."
  • Few executives believe MBA preps for real business. Francesca Di Meglio. "Save your cash." Business Week. May 15th, 2007: "In fact, only 20% of 133 top international executives said that an MBA prepares people to deal with the real-life challenges that a manager must face, according to a recently released report from executive search firm Egon Zehnder International."
  • Being graded and evaluated is not fun. Whenever you are being graded and evaluated, it is stressful and generally an unfortunate position to be in.
  • Work work is more rewarding than homework. Actually producing something of value and use in the world is of greater satisfaction than studying and working on fictional projects that go nowhere, even if they are educationally beneficial.
  • Challenge/reward can be found outside MBA. "Why Achieving an MBA is No Longer My Goal." Cash Money Life. April 13th, 2009: "One of the personal reasons I wanted an MBA was for the challenge. I enjoy working toward goals and I enjoy difficult challenges. A top tier MBA program places you among some of the top business minds in the world and you have a chance to learn from your professors and fellow students. In the last year and a half I have gotten most of the challenge I was seeking from my small business."


Entrepreneurs: Does an MBA help entrepreneurs?

Pro

  • MBA provides key knowledge for starting/running a business Dr. Ranee Kaur Banerjee. "Top 10 reasons to get an MBA." Bright Hub. June 8th, 2010: "Top 10 reasons to get an MBA."]: "MBA provide core knowledge in how to start, run, market, and grow a business from the ground up. This knowledge is not innate, and learning it while starting a business could simply mean that the business fails. #1: 'I want to start my own enterprise and an MBA will help me do it' I can't think of a better reason to go get that MBA qualification. [...] I firmly believe that the world needs more job makers than job seekers. Second, I know a lot of people who are entrepreneurs at heart and have really good ideas but they have to be contented working for others because they don't know how to run a business and don't want to risk failure. If you're one of them, sign-up for an MBA right now, because it will give you the knowledge, the network, the basic experience and the confidence to execute your ideas into reality."
  • MBAs have a statistically lower chance of failed start-ups. This is because MBA provide core knowledge in how to start, run, market, and grow a business from the ground up. This knowledge is not innate, and learning it while starting a business could simply mean that the business fails.


Con

  • MBA teaches analysis, when energy/creativity needed at start-ups Simon Woodroffe, Founder Of Yo! Sushi, said to the Independent in 2005: "It's not the person with the MBA who is running the business. MBAs think that if they do what business school teaches in terms of analysis, then they will be successful but it's just not true. Business is not entirely logical. It requires a plan but things don't go according to plan. I subscribe to the Alan Sugar view that business is about making things happen, about energy, drive and enthusiasm - not about analysis and theory."[4] He says the risk with an MBA for entrepreneurs is "paralysis by analysis."
  • Complex finance models and price discrimination are costly. "10 things MBA schools won't teach you." OnStartUps.com: "Price discrimination (in an economic sense) is a wonderful thing. Except that it often ignores the real costs in terms of organizational complexity. Every time you add a new product or product option a small part of your company dies."


Timing: Is it better to get MBA sooner than later?

Pro

  • MBA is a great way to make a career change. Dr. Ranee Kaur Banerjee. "Top 10 reasons to get an MBA." Bright Hub. June 8th, 2010: "#5: 'I will be able to change the course of my career if I get an MBA' Say you're a software engineer. You know you're good at what you do but lately, you haven't been feeling very satisfied. You think you could do more but you don't know what or how. You should definitely consider an MBA course. It will give you the wherewithal to consider other things you can do with your core knowledge of software programming."
  • Harder for older students to re-adjust to school/MBA. Michael Desiderio, the Executive Director of the Executive MBA Council: "I know what I tell people that are current students in the program that I was an alum of, they’ll always struggle in that first you know five or 10 weeks and I’ll say hey you’re going to have to find your flow but it will take you a little while because you’re not used to having to do this anymore. So I think the greatest challenge is just getting back into the rigor of a really hard academic program."[5]
  • Harder for older students to balance life/family/MBA Brian Bohrnstedt, Graduate of Wharton Business School at the University of Pennsylvania at age 35, Director of Strategic Pricing for Accuride Corporatio: "It is a little more difficult when you’re in your 30’s to decide to go for a MBA. I mean there are a lot of issues you have to take into consideration especially given my circumstances with being married with kids. I really had to decide whether or not I could take two years off work and focus on my education. But the way my wife and I viewed it was we were doing it together even though I was the one that was enrolled in the program and that worked really well for us. But ultimately I kind of view it as if you want to get ahead in your career and you really have an interest in business, a MBA will serve you very well."[6]


Con

  • Better to wait to see if MBA is necessary. While many people advocate for getting higher education sooner rather than later, this is not necessary. It is better to wait to see if the degree proves necessary. If it does, go get it. If not, then you are better off not having the debt.
  • Getting an MBA later in career and life is fine. It is completely acceptable to wait to get an MBA degree until your mid-30s, mid-40s, or even later. What's the rush? It is better to get it when you feel a resounding "I want this" or "I need this" then for any age or timing pressure.
  • Better to wait for employer who will pay your MBA. Plenty of employers will pay for you to go and get an MBA. It is much better to search around for different employers, find a company, organization, or govt agency that you really like and want to settle into, and then get them to pay for you to go get your MBA.
  • Older MBA students may appreciate it much more. John Fizel, the Director of Penn State’s online MBA program, said to MBA Podcaster: "I honestly believe that our older students are much more appreciative of what they have learned and what they have accomplished in the program than maybe the younger students."[7]
  • Older MBA students bring more experience/perspective. Jason Price, the Director of EMBA World, said to MBA Podcaster: "When you have those years of work experience under your belt, you’ve already had successes and failures in life. You already know what it may mean to see a business collapse or dissolve, or you see a business succeed or merge or acquired, it may have been through a recession or two. That is an education in its own right and when you bring that back into the classroom it provides an entirely different dimension."[8]

Networking: Does MBA offer great networking opportunities?

Pro

  • MBA offers unmatched networking opportunities Karen Kapoor. "Pros and cons of doing an MBA." Ezine: "It provides huge networking opportunity through fellow students, faculty and other peoples you meet during your MBA program which enhances your professional credentials."
  • MBA exposes one to ambitious peers. "The Pros and Cons Revisited." To MBA or not to MBA. May 6th, 2008: "I need to be around ambitious peers or I will die of boredom - I love my fellow GSBers! (Not all of them mind you, but enough of them.) Such a cliche but they really are the best thing about the experience, even for a stay at home nerd like me, ha."


Con

  • Great networking can be done in real world, outside MBA. Francesca Di Meglio. "Save your cash." Business Week. May 15th, 2007: "If you’re going to B-school to acquire a network, you’re not taking advantage of the one already in front of you—alumni from your undergraduate institution, professional organizations, your current and past colleagues, and all sorts of Internet communities. These folks already have relationships with people who can help you advance, whereas you’ll have to wait for fellow MBA students to graduate, get back in the game, and help themselves first."


Outside business: Is an MBA valuable outside of business?

Pro

  • MBA offers strategic/managerial skills useful anywhere. "Pros and cons of MBA." MBA Pursuit: "An MBA does help if you want to improve your strategic-thinking skills, develop your leadership abilities, and foster managerial effectiveness. Every business needs a manager, whether it is a non-profit organization, a university, or a startup. So even if you are, say, a civil engineer for a government engineering department or a salaried artist at a museum, you can use your technical knowledge and gain a business background to be managers of your company."


Con

Society: Are MBA degrees good for society?

Pro

  • MBA is equalizer; disadvantaged can excel after undergrad. Professor Anthony Hopwood, dean of the Said Business School, Oxford University, said to the Independent: "It's an equaliser. If someone is born and bred in North Dakota and doesn't comes from a rich family, that person is generally going to go to the University of North Dakota for their first degree. However, the person can then move onto a major business school for an MBA."[9]


Con

Pro/con sources

Pro


Con

See also

External links and resources

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