Last week, the Wall Street Journal wrote an article questioning the value of an MBA but I could have already told you that. As a graduate of the 2002 Wharton MBA program and a member of the Wharton Admissions Committee as a student, I get a lot of aspiring MBA candidates asking me the following question: “What do I need to do on my application to get into an MBA program?”
However, but before candidates can even ask me that question, I ask them is: “Why do you want an MBA and what schools are you applying to?”
The sad reality is that an MBA is not as valuable today as it was 30 years ago. Stanford University published data stating that from 2005 to 2008, over 94% of graduates had jobs by graduation. However, since then, only about 75% of graduates had jobs lined up at graduation. Stanford is a top MBA program, so you can imagine it being worse at other schools. In fact, 21 schools that are ranked by US News & World Report said that for the past few years, nearly 50% of their graduates did not have jobs at graduation.
MBA programs were created in the 1950s because large corporations felt that new employees lacked general management skills and as a result, many talented hires had to be taught on the job the basics of business such as accounting, finance, market research, etc.
Corporations started to demand that schools give them better trained employees. In response, many schools designed MBA programs as a two-year crash course for talented individuals to get a fundamental overview of how big business worked. MBAs were not designed to help you advance your career, they were designed to make you a great employee at a large firm. In fact, most large firms paid for your MBA and you, in return, committed to joining them for several years.
Fast forward to today, and you’ll notice that many people are opting for a different career path in business than simply joining a large corporation and working there for 25 years. MBA programs were not designed to teach students on how to be entrepreneurs, run small businesses, or manage their personal career goals in an ever-changing world. While most programs have tried to adapt to this shift, they still fall back to teaching traditional courses that prepare students for great middle management careers at Fortune 500 firms.
Many of my classmates from the Wharton Class of 2002 complain that their MBA was only valuable during their first job out of school. Once they went looking for another job, no one really cared what school they went to or how well they performed at the school. It was as if their degrees were rendered meaningless in all future jobs. Some classmates who work at startups actually hide the fact that they have an MBA from their work colleagues. Most startups look down on candidates with an MBA. They do not consider MBAs “rebellious” enough to be part of a startup or they find them lacking in core skills needed in an early stage startup: engineering, fundraising experience, bootstrap-marketing expertise, previous startup experience.
So, if you are planning on having a long career at GE or Bank of America, then an MBA is still a worthwhile investment. However, most MBA programs do a poor job of preparing students for the uncertain economic reality we live in today, which makes an MBA a poor investment.
In addition to this, there are several other factors that make an MBA less desirable. First, the cost of an MBA has increased dramatically over the past 15 years. With less large companies paying for an MBA, the cost is absorbed by students who usually already have an undergraduate loan they are still paying off.
What’s more, an MBA is no longer an entry to an exclusive club. Most universities now offer the degree and as the Wall Street Journal article mentions, most schools also have part-time and executive MBA options to go along with their full-time programs. These programs results in higher profits for the school, but at the cost of brand exclusivity. Twenty years ago, an MBA candidate would be competing with just his classmates for a job. However, today, he also has to compete with those graduating from the school’s executive and part-time programs.
Finally, the economic conditions that exist today have resulted in companies paying less and hiring less. MBAs just cannot get the job offers that their peers got several years before. An even more painful fact is that most employers now only hire a few MBAs and only recruit from a select few schools. So, those students going to second-tier MBA programs are finding less job opportunities at top firms.
Ten years ago, I used to tell candidates that an MBA was a great investment, regardless of which program they went into, as long as they had a general idea of where they wanted to take their career. Today, I cannot state that belief anymore. In fact, I tell candidates that if they want an MBA, then go to one of the top five schools: Wharton, Harvard, Stanford, MIT, and Kellogg. If they cannot get into one of these schools, then don’t even go to another school. The return on investment is just not there.
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