What Can I Do with an MBA Degree?
Recent press reports have questioned whether MBA degrees are worthwhile, focusing in particular on full-time, on-campus MBA programs that require investments of two years and as much as $200,000. Nevertheless, the acceptance rates at elite business schools continue to plummet, while those programs consistently find themselves deluged with applicants. In fact, in 2017 the Wall Street Journal reported that top programs like University of Pennsylvania’s Wharton School and Harvard Business School comprise 6 percent of the industry and receive more than half of all applications.
Why do applicants perceive such tremendous value in MBA degrees? How do these degrees enrich their lives? And what can they do with this degree that makes it so beneficial?
There are two valid answers to the question, “What can I do with an MBA degree?” One considers the top reasons people continue to want these degrees. The other answer reflects on the job and career prospects for MBA graduates.
Top Reasons People Want MBA Degrees
Although many believe that the top reason for pursuing an MBA is to earn a higher salary, the evidence from surveys does not corroborate that assumption. Below, BSchools considers two recent surveys that help to explain what applicants plan to do with their degree after graduation, and how they expect their MBA degrees to help them.
The AIGAC Prospective Students Survey Report
In June 2018, the Association of International Graduate Admissions Consultants (AIGAC) released one of the latest surveys that explores the reasons why so many professionals want MBA degrees. AIGAC’s survey echoes past studies that suggest that candidates pursue MBA degrees for a broad range of reasons besides higher salaries.
The AIGAC is an industry group that represents graduate admissions consultants. These consultants—who in many cases previously worked as deans and admissions committee gatekeepers at universities—help optimize the chances of acceptance by their clients, who are candidates applying to graduate degree programs. About 20 percent of AIGAC members counsel medical school applicants, 20 percent work with law school candidates, and almost all the consultants (97 percent) advise MBA program applicants.
These consultants play a significant role in the application process for students applying to highly selective business schools. Data associated with published application essays suggests that many students who won admission to the full-time programs at the world’s most popular M7 business schools—including Harvard, Wharton, and Stanford—relied on help from these consultants. Another recent survey reported that more than 20 percent of all MBA program applicants hire consultants.
Consisting of 180 member firms from 16 countries, AIGAC is a twelve-year-old nonprofit association that sets industry standards for admissions consultants. AIGAC’s membership includes several consulting firms who serve as prominent coaches for many MBA applicants to highly selective business schools. These include Accepted.com and ClearAdmit, who were among the association’s founders, as well as Stacy Blackman Consulting and Stratus Admissions Counseling.
Based on a sample of 1,377 business school applicants, the AIGAC Prospective Students Survey Report study cites twelve factors driving a candidate’s decision to apply to an MBA program. The most prominent factors can be summarized in three words: acquire, access, and advance.
The top factor was the acquisition of new information, skills, and knowledge, cited by 57 percent of respondents. Then, roughly a three-way-tie follows. Forty-nine percent want to access better job prospects so that they can change careers. Those who desire access to a powerful professional network and who wish to advance in their careers both accounted for 48 percent of the sample. Acquiring or enhancing professional credentials rounded out the top five rankings with 40 percent.
Halfway down in the rankings, in the sixth position, the salary boost reason comes up, accounting for 38 percent of respondents. Commenting on the AIGAC results in Forbes, Poets and Quants Editor-in-Chief John A. Byrne observed that almost as many (35 percent) want the degree to help fulfill their motivation to make a positive difference in the world and improve society. The remainder of the rankings present factors like gaining personal satisfaction and achievement and further developing existing skills and knowledge.
The Quacquarelli Symonds Top MBA Applicant Survey
Another study, the Quacquarelli Symonds Top MBA Applicant Survey, found that higher salaries are not the main reason students pursue MBA degrees. Unlike AIGAC who based its survey on a sample of admissions consulting clients and applicants to four highly selective top 20-ranked business schools, the Top MBA study sourced their sample very differently but obtained similar results.
Each year, thousands of MBA program applicants flock to MBA fairs where aspiring MBAs can cultivate personal connections with admissions representatives from many business schools in a single location. London-based Quacquarelli Symonds (QS) stages the QS World MBA Tour, which the U.S. News and World Report called “the most prestigious MBA fair in the world.” Each one of the tens of thousands of individuals who register for this fair receives a survey invitation, making this one of the most extensive business school surveys conducted worldwide.
Both the AIGAC and QS studies emphasize that most MBA candidates apply to business schools to improve their careers. The AIGAC study found that advancement through changing careers and vertical moves ranked in second and fourth place. Similarly, in the QS study, career advancement accounts for the top two most frequently reported reasons for pursuing the degree. Nearly 46 percent of QS respondents cited taking up a leadership or general management position as their immediate post-MBA career goal; 42 percent cited improving career prospects.
QS reports that globally, the number of MBA applicants who want to exert power and influence through a leadership role upon graduation represents almost three times as many as those who want a salary boost. Although less in North America, that ratio still accounts for nearly twice as many who seek leadership responsibilities instead of higher pay.
Remarkably, a more lucrative salary upon graduation does not even place within the top five reasons in the QS survey. That rationale ranks in ninth place—selected by only 17 percent of respondents. Although North American applicants (26 percent) and Western European applicants (20 percent) demonstrated more motivation by a higher wage than overall applicants around the world, this reason still fails to rank near the top.
These results beg the question of why higher salaries is not a primary concern for applicants. Two experts suggest that students find themselves more strongly motivated to share values with employers and engage in interesting and fulfilling work after graduation, rather than merely to earn higher salaries.
According to Isabella Pinucci, a coordinator of career services at the SDA Bocconi School of Management in Milan, “salary is still a driver because candidates want a return on investment, but personal values come into play a great deal. People want to work for companies they admire and with which they share values.”
Similarly, Byrne noted that “many students enroll at second- and third-tier schools to get the business basics that will allow them to lead more productive and fulfilled work lives. They are interested in the actual learning and hope to use it to gain more interesting work that they can feel passionate about.”
Job Prospects for MBA Graduates
There is another way to answer the question, “What can I do with an MBA degree?” This answer derives from some general themes that emerge from the data when one analyzes the job prospects of MBA graduates.
In general, as the studies above indicate, most MBA students attend business school for reasons outside of an increase in compensation. Nevertheless, something almost all graduates do with their MBA degrees is command higher salaries than they did before graduation.
Studies show that graduates can double and sometimes their salaries as soon as they graduate from MBA programs in the United States. Salary uplift metrics compare the bump in pay between the class average before admission and after graduation. This approach recognizes the schools best able to propel their alumni to higher earnings levels.
QS reports that a cluster of six flagship state institutions has uplifts ranging from 137 to 156 percent includes the University of Georgia, Pennsylvania State University, Arizona State University, the University of Minnesota, the State University of New York, and Indiana University. More remarkable, three universities produce the highest MBA salary uplifts in the world: Willamette University at 223 percent, the University of Illinois at Urbana-Champaign at 176 percent, and the University of Connecticut at 171 percent.
It should be noted that most MBA graduates accept employment after graduation in only a few industries. Those sectors include management consulting, investment banking and finance, technology, consumer packaged goods marketing, and healthcare. There is a much lower probability that firms in some of those industries—like management consulting and technology—would hire candidates without MBA degrees. However, many MBA graduates consider those to be exciting prospects with powerful employment incentives.
Management Consulting: Variety and Challenge
A perennial favorite of MBA graduates, management consulting has been considered by many to be the ultimate career choice for MBAs. Many view this work as interesting and intellectually stimulating. Byrne sums up consulting’s appeal due to variety and challenge. He points out how the sector offers MBA graduates “unparalleled variety, allowing a new recruit to work at different companies and industries, in different functions and locations,” all offering “broad exposure to a vast number of business challenges.” On top of those benefits, consulting offers exposure to top management and significant issues, interaction with high-powered networks, and lots of travel.
Moreover, management consulting provides a stepping stone to jobs at the consulting firm’s client companies, or with organizations where the firm’s previous employees now hold positions. Admissions and employment coach Angela Guido argues persuasively in favor of consulting careers:
A lot of people want an MBA in the first place to open more doors and expand their horizons. Consulting continues to do that by exposing you to a variety of industries and functions without—in the case of most firms—forcing you to specialize immediately. It gives you the chance to apply what the MBA taught you, continue developing at a rapid rate (consulting has a very steep learning curve), while still opening new doors and better positioning you for other jobs.
Many of the most sought-after positions in any industry require or prefer applicants to have a background in management consulting, Guido adds. In sum, the in-person networking built into consulting careers provides tremendous value to MBAs, since these jobs can propel professionals towards lucrative positions in their industry of choice.
Technology: Sexiness and Superior Work/Life Balance
As young professionals flock to Silicon Valley, MBA graduates are doing the same, opting increasingly for positions in technology. Conor Farese, a student at the top-ranked Haas School of Business at the University of California at Berkeley, told Bloomberg that “tech is sexy. You know all the companies, you see these apps on your phone. That’s a big piece of it.”
But the “sexiness” of these careers does not appear to be the only rationale for expanded tech company hiring. The work/life balance of MBAs with technology careers vastly surpasses that experienced by MBAs in many other industries. The Financial Times believes that the surge in MBA hiring by tech firms primarily results from better work-life balances and richer cultures at software companies, who give recent graduates more meaningful roles. Tech jobs stand in stark contrast with the outmoded, work-from-the-ground-up sweatshop approach still demanded by Wall Street:
It’s quite the juxtaposition to see big banks known for demanding jobs and three-piece suits competing for talent against software companies known for ping pong tables and employees wearing jeans to work. But it isn’t surprising. The fact is, the Silicon Valley culture is quickly permeating throughout the world. As the numbers show, people are becoming more and more drawn to more laid back organizations where employees feel empowered, as opposed to the top-down hierarchies where new employees work grueling hours.
One company, in particular, appears to be driving this trend towards MBA tech hiring. Amazon reported hiring at the rate of about 1,000 MBA graduates a year, a new record for any MBA employer in history, according to the Wall Street Journal. The next closest employer, management consulting powerhouse McKinsey & Co., typically recruits only about half that many.
Why are so many MBAs flocking to Amazon? One reason may be that even though Amazon pays only slightly less than McKinsey, data suggests that Amazon employees work significantly fewer hours. Amazon MBAs work about 52 hours a week, but those at McKinsey work 69 hours—about 33 percent more.
Entrepreneurship: Freedom and Excitement
Would an MBA degree help someone start a business? Admissions consultant Stacy Blackman argues in favor of that contention for three reasons. First, citing a surge in centers, courses, and contests devoted exclusively to new venture organization and operation over the last ten years, Blackman believes that business schools can serve as some of the best de facto new business incubators.
Second, she believes that MBA programs can provide outstanding environments for team-building, and third, she asserts that business schools teach essential skills vital to operating and growing startup businesses. In her view, many entrepreneurs have failed because they lacked the tools and access to resources in their arsenals that MBA programs provide.
Recent London Business School MBA graduate Guerric de Ternay adds that the kind of market- and competition-focused strategic analysis taught in business schools makes for an indispensable advantage when starting a business. That kind of strategic thought process can be vital to formulating a new corporate mission, as well as solving problems under pressure with that mission in mind.
He also argues that business school alumni networks can provide those launching new ventures with invaluable resources, talent, and support post-graduation, and that those networks will provide entrepreneurs with the ability to maintain connections that enable mutual support relationships lasting years or decades.
Moreover, another analyst, Forbes commentator John Greathouse, believes that MBAs can be extraordinarily successful as entrepreneurs that organize startups aligned with some key characteristics. One such aspect involves consumer focus, especially at unicorns—startups like Uber, Airbnb, and Palantir valued above $1 billion.
Citing the statistic that 45 percent of unicorns were started by least one MBA founder, Greathouse suggests that MBAs with nontechnical backgrounds may better understand customer-facing online commerce. He also points out that many unicorns exploit complex and efficient logistics and distribution systems as advantages because MBA programs trained their founders “to design, organize and manage such large-scale, complicated operations.”
Another of Greathouse’s characteristics involves large capital requirements. Even though unicorns often require enormous amounts of capital to win market share and achieve critical mass, he argues that securing staggering amounts of financing poses no problem at all for MBAs because they “have access to significant amounts of capital, primarily through their alumni and peer networks. Startups formed by Wharton, Harvard, and Stanford MBAs collectively raised $15.8 billion from 2010 to 2015.”
For more on what one can do with an MBA degree, see the following BSchools.org guides: