Is an MBA worth it? Benefits, opportunities, and challenges
Not long ago, a Master of Business Administration (MBA) degree was considered the key that unlocked the door to a successful and layoff-proof career as a business executive. Then, in 2008, came a years-long recession resulting from the bursting of the housing bubble. The effects of the downturn continue to linger: The top 10 business schools in the U.S. reported a 5.9% decline in MBA applicants in 2019, according to a survey reported in Forbes. This marked the second consecutive year of significant declines in MBA applications at the schools.
In the aftermath of the COVID-19 pandemic, answering the question “Is an MBA worth it?” becomes even more important for potential students. Some business analysts conclude that the answer is a flat no. Still others point out that the imminent death of the MBA degree has been predicted many, times in the past, such as in the wake of recessions in 1981, 1990, and 2001.
However, in every instance, the popularity of the MBA degree has come roaring back, promising to provide business students with the skills and experience to qualify for top management positions. In recent years, the MBA degree itself has been revitalized to offer options beyond the typical two-year program of study, including many innovative online MBA degrees.
Is an online MBA worth it?
The two elements that are most likely to prevent you from pursuing an MBA are not having the time or the money the programs require. Online programs promise greater flexibility and potential cost savings, but you may still wonder is an online MBA worth it?
Online MBA programs make it possible for many more people to pursue the degree, especially working professionals for whom a traditional program is impractical. The advantages of online MBA degree programs also extend to people who haven’t yet started their careers.
● You benefit from the same quality curriculum and professors as students of traditional MBA programs.
● You have more flexibility in scheduling your classes.
● Online programs typically cost less than their on-campus counterparts.
● You gain firsthand experience with the same remote access technology that corporations increasingly rely on.
● You’re able to interact with other students via online and in-person gatherings and events, including some that may be held on campus.
How an online MBA boosts your return on investment
One of the biggest criticisms leveled at traditional MBA degree programs is the expense. Investopedia estimates that the yearly tuition of a typical two-year MBA degree is $40,000.
While some online programs cost as much as their on-campus counterparts, the proliferation of online MBA programs has increased the number of options available to prospective MBA students, including institutions with more competitive tuition costs. In addition, some students find the flexibility of online programs more conducive to maintaining a full-time work schedule. The ability to schedule courses at times that are most convenient for you lets you craft a program that best suits your needs and lifestyle.
Investopedia notes that it’s difficult to calculate the long-term ROI of an MBA degree because so many factors can influence earnings as your career progresses. However, you can determine the short-term ROI by using the value-added ratio, which compares tuition costs to starting salaries. A variation of this technique compares education-related debt to starting salaries, which is considered more accurate because it considers factors other than tuition. However, the debt-to-starting salary ratio doesn’t apply to you if you didn’t incur any student debt.
Benefits of an MBA
Even with the time commitment and high costs associated with earning an MBA, having it on your resume has significant benefits. One of the most telling indications of an MBA’s long-term value is highlighted in the 2018 Alumni Perspectives Survey from the Graduate Management Admission Council (GMAC). The survey asked alumni of graduate business schools whether they’d pursue a graduate-level business degree knowing what they know now, and a whopping 93% said they would.
● 94% of alumni found their graduate management education personally rewarding.
● 89% of alumni found it professionally rewarding.
● 74% of alumni found it financially rewarding.
By contrast, when alumni were asked to identify the key driver in their initial pursuit of a graduate business degree, 47% said financial rewards, 38% said professional rewards, and 15% said personal rewards.
The graduate management degree holders were optimistic about the outlook for their counterparts in the future: When asked whether they would recommend their graduate-level business degree program to a friend or colleague, 61% of alumni of graduate business schools said they would do so, and only 13% said they wouldn’t recommend attending the school.
Learn key management skills and build a strong professional network
While you can realize many of the benefits of an MBA soon after graduating, such as higher starting salaries at many firms and a built-in network of alumni ready to help you get started, other advantages take longer to come to fruition.
● An MBA degree provides you with “future-ready skills” that companies prize as they’re forced to pivot quickly in response to changing markets and industry conditions.
● You’re taught a broad range of skills, including empathy and team building, to influence and motivate stakeholders from a range of backgrounds.
● An MBA helps you accelerate your career path, whether by advancing within your current organization or striking out on your own via the entrepreneurial route.
● Earning an MBA broadens and diversifies your professional network by establishing links to alumni as well as industry and community leaders.
The common belief is that the best time to earn an MBA is in your 20s, so you have more working years to capitalize on the degree. As the Wall Street Journal points out, many people are turning this axiom on its ear by earning an MBA midcareer. MBA programs seek students from diverse backgrounds and prize the practical business and life experience of older students.
The Wall Street Journal cites a GMAC study that reports the percentage of two-year MBA applicants with six or more years of work experience increased from 17% in 2019 to 32% in 2020. The percentage of such applicants with 10 or more years of work experience jumped from 7% in 2019 to 19% in 2020. The cooling of the job market as a result of COVID-19 and the availability of more affordable MBA programs contributed to the increase in midcareer MBA candidates.
Pros and cons of getting an MBA
Despite the benefits of having an MBA on your resume, the degree isn’t the best option for all business management careers. You have to balance the pros and cons of getting an MBA before deciding to pursue the degree. If your career goals don’t focus on work in a business field, earning a management position, or starting a company, an MBA may not be the best degree to prepare you.
Investopedia points out that companies prefer management candidates whose MBAs are from topflight business schools, so an MBA from a lesser-known school may not carry much weight with recruiters. Also, an MBA degree can’t make up for serious shortcomings in other areas, such as a lack of communication abilities or leadership skills.
The following are some of the important pros to earning an MBA degree:
● An MBA usually translates into a higher starting salary, which leads to higher earnings throughout your career.
● The skills that top graduate business management programs teach provide you with a built-in advantage over managers who haven’t earned an MBA.
● MBA programs serve as the foundation for picking up new knowledge and capabilities as your career progresses, promoting career growth.
● The MBA degree curriculum gives you exposure to new industries and management strategies that broaden the range of your potential career ambitions.
● In certain fields, such as private equity and money management, an MBA degree is a de facto requirement to qualify for management positions.
However, there are some things to keep in mind about earning an MBA:
● Realizing the value of an MBA degree requires you to constantly expand your knowledge and skills, which necessitates hard work and long hours above and beyond those spent fulfilling your current duties.
● Even with lower tuition and other expenses, an online MBA requires a considerable investment. As stated above, you also have to consider the opportunity costs of an MBA degree: The time and effort you spend pursuing the degree could be used to better effect in other areas.
● Now, you have many more graduate degree alternatives to earning an MBA, including Master of Accounting, Master of Finance, Master of Organizational Behavior, and Master of Business Analytics. Often, these degrees are paired with certifications such as Certified Financial Analyst (CFA), Certified Public Accountant (CPA), or Certified Business Analysis Professional (CBAP).
Average MBA salary
The ultimate goal of many MBA degree holders is to secure a top executive position with a business organization. The U.S. Bureau of Labor Statistics (BLS) reports that leading executives at public firms typically have earned a graduate degree in business administration, public administration, law, or liberal arts. The BLS notes that an MBA remains the most common degree earned by top executives at large firms.
The BLS reports the following median annual salaries of various top executives as of May 2020:
● Chief executives: $185,950
● Management occupations: $109,760
● Top executives (aggregate): $106,180
● General and operations managers: $103,650
The salary survey site PayScale estimates that the median annual salary for people with an MBA degree is about $90,000 as of May 2021. Within this group, project managers earned a median annual salary of around $85,000, senior financial analysts earned around $84,000, and chief financial officers earned around $151,000.
PayScale’s estimates of the annual salaries for other positions that typically require an MBA degree include the following:
In addition to their salary, MBA holders often receive compensation in the form of stock options and performance bonuses, as well as benefits such as expense allowances, use of company-owned vehicles, and memberships to exclusive clubs.
GMAC’s Business School Hiring Report: Corporate Recruiters Survey 2019 noted that 58% of companies offered their new MBA hires a signing bonus that averaged $10,500. The report also found that the average starting salary for MBA graduates in the U.S. was $115,000, the highest ever recorded in the survey.
MBA job outlook
MBA jobs declined in 2020 as a result of the COVID-19 pandemic. The GMAC Corporate Recruiters Survey indicated that the MBA job outlook will rebound in 2021: 89% of recruiters surveyed planned to hire MBA graduates in 2021, up from 77% in 2020 and approaching the pre-pandemic projection of 92% for 2020.
Much of the short-term demand for MBA graduates comes from the tech companies that are booming as a result of the pandemic. For example, the Wall Street Journal reports that 57% of full-time MBA programs reported an increase in the number of MBA job openings at tech companies such as Amazon and Zoom Video Communications. Other industries continue to scale back their MBA hiring plans, including retail, hospitality, and energy: 61% of MBA programs said they received notice of fewer openings from employers in the hospitality industry.
Looking past the pandemic, the job outlook for MBAs looks rosier because the overall economic forecast predicts growth. When any industry evolves and expands, it creates demand for MBA graduates’ business management skills. The BLS projects that the number of jobs for management analysts will increase by 11% between 2019 and 2029, much faster than the projected average growth for all occupations.
The following are among the industries that are expected to drive demand for MBA graduates:
● Consulting services
● Health care
● Information technology
● Government agencies
Similarly, the job outlook for financial analysts improves as the overall economic picture brightens. The BLS points out that a growing number of firms prefer to hire financial analyst candidates who have earned a master’s degree in business or a related field. In particular, the explosion in data analytics creates demand for financial analysts who are able to apply advanced analytics techniques to extract more insight from corporate data.
Another area that’s expected to recruit MBA graduates is medical and health services, which increasingly prefer candidates who have a master’s degree in business administration, health administration, nursing, or public health administration. The BLS forecasts that the number of jobs for medical and health services managers will increase by 32% between 2019 and 2029, much faster than the projected average growth for all occupations.
Is an MBA the best degree for achieving your career goals?
For many students, the answer to the question “Is an MBA worth it?” is a resounding yes. However, a growing number of educational alternatives exist for aspiring business managers and would-be business entrepreneurs who are looking to gain the skills and expertise that will future-proof their career objectives. Our recommendation engine can help you sort through the many options and find the best fit for your career aspirations.