What first springs to mind when hearing “MBA”? The image of a smiling CEO on the front cover of Forbes magazine? A world financial centre with skyscrapers and bustling white-collar workers speaking on their iPhones? Harvard? The saying that an MBA diploma is the most expensive piece of paper? Indeed, all these are true. But is it only this? What is an MBA all about?
1. What is an MBA?
An MBA or “Master in Business Administration” is an internationally recognised degree designed to develop skills required for careers in business and management. The degree is widely considered essential for those targeting top C-level management posts. An MBA opens doors to vast alumni networks, top-tier internships and the very best positions. Or, it could be the trigger needed by those striving for their own business venture.
The degree originated in the United States in the early 20th century when the country industrialised and companies sought scientific approaches to management. Half a century later, the first MBA programme emerged on the Old Continent and over the past decade MBA programmes have become very popular in the Middle East and Asia.
MBA programmes are certainly flourishing. In February 2016, the number of accredited business schools, according to the oldest accreditation agency, the US-based Association to Advance Collegiate Schools of Business (AACSB) International, had reached 755 in 51 countries and territories worldwide. In September 2015, 73 business schools around the world, of which 68.2% were in Europe, held the triple “crown” accreditation from the most sought after international accreditations: AACSB, AMBA and EQUIS.
Currently the number of member campuses, according to the US-based accreditation agency Accreditation Council for Business School & Programs (ACSBP) is 1,220, 233 of which are outside the US. Of those campuses, 962 have achieved accreditation and 160 are up for accreditation.
2. General management
At its heart, an MBA is about general management. The degree is a Masters degree in business management theory and practice. It is a broad study of all the main aspects of management. The curriculum includes courses in core studies such as accounting, finance, marketing, human resources, general management, operations, strategy, leadership and negotiations and elective courses that build on the fundamentals, allowing students to deepen their knowledge and skills in areas relevant to their personal career goals and ambitions.
“After doing four years of technology consulting … I started getting interested more and more in strategic business questions that I could touch a little bit but not really dive deep into. I found that doing an MBA was the best way for me to get that learning, to get those skills that I needed. The two-year programme worked better for me for several reasons. The first one is having an engineering background, I needed to learn the core – the core of marketing, of finance, of strategy I also wanted to explore different careers,” says Otman El Manser, who studied the two-year full-time MBA of Kellogg School of Management.
3. Specialised MBA programmes
Specialised MBA programmes have been gaining popularity in recent years. Unlike general MBAs or non-specialised programmes, they offer special knowledge in one particular area, enabling attendees to deepen their expertise in a particular business area or a branch of the science. The specialised MBA programme is an MBA with focus on a particular business area such as real estate, marketing, supply chain management, healthcare, investment management, etc. These programmes prepare competent, ready-for-the-job professionals with knowledge and skills tailored to the needs of a particular industry.
“The specialised programme is great, as long as everyone is clear what the career trajectory is,” says consultant and coach Jackie Wilbur, a former director of career development at MIT’s Sloan School.
4. Hard skills vs. Soft skills
An MBA is the only course that provides the perfect balance in teaching both hard and soft skills. “There are three key differences between hard and soft skills,” notes Lei Han, a Wharton MBA with 15+ years’ business experience, in her article “Hard skills vs. soft skills – difference and importance”. The first is about where you can learn those skills – hard skills can be learned in school and from books, while there is no simple path to learning soft skills because most soft skills are not well taught in school and have to be learned on the job by trial and error. Hard skills usually require “smarts” or IQ, also known as your left brain or the logical centre. Soft skills, on the other hand, usually take emotional intelligence or EI, also known as your right brain or the emotional centre. The third difference is that hard skills are skills where the rules stay the same, regardless of your chosen company, circumstances or colleagues. In contrast, soft skills are those where the rules change depending on the company culture and the people you work with.
The original US MBA format is a two-year course, including summer internship between years one and two. However, in recent years, business schools have started to adapt their programmes to the needs of changing economic realities, requiring faster learning. Schools have started delivering MBAs in shorter, 12 to 18 month, courses. Part-time programmes have become particularly favoured by those who don’t have the luxury of dedicating all their time to a full-time course. More flexible formats like online, modular and blended MBAs have also emerged, making the choice of which format to select easier, allowing attendees to pick the format best suited to their personal needs, career stage, needs and goals.
In the US, where the MBA originated, the two-year format is more common, while in Europe and Asia shorter MBA programmes are more popular.
A key asset of each MBA programme is the network opportunities it opens up to its students. MBA classes attract students from diverse nationalities with varied interests ranging from general management to doing business in sectors like food and beverage, defence, healthcare, etc. There is no other place where so many different personalities can meet and build a multicultural environment together. B-schools, students and alumni are dedicated to building vast networks where people from places that are wide apart can meet, share their ideas, opinions, goals and even raise funds for their ventures.
“My experience was further enhanced by my daily interactions with international classmates from all over the world.All the best memories are from activities done with my colourful classmates like the tough group projects, the adventurous trips around the region and the fun events organised in school. Although we had many differences, the bonds and friendship we had built in this MBA journey will last me a lifetime,” says Masana Takahashi, MBA from the National University of Singapore.
Using social networks such as Facebook, Twitter, LinkedIn or b-schools’ own platforms is the easiest way students and alumni can build their own network. Schools’ career services are particularly active in organising various type of networking events such as corporate visits, one-day fairs on campus, conferences, etc. mediating the link between first-year and second-year students, alumni and potential employers. Alumni are also highly committed to developing vast networks through different alumni events where students can be introduced, through professors, events, alumni speakers and the school’s career services. Alumni networks are promoted as catalysts for career opportunities. Alumni often act as role models, mentoring and supporting would-be MBAs in their career adventure.
“Our mission is to promote an everlasting relationship among the members of the IE community, facilitating a common platform of business, career development and lifelong learning opportunities, with the objective of propelling personal and professional development of IE students and alumni, in accordance with the principles and values of IE,” IE Business School says.
7. Corporate vs. entrepreneurial careers
An MBA is widely considered as a career accelerator. It could help you climb the corporate ladder within your current organisation or open doors to a new corporation and develop your career. It could bring you higher pay, a more senior post and certainly more responsibilities as a professional. Or, it could be the trigger you need to start a journey of your own, launching your own business. An MBA is invaluable for those who embark on their own adventures, mainly due to the skills it imparts to its students – strategic planning, global thinking, leadership and people management.
Figures speak best. According to the latest available statistics, which the Financial Times (FT) released as part of its research for its 2015 rankings, 22% of 7,800 MBA graduates from the world’s top 100 business schools had launched a start-up while studying for the qualification or shortly after completing their course. Three years after graduation, the average annual income among these fledgling entrepreneurs was 134,000 USD, compared with 132,000 USD for all those interviewed for the research.
“…those that quit corporate careers to create a start-up quickly make up any shortfall and are, in fact, earning more on average than their salaried peers just three years after completing their business school studies,” reads The Financial Times article “Start-up costs for MBA graduates pay off”.
A study of more than 30,000 Wharton graduates shows that the number of recent MBA graduatess who choose their own business adventure over traditional corporate roles in finance and management will continue growing. “MBA students are good at seeking where the opportunities are. When banking is hot, more students go into banking; when consulting is hot, they go into consulting; and when entrepreneurship is hot, they go into entrepreneurship,” says Ethan Mollick, entrepreneurship professor at Wharton and co-author of the study, as quoted by Business Insider.
8. Post-MBA salaries
High pay is certainly one of the biggest benefits of an MBA. The statement that getting an MBA degree is a lucrative long-term investment is certainly true.
Starting salaries for MBA degree holders are so high, compared to those of other graduates, that sometimes there is little point in comparing them. And there is even better news – salaries for MBAs continue rising years after graduation. Figures from FT’s Global MBA Ranking 2016 show that the lowest weighted salary of an MBA holder from the top 10 b-schools in the ranking, three years after graduation, is 154,150 USD, which is a 100% increase when compared to salaries before taking an MBA. The single highest weighted salary is 185,939 USD, which is an 87% rise.
The median starting salary expected in 2015 for recent MBA graduates in the United States was 100,000 USD, according to the last 2015 Corporate Recruiters Survey from the General Management Admission Council (GMAC). This represents an increase of 5,000 USD over 2014 salaries and is nearly double the expected starting salary of 55,000 USD for Bachelor candidates in 2015. Globally, more than half of employers planned to increase starting salaries for new MBA hires in 2015, either at the rate of inflation or higher.
9. Employment prospects
Most MBAs have no trouble landing quality posts. Three months after graduating, more than 80% of MBAs usually find a position. Surveys show that in 2016, as with previous years, employment prospects for MBA graduates will continue the upward trend.
Coming off a solid year for hiring in 2015, employer demand for graduate management talent is projected to increase in 2016. According to the 2015 year end poll of employers, by the General Management Admission Council (GMAC), three in four employers expect to hire MBA graduates in 2016, up four percent from 2015 actual hiring results. Of this group of employers, 85% plan to hire as many or more of these candidates than they did in 2015. Regional analysis reveals that employers in the United States are more likely to hire MBA graduates (82% of companies) compared with employers in Europe (63% of companies).
“When employers see a candidate with an MBA, they assume that person has been trained to think critically about business in a financial context, as well as having been trained to solve business problems. And in business, that’s an advantage,” says Tracy Cote, senior vice president of human resources with US-based OmniChannel customer experience and Contact Centre Solutions provider Genesys.
Nearly all employers who responded to the poll (96%) say that hiring recent business school graduates creates value for their companies, while 69% of employers agreed that recruiting graduates of MBA and specialised business Masters programmes is a priority in their company’s hiring plans for 2016.
Findings from another GMAC survey show that, with regards to job market prospects by industry, job level and job function, a graduate business degree unlocks employment opportunities in all industries, job functions, job levels, organisational sizes, and work locations. According to data from the 2016 Alumni Perspectives Survey, products and services, finance and accounting, and technology are the most common industries of employment for business school alumni. The majority of alumni (63%) fill positions in three areas: finance and accounting (24% of respondents), marketing and sales (21%), and general management (19%). Viewed by graduation year, recent alumni are more likely to be employed in products and services and technology-related industries, whereas those who graduated earlier are more likely to find roles in government and in non-profit organisations.
10. How much does it cost?
The last question is – how much does an MBA actually cost? Costs vary depending on several factors – the length of the programme, additional spending for accommodation, health insurance, food, travel, attending various networking events, books and materials. In general, in the US, the birthplace of the programme where the two-year format is still the most popular, the average tuition exceeds 60,000 USD. At a top 10 business school in the US tuition fees can reach as much as 100,000 USD. Of course, there are many schools that charge considerably less and in the US, it is possible to get a two-year MBA education for less than 20,000 USD.
At Harvard, the tuition fee for the 2017 MBA class is 61,225 USD. When health fees and insurance, programme support fees, including books, web-based course materials, other materials, room and utilities and personal spending are added, the sum increases to anything up to 98,400 USD.
Fees for MBA programmes in European business schools, where the established format is the one-year type, are similar. Additional costs are lower because of the length of the programme. In the London Business School, which was Europe’s top b-school for 2014 according to FT Ranking, tuition fees for the MBA starting in August 2016 were 70,800 GBP.
In Asia’s most popular business school, NUS Business School of the National University of Singapore, the tuition fee for its 17-month MBA programme is 62,000 SGD, which works out at 44,000 USD.
The price of an online MBA degree is very similar to that of a campus-based degree. Tuition costs range from 7,000 USD to more than 120,000 USD. Top business schools are typically on the higher end of the scale, but non-ranked schools can also charge exorbitant fees.
In the end, what is an MBA? Indeed, it is a costly investment. It demands money, time, energy and commitment. But it is an investment and it pays off. An MBA is a once-in-a-lifetime transformational experience that offers you new perspectives, opens up wider horizons and enables you to reach unexpected professional and personal heights. In a few words – an MBA is worth it – every part of it.
Quick facts about the MBA
An internationally recognised degree designed to develop skills required for careers in business and management
A broad study of all the main aspects of business management
Offers the opportunity to deepen knowledge and expertise in a particular business area or a branch of science
Provides perfect balance in mastering hard skills and soft skills
Flexible in format being available in full-time, part-time, modular, online or blended formats
Gives access to vast alumni networks
A career accelerator – it helps you to climb the corporate ladder within your current organisation, open doors to a new corporation, or build your own business venture
High pay is one of its most attractive benefits