3 Proven Cases When an MBA Is Worth It

CONTENTS

Introduction: MBA Value

An MBA can be worth it when you’re a round peg and fit into the round MBA hole. However, if you are a square peg, it’s a risk. To understand if an MBA is right for you, you need to understand the different use cases.

If you’re like most people, you spend a lot of time thinking about the future and making plans. If you foresee working in business, chances are you’ve considered an MBA. After all, MBA programs prepare people to become business leaders, right?

However, MBA programs aren’t for everyone. And many people who consider doing an MBA would be better off taking a different approach to accomplishing their goals.

It comes down to your use case, a fancy way of saying why you want to get an MBA. Your use case includes factors like who you are, what interests you, and what you want to do after completing an MBA program.

MBA admissions staff typically don’t acknowledge the reality of these use cases. It’s against their interest to discourage too many applicants from applying to their programs. After all, their ranking depends on their selectivity. And their selectivity depends on how many students apply for admission and how few they accept. They want their acceptance rate to be as low as possible. This approach helps them improve their ranking, which, in turn, helps them attract the best and brightest applicants.

In this article, we consider three types of use cases. While there will always be exceptions and nuances, we can safely define strong, medium, and weak MBA use cases.

Strong use cases demonstrate a clear established path. Over decades, MBA programs have built clear roads into specific industries, helping many graduates get jobs. If you understand how these industries work and have a clear idea of why you would be happy in an industry, pursuing an MBA can make a lot of sense.

MBA programs often market themselves to medium use cases, making their programs appear more valuable than they in reality are. Medium use cases sometimes make sense and sometimes don’t. You should do a lot of research and speak with a wide variety of people before pursuing an MBA if you fall into this category.

Weak use cases just don’t make sense. They don’t pay off for students who pursue these degrees. However, applicants with imperfect information and MBA programs needing to fill out their classes make these use cases a common problem.

So let’s start talking about those specific use cases.

Strong Use Cases

Strong use cases typically involve some blend of consulting, finance, and large corporations. The MBA curriculum does a reasonably good job of preparing students to work in these areas. And in these settings, the credential can make a difference in how people see you. Recruiters from these industries and job types regularly visit business school campuses to identify their next class of incoming hires. And some students can make enough money in these jobs to pay off their MBA loans in a reasonable period.

Your post-MBA career can start in consulting or finance and later lead to a senior role in a large corporation.

Management Consulting

Strategy & management consulting is possibly the most common MBA use case. These consultancies work with companies to help them make critical strategic decisions and implement projects. Examples could include entering a new market or dealing with an increase in competition. They lend themselves to high-level generalist thinking. And MBA programs do a decent job teaching students to see the big picture.


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The financial argument for working as a consultant after finishing your MBA often makes sense. Business school is expensive. Top programs can cost well over $200,000 to attend, including tuition and living costs. Unless your generous family has deep pockets, you had a lucrative pre-MBA career—in which case an MBA typically doesn’t make sense—then you will likely take out student loans. MBA graduates get hired as associates at consulting companies. They make $150K-$200K in the first couple of years. And their compensation can jump to over $250K if they get promoted to manager. However, only around a quarter of associates get promoted to manager.

Working in consulting isn’t for the faint of heart. Travel can be brutal and unrelenting. You can be on the road for four to five days a week. And when you’re traveling, don’t expect to get much sleep. But if you know what you’re getting into, consulting can be a rewarding path. And an MBA from a top school can help you break into this industry.

Investment Banking

If you’re interested in a career in investment banking, business school often makes sense. That is if you can get into a top school.

Investment banking is a fancy-sounding financial advisory service that helps companies raise money, buy other companies, or sell their company. The process of buying and selling companies is called mergers & acquisitions. Investment bankers represent buyers and sellers, helping them make deals. 

MBA programs are effective at preparing students for careers in investment banking. Junior-level investment bankers spend a lot of their time preparing financial models and PowerPoint presentations to propose deals to buyers or sellers. MBA programs prepare them for these tasks by teaching core courses in financial accounting, managerial accounting, strategy, and corporate finance. Programs often provide elective courses in relevant topics like mergers & acquisitions, advanced corporate finance, and business law.

The economic case for pursuing a career in investment banking after completing an MBA is reasonably strong. Investment banks hire MBA graduates as associates. These associates often start off making $250,000 or more per year. And it’s straightforward for associates to work for two to three years in this position and then receive a promotion to vice president. The transition from associate to vice president relates more to job title than responsibility. It’s not known for its competitiveness.

The payback period is quick. MBA graduates working on Wall Street can realistically pay off student loans in two to three years. They then have two to three years (as vice presidents) to save several hundred thousand dollars. By their mid-30s, they often find themselves in a healthy financial position.

However, the promotion from vice president to director is much more competitive. If they don’t make the jump, they find themselves changing careers in their mid-30s.

The exit options from investment banking are more limited than management consulting. Exit options are just a fancy way of talking about what sort of job you can get after leaving a job. So what does investment banking prepare you to do? Often, the answer is private equity. Private equity firms raise money from wealthy people, life insurance companies, university endowments, sovereign wealth funds, and other sources. They use this money to buy companies, improve their performance, and, after a few years, sell the companies for a profit.

Investment banking is a stepping stone for a career in private equity. Private equity firms perform mergers and acquisitions. Remember how sell-side investment bankers help companies find new owners? Sometimes, these new owners are the private equity funds. Private equity funds need people with these same skills on their side of the table. And investment banking prepares them for these roles.

But it’s not for everyone. The private equity industry is small and competitive. And not everyone in investment banking can—or wants to—transition to this industry. 

Another exit option is working in the corporate development department of a large corporation. While less glamorous than private equity, corporate development can be an attractive career path. Like private equity funds, corporate development teams look for other companies to buy. Working in corporate development involves evaluating these potential acquisitions and negotiating deals.

Investment banking can also lead in other directions. You could potentially work for a startup or in the finance group of a corporation. While investment banking doesn’t necessarily prepare you for these roles, your professional profile may appeal to employers. They may look at you as a driven competitor who completed a demanding MBA program and has what it takes to survive in challenging work environments.

Large Corporations

The third strong use case is to build a career as an ambitious corporate climber. Large corporations hire MBA graduates into leadership development programs and other roles.

If your goal is to become the CEO of a large company, an MBA program can help you get there. MBA programs teach you fundamental accounting and finance skills. They also teach you basic approaches to business operations and strategy.

However, MBA programs don’t effectively teach you to perform at a large corporation. Programs are often theoretical and abstract. And you will need to dig into the details to learn how your business truly works. Clinging to the big-picture, twenty-thousand-foot view is often the kiss of death for MBA graduates working at large corporations.

You will also need to take a long-term view. Climbing the corporate ladder to the C-Suite can take 20 years (or more.) And there is no guarantee that you will ever get there. Large corporations typically don’t pay particularly well until you reach the senior-director or vice-president level. And it is very competitive to reach these levels.

However, as you climb the ladder, an MBA can help you win the next promotion. Human resources departments often review their employees. They evaluate them and decide where to invest resources in future leaders. Having an MBA on your resume from a prestigious school can give you an edge in your personal branding. But know that large corporations also fire employees with prestigious MBAs all the time when they can’t get the job done. A credential entitles you to nothing.

Medium Use Cases

Medium use cases represent so-so reasons to attend business school. Programs cater to these use cases because they fall within their scope. But that doesn’t mean that they satisfactorily prepare students to excel in these areas. Be careful and do your research when you have a medium use case and are considering pursuing an MBA.

Entrepreneurship

Entrepreneurship has been a red-hot topic in business education for at least the last decade. Business schools have scrambled to prepare students for “entrepreneurial” business careers. What this aim means in practice is often unclear.

To justify being a founder with a significant equity stake in a startup, you must build or sell your product. Of course, there are other critical roles in the startup, but building and selling are the most important.

However, business schools don’t teach you how to build or sell products. Product design and development in high-potential ventures is usually technical. Most of the simple stuff already exists, and you need to innovate. Creating a new product usually involves software programming or engineering skills. But business school does not teach you these things. If you’re interested in being a technical founder, business school is usually a waste of time.

The other side to entrepreneurship is selling. It addresses how your business venture will generate revenue to survive and grow. Depending on the business model, sales could also include marketing.

Business schools are notoriously awful at teaching sales. In the distorted worldview of academia, sales is a trade, not a profession. Their approach is enormously counterproductive. Instead of being the critical lifeblood of business, it is an area that “business leaders” can address with “strategy.” 

There are two areas where an MBA can occasionally help an entrepreneur. The first is raising capital. The top three to five business schools have strong venture-capital and family-office alumni networks. Industrious students can potentially raise money through their alumni network. It still requires a lot of work and is far from easy, but it’s feasible.

Venture capitalists are often alumni of Harvard and Stanford. Less often, they attend Columbia and Wharton.

Beyond this small handful of schools, fewer venture capitalists, investors, and wealthy people in alumni communities reduce the likelihood that aspiring entrepreneurs will find the money they need.

MBA programs occasionally serve as matchmakers. Finding business partners is another way an MBA can sometimes help entrepreneurs. Business schools are full of bright, optimistic people looking to do new things. They understand the language of business and are open to discussing new ideas. Through your interactions with your business school classmates, you will likely find people interested in the same things that you are. It is only natural that you consider collaborating and starting a business together.

But you run into the same problem that we discussed earlier. People who attend business school seldom are builders or sellers. And MBA programs do not close this gap. Business school classmates forming partnerships often fail to address the critical competency areas in their venture. Proceed with extreme caution.

Finance Career Change

Building a career in finance is highly competitive. Lots of intelligent, hard-working people enter finance. And demand exceeds supply for prestigious and lucrative jobs that bolster status and bank accounts.

Many young adults working in finance consider buy-side jobs prestigious and lucrative. The buy side refers to investors who buy assets rather than professional services companies that sell their services. They compete with one another to win jobs at investment firms. For example, many investment banking analysts want to transition to private equity and hedge funds after completing their two-year analyst programs. However, not all of them make this transition.

Attending business school is one way junior sell-side professionals can land buy-side jobs. It’s a medium-strength use case. Transitioning from investment banking to private equity typically requires getting admitted to a prestigious business school, a winning personal brand, and extensive networking. To be sure, private equity funds find employees on business school campuses. However, their recruiting process is less formal than other industries.

Self-reflection is critical. Young finance professionals who initially fail to secure a job in a desired area of finance need to understand what prevented them from making this jump. Fragile egos inhibit this process. It’s easy to blame external factors like the economy, bias, or lack of connections while overlooking personal limitations. Only candid feedback uncovers your actual causes. Paying a headhunter—a professional recruiter who can sum you up in moments—for an honest assessment is cheaper than business school.

Engineering

For engineers thinking about attending Business School, it is a mixed bag.

Around the world, many people study engineering as undergraduates. Society generally views engineering as a good profession for intelligent, hard-working people. Engineers learn how to structure their thinking and develop solutions to real-world problems.

However, engineers with bachelor’s degrees who take engineering staff positions at companies often feel constrained by this line of work—a cog in the machine. And they may view their advancement as limited unless they develop business skills.

Given that engineers often have an academic orientation, business school can seem like an effective way to develop these hard and soft skills.

However, business school is not a critical step in the progression of engineers. An MBA is a nice-to-have accomplishment, at best. It is unlikely to lead to professional advancement within a particular company. Switching to sales or product management also doesn’t require an additional credential.

However, an MBA can help an engineer break into management consulting. Programs help socially-awkward engineers improve people skills, polish their professional image, and expand their business vocabulary. 

Engineers who aspire to lead companies should instead focus on specific growth areas. Such areas include soft skills and hard skills in finance, accounting, and operations strategy. Mastering these areas need not cost $200,000. They can efficiently close these gaps with inexpensive online courses and on-the-job practice.

An MBA may not be the best credential for becoming a CEO. Many CEOs of large companies are engineers without MBAs. The number of engineers in these positions probably exceeds the number of MBAs. There are other ways for savvy engineers to grow.

Weak Use Cases

Weak use cases help you understand when to avoid pursuing an MBA. MBA program staff and admissions consultants usually don’t advise you against enrolling in business school. It’s a conflict of interest. They need your application and tuition dollars to operate their programs and bolster their rankings. It’s imperative to recognize this reality to avoid long-term disappointment.

Figuring It Out

Business school is not the right approach if you’re trying to figure out what you want to do professionally. MBA programs provide you with a broad introduction to different business areas. And indeed, this aspect can be helpful. But business school requires a high level of focus from day one to get the most out of it. Recruiters arrive on campus immediately to build relationships with the students who know what they want. If you feel indecisive, it will come across to the recruiters. And they will cross you off their list. You operate at a significant disadvantage.

Indecision is a slippery slope. You will likely scramble to get internships and job offers in areas that don’t truly interest you. You may convince yourself that consulting or working for a large corporation is the best way to go. But if your conviction isn’t rooted in real-world insight, you will not last in these companies more than a few years. And you will find yourself bouncing around.

Business school is the wrong way to figure your life out.

Adding Professional Depth

Professionals from services industries sometimes seek to fill gaps with an MBA. For example, doctors, nurses, and lawyers sometimes pursue MBAs because it will help them learn about the business side of their profession. As professionals in these areas become acutely aware that their growth depends on their ability to generate revenue for their organization, they often feel unprepared. They look at MBA programs to fill the gap. After all, healthcare and professional services are businesses.

This approach is too superficial. Getting a business credential doesn’t make you a better lawyer or doctor. And it does not impress your customers or increase your revenue-generating ability. You may pick up a few new ideas. But many of these ideas won’t work in practice and can overcomplicate situations.

Professional Credibility

Credentialism persists. A surprising number of people attend business school simply for the piece of paper. They believe the credential is the only thing separating them from where they are from where they want to be. Sometimes they think that the degree will add to their professional gravitas or create new opportunities.

The root of this thinking is personal branding and marketing. The classic argument for an executive MBA is that it helps people advance within their organizations. On the other hand, traditional full-time MBA’s are for people who want to change their careers. But, in most industries, an MBA is a nice-to-have credential not critical to an individual’s success. There are always other lower-cost, higher-reward opportunities.

The primary problem is that people pursue the credential for the wrong reasons. They’re not there to learn, only to coast by and do the minimum. They don’t pay attention when their classmates give them feedback on how to improve—because they’re not there to perform in the first place. As a result, most potential gains of business school are unavailable to them.

Low-effort MBA students don’t benefit from the networking opportunities. Their classmates resent when they avoid group work, shirking assignments onto others. You don’t have to be a straight-A student to make friends in business school. But you need to pull your weight and make the requisite effort.

Conclusion

A strong use case is critical to making business school a worthwhile investment.


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Business school marketing teams don’t help. Their job is to make an MBA appealing to as many people as possible. And they may believe that their program helps students with weak use cases.

In general, there’s a lack of unbiased and objective information providing prospective MBA students with the guidance that they need to make the best decision. The use cases described in this article help you close this gap.

You might feel professionally rudderless or impatient to advance. But the true challenge is to identify bottlenecks that limit your rate of development and advancement. You must eliminate those constraints as quickly and inexpensively as possible. In cases where your needs and business school strengths align, it could make sense to attend. However, when they don’t align, business school can be an expensive waste of time.