Friday, March 17, 2006
The value of an MBA
In a story titled "Is The MBA Overrated?," BusinessWeek says:
[An MBA] only gets you so far. In fact, for those seeking a job at the very top of the corporate hierarchy, it's not even a requirement. BusinessWeek research has found that fewer than one out of three executives who reach those lofty heights do so with the help of an MBA. And if you think a sheepskin from a top school is a necessity, think again. Only half of the executives with MBAs went to the top 10 schools in the 2004 BusinessWeek ranking.It's an interesting survey, but the methodology means that it is essentially an evaluation of the value of an MBA from two decades ago. This is what they did:
BusinessWeek examined the five highest-paid executives at each of the S&P 100 companies in 2004, the most recent year for which data are available. We then tracked their educational credentials, obtaining information on 441. Finally, we calculated the pay for all 500 executives and combined that data with statistics about each school's alumni base as well as company performance for 2002-04.Considering that those top five executives would have got their MBAs -- or not -- a couple of decades ago or so, the results are necessarily outdated from a perspective of what the degree is worth today. Far more useful, but perhaps logistically very difficult to pull off, would be a survey of career paths from lower to middle to top management over the years. Even then, I'm not sure what the results would mean. As the BusinessWeek story goes on to say:
At the very top of the B-school pyramid, a self-fulfilling prophecy appears to be at work. High rankings bring in scores of applicants, allowing the best programs the luxury of being highly selective. Stanford, for example, rejects nearly 9 out of every 10 applicants. The result: a concentrated pool of talented students who would likely succeed under any circumstances, including skipping B-school altogether. Says Jeffrey Pfeffer, professor of organizational behavior at Stanford and longtime critic of B-schools: "If you are good enough to get in, you obviously have enough talent and abilities to do well, regardless."So if you've got the mojo, you'll rock regardless of whether you got an MBA along the way. It might help, of course, but I'm not sure one can quantify by how much.