Wednesday, July 14, 2010

Doing an MBA has its benefits, and risks too(Text: Co-founders of, a financial advisory business)

Below is a useful article i got from ET(

In the recent past, leading business schools in India have announced that they are raising their fees by almost 10%. This begs the question, if an MBA is worth it.

In true MBA style, let's do a cost-benefit analysis of what it means to get an MBA. However, this is not just about looking at what you spend on tuition - and boarding and lodging - and how quickly after graduation you can expect to earn this money back through a high salary.

Cost-benefit analysis of what it means to get an MBA
There are numerous intangibles that must come into the equation that we need to talk about. At the outset, we must admit that we are biased — both of us have had the good fortune to get our MBA degrees from Harvard Business School in 2002, and have over the past 8 years recognised the true value of what our education and experience can offer and has indeed offered us.

What is expressed here is our personal view. While one could spend pages writing a thesis on this very topic, we hope that this brief article, in the very least, will prompt you to think about some of the issues that matter when thinking of enrolling for an MBA programme

The obvious cost is that of tuition, boarding and lodging. This will vary depending upon the school as well as whether you attend a 1- or a 2-year programme and whether you get your MBA in India or abroad. You, of course, need to add to this, costs of sundry items such as a computer, travel costs, day-to-day living expenses and the like.

The next cost one must consider, one that is equally if not more important but often neglected, is the opportunity cost of being away from the work force while one is on campus. This is the lost salary that one could have earned, the promotions you lose to your peers that might have been yours and the irreplaceable real world experience that you miss

An MBA is a great way to jump-start one's career, especially if one is looking to change a career. One can get access to opportunities that otherwise might not have been accessible because certain jobs require an MBA as a minimum qualification. This often comes with the potential rewards of better earnings potential.

It's not uncommon to read about graduates from top business schools earning more than what their parents did at their retirement age.

But equally, if not more importantly, there are softer benefits that most MBAs from top business schools find more rewarding, but are unquantifiable.

First, it's the intellectual stimulation that one can get from being in a room full of people from diverse backgrounds, especially if the school prefers to admit students with work experience.

Then, there is the opportunity to build a network and circle of classmates and alumni who remain your friends, advisors and mentors for life and will open door for you. This is probably one of the most important reasons why there is a big difference between attending a top-ranked school versus going to just another business school.

An MBA education is also a great time to pick up new skills and improve on existing ones in order to add to one's competitiveness in the job market. For some reason, the perceived value of an MBA in the job market is high, and an MBA is often a convenient shortcut that recruiters use to attach certain minimum skills, intelligence and experience that you might be expected to possess.

Finally, there's job mobility. You might find it easier to move jobs and careers because the recruiting market considers MBAs to have transferable skills that can span across industries and geographies.

Notwithstanding the above benefits, just because you have an MBA does not directly translate into a better job with higher pay. If that were the case, then every graduate from an MBA programme would be the CEO of a business. Ultimately, your prospects depend upon what you make of your degree and its associated experiences. History has shown that while some MBAs do go on to become industry leaders, most get stuck in middle management.

Additionally, the opportunity cost is something that one can't ignore. In the real world, those with actual hands-on experience are sometimes more valuable than just an MBA qualification. The bulk of India's MBAs can end up in jobs that did not require an MBA, to begin with. You could have got the same job if you had sufficient work experience. Most importantly, where you get your MBA from is perhaps a huge determinant of the value of this qualification.

Due to competitive reasons, the highest salaries and the best jobs are usually limited to the graduates of the top 10-15 business schools, and not just graduates of any school. Yes, the curriculum and classroom materials might be the same. But how, where and with whom you learn is very important. If you aren't from one of the top schools, you might need to work that much harder to succeed and derive the full value of your MBA.

No comments:

Post a Comment