MBA Pay: Riches for Some, Not All

MBA Pay: Riches for Some, Not All
by Anne VanderMey
Thursday, October 1, 2009
provided by

http://finance.yahoo.com/college-education/article/107863/mba-pay-riches-for-some-not-all?mod=edu-continuing_education

Schools publish average salary figures that suggest most grads will reap rich rewards, but for many the "average" is a distant dream

The MBA in the corner office, fresh out of business school with a six-figure paycheck, is a standard trope of Corporate America. Every incoming student has heard rags-to-riches tales of that gilded certification leading to giant paychecks and even bigger bonuses. But how often do these MBA fairy tales actually come true? According to new research: not as often as you think.


The averages usually reported by schools tell prospective students only part of the story. Means and medians, like the ones reported on BusinessWeek's Web site, mostly gloss over the experiences of students in atypical careers such as microfinance or public service. And numbers outside the averages or ranges can be hard to come by, leaving students to play an uncomfortable guessing game in the shadow of student loans.

 

No surprise there, great article none the less. Name does count. It's something that hiring managers can put their finger on. Quality of the education really only appeals to those of us who cannot afford the top 20. And, what a surprise, employers are not interested in the actual quality.

 

I didn't find anything presented here particularly surprising. Schools presenting a mean salary don't benefit anyone without also telling them the range of salaries.

I make less than the average salary from my graduating class (slightly over $90k) but I am in a better position financially than I was prior to graduate school and actually like my job now. I don't know of anyone from my program that would tell you they wished they hadn't done it.

I don't think looking at schools like HBS, Columbia, Wharton and Tuck provides a lot of useful information for most people considering a MBA. A large portion of the students at these types of schools go into investment banking, M&A, hedge fund management, etc and drive average class salaries up. The companies paying those $200k+ salaries that drive up the mean salaries at these schools are only recruiting at 10-15 of the best programs.

Anyone pursuing a MBA at some mid-tier state school that is convinced they are about to walk into a six figure salary is delusional and only setting themselves up for disappointment.

 

Back in the MBA's heyday of the early 1980's, I read an interesting book about programs across the country. It had an interesting theme, that there were a handful of programs with nationwide reputations. Then there were a great many more that had good regional reputations, with the rest having (at best) local reputations. If you used your degree outside its reputation area, it was all pretty much a wash.

For example, I have an MBA from National. Most people in San Diego would agree that an MBA from, say, the University of San Diego is a better degree. (It certainly was back then.) But outside of San Diego, no one really knows or much cares.

A note about averages: the article lumps means and medians together, but they are really different things, especially when reporting on money (salaries, home prices, etc.) Means are greatly influenced by outlying values; medians much less so. For example, if you've got a basketball team with 4 guys at 6 feet tall and one at 7-3, your "average" height is 6-3. But your median hight is 6-0.

One graduate with a million-dollar income won't affect the median at all, but it could increase the mean.

 

not trying to shill for my own blog, but I recently interviewed one of my former classmates who is now a hiring manageer at accenture, and he had some interesting things to say that apply to this conversation.

http://mbabuzzkill.blogspot.com/2010/01/interview-with-l-david-kingsley.html

 

Could someone please enlighten me. First off, I respect anyone w/an MBA, especially from a real school, not DETC. Some people holding these degrees have an uppity attitude like their better than someone else (engineers can be the same way), but I do understand it is something to be proud of. What makes a Top 20 school sooooo much better than students from other top schools? What is the aura? My sister-in-law graduated from Fuqua (Duke) and her life changed since....money, money, money. But she tells me she was very weak in Stats. So why is Fuqua so much better than say a lower tier school when you can be very weak at Stats? My other question deals w/this Kingsley character. Regardless of his so called quals, how is he qualified to talk about MBA's in sort of a negative way when he chooses to take an easier route, that of OCM. And c'mon now, don't preach to me the benefits of this degree, it's theory based and I've found this type of training to be, well, quite frankly, HOGWASH! His comment was .....
I had been working in the Organizational Change Management space for five years, and wanted to understand more about the theory behind the consulting guidance I was providing to my clients. I selected a targeted Master of Arts, vice an MBA, because I wanted to spend my graduate class time in a focused manner. I am more valuable to my clients and my company by going to market as a focused specialist who speaks with deep experience in my field, vice a management generalist.
Isn't this guy sort of filled with BS? Please don't tell me about his salary, I've worked w/many $140,000 yr people w/no degree. If I had an MBA, I would feel insulted by him.

 

Pay after your MBA is appropriate to your pay before your MBA unless you come from a name school.

Like AU, I make around 90k. I expect that after my MBA, I'll make somewhere around 95k. It's not the degree, it's the person and the degree.

 

I think the name of the school carries a lot of weight because employers place a lot of weight on it. It is an easy way to trim an applicant pool because the admission standards are so high that only the very best have been admitted.

You will learn the same things at any reputable MBA program whether it is ranked #1 or #100. I've said this before and I know a lot of people will disagree with me, but the real value in a MBA isn't the education, it's the network you build. Top tier schools provide their students with access to people that other programs just can't do so they leave school with access to top level executives at the biggest investment banks, hedge funds, consulting firms, etc. in the world.

Having spent a lot of time around Harvard MBA students in the past year I can say that you see something special in a lot of them. They (for the most part) are extremely bright and driven with educations from some of the most elite universities in the world and professional work experience at the ages of 25-28 that most white collar professionals will probably never accumulate through their entire career. There were certainly a large number of people in my program at Owen that could have been competitive applicants at Harvard, but the classes at HBS are just stacked with talent from top to bottom. The only three programs I have seen with the same overall quality of students are Wharton, Tuck and Stanford.

 

I think that people need to also understand that alumni of top tier programs end up in markets in California, New England and NYC where $120k isn't as much as it sounds like. I'm from South Carolina, living in New England now and can say that my salary here is equivalent to making 20-30% less back home.

 

This has been the most difficult of things for me to swollow. Hindsight is 20/20 and I really do regret getting my MBA at AMU. My pay before the MBA was abysmal and I was hoping that adding some good general business training and education would increase my appeal to hiring managers.

Even if a turd has an MBA its still a turd. My poor work experience, and disparate military career have hampered me, so I'm back to square one.

The school name really has more cache than most of us would like to acknowledge. And the other thing that stinks is that you hear from someone (AUTiger) who works around HBS students and he tells us that they are all studs/studettes. Great.

Why can't you let us have our delusions into to thinking they are all GWB wannabes who are dumb and bought there way into school? So, they are smart and work hard too? What next, they are all attractive people as well?

 

A BusinessWeek article (e.g. that less than one of three executives who reach upper- echelon positions even hold an M.B.A.) regarding the higher-tier university MBA fallacy … Additionally, HBS boasts that over half of their graduates end up working for non-profit organizations. Isn't the whole point of getting a MBA being able to make lots of money and also enable accelerated promotions?
http://www.businessweek.com/magazine/content/06_12/b3976089.htm

 

I've been speaking with a lot of the EC students (Elective Curriculum, the term HBS uses for second year students)over the past three weeks as they've been returning from break and most I have spoken with already have lined up jobs with investment banking or consulting companies. One girl took a position with the FBI, but I haven't heard of anyone that is headed to a non-profit (though I am sure there are some).

Keep in mind, the class size at HBS is just under 1000 students so even if half take jobs in non-profits that is still 500 taking high(er) paying positions. Five hundred students is larger than most entire MBA programs, let alone a single class. The only program that is similar in size is Wharton, and again their graduates average 6 figure salaries.

Another comment about the students going to non-profits, several of the top tier programs have incentives in place to assist students with their student loan debt if they take positions with non-profit. One top ten program even subsidizes your salary if you go to a non profit.

 

So that Harvard koolaid must be real good. Would these be the same folks who managed this:

The total value of Harvard’s endowment fell nearly 30 percent

Admissions officers still have not managed to measure ethics and core values and, as I'm sure you know, our business schools have some strides to make in addressing those areas.

 

Ok, so with all these wonderful students graduating and leading our industry, how do you equate the results of the economy with the supposed best and brightest graduating from the best schools and providing consulting to an industry that was already flush with the same graduates prior to its collapse? Seems to me that we are doing the same thing over and over but somehow expecting different results.

 

Cory, I've seen you mention previously that you are unhappy with your degree from AMU because it hasn't resulted in the kind of opportunities you presumed that it would. I won't speak to the quality of AMU because I'm not very familiar with the school beyond the fact that it services our military men and women.

I have seen a few cases where MBA graduates from non-RA and/or AACSB accredited schools have been admitted to RA/AACSB MBA programs (I'm not sure what kind of case these people made in their applications for why they wanted a do over on their graduate education). I don't know your background or your personal circumstances, but have you considered "re-doing" a MBA from a school whose name carries more cache?

Oh, and not trying to rub salt in the wound but there aren't a lot of ugly people there at HBS either.

 

I was at Harvard a couple of years ago and noticed what appeared to be a homeless person, covered with a newspaper, sleeping in a doorway . I asked one of my acquaintances if the gentleman was homeless (and on campus!), the response: "nope, just a grad student who pulled an all nighter studying for exams."

 

Sounds like you were on the main campus. The business school is situated on the other side of the river away from the main campus (in fact, the main campus only houses Harvard College and GSAS). I have never seen anyone sleeping outside the business school campus. Beyond that, most of the MBA students live in apartments situated on the business school campus so if they wanted to nap they would probably just go back to their apartment.

Homeless people are known to sleep in the doorway of the Harvard Coop across the street from Harvard Yard because they keep the heat running and it is warm.

 

Hi Major, I had actually read this piece before. While it makes a compelling case for whether a MBA from a top-tier institution can lead to the corner office, I would be interested in finding out how many graduates from those schools are making say $200k+ a year. In my opinion, an annual salary of that amount would make the time, monetary investment and opportunity costs of a top-tier MBA worth it (assuming what you are doing for a living isn't soul crushing). Just my opinion. Thanks for sharing the article.

 

I guess my argument would be that you can't teach someone in their mid-20's ethics. They have already established who they are and at that point it would be very difficult to change them. Also, in Harvard's case, the school is graduating 950 students each year, I don't know how many of them fall into professional ethical problems in their career, but would assume that it is a very very small number per class. I'm not sure how the AdComm could institute a more stringent vetting process for applicants (I don't work in admissions), but if you have any ideas I would love to hear them.

 

I had seen a study a while ago (I hope someone else can find it because I won’t look) that individuals that graduate from Ivy League schools are more successful because of the drive they have – that is how they got accepted to a top school. If the same individuals went to lower tiered schools, in all probability, they would still be just as successful because it is “who they are” not where they went to school.

The company I work for used to be headquartered in Long Island. Lots of graduates from impressive NE schools (Harvard, Yale, Princeton, Brown, NYU, Columbia, etc) and the CEO they hired has a bachelor’s degree in humanities from an Ohio state school (Ohio State or University of Ohio- don’t remember). He is the CEO of the US and Latin America divisions. Is it the person or degree…I say person.