Three Big Problems with Business Schools (And the Smart Way to Get an MBA)

One of the keys to growing my career and enabling me to establish a great income was that I got an MBA 20 years ago. That degree opened the door to my first job which, in turn, set me on the path to earning a great income. I have literally made millions (with more to come) off a degree that cost me $5,000 to obtain.

But have the glory days of MBAs passed us by? And is the degree even relevant today?

According to The Personal MBA: Master the Art of Business, the glory days have passed and the degrees are not as relevant as they once were. The book makes a strong case for skipping those two years of added schooling (and the debt that most people accumulate during that time) and instead implementing a personalized course of study (reading books mostly) that will better prepare you for the real world of business.

I'm looking forward to hearing from the author of this book directly (he'll be doing some guest posts here at the end of December), but for now I wanted to share what he lists as three big problems with business schools. They are:

1. MBA programs have become so expensive you must effectively mortgage your life to pay the price of admission.

2. MBA programs teach many worthless, outdated, even outright damaging concepts and practices -- assuming your goal is to actually build a successful business and increase your net worth.

3. MBA programs won't guarantee you a high-paying job, let alone make you a skilled manager or leader with a shot at the executive suite.

Here are my thoughts on these:

1. Yes, getting an MBA can be expensive, but like any other college degree there are ways to lower the cost. I detailed these when I talked about making the most of a college degree, but here are two tips for an MBA in particular:

A. You don't have to go to Harvard. I recommend going to the most affordable school that gets you into the company/industry you want to be in. (FYI, I went to a Top 25 school -- nowhere near the top few, but not a sluggard either) These schools are much less expensive and still get you the start you want. From there, the results of your career are up to you.

B. Get an assistantship. That's what I did -- and it saved me a BOATLOAD.

2. I agree, MBA programs do teach many worthless things. They have done so for years (I haven't used even 20% of the educational knowledge that I learned in grad school.) In fact, much of what all our universities teach is different than what works in the "real world." That said, I learned several other valuable skills while in grad school -- working with and leading highly motivated people, how to handle a seemingly never-ending amount of work on tight timelines, how to communicate and present effectively, and so on.

3. Of course an MBA does not guarantee a high-paying job. Nothing does. There are no guarantees in life. However, you have a better chance of earning more with an MBA than without it. But it's worth saying that you simply can't get a degree and then wait for the world to bow before you. You'll still need to work hard and manage your career so that you maximize your earnings. But assuming you do work hard and have a decent amount of skills and abilities, an MBA can help you make a lot more than you would otherwise.

Here are some additional thoughts from me:

• Generally, I think getting an MBA is like getting any other degree. Do a cost/benefit analysis and see if what you're likely to get out of it is greater than the cost of it. If it is, then it's probably a good idea. If not, it probably isn't.
• Even if an MBA degree is totally useless from an educational standpoint (I'm not saying it is, but let's assume so for a moment), it does one powerful thing for your career/earning potential: it opens doors. When I graduated with my Bachelor's degree, I would have made $18,000 or so per year (remember, this is back in the day, so $18k wasn't as terribly low as it is today). Two years and an MBA later, I was making over twice that much and working for a name-brand company that set my career on an upward path. There is NO WAY I could have been hired by that company (or any like it) without my MBA.
• All MBAs are not created equal. You can NOT get an MBA from any school you like and expect to get the same benefits as you'd get with any other MBA. If I had a dime for every time someone told me they got an MBA from "Nowhere University" and now wanted to know why they weren't making $200k per year, I'd be a rich man. As I said earlier, you need to get an MBA from a school that will get you into the company/industry you want to be in. For example, if you want to work in marketing for Microsoft, you need an MBA from a school where Microsoft hires marketing MBAs. If you want to keep your current level of pay and job responsibility, then any MBA will do. But assuming you actually have some sort of plan to improve your career, you need to get an MBA that will help assist in achieving that goal.

Are there any MBA holders out there? What do you think of your degree? Or maybe those who decided not to get an MBA for one reason or another. What's your take?

Comments

[jim]

I'd agree with you on this. The books criticism of MBA's is stuff you could say about any degree really.
And their suggestion of "implementing a personalized course of study (reading books mostly)" doesn't look very good on a resume.

[Blake]

I just finished mine in May. I really enjoyed the challenge and I am proud of the way I did it.

I chose a state school that has a good reputation in my region. Also, this is a region I would prefer to grow in and stay for some time. It was an AACSB school.

My employer picked up 85% of the costs. I paid for my 15% out of cash flow without decreasing my savings rate.

I have not yet made any substantial career advances due to the degree; however, I am confident it will come. Based on how I paid for the degree, it does not take much to see some ROI. Most importantly, I was very interested in the subject matter and generally enjoyed the studies. Every degree has things that are seen as useless or outdated, however, much of this depends on your own experience prior to pursuing the degree. I tried to get as much as could out of the curriculum and felt I achieved that.

[Emily Hayes]

An MBA used to be something that would double your salary but not anymore. Everyone has them, which waters down their value. Also, Blake, you never accounted for the value of your time. Over the past two years I have started a photography business in my spare time (on top of my full time job), and have a gross profit of 30K in my 2nd year of business. To me, the experience of starting my own business has been way more valuable than getting an additional degree. I know how to network, market, blog, write and sell myself. I have experience in project management, customer service, sales, and accounting (and much more). I am now looking for a new position, and my resume is way heartier because of my experience as a small business owner. Only time will tell if it really will help me become more marketable, but I still ended up making money and having fun with it (although there were hard moments).

[Squirrelers]

I went full-time to get an MBA, and it was the best move I have made for growing my income. My salary doubled, post-MBA, and was very good use of time and capital for me. Of course, I wasn't make much before hand:) But regardless, it was great for me. The key was finding a good program with low tuition because I was a state resident.

Originally, I was disappointed because I was rejected off the final waitlist at an Ivy League school. However, the debt that I would have gotten into would have really set me back. I'm normally all about the highest ranked schools and think it can be an incredibly smart investment....but not always.

Anyway, an MBA can be worth it if it's at the right school, and at the right cost. Just have to take the time to calculate the ROI.

[Blake]

You are right Emily- I did not say much about my time. I was at a point in my life and career where it did work out well- by the end (total of 2.5 years) things had changed a lot! New wife, new house, new baby- I would definitely place a lot more value on my time if I were to begin the program now.

I can certainly see your point about starting a business having greater value to you than an MBA! That is great and good for you. I was committed to my employer for the duration of my MBA because I was also pursuing the work experience required to sit for the PE exam. Now that I have that, now would be the time for me to consider the potential of my own business.

Everybody has their own unique scenario- bottom line- just don't stop progressing forward. Whether its further education, certification, pursuing your own business, or simply advancing in your existing job. It all ties into FMFs stance on growing your career as one of your best investments.

[Joe B]

Blake-

I am doing almost the exact same thing, except my current employer is not picking up the tab. I needed to stay with my current employer to get experience to sit for the PE (Professional Engineering) exam and working on my MBA at night. I am finishing in a week and a half and will find out what the future holds.

[Emily]

Way to go to all those who have gotten it! School definatly was not for me, but I admire those who can handle it all!

[Jessica Bosari]

The MBA is a great investment, if you plan on being an employee. If you intend to work for yourself, it's helpful but unnecessary. Anything you can learn in a college is better learned in the real world. As noted, college teaches theory, the real world teaches you what works.

[joe]

My MBA has been totally worthless. I'd tell anyone to not start a program. The old adage is correct: it's not what you know, it's who you know.

If you can network with people at the school who are in industries you're capable of working in, maybe consider it. If not, save your time and money. for instance, my school was about 75% pharmaceutical-employed people, and unless you get in young or are a scientist, you have no shot of getting a job there.

[FMF]

Joe --

You knew that before you decided to go there, correct? So why did you attend?

[BD]

Man, this article and the comments make me feel even more hopeless about improving my life.
I'm currently going back to college for my Masters in Accounting, since my BFA in graphic design proved to be worthless. I'm middle-aged, and I can't afford a fancy "name" school, so I'm going to a no-name 4-year college (SUU) simply because I can live with my parents for free while doing so, and am making just enough from freelancing to cover the cheap tuition.

Is this going to be another worthless endeavor? :/

[Stephen]

A career change is one very good reason for doing an MBA. My girlfriend had an undergrad degree from a local college in finance. After 3 years of working in that field, she knew that wasn't what she wanted to do. She wasn't quite sure what it was but hoped to find out through classes and networking. She was able to get into a top 10 MBA program and found her industry passion. She has a great internship already lined up for next summer which very likely will help lead her to a full time job in brand management. It's nearly impossible to get a brand manager job without an MBA so it's worked out great for her so far. And more than likely will nearly double her previous salary.

[sandra]

@BD - a Masters in Accounting is very different from an MBA. Accounting is a spcialized field within the business world that is quite in demand (depending on what area of the country you are in), whereas an MBA is a more generalized degree. Of course, you can choose some specialties within an MBA depending on how you select your elective courses. My husband has an undergraduate degree in accounting and an MBA. His undergrad in accounting has landed him better jobs and better promotions than the MBA ever has.

[BD]

Sandra - I always thought an MBA came with an Emphasis. I already have a BFA, but my Emphasis is Graphic Design. Without an Emphasis, the degree would be just too general.

The people I know who hold MBA's have an Emphasis: Either Accounting, or Marketing, etc.
So to me, an MBA with an Emphasis in Accounting seems very close to a Master's in Accounting. Either way, after I finish my MA, I'll have a higher degree from a no-name college, and after reading this article I'm a bit worried. It also doesn't help that I'm reading in a lot of financial blogs that it seems EVERYONE is going back to college for the same thing: Accounting. I worry the field will be over-saturated with accountants. I pray that I'm wrong!

Thanks for the input. :)

[Bad_Brad]

At the end of the day, the MBA is a signal to an employer - a signal that you meet a certain hurdle in terms of overall business competence, and a signal that you can finish a task. Depending on where you go, you may learn some very useful things about finance, marketing, business strategy, negotiations, accounting/controls, IT/e-commerce, etc. But the most valuable thing I feel that I got out of my MBA was simply being immersed in a network of peers from many industries who had a similarly high level of intellectual curiosity and motivation.