Thursday, October 19, 2006
When 29-year-old Michael Rawluk decided to do his MBA full-time at I.H. Asper School of Business at the University of Manitoba, he had to give up his salaried job as a commercial account manager at TD Bank, forgo a year’s earnings, and ask his wife and children to downsize from a comfortable house to a small apartment. And then he had to put in gruelling 80-hour weeks to complete the program.
“It’s a significant commitment,” Mr. Rawluk says. With such a high price to pay, is an MBA worth the investment? For Mr. Rawluk, the answer was yes.
Many people are motivated to take an MBA because they want to broaden their options and advance their careers. After five years, Mr. Rawluk felt he had reached the ceiling of career development and marketability. So did Adam Watson, who was a health-care administrator in a hospital for five years and decided to take an MBA at Richard Ivey School of Business at the University of Western Ontario in London. “I needed business training to move into a consulting role,” he says.
With a new toolkit of skills — finance, valuation, strategy framework, etc. — Mr. Rawluk and Mr. Watson were able to move on to the executive track and snag a better position.
At graduation, Mr. Rawluk got a job as general manager in the Birchwood Automotive Group, managing a dealership in Winnipeg and overseeing the vehicle leasing division. Mr. Watson successfully started his own health care, life-science and technology consulting firm, Sequitur Inc.
MBA students also develop a great peer network and acquire access to business leaders — Mr. Rawluk’s mentor became his employer.
Furthermore, the degree adds value in the eyes of employers: Eight out of 10 executives say they would choose a candidate with an MBA over one without if other factors were equal, according to a survey conducted this year by Environics Research for Queen’s School of Business.
“The MBA is viewed by employers as providing a well-rounded business background,” says Janet Soles.
However, by itself, it’s not the golden ticket to the C-suite. Henry Mintzberg, Cleghorn professor of Management Studies at McGill University, makes a valid point in his book Managers not MBAs when he criticizes young grads with little or no years in the workforce who believe their ability to solve a case-study is the equivalent to real-life management experience.
“Some MBA grads may over-weight the value of the degree thinking it will elevate their career to another level because they’ve invested heavily in it. It’s one of many evaluation points across the spectrum,” Ms. Soles says.
MBA students should not assume a higher-priced school with a fancy reputation will get them a better job. According to Ms. Soles and Mike Bacchus, president of Edmonton-based David Aplin Recruiting, a degree from a brand-name school carries more prestige, but it won’t necessarily land students a better job or command a higher salary.
Some industries place more value on an MBA than others. “The financial industry gives a lot of weight to an MBA, the construction industry less so, though it often depends on the culture of the company,” Mr. Bacchus says.
And getting an MBA is expensive. Tuition at the Asper School of Business was $26,000 when Mr. Rawluk took his MBA in 2003. Mr. Watson ponied up $50,000 in 2000 for his two-year-program at Ivey. Add in lost income from being out of the workforce, and students are looking at a significant cost: Approximately $200,000 in Mr. Watson’s case.
Surveys have found MBA graduates on average make more money than they did before, but how much more varies. On average, graduates from HEC Montreal’s MBA program saw only a 23% increase in salary from $59,000 to $72,800, while those from Michael G. DeGroote School of Business at McMaster University in Hamilton saw the highest average jump of 117%, moving from $27,354 to $63,119, according to a survey conducted by Canadian Business magazine in 2005. The average signing bonus in Canada is US$16,367, according to a 2006 survey from the Graduate Management Admission Council, a non-profit organization of graduate business schools worldwide. Mr. Rawluk’s salary level rose 40%; Mr. Watson’s increased 300%.
Salary increases aside, MBA students need to know they are signing up for short-term pain in exchange for long-term gain. While Mr. Watson earned back the investment within two years, it will take Mr. Rawluk five years. “I’m still living in an apartment,” he says, adding he still has 30-plus working years ahead of him with increased earning power.
It is a winning scenario for younger students — most full-time MBAs are on average between 28 and 35, according to Dr. David Saunders, dean of Queen’s School of Business — but it won’t work as well for older students.
“It’s like a retirement savings plan. The earlier you invest, the longer you have to earn higher returns,” says Dr. David Wicks, dean of Sobey School of Business at Saint Mary’s University in Halifax.
Furthermore, MBA graduates must get an executive-track job to maximize their financial potential, so if someone lives in an area where these are not plentiful, he should be prepared to move. Approximately two-thirds of Sobey’s students come from the Atlantic Provinces, but many have to leave the region after graduation to find suitable employment. “Some students find jobs locally with companies such as Bell Aliant, but others need to take advantage of the opportunities elsewhere,” Dr. Wicks says.
Finally, it is important to understand to what extent an MBA would facilitate in realizing their goals. “You can progress faster with it, but if you don’t have an MBA, it won’t necessarily put a ceiling on your career advancement,” Mr. Bacchus says.
As Dr. Mintzberg writes in Managers Not MBAs, many successful business leaders have an MBA, but many don’t. He cites a Business Week survey that reveals the most-admired U.S. business leaders don’t have an MBA: Warren Buffet, Herb Kelleher, Michael Dell, Bill Gates, Jack Welch, and Oprah Winfrey.
Ultimately, the decision to do an MBA is up to the individual.