Palm Beach Atlantic University

Master in Business Administration

Quantitative Methods

Dr. Mike Chen

AN ANALYSIS OF THE MBA DEGREE IN TODAY’S BUSINESS ENVIRONMENT

“Does it have an effect on career success?”

Rena Mosquera

Sarah Sampaio

Steve Cury

2

Yvonique Briscoe

I - Introduction

Contradictory information has surrounded the real value of “The

MBA Degree” for a long time and our research team will try to answer

this question from using various secondary quantitative and current

business research data. Several experts in business and academia

have diverse opinions, but our team aims to explain and answer: “Does

an MBA degree have a strong contributing factor of the future career success of the

graduate ?”

The first question we want to pose is related to the cost/worth

relation of the MBA degree. Valuable time, sacrifice and money are

put forth to acquire this degree and most students pursuing this

degree want to know the real answer before they go through the hard

process.

Our team has found strong data on both sides of the spectrum to

support and contradict the MBA degree and its value. According to

3

Jeffrey Pfeffer, Professor of Organizational Behavior at Stanford

Graduate School of Business stated “A degree has value only if the

degree is scarce, and the MBA is completely un-scarce” (Boyde,

2014). Pfeffer’s theory states most business education companies

like GMAC (owners of the GMAT entrance exam) distort the data to

make MBAs seem more valuable than they really are. Every year

100,000 MBA degrees are awarded annually in the US alone with the

number of jobs remains relatively constant (Boyde, 2014).

Pfeffer states that unless you earn your MBA from a top 15

elite business school, it is a waste of money, but he also states

that the prestige of the MBA degree will never wane and will

continue its attraction for many students looking to further their

career goals of better jobs, salary increases and promotion.

Contradictory data from companies like GMAC and the corporate

recruiter’s survey report 2014, paint a different picture of the

data. The 2014 report found that four in five companies (80%) plan

to hire an MBA, up from 73 % in 2013 (GMAC survey, 2014). GMAC

median base salary for MBA’s in the US in 2014 is $ 95,000, with

most salaries remaining the same as previous year. Percent of

4

companies hiring (actual vs. projected) from 2010 to 2014 below,

shows the positive value of an MBA, with recent increases happening

due to a better overall economy and employer growth needs.

The ultimate goal of this analysis is to understand the real

value of future success from gaining an MBA advanced degree, while

focusing on four key points which clarify the intended value of the

degree throughout our analysis.

Jobs and or advancement: Are MBA students after graduation getting

more job offers after than undergraduate students? Data suggest more

employers will seek MBA graduate before other lesser degrees.

Advancement in an existing company is also a strong element for

5

current workers looking to move up managerial positions. Most

corporations will promote from within and a MBA degree often help

managers looking for promotions.

Compensation: are MBA graduates achieving higher pay than other

degrees or undergrad degrees? From our data, it does seem to show

MBA graduates do make higher salaries than people who carry lesser

degrees such Bachelors or Associate.

ROI (Return on Investment): time related to lost wages and actual

costs of graduate MBA education has to be considered vs. actual

gains from higher job incomes. This is a hard number to pinpoint as

the costs vary so much from school to school and the value of lost

time can’t be figured the same for all participants. (SEE GRAPH

BELOW- ROI based on graduation year).

Intrinsic Value: Greater confidence and knowledge in business

theories can be achieved in an MBA programs, but also personal

confidence is known to raise with an MBA degree, as well as a better

skill set for real business practices. Business Network and

personal contacts are an important part of this MBA experience,

which is not discussed that often, but has a real value that cannot

be discounted even if this qualitative data is hard to factor in.

6

MBA's contribution to employment and career advancement

The previous table shows the responses about the contribution

of MBA degree in employment and career advancement in the Middle

East (Saba & Mahmood, 2011). It shows the data on the MBA degree

contribution for employment and career advancement and 45% people

responded that MBA degree helps in fast employment while 35%

responded about its moderate effects, while on the other hand 35%

people responded degree of MBA helps in fast career advancement,

while 25% responses were that MBA degree proves better at moderate

level for getting promotion and better compensation.

Overall percentages show that degree of MBA is very helpful in

getting higher-pay jobs and career advancement.

7

Return on Investment after graduation

In summary, this analysis will represent new information and

data that could help and effect many individuals who place a great

value and monetary investment in an MBA education. This perceived

MBA future value of success ultimately effects the lives of many

students and graduates, along with their families who dedicate time

and money to attain these degrees. The consumers (MBA students) in

a way need to understand the complete picture of an MBA degree

before they think it will be the golden ticket. These consumers and

the companies that hire them should all know the real value of the

degree and understand how it can affect their future success.

The following questions will be answered in this paper:

8

1) Effects of an MBA degree on career success.

2) Effects of an MBA degree on career success related to gender

–Male and Female.

3) The impact of the perceived quality of the MBA school.

II- MBA Degree: is the cost worth it?

The MBA (Master of Business Administration) is a postgraduate

degree that is awarded to students who have mastered the study of

business.

In theory, the flexibility of the degree allows students to

acquire skills that would help them succeed in most fields such as

business, finance, accounting, marketing and human resources in a

manner most relevant to management analysis and strategy.

Although institutions of higher education around the world now

offer MBA programs, this degree is American born and bred. The first

graduate school of management, the Tuck School of Business, was

founded in 1900 at Dartmouth College. According to the school’s

website, it was the original graduate business school to award the

Master of Commercial Science degree, which later became known as the

9

Master of Business Administration. This idea of a graduate business

education quickly caught on and in 1908, the Harvard Graduate School

of Business Administration enrolled 80 students in the first ever

MBA program, according to its website. Throughout the years, MBA

programs have grown in number and range of subject matter.

Expected Financing Mix - Prospective students

On average, the cost of MBA tuition increase of 10.8% from 2009

to 2013 overshadowing the average salary increase and inflation. How

students pay from tuition has also shifted in the last 4 years where

approximately 5% less students used loans to pay for tuition between

while personal saving and parental support saw a significant

increase.

Pursuing an MBA degree is a major personal investment, since

Tuition and expenses at top business school programs are in excess

10

of $60,000 a year, excluding room and board, book etc. The sacrifice

of time and money come with the hopes of career advancement and

higher compensation.

The fastest growing segment in graduate business education has

been the short-cut degree: an accelerated one-year MBA or the one-

year Master’s of Management for students with little work

experience. It’s not hard to see why. The costs of such business

training is slashed to half of the traditional two-year MBA,

requiring students to borrow less money and stay out of the

workforce for much less time.

But the Graduate Management Admission Council has released data

that shows there is a price to pay for taking a short cut. This

year’s graduating class of Master’s in Management degrees saw their

11

employment rate fall to 76% as of September of 2014, the lowest

level in five years, down from 84% in 2012. Graduates of one-year

MBA programs this year, meantime, saw their employment rate decline

to 89% to 82% last year.

And the somewhat out-of-favor traditional two-year MBA grad?

Overall, the employment rate for those MBAs hit 92%, up from 90%

last year and 85% in 2009. It would have been even higher if not for

some sluggishness in Europe where 18% of graduating MBAs were

unemployed in September. For U.S. citizens who graduated from two-

year MBA programs, moreover, the employment rate was a whopping 95%,

the highest level in the past five years and up from 91% last year

(see chart below).

The job rates are a dramatic contrast to what has occurred in

law where the employment rate has fallen for five years in a row

since 2008. Even nine months after graduation from law school, the

Class of 2012  had an employment rate of only 84.7%, according to

the National Association for Legal Professionals.

12

The new GMAC report—based on responses from 915 members of the

Class of 2013 from 129 business schools around the world show

widespread satisfaction with graduate business education. GMAC said

that 96% of the responding Class of 2013 rate the value of their

degree as outstanding, excellent, or good, and the same percentage

of the class would recommend a graduate management education to

others. Three of every four members of the class say they could not

have obtained their job without their graduate business education.

13

Increasing earning potential is one of the major drivers

motivating prospective MBA students. The average undergraduate

majoring in business will earn $55,679 directly out of college, but

an MBA degree can greatly increase students’ compensation,

particularly for those graduating from top schools in specialized

finance roles. This chart outlines results from a survey of several

MBA programs and the starting salaries for students completing the

MBA program.  

The highest and lowest average starting salaries across all

schools ranges from $121,455 to $73,748, a difference of 65%. A

majority of MBA graduates enter Finance or Consulting & Strategy

roles (52%), which also receive the highest compensation. Top

14

finance graduates can expect to earn at least 30% more than the

average MBA student, with some students earning over $200,000.

III- Career Success and the Perceived Quality of Business School

Over the past few years there has been an increase in obtaining

Masters Degrees specifically in Business Administration. The

internet provides several articles with different rankings for top

Business Schools in the United States as well as throughout the

world. The information on these articles include items such as Rank,

School, Location, Tuition, Years to Payback, Pre-MBA salary, and

GMAT Score. Many of these top tier schools may not be affordable for

prospective students and it either discourages them from pursuing an

MBA or results in looking into alternative options.

Choosing to pursue a higher education is not only an investment

but many times it is done to increase income in the future, but,

does attending a top tier school guarantee a better education? or a

higher paid salary? are these candidates in a better position for

promotions within a company? A candidate’s personal background as

well as experience plays a factor in their Career Success and

15

Business School. Typically MBAs, with their broad management

training combined with several years of work experience, are placed

in generalist, analyst and strategy positions in large firms. (GMAT,

2012) Some companies have customized recruiting schemes to attract

business school grads with an annual intake of MBAs who are placed

on a rotational program to experience different commercial aspects

of the business. (GMAT, 2012)

An MBA will enter in a specific role at mid-management level,

often in business development, marketing, strategy, finance, or

operations. According to the GMAC 2012 Corporate Recruiters Survey

(with responses from 1,096 global companies), 66% expect to hire

MBAs for mid-level positions. And, these companies will employ new

MBA hires in a range of positions, which varies among employers by

region. (GMAT, 2012)

16

What are Employers looking for? Work Experience has a lot of

weight when it comes to potential employers. What do employers look

for when they hire an MBA out of business school? The ability to

read a balance sheet? Implement the marketing mix? Construct a GAANT

chart? Value an asset? No doubt, all of these skills are helpful,

17

along with the professional network, international outlook, and soft

skills developed through an MBA. (GMAT, 2012)

The recruiters that GMAC surveyed earlier this year indicated

the top factors they consider most important when choosing MBA

candidates to interview all have one element in common: work

experience. Corporate recruiters specifically look for:

Prior experience in job function (66%),

Industry experience (51%), and

Years of work experience (44%). 

Nearly three-quarters of these survey respondents reported they

seek to hire MBAs with more than three years of work experience,

whether earned before they enrolled in their program or in

combination with internships during their program. The top quality

they seek in MBA hires is leadership (51%). They also want

candidates who are goal-oriented, ethical, and motivated, who can

work under pressure, take initiative, and who can manage tasks as

well as people.

18

Source: GMAC (2012), Corporate Recruiters Survey Report 

One reason that having an MBA degree may show no effect is that

it may not be strongly related to the individual's mastery of

business knowledge. Recently, an investment bank was horrified to

find that an MBA graduate it hired from a leading business school,

an individual who had apparently taken a number of courses in

finance, could not calculate the net present value of a future

stream of payments. Crainer and Dearlove (1999), in their critical

overview of business education, described the "Wharton Walk"—a

drinking ritual in which the students at the University of

Pennsylvania business school visit 10 bars in one night. They

concluded, "This is what happens in business schools. Most students

19

simply get drunk. MBA students bond and network" (Crainer &

Dearlove, 1999: xix). Robinson's (1994) description of his life at

the Stanford Business School is illustrative of many students'

perspective. "Learning is not an explicit goal. Nowhere does

Robinson address the issue of what he wants to learn" (Armstrong,

1995: 102, emphasis in original). The examples given above can help

explain that even though someone attends a top-tier Graduate program

it does not provide the do’s and don’ts in a work environment.

IV - MBA Null and Alternative Hypothesis:

The empirical evidence on the effects of business school grade

point average (GPA) is mixed. Neither Pfeffer (1977) nor Dreher,

Dougherty, and Whiteley (1985) found any effect of grade point

average on either starting or current salaries. O'Reilly (2001), at

our request, reanalyzed data from his study with Chatman on the

effects of personality and intelligence on MBA graduates' subsequent

career outcomes (O'Reilly & Chatman, 1994).

He reported that U.C. Berkeley MBA graduates' GPA was unrelated

to (a) salary increases over 3 to 4 years after graduation, (b)

20

average salary of the job accepted, (c) the number of jobs held

since graduation, (d) the number of promotions since graduation, (e)

the number of job offers received upon graduation, (f) either job or

career satisfaction, and (g) the person's fit with his or her

current job. Burt (personal communication, Nov. 26, 2001) reported

that data from a survey of women who graduated from the University

of Chicago Business School showed that GPA had no effect on either

income or the probability of reaching senior rank.

In conclusion, going to a prestigious Business School does have

its advantages. One of these benefits is that employers will pay

higher salaries for Harvard or Stanford graduates as opposed to a

lower tier graduate. Forbes recently published an articles that

stated, “The job market for M.B.A.s has slowed since the Great

Recession, but a diploma at an elite business school still pays off.

Graduates of the top 25 programs make almost $160,000 a year after

five years, two and a half times what they earned pre-M.B.A.,

according to our 2013 Best Business Schools ranking.”

Regardless of what school students attend it is not the

determining factor on how successful they will be or what their

21

salary will be. Graduate business programs may be used as a

networking opportunity to meet people from different backgrounds and

possibly working professionals that are bringing experience from

where they currently work. Potential employers many times want to

know whether the candidate has any work experience, if they do how

many years, and whether they would be a good fit for the company.

Assessing someone’s skill set and what they would contribute to a

company is also important.

One reason that having an MBA degree may show no effect is that

it may not be strongly related to the individual's mastery of

business knowledge. Recently, an investment bank was horrified to

find that an MBA graduate it had hired from a leading business

school, an individual who had apparently taken a number of courses

in finance, could not calculate the net present value of a future

stream of payments. Crainer and Dearlove (1999), in their critical

overview of business education, described the "Wharton Walk"—a

drinking ritual in which the students at the University of

Pennsylvania business school visit 10 bars in one night.

22

They concluded: "This is what happens in business schools.

Most students simply get drunk. MBA students bond and network"

(Crainer & Dearlove, 1999: xix). Robinson's (1994) description of

his life at the Stanford Business School is illustrative of many

students' perspective.

"Learning is not an explicit goal. Nowhere does Robinson

address the issue of what he wants to learn" (Armstrong, 1995: 102,

emphasis in original). The examples given above can help explain

that even though someone attends a top-tier Graduate program it does

not provide the do’s and don’ts in a work environment.

IV- Conclusions and Recommendations

With this paper, our team attempted to shine a light on the MBA

dilemma, to look on both sides of the spectrum and analyze the

importance and effectiveness of a Masters Degree in Business

Administration. While there are academics and entrepreneurs who

don't really see the need or effectiveness of such degree, others

see value and relevance not only in the title, the diploma, but also

23

in the knowledge and professional network that it provides to the

students.

With that in mind, our group concludes that an MBA degree still

carries great value and provides an important foundation to students

who aim to take senior management positions in for profit and non-

profit organizations or even that would like to own their own

business, since MBA programs usually provide the tools to understand

how companies work and what is needed to be able to operate in the

market. Its broad approach, provides knowledge of the legal system,

economic trends, finance and corporate strategies, marketing and

advertising, among other important courses.

a) Recommendations:

Upon the decision of working towards your MBA, there are some

things that our group would recommend you consider in order to find

the right program for you.  The school's reputation regarding

employability, which means the types of companies where you’d like

to be employed and how close the school is to those companies.  Do

24

these job recruiters have a good relationship with the school you

are considering? 

Another important consideration is the academic rigor of the

program.  There are a lot of schools which have great reputations

for the emphasis in Quantitative courses, some have great

reputations for being more focused in Marketing and other schools

have great reputation for their focus in Operations and Strategy. 

Some are just general management schools.  The courses you will take

at a school is a good indicator of the type of program you are

applying for and what you would hope to have learned and achieved by

the end of the MBA program.

Most importantly, a candidate must consider the overall fit of

the school, if the courses, employability and institution best fits

your needs and goals. For example, Governments around the world are

more interested to introduce cultures that would promote

enterprises, create new ventures and as a result, education systems

would be changed, in varying degrees (Kirby, 2004).

An MBA degree certainly facilitates the transition from a

junior role to a senior one, since the graduates of the top business

25

schools are expected to progress swiftly to the executive suite and

a successful progression through MBA program thus marks a change of

status (Kelan & Jones, 2009; Hill, 2003, 2007).

In choosing a business school to attend, it is important to

note that there are hundreds of other students in the same position

as you, who are also choosing or considering that school, which

means, if you think that school fits you personally, it’s likely

that you’ll find like-minded students in your class who also made

the same decision and with whom you could create important network

and share knowledge and purpose.

b) Conclusions:

It is vital though, that students can add professional

experience and personal skills to the MBA background. We take the

example of Middle East countries like Saudi Arabia, Pakistan and

Arab Emirates, who are booming with new businesses and in search of

managers and directors with solid professional experience and good

academic foundations.

26

The table below represents the opinions of respondents in the

Middle East about the importance of the MBA degree to enhance one's

managerial skills.

Statements about variables t Sig. (2-St 1MBA is a degree for enhancement of managerial skills St 2MBA’s can manage time in a better way St 3MBA’s are not competent as other business graduates.. St 4Stress management is prominent quality of MBA's St 5MBA’s are good communicators St 6MBA degree can develop skill of writing good presentations St 7MBA's don't feel hesitation St 8My oral presentation is very good due to business graduation St 9MBA's are good researchers St 10MBA’s have gotten many promotion chances than other graduates St 11MBA's can manage conflicts raised by fellows. St 12

21.770

23.290

11.798

30.426

26.741

35.561

26.865

42.209

.000

.000

.055

.000

.000

.000

.000

.000

St 14MBA's become victim of great stress during hours of heavy work load thoughSt 15MBA's can handle any financial matter St 16MBA'S are good decision makers than other business graduates

9.984

28.306

31.73

.075

.000

.00

For this research performed and secondary data provided by Saba

& Mahmood (2011), a t test was applied to check the significance of

27

these statements (variables) towards an MBA degree and results shown

that all statements are highly significant except ST number 3 and ST

number 14. These two statements demonstrated a low level of

significance, being negative in nature.

These results prove that an MBA graduate is more skillful than

other business graduates. MBA's are stronger and more prepared

than business school undergraduates in all aforementioned

statements.

28

References

Kelan, E., & Jones, R.,D. (2009). Reinventing the MBA as a riteof passage for a boundary less era. Career DevelopmentInternational, 14 (6), pp.547-569. doi:10.1108/13620430910997295,http://dx.doi.org/10.1108/13620430910997295

Kirby, D., A. (2004). Points of view Entrepreneurshipeducation: can business schools meet the challenge? Education þTraining. 46 (8/9), pp. 510-519. doi:10.1108/00400910410569632,http://dx.doi.org/10.1108/00400910410569632

Saba, A., & Mahmood, B. Perceived Effects of MBA Degree onSkills Development and Career Advancement (2011) - InternationalJournal of Business and Managementhttp://www.ccsenet.org/journal/index.php/ijbm/article/viewFile/8727/7946

Paton, R., A. (2001). Developing businesses and people: an MBAsolution? Journal of Management Development, 20 (3), pp.235-244. [Online] Available:http://www.emeraldinsight.com