Historically, the MBA, also known as a Master of Business Administration, has been the business degree for entrepreneurs and ambitious businessmen to get. Many of the best CEOs and high earners in some of the most successful companies have either done some postgraduate work or earned their MBA, which has made it a popular degree to pursue for decades.
But telling a potential employer that you earned an MBA doesn’t have the same cache it used to, mostly because everyone wants one now. What once set the most skilled businesspeople apart is no longer unique. Let’s look at five reasons an MBA isn’t as prestigious as it once was and when it still makes sense to pursue one.
What is an MBA?
Harvard introduced the Master of Business Administration degree in 1908. Today, an MBA is a graduate degree offered by business schools across the country. Many colleges now have online MBA programs too, with location no longer a barrier to obtaining such a degree.
Regardless of whether you study in person or virtually, you can pursue your MBA part time or full time, and you have the option to specialize in specific areas of interest. For instance, you could focus on healthcare management, finance or business analytics. Some opt to pursue an MBA immediately after undergraduate coursework, while others return to school after time in the workforce.
Traditionally, earning your MBA has been an excellent way to stand out to potential employers. Many people still see it as a requirement to reach a C-suite position at a large company. But does it make sense for most people in business? Not necessarily.
Did you know? The cost of an MBA can vary greatly by school and specific program. According to The Economist and MBA.com, the average price for an executive MBA ranges from $62,000 to $213,000.
Why aren’t MBAs as prestigious as they once were?
Obtaining an MBA may seem appealing, but this advanced degree isn’t held in the same regard it once was.
Meeting someone with an MBA used to be a novelty, and MBA graduates commanded a lot of respect with their detailed knowledge of business. But now, there are all kinds of programs for earning your MBA, including part-time digital courses. With the easy accessibility and the large number of people entering and finishing these programs, the market for employees with an MBA is oversaturated.
If you’re depending on an MBA to separate you from the pack of quality job seekers, you’re taking a risk. You have to have something other than the degree that differentiates you from your peers. Further, many educators feel that because of the wide variety of MBA programs that exist today, the quality of the coursework has declined, and students are not receiving the education that is necessary to get a high-caliber job after graduation. They’re not as well educated as MBA graduates in years past and aren’t as distinguished.
“There is a huge gap between what they learn in business schools and what the industry needs,” said Suresh Chitturi, vice chairman and managing director of Srinivasa Hatcheries, who holds an MBA from Emory University. “Quite a few of them are out of sync with reality, get fascinated by an MBA degree and think that they’re something special, which they’re not.”
Rise of specialized M.S. programs
Beyond competition among students, the MBA has its own academic competitor: the Master of Science. Many schools offer specialized M.S. programs in areas like finance, accounting and medical management. Earning an M.S. usually costs less than an MBA and takes only one year.
Younger students who have little to no work experience and want to specialize in accounting or finance are often drawn to an M.S. instead of a pricey and time-consuming MBA. That said, M.S. programs don’t cover general management practices, so earning an MBA makes more sense for those who want to focus on business practices at large.
Tip: Don’t have the money for an MBA? Consider these cheap business ideas to still make your entrepreneurial dreams come true.
Competition on a global scale
Oh, and did we mention there is also global competition to consider? Once upon a time, only American students sought a master’s degree in business administration. But as the economies of places like Japan and China draw increasing attention, would-be businesspeople from Asia and elsewhere are seeking MBAs too. The same goes for people in Europe. The number of MBA graduates continues to increase, further diluting the value and uniqueness of the degree.
A declining economy often means employers simply can’t afford to hire the best and brightest minds, especially those who request a higher salary to pay for their expensive business degrees. Also, companies that may have previously subsidized schooling for employees are less likely to have the funds to continue to do so.
It’s a Catch-22 because a highly qualified employee can pay for themselves in the long run. However, it’s easier to hire someone less qualified and train them as they go, which is why many businesses use internal programs to give staffers more education over time. Why pay top dollar for a candidate with a generic MBA when it could be more efficient and cost-effective to teach another candidate your company’s specific operations? [Related article: 10 Salary Negotiation Tips for Employers]
“Even when hiring the best candidates, we recognize that many new starters have skill gaps,” said Gavin Cooper, executive director of global marketing for Crown Bioscience. “An individual development plan forms part of our new-employee induction program. We recognize the importance of developing our employees right from when they walk in the door.”
FYI: “Individual development plan” is a common phrase among HR professionals. Find out what other key terms you should know for human resources management.
The U.S. used to have a very stable and hierarchical business system. You started in an entry-level position, gained experience, moved to better management positions and eventually had an executive-level role by the time you retired. Today, companies and jobs are often temporary, making career trajectories more flexible but less predictable. Even if you spend years of your life studying and spending money on MBA courses, there’s no guarantee you will get your money back with a high-paying job.
Plus, employers are starting to recognize that other qualifications are equally as important as having an MBA. Not only that, but they are acknowledging that formal education isn’t the only way to be good at something valuable to a business. Internships and alternative experiences are increasingly accepted in lieu of degrees, which means there could be better ways to get to the places you want to go than spending time and money on an MBA. Furthermore, some companies today prioritize hiring for cultural fit over education and experience.
Did you know? The number of CEOs in the U.S. with an MBA is declining: 35% have MBAs, which is down from 42% five years ago, according to a Heidrick & Struggles study cited by Indeed.
When is getting an MBA still worth it?
An MBA may not be as prestigious as it once was, but that doesn’t mean no one should pursue one. Studies still show that those with an MBA earn more than those with a bachelor’s degree alone. In 2021, MBA graduates were expected to earn $29,000 more on average, according to a survey by the National Association of Colleges and Employers.
Besides a higher salary, an MBA can provide valuable networking opportunities you might not be exposed to otherwise. The connections you make while earning your MBA could lead to more career opportunities down the road. Additionally, if you’re exclusively focused on climbing the corporate ladder, an MBA provides a solid educational background and a great line on your résumé. Some traditional firms may even require it.
Take the time to research your desired field and ultimate goals, considering job title, responsibilities and pay. Then weigh whether an MBA is truly necessary to get you there, even with the above considerations in mind.
John Moyer contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.