Any accountant worth his or her qualification would recommend a careful cost-benefit analysis before shelling out corporate cash on an expensive asset. But would they do the same for themselves if the asset was a Masters in Business Administration?
Ron Pearson, a senior executive in group business development at the Rank group, did attempt a cost-benefit analysis before signing up for Cranfield’s full-time MBA in 1993.
But he says: ‘It’s very difficult to do. Do you look at a two-year payback period, or write off the cost over five years? I decided that if I got into a position between now and age 50 that I wouldn’t have got otherwise, the MBA would be worth it.’
Pearson, previously at Grant Thornton, believes he would not have got his job at Rank without his MBA passport into business. ‘As it happens, I believe it has benefited me in the short-term and has paid itself back in three years just at a pure financial level,’ he says.
What can an MBA do for you?
The potential benefits an MBA can bring range from the tangible, in terms of higher salaries, to the less easily measurable, such as greater self-knowledge.
Looking first at salaries, a survey published by the Association of MBAs in November found holders of MBAs from accredited courses earn an average base salary of #53,700, with 6% earning #100,000 or more.
Adding in performance-related pay, the average salary rises to #65,300.
But a significant 18% of those surveyed earn #30,000 or less.
The survey also found that salaries rise after completion of an MBA by an average of 42%, or 27% when adjusted for salary inflation. The impact of the MBA is strongest on the salaries of those who change job following qualification. These graduates enjoyed salary rises of 43% (adjusted) while those who stayed with their employers received just 3%.
Julia Tyler, director of the full-time MBA course at London Business School, says students there have experienced average rises of 80% when comparing their entry and exit salaries. But, as she says, this average includes the dramatic increases that can be experienced by MBA students coming from poorer countries who subsequently obtain jobs in the UK. That said, the top salary in 1997 for London graduates was #79,000 for a position in the finance sector.
AMBA’s survey also gives an indication of the impact of an MBA on promotion prospects. Around 40% of 1991 MBA graduates had received two or more promotions since completing the degree, while 33% had received one promotion. But there were still 27% without any promotion.
Robert Owen, accreditation services manager with AMBA, believes that the chance of making it to the highest level posts is boosted by an MBA.
‘In the past, if accountants wanted to get on the board, all it took was being a chartered accountant,’ he says. ‘Today the trend is that you are better prepared if you have an MBA too.’
For accountants, a key incentive for obtaining an MBA is to broaden specialist qualifications they already hold. Accountants in the profession might find it easier to move into industry or consulting if they can demonstrate proof of a broader business understanding.
Others already in industry might increase the chance of gaining a strategic or general management role. Some might want to change career tack completely.
‘Typically, we would find that around 70% of our students of any discipline want to change their career direction,’ says Tyler.
LBS offers a 21-month, full-time programme that ‘gives people plenty of time to realign themselves’, Tyler says. London students also complete a summer internship with a company that gives them the chance to try out their target industry sector. ‘Around half of our students receive permanent job offers at the end of that internship,’ Tyler says.
As with all qualifications, the true value of the MBA lies in how the student applies what he or she learns. As Martyn Jones, director of the full-time MBA at Cranfield, stresses: ‘The brand name of an MBA may get you a job, but it’s the substance of the thing that will make you good at it.’
He also stresses that MBAs do not suit everybody and should only be undertaken for positive reasons. ‘It’s not appropriate to kickstart a failing career,’ he says.
Suzanne Swycher, senior manager with recruitment consultants FSS Financial, has seen ‘a fair few’ people who haven’t been helped by the MBA experience.
‘They are usually people who have done the MBA thinking they will further their career just by having the letters on their CV, without going back to a company and proving themselves first,’ she says. ‘What counts is the knowledge you gain rather than the letters after your name.’
Recruitment specialists in general are sceptical about the impact an MBA has on career prospects for finance professionals.
‘If you are looking at becoming a finance director, then I don’t think having an MBA ultimately helps unless people have missed out on a first degree,’ says Jeff Grout, UK managing director of Robert Half International.
‘American companies are more MBA-aware than UK companies, but the most important factor is still work experience.’
David Hughes, managing director of accountancy recruitment specialists Executive Connections, warns that those who take time out of the workplace to do an MBA could lose ground to those who stay in work and increase their job experience.
‘The ground can quickly be regained and if done for the right reasons, the additional skills an MBA can provide can then start to make a difference. Generally, though, the benefit of an MBA in salary terms is unlikely to be immediate,’ he says.
The best way to maximise the impact your MBA makes on a potential employer is to study at a well respected business school. AMBA recommends that students attend a business school with a course it has accredited.
Attending a top school also maximises the probability that you will be able to network with other high-flyers. It is hard to put a price on the chance to become best buddies with the future chief executive of ICI.
‘There’s a lot of value in the networking,’ says FSS Financial’s Swycher. ‘You meet people from all walks of life.’
Another intangible benefit of doing an MBA is the time it gives an individual to develop personally. Andrew Stark, professor of accounting and director of the full-time MBA programme at Manchester Business School, says: ‘The MBA programme enables people to both learn new skills and learn about themselves a bit more.
We have an emphasis on multicultural group work. We ask students to think about themselves and their own culture and how it differs from others.’
On the other side of the cost-benefit equation sit the MBA course fees, which are significant. For example, Cranfield’s one-year course costs #15,000, while Warwick’s costs #14,000.
Evening or distance-learning options may be cheaper but take longer.
Further financial pain for those that leave their jobs to do a full-time MBA comes from the lost salary. How important is next year’s #40,000 to you? Again, those that can’t accept the drop in income could opt for an evening or distance-learning course if they can juggle the time conflicts.
Employers can ease costs
Costs may be eased through employer support. According to AMBA’s survey, more than 80% of respondents who were employed while studying for their MBA received some form of financial support from their employer. In 50% of cases employers paid all the student’s fees.
But looking at all survey respondents, 57% financed their studies personally.
Some students can get financial help through scholarships, such as Cranfield’s Women in Management scheme. But the really good news is MBA graduates who change jobs after the course may well receive a sign-on bonus that can help pay off loans.
Back on the intangible repercussions of an MBA, students have to accept restraints on their free time. Students on the Warwick distance-learning programme are advised to spend around 10 to 12 hours a week studying, which amounts to one day at the weekend and a couple of evenings in the week.
The toughness of the experience is highlighted by the fact that 25% to 30% of distance learners at Warwick fail to complete the course.
Jane Naul, programme manager for the distancelearning MBA at Warwick, believes juggling competing demands is often the toughest part for distance-learners and part-time MBA students. ‘If they are already in senior management roles they are not working the normal 9 to 5 anyway,’ she says. ‘And they usually have families that demand some attention.’
It shouldn’t be forgotten that your MBA could cost your nearest and dearest too if it deprives them of your time. Jones believes it is ‘critical’ to get family backing for your MBA plan before you start.
‘I exhort folks to bring in their partners so the MBA can be discussed,’ he says. Cranfield offers the partners of MBA students free language and IT training.
Ultimately, the extent to which having an MBA benefits an individual more than it costs comes down to how that individual uses it. ‘You can’t say that having an MBA equals getting a 20% salary increase,’ says John Seear, head of the English ICA’s Chartac Recruitment Service.
‘In my view, the benefit is to the individuals themselves and therefore difficult to quantify. I’ve found people go out with more confidence and as a result tend to perform better,’ he says. Which means they are more successful and in that way, both career and remuneration may be enhanced.
Sarah Perrin is a freelance journalist
MARCUS ADAMS, 40, DIRECTOR OF GROUP AUDIT SERVICES AT GUARDIAN ROYAL EXCHANGE
Marcus Adams signed up for a distance-learning MBA at Warwick Business School in 1989 while an audit manager with Price Waterhouse.
He completed the course in March 1993 and the following October left PW to run Guardian Royal Exchange’s corporate audit department.
Before taking his present post he was director of group mergers and acquisitions, overseeing the acquisition of PPP Healthcare.
Adams said he decided to do an MBA in order to differentiate himself from other accountants. ‘I was trying to make myself stand out,’ he says. A complete career break wasn’t feasible, hence the distance-learning option.
Adams financed the course himself. ‘The cost for distance-learning wasn’t unreasonable,’ he says. ‘I thought whatever career direction I took afterwards it would stand me in good stead. If I compare what I earn now to then, the cost has certainly been paid back.’
During the MBA he decided he wanted to leave the profession and now feels that having the MBA helped him move into business.
‘Having an MBA on the CV also opens doors that wouldn’t otherwise be opened for you. It makes you a more well-rounded and confident person.’
IMRAN RAZZAQ, 28, FIRST-YEAR FULL-TIME MBA STUDENT AT LONDON BUSINESS SCHOOL
Imran Razzaq qualified as a chartered accountant with Coopers & Lybrand in Manchester in 1994. He subsequently worked for Reuters and Courtaulds Textiles before opting to do the 21-month full-time MBA in London, starting last autumn.
Razzaq is financing his MBA himself. He did his sums before signing up but says: ‘Cost was never an issue for me. I had been wanting to do an MBA for a while and broaden my skills base.’ He was particularly attracted by the potential to learn about business strategy, marketing, human resources management and entrepreneurship.
Razzaq averages two hours’ study each evening and in addition spends his hour’s tube journey into college reading course material. ‘If you want high marks you have to put in a lot of time and effort,’ he says.
It isn’t all work, however. Plenty of networking goes on. ‘We have very active social lives here,’ he says.
‘This is a voyage of discovery for me,’ says Razzaq, who is confident his career will benefit from the MBA study, whatever he decides to do afterwards. ‘I know that when I leave there will be a wide range of opportunities and they’ll be much better paid.’
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