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NextGen Magazine


Value of an MBA Largely Contingent on the School

Chris Gaetano
Published Date:
Jun 11, 2019

A recent survey of MBA students found that 62 percent of them have received an initial job offer that included a base salary of at least $125,000, and while this might indicate the value of an MBA, Bloomberg noted that the majority of survey respondents came from top 25 schools. Those who do not attend these prestigious institutions find much more modest rewards, showing a vast gulf in value between the top institutions and everyone else. 

For instance, while MBA grads from the University of Michigan—which is ranked 18th on Bloomberg's rankings for business schools—earned about $120,000 post-graduation, those from the University of Colorado—which is ranked 67th—averaged about $68,000. At the same time, however, Bloomberg said that those who go to elite institutions tend to graduate with much more debt than those who did not: MBA grads from Northwestern University, for instance, carry a mean $126,300 in debt, while those who got their MBA from the University of Mississippi, ranked 71st, had a mean debt of $20,500. 

The outsize earnings of those from top programs reflects an overall bias that favors graduates from top universities in ways that have little to do with their actual skill levels.

A report from jobs site Indeed, for example, found that among 500 senior-level and executive managers with at least four direct reports who have managed their team for a minimum of one year, 29 percent prefer to hire only candidates from top institutions, while almost half, 48 percent, believe the institution a candidate graduated from plays a somewhat important role in hiring. Indeed found that only 4 percent don’t care about the name on an employee’s degree as long as educational requirements for the role are met. The report indicated that some form of bias was at play because when asked, managers said that what they wanted was someone who worked well with others, thought strategically, and was self-directed, none of which strictly require a college education. Indeed suggested that there could be an element of self-identification at work, as 37 percent of top managers who said they came from a top school said they preferred to hire only candidates from similarly elite institutions, as opposed to 6 percent of managers who did not attend a top school. 

Another study, detailed in the Harvard Business Review, found—over the course of 120 interviews with decision-makers at top-tier investment banks, management consulting firms, and law firms—that most of the new hires at top-tier institutions come from only three to five elite educational institutions. This is, in fact, standard hiring practice at these firms. Also standard practice, the study found, was keeping a secondary list of about 15 other educational institutions which are less favored but still acceptable. Anyone not from these schools, it was found, is extremely unlikely to be hired. Interviews found that this was because these top-tier firms held on to the belief that these prestigious institutions already accept only the best and brightest pupils, meaning that, in the words of one interview, the schools had already done two-thirds of the firm's screening work for them. 

Beyond theoretical meritocratic screening, however, another factor could be the culture that those educated at elite institutions can have in common. The same study said this is not just about a matter of liking an individual, though, as these commonalities are also ways through which people evaluate merit as they see it. Similarities in leisure pursuits, experiences, self-presentation, and other lifestyle markers, said the study, serve as badges of group membership and bases of inclusion or exclusion from desirable social opportunities. The study said that similarities in culture affect candidate evaluation through three processes: (1) organizational processes encouraging selection on cultural fit; (2) cognitive processes, whereby similarities contributed to greater understanding and valuation of candidates’ qualifications; and (3) affective processes, whereby similarities generated excitement and increased the likelihood that evaluators would fight for candidates in deliberations.

Regardless of the nature of the educational institution, people in general seem to use college as an overall proxy for skills that have little to do with what one learns there. A 2017 study from Harvard found that the number of jobs requiring a college degree, even in fields someone would never think it relevant, has been growing. The research found that, in general, employers used a college degree as an indicator that someone had both hard (70 percent) and soft (60 percent) skills. For many companies, a bachelor’s degree signals that the person has put themselves through four years of college, so they have certain life experiences, commitment levels, and organization levels. 

This phenomenon does not seem to be slowing down. At the beginning of this year, the Bureau of Labor Statistics projected that jobs that require a master's degree at a minimum will grow faster than jobs requiring bachelor's, associate and especially high school degrees. Overall, the BLS expects that educational standards for jobs will continue rising, and more jobs will require at least some post-secondary education. 
Occupations that typically require a master’s degree, the smallest group in terms of base-year employment in 2016, are projected to grow at a rate of 16.7 percent through 2026. That’s more than twice the rate of growth projected for all occupations, 7.4 percent. 

However, it may be possible that, at least where MBAs are concerned, students are starting to become more savvy on the value such a degree gains. The Wall Street Journal recently reported that applications to full-time MBA programs have been dropping in recent years: between 2014 and 2018, the number of accredited full-time MBA programs in the United States shrank by 9 percent to 1,189. Schools, unable to justify the cost of maintaining such programs in the face of declining popularity, have also been shuttering them in response. However, this does not indicate an overall declining interest in business relevant degrees: Both students and schools seem to be favoring, instead, more specialized masters programs and online degrees.