In a Global Workforce, Does An MBA Still Carry Clout?Published: September 14, 2006 in Knowledge@Emory
For 14 years Michael Ryan worked with the “Big Four” CPA firm KPMG, eventually rising to a director. But Ryan, a CPA, says that even as he moved up the ranks, the lack of an MBA or other postgraduate degree hindered his ability to advance. Finally, last December, Ryan, who now works with the Atlanta, Ga., building products distributor BlueLinx, entered Emory University’s Goizueta Business School for an MBA, choosing an Executive MBA format that allows him to pursue the degree without interrupting his career.
As companies strive for a competitive advantage, a bachelor’s degree is often no longer enough. Instead, an increasing number of enterprises are looking to recruit and advance MBAs, and graduate programs are changing to meet new business demands. Responding to the lure of greater mobility and increased salaries, more students are pursuing post-graduate business studies.
“We see a lot of people, including engineers and IT professionals, looking at the MBA as a way to broaden their opportunities with their current employers,” says Susan Gilbert, an associate professor in the practice of finance and associate dean and director of the Evening MBA Program at Emory University’s Goizueta Business School. “Quite a few students move from an IT specialist position to finance, marketing and managerial positions.”
Part of the reason is the prospect of higher compensation. In 2006, the average newly minted MBA will earn $92,360 during his or her year on the job, up 4.2% from the $88,626 received by graduates in 2005, according to the Graduate Management Admission Council (GMAC). The McLean, Va.-based organization administers the Graduate Management Admissions Test (GMAT), an entrance assessment tool used by business schools As part of the admissions review process.
Individuals who hold an MBA are also more likely to quickly secure a job. According to GMAC, 52% of respondents to a 2006 global survey said they had received or accepted a job offer before graduation, compared with 50% in 2005, 42% in 2004 and 36% in 2003.
To compete in today’s labor market, employees must have more skills and must be adaptable throughout their careers to changing technology, product demand, and global competition, according to a Rand Corporation research paper titled The 21st Century at Work. It also notes that a key challenge for the public and private sectors will be the creation of an education and training system that’s responsive to the needs of the twenty-first century labor market.
As Associate Dean and Director of MBA Admissions at Emory's Goizueta Business School since 1988, Julie Barefoot has seen an evolution in MBA programs and the students who are taking the courses.
She adds that today’s recruiters expect new MBA hires to quickly add value to their company; and the makeup of candidates reflects this trend.
“A decade ago, MBA enrollees had an average of two years of work experience,” she relates. “Now they have about five years. As companies cut back on the training programs they offer to new hires, the timeframe in which MBA graduates are expected to start contributing keeps getting shorter. A candidate’s prior work experience has an increasingly larger impact on his or her ability to quickly ramp up performance.”
Barefoot points out that the impact of globalization is also reflected in the makeup of MBA candidates.
“As more companies do business across international borders, they’re looking for job candidates that can function well in a multicultural environment,” she explains. “At Goizueta, we’re seeing an incoming student population that’s internationally diverse, with candidates that are forging a global network of contacts that will have a positive, critical impact on their job performance.”
Many students say they are coming back to school to advance their career or increase their opportunities, but Andrea Hershatter, a senior lecturer in organization and management at Goizueta, says that the value of continuing education goes beyond that.
“I believe continuing education, both in the form of degree programs as well as other educational opportunities, is absolutely necessary, perhaps now more than ever,” says Hershatter, who also serves as associate dean and director of Goizueta’s Undergraduate Program. “I think there are three key reasons behind this: environmental, cognitive, and developmental.”
Addressing the environmental driver she notes that individuals today operate in a knowledge-based economy, where conditions change rapidly.
“The people who will thrive will be those who can not only understand what is transpiring, but can also forecast the related implications,” she says. “To make sense of a world that is simultaneously expanding in scope and contracting in reach requires both intellectual capacity and academic grounding.”
Taking up the cognitive issue, she notes that even very successful people can develop tunnel vision, since intentional, absolute focus—the kind that characterizes effective people—requires a screening process that may not be conducive to innovation and growth.
“In contrast, creativity requires combining interesting and seemingly unrelated bits of information in new and unexpected ways,” Hershatter advises. “The educational process, by definition, broadens perspectives and assimilates new approaches, methodologies and information. At its best, it is enlightenment. So even individuals who are returning to school with specific objectives find that the experience provides non-linear opportunities to refine, redefine, or refocus one's professional endeavors.”
Continuing education also enhances personal growth, adds Hershatter. “Even if going back to school simply pushes us out of our comfort zone and shows us how much we do not know, it is still a very liberating process,” she maintains. “All research shows the contribution of lifelong learning to the full development of the individual. Learning is a fundamental human need that does not diminish with age or accumulated wisdom. In fact, the more we know, the more we benefit from exposure to great thinkers and the frameworks they have developed for understanding the world.”
The importance of an ongoing educational process appears to be further underscored by the Rand study, which notes that, “Shifts in the nature of business organizations and the growing importance of knowledge-based work” favor the development of non-routine cognitive skills, including abstract reasoning, problem-solving, communication, and collaboration.
“Within this context, education and training become a continuous process throughout the life course involving training and retraining that continues well past initial entry into the labor market,” according to the study. “Technology mediated learning offers the potential to support lifelong learning both on the job and through traditional public and private education and training institutions.”
Adjoined Consulting, which was acquired by the global IT services firm Kanbay International in March 2006, actively recruits MBAs directly from top business schools as well as MBAs with several years of post-MBA experience. Managing Director Andrew Duncan explains that the MBA graduates “have consistently elevated themselves more quickly through the organization into important leadership and firm development roles - including driving our own post-merger integration activities."
Erin Melick, a Goizueta evening MBA alumnus, for example, has been working full-time in the Post Merger Office since the Kanbay-Adjoined merger. Chris Miller, another Goizueta MBA alumnus, references the firm's track record in demonstrating the value of MBAs.
“Our tuition reimbursement program is significantly greater than other firms simply because we have been able to quantitatively and qualitatively define the exceptional value that MBA graduates have contributed to our success,” Miller explains. “Every year the focus and allocation of resources to MBA programs has grown exponentially.”
Yet despite education's demonstrated value-added, and the ability of technology to make the transmission and transfer of knowledge widely accessible, some disturbing signs are emerging.
For example, only 55% of American students who start college actually complete it within six years, according to a 2005 report issued by the Society for College and University Planning, an Ann Arbor, Michigan-based organization that promotes research into issues affecting higher education. Among African American and Hispanic students, the number drops to 41%.
Women make up another group that tends to be under-represented in MBA programs, according to Elissa Ellis, executive director of the Austin, Texas-based Forté Foundation. The organization, a consortium of corporations, business schools and nonprofit organizations, focuses on ways to educate and direct women toward leadership roles in business.
“In general, women have been found to be more risk-averse than their male counterparts, and are thus less likely to sacrifice the time needed to complete an MBA,” she explains. “For women who are already in the workforce and either have children or plan to, any initial doubts about going for an MBA may be compounded by issues like balancing work and family, further discouraging them.”
All of this is taking place against a rising demand for MBAs. But will there be enough of them to meet that need?
One leading indicator of future supply—the number of students taking the GMAT—has remained stagnant and even dipped a bit, according to a report issued in May 2006 by the London Business School. Drawing on data gathered by the Graduate Management Admission Council, the institution says that during the period from 1995 to 2005, the number of students taking the graduate admissions test fell from 131,118 to 109,852. During that period however, it rose in Europe from 72,050 in 1995 to 86,500 in 2005.
Part of the decline in overall U.S. numbers may be due to opportunity costs, says Joan Coonrod, director of admissions of the W. Cliff Oxford Executive MBA Program at Goizueta.
“Many people today can’t afford to take the time to go back to school full time for a graduate degree,” Coonrod says. “Despite the clear advantages, people in general seem to be taking more time before deciding to enroll in an MBA program. And more of them are signing up for part-time programs, such as executive or evening MBA programs. These programs allow immediate application of learning back to the workplace—a real bonus for both the students and for their companies. Executive MBA programs tend to attract higher level professionals, so the faculty and class interaction is much more applicable to the business issues they are facing.”
The increase in the European MBA market is driven by a number of factors says Dan LeClair, vice president and chief knowledge officer at The Association to Advance Collegiate Schools of Business. The Tampa, Florida-based organization is made up of educational institutions, corporations and other organizations with a focus on business-oriented higher education.
“Through an initiative known as the Bologna Accord [a June 1999 agreement aimed at creating a system of standardized degrees throughout the European Union by 2010], it’s easier to transport degrees and studies throughout the EU, which encourages the pursuit of higher education,” explains LeClair. “MBAs are also gaining in importance in Asia, where booming economies are spurring demand.”
Meanwhile in Japan, the rotation away from the lifetime employment model has spurred competition among job-seekers, and more students are enrolling in MBA programs as a way to stand out from the crowd.
Looking ahead, LeClair sees significant differences in worldwide trends in the key 25-to-29 year-old population that makes up the bulk of full-time MBA enrollment.
“In the U.S., the population of 25 through 29 year-olds is expected to increase by more than 13% through 2020,” he says. “But Europe is expected to see an 8% decline in the age group during this period. In contrast, in Latin America and Asia this demographic group is expected to grow by 11% and 20%, respectively.”
Elissa Ellis, from the Forté Foundation, thinks market forces may eventually help to balance out supply and demand.
“As aging baby boomers retire, businesses may find a shortage of experienced management-level employees,” she says. “And the so-called Millennium generation workforce, male and female, will likely demand flexibility in their jobs. When businesses hurt, they tend to be more responsive; so there’s a good chance that in coming years we’ll see the kinds of changes in the workplace that will make it more attractive. And that may bring in more women and others that can refill the ranks of MBAs. The change will not come at lightning speeds, but I think it will come nonetheless.”