A reader recently sent me an email as follows:
I had a question for you following up to the post on whether or not to get your MBA.
A little background for you: I was an elementary education major, taught for two years, did not like it, networked my way into an entry level position at a large corporation, worked my way up to a marketing analyst position in a little over a year, was let go in their big layoffs last March (’15), and am now working in product management at a different company. I have done very little to get where I have, and thank God for providing many open doors for me through a great network.
Back to the MBA. I have strongly considered pursuing my MBA, due to my lack of foundational business knowledge. I wasn’t planning to pursue this venture for another few years, but as part of my severance package from the first company, they offered 40% off an MBA at a local Minnesota school, the University of St. Thomas. I had to enroll right away to take advantage of the discount, and am now two semesters into my program. My dream was to get into Northwestern’s MBA program, but I couldn’t pass up the value of what I was being offered at St. Thomas. The University of St. Thomas also allows me to go part-time while I continue to work and raise a family, while a part-time program at Northwestern would not be feasible due to where we live. A move would be required to pursue any sort of part-time or full-time program at Northwestern.
What I am curious about is your thoughts on the value of a nearly free education from a middle-tier university vs. a potentially more expensive education from a top-notch university. The University of St. Thomas is highly regarded in Minnesota, the Dakotas, Iowa and Wisconsin, but hardly known outside of that circle. Northwestern, on the other hand, offers a world-class education.
It sounded to me like he had already made his decision since he was currently going to St. Thomas. So I wrote back:
Sounds like you’ve already made your choice, right? You’re half way through your St. Thomas MBA, so what does it matter? Are you just asking a theoretical question?
To which he responded:
I have only taken two classes out of 15.
I’ve been taking the minimum to continue to take advantage of the discount, but I still feel unsettled about it, and go through an extensive contemplation process at the end of each semester. Was wanting to get your professional opinion and see what your experience was working with people from different tiers of MBA schools. At the end of the day, does it come to personal experience and success, or could the caliber of my MBA education make a difference at this point.
I then asked if I could make this into a blog post and open it up to all ESI Money readers. I know many of you are very successful business people and a variety of views would give the reader lots of perspectives to consider.
He responded:
That’d be great. Would love to benefit from the shared perspective.
I’m focused on knocking out the core classes at this point, and am planning to take another 3 years to complete the entire degree. Northwestern has a one-year MBA, but requires you to have the five core business classes completed, so I’ve considered taking a hybrid approach, getting those classes completed for free at St. Thomas, but getting the degree from Northwestern.
MBA Pecking Order
So let me give my thoughts first and then open it up for comments. But before we get to that, here’s some background for those of you who may not be familiar with MBA schools:
First of all, Northwestern is an elite business school, among the best in the world. Type “top MBA schools” into Google and the first article is this one from U.S. News. It ranks Northwestern as #5 (tied with MIT). Yes, it’s that good. It also costs $64k a year. Yikes!
Second, type “St Thomas MBA school ranking” into Google and this page comes up as the first. It ranks the school as #114. Full-time tuition is $33k.
The pecking order for MBA schools is roughly this:
- The top 10 or so are elite
- The next 15 or so (top 25) are pretty good and well-known/respected
- After that, the schools begin to lose their appeal in perception of how valuable the degree is and how marketable it is (and to what geographic range, companies, etc.)
Thoughts to Consider
Ok, enough for background, here are some of my thoughts for the reader:
1. Deciding whether or not to get an MBA has an obvious financial aspect to it. There’s a cost/benefit trade-off to be considered.
In this case, St. Thomas costs much less, is subsidized, and allows the reader to work while going to school. Northwestern is more expensive, is not subsidized, would make him give up his job, and would require a move. Much, much more expensive.
On the revenue side, this site聽says 73% of St. Thomas graduates have job offers at graduation and the average starting salary is $60k. Forbes says Northwestern placement rates are 90% with an average salary of $125k plus signing bonus of $25k. Big difference in pay.
Putting these together, at face value it looks like Northwestern is a no-brainer economically speaking. He spends $64k in tuition, $10k in room and board, foregoes a year of work (let’s say $70k loss), and moves (let’s say $20k) to make $65k more per year (plus $25k more than that in year one) than St. Thomas for the rest of his life. As I said, it’s a no-brainer!
But there’s way more to consider.
2. The type of job/career he wants may make the economics a non-issue. For instance, if he wants to work in marketing at XYZ Company, both St. Thomas and Northwestern place marketing people at that company, and MBA graduates from each school earn the same amount when hired there, then going with the low-cost option could be the better solution.
Many of you know that I have an MBA. When I went to my school, it was ranked around #25. Today it’s ranked closer to #50. The years have not been good to my alma matter.
That said, the name-brand employer I wanted to work for recruited at my school. They also recruited at Stanford, Harvard, Wharton, and the like. I was hired and entered the same starting class at almost the same exact pay as graduates from top-tier schools. The difference: I had $5k in debt and they had $50k (a TON of money back in the late 80’s).
Once I had that job, my earning potential was sky-high https://esimoney.com/five-steps-to-six-figures-in-seven-years/ It didn’t matter where I went to school.
My guess is that there’s a big enough gap between these two schools that the same companies don’t recruit from both of them. My school being #25 and competing with #1 is much different than #114 competing with the same schools.
But it’s a possibility, so I brought it up.
3. Maybe St. Thomas is enough to get him home. A related issue to #2 is where he wants to work (what city) and for what company. If it’s a company that’s local it might actually prefer St. Thomas grads to Northwestern grads. Probably unlikely, but a possibility.
4. There are other career and lifestyle considerations. Does he want to work for Fortune 500 companies and with the brightest business minds out there? A Northwestern degree would get him there. There is certainly something compelling about this (especially with the salary) but it will require a dedication and lifestyle he may or may not want. Getting the MBA is just step #1. After he gets it he then needs to pay his dues with hours, hours, hours. Does he want this sort of lifestyle?
I was single when I had my first two jobs out of grad school. They were all-consuming and would have been hard to manage while married, especially once we had kids. Even when my hours weren’t as crazy (later in my career) they were often a strain on our family since I wasn’t around as much as I wanted/needed to be. Thankfully I found a great job at an awesome company that helped me earn more money AND work only 40 hours a week. It was a blessing to me and my family to be there for nine years.
5. Family needs to be considered. What are the implications for his family? He said “we” would have to move, so I assume he’s married. Is his wife willing to move? Does she have a job/career that’s going to be disrupted by a move? Is she willing to follow him around the country (something making the most of a Northwestern degree might require) to maximize his earnings and career potential?
Summary
In addition to the above black and white picture I paint on various issues, there are shades to be considered. For instance, perhaps he gets a Northwestern degree, takes a job that “only” makes $30k more a year than a St. Thomas degree, and has less of a time requirement than a high-pressure, top-notch job right out of grad school. This would still be a good economic choice, make him very marketable, and not kill his home life (at least in theory).
So, what should he do? I can’t answer that. He’ll need to take the above thoughts into consideration and make a decision.
In addition, I’m sure ESI Money readers have some great suggestions for him. Please leave them in the comments below.
Jon @ Be Net Worthy says
Wow, I won’t repeat the points you made above ESI because you are right on the money. I have been asked variants of this same question many times during my career. Often it’s the same situation. Do I get an almost free MBA from a no-name university or pay much more for a top 20 school.
Given all the caveats and considerations above, I have always recommended biting the bullet and going for the name brand school. The job prospects and career options are so much better.
I have had several people tell me, after the fact, that they wish they would NOT have gone to the no-name school. That even though it was a cheaper option, it was a waste of time because it did not impact their career in any way.
Of course, I’ve going the Fortune 500 route, so that’s the perspective that I have.
Best of luck as you sort things out for yourself!
Erith @ Cracking retirement says
I have an MBA from The University of Edinburgh. It just sneaks in to the top 100 worldwide in the latest Financial Times ranking (#98). While I would love to have gone to a top school, I was already married and had teenage children when I decided to do the MBA, (aged 40), so I had a lot less choice than had I been young and single.
I reviewed the schools within commuting distance, and also some of the distance learning options. I could get full sponsorship from my company (hence I wanted to stay working for them). I could have transferred to London and gone to one of the big business schools there, but decided the least family impact was to go to my local university, part-time, while continuing to work full time. Given I stayed with the same company, it was less important which school I got the degree from.
I wasn’t really aware of an immediate benefit, but by chance my company underwent major changes the year I graduated, and all of a sudden, I found myself with a couple of big promotions, and on a six figure salary, much of which was from the confidence and knowledge the MBA gave me.
Regardless of which school you go to, you will learn lots of new stuff, which if you apply it to your job it will bring you benefits. However, if you are young and heading to transform the world, then the school is more important.
After a few years, wherever your degree is from, the school becomes less important, what you have done with the degree is far more key.
SavvyFinancialLatina says
I would not take time off to finish your MBA. I actually was recruited by my current company a couple months (global mega corp) and they tend to recruit students from top tier MBAs (MIT is one of them). I had work experience, two master’s from another lower profile school with no debt, great profile, and was recruited by the company. I’m younger, have a more senior position, and higher salary than the MBA grads. Networking and increasing your profile is another route you can take.
JayCeezy says
People think an MBA from a ‘top-tier’ school is a ticket to a high-compensation career. I don’t think so, there are a surprising number of graduates from the bottom-half that just keep ‘treading water’ if they are fortunate. This reader’s experience is ‘soft’, by that I mean not really quantifiable or oriented to profits. Education? Marketing?
I have only one question for the reader: have you applied to, and been accepted by, Northwestern? The answer to that question is the reader’s answer.
ESI says
Hey! My MBA was in marketing!!!!! 馃槈
Troy says
Related advice.
Get the cheaper MBA. It won’t make much of a difference anyway. As others have said, once you complete the MBA, coupled with your existing experience, that may trump a newly minted elite MBA.
Unrelated advice.
Don’t find a job. Make one. Don’t take a job, create one. Actually create a company with what you already know and are going to spend on the MBA.
Take what you know and who you know now, and use the time & money you are planning on spending part time on the MBA and create a business in an area you have some expertise in and create a niche. Work & Grow the business, and you will be better off, and the MBA won’t matter. You will have something you own that has value, and you will learn more that you would have in school
I have an MBA from a top school. Doesn’t matter much actually. My experience starting and running a business is far more relevant and I make far more money.
In fact, most all of the very successful people I know own their own businesses or run their own companies…even physicians. If you do go the MBA/corporate ladder route, eventually you will yearn to leave it and go out and do your own thing anyway. So go straight to the “your own thing” now while you have the benefit of exuberance and high risk tolerance.
Apex says
Troy,
I had posed a question to you about your education on this post:
https://esimoney.com/how-to-select-a-college/
You probably didn’t see it because it was a few days after the post went up. I think your response above gives me a pretty good idea how you would answer my question there but I would be curious if you were to go there and read it how you would answer the question of how valuable you though your degree was from a self employed stand point if it is not used to open corporate doors.
Basically the jist of the question was do you think the degree gives you skills that improve your performance as a self employed business person or do you think that since you didn’t use it to open a corporate door that it didn’t provide you many real life skills that either weren’t very applicable to your self employed business or that you couldn’t figure out on your own with a little effort anyway.
Curious your response as someone who has the big degree and then did his own thing rather than going corporate.
ESI says
FWIW, my MBA got me my first job at a name-brand company and that was the major contribution it made to my career.
Once I worked at that company (Fortune 50), my career was off to the races and my performance mattered than where I went to school. I had people check that I had an MBA for future job opportunities, but the fact that I went to a particular school didn’t matter — other than that first job.
The only meaningful skill I learned from my MBA and which carried over to my jobs/life was how to balance massive amounts of work in a limited time period. the education itself taught me things that were nice to know, but which I would have learned anyway in many cases and never used in the real world in most cases.
DIY$ says
My two cents — If you proceed with the lesser known MBA just don’t expect it to do for your career what an MBA from a better known school would do. If $60k is the average starting salary you can get there and then some on your own (I made >$150k without an MBA but with an undergrad degree in finance). Northwestern is a great school but a lot of the numbers are skewed by so many students going to work in consulting or banking. If that’s not what you want to do, check out their salary report and you may be able to find better data. We just hired a guy from that program and with bonus he’s going to make right around the average quoted above.
When you get an MBA, where you went to school definitely matters for that first job out of business school. After a year or two, your own professional accomplishments are more important than where you went to school. I got a top tier MBA (my school flips between top 10 and top 20).and now work in Fortune 100 corporate finance. I don’t make as much as my consulting and banking friends but I also don’t have to travel for work and am home for dinner with my family 99% of the time.
Although my company doesn’t usually show up on the “top 10 employers MBAs want to work for” lists, we are a well known and respected brand. Our active MBA recruiting does tend to be at schools in the top 25 but not the most elite. I have seen people join who have MBAs from lesser known schools but they generally are not in fast track positions and don’t have the same visibility to senior leadership. Those from better known schools have a built in network of senior leaders who can be instrumental in helping get promoted. It isn’t exactly intended to be an exclusive club but sharing similar backgrounds allows you to interact more casually with executives (case in point, I got offered college football tickets from our COO as a new hire because we shared alma maters)
David D says
Like others have stated, it depends on your goals. My advice when posed this question is to decide three things.
1. Do you want to stay with your current employer and get a promotion (or move to another functional area)? If so, then go with the cheapest/easiest route to getting your MBA. This usually means a local school and having your employer help pay for it.
2. Do you have a specific employer you want to work for? Find out where the recruit from and go to those schools.
3. Do you want to change locations? If so, then move to the new area and get your MBA there. This is because the local/regional employers will understand the value they are getting when hiring a grad from those programs. Also, it will help you build a network in the area.
The only reason I see the value in a top 10 program, is that you can obtain a job in consulting or finance at one of the biggest (and largest paying) companies. Also, if you are unsure about what you want, this is also a safe bet, albeit expensive. The networks built from these top programs can be powerful, but you can leverage the networks at other schools for almost anything you would want to do as well.
Good luck!
Cody says
I concur with the advice offered above (from wiser, more experienced sources than myself). I am in the earlier stages of my career. I went to a well-known regional school for my MBA. The main factors I considered were convenience (I was able to work-full time while earning my MBA in two years), cost (paying for it entirely myself) and quality. The school I chose ranked the best for all three as they related to my personal situation. I do sometimes wonder where I’d be if I had gone to a top school, but overall, I am happy with my decision. My MBA opened the door for me to become the COO of a few different early stage tech startups and now, similar to Troy’s comment above, I am working on launching my own projects. With all that being said, the education I received working in that capacity in the startup world is FAR superior to the education I received from pursuing my MBA.
PatientWealth says
To me the big decider was what I call “professional motivation factor.” If your professional motivation is so high that you would move to the best place in the country to further your career, you have no problem working weekends or evenings, curtail weekends to succeed on projects, and would like to get to a “C” level executive within 10 – 15 years, then you should certainly go to the top tier school. No question.
If you have aspirations to be a “C” level executive maybe one day but have less commitment to your profession and are more fulfilled in your life by having time to spend with family and friends then you should go to the regional school. The regional school can still allow you to go to the top. It’s just going to be much less likely, take a longer time, and it may be at a smaller company.
Working at a Fortune 100 company for 10 years I’ve realized the Elite schools fast track you to the higher ranks. But there is a big price to pay – not just in dollars – but in terms of commitment!
HM says
I think most people have already covered all the right things to consider. I went to an elite MBA program, I work for one of those “Best Places to Work” companies so I am in that rare situation where I make good money but do not work crazy hours.
For me, an MBA was a means to achieve my end: Retire early. Start with the end in mind. Those tops school’s graduates make more money (in my opinion, even if you factor in higher costs of living it becomes worth it if you can advance in those companies) and thus can save a lot more.
I think the education you receive is probably very similar, but an elite MBA stamp of approval on your resume is going to get you most interviews, then it’s just up to you. Without that stamp, it’s much harder to get the initial opportunity.
HM says
I think most people have already covered all the right things to consider. I went to an elite MBA program, I work for one of those “Best Places to Work” companies so I am in that rare situation where I make good money but do not work crazy hours.
For me, an MBA was a means to achieve my end: Retire early. Start with the end in mind. Those tops school’s graduates make more money (in my opinion, even if you factor in higher costs of living it becomes worth it if you can advance in those companies) and thus can save a lot more.
I think the education you receive is probably very similar at most programs, but an elite MBA stamp of approval on your resume is going to get you most interviews, then it’s just up to you. Without that stamp, it’s much harder to get the initial opportunity.
Roz says
I am appreciate all the discussion around this topic. I am currently a military officer, but thinking that when I get out I will pursue an MBA with a decent chunk of it covered with the GI Bill. I am wondering if some of my leadership and other experiences in the military allow me to still be considered amongst those with top school MBAs if I go to a school that depending on the ranking makes it somewhere between 75 to 100 in the US and is one of the top schools in the Pacific Northwest.
ESI says
I think your experience will help you out in getting into a school. But it probably won’t be the only factor.
You’ll still want/need to have good college grades and a decent GMAT score.
Erith @ Cracking retirement says
Just curious – what’s considered a decent GMAT score in the US? I had to do the GMAT to get sponsorship from my company, and they asked for better than 550, which I well exceeded, but it isn’t used much in the UK, and my university didn’t ask for it. So hard to tell if my 700 would have got me into a good US school?
ESI says
It depends on the school you want to get into.
I’d advise anyone to look at the sort of school(s) you’re considering and it’s likely they will have a range for what they consider an acceptable GMAT score.
HM says
In the US, a 700+ score will make you competitive (although not exactly a shoo-in) at even the most selective schools. At slightly less competitive schools that could even get you some sort of scholarship. But a 550 would be a pretty bad score (bottom half of all test takers) and would likely get you put in the “Not Admitted” stack at most of the “good” schools unless you had some sort of significant additional unique qualifications.
HM says
+1 to ESIs comment. I was an Army officer for seven years and then got my MBA when I got out and learned a lot about the process along the way…
Business schools are looking to build a diverse student body and adding military folks contributes to that aim. The most selective schools want military officers but don’t really need to compromise on their standards to get them b/c every year there will be a handful of applicants from the military that also have good undergrad grades and high GMAT scores. If they need a few more veterans in a class to hit their optimal blend, they might be willing to lower their bar slightly. I had a friend in business school who was Hispanic and had been shot by a sniper in Iraq; he had a GMAT score that was about 70 points lower than my school’s average but still got in as he helped fill two buckets that are a little harder to fill than, say, white guy consultants who want an MBA. 馃槈
So there definitely is some wiggle room in admissions if you can help them meet their overall class composition goals. Everything I’m describing is from my own experience and what I learned in the process; things could be different in that tier you’re looking at but in general your military experience is going to be looked at favorably by admission committees (and in the real world in general).
Joe says
While I agree with many of the above comments, let me add a few things into the mix. I am a Finance Director at a large Twin-CIties company, so I’m familiar with St. Thomas (although I graduated from it’s biggest rival – so excuse any bias) and have worked with many of its graduates.
First, my question would be – do you WANT to get an MBA? Does the material truly interest you? Are you hungry to apply the sklls you would learn? Employers will, eventually, know and understand whether you took an MBA as “return-on-investment” exercise and if you truly have the energy, enthusiasm, and drive to apply what they have learned to the benefit of their employer. At my former employer, the CFO and my boss, the EVP of FInance were MBA-less, but had proven themselves everyday to be capable and smart. I myself do not have an MBA but have done a ton of self-study and have a separate professional designation – when people meet me they know very soon that I have a strong grasp of business concepts.
Second, in my career I have dealt with top-tier MBA graduations often. I have been thoroughly unimpressed by many of them. And I have been thoroughly impressed by many St. Thomas and U of M grads. The cache of your MBA lasts about 5 years, IMO, and then its up to you.
Third, I would echo the comments above that building a career is so much more than leveraging education. Doing and excellent job at the job you have and building and sustaining a network is much more important than playing the statistics around “if I invest $x in my education, I will earn $y” (and that’s a finance guy talking!)
Best wishes on your decision and career!