Why does the MBA degree remain popular?

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The obituary of the MBA degree has been written several times since the 1950s. As the Economist has pointed out, a Ford Foundation report in the 1950s criticized the degree for being weak and irrelevant. In the 1980s, Business Week complained that MBA graduates relied excessively on mathematical models of management and worse, they expected to reach the top of their organizations with unrealistic rapidity. In the aftermath of the financial crisis of 2007 and 2008, many observers—including Harvard Business School professor Rakesh Khurana—commented on what Khurana called the “unfulfilled promise of management as a profession.”

Even so, despite all these jeremiads suggesting that the end of the MBA degree is nigh, this degree continues to be popular. Why is this the case? Let us investigate.

The first point has everything to do with dollars and cents. Since it typically takes at most two years to complete the MBA degree, relative to the financial benefits of a college education only, the MBA is the fastest way to increase one’s salary, sometimes by a significant amount. For instance, data and rankings produced by the Economist show that by attending the Booth Business School at the University of Chicago, which is currently the top-ranked business school, one can increase one’s pre-MBA salary by 73 percent. Attendance at the Fuqua School of Business at Duke University—ranked No. 20 in the world—increases one’s pre-MBA salary by a whopping 86 percent. The point to grasp is straightforward: Relative to the monetary and time costs, the rewards from a MBA degree, particularly one from a top business school, are substantial.

Second, in this era of globalization, the MBA degree is portable across national boundaries in a way that medical and law degrees, for instance, are not. Therefore, even though there is some evidence to suggest that MBA applicants seek to attend business schools in regions where they would eventually like to work, the portability of the degree ensures that MBA graduates can effectively tap into an international job market. In other words, it would not be unusual at all for a Stanford MBA graduate to be employed in, say, Singapore.

Third, earning an MBA degree, particularly from a highly ranked business school, allows an individual to tap into job and other professional networks in a way that this individual simply could not with only a baccalaureate degree—even if the baccalaureate degree is in business. The ability to use such professional networks serves as an effective career advancement mechanism. In addition, such networks may even lower the probability of being unemployed in the event of a localized business downturn.

Fourth, and related to the second point above, is the increasing internationalization of management education. Several highly ranked business schools—such as INSEAD in France and IESE in Spain—are now located outside the United States, and they often have branch campuses in Asian nations. As a result, foreign students who would formerly apply almost exclusively to U.S. business schools now have several top-notch, non-U.S. options. This matters because as noted above, applicants frequently select a business school based on where they would like to be employed after obtaining the MBA degree.

Despite the continuing popularity of the MBA degree, one should not come away with the impression that all is well in management education. The top business schools are unlikely to be affected by the many forces of change currently operating in higher education in general and in management education in particular. Even so, business schools that are not highly ranked are increasingly likely to feel the pressures brought about by tightening immigration regulations, particularly in nations like the United States and the United Kingdom; the emergence of online education; a change in the traditional structure of the MBA degree; and the perceived irrelevance of this degree on the part of some employers.