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September 15, 2008 10:51 am
Full-time MBA business school enrolments tend to be counter-cyclical. As the economy slows, the opportunity cost of attending business school goes down (the sacrifices in forgone earnings are lower when opportunities are less plentiful).
There is another good reason to consider pursuing an MBA earlier. Namely, the opportunity cost one forgoes by earning an MBA full-time is significantly lower when attending earlier in one’s career. And the benefit of having a framework to solve business problems that an MBA education provides may be greater if that learning occurs earlier in a career.
But applying early to a full-time MBA programme runs counter to the admissions trends at schools over the past 20 years. Business schools have skewed their recruiting efforts toward older students, and the amount of prior work experience at such programmes now averages four to six years. The belief is that more experienced students bring a wider perspective.
But the strategy also helps boost a school’s salary results in the rankings race. By focusing on, among other things, post-MBA starting salaries, these media rankings have created an incentive for schools to look for older students. This is because the best predictor of post-MBA salary is a student’s pre-MBA salary.
Graduating older students with higher salaries, however, does not necessarily mean that the value-added associated with a full-time MBA degree is greater. Before the rankings, most schools admitted candidates straight from college and presumably found it advantageous to do so.
At the Simon School of Business at the University of Rochester, New York, we instituted our Early Leaders initiative in 2005 and we are seeing gains in enrolment, student quality and diversity. We believe the initiative, which targets suitable candidates recently out of college, is good for recruiters, students and the economy.
Early Leaders are more likely to attain C-level (CEO, CFO, COO, etc) positions than their older counterparts. Also, by the age of 30, the average Early Leader has caught up salary-wise to their older counterparts, allowing us to calculate that the value added to pursuing a full-time MBA as an Early Leader is appreciably greater than older candidates averaging four to six years work experience.
Based on average pre- and post-MBA salary data for older versus Early Leader students, investing in a full-time MBA, the average experienced student can expect to add $170,000 ( €120,000, £96,000) in value, net of tuition, by the age of 30. The comparable increase in value for the typical Simon Early Leader is $340,000 by the same age. Early Leaders secure the post-MBA salary jump sooner and see it compounded by annual pay increases. They also sacrifice less to attend business school (older students give up more in salary and are more likely to have families who need to relocate).
Our Early Leaders strategy has boosted full-time enrolments by 40 per cent since 2005 (versus an average of less than 25 per cent at other top schools). We also have seen improvements in incoming student quality and diversity. Half of the Early Leaders in the most recent Simon MBA class are female, against 30 per cent across the nation.
Recruiters are reacting positively. Our Early Leaders are being hired at a 10 per cent faster rate than their more experienced counterparts and have been averaging starting salaries only $12,000 less than their more experienced peers.
In the business of business schools, rankings matter. And we are proud of our reputation. But as we see our enrolment numbers, student quality and diversity increase, we also expect to continue to improve our reputation. We do not plan to let the race for rankings blind us to our mission to attract the best students and then prepare them to lead.
James Brickley is Gleason professor of business administration and Mark Zupan is dean of the Simon School of Business, University of Rochester.
The Soapbox column is open to professors, students and others interested in the future of business schools. To comment on this article go to www.ft.com/soapbox
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