This month’s worldwide financial volatility has thrown the MBA business into turmoil. Over the past six months applications have been strong and job offers have been flowing in, but it is a brave business school dean who will predict that these trends will continue. Is this the right time to study for an MBA?
A panel of international experts answer your questions about doing an MBA.
On the panel are:
Dipak Jain, dean of the Kellogg School of Management at Northwestern University
Indy Lachhar, graduate and MBA recruitment manager for global banking at HSBC
Jacklyn Sing, first year MBA student at MIT Sloan
Della Bradshaw, business education editor, Financial Times
Have MBA applications generally gone up or gone down at the beginning of recessionary periods in the US ? Does recession also mean spending cutbacks at most business schools?
Hakan Ener, Singapore
Della Bradshaw: Applications to US business schools tend to go up, though there is evidence that this might not be true in other countries, particularly in Asia/Pacific.
As to spending......most top US business schools have large enough endowments to ride out this kind of storm. The business schools that may be vulnerable are in the state universities. They could be subject to education cuts.
I am an American currently applying to MBA programmes, and if I enrol, I will have to finance almost my entire program on loans and scholarships. I am not currently in debt. Do you have any thoughts on taking out large loans for an MBA, given the current economic outlook and graduate’s potential for greater earning power?
Elizabeth, Rio de Janeiro, Brazil
Della Bradshaw: Quite a lot of research has been done which suggests that one reason why there are relatively few women on MBA programmes - only about one third of applicants are women - is that women are less comfortable with taking on large burdens of debt than men. My response would be that there is clear evidence that those that do an MBA do make substantial progress in their careers, and increases in their salary, to justify that debt.
There is an unstated bias for companies to recruit young(ish) MBA graduates? Which jobs should executive MBAs focus on, if they wish to change careers? Are there positions that are less well suited for seasoned professionals in which firms prefer to higher younger MBA graduates?
Della Bradshaw: What I’ve really noticed over the past two years is that the career development services that have always been in place for full-time MBA students are now being offered to executive, or part-time, MBA students as well. So if you enrol on a good EMBA programme, you will get professional advice on this kind of issue.
It’s understandable that the turmoil in the financial markets will have somewhat of a direct impact on recruiting for the banking sector. But to what extent do you think a global slowdown will affect the recruiting for consulting and industry in 2009 and beyond?
Ramanjit Singh, New York
Jacklyn Sing: I think consulting is a relatively stable industry: companies have a definite need to do a lot of initiatives and do not have the capability or expertise to do it so they hire consultants. It is hard to say how the global slowdown will affect this industry; it depends on how long and deep the slowdown is going to be and how fast the economies are able to recover.
My guess is that some companies would cut down on discretionary expenses or would postpone projects and this may affect their ability to hire consultants; however, I do think that the market beyond the US are still robust and that consultants would be needed more than ever.
I’m a software engineer with four years IT development experience. I have been thinking of pursuing an MBA from a reputed business school. Does it really make a difference between pursuing MBA full or part-time? Will a part-time MBA help me in going to a higher management level?
Vikas, Sydney, Australia
Della Bradshaw: I think the overriding factor here is the reputation of the institution at which you study, not the format of the study. Most of the big brand name schools - Kellogg, Wharton, Chicago, Columbia, London Business School - have both full-time and executive MBA programmes and graduates from all those programmes do really well.
What is the right balance between practical and theoretical approaches in studying for an MBA? Should more attention be paid to case studies or on-site live education? What are the benefits of doing an MBA for a business-savvy entrepreneur?
Dimitri Ledenyov, Melbourne, Australia
Dipak Jain: The MBA programme at Kellogg has a nice balance between “academic rigour” (theory) and “business relevance” (practice). Students learn from research-based faculty in the classroom, while also working collaboratively with teammates to address complex global business problems.
MBA education focuses on putting structure on unstructured business problems. Therefore, we believe that an MBA degree is very important for entrepreneurs because it helps them in acquiring both analytical and people skills that they can apply to future ventures.
Della Bradshaw: The past few years have seen business schools beating their breasts over this - should MBAs teach ”hard” skills - quantitative number-crunching - or ”soft” skills - communications, empathy etc. Also, the extent to which consultancy work, projects etc should form part of the curriculum is under review. The answer, basically, is not very helpful - the more you can get of all of these things the better!
But from the point of view of the entrepreneur, one of the ”invisible earnings”, if you like, that comes from an MBA is the network of peers you develop. And the other is the input from your fellow students.
If I am more technically focused but wish to work in the business side. Am I better off applying for a Masters in Finance or an MBA? What are the advantages and disadvantages of both?
Patrick O’Driscoll, London
Indy Lachhar: From a recruiter’s point of view, we would consider MBAs from both a Masters in Finance background and MBA background - students have a similar skill set to offer and as long as the basic technicals are understood, most companies would ensure that you receive sufficient training and responsibility to demonstrate your capabilities and skills.
I think it’s more important that you look at the content of each course and what appeals to you more. We have certainly recruited students from both backgrounds. Once again, from a banking perspective, we are looking for individual who are committed to a career in Investment Banking - individuals who are willing to put in the hours and hard work as well as enjoy the rewards.
Both the MIF and MBA enable you to acquire an outstanding academic background but what’s more important is for you find an industry that you feel you are well suited for.
Jacklyn Sing: I am not familiar with the Masters in Finance. I do think that an MBA is a great programme for the business side because it allows you to explore a lot of areas (general management, marketing, corporate strategy, finance, etc.). If you do choose to focus on Finance, a lot of MBA programmes offer you the chance to take up subjects along those areas as well (same subjects as in the Masters in Finance).
What I personally like about the MBA programme at MIT is that it allows you the flexibility to do this starting your second semester: I am now taking up a lot of subjects on finance from investments, to financial statement analysis, etc.
Dipak Jain: The MBA education is more comprehensive and exposes students to various aspects of management. If your desire is to work on the business side, in addition to the financial skills you need to acquire, you’ll need to acquire other skills that will help you address business issues in today’s ever-changing and challenging landscape.
Della Bradshaw: It depends entirely on what you want to do on graduation. If you are convinced you want to work in the finance sector, then a specialist degree would be the best way to guarantee that. If you are not sure, then an MBA gives you the opportunity to explore your options. MBA programmes are packed with technical people - engineers, chemist, doctors.
The supply of MBAs is five times the demand. How can administrators keep a straight face when talking young men and women into paying upwards of $75,000 for something they know does not have enough demand?
Lou Volpano, Newport Beach , California
Della Bradshaw: Great statistic! But an MBA is an education as well as a qualification. Given the growing demand for able managers around the world (and not just in Newport Beach) its hard to give that sort of statement much credence, fun though it is.
Jacklyn Sing: I am not familiar with where you got your data on the supply and demand for MBAs. What I do know is that there is still a strong demand for MBA students because of the increasingly complex business problems faced by managers today – whether it be in the US, Asia, Europe, etc.
There is not enough supply of MBAs, especially from a top MBA programme, based on the strong job openings that I am seeing in our career website. More importantly, people have different reasons for getting an MBA – for me, an MBA sets you up for life, provides you with the managerial skills that you need, gives you the credibility and global alumni network that is invaluable whether you choose to work for someone or establish your own business.
With fears of US entering into recession this year, how do you foresee the job prospects for a foreign student enrolling for a full time MBA course in one of the top MBA universities in US this year?
Somesh Painuli, Mumbai, India
Jacklyn Sing: The worst-hit industry from the recent events is the financial services industry. Finding a job in Investment Banking in the US is definitely tougher this year based on what I’ve heard from peers (whether it be US citizens or international). The usual challenges for international students are (1) knowledge of the US market, (2) communication skills, (3) Visa permits as some smaller companies during internships prefer citizens.
As an international student and career-shifter, I would have had the chance to do an externship in my area of interest had I been permitted to work; this would have given me the chance to develop the skills and demonstrate my interest in the area during summer internship interviews. Despite the slowdown in US economy, the job prospects overseas (in Asia, Europe, Latin America, etc.) still look bright; in fact, international students have an edge over applicants if they apply for jobs near their area of origin: language, knowledge of the industries, etc.
Lastly, coming from a top MBA programme (whether it be in the US, Europe, etc.) gives students a significant leverage over other job seekers: companies recruit on campus, there are established resources, relations and alumni in a lot of companies, and you get the chance to do at least the first interview.
Della Bradshaw: Clearly anyone entering a two-year MBA programme in 2008 will not graduate until 2010 and it is hard to know what will happen at that point. What I can tell you from the data we have collected in the past for our rankings is that even those MBAs who graduate in very difficult years eventually get very good jobs.
The class that graduated in 2002, for example, often ended up taking jobs on graduation that paid lower salaries than the jobs they had quit before doing the programme. But three years after graduation - when we survey them for our rankings - they were earning salaries comparable to those reported by their peers in previous years.
Dipak Jain: Regardless of economic conditions, the market is always looking for top talent.
Even during the economic downturn following September 11, 2001, more than 90 percent of graduating Kellogg students found a job. We continue to pro-actively work with all of our students to help them in achieving their goals and aspirations.
Do you think that there is a lack of research (and academic) focus on turnaround and restructuring related aspects at most business schools? Is this an area which can provide a partial hedge to finding job opportunities for students in times of economic slowdown and recessions?
Bharat Gupta, London
Jacklyn Sing: I do not think there is a lack of research/academic focus on this area here in MIT Sloan. Aside from subjects offered, students can also immerse themselves in consulting-type projects with real firms or get externship with firms through the alumni network. In terms of looking for a job, I would think that having an in-depth knowledge or expertise in an area (and of course, matching that with the job requirements of the employer) would give you an edge over other applicants.
Note that a lot of consulting firms have a set criteria in their hiring process for MBAs and they don’t necessarily hire people with experience in this area (since they train them themselves). I do agree that we may see more turnaround or restructuring initiatives taking place in companies in the next couple of years.
Dipak Jain: We at Kellogg look at management education as a balance between “academic rigor” (theory) and “business relevance” (practice). Our faculty exposes students to the latest research and innovative practices by engaging them in experiential learning through real-world projects with global corporations. We believe that such comprehensive training will enhance their chances of achieving their desired career goals and opportunities - regardless of economic conditions globally.
Due to globalisation, the demand for talent has increased significantly. Therefore, students should focus on learning both in the classroom and through collaborative teamwork. This will help them in developing critical and relevant business and leadership skills which will set them apart and make them valuable for corporations seeking talent.
Is this year a bad time to enrol in any one-year, finance-focused program given the state of economy? One-year program students will interview for jobs in October/November this year - what does the recruitment forecast look like for them?
Indy Lachhar: Despite the state of the markets, finance companies on the whole are still recruiting and the majority should be returning to campus later this year for the full-time recruitment. Some may have reduced their potential intake numbers but the demand is still there. One-year programme students should make an effort to connect with recruiters and bankers in advance of the full-time recruiting kicking off in October/November this year. This effort is recognised and it helps to build a relationship up on both sides.
Jacklyn Sing: The choice of the MBA program should be based on the goals of the candidate. I would advise the person to reflect on what he wants to get out of the program (finance, entrepreneurship, general management, marketing, etc. as different schools have different focus are), what his plans are, and when is the right time to do it.
Remember: you take your MBA only once so make sure you choose the right one. In terms of the job market, based on observations in my program, the US market for investment banking is more competitive this year (a lot of people are looking into Europe or Asia). I think that other areas (i.e. corporate finance, asset management, etc.) would have a stable trend from the past couple of years.
Regarding the one-year program and October/November forecast: banks are less optimistic which will trickle down to the recruitment. Should the US economy recover, I still believe the effect on recruitment would be gradual so overall, the job market in October/November would be more competitive than previous years.
Dipak Jain: I don’t believe in market timing for pursuing an MBA degree. Given applicants’ personal situation and goals, they need to determine for themselves which type of MBA program is optimal for their needs.
The market is always looking for talent. If you acquire the right skills in a one-year, focused MBA program, there will always be demand for what you have to offer - even in the financial services sector.
Della Bradshaw: Anecdotally, banks and financial institutions still seem to be interviewing for financial positions and for internships. I think many of the banks and consultancies learnt back in 2002/3 that not bringing any new blood into the organisation stored up problems for the future. I also think that this year there are a far wider range of financial institutions looking for MBAs - it is no longer just the investment banks
Is this the right time to do a two-year MBA, given that the slowdown may last longer than this period? And are US business schools, pioneers of the MBA, losing out to their European counterparts?
Jacklyn Sing: There is no one answer to the ”right time” in doing an MBA. I think it should be customised to the profile of the applicant - where are you in terms of your career, what are your goals in getting an MBA, etc.
That being said, the length of the MBA program is driven more by the depth of experience of the applicant (i.e. 10 years vs. three years), financial considerations (being out of the job for two years), etc. I have a relatively younger profile so I chose a two-year program that will enable me to take subjects I wanted to improve on or am interested in, as well as get a summer internship.
Regarding US vs. European schools, I don’t have facts at this point but I personally think that is not the case. A lot of people choose the location of the MBA program (US vs. Europe) based on where they want to be afterwards: work in the US, work in Europe where the alumni network and career opportunities would be more available.
Dipak Jain: The right time to do an MBA is when you are mentally prepared to start the journey. External market conditions need to be factored into your decision but they should not be the driving decision. Conditions come and go, but the MBA degree will continue to be of enduring value. We believe that intellectual curiosity and learning should be your guide in the journey ahead.
I do not feel that U.S. schools are losing out to European counterparts. On the contrary, applications to full-time programs in U.S. business schools are going up. Particularly for the coming year, applications at the Kellogg School are up by more than 20 per cent.
Della Bradshaw: This is the $64m question, isn’t it? I think there are a lot of business schools out there who like to be able to predict the answer to that. What interests me, is whether the prospect of an economic slowdown gives two-year MBA programmes an edge over one year programmes. After all, if you begin your one-year MBA in September/October 2008, you will have to start job-hunting at the beginning of 2009.
Do you feel that in light of recent economic conditions, the MBA market will move towards more students undertaking part-time or distance-learning programmes?
Della Bradshaw: I think intuitively my first reaction would be yes. But research done this year by the FT’s deputy head of statistics shows that the number of GMAT test-takers (which is a good proxy for applications) tends to be counter-cyclical. In particular the number of test-takers goes down as financial sector earnings go up. So if we are seeing job cuts and lower than expected earnings in the financial sector this year, then applications to business school for full-time MBA programmes may well go up may well go up
Dipak Jain: Despite the current economic conditions, I feel that the demand for full-time programs will continue to be strong for students looking for a career change. In addition, those who are risk-averse may seek part-time programs to enhance both their analytical and people skills. The full- and part-time programs cater to student segments with different goals and aspirations. As a result, the demand for full-time students is not going to shift to part-time.
Jacklyn Sing: Personally, I think there are a lot of strengths in going through a full-time MBA program - a great part of your learning would be from your peers/classmates, the curriculum would be more intense, and the student gets more chances to explore activities outside of the classroom (club activities, inter-university competitions, projects, etc.)
How relevant is an MBA degree in today’s ever-changing world? And will it still be highly regarded by employers in the future?
Gavin Doig, London
Jacklyn Sing: An MBA degree is definitely growing in relevance in today’s world and I believe that employers would demand this more based on the increasing need for higher-level skill-set in conducting increasingly complex businesses today. There is a practical aspect to it: you get a global education that equips you with the management skills, you become part of a world-wide network of alumni, you get instant credibility, and you encounter new opportunities otherwise beyond your reach (i.e. job overseas, jumpstart your career, etc.). Another way to look at it is that more and more people are taking further studies; thus, to stay competitive in the job market, it is almost ”necessary” to get an MBA.
Della Bradshaw: Well, employers certainly still value it. What has surprised me in the past few years in the UK is how many large employers - BTand Barclays commercial and retail banking arm are just two examples - have now developed programmes specifically to recruit MBAs and train them for specific jobs in the company. In the past I think European companies have not valued the MBA brand as much in the US and Asia but this is really beginning to change.
Indy Lachhar: The MBA is becoming more and more relevant in an ever-changing global market. Since our MBA programme has been introduced, we have looked to increase the numbers for both summer and full-time programmes each year.
For the banking sector in particular, MBAs are not only able to bring their strong analytical skills to the table but also a range of new ideas and strategies. In addition, an MBA also brings their previous work experience to their new role which for the majority is from a different career background - this simply makes it even more appealing for a potential employer.
Dipak Jain: The MBA degree is relevant now more than ever. Globalisation today is almost like a force of gravity, and it’s essential that managers are equipped with the right tools and foundations of managerial skills to lead in an ever-changing and challenging business environment.
Twenty years ago, an MBA degree was seen as a value-add. Now that it’s more ubiquitous, chances are that those you’ll be reporting to already have the MBA degree. As such, it’s essential that, in addition to the basic skills taught in business schools, you need to be driven by intellectual curiosity and “dig deeper” so that you become familiar with the current theories and frameworks. It is then that you’ll more effectively be able to lead an organisation. These qualities are valued by employers now and will continue to have “enduring value” in the future.
What is the most important factor to consider when choosing an MBA program?
Douglas, New York
Della Bradshaw: Which programme is right for you - right for what you want to do on graduation, right for your lifestyle, right for your style of learning.
Too often, we question whether it’s the right time to pursue an MBA by considering job prospects and economic opportunities. Yet, a volatile economy in tumultuous times is perhaps the best time to study macro-economics, strategy, change management, mergers and acquisitions and other core MBA courses. External disruption in the financial markets and global economic uncertainty, while rendering us uneasy and insecure, turn the world into a great classroom laboratory and give genuine meaning to problem-based readings. In the end, these patterns are cyclical or at least repetitive to some extent. So why not promote these times as the best time to study for an MBA?
Mark S. Guralnick, MBA, Philadelphia
Della Bradshaw: I can see that appearing in a few MBA brochures as we write.......