What salary justifies getting an MBA?

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BruinKJC

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At what salary (pre-MBA) is it worth getting an MBA? For example, if someone is making $100K now, is it worth pursuing an MBA? What if this person is making $150K? $200K?

If I complete the CFA program, I expect to be making north of six figures, in line with starting salaries of Ivy League MBAs. In that case, I pose the question - would it ever be worth getting an MBA (salary wise)?

I'm not speaking for management potential; merely salary potential.
 
MBA is good to have only when the big boss thinks it's important. You just don't want your best job opportunity slips through your fingers because you don't have it.

You can have a damn good carreer without it, but it is opening doors that you don't even know that they exists.

Ponponpq
 
Arg. Perhaps an MBA is worth something other than the increase in salary the credential might bring?
 
seems like an MBA is worth more from the perception point of view than it is for its' intrinsic value.
 
It's a reasonably line of inquiry (what the purely economic value of an MBA is).

The answer is obviously dependent upon what you pay for the MBA, for how long your expect to earn how much (more), and the discount rate you use.

Tell me these things and I'll have your answer immediately!
 
As a Ph.D. student, I used to look down on MBAs, figuring that they just wanted a higher degree to go out and make money and weren't really trying to learn about things and how the world works (I meanwhile, was on a noble search for truth and all that cr*p). There still may be truth in that for about 50% of the MBA class, but I discovered over time that 1) there are plenty of MBA types that are genuinely interested in how the business world runs and how to make it run better (by various criteria), and 2) there are real skills that an MBA teaches that - while not necessarily rocket science - are very valuable for getting things accomplished in a business, and which plenty of Ph.D./academic types completely lack, to their detriment.

I think the CFA is a better deal for people doing finance/asset management/etc, in terms of raw technical skills, but the project management skills developed doing these team projects, and the communication skills needed, and even the exposure to what goes on in marketing strategy is stuff that, quite simply: if you don't know it, a lot avoidable things will go wrong. And this should not be underestimated. Definitely take a course on project management if you don't do an MBA.

So years later, I have much more respect for the MBA degree than I did when I was a graduate student.



Edited 1 time(s). Last edit at Monday, June 18, 2007 at 08:33AM by bchadwick.
 
Thanks everyone for providing insight.

I think it just reinforced my original view that an MBA will add prestige/credentials/mgmt opportunities, but will not necessarily have economic value.
 
BruinKJC Wrote:
-------------------------------------------------------
> Thanks everyone for providing insight.
>
> I think it just reinforced my original view that
> an MBA will add prestige/credentials/mgmt
> opportunities, but will not necessarily have
> economic value.

an MBA does have economic value if you include option value. on a straight NPV basis, your capital would be better deployed elsewhere. but the fact is that there are certain jobs that you basically can't get without having a top MBA, and if you want to break into that world (exercise the option), you need the letters.
 
I make about $200,000 as an analyst without an MBA, so for me to go back to school a) my company would have to pay for it and b) they would have to guarantee minimum annual compensation of $500,000 afterwards.
 
On the "buy-side" many job postings now simply say, "MBA or CFA a plus". Take that how you will, but I do generally think that once you have a CFA, the MBA may not add enough to justify its cost.
 
I don't think you can necessarily put a price on the networking and connections you will make in your 2 years at an MBA program. In 10 or 20 years some of your former classmates will be CEOs of companies or running divisions of large banks or PMs of hedge funds and may be willing to help you out because they know you from your MBA days. Not to mention, you will become friends with people from around the world and get a chance to travel a lot with people to their native countries. While in school, I went to China, India, Argentina, Russia, Turkey, Jordan, and South Africa, all with friends from school who were native to those countries, and I think those were all experiences that are worth so much more than any salary increase I may have gotten for getting my MBA.
 
"On the "buy-side" many job postings now simply say, "MBA or CFA a plus". Take that how you will, but I do generally think that once you have a CFA, the MBA may not add enough to justify its cost."

I would disagree. Most postings for buyside jobs include the phrase "MBA and/or CFA." Now you could read that as meaning you could get someone to look at you with just a CFA charter, which might be true if your a known quantity in the community with 10+ years experience. But for the majority of jobs, if you don't have an MBA and CFA charter your likely falling to the bottom of the candidates pile since a significant number of IM folks have both.
 
"if you don't have an MBA and CFA charter your likely falling to the bottom of the candidates pile since a significant number of IM folks have both"

Maybe 10 years ago. Everyone I know under 30 is taking CFA first today. Those that fail go back to do MBAs. The obvious trend is that someday everyone who has a CFA will be smarter than all MBAs. Kind of like how the idea of hiring someone smarter than you implies the CEO is the dumbest person in the company.
 
HoldSideAnalyst Wrote:
-------------------------------------------------------
> "if you don't have an MBA and CFA charter your
> likely falling to the bottom of the candidates
> pile since a significant number of IM folks have
> both"
>
> Maybe 10 years ago. Everyone I know under 30 is
> taking CFA first today. Those that fail go back
> to do MBAs. The obvious trend is that someday
> everyone who has a CFA will be smarter than all
> MBAs. Kind of like how the idea of hiring someone
> smarter than you implies the CEO is the dumbest
> person in the company.

I know some people who can't do CFA that are applying for business school now. I think MBA is easier cuz you are taking time off work to prusue it.

Most people have full time jobs when they are taking the CFA. That makes it extra hard.
Ver
 
"Those that fail go back to do MBAs."

can you explain this? it sounds like nonsense. try "those that succeed at what they pursue and are among the best applicants in any given year go on to (top) MBA programs and are typically very successful aftward" and you'll be getting warmer. CFA is okay but probably not enough to break into the really good jobs.
 
I figure that if your firm pays for anything over 55% of it, then you basically HAVE to do it. If you're covering it yourself, then I would say that if the MBA can up your comp by 35% to 45% you should be thinking about it.

Willy

PS - Anyone been using my WSP buddy code? In the last few weeks I've had like around 25 requests for it. Are you guys liking the program or is it a waste?
 
I agree with "asdffdsa". CFA is no Panacea for getting a job.

Passing the CFA exams alone is not going to do much for somebody with no experience going up against someone with a BA/BS with one/two years experience. Also, some firms don't value CFA as much as others. I would suggest looking at company bios section to gauge how much a CFA is worth at that firm by how many people their have earned a charter.

Just because you don't pass CFA does not mean your not smart or doomed to never find work. A lot people don't pass CFA simply because they have families or other commitments that prohibit them from studying the necessary amount of hours to be successful. Anybody could pass CFA if they had enough time to study.

So many people on the message board are so naive to think that CFA is going to make them hot commoditie in the eyes of the people who are going to be interviewing them. Gimme a break. CFA is just one piece of the numerous skills you must exhibit to get jobs, mainly, determination and the ability to perservere. However to be successful many other talents are necessary.

The truth is most shops care more about how well fit in and how well you communicate with others first and foremost. Finance is a relationship business first, client focused. So if your some dork, or pompous a-hole who can't make small talk within your group, can't network, can't sell your ideas or the firms products, can't be comfortable around people who are worth more than your life, can't make people who may intimidated by your intellect feel comfortable (instead of like idiots) a CFA MBA combo is basically worthless to any firm. Only a relative few get to be exceptions and those are generally the folks who are irreplacable, which excludes 90 percent of people and most of them are "quants" buried in the back office where they won't have any interaction with anybody who can't speak quant. The rest are front office PMs, Analyst and Traders who must be good with people.

There are so many people without CFAs and MBAs in grand positions. I guarantee they all are great with people and fit in. Of course you have to have finance skills but most shops will train people if their personality fits the shop, their intelligent, and driven over somebody with pure technical skills and no soft skills.
 
The proper way to value an MBA is to compare the PV of any lost salary while completing the MBA plus the cost of the program (i.e. the opportunity cost of the earning an MBA) to the PV of the expected increase in salary from earning the MBA.

It's a basic NPV approach. If the the discounted value of the excess earnings is less than the total opportunity costs your better of just not getting the degree at least in terms of financial value.

If the program is going to cost you 200000 (lost salary of 60k for two yrs + 80k for tuition and expenses) up front, but the your only going to earn an extra 30000k a year on average and work for another 20 years, your NPV is a little over 141000k. Thats a nice 70% return assuming a 10% rate of return.

Of course it becomes tricky when you consider heath care benefits or qualitative measures such as added stress, or personal achievement, but you get the idea.

Make reasonable assumptions about your required return and cash flows and start crunching out NPVs. Later peeps.
 
BruinKJC Wrote:
-------------------------------------------------------
> Thanks everyone for providing insight.
>
> I think it just reinforced my original view that
> an MBA will add prestige/credentials/mgmt
> opportunities, but will not necessarily have
> economic value.


My salary doubled within 2 years of the completion of my MBA, tripled if you include bonus. I also finshed the year after I finshed my MBA so that may have played a factor as well.
 
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