Making the MBA your way

An MBA is a once-in-a-lifetime move, and 2009 is the perfect year to make it. With the global financial and economic meltdown, MBA candidates are making […]

An MBA is a once-in-a-lifetime move, and 2009 is the perfect year to make it. With the global financial and economic meltdown, MBA candidates are making much better use of these difficult times to strengthen their profile or start on a career makeover.

According to the Graduate Management Admission Council, which has a membership of 165 graduate business schools, nearly eight in 10 full-time MBA programmes overall reported that they received more applications during the 2008 – 2009 application cycle than they did in the previous year’s cycle. “This is the largest proportion of programmes to indicate such an increase in the past five years,” said the GMAC authors. In addition, the number of students taking the GMAT test was up more than five per cent this year over last year.

Part of the reason for the reported increase in MBA applications is the global crisis. Those immediately affected by the layoffs hitting the financial sector, including traders and investment bankers, are using the opportunity to apply to business schools. Many others in the sector have been warned that their positions will soon be terminated. Far more people in the banking industry sense that advancement is a thing of the past and, even though their jobs are not threatened at the moment, are opting for a MBA now rather than wait until stability returns in the next few years.

Changing Directions

The upsurge in MBA applications highlights the counter-cyclical trend of MBA admissions: i.e., when the global economy goes into recession, MBA applications start accelerating at an even faster pace than before. According to Bart van Ark, chief economist with the Conference Board, the economy is likely to get worse before it gets better. “Business has hugely contracted in terms of investment,” he said. In the past, many students would only consider careers in investment banking. At schools like the Stern School of Business, New York University, as much as 40 per cent of MBA graduates go into investment banking. But with the global financial and economic crisis, this mindset is changing quickly. The collapse of Lehman Brothers in September 2008 is driving MBA candidates into new directions and often into uncharted territory such as smaller investment companies where positions have often gone unfilled in the past.

“My wife was in the air on the way from our home in Iceland to Rotterdam when the Icelandic banks started collapsing,” said Gumundur Kristjansson, who started an MBA at RSM in October 2008. “I am certainly not thinking of going into investment banking after all this, but rather to deepen my profile in high technology.”

Return on Investment

While there is a direct relationship between educational achievement and salary growth, the financial impact of earning an MBA at a top business school can be exponential. MBAs can put students on the right track to career success and high salaries. According to PayScale, a market leader in global online compensation data, MBA salaries are much higher than salaries for those without an MBA degree.

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Furthermore, earnings on the job increase as the amount of time since graduation increases. On average, the most recent business school graduate currently earns $92,360 annually, according to the GMAC 2007 Alumni Perspectives report. Alumni who graduated in 2000 now earn 78 per cent more than that—$164,628 per year, on average. With such a huge salary advantage, it’s not surprising that prospective candidates want to earn an MBA degree, despite the time and financial investment that obtaining it entails.

In a difficult economic environment, an MBA is even a bigger investment in lost earnings, tuition and room and board, and the payback for that investment becomes more important than ever. Every year Business Week ranks the best international business schools by their return on investment. In 2008, Business Week ranked the 13-month full-time MBA programme at IE Business School # 1 for ROI.

According to the Business Week statistics, the estimated total cost of the full-time programme at IE Business School, which includes tuition, lodging and food is $151, 450. Students who earned a full-time MBA at IE Business School reported that they could earn this investment back within just over a year and a half. This astonishing rate of return is based on the fact that IE students reported that their annual salaries jumped on average by $96,500 in their first year upon earning the MBA. In the year before the MBA, the median salary was only $53,000, but it leaped to $149,500 in the year after.

A Taste for the Unknown

By doing an MBA, graduates learn highly prized leadership skills and come to the table with organizational skills, renewed powers of persuasion, and the ability to work in teams. According to Kirt Wood, Recruiting and Development at RSM, “Highly motivated, MBAs are determined more than ever before to reach satisfying management positions with major companies and organizations. But in today’s volatile market, it is the sense of adventure and global scope that makes the MBA unique. MBA students can leverage their professional and life experiences, but also make the most of their language skills; in the emerging countries having even a limited grasp of Arab or Chinese counts for a lot.”

This sense of adventure and global scope is exactly what is needed in today’s upside-down market. At top business schools, MBA students are turning to the Gulf region for job opportunities. Financial centres in emerging cities like Dubai are now attracting MBA students because the Middle East appears to be more resilient to the global financial crisis than Europe and North America.

The Middle East and Asia are indeed strong growth areas for the top b-schools. INSEAD recently held its second annual Leadership Summit Asia on its Asia campus in Singapore, drawing more than 300 business and global leaders. “This is a critical time for Asia and the rest of the world,” said J. Frank Brown, Dean of INSEAD. “The Asia growth engine is still travelling at a remarkable speed despite the uncertainty in the financial markets and a global economic downturn. Collaboration between leaders in the East and West will be the lifeline in creating sustainable growth in what has become an increasingly unstable marketplace.”

Hosting job treks to the region have also become popular at many top b-schools. Of its three Global Alumni Forums scheduled in 2009, Wharton will hold the first one in Dubai in March and the second one in Beijing. Wharton is keen to invite its admitted students to these forums so that they can meet faculty, alumni and current students.