The MBA Dilemma

After getting TONS of experience now for one year of researching GMAT and MBA stuff, I present prospective with MBAs some results of my research.

In this post I shall be discussing only MBA degrees offered by colleges accepting GMAT and/or TOEFL scores for the same.
Ok. Let’s assume that you have already taken a decision to get an MBA. The reasons might be varied. You hate your job – want to switch an industry. You love your job – want to accelerate to a higher position. You hate your city – want to get out. You love your city – want to enjoy it rather than work all day. The reasons might be varied, some true, some false. But you won’t change your decision. You want to get an MBA and that’s it.
If you changed your decision, please do not read further.
In the foregoing discussion we shall make the following assumptions.
1)You want an MBA from a good college.
2)You are not filthy rich. As in, you weigh options with application fees, tuition fees, living expenses, education loans, your salary post MBA, and your return on investment.
3)Your MBA degree is more or less the final frontier. You are not looking for an immediate qualification after the MBA. (Implying that you want your MBA to work for you for a long time, so it will affect your income for the rest of your earning life)
All statistics (fees, salaries, stats) are relevant to year 2007-2008.

STEP ONE – exams: GMAT and TOEFL

1) To take the GMAT you have to register on http://www.mba.com/ and thenceforth start studying.
2) A good pattern would be
i)The Princeton Review
ii)The GMAT Official Guide
iii)Sample Tests
3) There is plenty of material on the net and social networking sites like Orkut.
My advice: After you take the GMAT and are satisfied with your GMAT score, take the TOEFL too. Reason: Foreign Universities usually want it, especially in the UK. Some places they say that “if the medium of instruction of your undergraduate degree was English, then you are exempt from the TOEFL/IELTS.” But it is a good idea to take either TOEFL or the IELTS in advance. Trust me, you won’t regret it.
Now before you take the GMAT, you are supposed to decide upon 5 institutions where the ETS (the body conducting the GMAT) will send your scores for free. If you choose to send your scores to more institutions later you are charged $28 per institution. Almost all institutions want that Official GMAT scores are sent to them directly through ETS. Similarly you can send TOEFL scores to some universities for free but for each additional university you will be charged $17.
SO WHICH COLLEGES TO CHOOSE ON THE GMAT FORM ?
Now if you don’t know your GMAT score, how do you choose a B-School to send it to?
This question is better answered after the GMAT. Paradoxical right? Well in the following discussion I will prove how little a GMAT score has to do with your decision of pursuing a good MBA. Try to score 660/800 and above nevertheless.

A GOOD MBA?

What exactly is a good MBA? Again, answers are many. We will research the most common one – increase in salary. True, very true. An MBA from a prestigious institute gives you the kind of salary hike, parallelled by no other promotion/degree/career change.
Well, let’s start with an easy going discussion, which will get more and more complicated as we progress.
We will divide all B-Schools into two categories. US and non-US. Why?
The reason for the above is that even before you want to study an MBA, you must be very very clear on one important question.
Do you want to live and work in the US, post MBA, for say 10 years or so?
Following are the words of a Wharton Graduate (2002 MBA full time) on his blog -
MBA-Think carefully before taking the plunge.
“In conclusion, my been-there-done-that experience has taught me that a top MBA program provide some benefits, but at a steep price. If you are currently considering attending a full-time program, please stop to ask yourself whether or not you are willing to take the risk. Business school is a big risk. Should you choose to enroll, the only certainty is that you will shell out about $125,000. Such a figure correllates to a $1,500/month non-deductible loan repayment and a ten-year period of time in which you will not be able to save a red cent. If you think that this payment is worth it to earn the pedigree, the fraternity, the two years off, and a shot at the big bucks, then the MBA is right for you.If not, please do something else.”
The figure 125000 USD is quoted in 2002, now its even steeper. The break-even point that the graduate cites is 10 years !! Which means that you will actually start really earning after 10 years from your MBA completion. Till then you will be paying back bank loans.
Now, this gets even worse. The MBA graduate quoted above, works in the US. US companies are amongst the highest paying companies in the world. Let’s say you get an expensive MBA from a top US university. Now to grab a higher salary you will have to work in a US company. If, you are considering to return to your own country/continent for a job after a US MBA, sorry, you’re in for a disappointment.
Not to say that all US universities are expensive, some of them are not. But then those that are not, do not offer that good jobs, and hence no fat salaries. Irregardless of the fee in the university, the living expenses are more or less constant in the US.
To summarize, the reason that we categorised B-schools into US and non-US is return on investment. You get a US MBA, you spend money, now you have to work in the US to pay back the loans. Forget about leaving the US for another 10 years or so.
So, make this decision now. Do you want to live and work in the US or no?
Let’s move on.

STEP TWO – RESEARCHING B-SCHOOLS

All B-Schools will advertise themselves very very well. Think about it. The people who teach you managment and marketing will be good at it themselves, right? “We look for highly motivated individuals who can contribute to a truly world-class international environment for fulfilling their personal and professional goals” This can be the punch line of any decent B-School you can think of.
So what common factors should you consider when researching a school? Rankings? Post MBA salaries? School’s advertisement? Alumni interaction? School’s placement services?
We shall discuss these and a lot more, step by step.
We will rate each factor on a scale of 1 to 10, 10 being the most important in your impression of a B-School.

RANKINGS. (5/10)

Two (of the gazillions) of websites that provide B-School analysis/surverys and rankings are Business Week MBA Rankings and Financial Times MBA rankings.
Do these actually represent the true positions/priorities that you should be choosing a B-School on?
Under the Full Time tab, Business Week lists Queen’s University, Kingston, Canada as the TOP NON US MBA PROGRAM. In the Financial Times top 100 ranking Queen’s is not even listed!
In the Financial Times rankings, Manchester MBA in UK is 22nd in the world. In the Business Week Rankings, it is not even listed among the long non-US/European MBA lists!
So much for the rankings. Now what do we do? Let’s take the case of Financial Times MBA rankings. You have before you a lot of columns.Name of the institute, Country, Weighted Salary and so on. You can play about with them and sort all the columns in whichever order you want. You can even download a pdf or xls format views of the table.
What you actually want to do here is that notice that there are more columns that you can add to your table. Among these coulmns one is named RECOMMENDS. Add that to your table and sort according to it. The Recommends column lists ranks of the B-Schools as reported by alumni in answer to the question “Which B-School would you want to hire MBAs from?” Sweet !
This gives a very representative ranking of all the B-Schools. Notice that although Kellogg, Northwestern is 19th, yet its “recommends ranking is 4. This is the ranking you want to compare different B-Schools on. This gives you the NAME worth of the B-School.
The name of the institute from where you got your undergraduate degree (BSc, BA, BTech, BE, MBBS, BALLB) might not matter in the job market, but the NAME of the institute from where you get your MBA will make a BIG difference to your resume. Trust me.

POST MBA SALARIES (5/10)

The reason for a FIVE is that B-Schools do not report the most common information.
A little bit of mathematics here. We have a set of ten numbers.
2,2,4,4,4,4,4,4,200,400.
The LOWEST VALUE is 2. The HIGHEST is 400. The MEAN is 62.8 and the MEDIAN IS 4.
MEDIAN IS THE MOST FREQUENTLY OCCURING VALUE IN THE SET.
Now imagine that this set was the salary of MBAs in thousands of US dollars.
2000$,2000$,4000$,4000$,4000$,4000$,4000$,4000$,200000$,400000$. The median would be THE SALARY OFFERED TO THE MAXIMUM NUMBER OF STUDENTS IN THE CLASS.
How do B-Schools collect this data? They send requests to alumni to participate in salary surverys. Does everyone participate? No. Why? If your classmate receives a salary twice as much as you do, would you disclose yours?
Is the MEAN salary an actual indication of the salary you will be getting post MBA? No!!!
The MEAN of the above set is 62800$ while the most common salary is 4000$.
Yes, you might ask but the above example is exaggerated. Can there be such a huge difference in salaries within one class?
Enter Indian School of Business, Hyderabad, India. The school is not to be found in any rankings, its only 5 years old. The school has tie-ups with Wharton, Kellogg and London Business School. The fee is about 50000$. The highest salary offer this year was 233000$ !!! The lowest was around 20000$. Why?
This is where the power of researching a school comes in. What is the figure 233000$ ?
Firstly, this is the gross package, which includes a huge amount of performance incentive. The basic pay is lesser, say 40000$, but if your performance in the company is good, you get the rest. Secondly, do all students get interviewed for that kind of a job? No! A company X plans to give a student of ISB a package of 200000$. The company’s ex-MD is now on the board of Directors of ISB. It is this reason why the company X came to ISB in the first place. Now when X comes there what happens? They look at your academic record. If you are among the top 10 people in a class of academically rich 467 students, you will be interviewed. One amongst those interviewed will make it. Thirdly, the lowest offer would be around 20000$. Which makes the MEAN as 115000$, not at all representative of the majority salaries. The MEDIAN package would be around 40000$.

To summarize,the MEDIAN post MBA salary is the most representative of the salaries (maximum, weighted, etc.)
Sadly, since this usually gives away the impression of the B-School in the market, Financial Times does not list it under a separate column. Your best bet, therefore is to download a B-School’s brochure and explore it for MEDIAN salary. One example is the range of different average and median salaries offered to MBA graduates in this B-School.
This MEDIAN salary figure is what you will be analysing when you calculate your return on investment. I do not propose to get into a detailed discussion of the economics of the same (lest I be penalised for irony – applying economic principles to admissions in a B-School). However let’s tackle the question with common sense.
The fees that you would like to look at in a B-School is the sum of tuition and living expenses. All the B-Schools make the fees figure available on their websites on in brochures. Some include the living expenses, some don’t. Research well.
Let’s say the total expense for a full-time (one year or two year) program in any B-School is 1000$. Now you take a loan from the bank for 1000$. After two years you will have to return around 1.7 times the amount. That is 1700$. Let’s say you have to return it in 5 years’ time. So you have to send the bank around 30$ every month post MBA. Hence for a decent living you must be earning at least 75$ per month. Which is 900$ per annum.
You spent 1000$ for one (or two years) for an MBA, you got a job that pays you 900$ per annum and for the first five years, 450$ per annum goes to the bank. Lets arrive at a MEDIAN figure here. You NEED a salary of 900$ per annum, which is 90% of your fees. Let’s generalise this point and remember it. Of-course it will vary according to a number of factors but it’s enough to drive the point home.
A real example. In a B-School the total expense is 65000$ for a one year MBA. Post MBA you should be able to earn at least 90% of that per annum. Which is 58500$ per annum. This is a good enough figure for eliminating a number of possible colleges from your list.
Take my advice : If you are overwhelmed by the number of choices of B-Schools, just do this analysis.
What is the total expense : X $ per annum.
What is the MEDIAN salary : If its less than 90% of X, you would want to reconsider your choice.
The figure of 90% ofcourse is subjective. If you think you can lead a much frugal lifestyle and dont mind the long loan repayment period, you might reduce the figure to 80,70,60 etc or if you think you can work more in your industry and want to payback your loans fast enough you might increase it to 100,110,120 This small thinking step can save you a lot of time and energy. Experiment with it. Find a figure for yourself.
An interesting small article and ranking of different B-Schools on return of investment basis can be found on this site.

ALUMNI INTERACTION (8/10)

This is perhaps the single most valuable tool that can really help you to know about a B-School. Alas! It’s not easy. Alumni are busy people. They travel a lot with their jobs, might not have a second to spare. Now what?
Enter MBA WORLD TOUR.
On the website of the MBA tour you can find a number of venues where the tour will be held. The tour is like an MBA fair where different B-Schools advertise themselves, give out brochures, have their staff for you to grill and above all have their alumni present for you to interact with personally and informally. I strongly suggest that even if you are remotely thinking of an international MBA, have not even taken the GMAT yet, do not miss an opportunity to attend the MBA tour. I further suggest that you explore their website for upcoming events. The experiences of some people in these tours are listed below.
http://journeytolbs.blogspot.com/2006/09/mba-tour-taipei-09162006.html
http://daveformba.blogspot.com/2004/09/world-mba-tour-happenings.html
http://www.lums.lancs.ac.uk/news/worldtour/
You can find many more on the web. Just google. But do attend at least one tour. They have a fee but the exposure should be worth it.
If you are known to an Alumnus or even have him/her working in your area, you can arrange the B-School itself to arrange an appointment. Many B-Schools will gladly help you to meet their alumni personally or over the phone. All you have to do is ask!! (email, fax, phone or talk).
You can (sometimes diplomatically) gouge out the information that you need directly from the horse’s (in this case alumnus’s) mouth. An alumnus presents you with the true picture of your career that you would be looking at, post MBA. These meetings are often casual and need not be reported to the school itself.

WHAT SUITS YOU? (10/10)!!

An MBA largely is a matter of personal choice. What do you want from your career? Why?
Let’s say you are a doctor, and want to pursue Healthcare Management.
You have two choices :
Do a General Mgmt MBA, and get a Healthcare Mgmt Job OR Do a Healthcare Mgmt MBA and get a Healthcare Mgmt Job.
What are the pros/cons?
Simply put, if you get a General Mgmt MBA you could at the end of your MBA, apply to firms for jobs other than healthcare. If you pursue a healthcare MBA, applying to other sectors might be difficult. Again a healthcare company on the other hand will be more inclined to hire a healthcare MBA than a general mgmt MBA. Research your career plans very well. Your job statement should not be “I want a job in consulting” but on the lines of “I want a job in finance consulting in the healthcare industry”. Be very very clear on what you want to do with your career. Small adjustments here and there are fine but B-Schools should not see you undecided. A list of companies that you would like to join post MBA, is a good impression for a B-School, whether you hint at it in your essays or talk about it in the interview. Also if you get dinged from the admission process of a B-School that you would want to get into, you either have to wait for another year (in most cases) or make little changes in your personal preferences/career goals to fit into some other school.
Research this part well. Very very well.

School’s PLACEMENT SERVICES and POST MBA POSITION/RANK (8/10)

Almost all B-Schools have an active Career Placement Cell, the purpose being the same, the name varies. The purpose of this body is to find the right job that suits you, keeping your career goals in perspective. But there is a big catch. In ISB, India this is the feedback from an alumnus:
(name witheld on request)
“The placement services are bad. The companies that come on campus do not interview everyone in the first place. They arrange for some company interviews only if you choose not to participate in the general placement process. Career goals are haywire at the end of the term. Everyone seems to be applying everywhere. Its chaotic.”
This is the reason why I said earlier, that the NAME of the institute from where you are doing an MBA matters and that you must attend these MBA tours and get in touch with alumni.
The post MBA ranking is important in your choice for an MBA. In the B-School brochure or on the website you might get information of the number of people placed, the industry they are placed in and as what. If you graduate from a very good MBA school you might start as Vice President of a company, if not you might be earning more but start as Associate Manager. This often is in direct proportion to the number of years of work experience you have pre-MBA. The more your work experience, the closely it is related to your post MBA plans, the better are your chances of starting big. A decent figure is around 5 to 7 years of average work experience that every B-School takes, though that is not the deciding factor alone. If you have less work experience say 1 or 2 years, you are taking a risk enrolling for an MBA, simply because the returns might not be proportionate to that of your classmate who has a 5 year work experience. I suggest in this case please work for sometime and then come back. The world needs managers and it always will. Don’t rush things. That is a good reason why the GMAT score is valid for 5 years (though some universities may not consider a score more than 2 years old).

WHAT DOES IT ALL MEAN?

It all means that if you want an MBA to pay you back for the rest of your life, research well. Don’t panic in the face of failures. An MBA, in B-School language is either a HIGH Risk – HIGH Return venture or a LOW Risk – LOW Return venture. If you want a better return, you will enroll in a highly ranked (hence expensive) B-School, but the returns are not guaranteed. If you enroll in a not-so-good B-School, it wil be cheaper, but the returns will be lesser and remember what I said at the start of this article. “If MBA is thy final frontier…” Doing another MBA just because the previous one didn’t pay you that well, is going to be tough and painful. However, you might ask, many of the students enrolling in MBA/PGPM programs are already MBAs. What about them? As I said, its a matter of perspective. A company might not have a very differing opinion about an MBA+MBA as compared to only an MBA. However, post MBA+MBA many graduates might return to their previous employers in the hope of getting promoted etc.
Whatever decision you take, take in sensibly. So that you don’t have to regret later. All the best!

WHY SHOULD YOU PAY ATTENTION TO THIS ARTICLE.

This article is not exhaustive, but is a good distillation from my MBA application processes and interviews. I have applied to some B-Schools lately and am awaiting results. Wish me luck!
P.S. In the entire article, the DOLLAR SIGN $, is after the figure. This is wrong. 1000$ should actually be written as $1000 as is the standard convention. After having two cups of strong Brazilian Coffee for writing this article, I am in no mood to rectify the error.