The modern business school and masters of business administration (MBA) programs have a long history. In 1881, the University of Pennsylvania (Wharton) established the first business school in the United States, followed soon afterward by the University of California-Berkeley. These were only undergraduate programs; the first graduate curriculum was not developed until 1908.
That year, Harvard University initiated a master’s program with 33 students and 15 faculty members. Harvard’s original graduating class had 47 students. The antecedents of the modern MBA degree were established by the Harvard program. It wasn’t until 1950 that the first MBA program outside of the United States was developed at the University of Western Ontario (London, Ontario). The initial international MBA program was developed at the University of Karachi in Pakistan in 1955 (The Homa Files, 2014).
The awarding of MBA degrees has skyrocketed during the last 45 years. Fewer than 30,000 MBA degrees were awarded worldwide in the early to mid-1970s. Even this was a significant increase from the estimated 5,000 awarded per year before World War II. In the 1970s, the degree was prestigious and unusual, given only to those managers seeking to reach the highest rungs of organizations. By 2012, nearly 200,000 MBAs were awarded annually (worldwide), 100,000 in the U.S. alone, and more than 2.1 million have been received around the globe in the last 45 years (Digest of Education Statistics, 2013).
Nearly every U.S. and international college and university of any size now offers an MBA program. Some commentators have noted that the degree has become a commodity, the education watered down, and the return on investment (ROI) highly questionable (The Economist, 2014).
The Economist magazine recently noted, “Which MBA offers the best return on investment (ROI)? That depends on whether you are after a long- or short-term gain… Two-year courses at prestigious American institutions are the most expensive. An MBA at Wharton costs $330,000 on average, in part because it enrolls well-paid executives. But the immediate return on such degrees is small. Graduates tend to land jobs just a few notches above the ones they left. Cheaper, shorter MBAs around the world offer better returns.”
The Financial Times newspaper is even more blunt: “A degree has value only if the degree is scarce, and the MBA is completely unscarce, said Jeffrey Pfeffer, professor of organizational behavior at (the) Stanford Graduate School of Business. Professor Pfeffer has published on a wide range of topics, but is well known for taking on the industry in which he works — business education. He argues that schools’ reputations have suffered from promoting themselves as a route to enhanced future salaries. The professor has been pointing out for a decade that the value of a degree is linked to the prestige of an institution rather than what it teaches.”
Nearly all of the top-20 MBA programs and universities are national or international household names known to most potential employers (U.S. News & World Report, 2015).
An additional consideration to the wholesale issuance of degrees is the high level of competition being created. Pfeffer noted, “No matter how many people do the degree, the number of jobs remains relatively constant. Logic dictates large numbers of people will be disappointed” with the ROI of the degree. “He reiterates his view that an MBA is a waste of money unless it is from an elite school.”
Pfeffer and others do not denigrate the knowledge obtained, only the cost/benefit of the degree. The Economist points out alternatives to the expense of obtaining an MBA.
• The Homa Files, https://kenhoma.files.wordpress.com/2014.
• Digest of Education Statistics, http://nces.ed.gov/programs/digest/2013menu_tables.asp.
• The Economist, “Payback Time,” www.economist.com/news/business/21601884-payback-time, May 10, 2014.
• Financial Times, “Is an MBA Worth The Cost?” by Emma Boyde, www.ft.com, April, 29, 2014.
• U.S. News & World Report, “Best Business Schools Ranked in 2015,” http://grad-schools.usnews.rankingsandreviews.com.
One significant approach is to consider “massive open online courses.” Many top graduate business programs already offer this alternative. The Economist identifies programs such as those offered by Chicago Booth, Stanford, Wharton, and Yale as worthy of consideration. As the paper noted, “Successful completion of each course earns a basic certificate of accomplishment… however, these certificates neither confer credit towards a degree nor represent any recognized form of qualification. …Considering the average tuition fees reported by (the) top ten full-time MBA schools are almost $115,000,” the online approach may be a better alternative for many individuals.
For design and construction industry project managers, business education is a valuable and necessary addition to your technical undergraduate degree. Architects and engineers, in particular, suffer from a near total absence of any business training and often pay the price in an inability to run their businesses effectively, manage projects, control budgets, develop business plans, understand financial reports, and be successful in a wide array of other vital skills. While an MBA may not be affordable (time and/or money), or necessary, project managers should seek to obtain the knowledge many business courses offer.
Howard Birnberg is executive director of the Association for Project Managers. His undergraduate degree is in architecture and he received his MBA from one of the so-called “elite” business schools back in the day when only 25,000 were awarded worldwide each year. He may be reached at 312-664-2300 or email@example.com.