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Mixed Feelings About A Shrinking MBA Market

Getting my MBA was easily the best financial investment I ever made. Or, rather, the best investment my wife ever made.

Linda already had her MBA (from the highly regarded business school at the University of Michigan) when we met at the wedding of one of my co-workers. I was a journalist for The Associated Press at the time. Journalism being the modestly paid field that it was, and mostly remains, I jokingly called her my “meal ticket.” She married me anyway.

Soon, however, I was pursuing my own MBA at New York University’s Graduate School of Business Administration, at a time before it had been renamed for later benefactor Leonard Stern. It was then located a block away from the World Trade Center in Manhattan, and I was working nearby covering the U.S. district court for the AP. I knew, as I approached my 30s, that I would not want to keep working as a reporter forever. I calculated that business school would open many more career paths for me.

Linda had a marketing job at Reader’s Digest. Budgeting carefully, we lived on my income while we used hers to pay my tuition. I graduated just in time for the birth of our first child, and soon moved into accounting at Arthur Andersen. Six years later, I was ready to head out on my own as a tax and financial planner.

I called myself “the world’s smallest accounting firm” at first, but I always had bigger plans. For the most part, they have panned out. In a couple of months my business will be 25 years old. We have 28 employees in six states, manage more than $1.3 billion in investments and, while we are far from the biggest firm of our type, we certainly are nowhere near the smallest. It has been a great run. I love the clients I work for and the people I work with, and the financial investment in my tuition has been repaid many times over.

I use the skills I learned in business school every day – mostly without even noticing that I’m using them. So you might assume that I am a big advocate of MBA training. But I am not, for pretty much the same reasons that pastry chefs are not big advocates of handing people sticks of butter. The utility of both business education and particular baking ingredients depends on where, when and how you apply them.

So when I read that enrollments are declining in full-time MBA programs and that some institutions, including the University of Iowa, are even eliminating their offerings, I tend to think it’s probably for the best.

Iowa’s Tippie College of Business will continue to offer shorter, specialized degree programs, but says a shrinking market for full-time MBA students led it to end its two-year degree program. Other schools have taken the same route, and an administrator at the University of Wisconsin’s School of Business recently told The Wall Street Journal that it is reviewing its offerings with an eye toward possibly ending its full-time program as well. Overall enrollment in full-time, two-year MBA programs fell by more than a third between 2010 and 2016, according to research from the Association to Advance Collegiate Schools of Business. Most graduate business schools also report a marked decline in applications from international students. Part-time applications have dropped in some places too, especially as employer-funded MBAs become increasingly rare.

MBA programs typically include an area of concentration, though they are built around a broad core of business knowledge. In New York during the 1980s, finance was by far the most popular offering, because everyone wanted to work on Wall Street. I was more interested in taxation, which was a topic I had covered as a reporter in state capitals and in Washington, D.C. But a wise professor advised me to take the accounting track instead, because the big accounting firms were the best places for nonlawyers to work in taxes, and the only way to become an accounting firm partner was to be a CPA. So that’s what I studied, and a CPA is what I eventually became.

But the MBA program also gave me a solid foundation in other disciplines such as marketing, operations management, business law, information technology and human resource management. You can’t build a business – certainly not a business like mine – without skills in all these areas. Surviving tax season is an exercise in operations management. Hiring, training, compensating and developing staff is the very definition of H.R. Without marketing, I’d still have the world’s smallest accounting firm, and without technology I probably couldn’t even have that. I apply business law concepts in everything from office leases to client engagement letters.

I only took a couple of basic accounting classes when I majored in journalism as an undergraduate. The MBA program, which I started after five years at the AP and completed in three years (taking night classes while keeping my day job covering the federal courthouse), was the best avenue for me to acquire the skills I have been using in my work for more than 30 years since.

I often encounter young people who majored in business as undergraduates and are contemplating getting an MBA as well. When they solicit my advice, I usually counsel against it, or at least advise them to wait until they get a solid start in their careers and see what sort of additional education would be most useful. In many cases, as far as I can tell, too much of the basic MBA curriculum overlaps undergraduate business major coursework to justify the extra cost. That cost is nothing to sneeze at: Forbes’ top 25 MBA programs average $119,000 for tuition and fees over two years, not to mention forgone salary for full-time students.

There is a widespread perception that these costs are offset because MBAs make more money than undergraduate business majors, just because of their extra degree. To the extent this is true, it is transitory – an assumption on the part of hiring managers that recruits at the MBA level are automatically worth more. They will be in some cases, but mainly because of graduate students’ additional experiences and maturity, rather than because of the overlapping extra training.

I have also encountered newly minted MBAs who believe that companies hire them in order to be told how to better run their businesses. That’s usually the ill-informed arrogance of youth. MBAs do, indeed, have the fundamental skills to run a business (or at least they should), but they seldom have the real-world experience and judgment to go with those textbook skills. To run a business you need both. At a minimum, you need at least some understanding of how much you don’t know.

I think graduate business programs can be an excellent investment for people who have spent at least a few years in the workforce, and who actually have an interest in building and running businesses. Business school is great for people who want to be in business, just as law school is great for people who truly want to study law and become lawyers. But back in the ‘70s and ‘80s, when MBAs first became popular with young workers, too many people pursued the credential just because they thought it was a ticket to higher income. More recently, law schools have been marketed with the same hype. Both have led to frequent disappointment. In the long run the degree matters less than what you do with it, or the alternatives you might pursue without it.

As full-time, on-campus MBA programs decline, online programs targeting more mature students are almost certain to grow. So, too, will increasingly popular certificate programs that offer training in specific and narrower areas. Some of those credentials still won’t be worth much; once you enter the workforce you discover that a lot of people want to sell you credentials. But the best ones, like the Certified Financial Planner™ designation I obtained while working at Arthur Andersen, will indeed let you do more and better work within a wider set of opportunities.

One of the things you learn in business school is that almost any organization needs periodic pruning, just like a plant, to focus energy and resources where they can bring the best results. Now the business school community itself is undergoing that process. It will be a painful adjustment for some, but the eventual benefits will have a substantially positive net present value. And if you aren’t sure what that means, just ask the nearest MBA.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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