Would an MBA Help You Move Up or Move Out of Your Position?

An MBA has the reputation for being a one-way ticket to a more prestigious position and a bigger paycheck—but is it the right choice for you? Given the high cost of pursuing an MBA in terms of both time and money, it's worth expending some effort examining how beneficial this type of graduate degree would be for your career. Will an MBA help you move up or move out of your current position?

What is an MBA?

The Master of Business Administration degree—denoted by the letters after the degree holder's name—signals a broad, general competency in business management. The degree provides a solid foundation for working at a financial institution, in corporate management, or for founding a start-up.

A traditional full-time MBA student spends one to two years studying topics including accounting, finance, economics, and management. A part-time or executive MBA student—generally someone who is pursuing the degree after several years of experience in the workforce—might spend up to five years in evening or weekend courses. Employers often pay all or part of tuition for executive MBA students.

How beneficial is an MBA?

The popularity of MBA degrees has grown rapidly in the past few decades. According to the National Center for Education Statistics, fewer than 5,000 MBAs were conferred in 1960; today, that number is close to 200,000. U.S. Department of Education data shows the MBA is the most popular postgraduate degree in the U.S., and an increasing number of universities offer part-time and online MBA programs each year. This proliferation of programs might dilute the overall quality of the degree.

MBA alumni report overwhelming on surveys that they consider the value of their degrees to be outstanding or excellent, and nine out of 10 MBAs tell the Graduate Management Admission Council they would still choose the same postgraduate path knowing what they know now. MBA alumni point to their professional networks and salaries as evidence of the benefits. One study by QS Quacquarelli Symonds found that within a decade, the average return on investment for an MBA degree is more than $390,000, even taking tuition and opportunity costs into account. An MBA from a prestigious institution could garner an ROI of over $1 million.

The downsides to pursuing an MBA

Before you sign up for the Graduate Management Admission Test (GMAT), however, you’ll want to ask yourself a few questions:

• Do you want to be a generalist in a leadership position, or would you prefer to be a specialist? If your passion is in a particular area of business, such as accounting, an MPA degree might be a better fit. The MBA is an interdisciplinary degree.
• Did you study business in college? If not, you'll likely have to take prerequisite courses before you can begin an MBA program—adding cost and time to your course of study.
• Are you financially prepared to make this investment? Tuition for a two-year program can top $100,000. If your company is chipping in, that might be OK, but if not, that's a chunk of change. (Keep in mind, though, the stated price of MBA tuition is often just a "sticker price," with programs offering ample scholarships to attract students.)

Some experts measure the ROI of an MBA in terms of a "value-added ratio"—the ratio of how much an MBA adds to the degree holder's salary compared to how much it cost to obtain. The proliferation of MBA degrees has resulted in a worsening ratio. Even at Harvard, the ratio was seven-to-one in 1969, the ratio is now four-to-one.

Given all this, it's clear the MBA isn't the right choice for everyone—but it might be the right choice for you, depending on your long-term goals and available resources. This cost-benefit analysis might be good practice anyway; it sounds like a personal version of the type of case you'll be assigned in business school.