MBAs: valuable investment or dime a dozen?

Many HR professionals are turning to MBAs as a fast track way to broaden their business skills, enhance their reputations among business peers and improve their career prospects. Does an MBA in 2004 deliver all that it promises, or has the proliferation of providers and graduates diluted the value of this once most prestigious degree? Teresa Russell talks to providers and graduates about the cost and value of a Masters of Business Administration

Many HR professionals are turning to MBAs as a fast track way to broaden their business skills, enhance their reputations among business peers and improve their career prospects. Does an MBA in 2004 deliver all that it promises, or has the proliferation of providers and graduates diluted the value of this once most prestigious degree? Teresa Russell talks to providers and graduates about the cost and value of a Masters of Business Administration

Thirty years ago, if you had an MBA from America’s Harvard Business School, you could command film-star wages and work for your choice of employer. Australian MBA students could study at just a handful of universities and were also highly regarded. Today, there are more than 40 Australian universities offering over 80 types of MBAs to 27,700 students. Courses range from one to two years in duration (two to four years part time), cost between $10,000 and $48,000 and can be 100 per cent classroom learning, completely by correspondence, or a mixture of both.

What should a HR professional look for in an MBA program, both for personal study and from the point of view of hiring an MBA graduate? How do you find an impartial view? What salary expectations should graduates have and does it really help you do your job better or is it just a piece of paper?

How to compare MBAs

MBA programs around Australia (and the world) are rated in various ways. The Good Universities Guide to Business Management Courses, for example, rates and ranks programs through a number of different criteria such as choice in the curriculum, numbers of international students, proportion of senior managers, corporate links, size of faculty, academic qualifications of teaching staff and share of international market. It also outlines course costs, which are $15,000–20,000 for most, as well as salaries upon graduation. The latter range is $45,000–90,000, with graduates of Deakin University, Melbourne University and the Melbourne Graduate School of Management receiving the top five-star rating.

Other MBA course rankings can be found in the Australian Financial Reviews Boss Magazine, Asia Incs magazine and the UK’s Financial Times newspaper. Each university publishes graduate statistics and information about the MBA on its website. The Australian Graduate School of Management (AGSM), Monash University, Melbourne Business School and Macquarie Graduate School of Management have been declared the top-tier business schools in 2003 in various rankings.

Age and experience

The average age of an MBA student at Melbourne’s Monash University is 31–32 years with 10 years commercial experience. Professor Rob Willis, associate dean of Monash’s MBA and DBA (Doctor of Business Administration) programs claims the drop-out rate is minimal. “Doing an MBA [at Monash] is not like wandering into a first degree. Our students usually have family and/or financial commitments. They have chosen this university not just because of the core program, but because of other areas of specialisation they can pursue, either as a major or a double degree,” he says.

Both the AGSM and Monash Business School have good national and international reputations. They differentiate their degrees from the plethora of other providers in different ways. Each screens prospective students, relying heavily on students’ commercial experiences as a valuable ingredient in the class mix, believing that the more business experience a student has, the more they will get out of the degree. Both schools require a minimum of two years experience, but have a student body with an average of six.

AGSM uses the GMAT (Graduate Management Admissions Test) as one of its selection criteria for its full-time course, but not for its part-time MBA Executive degree. It also relies heavily on the quality of its faculty, the research it publishes and its network of students as points of difference.

Willis says that Monash targets students looking for a specialist MBA. “It is a 16 unit degree, whereas many are just 12 units. We require our students to pass exams worth 50 per cent of the subject in all core MBA units.” (Apparently, many MBAs on offer have assignment work, often in groups, which account for far more than 50 per cent of a subject’s mark).

ROI

At an average cost of $15,000–20,000 (AGSM’s is $45,360 and Monash’s is about $47,000 for Australian students), how can a student or their sponsoring employer measure return on investment? It’s an easier calculation for a personal expense. Today, fewer companies are paying MBA bills than a decade ago and many students defer the payment using PELS (Postgraduate Education Loan Scheme).

Penny Liggins, director of careers at AGSM says that its mean graduate salary package in 2003 was $130,000, but it is important to differentiate between full-time and part-time students. “Around 50 per cent of full-time students move industry or function after graduation, while part-time students are more likely to be in higher paid jobs to start with,” she says. Students’ salary and career expectations are managed through careers team interviews, starting in the first year. They then help graduates find a job and encourage alumni networking, Liggins explains.

Willis says that no MBA student should expect course costs to be reimbursed in their first year following graduation. However, he points out that top MBA graduates will double their salaries in three to five years, according to student follow-ups. The AGSM’s MBA program director, Sue Bennett-Williams refers to the latest Forbes ranking of ROI for non-US business schools. The AGSM ROI was measured at three years. “Companies sponsoring part-time MBA students start getting a return on investment during the course, as students use real business problems in their own companies for case studies,” Bennett-Williams says.

Networking

All top MBA programs promote high quality networks as one of their attractions. They choose top candidates and encourage and support peer networking, then remain in contact with old alumni. Universities with distance learning programs usually can’t lay claim to this benefit. Robert Weller, president of the Graduate Management Association of Australia (GMAA), an organisation that promotes the value and standing of MBAs and DBAs, says that many people actually do an MBA to improve their network of business peers. “No-one builds and uses networks like American business schools,” he adds.

MBA job market

According to AGSM’s Liggins, the MBA job market mirrors the economy. Trudy McCutcheon, director of McCutcheon Business Associates, a Sydney-based international MBA-only recruiter, agrees. “The last three years have been the toughest since the business started in 1986. However, the last month has seen incredibly strong demand return to the MBA employment market,” she says.

McCutcheon believes that if an individual gets an opportunity to attend a top overseas business school, they should jump at the chance. “US schools like Harvard, Stanford, Kellogg, Wharton, Columbia and Chicago, or Europe’s INSEAD, IMD or London Business School really set you apart from the MBA crowd,” says McCutcheon. She refers to them as “CEO training grounds” and believes graduates excel in strategy and business development in the corporate environment.

HR and the MBA

There are many HR professionals who do MBAs to broaden business skills and enhance their careers. Sam Toppenberg, global manager organisational development for Southcorp, graduated from the AGSM’s part time course in 2001. She previously worked for Boral and Merck Pharmaceuticals.

“I have worked in fairly tough businesses and wanted to do an MBA so I could be more strategic in my role. I knew I had to get clever about all the financial stuff,” Toppenberg says. She also likes the credibility her degree gives to HR and the shocked look on colleagues’ faces when they find she has an MBA. She says she was “one of the lucky ones” who was sponsored by her company and enjoyed the broad-based business subjects. Toppenberg says she is “not an aggressive networker” herself and found the attitude of some of her fellow students quite pretentious – the only downside to her MBA.

Cathy Doyle, executive general manager people at the Commonwealth Bank’s Investment and Insurance Services division, completed her UNE correspondence MBA in 1999 and is a strong advocate of the degree. “I chose that particular provider because of its flexibility, the electives and the fact that there were no residentials I had to attend,” she says. She believes it positioned her well for her first general management HR role at the age of 32. “It’s important to be able to talk the language of the leader, not just HR lingo,” says Doyle. She admits to missing a cohort of peers by doing a distance learning degree, but had a business mentor and developed networks at work instead.

Padam Chirmuley, director organisational development for Dun & Bradstreet did his full-time MBA 12 years ago, on the back of his undergraduate chemistry degree and masters. “With no business experience, the study was more theoretical than practical for me, but it gave me a broad understanding of the business world and exposure to business theory and other students,” he says. Chirmuley advocates work experience as a prerequisite for an MBA. It facilitated his transition from science to HR utilising networks of the academics and says it helped him align HR strategies to his employers’ financial and marketing imperatives.

Hawker de Havilland takes MBAs in-house

Boeing subsidiary Hawker de Havilland, recently launched a program which provides tailored learning and development opportunities for its broader workforce, along with the opportunity to pursue an MBA for those seeking the qualification.

Dubbed ‘Higher learning’, the program is designed to develop leadership capability and a culture of innovation that contributes to the bottom line. Conducted in partnership with the Australian Graduate School of Entrepreneurship at Swinburne University, Higher learning is internationally recognised as a fully accredited MBA program.

The first of its kind in Australia, Higher learning was conceived of two years ago when Hawker de Havilland recognised a gap between its current and future states of people development. The program has been developed as a more focussed investment in learning and development, which is fully aligned with business strategy, according to David Carbon, Hawker de Havilland’s general manager of human resources.

Higher learning ties into the business by linking to the broader organisational development blueprint, which encompasses mentoring, performance development and succession planning. The program is conducted via a mix of classroom participation and work-based projects, and offers employees the flexibility to select specific learning modules to suit their needs. Content is industry-specific, with case studies relative to manufacturing, aerospace and engineering, for example.

“The aerospace industry is undergoing massive change and consolidation of the supplier base,” says Carbon. “Our business direction is to ensure that we are a ‘tier 1’ supplier, i.e. one of the handful of suppliers directly to the prime aerospace companies such as Boeing and Airbus. Both project management and risk management are becoming fundamental to our success.” As such, subjects in these areas form part of the larger MBA but are also available as standalone subjects for Hawker de Havilland’s broader workforce.

Higher learning is supported by a $1 million dollar investment over three years, and up to 300 of Hawker de Havilland’s almost 1,400 employees are expected to undertake the program. However, in such a relatively small workforce, one of the main challenges going forward is managing expectations. “We employ people at the level that we need for a particular role rather than paying for experience or qualifications we may not have a need for,” Carbon explains.

The flipside of this coin is ensuring that MBA students are provided with the opportunities to apply their learnings back into the business and provide a return on investment.

This was a cornerstone in Higher learning’s business case, which projected more strategically aligned development opportunities, a more effective use of Hawker de Havilland’s training dollar, and simplifying and rationalising its supplier base in order to achieve greater economies and efficiencies.

“My vision is that Higher learning becomes a benchmark in people development – attracting people from other Australian industry, key suppliers and from Boeing in the States – eventually becoming self-funding and even revenue building,” Carbon adds.

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