It’s no secret that many MBA candidates attend business schools in the hopes of improving their career options, including higher salaries, more responsibility, and more influence.
In this episode of Business Casual, John, Maria, and Caroline will discuss MBA employment, specifically how the job market for MBAs has been exceptional this year.
Points of discussion:
- How dynamic is the MBA industry in general?
- How huge are the numbers involved?
- Which b-schools align with your future job interests?
Episode Transcript
[00:00:07.750] – John
Well, hello, everyone. This is John Byrne with Poets and Quants. And welcome to Business Casual, our weekly podcast with my co host, Maria Wich Vila and Caroline Diarte Edwards. Maria, of course, is the founder of Applicants Lab. And Caroline is the former admissions director of INSEAD and a co founder of Fortuna Admissions. We’re going to talk today about employment. Obviously, people go to MBA programs in part to enhance the opportunities in their careers for greater pay and greater responsibility and influence. And we can tell you that it’s been an incredible job market for MBAs this year, and it’s looking like we’re heading into another great year as well. One school after another is reporting record pay and signing bonuses for their graduates, as well as record or near record placement rates, both at graduation and three months later. And we all know that there is a labor shortage in the US, but oftentimes we think of a labor shortage in terms of those low cost jobs at McDonald’s and Starbucks and other places. But, in fact, the demand for MBA talent and the people who are graduating specialty master’s degrees is so great right now that there’s clearly a demand for highly talented young people as well.
[00:01:37.990] – John
Caroline, what do you make of this? What does this tell us about the enduring value of the MBA and the ROI on it?
[00:01:46.770] – Caroline
Yeah, it says a lot, doesn’t it? I mean, it’s great news that the economy is doing well and rebounded faster than people had thought twelve months ago and that the recruiting market is so strong. And as you say, it says a lot about the value that employers place on the MBA. And periodically we discussed the criticism that comes up in the media of business schools and the MBA and people who say that it’s not worth as much as people think. But the proof is in the pudding. Right. And the proof is what people are willing to pay for that credential and the experience and the skills that people build during the programs and the fact that recruiters are coming back every single year and recruiting in such vast numbers and willing to pay such a premium for those graduates. That says more than anything else about the value of the degree. And the students are seeing a tremendous bump in their salary. When you look at what people are earning before the program and what they’re earning when they graduate, isn’t it the degree program that generates the best return on investment and the fastest payback?
[00:02:58.130]
Yes.
[00:02:59.450] – Caroline
Excellent news. Yeah, it’s somewhat paradoxical there, isn’t it? Because it’s great news for the business schools and for the students. But it also means that there may be a downturn and applications coming because the job market is so strong and there may be a decrease in the pipeline. People applying to business schools because the candidates who might otherwise apply are also getting job offers and promotion. So it’s a somewhat paradoxical picture for business schools that while job markets are very strong, sometimes things are tighter on the incoming pipeline, and when there’s a surge of applications, it’s often more difficult to place those students. So it’s a somewhat paradoxical situation.
[00:03:47.990] – John
Yeah, that’s really true. Usually application volume is counter cyclical to the economy, and as the economy goes strong, applications go down. So it will be interesting to see when this current application period is over, will things be flat? Will they be down? I know in round one, the number of schools were reporting fairly significant increases in their applications. Maria, what do you make of these salary numbers? And I bet you wish you graduated with your MBA now as opposed to then.
[00:04:22.570] – Maria
I wish I were 29 years old. In general.
[00:04:29.310] – Caroline
You are 29 years old. You’re right.
[00:04:33.330] – Maria
I will Venmo you the money that I’m going to pay you to say that. Yeah. No, of course I wish I were graduating now. I think reports of MBA career opportunity death have been greatly exaggerated. I got a real kick out of that. Four days ago, the Wall Street Journal published an article that was titled MBA starting salaries are Soaring, and a little over a year ago, they published an article that was like, MBAs are usually swimming in job offers by now, but not this year. We’ve talked about this so many times, where the business media, where the writers themselves don’t often have MBA, is really love to bash on the MBA when it’s down. They love to kick it whenever there’s even a shred of bad news. But I think, as Caroline said, the fact that these employment numbers have come roaring back to where they have been in the past, the fact that the salaries are in fact, going up a little, I think it’s great news and continues to be an enduring testament to the value of this degree.
[00:05:38.670] – John
Yeah, definitely. Now we have yet to see the reports from Harvard and Stanford or Columbia. Harvard and Columbia will come out before the end of November. Stanford tends to hold off until early January because they graduate a bit later than the other schools. But if you look at some of these reports, they’re pretty impressive. Okay. Wharton basically found that by late summer, nearly all of the schools graduates seeking jobs were working or had received offers of work. There was 99% offer rate after three months, a new school record. Over at MIT, there was a big increase in other compensation, which some schools have now stopped reporting. But this is revealing because other compensation is often a carrot dangled in front of MBA graduates to get them to take an offer. The median went from 11,000 other comp to 34,000. Overall, I contributed to an eight and a half percent jump in total compensation to 195,600. At MIT Sloan Chicago, Booth also saw median salaries and bonuses increase, leading to overall compensation of 178,000, plus up about 5% over the previous year. Kellogg today, in fact, gave a little glimpse of its numbers, and they reported that basically 97% of the graduates of job offers three months after graduation, which is up from 95% meeting and starting salaries, jumped $$6,000 to $150,000.
[00:07:17.430] – John
And if you add in the bonuses, that comes to $175,800. That’s pretty good money for someone who could be 28, 29, maybe 30. There aren’t a lot of people in the world who make that kind of money, no matter what age they are. To be making that kind of money at 28 to 30 is really a big chunk of change. And of course, that’s just start oftentimes we value these programs on the basis of the starting pay numbers, but the truth is that the long term benefits of the MBA are far more important than what you get when you graduate. Right, Caroline?
[00:08:06.870] – Caroline
Yeah, that’s right. And schools do survey alumni three years out, and often later on, often when the schools invite alumni back for reunions, they’ll survey the alumni and ask a bunch of questions to sort of understand how their careers have evolved and so on. It continues to pay off, as you say. And I think the payoff is not just financial, although that’s a big part of it. I think in terms of life satisfaction and career satisfaction, you also see very good data as well, because it gives people options. Right. You don’t have to stay stuck in a job if you’re not enjoying it and you’re not happy there. It opens doors not just when you graduate, but five years, ten years, 20 years down the line. It gives you the credibility to knock on the door of an employer who might not have otherwise considered you. And also you have access to that amazing network of people who are ready to help you if you need help with a career change, career switch, it is something that has tremendous long term value, both financial and in terms of general satisfaction with how your career is evolving.
[00:09:26.590] – John
Yeah. One of the intriguing things that I’ve seen over the course of Harvard Business Schools is Harvard Business School. When they have reunions, they often survey their classmates and then deliver a report. And of course, these reports are private and confidential and meant only for the classmates. A number of years ago, I got hold of one for the 25th anniversary reunion of a given class. And what you see is just remarkable detail on the success of people with an MBA 25 years after they graduated from Harvard Business School. Maria, have you had your 25th anniversary yet?
[00:10:09.720] – Maria
I’ve gone from being 29 years old to now being 25 years out. No, for John, there’s like a picture of Dorian Gray that’s just like bouncing all over someone in my house. I have not had my 25th reunion yet. And actually, the news of this report is actually, I have to admit, news to me. So I don’t know that maybe they only do it for the 25th, maybe they do it for all of them. And I just have not paid attention.
[00:10:40.790] – John
Let me say this for those who want to look this up, this is one of my favorite stories of all time, and I love the headline Love, Sex and Money, a revealing class portrait of the lives of Harvard MBA’s. You might find yourself in that story, Maria.
[00:10:58.670] – Maria
That is a click worthy.
[00:11:01.910] – John
And it’s totally worthy of the story.
[00:11:05.510] – Maria
Yes, of course.
[00:11:06.360] – John
What I did is I had a friendly member of the class of 1000 1986 dropped this report on me 25 years later. Here’s what it said. The median annual income of a class of 86 MBA was $350,000. Slightly more than one in four class members reported annual income of 1 million or more, while 8% of the class said they earned more than 5 million. Last year, the median net worth of a member of the class of $6 million. But that number really only tells a small part of the story because 19% of the class reported net worth between 20 million and 100 million. And about 4% of the class said their personal net worth exceeded $100 million. Now here’s really some of the cool stuff. All right. Are you ready for this? Some 18% dated someone they met online, but only 3% of the class married the person they met on the Internet or by some other commercial means.
[00:12:07.850] – Maria
Get that commercial means, I don’t know. Hold up. Listen, maybe that’s where people are making $100 million. Maybe they set up that commercial means business, and that’s how they made their money.
[00:12:22.070] – John
Some 14% of the class is divorced and another 1% separated. About 5% divorced and remarried. The class of 1986 wasn’t into the bar scene. Only 3% of the class met their spouses at bars from 6% said they met in the party and 4% met randomly on a plane.
[00:12:39.980] – Caroline
What? Can they track this?
[00:12:41.600] – Maria
What is yeah, this is very this incredible detail. We need it for science. It’s very important for our information about business analytics.
[00:12:51.610] – John
Okay.
[00:12:51.970] – Maria
Yeah.
[00:12:53.510] – John
About 21% met their spouses at their undergraduate schools, while 14% found their spouses at Harvard Business School. How about that? About one in five has skydived, while one in three completed the marathon. Here’s one for the people who have, well, shoe fetishes, one in four on 25 or more pairs of shoes. That’s 58% of the women and 15% of the men. Now, does this story deliver on love, sex and money come around?
[00:13:26.190] – Maria
It does, yeah.
[00:13:29.500] – John
You got to look it up. But really, the main point here is long term MBA pay. And yeah, this is only a glimpse at one particular class at Harvard Business School. Admittedly the school where people do very well when they graduate from. But nonetheless, I think it’s very revealing and it’s symbolic of what MDAs across the best schools do experience. And to Maria’s point, it’s not only getting the job that pays well, it’s getting a job that gives you fulfillment, personal fulfillment, personal development. And it’s a job that you can pour yourself into and really enjoy. Actually, it’s not even a job. It’s a career, and you’re learning all the time. And I think that’s really what’s not captured in the employment reports that are coming out now. As cool as the numbers are, there aren’t any reports. Of course, the percentages of people who choose different fields, whether they be consulting or finance or technology or healthcare or other consumer packaged goods, media and entertainment and things like that. Obviously, what we’re seeing yet again is, look, the most lucrative careers you can pursue are largely in hedge funds and private equity, followed pretty closely by consulting.
[00:14:51.280] – John
If you can land a job at one of the top consulting firms, your starting pay is going to be $165 to $170, with a $30 to $35,000 sign on bonus right off the bat. And I was making the point earlier in our pre discussion that if you look historically at the MBA, what you find is that the actual number of graduates from, let’s say, the top 25 schools in the world hasn’t changed all that much over the years. Yeah, it’s increased a little bit, but not a whole lot. Meantime, student choices have changed dramatically. There are more people going into jobs like hedge funds and private equity firms. There are more people going into early stage companies and startups. And what that all means is that many of the mainstream recruiters of MBAs companies like McKinsey, Bay and BCG and Deloitte and companies like Google, Facebook, Apple, Amazon, which actually didn’t even exist before, but they’ve kind of replaced it to some degree. The IBM’s and Procter and Gamble in a way, although obviously IBM, Proctor, and Gamble still recruit MBAs. But there’s actually a smaller supply of MBAs from those top schools available to mainstream recruiters.
[00:16:14.970] – John
And I think that bodes well for the future because the need for really smart, ambitious people who can make a difference in the world of work isn’t going down. It’s only going up. And B schools tend to have a disproportionate share in them. So to the extent that more of those graduates are allured seduced by PE, hedge funds, startups and early stage companies and fewer going into those mainstream MBA jobs, that bodes well because there is less of them and there’s a greater need for them. Maria, do you think that’s true?
[00:16:54.010] – Maria
Yeah, absolutely. And one of the things I love about pouring through data like this is that we have said over and over again on this podcast that the rankings are not nearly as life or death important as some people, unfortunately, make them out to be. And some of this data just proves that out. So, for example, if you look at the percentage of people who go into consulting between Wharton, MIT, Booth, and Ross, you’re looking at high 20% to mid 30%, 27%, 28%, 35%. And the salaries are essentially identical, right? Yeah. If you go into consulting out of Ross, you’re making the same amount of money as if you go into consulting out of Wharton. And so it’s so interesting to me sometimes the psychology of the rankings where people say things like, oh, my gosh, I got into a school that’s ranked fourth and I like it more. But I also got into a school that’s ranked second, and I don’t like it as much, but it’s ranked second versus fourth. And it’s like it doesn’t matter, first of all, where you think you’ll be happier. But also if you want one of the sort of the typical big feeder jobs like consulting and technology, especially, you can get those opportunities from top ten, top 15 schools, pretty much identical opportunities.
[00:18:11.350] – Maria
We all have clients, former clients that are now at the Amazons of the world. Whether they went to Ross or they went to Harvard, they’re now working together in the same product management jobs. So I think that overall, if you want to go into one of those big feeder destinations, then I think keep your eyes on the prize and say, well, that’s the end goal. So I am not going to obsess and lose sleep over the rankings. That having been said, on the flip side, there are certain fields that are absolutely mostly or primarily available to the top schools, but I think that’s a matter of a chicken and egg situation. So for example, about 14 and a half percent of the class at Wharton went into either private equity or venture capital, and only about one and a half percent of the class at Ross did, if I looked up this data correctly. So that’s a pretty big percentage. And you might say, oh, well, then in that case, I shouldn’t go to a place like Ross. However, I am guessing that a significant percentage of the class entering into Wharton already had either some sort of private equity or relevant venture capital.
[00:19:15.090] – Maria
So I think that becomes sort of a chicken and egg. And I think the final point I want to make also is that if you are interested in more of a niche type of a job, like media and entertainment or real estate, really now, it’s not about digging into rankings at all. Really dig into those placement percentages. So just to take real estate as an example, MIT had less than 1% of its graduates, zero. 7% of its graduates going to real estate. Wharton had 2.1%. Three times. If you just look at the percentages three times higher of a percentage of people went into real estate. So if real estate is your passion, don’t just look at the top tippy top schools by the overall rankings, look at a Columbia, look at a Wharton. And again, just keep your eyes on the prize. Similarly with media and entertainment until I’m blue in the face, I talk to people who are like, I really want to work for Netflix, I really want to work for Disney. And I’m like, great, go to UCLA or USC. And they’re like, well, no, I don’t want to do that. You don’t understand how not just in terms of post graduation jobs, but to Caroline’s point earlier, there are so many alumni of USC and UCLA all over Hollywood that for years, for decades to come, going to one of those schools is a pretty good bet.
[00:20:31.300] – Maria
So anyway, the data just sort of, I think, backs up things that we have been preaching from the mountain tops for many sessions.
[00:20:39.640] – John
Now that’s really true. And talking about career choice, I wonder, Caroline, do you think it’s often said, okay, you want to go into consulting, you go to INSEAD, you want to go into finance, you go to London Business School. But it’s not that simple, is it?
[00:20:52.960] – Caroline
No, it’s not. The data shows that, as you said, graduates have a tremendous choice of employers. And I’m sure that whilst we see these wonderful numbers, I’m sure that many of those students had multiple offers that they were choosing from in times like this. It’s not just that the tide has risen and they’re getting increased salary offers. The recruiters are competing more to get those graduates to accept the offer because those graduates are getting multiple offers. So you have a multitude of options that’s the wonderful thing about going to business school is it just gives you credibility to interview with recruiters who were just not otherwise have considered you at all. And so many different paths become open because of that springboard that you’re given to a new future. Sometimes it’s easier to stand out. People think, oh, you have to go to London Business School if you’re looking at international school to go into finance. But if everybody thinks that right, the competition to land a job in finance at London Business School is going to be greater than if you’re trying to get into investment banking from Inc yet, for example. So sometimes it’s better to be in an environment where not everyone is trying to do the same thing and it’s easier to actually distinguish yourself.
[00:22:16.370] – John
Now, what advice do you have for people who are basically deciding between or among different offers at schools and they look at the employment report to help make their choice? What should they, in fact, be looking at in those employment reports? Because you can make the argument. And this goes back to what Maria was saying, sure, if you want to go into venture capital, private equity or hedge funds, I think those are very exclusive kinds of positions. They are onesy to Z kind of recruiting opportunities for organizations, usually involving an independent job search of some kind. And there are schools that are known for that, like Stanford, like Wharton, like Columbia, Harvard, Chicago, to some extent. But for other things, I mean, how do you read an employment report to help you decide what school to go to? Any advice?
[00:23:12.530] – Maria
I think for me it’s really looking at those percentages of the class. And then also, I guess if the percentages are equal, you could look at the size of the class and just sort of say like how many people are in the alumni network. If every year, 50 people every year after year after year are going into this industry, then that’s probably a good thing for me versus if it’s two people from another school. But I think it’s more than just employment report. The other element of the employment report that you should look at, I should say it’s more than just the employment percentages. It’s also the element of the employment report that you should look at is the geography as well. So you might go to business school and you might say, oh, I really want to get a job offer at McKinsey.
[00:23:51.070]
Great.
[00:23:51.440] – Maria
But if you go to a business school in a certain or whatever, if you go to a business school in a certain geography, that regional office might be the one hiring. So you have to look at also where do people end up after business school? I did not anticipate while people do spread out after business school, there actually is quite a bit of gravitational pull for the major business schools for people to stay roughly in that area. It’s a pretty big percentage. So if there’s a certain part of the country or the world that specializes in this is my point with the UCLA, USC thing with entertainment, just simply being in the same city is going to give you networking opportunities, internship opportunities, project opportunities that you’re not going to get if you’re in some random I don’t want to pick on another school, but that you’re not going to get if you’re in a different geography. So I would look at the percentages, the geography, and then the other thing I would look at that’s not in the employment report is looking up the professional clubs, the career focused clubs, and going to that website and seeing okay, oh, look, the entertainment and media club here at Columbia and NYU has an annual conference that has hundreds of attendees.
[00:25:02.000] – Maria
And look at who the keynote speakers were versus if you go to another school’s media and entertainment club website, it’s like two people. And it was last updated five years ago. And that can be a really good hint to you of how active is that community for that niche interest of yours within a school. So that’s my other data point.
[00:25:21.230] – John
Yeah. Caroline, do you have any advice for reading employment reports for the purposes of either deciding where to apply or where to go?
[00:25:30.050] – Caroline
I think that all of that makes a lot of sense. It’s important to think about whether the program that you’re applying to or that you’re thinking of accepting is actually going to help you achieve your goals and get beyond the brand and the reputation and where your parents think you should go to business school and focus on the long term and whether you’re going to, as Maria said, whether the recruiters that you’re actually really interested in are recruiting in significant numbers at that school and whether it’s going to enable you to make the change that you’re looking to make or the acceleration that you’re looking to make and then get beyond the data as well. Talk to people in your target industry who went to that school and find out more about their experience and how the school supported them with their job search and help them achieve their goals and how the school continues to play a role in their careers and their life post MBA. So I think that sort of qualitative input from people who know the school really well from the inside is just as important, if not more important sometimes than that.
[00:26:45.540] – John
Hard data really true. In any case, it’s a great market out there. And as more of these employment reports come out, I think you’re going to see even more evidence of that. All right, so all good news and the Wall Street Journal actually reported good news about the NBA. That’s news in and of itself. How about that? Maria and Caroline, thank you so much. Again, this is John Byrne for Poets and Quants. You’ve been listening to Business Casual. Our weekly podcast.
