If you're thinking of heading back to school for a master's degree in business administration (MBA), you've probably wondered how it could change your paycheck.
It depends upon many variables, including which school you attend, your prior experience and whether you enroll in a full- or part-time program, says Rachel Edgington, project manager in information services for the Graduate Management Admission Council (GMAC). GMAC, which administers the GMAT (Graduate Management Admission Test) that graduate schools use to determine who gets into MBA programs, surveys past test takers to see where they end up and what they earn before and after graduation.
GMAC's ongoing research has found that these three factors affect MBA salary the most (in order of highest influence):
- Preexisting salary
- Function of employer
- Number of people managed (pre-MBA)
In reaching these conclusions, Edgington controlled for other factors that could influence salary levels, such as age, gender, program type, race or ethnicity, marital status, number of dependents, specialization, life values (the importance of wealth, financial security, work and family) and pre-MBA work experience (size of budget, number of people managed, years of experience and highest position held).
The three factors add up to the following: An MBA won't guarantee you a job on Wall Street if you have no quantitative skills or experience to back it up. It's an issue David Petersam comes across often as president of AdmissionsConsultants Inc., a Vienna, Virginia, firm that helps business school applicants gain admission to suitable schools.
"Sometimes people get their hopes up about salaries when they get out of school," Petersam said. "If you don't have the background for investment banking, you don't want to be disappointed when Goldman Sachs won't touch you [after graduation]."
You also have to match your temperament and interests to your postgraduation work. If you don't have the drive it takes to work extremely long hours, you won't like -- or do well in -- investment banking.
Likewise, you need to make sure an MBA is right for helping you reach your career goals. Petersam has counseled MBA wannabes who plan to use their degrees to become financial planners. He tells them they're going after the wrong degree and refers them instead to a financial planning certification program.
Where You Work
Both experts agree that consulting firms and the health-care industry pay the highest salaries to newly minted MBAs. GMAC's data show graduates working in consulting earned a median of $95,000 and those in health care a median of $80,000.
However, those figures -- as well as salary data given out by graduate schools themselves -- may be inflated for two reasons. First, the figures are self-reported, and who doesn't like to exaggerate a little? Second, salaries in banking can include big bonuses, so total compensation might be higher in that field, depending upon what kind of year you have, Petersam says.
According to GMAC's 2004 Global MBA Graduate Survey, typical MBA grads "expect a 35% increase from their pre-MBA salary [to $76,000 from $56,000]." And the results of GMAC's Corporate Recruiters Survey 2004-05 show that most MBA graduates can expect to earn "a salary premium of 28% [more than] graduates from other graduate programs and 71% [more than] new hires from undergraduate programs."
Full Time vs. Part Time
Will your choice of programs make a significant difference in your post-MBA salary? Part-time students tend to enjoy a lower percentage increase in their salaries, possibly because part-time students typically have higher salaries to begin with.
While money is important, there's more than one way to judge the cost and benefit of pursuing an MBA, says Jeff Blum, founder of MBA Depot, an online networking site for MBA alums.
"For someone who wants to start his own business, the return is going to be different than someone who wants to go to a top-tier consulting firm," Blum said. "If you want to work on Wall Street, you don't want to go to a second-tier school, because those top employers aren't going to interview on your campus."
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