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The Top Business Schools (A Special Report)
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Do M.B.A. Degrees Pay Off?
By Ronald Alsop 723 words
9 September 2002
The Wall Street Journal
R9
English
(Copyright (c) 2002, Dow Jones & Company, Inc.)
STANFORD UNIVERSITY graduates may boast the richest compensation packages of any business school in the world, but one of Stanford's own is questioning the payoff from an M.B.A. degree.
"There is little evidence that mastery of the knowledge acquired in business schools enhances people's careers, or that even attaining the M.B.A. credential itself has much effect on graduates' salaries or career attainment," Jeffrey Pfeffer, a professor at Stanford's Graduate School of Business, states in a paper scheduled to be published in a management-education journal this fall. He cites previous research by other people, noting that one study of an investment bank's employees showed that more education didn't boost total compensation but simply made M.B.A. graduates a couple of years older than their peers.
Mr. Pfeffer's paper has caused a tempest in the business-school world. On the one hand, it rings true to this year's M.B.A. graduates who remain unemployed after spending $100,000 or more to earn their degrees. Yet it has incensed the Graduate Management Admission Council.
"I'm concerned his paper is dealing only with anecdotal information," says David Wilson, president and chief executive officer of the council. "Where's the beef?"
The admission council claims to have the beef in its latest study. It surveyed 4,700 graduating M.B.A. students world-wide this year and found an average salary increase of 64% from their last full-time job before school. For students in the U.S., the average salary rose 54% to $77,000 from $50,000 pre-M.B.A.
Prof. Pfeffer cites an earlier study by the council of M.B.A. salary gains but says it could be interpreted to show that "what is being assessed is the quality of the student body rather than the effects of acquiring some specific skills or knowledge." He also believes the 1999 council study indicates that an M.B.A. mostly benefited graduates of prestigious schools.
For his part, Mr. Wilson argues that M.B.A. degrees from most universities, not just the elite schools, increase graduates' salaries and speed their career progress. "That's why," he says, "so many people are applying to business schools right now." The number of people taking the Graduate Management Admission Test rose 13% in the first half of 2002 compared with the year-earlier period, according to the admission council.
At Stanford, Mr. Pfeffer's paper is sparking heated discussion. Some professors and deans especially question his assertion that an M.B.A. doesn't translate into fatter paychecks. "The simplest direct test of salary improvement is whether students who leave M.B.A. programs earn more than when they come in," says David Kreps, senior associate dean for academic affairs.
"Of course, Mr. Pfeffer will complain that the effect is temporary, that there is no increase in lifetime earnings," he adds. "But at least in the short run, and at schools such as Stanford, students leave with significantly higher salaries than those they had upon entry."
Indeed, Stanford's class of 2001 seems to have profited quite nicely, departing with average base salaries of $105,000, compared with a pre-M.B.A. average of $63,000.
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Top Salaries
Class of 2001 graduates from these business schools received the
highest average salaries
Signing Guaranteed Year-end
College (business school) Salary Bonus Bonus
1. Stanford University $105,000 $25,000 $37,000
2. IMD International 103,000 20,000 N.A.
3. Harvard University 102,338 23,998 N.A.
4. Dartmouth College (Tuck)97,711 26,524 56,695
University of
Pennsylvania (Wharton) 97,711 25,789 27,890
6. Massachusetts Institute
of Technology (Sloan) 95,449 26,355 28,863
7. Northwestern (Kellogg) 95,000 25,100 27,000
8. University of Michigan 94,429 25,289 24,506
9. University of California
at Berkeley (Haas) 94,094 21,466 24,675
10.Columbia University 94,000 27,000 54,000
(See related article: "Boring Is Back: As New Economy companies vanish, Old Economy recruiters are feeling a lot more desirable; But they wonder: Is It love, or is it desperation? -- WSJ Sept. 9, 2002)
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