Research from Rollins MBA Disputes Myth about the Financial Value of Pre-MBA Work Experience

November 4, 2009 9:58 AM EST

ORLANDO, Fla.--(BUSINESS WIRE)-- The Rollins MBA at the Crummer Graduate School of Business today announced the findings of research which measured the value of an MBA degree for those with and without pre-MBA work experience. The study investigated the economic benefits and costs associated with choosing to delay matriculation to a full-time MBA program to gain work experience, rather than enrolling immediately after completion of undergraduate studies. It concluded that there is a financial disadvantage to delaying matriculation into a full-time MBA program.

While students who have less work experience had lower starting salaries, the difference was overcome by the advantage of getting an early start on careers. The study found that, by the age of 30, those who attend business school right out of college tend to be paid about the same amount as those who worked one to five years before receiving their MBA; and students who delay matriculation may incur a long-term financial penalty. MBA students without work experience showed an average 96 percent gain in salaries five years after receiving their MBA compared to 80 percent for those who had one to five years of experience.

"Pre-MBA work experience is required for admission to many graduate schools of business," said Craig McAllaster, dean of the Crummer Graduate School of Business. "The perception among students has been that this work experience translates into a higher salary. While this might be true immediately following graduation, our research shows that those with no work experience actually see a higher gain in salary five years after graduation, compared to those students who worked for one to five years prior to obtaining their MBA."

The research supports an increasing awareness that dropping out of the workforce at age 28 to attend a two-year MBA program creates a large opportunity cost, not only in terms of forgone salary but also in terms of lost career momentum, particularly in the fast moving industries, such as high-tech. As a result, alternatives to enrollment in full-time MBA programs continue to surge whereas full-time programs have seen a decrease in applicants in recent years. Part-time students do not incur the high opportunity cost of forgone salary and many have their tuition reimbursed by their employer.

"The study underscores that, contrary to the conventional wisdom resulting from the business school rankings, it is advantageous for students with the right attitude and aptitude to pursue an MBA directly out of college, or shortly thereafter, for a variety of reasons including a higher return on investment," said Mark Zupan, dean of the Simon School of Business, University of Rochester. "This research comes at a critical time in graduate management education. GMAC reports that the under 24 age group of GMAT test takers has doubled in size since 2004-05 while growth in the 24-30 age group has only marginally increased in the same time period."

The research was conducted by Mark Johnston, Alan and Sandra Gerry professor of marketing and ethics; Keith Whittingham, associate professor of management science, of the Rollins MBA; and Ronald Yeaple, former associate dean and distinguished professor of marketing. Full findings of the research will appear in volume 85 issue one of the Journal of Education for Business.

Methodology

MBA graduates with a wide-variety of pre-MBA work experience were surveyed to assess the economic value of work experience. A questionnaire was mailed to all of the 1,902 U.S. MBA alumni of the Crummer Graduate School of Business from the class of 1996 to the class of 2006, including full-time, part-time and executive MBAs. Respondents were asked about: demographics (age and undergraduate degree), areas of course concentration, year of graduation, pre-MBA job description and salary, first post-MBA job description and salary at five years after graduation, and job description and salary at the time the survey was conducted.

Additional questions inquired about their overall satisfaction with their MBA educational experience, from the perspective of having several years of post-MBA work experience. Anonymous survey responses were mailed to a research organization geographically remote from the school. A total of 550 usable responses were received for a response rate of about 30 percent. The responses include 174 graduates from the school's two-year full-time MBA program, 78 from the one-year full-time program, 170 from the evening part-time program, 21 from the Saturday part-time program and 107 from the Executive MBA program. All of the typical areas of MBA concentration (finance, management, marketing and operations) were well represented among the survey respondents.

    Source: The Rollins MBA at the Crummer Graduate School of Business

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