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The Opportunity Cost of Hiring an MBA, from the Employer’s Perspective (Part 1)

Last week’s column highlighted the extent to which having a ‘hard work’ ethos and a mindset focused on seeking out tough challenges after graduation (rather than expecting immediate gratification and a big payout from one’s business school efforts) can be a driving factor in students’ post-MBA success rates.

As part of that focus on appropriate mindset, it’s worthwhile to expand MBA candidates’ awareness and field of vision to include some of the opportunity costs of recruiting MBAs that play a role in employers’ decisions and expectations with respect to hiring business school candidates.

There are, of course, other ‘flavors’ of MBA than the traditional two-year programs that often comprise a company’s recruiting mix and serve as additional competition for full-time MBAs. (See The Best Business Schools of 2013: Part-Time and Executive MBA for BusinessWeek’s latest ranking of leading programs.)

It’s noteworthy that as business schools have grown and diversified their service portfolios to reflect their own competitive landscape (e.g., by offering specialized, one-year degree programs, in addition to undergraduate business degrees as well as Executive MBA and Part-Time degrees), they’ve created attractive pools of candidates that, from an employer’s perspective, bear the same educational imprimatur and can offer distinct advantages. For example, one advantage of specialized programs is that they can provide employees with deeper technical expertise, something not always associated with the general management focus of most full-time MBA programs (see The Business of Zeroing In and The Booming Market for Specialized Master’s Degrees for additional perspectives).

Specialized degrees aside, employers have a choice between two ends of the experience level continuum. Hiring smart undergraduates (including those outside of the management disciplines) offers a way to bring on board a cohort of employees who are viewed as highly energetic as well as open to learning new skills, relocating for new assignments, and enduring frequent travel and long hours … candidates who are every bit the intellectual equals of their MBA counterparts and can be acquired at a substantially lower cost.

On the opposite end of the scale, hiring Executive MBAs or Part-Time (experienced) MBAs can also be a good value proposition. Exec MBAs may require higher and more comprehensive compensation packages, but they can also be placed more readily in roles that involve managing teams, having P&L responsibility, owning client accounts, overseeing important business functions, and contributing deep knowledge and industry know-how that is hard to match by traditional full-time MBAs.

So, are ‘regular’ MBAs somehow hopelessly squeezed in the middle … much too expensive in comparison to undergraduates, not as ready to lead as Exec MBAs, and frequently as demanding as those on either end of the spectrum? Well, not quite.

There is a reason many business schools call the two-year degree their “flagship” MBA offering (see The Value of the Two-Year MBA) and invest so much faculty, administrative, and PR time and attention to sculpting curricula and ‘getting the message out.’

In part, it’s the implicit promise that a two-year MBA program is truly transformational … that full immersion in the MBA experience over a substantial period of time (the sum total of personal growth and development that can occur not only via the instructional experience, but as a function of extracurricular activities, global travel, peer learning opportunities, conferences, competitions, and hands-on business practicum experiences) produces a candidate that is more widely skilled, more worldly, and better-able to cope with ambiguity and complexity.

Another factor is ‘admissions selectivity,’ the notion that full-time MBAs are not merely flow units in an academic machine that accepts inputs, adds educational value, and produces products ready for the market, but that the individuals who enroll in each class are carefully selected (I would argue more so relative to undergraduate admits or Exec MBAs) to assume an integral function of the business school enterprise … to not only contribute to a community of practice while enrolled, but to build the reputation of the school and become the future success stories, the leading doers and thinkers, whose achievements can serve to augment all business school endeavors and attract the next generation of MBA talent.

It’s this last less tangible aspect, I believe, that continues to attract full-time MBA employers. The fact that so much is at stake, that students have made a deliberate choice to spend two years of their lives (interrupting careers in progress as well as career-switching) immersed in an experience that is all-consuming, sends a strong signal to employers regarding students’ commitment, intentions, and drive.

Perhaps the decision to apply to a full-time MBA program is the first step in a progression discussed last week … it’s the hallmark of a willingness to take on greater challenge and a desire to achieve that carries an MBA student from the point of application through years of study, and ultimately through the period of time post-graduation required to build organizations, invent new products and services, and have a positive impact on the world.

Tune in next week for insights and thoughts on the resource-intensiveness of the MBA recruiting process itself…

BIO and contact info

Ivan Kerbel is the CEO of Practice LLC, an educational services firm that conducts an intensive, annual pre-orientation program for newly-admitted MBAs, The Practice MBA Summer Forum. Ivan served previously as Director of the Career Development Office at The Yale School of Management and as a Sr. Associate Director at Wharton’s MBA Career Management office. He is a Wharton MBA alumnus and a former management consultant at Katzenbach Partners, a New York City strategy consulting boutique. Ivan can be reached via LinkedIn.