Older and maybe just a little bit wiser…
Marietjie Wepener, the Deputy Director: Business Development, Marketing and Communication at the University of Stellenbosch Business School (USB), makes an important distinction about the students they see coming through their doors: “Notably, in South Africa, people enrol for their MBA degree later than in other parts of the world (like Europe and Asia). Therefore they have more work experience than their European or Asian counterparts. The average age of our different MBA groups varies between 34 and 38 years, and 73% of students already have more than seven years of work experience (mostly managerial) when they enter the MBA.”
This is fairly ref lected in the research we conducted, which showed that survey respondents were between 30 and 39 years old and on its own tells an interesting story. If you are considering doing an MBA in your mid-twenties, you may want postpone that decision for a bit to ensure you get the maximum return on investment.
IS THE MBA THE SILVER BULLET TO FINANCIAL INDEPENDENCE?
One MBA graduate from UKZN (2010) told our researchers: “The MBA degree can best be described using the analogy of a soldier going to war: it equips all those that graduate with the same tools and skill set (weaponry and armour in the case of the soldier); and some use these more successfully than others, and are able to effect change, not only in their own personal and professional lives, but inspire those around them to do so as well (survival and death in the case of a soldier).”
SHOW US THE COLD, HARD CASH
While there may be a perception that the MBA adds materially to a salary, it only came seventh in our research in terms of motivations for doing the qualification. Thirty two percent of respondents selected this as a reason to do the qualif ication. By far the main reason for studying an MBA degree is the attainment of business knowledge (selected by 79% of respondents). This is followed by ‘Improvement in Soft Skills’ (51%) and ‘Confidence in a Business Setting’ (49%).
A fascinating exercise f rom the Finweek perspective was chatting to representatives from the various business schools about what the impact of the MBA was on the earning power post the achievement of the MBA qualification.
“Figures for South African students are difficult to come by, however, international studies would suggest that MBA graduates from top US schools double their pre-MBA salaries within about three years of completing the degree. Many South African students use the MBA to make a career move, often into consulting or investment banking, and thus such moves hold marked impact on the MBA graduates’ salary package,” explained Conrad Viedge, MBA Director at Wits Business School.
“Recent research shows that more than 85% of employers value the ‘strategic planning ability’ and ‘strategic insight’ of MBA graduates. Fifty t wo percent of employers indicated that they pay MBA graduates more than other employees. At USB, 77% of our MBA graduates, who completed their studies in the last three years, now earn R600k (TCTC) and more, while a mere 31% of the same group earned the same amount prior to starting their MBA studies,” adds Marietjie Wepener, Deputy Director: Business Development, Marketing and Communication at the University of Stellenbosch Business School (USB).
Kevin Rafferty, a senior lecturer at the Rhodes Business School, pointed to the 2011/12 survey conducted by Feedbackrocket.com and Finweek, and used the
16.5% f igure. However, lead researcher Gavin Symanowitz is quick to point out: “Last year, the overall annual salary growth of an MBA graduate was calculated to be 16.5% per annum. However, the annual salary growth of the same individual before getting the MBA was 11%. So the impact of the MBA was to add an extra 5.5% to the graduate’s expected future salary growth.”
In terms of our research for 2013, we conclude that:
On average, the annual rate of salary growth during the period of MBA study was 9.1%.
On average, the annual rate of salary growth after the MBA was 11.2%.
In essence, the MBA adds an extra 2.1% to expected annual salary growth postMBA qualification.
The MBA premium is only 0.3% per annum for females (compared to 2.8% per annum for males). So it would appear that the MBA does not add significantly to future earning trajectory of females.
The MBA has the effect of adding an extra 6.6% per annum to the average salary growth rate of black MBA graduates, which is much higher than for the MBA group as a whole. This is not unexpected, due to the effect of the BEE (black economic empowerment) codes and the need for corporates to appoint black senior managers.
The impact of the MBA is particularly strong for middle managers – these respondents experienced a 4.8% boost to their average annual salary growth as a result of the MBA.
Those who left South Africa after completing the MBA experienced an additional boost of 4.6% to their average annual salary growth. This is more than double those that stayed to work in this country.
Those who paid for the MBA them- selves (as opposed to their companies paying for it) experienced a higher rate of additional salary growth after the MBA (MBA premium of 3.3% vs 1.1%).
Jon Foster-Pedley, dean and director at Henley Business School, however cautions: “But salary payback, while important to an individual, is a relatively poor and superficial way to evaluate the benefit of an MBA. If an MBA is any good it will transform the way a person works, thinks and delivers value. It will provide skills – rich, high-level skills. The real outcome of a good MBA will show up in following years as the person applies new knowledge and skills into building better businesses and organisations that contribute to their clients and to society by providing solutions and value that are superior and valued. They will use resources better, apply their imagination and creativity more effectively, and dare to transform and make progress. This is the only reason that MBAs should result in higher salaries – because they create value.”