HootSuite CEO Ryan Holmes advises business professionals to Skip the MBA: Get a Real World Experience Instead. It may sound a bit self-serving, but we couldn’t disagree more. As the head of Tippie’s MBA programs, I thought I’d respond to Mr. Holmes’ article, starting at the beginning.
In 1999, I dropped out of business school. I think it was one of the best decisions I ever made.
Fast-forward to the present and I’m CEO of HootSuite, a quickly growing social media company with 300 (amazing) employees and more than 6 million customers. It was real-world experience in business that led me every step of the way—not an expensive college degree.
Higher education is pricier than ever, but in today’s job climate, it doesn’t always guarantee a return on investment. This especially applies to the once-coveted Master in Business Administration.
We’re incredibly happy for Ryan (we’re users of HootSuite too!), but it’s a stretch to take his success story and extrapolate it to the broader population. The statement that “[an MBA] doesn’t always guarantee a return on investment” is true for LinkedIn-surfing, or starting your own business without the right capital, expertise, or personal network.
Ryan also assumes that all MBAs are “pricier than ever,” but that’s not the case here at Tippie. More on that later.
1. MBAs no longer make sense financially.
Many people say they want an MBA for the money. But decreasing salaries for MBA graduates combined with skyrocketing tuition costs mean they aren’t experiencing the kind of financial rewards they once did. While students coming out of top U.S. MBA programmes in the mid-1990s saw their salaries triple in just five years, graduates leaving the exact same programs in 2008 and 2009 saw that pay cut spike in half. Meanwhile, MBA students in 2012 paid 62 percent more in fees compared to those in 2005. A two-year MBA at an established school like Harvard or Columbia may well cost you around $150,000. That’s just staggering.
First, I must point out that 2008-2009 was the height of the recession, and nearly every industry saw pay cuts. That said, we agree that MBAs should consider ROI carefully before making such a large financial/life decision. But not all MBA programs have suffered a drastic drop in return.
The Tippie MBA has fared particularly well on this metric, and it’s no accident. A few data points:
- Average salary increase, from pre-MBA to post-MBA salary: 124%
- Average salary increase, from pre-MBA to four years after graduation: 167%
Our program’s based in the upper Midwest, and logically, salaries in Chicago and Minneapolis are lower than Manhattan or Houston. Our average salary at graduation (averaging around $90k for several years now) may look modest in comparison to Harvard and MIT. But hidden behind that number is an ROI that’s second to none. In fact, it’s tied for #1 best payback in the country, according to Forbes.
When you can pay off half your MBA debt with your post-MBA signing bonus (a common occurrence with Tippie grads), you don’t have to crunch numbers to know your degree has a stellar ROI.
What Ryan’s assessment also misses are the non-quantifiable “returns” on a good MBA, such as the upward career mobility, and learning how to analyze, question, and think critically. Not to mention the lifelong professional network. Which brings me to #2…
2. MBAs are no longer the best way to network.
A lot of people get an MBA for the networking opportunities. But the Internet and social media have changed the way we network. Now, anyone can connect with people all over the world using professional social networking sites like LinkedIn. Even Facebook and Twitter are proving to be tools for connecting with valuable allies and business partners. Take for example the story of Stacey Ferreira, a 19-year-old who landed a million-dollar investment from Richard Branson with a tweet. (She’s since dropped out of college.) Technology has leveled the playing field—no longer do you need an Ivy League pedigree to mingle with the decision makers.
MBA programs themselves tend to be highly competitive as well, so there’s no guarantee that your classmates are going to become trusted allies. As for the professors, they may not make the best contacts either, since many are smart theorists but untested business people.
We think of an in-person network and a LinkedIn network as elements that complement each other, as opposed to one obsoleting the other.
When was the last time LinkedIn sat you down to talk about your personal goals, your individual development plan, and put you in contact with influencers that can be resources for you? When was the last time Twitter helped you prepare for a job interview, perfect your 30-second elevator pitch, or ensure your resume accurately represented how amazing you are?
This is the type of individualized career support students get at Tippie.
Competitiveness exists, yes, but it’s not prevalent here. Our students learn from each other, grow together, and support one another, thanks in part to our small class sizes. We never incentivize academic competition (though we promote a little friendly competition for a good cause). This camaraderie is proven through our ranking for #10 Best Campus Environment.
3. MBAs are not as exclusive or prestigious anymore.
MBAs used to be something that really helped you stand out. Now that elite clique is more like a crowd. In 2010, schools in the US gave out 126,214 MBAs, a whopping 74 percent increase from the 2000-2001 school year. Before the early ‘90s, you had to be enrolled in a full-time program to attain an MBA. These days, you can get one part-time or online from schools that are hardly household names.
Don’t get me wrong. I’m not saying that an MBA is worthless. It still boosts your chances for employment. It’s just that the degree no longer offers the same value it once did. The new business landscape—thanks in part to the Internet and social media—grants innovative, entrepreneurial and ambitious people all sorts of new opportunities, without the degrees.
An increase in the supply of MBAs certainly devalues the value of the three letters, but it also indicates that an undergraduate degree is often not enough. Employers will need to pay attention to what kind of MBA a candidate received as opposed to assuming that every grad had the same experience.
The reality is that the MBA hiring market is biased – in the good way – toward more rigorous programs. The difficulty of the coursework, how it stretches you far outside your comfort zone, real-life consulting projects, and myriad other experiences unique to full-time MBAs.
Hiring managers realize this (many have their own full-time MBA). The letters “MBA” are diluted – that’s a fair assertion. But in context with the institution where you earned it, and the type of program you completed, they gain strength again, and deliver greater opportunities to the holder.
So instead of burdening yourself with a $100,000 debt, why not try an internship or start your own business? Instead of pursuing purely financial goals, why not pursue a passion instead? Find that activity you get lost in, the thing you love to do, and do it. After dropping out of business school, I followed two of my greatest passions, programming and entrepreneurship. Safe to say, I don’t regret my decision.
But don’t take it from me. Ask Harvard first-year dropout Bill Gates. Or Ted Turner, billionaire founder of CNN and TBS. Or Sir Richard Branson, who skipped college and started his own magazine company at the age of 16. And let’s not forget the late and great Steve Jobs, who dropped out of Reed College after just six months and instead spent the next year and a half dropping in on a variety of classes…including a calligraphy course.
Ted Turner and Bill Gates are highly inspirational examples, but they are part of a statistic without a denominator. Their situation is so rare that we know them by name.
How many people dropped out, started their own business and did not achieve similar success? Is it because they were ill-prepared for entrepreneurship or because they made errors along the way?
Some make it happen, and others don’t. Small businesses have only a 37% chance of surviving four years. Just 9% will make it beyond 10 years.1
It’s no coincidence that every MBA graduate from Tippie takes courses in accounting, financial management, marketing, human resources, and operations management. These and other key courses in product and pricing, global business strategy, and business analytics prepare our students for their first post-MBA job – whether that is starting their own business or working in the private or public sector.
In short, Ryan Holmes advice is inspirational, but can’t be applied to the broader population. And certainly not to the MBA experience we provide here at the Tippie MBA at the University of Iowa.
1 Source: Taylor, L.J. and Seanard, E. “Using Goldratt’s Thinking Process to Improve the Success Rate of Small Business Start-ups”. 2004. http://sbaer.uca.edu/research/asbe/2004/PDFS/23.pdf Accessed 7/22/2013