An MBA: Is It Worth It?

Local execs, recruiters, profs, and alums reassess a costly business credential.



Illustration by Morgan Schweitzer

Think an MBA (a Master’s of Business Administration) degree is a golden passport to the top ranks of the business world?
“If I could hire my son, who just got his MBA in finance, to be my company’s chief financial officer, I would have to tell him no,” says Stewart Strauss, president and CEO of Strauss Paper Company, Inc., a thriving Port Chester-based wholesale and distribution firm with 80 employees. “I look for people with great experience. The way they learn to execute, to implement processes, is better than what you can learn from going to class.”

    A lack of real-world practical applications is a common qualm about MBA grads from business successes in Westchester. Says David Singer, president of Robison Oil, the Elmsford energy company he has expanded to more than 200 employees: “I think of Rodney Dangerfield as a businessman-turned-student in the movie Back to School. When the business professor discusses a case study in class, Dangerfield argues that he left out paying off building inspectors and talking to unions and the garbage company.” (In the movie, Dangerfield adds: “I don’t know if you’re familiar with who runs that business but, I assure you, it’s not the Boy Scouts.”) Explains Singer, “Business academics can get into a pattern of what I call ‘paralysis by analysis’—not moving fast enough, missing opportunities, or appearing to be unresponsive to the market.”

   Reflecting doubts about the value of the degree, applications to many MBA programs nationwide have declined over the past two years.

    There are celebrated MBA success stories locally, like CEO Lou Gerstner’s turnaround of IBM in Armonk in the 1990s. “He would never have been considered to be the first and only outsider to head up IBM if he hadn’t come out of a Harvard MBA, McKinsey & Company management-consulting background,” says Doug Garr, a former IBM executive speechwriter and author of the HarperCollins book IBM Redux: Lou Gerstner & the Business Turnaround of the Decade.

    An MBA is hardly a requirement for occupying the corner suite in Westchester. Among the county’s Top 10 private-sector employers today, only four of 10 are currently headed by MBA holders (two hospital CEOs have master's degrees in health administration). Our top employer, the resurgent IBM, is led by Samuel Palmisano, who did not earn an advanced business diploma. “He made his way through the ranks at IBM,” Garr says. “They hired him right out of Johns Hopkins undergrad, not usually the fast track to becoming a CEO. To get his ticket punched, he had to show that he could make money or rescue a unit. He ran the PC company and didn’t make money, but he staunched the bleeding. You don’t get that kind of experience in business school.” (For “Our Top 10 CEOs and Their Degrees,” see page 47.)

    It makes one wonder if tuition of close to $100,000 or more (plus several years of effort) for an MBA may not be worth it, after all. One alternative is less expensive (and quicker) training from non-academic sources. For instance, Stewart Strauss, a staunch believer in investing in his management team’s ongoing education, subsidizes classes offered by trade groups like the National Association of Wholesaler Distributors (NAW), providing off-site, industry-focused management courses for under $5,000 (for organization members) in just a few weeks. He’s taken the courses himself. “You spend a few days on finance for wholesale distribution. You spend a few days on logistics, and so on. They bring in different experts. Two months later, you come back after writing a thesis or a paper in one of these areas that relates back to your business.”
So who needs an MBA, anyway?

Access, Access

    “The most important thing I can say is that an MBA gives you access,” says Vin Licari, co-founder of Licari & Vitanza Associates, professional recruiters in Mahopac, New York. “The MBA allows you to be considered for opportunities that you might not get otherwise. If you’re looking at finance-oriented jobs that pay a hundred twenty-five thousand dollars and above, ninety percent of them require an MBA.”

    Not all MBAs are created equal. Once synonymous with the general Executive MBA (EMBA) credential, now most MBA degrees are awarded with specializations in functional areas like finance, accounting, or marketing. These specialized MBAs can provide entry to lucrative positions off-limits to others.

    Nor are MBA schools considered equal. “Absolutely, there’s a difference in where your MBA comes from,” Licari says. “There are companies that tell you, ‘We’d prefer a Top-Twenty-Five MBA.’” Despite national ratings by news and business media subject to fluctuation, there’s general consensus that the most valuable MBA to be earned within Westchester borders is from the Leonard N. Stern School of Business at New York University (NYU), with classes in Purchase. “Without a doubt, I’d recommend the NYU program to any candidate pursuing an MBA in the county.”

    For a Top-3 MBA, you would have to travel to California, Massachusetts, or Pennsylvania. “The Big Three schools are Stanford, Harvard, and Wharton,” says business journalist Garr. “Getting your MBA there means you can go on to Boston Consulting, McKinsey & Company, Booz Allen—the major management consulting firms. You do your five years and a company asks, ‘Would you like to be a VP?’ In your thirties, you’re CEO material.”

    Locally, an investment in a less-prestigious MBA program may prove even more lucrative. “We’re not in the national Top Fifty, but our part-time programs have been well-placed,” says Daniel Baugher, associate dean and director of Graduate Programs at Pace University’s Lubin School of Business. Also professor of Management, he cites a 2006 study on an MBA degree’s ROI (return on investment—an analysis familiar to MBA students) showing that “if you went to a Top Ten school, you’ll get a lower return on investment and longer payback period because it takes a while for a better salary to make up for the higher tuition cost.”

    The study, published by the Graduate Management Admissions Council, administrators of the GMAT, required by most MBA programs for admission, showed a 6-percent extra annual ROI for MBAs from schools that were Non-Top 10, with a Top 10 school MBA yielding an investment return of 118 percent over 10 years, while Non- Top 10 MBAs gained a return of 185 percent. Even slightly reduced yields over the past few years would still make a Non- Top 10 MBA sound like a solid investment.

Tarrytowner Steve Ditlea began his freelance business journalism career as Popular Computing's small-business computing columnist in 1982.

Big Blue MBAs

    Any doubts about the value of a part-time MBA from a local Non-Top 50 school can be dispelled by two Pace graduates at work in Armonk for IBM.

    For Heather Wilson, senior financial analyst in IBM’s corporate treasury group, her part-time, later full-time, MBA from Pace let her make the transition from a banking career, then stay-at-home mom, back into the corporate world at a higher level of expertise. “Getting my MBA was part of my plan to keep myself relevant,” she says. “I was at home for four-and-a-half years with two little girls. The MBA was a ticket back into the workplace.” With an interest in working in corporate treasury, she opted for a self-financed MBA in accounting, leading to a job offer upon graduation from IBM, via career services at Pace. She’s never done an ROI analysis of her degree’s costs. “It was a softer calculation of the benefits of being in school," she says. "What I learned in the classroom turned out to be very relevant at work. I’m in a role where I do a lot of analysis work that’s different from what I had done in my previous life.”

    Paula Summa is IBM.com’s general manager, overseeing a global team of 5,000 employees. The Port Chester native holds Pace undergraduate and MBA degrees, the latter earned part-time soon after being hired at IBM. “I would recommend doing it early in your career, because it’s quite time-consuming,” says the veteran of global financial positions at IBM. “It’s not just the classes. It’s the after-hours team meetings. You have to want to get it done and try to manage your time. “

    One unexpected result of her advanced business degree: she’s one of few senior managers who doesn’t think IBM means I’ve Been Moved. “I’m unique in that I’ve never been moved since I’ve been working for IBM. I’ve traveled quite a bit because our work is global, but I haven’t had to move my home away from Westchester.”

Our Top-10 CEOs and Their Degrees

 

     
Samuel J. Palmisano
IBM                              
BA, Johns Hopkins
 
Greg Fleming
Morgan Stanley Smith Barney
BA, Colgate; JD, Yale Law School
Indra K. Nooyi
PepsiCo
BS, Madras Christian College; MBA, Indian Institute of Management; Master's in Public and Private Management, Yale
 
John Spicer
Sound Shore Medical Center
BS, Manhattan College, Master’s in Healthcare Administration, C. W. Post College
 
John E. Kelly, III
IBM Watson Research Center
BS, Union College; MS, PhD, Rensselaer Polytechnic Institute
 
     
Jon B. Schandler
White Plains Hospital Center
BA, Villanova; MBA, Fordham
 
Massimo F. d’Amore
PepsiCo Beverages Americas
BS, MS, Swiss Polytechnic Institute in Lausanne
 
Keith F. Safian
Phelps Memorial Hospital Center
BS in Industrial and Electrical Engineering, University of Buffalo; MBA, Wharton School of Business, University of Pennsylvania
Joel Seligman
Northern Westchester Hospital
BS, Boston University; MPH, MBA
Columbia University

 
Ronald J. Corti
Riverside/St. John’s Hospital
BS, Fordham University; Master's in Public Administration, Health Administration, Long Island University