Should you get an MBA? (MBA Value Proposition)

This week I talk about MBAs and what makes them so valuable for companies!

VIDEO SUMMARY

So today we are considering the question “should you get an MBA?” An MBA is a big decision, primarily because MBAs are really expensive. It is expensive for companies to hire MBAs, and it is expensive for individuals to get an MBA. I have never met an MBA graduate who didn’t sacrifice to get their degree. You sacrifice time with your family, you sacrifice financially, and you sacrifice time you could be spending doing other things. So when you start investigating the value proposition for getting an MBA, it becomes a really interesting question. What value does an MBA really bring to an organization? If you answer that question, you will have a better understanding of whether an MBA is right for you.

So if I ask you that question “why should a company hire an MBA?” what would you say? Some people say MBAs are hard workers. So if a company wants hard workers, they should hire a bunch of MBAs. It is true that MBAs are hard workers, but so are people with other types of degrees.

Some people say MBAs are smart. If a company wants smart workers, they should hire a bunch of MBAs. It is true that MBAs are smart, but so are people with other types of degrees. You could hire engineers. Or a bunch of lawyers.

Some people say MBAs have a high level of business knowledge. They know accounting, marketing, strategy, supply chain, and all kinds of business topics. That’s also true, but I want to suggest that an MBA is more than that. I think there are cheaper ways out there of getting the knowledge base.

So what is it that makes MBAs unique? And what sets them apart from any other major out there? There is something… I find a lot of MBAs themselves have a hard time articulating this answer, so I am going to share with you my perspective.

During an MBA program, students spend a lot of time studying business cases. And business cases talk about a specific business scenario, and the student has to come up with a solution. So you do all these different business cases that cover many different topics. But all the business cases have one thing in common. They are about allocating resources with limited information, and building a case for a financial decision. Now just think about this. This is actually a very unique skill. You have limited information, (there is no sure right or wrong answer) and you have to make a decision that is going to cost the company money, and you have to back that decision up somehow. And this happens a lot of times in business, where there is not necessarily a right answer. But you still have to make a decision. This is a very different skill than what they teach engineers, and very different than what they teach lawyers. Engineers learn how to look at the data and come up with the right answer. That is a very different thing than not having the data and still coming up with an answer. Lawyers often don’t deal with data at all. They are working with philosophy.

So MBAs spend two years, building this very unique skill, by doing these business cases over and over and over again. It’s like any muscle in your body. You have to exercise it to build the skill. And this is what students do, is sit around and practice this together in groups over and over again. You can’t get this from a book.

And this is actually a very hard thing to do. Allocating resources with limited data, can often lead to decision paralysis for an organization. Because here is how it plays out. Let’s say your company is setting the budget for the year, and they are evaluating five different projects to focus on. So the management team gets together and reviews the five projects. Now they can allocate the money any way they want across these five projects. The smart decision would be to pick the project that will be the most successful and put all the money against that project. But which of the five is going to be the most successful? We don’t know. We probably have some data on each of the projects, but not enough to answer that question, of what is the best.

So here is what happens. It’s called “peanut buttering.” They take the budget and “peanut butter” it, by spreading it equally across all five projects. All five projects end up being underfunded, and no one project is really funded at the level it needs to succeed. And the company continues to limp along.

This is actually really common in business, because it is really hard to make that decision. Because think about what that decision means. You have to build a case for why your decision makes sense. And then you have to go to the departments you are cutting and explain your decision. An unbelievably difficult thing to do.

This is where MBAs come in. Because they have spent years preparing for this moment. MBAs can really help organizations think through some of these difficult decisions. And if companies can implement this skill set will, they can create a competitive advantage, because so many other companies are bad at doing this.

So that is my perspective of the value proposition for MBAs. It is allocating resources with limited information, and building a case for a financial decision. So think about your company and your position. If you see this skill adding value to your position, than an MBA might create value for your career.

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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.