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What’s an MBA Worth?
Today, the value of an advanced degrees transcends the degree-holder
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Business New Haven
11/29/1999
By: Abigail White
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Not long ago, Federal Reserve Chairman Alan Greenspan testified before Congress on productivity in the American economy. He was exuberant about the benefits of technology, thanks to the digital revolution, and asserted that the resulting gains in productivity have bolstered U.S. economic efficiency while at the same time playing a key role in restraining inflation.
“A lot of what's been going on in the last ten or 15 years in American business was to come to grips with how to use technology,” concurs Stanley Garstka, deputy dean and professor at the Yale School of Management.
Higher education has played an integral role in this adjustment period for using technology in business applications within the public and private sectors. In Greenspan's observations on technology and its benefits to the economy, it would stand to reason that people who have more education are more likely able to adapt to, and effectively employ, computer technology.
In addition, creative problem-solving has become the new business paradigm, brought on by the growth of the global economy and the Internet. American business has embraced this In Search of Excellence philosophy into the contemporary mainstream, and placing an ever-greater emphasis on ongoing professional development.
And as professionals change both jobs are areas of expertise with increasing frequency, continuing professional development is thought to be a contemporary necessity - a valued priority for competitive-edge performance. As we move toward and into the new Millennium, the value of creative-thinking skills and risk-taking skills will be paramount in the new global economy.
Already there has been a change in the complexion of management's hierarchical structure: managerial processes no longer follow a funnel-like path, but instead bridge any number of different functions. This alone is an important reason for examining the economics of education.
But there are other reasons as well. Individuals derive other benefits from higher education besides increased incomes. They can usually expect more benefits, including stock options. Since they can earn more, they can save more, thus enhancing their ability to buy a home, an automobile and other items essential to their quality of life.
It also offers an opportunity for households to set aside funds so that the breadwinner eventually can retire to a comfortable lifestyle.
Finally, those with higher educational attainment tend to have greater personal and professional mobility than those whose education has stopped.
“The income is going to come if I perform, so I don't expect to get additional income because I have an M.B.A.,” says George Lopez, vice president and New Haven region manager for the Bridgeport-based People's Bank.
“I decided I wanted to do the Executive M.B.A. program at UConn because I wanted to get it done quickly,” explains Lopez. “My primary reason I wanted my master's was for self-satisfaction, and also to do it in a certain time frame.”
Of course, even many part-time master's-level programs require a measure of employer participation – or at least forebearance.
“I went to our executive officer for our division and asked them to sponsor me, meaning pay for the tuition and give me the time to do it,” recalls Lopez. “I think it helps level the playing field if it ever comes down to an opportunity here at the bank and they have two candidates to look at – it's not going to hurt having [the degree].”
“If you look at what's happening in the world economy: We're getting more global and more complex - change is more rapid,” says SOM's Garstka. “It is precisely in that kind of environment where you can't train graduates; you have to educate them.
“Because if you can teach someone how to think about dealing with change, they're going to know how to deal with it,” Garstka says. “They will know how to think about problems, what the implications are, what has to be done to solve them, and then implement the solution.
“Here at Yale, if someone is really good - they're bright and have a lot of potential - they'll do very well,” Garstka says of the students he works with. “If a company hires a Yale graduate, it means something - and the evidence of the value of our graduates is the fact that these companies come back to hire more graduates.
“Our faculty goes out and consults, or serves on boards of directors, and that's an added value we bring back to our classrooms,” Garstka says. “We truly want our students to understand what's going on at very fundamental levels, not just techniques.”
Human-resources professionals consider advanced degrees as only part of the picture. What used to be a meal ticket to the next position now becomes merely expected - and “life skills” are considered more and more.
Interviewers today not only look at what a candidate has for specialized training, but what she has accumulated in life skills: such as a strong sense of self, good communications skills, the ability to think strategically.
The reason for this less-traditional approach to HR is due to the premium the business climate has placed on “generative thinking” - the generation of novel rearrangements of existing knowledge. This alone is an important reason for examining the economics of education.
In the case of the Institutes for Pharmaceutical Discovery (IPD), a Branford bioscience firm founded to conduct discovery research for a variety of diseases, the economics are more concentrated.
IPD Chairman Gordon Polley applies his own venture-capital experience from Wall Street in overseeing the financial, contractual and intellectual-property aspects involved. Polley holdsan M.B.A. and says that over the years his degree has been of great use to him and continues to help him given his involvement in a bio-research institute.
The success of IPD depends on combining efforts of science and management - and advanced degrees play a critical role.
“We are a scientific research company,” Polley explains, “so that those who direct our science effort, particularly our lab managers, are all Ph.Ds.”
Still another consideration for the economics of higher education is the advancing efficiency potential brought on in the new tenets of business operations that include ever-greater use of technology.
“We truly want our students to understand what's going on at very fundamental levels, not just techniques,” Garstka says, “so they can apply their leadership to the organizations they are involved with.
“Places like this are real pressure cookers - the students usually work 70 hours a week between their school work and other types of activities,” explains Garstka. “In the end they are able to handle top executive situations.”
With advanced degrees, what used to be a process of development for individuals in a very limited number of professions has now expanded across other professions and has gained corporate sponsorship: backed by employment grants and recruitment offers. From the shared perspective of the professional, the educator, and the employer there seems to be a growing consensus that advanced degrees can complement life skills and motivation to add value and productivity to the American economy.
The new economy in turn offers ample opportunities for growth to be created by the contributions made by the resulting gains in workforce efficiency and productivity. The benefits of technology and the added value generated by innovation and creativity creates wealth.
Increased workforce flexibility fuels the economy with a new set of operating tenets: where the baseline of skills and performance requirements have changed, and where people with more education have a better ability to adapt to, and use, technology. In this environment profit and wealth is created by education. BNH
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