MBA’s where they work and where they are needed

MBA’s where they work and where they are needed

Michael Stanton

MBA’S Where They Work and Where They’re Needed

Amaster’s degree in business administration –the MBA–has become the degree of choice in graduate education for thousands of people. Many view the MBA as the starting gate on the fast track to rapid promotions, greater responsibilities, and paychecks to match.

Why? Because solid management skills can be the difference between success and failure in business. Many employers believe that MBA graduates have these skills and are willing to pay top dollar to get them.

This year, around 65,000 newly minted MBA degree holders are expected to take their first steps towards the executive suite. Some will be entering the job market for the first time; many others will be reentering the labor force, having worked prior to their graduate studies; and still more will be changing jobs, having worked full time while pursuing their degree. As diverse as their backgrounds may be, they all share one hope–that the MBA degree will lead to greater opportunities.

These opportunities are the focus of this article. It examines some of the functional areas typically found in every business that traditionally attract large numbers of MBA’s and profiles some industries, such as investment banking and management consulting, that employ large numbers of management graduates.

The MBA degree has its critics. Some believe that MBA curriculums place too great an emphasis upon business theory to the detriment of operational skills. This and other questions are considered at the end of the article.

How Many MBA’s Does It Take To Change a Business?

The MBA degree has enjoyed skyrocketing popularity over the last two decades. The number of degrees awarded grew markedly, and the percentage of all master’s degrees awarded by business schools more than tripled. According to the National Center for Education Statistics, 5,787 MBA degrees were awarded in 1962. In 1982, the most recent year for which statistics are available, the number stood at 61,428.

The increase in the number and percentage of women earning the degree has been significant. In 1962, fewer than 300 of the new MBA’s were women. In 1982, 17,069 were, 30 percent of the total. The increase has been especially sharp since the mid-1960’s. Before 1967, the annual rate of increase in the number of men earning MBA degrees was consistently higher than that of women. Since 1967, however, the reverse has been true. In 1982, the increase over the previous year was only 2 percent for men and 17.6 percent for women. The actual numbers are startling. In the 5 years from 1977 to 1982, the number of women MBA graduates per year more than doubled, from 8,183 to 17,069. For the same period, the number of men earning the degree increased from 40,301 to 44,359.

Not only has the number of MBA degrees awarded grown steadily but the number of MBA degrees as a proportion of total master’s awarded has experienced a concomitant increase. In 1962, of the roughly 91,000 master’s degrees earned, approximately 1 in 16 was an MBA. Ten years later, the MBA share was approximately 1 in 8. In 1982, when a total of 295,546 master’s degrees were conferred, approximately 1 in 5 was an MBA.

A third but less certain measure of the MBA’s attraction comes from some statistics on the Graduate Management Admissions Test (GMAT), a standardized examination required for admission into most graduate schools of business. In 1965- 66, the number of registrants for the exam totaled 36,342. By 1981, this figure had risen to 307,737, more than a ninefold increase. In the next 3 years, however, the number of registrants decreased.

Whether the recent drop portends a leveling in MBA growth is questionable. In an article entitled “The Changing Demand for Graduate Management Education,’ which appeared in the Spring 1985 issue of Selections, Ross Stulzenberg, the vice-president for research for the Graduate Management Admissions Council, writes that although this drop suggests that graduate management enrollments have entered an era of decline, such a conclusion would be premature; declines in the number of test takers during the 1970’s were followed by further strong growth in the number of degrees awarded.

The Jobs They Take

Every business and industry is different. But a variety of managerial functions are similar in nearly all of them. Among these functions are finance and accounting, marketing, information management, operations and production, and general management. The Association of MBA Executives (AMBA) regularly surveys major business schools and companies around the country to determine where new graduates are finding jobs. According to its data on the class of 1983, which are summarized in the following section, more than half of all new MBA’s work in finance and accounting or marketing; the other categories employ much smaller percentages of the graduates.

Finance and accounting. This broad area provides more jobs than any other field for MBA graduates. Finance incorporates all areas of money management, from analyzing how a firm uses its monetary resources to raising new capital. Banks, accounting firms, consulting firms, and insurance companies are major employers.

Accounting traditionally represents a large source of jobs for MBA grads. Graduates may work as certified public accountants or as staff accountants for businesses. They might also serve as financial analysts or auditors in business, industry, or government.

Together, finance and accounting employed about 34 percent of the new MBA’s in 1983; accounting in particular employed about 9 percent.

Marketing. Marketing usually attracts many MBA’s; more than 20 percent of the new graduates entered this field in 1983.

These are the managers that get the products to the customer and develop new ones. All firms that produce goods or services have a marketing arm or department. A major part of marketing is conducting research to determine what the customer wants and then developing the product or services to meet these desires. Designing sales and distribution systems is part of marketing as well. MBA’s in marketing often start out as marketing assistants involved in such tasks as developing sales strategy or designing new packaging.

General management and administration. In AMBA’s survey, this broad area accounted for 7 percent of the jobs for new MBA’s in 1983. General management encompasses such activities as contract administration, purchasing, procurement, and personnel. An assistant manager of a department store–who, in a single day, might participate in pricing decisions, interview prospective employees, and direct the construction of a display–would fall into this category.

Information management. The incorporation of computer technology into nearly all aspects of business and industry and the rapid advances in telecommunications technology have created a variety of new career possibilities over the last few years. Opportunities exist throughout the economy in the design, development, implementation, and analysis of information systems. The growing use of new systems has increased the need for individuals with both the technical expertise and the management skills to coordinate data and word processing functions. The advent of desktop computers has further increased the opportunities in this field, which employed 6 percent of the class of 1983.

Operations and production. It’s the job of the manager in this field to develop and manage efficient combinations of people, machines, and material to produce a firm’s product. Skills in organization and human relations are vital. According to Peterson’s Guide to Business and Management Jobs, 1985, attention is focused on operations and production because “. . . production managers are being called on to implement innovative manufacturing methods and motivational techniques and enable American industry to compete successfully in the world economy.’ The tasks and responsibilities associated with production and operations are wide ranging.

How Many Industries Does It Take To Employ All the MBA’s?

Besides its surveys of new hires, AMBA regularly examines the prospects for MBA’s within particular industries. The results of these surveys are published in a series entitled MBA Executive Industry Reports. Each report looks at the present state of a single industry, presents some of the options that may be available to entering MBA’s, and highlights hiring trends at several major companies within each industry. The following section draws heavily upon AMBA’s research.

A 1983 survey of graduate business schools showed that 20 percent of their graduates found jobs within manufacturing industries. Two of the largest industries within this broad sector are the aerospace and automotive industries. Other industries that employ large numbers of MBA’s include investment banking, commercial banking, consulting services, retailing, and communications.

Automotive. Companies that manufacture cars, trucks, and related parts and products are major employers in the United States. According to AMBA, “Of the 25 largest automobile, truck, and parts firms across the nation, only a few

actively recruit MBA’s. In those companies that do actively recruit, competition [for jobs] is keen.’ The most frequently mentioned entry areas are finance, marketing, and, to a lesser degree, manufacturing. Other functional areas of employment are accounting and product planning.

First jobs for MBA’s include financial or market analyst, staff accountant, and personnel or industrial relations specialist. Salaries range from the mid-20’s to mid-30’s, depending upon individual qualifications. Candidates with work experience and technical undergraduate degrees usually command more money.

Aerospace. The aerospace industry is a complex, highly technical field involved in the design, production, and manufacture of aircraft, missiles, and spacecraft. Total employment is about 1.3 million people.

Management positions are usually filled by people with a strong technical background. In fact, AMBA’s survey of leading aerospace firms shows that fewer MBA’s are hired by aerospace firms than by other industries. AMBA states that the top five aerospace firms, which together employ about one-third of the industry’s workers, typically seek fewer than 100 MBA’s a year. Competition for these positions is keen. Entry-level jobs vary from company to company but tend to be concentrated in financial and market analysis, accounting, and sales administration. Typically, MBA’s progress through a series of increasingly complex positions. Performance is usually monitored by a corporate officer.

Salaries for entering MBA’s are similar to those in the automotive industry. People with work experience and technical backgrounds usually command higher starting salaries.

Investment banking. “The economy’s circulatory system,’ as AMBA calls the securities industry, includes investment banking. It has received considerable attention lately due to its key role in the many corporate mergers and acquisitions of the last few years. An investment banker raises capital to finance these corporate moves by underwriting or purchasing corporate bonds and securities and selling them to other investors.

Investment banking firms are generally divided into several divisions or departments, such as the following.

Corporate and public finance–people in these departments advise corporations and governments about raising capital and solving financial problems.

Trading–traders use the investment firm’s capital to buy and sell securities in order to raise additional funds.

Mergers and acquisitions–these specialists advise corporate clients on the management, operations, and finances of companies being considered for merger. They also assist companies in their defense against hostile takeovers.

Sales–these workers link the firm and its clients by identifying possible markets and occasionally selling securities to individuals and small investors.

Investment banking is a high-risk, high-payoff industry. Competition for jobs with major firms is very keen, although the industry employs about 10 percent of the new graduates. Industry firms surveyed by AMBA say that only 3 to 8 percent of those interviewed are hired. Career paths differ from firm to firm and tend to be very individualized. Promotion is based largely upon short-term performance. Investment banking tends to be an up-or-out profession.

Investment bankers are very generously compensated. Along with consultants, they receive some of the highest salaries among the variety of MBA career choices. Starting salaries of $40,000 to $50,000 a year are not unusual. But it is a high-pressure job that requires long hours and frequent travel.

Commercial banking. Individuals, corporations, and even governments make all kinds of financial transactions through the firms in this industry. Around 12 percent of the MBA graduates in 1983 found jobs in the commercial banking industry, according to the AMBA’s survey of leading business schools.

Most commercial banks have various divisions to serve different customers. Some of these divisions are the following.

Retail–loans money to, and takes deposits from, individual customers.

Wholesale–provides similar services to businesses.

International–serves international corporations and foreign governments.

Trust–works with corporations and institutions, managing and administering pension and profit sharing plans.

Aggressive competition characterizes the commercial banking industry today. To compete, banks need top talent and actively recruit qualified MBA’s. As in other industries, competition is keen. Only a small percentage of those interviewed are hired. Graduates with proven skills in finance, accounting, and marketing stand the best chances; nearly all the banks surveyed in AMBA’s study prefer candidates with work experience and industry exposure.

Frequently, the first job for an MBA in commercial banking is a position as a commercial loan officer in either retail or wholesale banking. Good analytical and marketing skills are important. Herbert Aspbury, a vice president with Manufacturers Hanover, says, “The corporate market requires people who can properly analyze a company’s needs, sell a financing proposal within the bank, and deliver new products–both credit and non-credit–on a continual basis.’

Rewards in commercial banking can be substantial. At major banks, starting salaries for MBA’s range from the high 20’s to as much as $40,000.

Management and consulting services. Consulting firms contract their services to a business or government for a short period. Business analysis, efficiency studies, and market research are among the many services offered. The consulting industry has grown considerably over the last two decades. A recent AMBA survey of nearly 600 consulting firms showed that more than 75 percent of them were founded after 1960.

Management consulting has been a popular career choice for MBA’s over the last few decades. According to the AMBA, “Management consultants run the gamut from engineering specialists to business generalists and their methods [range] from management science to behavioral studies.’ Their clients cross all lines of business and government.

Besides working independently or for general management consulting firms, consultants may work in the consulting departments of banks, public accounting firms, executive recruiting and search firms, or other corporations.

This industry hired 6 percent of the MBA’s in 1983. The majority of consulting firms actively recruit MBA’s. As with other industries, the ratio of MBA’s hired to the number interviewed is very low. Competition is keen, not only among graduates searching for jobs but also among firms recruiting top graduates. This competition has prompted the recruitment of first-year MBA students for summer internships.

Performance is key in the consulting business. Those who don’t perform aren’t around for long. There is no time for on-the-job training. New employees are expected to be substantive performers from day 1.

Compensation is generous, with some new staffers earning salaries in the mid-40’s. Long hours and frequent travel can be expected.

Retailing. The largest industry in the United States, retailing accounts for nearly half of all American enterprises. It is also one of the largest employers, with nearly 17 million workers in 1984.

Most major retailers maintain MBA recruitment programs, but the proportion of MBA’s hired is small (only 3 percent). One reason for this is that the industry is very labor intensive, and the proportion of management jobs is low. Furthermore, according to AMBA’s survey, many companies prefer to hire associate’s and bachelor’s degree holders for their management training programs.

The most common professional career areas in retailing are buying, merchandising, operations, and store management. MBA’s are also hired to fill positions similar to those in other industries, such as financial analysis and marketing. Career advancement opportunities and salaries are similar to those in other industries.

Communications. AMBA’s 1983 survey of major business schools indicates that 11 percent of that year’s graduates accepted jobs within the communications industry, which includes radio and television broadcasting. Many of these graduates, and those of succeeding years, have found jobs in one of the major growth industries of the decade– telecommunications. Increased competition, spurred by new technologies and industry deregulation, has prompted the emergency of a host of new companies, new products, new services, and new jobs as well. Richard Sparks, Director of Personnel Services at AT&T Communications, the long-distance arm of AT&T, says, “The volatile environment has created the need for more skilled individuals than ever before–not just engineers and technicians, but managers in fields ranging from marketing and sales to finance and operations. As competition grows, the need for people with special skills and backgrounds, particularly MBA’s, will also increase.’

The contest for customers is fierce among competing companies. Marketing, sales, and advertising specialists are important, too, in every company’s plans. The money managers in the finance departments face new challenges, says Sparks. “In the area of finance, the MBA’s knowledge and skills must surpass what was previously required to perform [the job] in a regulated environment.’

MBA salaries in telecommunications are competitive with other industries. Those with technical skills to match their business acumen can command the best pay.

Other Prospects

The great majority of MBA graduates accept jobs in the industries discussed above. The general management curriculums offered by most business schools point in their direction. But a few opportunities exist outside these traditional options.

A small percentage of students every year seek jobs in Federal, State, and local government. Nonprofit organizations, such as foundations, philanthropies, professional associations, libraries, and museums also attract some MBA’s.

A number of graduate business schools, such as the University of Wisconsin and UCLA, offer concentrations in arts management within their general business curriculums. Student internships within these and similar programs provide training at such institutions as the New York City Opera and the Boston Symphony.

Jobs in the public sector, in health or arts management, or with the many non-profit organizations vary widely. One characteristics they do generally share is lower compensation. Management graduates who opt for jobs in this broad area can expect lower salaries than their counterparts in business and industry. But with every choice there is usually a tradeoff. Responsibilities, plus the opportunity to make a significant contribution, may come more quickly to these managers. And the sense of personal fulfillment derived from a commitment to public service is difficult to measure in dollars and cents.

Opportunities for MBA’s are also found overseas. For most major American corporations, the world is the market. A quick glance at the Fortune 500 shows many multinational corporations with personnel scattered around the globe, searching for markets, buying resources, and selling products. The challenge and glamour of an international career are powerful allures to some MBA’s. These international assignments are rarely available until an employee has served with a company for several years.

Opportunities for foreign assignments may come more quickly for management graduates who seek employment with organizations such as the United States Agency for International Development, the World Bank, and the International Finance Corporation.

The United States Agency for International Development plans, implements, and manages the Federal Government’s foreign economic assistance programs. The International Development Intern Program trains men and women to design and manage these programs. Two or three MBA’s win acceptance into each of the two 25-person intern classes each year.

A similar program exists at the World Bank and the International Finance Corporation. The Young Professionals Program was founded in 1963; since its beginning, more than 800 people from 90 different countries have been hired. Competition is keen. Applicants must be no older than 30 and possess at least a master’s degree with a strong background in economics and finance. Salaries are competitive with those offered MBA’s by other employers.

Does the MBA Deserve Straight A’s?

In the 1970’s, the MBA degree became, in effect, a prerequisites for many corporate positions. Many schools stepped forward to meet the need. Twenty years ago, fewer than 200 schools received GMAT scores. Today, 608 do. And not all institutions require prospective students to take the GMAT. According to the Graduate Management Admissions Council, approximately 800 colleges and universities maintain MBA programs. Of this number, however, only 213 are accredited by the American Assembly of Collegiate Schools of Business (AACSB). The Department of Education and the Council of Post-Secondary Accreditation recognize AACSB as the sole accrediting body for baccalaureate and graduate programs in business.

Today a record-breaking 200,000 students are studying for the degree. When they graduate, they’ll likely be entering a buyer’s market for MBA’s. The 1984 Northwestern Endicott Report, prepared by the Placement Center of Northwestern University, affirms this. In its annual survey of major business and industrial firms, 75 percent of the respondents believed a surplus of MBA’s was entering the job market. Some business educators concede that supply outpaces demand.

In addition to the charge that the schools have oversupplied the market, several other criticisms have drawn attention. The business community, the business press, and MBA’s themselves have criticized the preparation these programs provide and the expectations they raise.

Critics have charged that MBA graduates are too narrowly educated and that business schools place too great an emphasis upon quantitative analysis at the expense of general management and communications skills. According to a recent article in the Harvard Business Review, some schools “stress data gathering, manipulation of information, and problem solving rather than problem identification, goal determination, and implementation.’

In the eyes of critics, compounding the lack of preparation is the question of expectations. The perception of the MBA degree as “the ticket of opportunity’ has encouraged some students to assume that the credential guarantees high salaries and rapid promotions. This attitude has led to disappointment for some new MBA’s and aggravation for some executives.

Although these criticisms have surfaced frequently in the business press, they are, for the most part, impressionistic and anecdotal, because few surveys have been conducted. Recently, however, Roger Jenkins and Richard Reizenstein, associate professors of marketing at the University of Tennessee, and F.G. Rodgers, vice president of marketing at IBM, conducted a survey to assess the state of MBA education. Fortune 500 presidents and personnel officers, accredited business school deans and faculty, and a sampling of recently graduated MBA’s participated in the polling. The results appeared in the Spring 1984 issue of Selections, published by the Graduate Management Admissions Council, and in the September–October 1984 issue of the Harvard Business Review.

While all groups favored an “applications oriented’ curriculum that stressed decisionmaking rather than memorization, their evaluations diverged on “the success of current MBA programs in achieving that goal.’ A majority of the business respondents believed that schools neglected practical business problems. Another point of divergence between business respondents and the business school community was their assessment of graduates’ planning and operational skills. Business leaders were less satisfied with their ability to improve a firm’s short-term performance.

The survey indicated that all groups were generally satisfied with the MBA’s analytical and conceptual skills as well as their initiative and maturity. The current crop of MBA’s was perceived to be weakest in interpersonal and managerial skills and in communications skills, both written and oral.

“Some startling data’ from the survey, according to the authors, concern admissions requirements. The two factors traditionally believed to be of most importance are grades and test results, but all respondents listed “leadership positions held in extracurricular activities’ as either first or second in importance.

A Final Word

Charles Hickman, Associate Director of The AACSB, believes that the MBA degree should continue to open the door to challenging opportunities but that competition for good jobs will remain very keen. Students graduating from schools with established reputations will encounter the best prospects. Hickman says, “Employers are becoming much more selective in whom they’re hiring and are going to schools with proven track records.’ Students considering graduate study in business should do through research before choosing their school. Of particular importance is information regarding postgraduate employment. Most schools should have that information readily available.

Employers also value experience. “I believe we will see fewer MBA’s of college age in the future,’ says Hickman. Pat Mochel, Coordinator of Business School Placement Services at the University of Hartford, concurs. “While some of our students come straight from undergraduate school,’ she says, “most have worked for a few years. Recruiters absolutely prefer candidates with experience.’ She also asserts that experience enhances business education as well. “You can’t get your money’s worth out of a good program without some real work experience.

Table: Where 1983’s MBA’s Went To Work

COPYRIGHT 1985 U.S. Government Printing Office

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