Is the MBA the most valuable degree in the world?
Perhaps. It’s certainly the most popular. MBAs account for two-thirds of all advanced degrees in the U.S., and about 156,000 new MBA graduates are minted every year. In India, that number is double.
But MBAs don’t come cheap. In Europe, the average cost is about $70,000. In the U.S., tuition averages around $100,000.
There is no doubt there are financial and career payoffs. In the U.S., MBA salaries range from $81,000 at a non-profit to $126,000 at a consulting company. At 1.6 percent, U.S. unemployment figures for MBAs are very low, especially compared to other professionals such as lawyers, which have a 15 percent unemployment rate. And if you have ambition to climb the ladder, about 50 percent of CEOs hold MBAs.
But the real question for companies that look to hire and promote people with MBAs is whether the degree really makes them better business leaders. According to Quartz India, 93 percent of Indian MBA graduates are “useless.” And, out of a recent Harvard Business Review study of the 100 best performing CEOs in the world, only 24 percent had MBAs.
To find out whether MBAs have better leadership skills than people with undergraduate degrees, DDI studied data from its assessments of more than 15,000 leaders across 300 companies and 18 countries. Because the assessments were based on performance in multi-day simulations designed to consistently gauge a full realm of leadership skills and behaviors, we were able to accurately compare the leadership skills of those who had MBAs with those who only had undergraduate degrees.
We found that there were significant differences between the two groups. As you might anticipate, MBAs rated higher in financial acumen, business savvy, and establishing strategic direction — skills that are commonly emphasized and developed in most MBA programs. On the other hand, MBAs were lower than undergraduate degree-holders in coaching and developing others, driving for results, and selling a vision. Thus, while an MBA program can strengthen many important leadership skills, it won’t necessarily produce strength in all of the skills leaders need to be successful.
While a business degree — even an advanced business degree — will still leave some leaders with important skill gaps, are there other degrees that are better at preparing leaders? To answer this question, we looked at assessment results across eight target leadership skills from leaders who held one of seven different degrees. In addition to leaders with a business degree, we also identified those who had a degree in engineering, law, humanities, information technology, natural sciences and social sciences.
Leaders with business degrees were strong in five of the eight leadership skills. So too were those leaders with humanities degrees, but in some different areas.
So, what’s the takeaway from this finding? Is it that those individuals considering getting an MBA to help advance their leadership careers should instead go back to school to study ancient languages and philosophy? Well, not exactly.
While the leaders with business degrees were not as strong in some of the areas that humanity degree holders excelled, they were not weak in any area. Humanities degree-holders, as the figure above shows, were weak in financial acumen and business savvy — both of which are extremely important for business leaders. Other degrees did not deliver nearly as many leadership strengths to graduates.
The key lesson is that graduates from MBA programs (and their employers) should recognize that while business degree programs develop a strong base of critical leadership skills, it is often an incomplete education. The skills where business degree-holders weren’t strong — compelling communication, driving for results, and inspiring excellence — may need to be developed outside of an academic program. In parallel, the data is a wake-up call for MBA programs to balance hard skills with human skills. It is why Carnegie Mellon University Tepper School of Business, for example, has incorporated both assessment and training in interaction skills into its MBA program, and others are soon to follow.
Evan Sinar, Ph.D is chief scientist and vice president at DDI’s Center for Analytics and Behavioral Research (CABER). Richard Wellins, Ph.D. is senior vice president at DDI and coauthor of five books, including “Your First Leadership Job: How Catalyst Leaders Bring Out the Best in Others.” Sinar and Wellins are co-authors of DDI’s Global Leadership Forecast. Organizations can participate in the 2017|2018 Global Leadership Forecast and receive a complimentary leadership benchmarking report by visiting http://www.ddiworld.com/glf-survey. DDI is the research partner of CNBC for the annual Asia Business Leaders Awards (ABLA).