From the August 5, 2005 print edition

Mastering the payoff

Return on M.B.A. investment may not be money

Daniel S. Levine

What's the difference between an M.B.A. from the Wharton West MBA Program for Executives and one from the full-time program of San Francisco State University's College of Business Graduate Studies?

About $130,000. And maybe not much else -- at least while you're in school.

Thousands of people are enrolled in M.B.A. programs at 15 institutions that offer full-time, part-time or executive M.B.A. programs in the Bay Area. The curriculum varies little from one school to the next. But costs vary a lot. Students pay as little as $8,400 for a degree from San Francisco State or as much as $138,500 for one from Wharton West, which is part of the Wharton School at the University of Pennsylvania.

So if you learn the same thing, why would one progam be worth $100,000 or so more than the next? What do you get for the extra hundred grand?

Price of admission

Students in the elite programs are paying at least in part for the pedigree, which means the recruiters drawn to the program's name and the alumni pool they'll join when they graduate.

"They are part of the Wharton alumni network, and they have all of those connections and that whole Rolodex that comes with being a Wharton grad," said Howard Kaufold, director of the MBA Program for Executives at the Wharton School. "If you go to any top business school, you have a top network. We think we have one of the best."

That, say some, is worth the price of admission. Mori Taheripour, managing partner of the Emeryville-based consulting firm Innovative Health Solutions Inc., graduated from Wharton West in 2003. She thought about the expense of the Wharton program before beginning it, but hasn't given it a thought since.

"In a lot of ways it's already paid for itself. It just opens a lot of doors," she said. "You make a series of connections and network in ways you wouldn't be able to do otherwise."

The problem is for people who aren't in one of the elite programs.

For many students, the decision to get an M.B.A. is driven by the hopes for a high-paying executive position with a top employer. An M.B.A. can help with that goal, but it's no guarantee.

While many of the annual surveys of M.B.A. programs now look at return on investment of the degree -- BusinessWeek offers a ROI calculator -- the question as to whether it pays to get an M.B.A. depends in large part on what someone hopes to get out of the degree.

If the goal is a top-paying job with a blue-chip employer, an M.B.A. by itself is no guarantee. For some employers, the degree is starting to lose its luster.

Not surprisingly, officials at the elite schools say it's the name of the institution on the diploma that makes the difference.

"Recruiters at top investment banks like Goldman Sachs or Lehman Brothers or Deutsche Bank only go to the highly rated business schools," said Andrew Shogan, associate dean of the Haas School of Business at UC Berkeley. "If you want to get a job from San Francisco State to Goldman Sachs you have a shot at it, but you are going to have to send your resume in by mail and hope they take a look at it as opposed to them showing up on campus."

Though graduates from Stanford University's graduate school of business earn on average more than $100,000, students from San Francisco State University earn starting salaries of about $65,000, about the mean $65,900 starting salary of all M.B.A.s in the class of 2004 reported in a survey conducted by the Graduate Management Admission Council.

A few years on the job pays for the degree for elite-school graduates.

But research suggests the bulk of students may be paying for phantom benefits.

The pedigree that counts

Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business who has been an outspoken critic of the current state of graduate business education, found in a 2002 study that there is little evidence that earning an M.B.A. has much effect on a graduate's salary or career attainment.

"If you don't get your degree from a top 15 school, the economic return is zero. The M.B.A. by itself means nothing," he said. "You have to have an M.B.A. from an elite, highly rated place in order for it to have a much of an economic effect."

No difference

Pfeffer also found that several in-house studies conducted by consulting firms found that new hires with M.B.A.s performed no better than new hires without the degree.

Instead, many employers are finding they can get as much talent hiring from other sources as they can get from M.B.A. programs, as long as they provide internal training to make sure employees have the grounding they need.

That's something Wells Fargo is finding in its Licensed Banker Program. The program, launched at the start of the year, brings new hires into an entry-level position to serve a range of client needs. The position provides broad exposure to the bank's various business lines and an opportunity to advance along one of several career paths and begins with a 14-week training program.

"We don't see necessarily any huge differential in the quality of the candidates that have M.B.A.s and don't," said Suzanne Ramos, senior vice president and director of Wells Fargo's Licensed Banker Academy for the San Francisco Bay Region.

While she said an M.B.A. is seen as a plus, the company is more concerned about candidates' communication skills, how they value the Wells Fargo culture and their passion for delivering customer service. The bank doesn't pay M.B.A.s at higher starting salaries than non-M.B.A.s.

Bang for the buck

Stanford's Pfeffer thinks students' focus on getting a return on their investment and M.B.A. programs' compulsions with survey rankings have helped skew these programs from their academic missions.

If learning -- rather than an immediate career boost -- is what a student is after, many programs that are lesser known can give plenty of bang for the buck.

Kenny Dang, R&D manager at Guidant Corp., earned an M.B.A. from San Francisco State in 2004 while working in his current job. The degree hasn't gotten him a raise or a promotion. But he said he sought the degree to get a better understanding of how the business works as a whole, how decisions are made and how what he does fits into a broader strategic vision.

"Even though it's not like I got my M.B.A. and I got promoted three levels, it does help me with my current job and allows me to better understand what it is that I do and how it impacts the business in general."

Others see the degree as a useful way to make a career change. Duc Le used the M.B.A. as a way to move from working as a project manager in information technology to working in diversity planning for the human resources department of a retail grocer. He said even though he's making about the same salary as he did in his old job, the M.B.A. he earned from California State University East Bay distinguished him from other applicants, most of whom had certification from the Society of Human Resource Managers.

"A lot of people were fascinated with the M.B.A.," he said, noting the position he took was more geared toward M.B.A.s, but that the company found them hard to attract because most people with the degree want to go into finance or accounting. "They said they found me a lot more analytical than their HR professionals."

Daniel S. Levine is a reporter for the San Francisco Business Times.

© 2005 American City Business Journals Inc.