Do employers still care about MBAs?

Is an MBA still worth it?

That question was asked by the Economist recently, when it looked at the success rates of MBA graduates from top business schools in the U.S.

At the top 15 schools, the share of students in 2024 who sought and accepted a job offer within three months of graduating fell by six percentage points, to 84%. Compared with the average over the past five years, that share declined by eight points.

As a further example, for the Massachusetts Institute of Technology (mit) during the decade to 2022, on average, 82% of its students searching for a job had accepted one at graduation, while 93% had done so three months later — by 2024, those numbers had fallen to 62% and 77%, respectively, says the Economist.

On the other hand, based on responses from nearly 1,000 corporate recruiters and staffing firms around the world, the Corporate Recruiters Survey, 36% of employers in 2024 hired more MBAs than expected in 2023, or planned to hire more.

Just 13% planned to hire fewer or did hire fewer MBA graduates.

So, have MBAs lost some of their lustre — or is it all about how you look at the numbers?

There’s no final answer, says Yannick Fouagou, director of people operations and solutions at GreenShield.

“I think they are super valuable to get [a foot in] the door… But it's not the predictor of success, basically. So, having somebody with that degree will not predict their success or their growth in companies.”

The answer is both yes and no, says Mark Rouse, partner at IQ Partners in Toronto.

“[Overall] they still matter, and there are exceptions where it matters a lot — but they don't matter as much as they once did.”

For example, a client in the life sciences industry hiring a medical writer is only looking at candidates with master's degrees while another client, a law firm, is looking for marketing candidates with law degrees.

“It's not mandatory for the role, but it's a nice to have, and I think at one point, that might have been a mandatory for the role, and it's not anymore,” he says.

“A lot of the time, if it comes down to two candidates that are in all other ways equal, and one has a degree and one doesn't; very often, [the employer] would side with the candidate that has the degree — it would be enough to push them over, but it's not necessarily enough to get them on the list in the first place.”

Skills-based hiring grows in importance

So, if business degrees are less popular with HR and employers, what might be behind the decline?

A primary reason is the switch to skills-based hiring, says Rouse.

“Skills-based hiring is really taking a larger role in the interview process and the only way to demonstrate that you have those skills is work experience. You can't get it from a degree or an MBA,” he says.

“When we do a candidate assessment, we're very much oriented to what they've accomplished and how well they did certain things, depending on the job description. And we're looking for accomplishments and successes and the skills that are going to be required to be successful in the new role. If there's a university degree or not, it doesn't really affect that assessment.”

A lot of hiring leaders, especially senior ones who have been around for a long time, want to see those degrees to get people in the door, says Fouagou.

But when they’re actually on the job, these leaders want more than a degree because they see the gaps.

“It’s more about the experience, it’s more about iteration, it's more about exposure, it's more about the mindset or skill set that people with degrees tend to not prioritize,” he says.

“You need to have those skills that you build from experience, from working on some type of project and that's where the training is coming from… there's a gap between just the degree and the skills that are learned on the ground.”

Timing matters with MBA degrees

Another possible explanation behind the questionable value of MBAs and other master’s degrees is timing: When a person chooses to pursue the degree can make a difference to employers.

“A university degree or an MBA often matters more earlier in the candidate’s career, because [an employer] can evaluate them based on their ability to learn at a certain level and under time pressure, whereas you can't judge them on their work experience, because they don't have any yet, earlier on in their career,” says Rouse.

Someone who does an MBA at the middle management level tends to be a lot more valuable because they have already acquired the core skills of their domain, says Fouagou.

“The MBA will now augment that with the leadership skills, the management skills, the project type skills to get you to the next level in your career, to be directors and VPs and everything else,” he says.

“So, acquiring  those type of degrees too early, that's where you see a bigger gap between the expected outcomes of those graduates and what they actually deliver.”

Does reputation matter?

Also a factor when it comes to the value of an MBA and other degrees? The reputation or prominence of the business school.

“Name brand schools still matter,” says Rouse. “For instance, if you're going into certain forms of business, a degree, especially an MBA from a Schulich or an Ivy, they do carry more weight… some clients want a university degree, want an MBA, are looking for somebody from a certain set of schools, and it's based on faith in those schools and in the reputation it has… I hope there's some data behind it, but for some of them, it could just be conceit.”

On the other hand, some employers just want the degree and the name of the school doesn’t matter as much, he says.

“They're not really stuck on where it's coming from. And, honestly, some of the online MBA courses are amazing.”

According to Fouagou, the school name is important, because that's what employers look at initially.

“They make assumptions on the value of the school and the value of the candidate… it's not about the content of what they teach, it’s really around the selectiveness of their program,” he says, adding that any big name employers are also important when it comes to previous experience through job placements.

Keeping courses relevant

Another concern for employers is the quality of their studies. Surveys have shown disappointment with recent graduates — does that translate further when it comes to master’s degrees?

Keeping the content of these programs relevant is very important, according to Bharat Maheshwari, director of the MBA program at the University of Windsor, which means asking questions like: “What are they getting in the program, or is the program able to pivot to the needs of the students? What are the tools sets, what are the skill sets, what are the mindsets needed to be successful?”

Employers working with the school and the professors can help shape curriculum, he says.

“Different mindsets are being sought, different skill sets are being sought, and that comes from the partnerships which are established between the faculty, the program, the staff, and the companies, because our brand names are established by this relationship.”

There has to be a “healthy tension” between the industries, leaders, companies and schools, in both directions, says Fouagou.

“I think the schools need to tell the employers and the companies [about] the new ways of doing things and new ways of working and everything else around that; and, at the same time, the companies need to tell the [schools] what they need on the ground. It shouldn't just be one way. Otherwise… the MBA will just lose its value.”

Co-ops make a difference

Also appealing for many employers when it comes to a master’s program? Co-ops or job placements.

“Quite often, candidates will get hired where they're doing their internship, and ... I like to see that in a candidate resume, because it means that the employer test drove the candidate for three to six months, whatever the internship was, and then liked them well enough and thought highly enough of their contributions to hire them full time,” says Rouse.

“That's a success marker on a resume that I would definitely look for.”

Even if the employer doesn’t end up hiring the intern, that doesn't necessarily have to do with performance — it could be because of budget restraints, for example.

“You have to read between the lines and be careful about that,” he says. “But, it's something that's nice to see… because it does count as real world experience. And that gives a hiring manager the ability to evaluate their skills in a business setting.”

GreenShield has hired at least a half a dozen people through co-op programs, says Fouagou.

“You get people in, you get to see what they are doing, you get to see their level of expertise [and] competency driving everything around that, and you have the option to keep them or to call them back. So, it's a pipeline builder.”

On the flip side, not everyone appreciates the co-op placements, he admits.

“They are also distractible. A lot of mid-level managers do not like that, because they will have to bring people in, they will have to train them… and when the person is somehow competent at their work, the person goes away. So, [managers] would rather get maybe more full-time people.”

Money matters and MBAs

It’s also possible that employers are partly to blame: If they’re not paying as much as they used to, fewer people may be interested in pursuing a master’s degree.

Projected salaries for U.S. MBA graduates in 2024 were in the same range as 2023, with average starting salaries estimated at roughly $120,000, found the Corporate Recruiters survey.

The return on investing in post-secondary education has shrunk in recent years, according to an RBC report.

“The rising cost of tuition in Canada has outpaced median income growth for post-secondary graduates five years after they completed an undergraduate university degree. After adjusting for inflation, tuition rose 12% between 2012 and 2017 for all undergraduate studies, while the median income for graduates rose just 4% from 2017 to 2022. The gap is more pronounced for engineering, architecture, and related science graduates when final year tuition increased faster than in other fields.”

While it’s true that compensation rates aren't keeping pace with inflation, Rouse says he hasn’t seen evidence that people with MBAs earn more over their career lifetimes than those who don’t have one.

“I know the MBA schools sell it really hard… to justify their fairly high fees to get an MBA, and I get that they want to make sure that people are seeing a return on investment. I've never really seen the evidence of that, and I've been recruiting for close to 18 years now.”

But if it’s true that MBA graduates do earn more over their career, that may be because of their expectations, he says.

“It gives them the confidence to negotiate harder. You don't really need an MBA to do that, but I think that's part of what it provides them.”

It’s also important to recognize that many MBA graduates are going to earn lower salaries when they first start working, says Maheshwari.

“It doesn't matter how much salary you get in the starting phase, it matters how much you are learning the ropes and the tricks and how much you are establishing the trust that they can pull you up,” he says. “Our starting salaries last year were about $94,000 but that doesn't mean all were $94,000 — some were $140,000 and some were $70,000. The market goes in averages.”

Ultimately, it’s about setting people up for their employment journey, he says.

“Pure employment is easy. I want my alumni to be the leaders and change makers, and for that, I need to help them get a skill set which gives them the entry and also the right mindset.”