Why would someone pursue graduate management education? Why would organizations seek to hire those with graduate management degrees? What are the implications of graduate manĀagement education for society at large? Such questions are fundamental to the ultimate purposes of today's schools of business. Still further, questions about the value proposition of graduate management education undergird many of the recent criticisms of business schools and, at the same time, overlay the very reasons that renovations of our current practices are critical. In the sections following, we discuss the various ways graduate management education shapes individuals, organizations, and society.
Individual Value
Here, the question of value centers on the potential individual-level benefits that coincide with graduate-level training in business schools. Considering the substantial investments of time, money, and effort that graduate-level business training requires, one would hope there would be evidence to support a viable value proposition. Indeed, there are ample reasons to suggest the value of graduate management education for individuals.
At a general level, graduate management education holds perceived value for individuals across a number of business school stakeholders. For example, prospective students frequently indicate that graduate management education will bring them increased job opportunities, salary potential, and business-related knowledge and skills (Graduate Management Admission Council [GMAC], 2012a). Such positive perceptions hold after graduation, when the vast majority of MBA alumni indicate that, knowing what they know now, they would pursue the degree again (GMAC, 2013). Among the key benefits these alumni frequently cite are opportunities to develop management knowledge and technical skills, network and form relationships of long-term value, and expand their career options (Bruce, 2010). In addition, potential employers consistently recognize the value of graduate management education when they recruit graduates, acknowledging that it instills competencies needed for successful job performance (GMAC, 2010).
In addition to perceptions of value, there is evidence that graduate management education has significant competency and career consequences for individuals. For example, graduate management education is capable of increasing cognitive and interpersonal competencies related to managerial effectiveness (Boyatzis, Stubbs, & Taylor, 2002; Hoover, Giambatista, Sorenson, & Bommer, 2010). MBA programs typically require coursework that, at a minimum, touches the key competencies required for managerial performance, including managing human capital, strategy and innovation, decision-making processes, administrative activities, external constituents and context, and logistics and technology (Rubin & Dierdorff, 2009). MBA programs generally include instruction on additional key areas of business management, such as integrative or systems thinking (Atwater, Kannan, & Stephens, 2008). The personal competence that is gained from graduate management education benefits individual careers in both the long and short term (Zhao, Truell, Alexander, & Hill, 2006). For instance, longitudinal studies show that individuals who complete the MBA report greater early career success than similarly qualified individuals without the degree (Inderrieden, Holtom, & Bies, 2006). Finally, building social capital and increasing networking opportunities are frequently listed as advantages of pursuing graduate management education (Vaara & Fay, 2011).
Graduate management education also provides significant economic consequences for individuals. For example, those who complete their MBAs stand to earn as much as 81 percent more after graduation than before they entered the MBA program, and employers report a five-year stable salary premium of US $40,000 for an MBA graduate over someone with a bachelor's degree (GMAC, 2012b). Such findings are consistent with other research showing that MBA salaries and rates of return are substantial (Connolly, 2003). As a result, some have concluded that the āMBA yields an excellent return on investment for nearly everyone, regardless of the type of program, the race of the student, or even the ranking of the schoolā (Holtom & Inderrieden, 2007, p. 36).
This discussion strongly suggests that graduate management education holds both perceived and actual consequences for individuals. This is not to say that current models of graduate management education are without need of improvement, a point to which we return later in the chapter. However, graduate management education does appear to be a fruitful, systematic training ground for managerial competence that brings with it numerous personal benefits coinciding with its completion.
Organizational Value
Given the consequences of graduate management education for individuals, the question becomes whether or not organizations benefit as well. There are several reasons to believe they do. For example, graduate management education offers cross-functional exposure that is difficult to either imitate or systematically implement in other organization-specific training settings. In addition, graduate management education serves as a filter of sorts; organizations can reasonably assume that individuals who apply and eventually matriculate from business schools possess demonstrated ability and motivation that underlies effective job performance. Finally, the intent of graduate management education is to train individuals in evidence-based, state-of-the-art management practices that help solve complex organizational problems. By continuing to hire MBAs, organizations give the impression that they perceive such value in graduate management education. As an example, a 2012 survey of 1,096 employers found that nearly four in five companies planned to hire at least one MBA candidate (GMAC, 2012b).
Beyond simple market demand, there are other reasons to believe such training adds value to organizations. For instance, at their essence, MBA programs are formalized management development programs, and research has consistently demonstrated the effectiveness of formal programs in promoting managerial competence (see Burke & Day, 1986; Collins & Holton, 2004). Of particular value to organizations is the fact that managerial competence has been linked to a variety of outcomes. These outcomes include reductions in large employee-related costs such as turnover (Griffith, Hom, & Gaertner, 2000) and counterproductive behaviors (Greenberg, 1990); increases in employee and team performance (Judge & Piccolo, 2004; Stajkovic & Luthans, 2003) and organizational citizenship (Podsakoff, MacKenzie, Paine, & Bachrach, 2000); and improved overall commitment and satisfaction (Podsakoff, Bommer, Podsakoff, & MacKenzie, 2006). Still other research suggests that when it comes to outcomes such as revenue and environmental sustainability, companies led by executives with graduate management education often outperform companies with executives who do not (Jiang & Murphy, 2007; Slater & Dixon-Fowler, 2010).
Another way in which graduate management education benefits organizations is through management practices that are first taught to students and then transferred to the students' eventual employers. Not only do many of these strategies defy the ācommonsenseā approaches routinely found in contemporary organizations (Pfeffer & Sutton, 2006), but evidence also indicates that effective management practices are quite rare in industry (Bloom, Sudun, & Van Reenen, 2012). For example, the evidence is rather clear that downsizing seldom, if ever, makes a firm more competitive (see Cascio, 2005; Datta, Guthrie, Basuil, & Pandey, 2010), yet the practice is commonplace in today's organizations. Other specific management practices, such as internal promotion or succession planning, have been convincingly linked to better organizational performance...
