Monday, 11 April 2016

Why Pay to do an MBA - Quora FAQ 1

Since the start of the year I've been pretty active on Quora, mostly doling out advice on the GMAT and MBA prep based on my own experiences. It has been interesting seeing what questions Quora throws me, but most of the questions do end up being pretty similar. Thus I thought it might be useful to whoever stumbles upon my blog to pop some of my answers to these frequently asked questions on this blog.

Question: Why pay to do an MBA?

Some variations:
  • What's the point of doing an MBA?
  • Is an MBA necessary or can I study the skills on my own?
  • Is it worth paying to attend a top MBA school or getting one from a cheaper school?
My thoughts...

The value of an MBA isn't its educational course content. I'm not saying that course content isn't important. It's just that the knowledge from the course material are easily obtained from outside the program itself. There are tons of textbooks and cheaper courses out there on finance, accounting, operations management, marketing, management etc.

So why take on more debt to do an MBA? Why pay top prices for a top school when it would be much cheaper to do one at a much lower ranked school?

For those of us who decide on going down the MBA route and pay top dollar, it's not just the educational business skills we're after. It's usually because we're also after a combination of the following: 
  1. Ability to leverage the brand name of the school
    Prospective employers or customers don't really know you as a person, but they know top schools. Since we inherently subconsciously rely on pre-conceptions to interact with new people, their initial perception of you will be based on what they think of your CV. Top MBA programs are notoriously hard to get accepted into and getting admitted is an achievement on its own. As such, having an MBA from a top school on your CV automatically makes potential employers perceive you as a "quality" candidate before they meet you. This in turn has subconscious effects on how they interact with you so you're more likely to start off on a positive foot when meeting them
    It also means you could potentially command a higher paycheck. After all one doesn't expect an MBA grad from a top school to come cheap.
  2. Opportunities to interact with recruiters from top organisations who come to you
    Attracting the notice of highly desirable firms like McKinsley, BCG, Goldman Sachs etc. isn't easy. They're also very selective about where and how they do their recruiting. Granted, you could manage to network your way in, but it's certainly easier when they are coming to you at your school and you are presented with opportunities to have coffee chats with them. These firms rely on the rigor of the MBA application process to shortlist the thousands of applications that are coming in
  3. Opportunities to interact with top executives from top companiesTop business schools have cultivated relationships with top global companies for years. Plus it's highly likely that their alumni can be found amongst the top execs anyway. This means they are able to help students get an audience with key executives by organising various events e.g. guest speakers and conferences. Let's face it, top executives in huge global companies aren't exactly the easiest people to reach and their time is extremely precious.
  4. Career switchingMany senior positions seek "previous experience".This makes changing industries or job functions not easy unless you're willing to start from the bottom. The MBA program is therefore a shortcut for career-switchers to jump to the middle, thanks in part to the ability to leverage on the school name and in part to the rigor of the course.
  5. Instant access to a large network of successful people who are more likely to assist you with whatever you needTop MBA programs admit people who have a very high potential of being successful. The alumni network is therefore a goldmine of useful connections. You'd get far better response and assistance cold-calling an alumnus and saying that you're from the same school than an otherwise complete stranger.
  6. Other experiences
    There are many other experiences that you get to have with doing an MBA that would be more challenging to obtain on your own. For instance seeing a problem from different perspectives due to the widely varied backgrounds of your classmates; learning to work with multiple Type A personalities on different projects; learning about different cultures through first-hand interactions; career treks....the list goes on

Basically, what you're ultimately paying for is the network, opportunities and experiences that would be difficult to obtain on your own. T
he value of the MBA program really lies in the people and not the content itself. In the end it comes down to what you want out of the MBA. Is it just business knowledge, or more.

Of course, an MBA doesn't automatically make you successful. It merely provides you with the opportunity. What you do with the opportunities, the network and the experiences is then entirely up to you.

Monday, 4 April 2016

MBA Funding Options for NZ & Australian Citizens

3 months have gone by in a flash and I can't believe it's April already! This means that
  1. It's only 3 months till I move to London
  2. I need to sort how I'm going to fund my MBA 
  3. I've only got 3 months of cash inflow left
And in case anyone is wondering, no I still don't have a scholarship.  :( I am hoping though that May will bring forth some good news when LBS does its second round of scholarship reviews for Round 1-3 admits. That said, I really can't afford to count on it.

In the last months of investigating various financing options, I have come to a conclusion that NZ and Australian citizens who reside in NZ or Australia have some of the most limited funding options. If you're from NZ or Australia and thinking of applying to London Business School (or another UK MBA program) in future, I'd advise planning to work in the UK in the 3 years preceding. Why? Because then at least you'll be eligible for certain loans and scholarships that are open to UK residents who are internationals.

If like me, you didn't know, didn't plan that far ahead, aren't rich and don't have a scholarship, well you're pretty screwed...your funding options are limited to the following:

  • Prodigy Finance loan - which is extremely unlikely to cover all of your fees and definitely not your living expenses. APR interest rates vary depending on circumstance but is around 8.34% for LBS
  • There might be 1 or 2 government scholarships e.g. Chevening that require you returning to Australia/NZ after graduation (Note that LBS MBA applicants are ineligible for Chevening Scholarships but other UK 1 year MBA programs meet the criteria) - not an option if you don't plan to be returning for awhile
  • Personal loans from the bank - hard to borrow much and once you convert this to GBP, it's not much. APR is also really high
  • Credit card - not advisable due to very high interest rates. Also for visa applications, funding from credit cards is not considered a valid funding option.
  • Refinancing property - a good option if you own property, especially since mortgage interest rates (currently) are much lower than personal loans and you can borrow a large sum potentially covering both fees and living expenses...just don't disclose that you're quitting your job to study and will no longer have any income for the next 2 years...
  • Savings
  • Financial help from friends and family
  • Company sponsorship - Might be a bit tough to get this one if you're off on a full-time 2 year MBA program

So those are all the options I've managed to find. Unfortunately compared to other developed countries, NZ and Australian citizens have a bit of the short straw when it comes to scholarships and loans, and local bank loans aren't ideal. :( If anyone knows otherwise, I'm all ears!

Now to figure out my funding cocktail....