It pays to get an MBA, especially if you're a man, writes Brendan Peacock

A master of Business Administration (MBA) is still seen as the pinnacle of business leadership qualifications, and while there occasionally seem to be minor discrepancies between the content of MBAs and the real needs of businesses, most organisations are still quite willing to partly or fully fund employees' MBA studies.

For graduates, the financial rewards and career prospects are almost uniformly significant. So, just how much return on your MBA investment can you hope for?

According to the Financial Mail's (FM) Ranking the MBAs survey for 2010, nearly all MBA graduates saw a significant rise in pay, especially those in the brackets of salaries up to R600000 a year. Apart from financial gain, those polled in the FM survey claimed strategic planning ability was the greatest skill gained, followed closely by strategic insight, intellectual ability, research ability and leadership ability. Interestingly, in the ranking of reasons for undertaking an MBA, "financial reward" placed fourth behind a stated desire for business education, personal skills and career progress. Job promotion ranked eighth. Asked whether the MBA courses had delivered on these reasons, 37% of graduates felt their financial reward desires had been met, and 57% felt their career-progress ambitions were being met since completing the course. Forty-five percent had received promotions.

Owen Skae, director of the Rhodes Investec Business School, said applicants certainly seemed to believe an MBA was a vital component in the creation of good and responsible corporate leaders.

"My assessment in talking to companies is that most generally agree that MBAs have the potential to create responsible corporate leaders and it is still seen as the de facto benchmark for executive education. What other qualification gives you the breadth of coverage and intensity of study required to complete an MBA? Certainly the CA designation carries a huge amount of weight in the corporate world, but chartered accountants are still focused on the financial aspects of a business. An MBA exposes one to a multitude of business imperatives and brings you into contact with learners from a variety of backgrounds, professions and organisational perspectives. We require our students to engage critically with the issues confronting leaders and managers," said Skae.

"By the same token, I also believe South African companies are grounded enough to know an MBA is not a magical or mystical qualification that provides silver bullets to all kinds of business problems. They appreciate that whoever has earned it has sacrificed a lot to get there and hence are very worthy of consideration when considering leadership and management potential."

Skae said virtually all of Rhodes' MBA students were already employed. "A significant proportion of them are paid for by their companies. Insofar as the private sector is concerned, we have not seen too much change in proportion of those being funded.

"However, in the public sector we are anticipating a reduction. A number of potential applicants from the public sector have told us some elements of the public sector view an MBA as a private-sector qualification and hence are concerned that the moment their employees obtain MBAs they will seek out higher-paying opportunities in the private sector.

"The argument goes that there will be no benefit for the public-sector employer. My personal view is that if this is true, it is short-sighted and one hopes the public sector will see that MBAs are crucial to the effective running of our country's civil service. Perhaps the public sector should be looking at other opportunities to entice and encourage good leaders and managers to remain in the public sector," said Skae.

"I believe most of our MBA students are not motivated by financial reward. Clearly they are ambitious and talented individuals. I believe their motivation ultimately comes from wanting to make a difference. We place huge emphasis on sustainability. Even with the skills shortage in South Africa, I am of the opinion that none of our graduates believe they can write their own job description and pay cheque," said Skae, adding that local MBAs compared very favourably with the fees for MBA courses in other countries.

"Going to study overseas will cost you appreciably more. Of course, one cannot rule out the impact of technology in making the top international names more affordable in the future, but ultimately there is no substitute for the face-to-face interaction brought in a classroom teaching environment," he said.

"Local MBAs are a third to a quarter of the fees of an international tier-one MBA," said Nick Binedell, director of the Gordon Institute of Business Science (Gibs).

In terms of who pays for MBAs, the FM survey revealed that percentages of students with partial or full sponsorships and bursaries varied greatly, with Potchefstroom recording 75%, Gibs 70% and Stellenbosch 49%, with Henley just 1% and Mancosa 5%. Interestingly, these statistics do not correlate directly to the cost of the various MBAs - while it costs R165770 to study an MBA at Gibs, Henley charges R161100 and Wits, with just 7% of students subsidised, R136 120.

Tommy du Plessis, director of the Potchefstroom Business School, said the school was in the middle of enrolments and 2011 applications were showing the same escalating tendency as in the last couple of years. "It is just a pity factors such as capacity are inhibiting us from taking on more students. This is an indication that we satisfy the needs of the market. The MBA degree remains one of the most popular postgraduate degrees at this university and because we have regular feedback from employers, we know it will remain as such.

"However, from day one we make it clear to students that if they are purely studying to improve their financial situation, they are doing it for the wrong reasons. They should do it to become better leaders and managers.

"We are fortunate that most of our students are already in management or senior capacities and our part-time Executive MBA fits the objectives of the companies more than personal aspirations. Having said that, we do keep ourselves informed of alumni's track record as far as promotions are concerned and we are proud of their achievements to date.

Binedell said companies had a clear growth plan in place and the decision to invest in their key performers was critical to their business sustainability and success. "Additionally, companies are keen to invest in their talent as part of their talent-retention strategy. This creates a contractual obligation for key managers to remain within the organisation.

"By promoting individuals with an MBA either in their existing business unit or through promotion to other business units, the return on investment is realised. In post-MBA surveys conducted with our graduates, less than 15% actually change companies."

"The monetary reward comes with added responsibility and growth in career within the company. Companies would hardly sponsor individuals who are driven by greed and self-enrichment intentions. If MBAs were overwhelmingly paid for by individuals, we could argue that financial reward would have probably been a greater driver," said Binedell.

"Survey data show there has been a slight dip in financial reward post-MBA. The average salary increase five years ago was in the region of 70% on graduation. Our last two surveys, including our most recent with the 2010 graduates, show a 60%-65% average increase.

"Given the tight economic conditions in the last two years, that is still a positive outlook for MBA graduates.

"The trend depicted by the data shows that generally money expectations are realised but power aspirations are more elusive for a fresh graduate," said Binedell.

Men get cream of salary increases

According to Gibs's electronically conducted research on the graduating cohort of 2008 and 2009 students returning to their workplaces (conducted from March to September 2010), 44 male respondents received much higher salary increases on average across all race groups than the 24 female respondents. Although there were exceptions, such as a woman whose salary shot up from R37500 to R100000 a month, and others who received 100% pay rises, as well as graduates of both genders who experienced pay drops, on average men received a 54% salary increase and women 15% after graduating. This does not take into account share and profit-share options and incentives, which in most cases were also significant. The average salary post-increase (across all the Gibs respondents) was R60556.