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How useful is an MBA degree?

  Many people are unsure about why to pursue a management degree. The decision to garner an MBA should be based on how it will develop an individual's core strengths. Merely to gain bragging rights or make your resume stand out are not good enough reasons.  

How useful is an MBA degree?
This is one question that I have been asked thousands of times by thousands of students in the last 19 years of my career in education industry. And my answer today will be the same as it has always been to all these baffled students.

‘It depends’
I know what you are wondering. Isn’t it a very subjective and vague answer? For that matter, it is not even an answer! But the fact of the matter is, that’s how it is.

It completely depends on the person. For example, a person may be handling regular checklist oriented work where he is not expected to use a lot of reasoning but just follow the process. Or he may want to work in a field that requires very specific technical skills in a particular domain such as developing computer software, entertainment, treating diseases. It might even be that a person wants a relaxed ‘10 to 6’ work profile, then an MBA might not really be required. I would rather say that an MBA programme will not really help him in his work and growth.

The value attached to an MBA can never be questioned. The more important questions to be answered are –

How are you going to use this value to realise your career goals? 
Whatever you learn and experience in your MBA programme, you should be able to use it in the work profile you are handling. Also, you should be able to leverage the network or even the brand name (as an alumnus) you’ve created while doing your MBA.

Are your career goals aligned with your skill sets and interest areas?
You might want to work in the field of finance and would want to become a successful finance professional, but if math or number crunching is something which does not interest you, it will be very difficult for you in the long run. So it’s essential for you to introspect, find out your skill sets and interest areas, and look for a career path which is in sync with them.

What are your reasons for doing an MBA? In other words – what do you expect to achieve after completing the programme?  
I want to do an MBA because I want to be a team leader rather than being just a team member.’
This is not a good reason for getting into an MBA programme. There might be a lot of managerial roles where you might not even have a team. And if you land up in such a one, you would be very disappointed and demotivated.
Instead of this, a better reason would be, ‘I want to motivate people and coordinate with them to achieve overall business objectives.’

And most important of all – Will you really be able to achieve those objectives after your MBA programme is over?
This is very critical to your success and has more to do with the specific MBA programme and its curriculum. So if you want to be on the branding and creative side of marketing a product then the MBA programme you choose should have courses related to it. More importantly, the B-school should be able to provide you an exposure to these areas so that your learning can be well oriented towards your objectives.

Myths about MBA
Though there is a variety of reasons, right or wrong, for doing an MBA, a few general reasons cited by some students are not the right ones.

I will get an MBA degree. It’s better than a plain graduate degree.
First of all, MBA is not merely a degree or a certificate. It’s a programme, which helps you develop certain skills and knowledge. The decision to pursue an MBA should be based on how it will develop your core strengths. Merely to gain bragging rights or make your resume stand out are not good enough reasons. While it does help to the extent when the minimum eligibility criteria for applying to a job is MBA, in the long run your MBA will help you only if your learning and experience during your programme has been really superior and relevant; more so if you are able to utilise what you’ve learnt during the programme effectively.

MBA is the most happening thing and it’s essential for success.
If all your friends are doing MBA it does not necessarily mean that you too have to get into it. This herd mentality is detrimental to growth and achieving long term objectives. As mentioned earlier also, your reason for doing an MBA is ‘your reason’ – it should be relevant to your career goals and your long term objectives.
At this point I will also like to clarify that a good MBA programme provides you with certain skills and knowledge that are essential in handling and leading a business. However it is NOT integral to success or vice versa. There are many professionals, business heads, top executives, company heads and entrepreneurs across the world who have been very successful without even seeing the gates of a B-school.

Should I do an MBA?
In 2010 I had a 50-year-old student, who wanted to get into an MBA programme. He was also an entrepreneur who provided consulting to real estate companies and even provided complete project management solutions to a few small start-up clients. Now this is where the problem started. The new age companies have new working methods, systems, processes, technology and, above all, people with new thoughts.
The reason cited by this gentleman for pursuing an MBA programme was that he wanted to keep abreast with the changing times and learn the new age systems and methods in order to successfully implement the projects. I believe this to be a good enough reason for pursuing an MBA programme. However, let me also clarify that it was essential for him to map his expectations with the pedagogy of the specific MBA programme that he was targeting.
Another student, who was working with TATA Power in the logistics department, wanted to move out of his mundane operations work and get into a more dynamic risk analysis profile in the finance domain, and apply numerical logic and decision making skills. There are two things that need to be analysed in this example –
The personality type and expectations were not matching the work profile.
The student realised what his skills are and therefore wanted to do something more dynamic to make better use of those skills.

In order to change his career track and handle the desired new work profile, it was essential for him to equip himself with the technicalities of that work, and hence, an MBA was essential.
In short, “I want to work in the field of finance” is not a good reason for doing an MBA since it is very general and broad. If you want to work in taxation or any similar field in the finance domain, then it’s better to be a Chartered Accountant, and an MBA might not really help much, but if you want to work in risk or portfolio management in the sphere of finance, then going for an MBA programme would make a lot of sense.
Hence my suggestion: Find the right reasons for doing an MBA.
For more clarity, the process flow for taking this decision should be something like this –

What does an MBA programme give you in general?
A holistic perspective of the business
An MBA programme exposes you to case studies of different kinds of corporations from around the world. You’ll learn valuable and practical business lessons from organisations you might otherwise never encounter. More importantly, you learn all aspects of the business like finance, marketing, HR, operations etc, which help you to look at overall organisational goals and how the decisions of one department will impact the other departments.

During an MBA programme, you get to meet a lot of people and learn from them. You are surrounded by professors, faculty, batchmates and industry professionals. Internships, which are an integral required component of most MBA programmes, are a way to get a foot in the door of  companies and industries you are interested in. And above all, you are able to connect with the alumni of the college. So go ahead and do a lot of networking.

Career advancement and increased opportunities
In most cases, if the MBA programme is pursued after a brief work experience it helps in shifting from one industry to another and even from one functional area to another. Also, it has been observed that a good MBA programme helps to develop relevant skill sets, gain more reasoning abilities and confidence, and therefore helps you advance in your own career.

Practical learning
Most of the good B-schools across the globe have a case study and internship-based pedagogy. This helps you understand real business issues and how to tackle them. One of the main reasons why MBAs are preferred is because of their ability to troubleshoot critical problems, an ability gained from the practical learning methodology during their programme.

Learning from top executives and successful leaders
Imagine what you would learn if Nandan Nilekani, Indra Nooyi, Mukesh Ambani or other successful leaders like them come and share their experiences with you! One of the best things about these leaders and business executives is that they love to visit B-schools and give guest lectures. These talks are an amazing way to gain insights and advice from people who’ve already done what you want to do. It also takes you away from the mundane theoretical bookish knowledge and makes the learning more interactive and interesting. The value added from these sessions is massive.

Team work
In the real business world you are expected to work with teams. Management, per se, is a lot about teamwork and collaboration. Most of the courses in MBA programmes include group projects, and you will have several opportunities to master the art of team building. Even if you’re not assigned group work, you may still seek out opportunities to collaborate with your peers. Knowing how to bring people together will be extremely helpful in grooming you into a successful business leader.

Liberal thinking
Planning, strategising, rationalising, alternative thinking and taking the long view are core to being a successful manager. A good MBA programme helps you develop business related reasoning and the ability to correlate things. It provides you greater breadth as well as depth in creating plans and analysing issues.

Provides more credibility to your candidature
I am so very tempted to not include this point because it is highly misunderstood by many. So I will mention this as an outcome of your completing the MBA programme, but with a rider. Being an MBA certainly provides more strength to your resume and hence your candidature for a job, but it is not the only thing. Whatever you’ve gained from your MBA programme is far more critical; more importantly, whether you are able to demonstrate that during your interview or not differentiates you from other candidates. Another very important point is once you’ve completed your MBA programme, the expectations that the interviewers and companies have from you are much higher than those from a non-MBA graduate.

Why companies prefer MBAs
According to the B-schools that educate them and employers who hire them, MBA grads are sought after for their ability to think critically, deal with ambiguity and solve complex problems. In the broadest sense, the MBA degree represents a way of thinking and not just a set of financial skills and business knowledge. An MBA grad is typically expected to be a strategic thinker who takes an analytical approach.
For example, operations managers who have risen through the company’s ranks are experts at getting things done, but MBA grads from the outside can bring a fresh perspective, like figuring out how to improve key business processes, such as filling catalogue orders.
Companies primarily prefer MBAs because they are -
Professional trouble shooters
MBAs are professionally trained in problem solving. They know how to frame problems, ask relevant questions, collect data and come up with multiple solutions. They have developed the ability to deal with ambiguity and introduce changes to help the company compete in the market.

Trained critical thinkers
An MBA grad can evaluate a company by looking at its financials. But that’s not why employers want them. They also ask if the numbers make sense in terms of other realities. The process of earning the degree, which relies heavily on the case-study approach and requires students to evaluate business dilemmas and formulate the best plan of action, teaches them to think critically.
To wrap up, I will go back and ask the same question again –

‘Does an MBA help?’
And after all the details I spoke of, I will answer the question in the same way as I did for the first time to a student in 1997 –

‘It depends’
But now I know that it doesn’t sound subjective or vague to you anymore. All the best! 

Questions to ask before you apply for a loan

  • What expenses and fees are covered by the loan?
  • What is the maximum amount that can be availed?
  • What is the rate of interest?
  • Is a guarantor required?
  • Is any collateral required? If so, how much?
  • How long will it take for the loan application to be processed?
  • What are the payback procedures and terms?

Need for a guarantor and collateral
Most banks have done away with collateral requirement for loans up to `4 lakh. For higher amounts, one would need to present details of collateral security, which is valued by a valuation authority approved by the government. In some cases, depending on the loan amount (usually over `4 lakh), banks also ask for a third party guarantor.
For very high loan amounts, the collateral should be in the form of immovable property or transferable securities. Having a life insurance policy can be beneficial to a student who wants to avail a loan. The bank also benefits from such security; therefore, a few banks provide an insurance cover to a student who avails an education loan (for instance, the Union Bank of India has provisions for an insurance policy in their education loan scheme).

Tie-ups that help
Many of the leading banks have tie-ups with premier institutes like the IIMs, IITs, XLRI, etc to name a few. The State Bank of India and Bank of Baroda are a few such banks. This is helpful for many students, as they do not have to search for the best loan deal with the lowest interest from a host of banks. These tie-ups provide students easy access to loans at the best interest rates and a reduction in the loan processing time.
For instance, Allahabad Bank has drawn up a list of over 80 educational institutes whose courses it will finance, and it has special rates for IIMs/IITs/ISB etc. The bank also provides lower interest rates for girl candidates.
To summarise, female students with admission to premier institutes really have an advantage in terms of the interest rates on education loans. On a more general note, students who have secured admissions to some of the new or upcoming institutes may have to try harder to convince the bank to give an education loan.

Important things to note before you apply for a loan
Usually, students opting for professional courses tend to get loans smoothly and much more easily than those choosing to pursue higher studies in the liberal arts or sciences. It is important to understand the eligibility criteria stated by each of the banks. Each of the banks has its own set of preferences when it comes to assessment of a loan application; some may stress on good academic record, while others may have age constraints.
For instance, it is seen that typically, education loans can be availed of within a 15 to 35 years age bracket. HDFC Bank, for example, has an age bracket of 16-35 years for its education loan. Some banks insist on financing only certain kinds of courses or programmes from select institutes.
However, the general eligibility criteria followed by most banks in India are as follows.
The candidate seeking a loan must be an Indian national and they must have secured admission to the programme intended for study on merit, i.e., either based on individual academic performance or the screening test scores (like CAT/XAT/GMAT/SNAP/NMAT, etc to name a few).
Banks also insist that one should not have any outstanding education loans from other banks/institutes.

Following is a list of documents generally needed while applying for the loan (this will again differ between banks):

  • B-school admission letter along with details of year-wise fees and other expenses
  • Scholarship letter (if any)
  • Attested copies of birth certificate (or any other proof of age) and proof of residential address
  • Passport size photo of the applicant, co-obligants and guarantors
  • Copies of mark sheets / degree certificates of previous academic qualifications
  • Income proof / latest income tax returns of co-obligants, guarantors (if any)
  • Details of collateral security along with valuation certificate of government approved valuer (if any)
  • Last six months’ bank statements of the applicant / co-obligants / guarantors (if any)
  • Copy of passport/visa, cost of air tickets in case of studies abroad

How to apply
Most banks now have the provision for an online application for an education loan. After all the research and information gathering process is complete, one can visit a representative of the nearest branch of the bank chosen.
So, to summarise, management education is booming, and recruiters are constantly on the lookout for good talent from the top B-schools. Avenues for funding are ample and one just needs to be aware and informed. At the end of the day with funds secured, the decision should largely be guided by the rationale behind studying for an MBA and the immediate expectations from it.  

Bank MCLR Interest rate per annum Maximum quantum of loan (in INR lakhs) Eligibility
Axis Bank 8.20% Up to `4 lakh = 15%, `4 to 7.5 lakh = 14.5%, more than `7.5 lakh = 13.5%, Girl child = less 0.25% 75 Indian national, secured admission to the institute on merit, at least 50% in 12th and graduation
Bank of Baroda One year
MCLR = 8.30%
Up to `7.5 lakh = MCLR + Strategic Premium + 2.5%, more than `7.5 lakh = MCLR + Strategic Premium + 1.75%;
MCLR + Strategic Premium;
List-A institutes (Other IIMs, IIFT, ISB, MDI, SPJIMR, IIT Kanpur, Delhi, SCMHRD, SIBM, XIMB, et al
Up to `15 lakh = MCLR + Strategic Premium + 0.25%, More than `15 lakh = MCLR + Strategic Premium;
List-B institutes (FMS, IIFM, IMT, IRMA, JBIMS, LIBA, MICA, NMIMS, NITIE, Nirma, TISS, et al
Up to `7.5 lakh = MCLR + Strategic Premium + 0.75%, More than `7.5 lakh = MCLR + Strategic Premium + 0.50%
10 Indian national, secured admission to the institute on merit
Bank of India One year MCLR = 8.30% Up to `7.5 lakh = MCLR + 1.75%, more than `7.5 lakh = MCLR + 2.5%; Girl child = less 1% for loans above `50,000; less 0.50% for Management courses subject to 1 year MCLR 10 Indian national, secured admission to the institute on merit, admission to  IIMs, IITs, XLRI, and other institutes set up by Central/State Govt
Bank of Maharashtra One year MCLR = 8.75% Up to `7.5 lakh = MCLR + 1.7%, more than `7.5 lakh = MCLR + 2.50%
Less 0.50% for girl child
10 Indian national, secured admission to the institute on merit
HDFC Bank One year MCLR = 8.15% Not provided 10 Indian national of 16 to 35 years of age, secured admission to the institute on merit, collateral for loans over `7.5 lakh
IDBI Bank 6-month MCLR = 8.35%
One year MCLR = 8.55%
Up to `10 lakh = MCLR + 0.85%, more than `10 lakh = MCLR + 1.45% (Premier institutes including ISB = 6-month MCLR + 0.05% for all amounts) 30 (IIMs, IITs, ISB, IIFT, top management colleges, or 100% of the total cost of the program, whichever is lower) 20 (for other institutes) Indian national, secured admission to the institute on merit
Indian Overseas Bank One year MCLR = 8.40% Up to `7.5 lakh = 10.40%, More than `7.5 lakh = 11.40% 30 Indian national, secured admission to the institute on merit
Central Bank of India One year MCLR = 8.50% IIMs, XLRI, XIMB, SPJIMR, MDI = MCLR;
Male students = MCLR + 2%, Female, SC/ST students = MCLR + 1.50%
Others = 10
Indian national, secured admission to the institute on merit
Punjab National Bank One year MCLR = 8.15% General
Up to `7.5 lakh = MCLR + 2%, More than `7.5 lakh = MCLR + 2.6%
Up to `7.5 lakh = MCLR + 0.50%, More than `7.5 lakh = MCLR
Other than IITs, IIMs, XLRI
Up to `7.5 lakh = MCLR + 0.60%, More than `7.5 lakh = MCLR + 0.10%
Need based Indian national, secured admission to the institute on merit
State Bank of India One year MCLR = 7.95% General
Up to `7.5 lakh = MCLR + 2%, More than `7.5 lakh = MCLR + 2.75% (less 0.50% for girl child);
List AA institutes
All amounts = MCLR + 0.35%;
List A institutes (IIMs)
All amounts = MCLR + 0.35%;
List A institutes (Others)
All amounts = MCLR + 0.50%;
List B institutes
All amounts = MCLR + 1% (less 0.25% for work ex students);
List C institutes
All amounts = MCLR + 2%"
List AA institutes
(IIM-A,B,C,I,L,K, XLRI, ISB) = 35
without collateral;
List A institutes
(other IIMs, IIFT, IITs, MDI, BITS, SPJIMR, NITIE, SIBM, XIMB, IMT) = 20 without collateral, 30 with collateral;
List B institutes
(FMS, BIM Trichy, GIM, IMI, JBIMS, NMIMS, WeSchool, etc) = 20 without collateral;
List C institutes
(IIFM, LIBA,  etc) = 7.5 without collateral, 30 with collateral
Indian national, secured admission to the institute on merit
UCO bank One year MCLR = 8.45% General
Up to `7.5 lakh = MCLR + 2%, More than `7.5 lakh = MCLR + 2.4%;
List A, B, C institutes
All amounts = MCLR + 1.15%;
All amounts = MCLR;
General = 10;
List A institutes (IIMs, XLRI, ISB, FMS, SPJIMR, etc) = 30;
List B institutes (IIFT, Nirma, IMT, XIMB, MDI, SIBM, MICA, IRMA, TISS, etc) = 20;
List C institutes (IMI, FORE, BIMTECH, TAPMI, LIBA, GIM, etc) = 15
Indian national, secured admission to the institute on merit, maximum age 30 yrs (33 for SC/ST) for PG courses, 38 (max 40) for premier institutes.
Union Bank of India One year MCLR = 8.20% Up to `7.5 lakh = MCLR + 2%, More than `7.5 lakh = MCLR + 2% (male) & MCLR + 1.50% (female);
Tier II = MCLR + 1.65% (less 0.50% for girl child)
ISB = 40;
Indian national, secured admission to the institute on merit