Apr 25, 2009

Price of Darden MBA

First a disclaimer. I computed costs of MBA initially to make sure it made financial sense, but once I became convinced of the value of MBA, then computing the actual financial cost became more of an academic exercise.

Computing the cost of MBA can be complicated if you look into the crystal ball of the future, of what could be and what might be missed on account of devoting 2 years of one's life to school. However, the short-term monetary costs are fairly straight-forward. There are two broad categories of financial costs: 1) tuition, fees & living expenses and 2) opportunity cost.

1) Tuition & fees:
Darden tuition and required fees for out-of-state students are $48,500 for 2009-2010. I'm going to assume an increase to $51,500 for 2010-2011. Darden MBA website suggests a 9-mo living expense of $20,500. If I project a 4% cost increase the following year, and use 22-mo expense over the course of the MBA program, then the cost of the school itself is approximately $150,000.

2) Opportunity cost:
This depends on the individual. For me, here's the deal. Our firm FY roughly corresponds to school year. For 2009-2010, I expect a base of around $64,000 and a promotion bonus of $6,500. For 2010-2011, I can expect a base of around $68,000, and probably no material bonus. The foregone wages are off-set by 2010 summer internship expected at around $18,000 for 12-weeks. The net cost is $120,500.

Darden 2009 - 2011 $ 150,000
Opportunity cost 120,500
$ 270,500

This is no small amount. Nevertheless, using a reasonable projection of post-MBA salary increases, I personally expect to re-coup the financial cost alone within 4-5 years. Apart from this, the value of MBA appears to be so much more that are not shown in these figures. In the end, such factors are intangibles, and you can certainly assign a value to it, but only time will tell how much it's truly worth.

Apr 19, 2009

On Kenan-Flagler

Kenan-Flagler just closed its class of 2011 Experience Weekend. I primarily attended Saturday events on April 18.

I have to say that I was impressed by what I saw and experienced. I was impressed with the involvement of the school's students, faculty, and staff. They strongly demonstrated their vision and values, and expressed what it might be like to be part of the "OneMBA" community. I felt especially good about the momentum of the program. For example, there was a renewed focus on leadership and opportunities through the Kenan Institute to enable that leadership for its students. Also, the school revised its consulting curriculum under Paul Friga (co-author of "The McKinsey Mind") and I believe its integrated and focused approach will show a huge dividend in years to come. In speaking with the current students, my overall conclusion is that Darden students are of higher caliber in terms of their intellect, their maturity, and in their career aspirations.

Per 2008 employment report by function (% reporting, mean base, bonus):

Consulting, 19% - $114,000, $22,500
General management (strictly), 4% - $89,000, $22,500

Per preliminary 2009 employment report shared during the weekend, these figures had changed:

Consulting, 17% - $109,000, $33,000
General management (strictly), 10% - $96,000, $19,000

Apr 17, 2009

On Ernst & Young Feedback Process

I met with my counselor for lunch ahead of FY2009 annual reviews, also known as the round table. Over lunch, we discussed my goals, my self review, and my performance feedbacks from various engagements as a preparation for the upcoming round table.

Since I have made up my mind to leave the firm, I didn't much care for the exercise, but still took care to update these reviews, because I wanted to end my career at Ernst & Young without shame or regret. Nevertheless, I feel that MBA application process was a much more meaningful and beneficial self discovery process than reflecting on my performance as an auditor over the past year. Even if I were to disregard MBA considerations, I still find that Ernst & Young 360 feedback is faulty to the point of uselessness. In my mind, that fault primarily is due to the lack of impact of the feedback.

The firm's feedback and review process results in assigning a numerical rating of an employee against his or her peers ranging from 1 (worst) to 5 (best). The rating is supposed to follow a forced curve and allegedly directly relates to one's annual salary increase. The range of the annual raises depends on the firm's performance. For instance, if the firm announced raises ranging from 3 - 12%, then those rated 5 are most likely to receive the double digit raise. I could care less for at least three reason (again, excluding MBA considerations):

1) I think the firm's raises will suck this year - many may not even receive a raise, and those who do will see only a modest increase. This assessment is based on economy in general, but also based on local market considerations. For example, our office has lost some accounts, and our other clients have pressured for lower fees. This has to translate to either a) layoffs or b) salary freezes. We'll see both.

2) Even if you receive a rating of 5, it doesn't guaranty that your raise will be commensurate. I can vouch for instances in which my % increase as a 4 was lower than a staff who received a 3. I think the actual raise is as much based on one's current base and how much the firm thinks it can get away with, etc.

3) Even if one were to receive a high raise, I feel like the entire game is pointless to the extent that you'll always be a little fish in a small pond. Out in the industry, or for those accountants jumping around, there is always more money to be made. For example, if you were to leave and work for a competitor, you could probably negotiate a 15%+ raise verus the 5% you're likely to get for staying. If you left for industry, you might get something like 30% raise.

Now, enter MBA (with respect to salary). My current base is $62,500. If I figure about a 5% raise (I expect to receive a rating of 5 or 4), then my base will increase to around $65,500. This would be considered generous this year. If I figure two subsequent annual raises of 10% per annum (highly unlikely - in fact, will not happen), then my base would be just shy of $80,000. Now, at the same time in the Fall following graduation, my base will be in excess of $100,000, working less hours and with more prestige and more enjoyable responsibilities. Hmmm ... tough call. So, there it is, a little fish in a small pond. Of course, salary isn't the reason I'm leaving, but it's yet another validation that there is no future for me at Ernst & Young.

Given these considerations, why would someone with the ability to jump ship stay on board? In fact, we find that those who can, do not stay. If Ernst & Young wants to become a great services firm it purports to be, then it must address this weakness.

Apr 5, 2009

To Darden or not to Darden

I've been agonizing since Darden admission notice as to whether I should enroll at Darden or at Kenan-Flagler.

I've continued to speak to various folks from different walks of life to help me make a better decision:
1) Current students and recent alumni at Darden and KF
2) Business people outside of the school community - including MBAs at other schools and current, successful businessmen without MBAs
3) Friends and family - for perspective ... just as a means of stepping outside of business world to overcome myopia.

I'll share the outcomes of these conversations separately.

The more I have talked to others, I became more convinced that in the end, I really need to talk to myself. Rather, listen to myself. At some point, additional information adds only a marginal value, and may have deleterious effect. To dispel confusion, and to renew my career direction, I felt I needed to find my own voice. Hence, I paused to reconsider my chief aspirations from enrolling: 1) to learn and challenge myself intellectually and vocationally, 2) to transition to a general management role and fill in gaps in my training necessary for that transition to leadership, and 3) to build and have a brand and network to serve as a tool or a framework of support throughout my career.

1) Learning - I'm leaning Darden on this count. I believe I will learn better through the case method, and 3 quarters of team learning at Darden appeals to me more than 2 quarters at Kenan Flagler.
2) General management career - This is comparable as I believe both schools would allow me to have a broad management education. That said, I believe the case method is more conducive to training a general manager. However, I also understand that managing is not an academic exercise, so I don't know that case method has any edge here. I am leaning Darden on this attribute as I believe this is a path more established at Darden. For example, by function Darden had greater % doing GM than KF.

Darden, class of 2008 - 21%
KF, class of 2008 - 13%
(I consolidated general management, operations, strategy/development, leadership rotation programs; I excluded marketing, though I imagine there is some overlap)

3) Brand and network - I think the two schools are very comparable here, and will matter especially little as my goal is general management. If consulting, I would go with Darden. If banking, I would go with KF. As it stands, I think there is no material difference. However, I will note that more Fortune 100 companies recruit at Darden than at KF.