MBA Advisor: Doubts About The MBA As Economic Mobility Engine

The pay gap is a persistent reality for women post-MBA. In fact, according to a new report by the Forte Foundation, the gap is widening.

The MBA has always been styled as a ticket to a better income, and by extension, a better life. New data released today (January 17) by a non-profit consortium of leading corporations and business schools strongly suggest that that pathway currently exists for men to a much greater degree than for women.

The Forte Foundation’s report, Outcomes and Perspectives of MBA Graduates, shows that the pay gap that women and men take into their MBA experience follows them when they re-enter the workplace — when it actually becomes worse than before. Yes: the pay gap widens from pre-MBA to first post-MBA job to current role, as women on average earned 97% of what their male counterparts earned pre-MBA, but just 90% in their first post-MBA job — and a shocking 72% in current compensation, adjusted for years of experience.

Moreover, the study found, women with an MBA don’t advance to the same level as men, have fewer direct reports, and have less job satisfaction. The report also looked at minority MBA graduates, finding that even as the degree helps them narrow the pay gap with non-minorities, overall they have lower career satisfaction than non-minorities in both salary and career progression.

“It’s encouraging to see that an MBA provides greater economic mobility for women and minorities and narrows the pay gap for minorities in their first job post-MBA, but the whopping gender pay gap and income disparity for women and minorities needs to be addressed, and soon,” says Elissa Sangster, Forte Foundation CEO.

THE GOOD AND THE NOT-SO-GOOD

Elissa Sangster. File photo

The Forte Foundation’s online survey of 900 male and female MBA alumni who graduated between 2005 and 2017 is the first part of a new research series, and the results are decidedly mixed. On the one hand is the persistent and widening pay gap between the genders post-MBA, most strikingly seen in the areas of finance and operations; on the other is the undeniable financial benefit all MBA holders derive from having earned the degree, in the form of a massive income boost.

While on average women earned 3% less than their male counterparts pre-MBA, the gap widens to 10% for first post-MBA position, and 28% for current compensation, adjusted for years of experience. And while women do, indeed, get a positive ROI from the MBA, seeing a 63% salary bump from their last pre-MBA job to the first post-MBA role — that is dwarfed by the 76% increase for men in the same circumstances.

Forte looked at the minority experience as well, and there the results were … also mixed. On the one hand is a narrowing pay gap for minorities versus non-minorities overall in their first post-MBA job — but on the other is the fact that in their present position, minority women still make 52% less than non-minority men, a difference of $76,589. Overall, minority MBA graduates had lower career satisfaction than non-minorities in two areas: their current salary and their career progression since obtaining an MBA.

“We’ve been working on that minority problem a bit longer, even though women in the workforce have been the focus on gender imbalance the last 10, 15 years,” Sangster tells Poets&Quants. “So many minority issues were beginning in the ‘60s and ‘70s in terms of equity in the workplace — so it’s good that that’s playing out in some of these numbers. But obviously, on the gender side, there’s still a ways to go.”

‘WORK TO BE DONE UP FRONT’

The Forte survey was conducted between March and April 2018, and the research was led by Michelle Wieser, interim dean of the St. Catherine University School of Business & Professional Studies in St. Paul, Minnesota. It was distributed through the Consortium for Graduate Study in Management, Forté Foundation sponsors schools (which include most of the elite U.S. and international B-schools), and the Forté Foundation database of alumni. Participants were asked to provide their current job function, to allow researchers to take a deeper dive into what might be driving the gender pay gap with current compensation.

They found that the job functions shown to contribute the most to the gender pay gap are finance (60% gap) and operations (48% gap), while marketing is the only function where women were shown to earn more than men (2%). Around 40% of respondents — primarily women — say they’ve experienced a gender pay gap.

Overall 55% of respondents believe that a gender pay gap “probably or definitely” exists — but it’s a view that only one in three men share with two in three women (men 34%, women 65%). A greater percentage of minorities believes that a gender pay gap “probably” or “definitely” exists (women: 68% minority, 63% non-minority; men: 44% minority, 33% non-minority). Survey respondents also under-estimate the gap, guessing it to be around 24%, with men earning 24% more than women — but the actual gender pay gap reported in the Forte study was 28% (adjusted for years of experience), representing over $58,994 in annual compensation.

“I think that there’s still room for improvement and work to be done up front,” Sangster says. “I think from a corporate perspective, they need to really pay attention to the inequities that are out there in the workforces, especially in this really important leadership pipeline that we know MBAs are for these companies, to make sure that they’re giving women the opportunities that they need to advance in their careers — and not to marginalize those opportunities even after they’ve invested in this MBA path to leadership.”

Business schools have been getting closer to the parity threshold for years, with one major school — USC Marshall — achieving it last fall. But a new report from the Forte Foundation shows that women should be concerned with what happens after their MBA experience when they rejoin the workplace. File photo

How do women combat the pay gap when they realize they are on the wrong side of it? The top survey responses were: “I have not taken action and do not intend to,” and “I left the company.” It’s a recipe for inaction, Sangster tells P&Q.

“I think women need to take action and call attention to these inequities and not walk away from an organization without being clear about why you’re leaving,” she says. “And I think as they’re exiting we saw that they weren’t addressing that necessarily with their employer and I think it’s on the onus of the company as well though to ask those questions and to have a good understanding of why they’re losing talent and not just assume that it’s about something that’s work/life balance or stepping out of the workforce or whatever assumption they might be making but that those employees are choosing a different path because they didn’t see that path open to them at their company.

“When we asked women MBAs how they intend to address the gender pay gap they’ve experienced, it’s more common for them to leave the company rather than speak about it with their manager, human resources or company leadership. This is a wake-up call — companies need to take proactive steps to lessen the pay gap, or risk losing highly skilled women employees.”

MORE BREAKS FOR MEN, CHALLENGES FOR WOMEN

Additional research insights and data include:

For minority women and men, the return on investment for an MBA is even greater than non-minorities in their first post-MBA job in terms of a salary bump: women (minority 70%, non-minority 63%); men (minority 84%, non-minority 70%). Meanwhile, the pay gap narrows post-MBA between minorities and non-minorities: (24% pre-MBA, 16% first post-MBA job, 12% current role).

In addition to compensation, the Forte study examined other typical measures of career progression, including a number of promotions and direct reports, plus level-title, since the first post-MBA position. The outcomes revealed that, on average, men have received 2.3 promotions since completing their MBA program, while women have only received 1.8. Men have an average of 3.3 individuals reporting to them; women only have an average of 1.8. And men have achieved, on average, the equivalent of the Director level within their organizations, while women trail behind one rung on the career ladder with an average level of Senior Manager. However, the study found no statistically significant differences in these areas for minorities versus non-minorities.

The research also examined six elements of career satisfaction: current role, company, level within the organization, the number of direct reports, current compensation, and career progression to date. It found that men have achieved higher levels of career satisfaction than women across all six elements. The number of direct reports women have, and their current compensation, are the biggest sources of career dissatisfaction for women.

“I really always thought that the MBA kind of leveled the playing field, and I think it still does in some respects because I think the opportunities that are out there are different post-MBA,” Sangster says. “But it doesn’t necessarily level the playing field in terms of the salary and I think that gap persists and it’s kind of related to the women making choices to go to other places. Maybe they’re not asking to address the issue within their own organization and see that pay gap go away or their pay increase. And I think that ultimately, in their post-MBA careers, they are still they’re faced with a lack of flexibility. Many of them are entering into a time in their career when they are thinking about work/life balance, and so if a company has not structured opportunities so that it’s flexible and it allows them to do both of those things, and you’re in a two-MBA household perhaps and you’re both out pursuing your careers and then you’re confronted with how to balance work and life, somebody usually steps back and I think often that is the female in the relationship.

“And so I think that’s part of what’s playing out, especially knowing where MBAs are going in their career path into these financial firms, the consulting firms that require some sacrifice that potentially women are not able to make because of other reasons, family reasons, or they’re just not willing to make because that’s not the most important thing to them. These firms haven’t really figured out how to structure a professional career leadership pathway that accommodates these kinds of choices.”