Is pursuing an MBA degree a risk during an economic downturn?

A couple of weeks ago I had written an article on Do you need an MBA? It seems to have had an impact on the CAT aspirants this year.

According to an article in the Mint, the number of MBA aspirants appearing for the CAT is down by almost 76,000 since 2008. The trend is similar for other aspirants in other entrance exams like XAT and SNAP.

Why is this happening? I did some analysis and came up with three reasons.

1. The Economic downturn offers safety

In the West an economic downturn sees more people enrolling themselves for higher studies. But in India it is the opposite.

More people put off plans for higher studies and instead concentrate on holding on to their jobs. As most Indian corporates are averse to laying people off (no matter what the situation), employees have to just show up for work to be able to keep their jobs.

Having a job is seen as being more secure than scouting for one in a downturn.

In the West, companies are not averse to laying people off during a downturn and hence to avoid this eventuality most people take the opportunity to go on unpaid sabbaticals (or plain quit their jobs) to pursue higher studies including MBA.

2. MBA placements are difficult during a downturn

In the West most B-schools do not guarantee placements and students have to hunt on their own for opportunities. As a result they spend a lot of time networking with corporates, attending conferences and going to other countries to get international experience so as to improve their chances of getting a job. This also exposes them to real challenges and opportunities.

In India, most B schools guarantee placements. So all the student has to do is show up on campus, attend classes and focus on academics.

The job of finding a job is handled by the institute, aided by bodies like the campus recruitment cell or placements cell. Most students in Indian are not familiar with networking or connecting with corporates outside of campus.

During a downturn students are not confident of the institute’s ability to find them appropriate jobs and hence prefer not enrolling for the course. Additionally, as most CAT aspirants don’t have work experience (unlike their peers in the West), they usually don’t have any professional networks to tap into for opportunities.

3. Lack of entrepreneurship

Entrepreneurship is not high on an Indian MBA’s radar of job opportunities. But this is one of the key factors considered by students in the west.

Typically 30-40 % of B-school aspirants in the West accept job offers either with a startup or start a new venture on their own.

Facebook and Google are among the best examples of how companies were started from campuses. In India, although entrepreneurship is catching up, most B school students still prefer corporates hiring them in order to justify their investment (time and money) in B school.

Do you agree with my possible reasons? Please share your views.

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