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What's In A Degree? The Value Of An MBA

by Dr. Steven Langer, PhD, SPHR

Are all those extra years at college really worth the trouble? Yes, according to a recent compensation survey into dozens of accounting/financial positions, ranging from Chief Corporate Financial Officer to Junior Account Clerk. The study finds that CFOs without a degree have a median salary of only $38,920, BA/BS/BBAs earn $88,836, while MBAs receive $104,284---quite a return for a few semesters of higher education.

Not surprisingly, holders of a CPA also fare better than those without one. For example, median income for Chief Corporate Financial Officers holding a CPA is $100,000, 17 % higher than peers who lack that diploma. Additionally, among non-supervisory accountants and auditors, possession of a CPA results in an increased income of 13%.

But it is not just an MBA or CPA that makes a difference. Almost any level of professional certification has a lasting impact on earning power. According to Dr. Karl. E. Reichardt, CMA, PhD, Associate Professor of Accounting at Valparaiso University's College of Business Administration, "Degree level and certification are major factors in compensation which appear to follow individuals throughout their career."

And while education level is an excellent overall barometer of income in the accounting/financial field, there are many other variables that influence compensation. Such factors as length of experience, type of industry, geographic location, size and income of business and supervisory responsibilities also play a part.

Length Of Experience
Length of experience can have almost as great an impact as level of education. For instance, supervisory/managerial accountants and auditors with 25 or more years of experience have a median income 73% greater than those with under one year of experience. A similar but less pronounced pattern is also found among non-supervisory accountants and auditors and account clerks and payroll clerks.

Supervisory Responsibility

Predictably, median income for personnel supervising five or more non-professionals rises by 11% compared to those with little or no supervisory duties. However, this variable soars to 72% when 10 or more professionals and non-professionals are being supervised. Using Chief Corporate Financial Officers as an example, median income is $60,000 when a CFO is supervising under five staff. But income jumps to $100,000 when supervising 10 or more and to $142,000 when directing 25 or more professionals.

Geographic Location
Region, state, and metropolitan area can have a significant effect on income. For instance, CFOs in Kansas average $62,420, compared to their counterparts in Massachusetts who earn $145,000. Similarly, a Washington DC position pays $38,000 more than one in Detroit. Although the Northeast and the West generally command the highest incomes, accounting/ financial personnel in certain Midwestern and North Central manufacturing hubs can sometimes earn more than do their colleagues on either Coast.

Industry
Surprising differences show up when compensation is evaluated along industry lines. CFOs with manufacturing firms average $115,000, as opposed to only $86,225 for non-manufacturing employees. Even within the manufacturing sector, there are major variances. Those in chemicals and plastics are rewarded with a median income of $150,000, while CFOs infabricated metal firms make $87,500. And among the non-manufacturing categories, financial institutions ($135,500) and insurance firms ($133,295) lead the way in CFO compensation, with government positions averaging only $77,856. The healthcare industry comes in lower at $73,328 and non-profits even lower at $60,765.

Size of the Organization
There are many facets to organizational size. As well as number of staff, revenue and budget also play their part. For a CFO in a business that has fewer than 25 employees, for example, the median income is $68,500, while companies with 500 to 1,000 employees pay $116,744. When looked at from the perspective of annual sales, though, a firm with annual revenue of less than $25 million pays a CFO $95,000, compared to $161,000 in businesses in the $100 million-plus revenue bracket.

Combination of Variables

Clearly, the above factors do not act in isolation. It is therefore necessary to view a combination of variables in order to predict and determine income levels for a particular individual. Yet, certain generalities exist. To earn top dollar, CFOs need to have an MBA and a CPA, plus 15 to 20 years¨ª experience. In addition, they have to be responsible for 25 or more professionals and live in one of the major commercial centers in the Northeast or the West. Finally, they likely work for a huge financial services firm with multi-billion assets.
But there are tremendous variations, particularly in the manufacturing field. For CFOs among manufacturing firms with annual sales between $25 and 50 million, those in the Northeast earn $30,000 less on average than their Midwestern counterparts, and, in this same revenue category, CFOs with an MBA actually average $1,000 less annually than those with a lesserdegree. In spite of the exceptions, however, these factors provide insight into income potential and the variables that govern it.

Compensation in the Accounting/Financial Field

This information was culled from the 17th edition of 'Compensation in the Accounting/Financial Field', a three-volume, 917-page statistical analysis of current salaries and total cash compensation of 59 benchmark jobs in the field. Useable survey data was received from 564 U.S. organizations in the business, industry, government and non-profit fields. This annual survey reports current salaries and total cash compensation by nine demographic variables, as well as certain combinations of variables.

The report has proven valuable to human resource departments, managerial personnel, consultants, and individuals in the accounting/financial field who wish to ensure they, their subordinates and/or their clients' employees are being correctly compensated. "This type of survey is invaluable in helping companies to calculate salary structures, as well as in informing people entering the field on the kind of salaries they can expect," says Robert Randall, assistant publisher of the Institute of Management Accountants.

Reaching a Higher Plateau
If an MBA alone can add as much as $463,440 in lifetime earnings for a CFO when compared to a baccalaureate degree, what is the price tag on the right location, the right industry or the right position? By achieving a firm understanding of these variables and acting on them, it is possible for an individual to set a course for a higher plateau of success.

Dr. Steven Langer is the president of Abbott, Langer & Associates, a consulting company based in Crete, IL.

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