Why MBA ROI Is the Gift that Keeps On Giving

Elie Maaloui knew going to business school would require a significant investment in her personal and professional development.

Maaloui, who is Lebanese, undertook an MBA at EMLYON Business School in France, where tuition fees are €38,500 (US$45,052) for the 12-month course.

However, she seemingly has no regrets about investing the money and time needed to get her MBA, as the return on investment (ROI) has been huge for her as she now works for Nissan in Paris.

Maaloui say, “What you gain from the program is not only monetary; it’s a network, a new way of thinking, tools to better yourself, and the confidence to take risks in life and your career.”

Defining ROI

ROI is of paramount importance to prospective business school students. An MBA is a costly course, for example, the two-year program at the University of Pennsylvania’s Wharton School is US$108,000 in tuition.

Full-time students also sacrifice a salary to study, and unfortunately, the average cost of a two-year MBA increased by 44 percent between 2008 and 2014 to $104,000, according to FT data.

The conventional way to judge ROI is through the associated salary boost of an MBA. US companies offer a median starting base salary of US$105,000 to MBA graduates in 2018, according to a recent GMAC survey.

The big bucks

Salaries tend to be higher in the financial services sector and lower in the public or non-profit sectors, school career reports suggest.

At Harvard Business School, the median base salary for MBAs in venture capital and private equity was US$152,000 last year.

Salary figures also vary significantly by school, with graduates of the most prestigious institutions making bigger bucks, though students at lower-ranked schools often see a larger salary increase because they entered the course with relatively low pay.

Alumni of Stanford Graduate School of Business sacrificed, on average, salaries of more than US$100,000 to get the MBA. However, three years after graduating alumni earn almost US$200,000, FT figures show.

Comparatively, MBA graduates from Iowa’s Tippie College of Business earn around US$100,000. This salary represents an increase of 130 percent on their pre-MBA pay, which averaged around US$45,000.

The length of the MBA is worth considering too. Hannah Daniels, assistant director of the degree at London’s Imperial College Business School says, “The financial return of our one-year full-time MBA program is substantial, and it has proven to be a popular option among students, as they will be able to get the return on investment sooner than from a two-year program.”

Choosing your MBA program

The vast majority of one-year MBA courses in Europe have seen increases in applications, while the number of US schools reporting application increases to two-year MBAs has fallen in recent years, according to GMAC.

Imperial’s MBA students pay £52,000 (US$68,162) in tuition for just 12 months. Three years after graduation, the salary increases by 68 percent on average to around US$118,000.

At EMLYON Business School in France, where the payback period is between two and four years, the main reason participants take an MBA is to accelerate their corporate career and fast-track their transition to senior management, or start their own company, says Rhoda Davidson, director of MBA programs.

But there’s much more to an MBA than the money, Davidson says. Personal development, interpersonal skills and ethics also matter to MBA students.

Many business schools offer generous financial awards to help students pay for the MBA, and this should be a factor when prospective students make their decision on where to apply.

Exceptional extras

Germany’s Mannheim Business School offers scholarships to exceptional and/or minority candidates, such as women, in addition to working with Prodigy Finance, which offers community-funded loans to international students.

Ralf Bürkle, director of marketing says, “As our tuition fees and the costs of living in Mannheim are comparatively low — and thus the value for money is high — we offer scholarships on a moderate level,” with typical awards of around €7,000 (US$8,175).

Mannheim’s one-year MBA tuition is €39,500 (US$46,128); alumni more than tripled their pre-MBA salaries of US$55,000 five years after graduating, to US$144,000, Bürkle says.

Francesco Daveri, full-time MBA director at Italy’s SDA Bocconi School of Management, says many students value the ability to change industries, functions and geographies, and factor this into the ROI. “They can move into more profitable sectors, such as healthcare and strategy consulting,” he says.

Bocconi’s MBAs pay €49,000 (US$57,181) in tuition fees and within three months of graduation, they earn more than €80,000 (US$93,356), giving the school the fastest ROI in the world at 2.2 years, according to Forbes data.

The ROI value

Longer-term payoffs of the MBA can include further career advancement with progressively higher salaries, due to more status and credibility in your organization, says Davidson, at EMLYON.

She says, “An MBA also places a strong emphasis on leadership development, helping high potential managers to become much more certain about their career direction. This allows them to make better choices about the types of jobs that they will find fulfilling.”

For example, Ben Kirk, a full-time MBA student at Imperial, has recently joined ThinAir Water, a start-up that focuses on transforming access to water in rural communities and drought-stricken areas, in the role of CFO.

Stephen Rakas, executive director of the Masters Career Center at the Tepper School of Business, believes MBA students can maximize their ROI by taking advantage of the school’s alumni network across the globe.

“While a higher income over one’s career is a significant benefit, another important ROI factor is having access to a close-knit alumni network,” he says. “At the Tepper School, our MBA alumni belong to a connected and supportive professional network, which is available to them throughout the rest of their career."

So despite the upfront investment, an MBA is the gift that keeps on giving.