New MBAs Discover Degree’s ROI is ‘More Than Just Money’

This article is sponsored by IMD. Learn more about IMD.

Facing an uncertain job market, many view higher education as the pathway toward better prospects. Yet during the Great Recession, applications to MBA programs actually declined. In 2013, the Graduate Management Admission Council (GMAC) reported that many schools were still seeing a drop in applications. Schools with full-time, two-year MBA programs experienced a 46% decline. It's logical that the most expensive, time-consuming MBA option saw a drop, but part-time MBA programs fared even worse –  54% saw declines in admissions.  

There are many good reasons for this. After all, banks and financial institutions traditionally attract the highest percentage of MBAs, but after cutting thousands of jobs they represented far less appealing employment prospects. The core group of most MBA programs has been middle managers – the same group that found themselves suddenly out of work and unable to afford tuition, while credit tightening by private lenders reduced the availability of loans.

Today as most MBA programs report a surge in applications, the worst may well be behind us but even with the recession in the rear view mirror the road ahead is hardly clear of obstacles. This is why prospective students are most concerned about an MBA's ROI – the return on investment.

For many, Switzerland’s IMD stands out for its ROI. Founded in 1990 as the International Institute for Management Development, Switzerland’s IMD is the successor of two independent business schools. As IMD notes on its website, the school “prepares its graduates not only to tackle the complex business challenges of the future but also to exercise the leadership needed to obtain results through others.”

Management skills

Economic uncertainty means that now more than ever, those considering an MBA have to do their research. It’s called due diligence and it’s what any investor must do before committing. After all, buying a house and financing an MBA are probably the most pricy investments you’ll make. Both can cost thousands, create debts that take years to repay and without careful research leave you heartbroken. You’ll be applying management skills even before attending class!

Many MBA applicants already possess these skills, which have been developed through work and internships. Yet the best programs hone those talents, immersing students in an environment which closely resembles their future workplace. For Galina Antova, earning her MBA at IMD meant “working on group projects, in high pressure, short deadline situations, [that] re-creates the stress we feel in the ‘real’ world on the jobs… I see this as the true differentiating value of the program – it brings people together under pressure and forces them to gain a better understanding of who they are.”

To her and many others, the management skills utilized and honed during the MBA provided the best ROI. Of course, the cost of earning an MBA goes beyond tuition. There is also an opportunity cost. Attending school usually means forgoing earnings. While MBA students are studying, they aren’t working. Executive MBA programs allow students to keep their jobs, but in most cases tuition bills match or exceed the student’s income. No matter how one considers it, there’s no escaping the fact that earning an MBA is an expensive proposition.

Just as daunting are the horror stories. Every prospective student is familiar with these tales of woe starring MBA grads unable to land full-time employment or forced by economic necessity to accept positions where their degree is superfluous. Today MBAs pursuing careers in banking and finance, traditionally the most receptive to their degree, are competing against candidates without graduate-level education. The world of money has decided it’s cheaper to hire someone at a lower salary and train them than to pay an MBA premium for someone who has already developed management skills.

Meanwhile, students should note top-ranked programs may not fare as well when they are rated for their MBA ROI. In May, The Economist examined tuition, forgone earnings and average starting salaries amongst graduates for MBA programs across the globe. Many top-ranked schools rated poorly in this ROI matrix. As website Poets and Quants points out, “The top performers were moderately-priced international schools with shorter curriculums that drew students earning modest income.”

The most important question potential MBA students must ask is does the degree pay off?

Soft skills

One recent IMD grad, Denis Peres, saw an immediate return in his investment, explaining that, “The MBA had a significant impact not only in my immediate salary, but also in my earnings potential in the long-term.” He notes that after earning the degree his salary more than doubled. “I was already enjoying great career progression before the MBA, but it definitively sped up the progression and [meant I was trusted] with bigger challenges and roles.”

But for Peres, the return on his investment was about more than just money. To him, other factors like the improvement in his soft skills were equally important. These are the character traits and interpersonal skills governing how we interact with others. Soft skills are about who we are more than what we know. Peres appreciated how IMD polished his soft skills, as he explained in a posting on IMD's website: “I wanted to learn more about how to relate with others and to understand myself better. I could learn more about finance by reading a book. But to learn more about leadership of multicultural teams, I had to put myself in that environment. At IMD, I have learned to listen more.”

Antova also points to the development of her own soft skills as a demonstration of good ROI, saying there was a process of “getting to know myself better as a leader and as a person. The self-awareness gained at IMD is one of the most important characteristics of its leadership development orientation.”

People management

After spending upwards of US$100,000, it's understandable that increased salary would drive decisions. Yet most MBAs insist it's what isn’t quantifiable in dollars and cents that stays with them.

In addition, alumni point to the friends and contacts made during their time earning an MBA. The process of people management – working with a team and learning how to be a leader – led Peres to note that at IMD he “started to question myself much more, being more attentive to the reasons behind my actions and my tendencies, then instead of just reacting being more inquisitive about them. My point is that the IMD MBA had an impact that I was not expecting in my personal life, plus I don’t think that other MBAs also do that, since this was specifically related to the well-developed leadership stream of the IMD course.”

Antova had her own experience acquiring people management skills, explaining that, “The most important transformation was recognizing the importance self-awareness plays in my role as a leader and in my personal life. Additionally, we had the option of working with a counselor to further develop our self-awareness as we explore our challenges and motivators. Dedicating the time to analyze myself and understand why I do what I do – professionally and personally – has given me great insights and enabled my success.”

Clearly, Peres and Galina's experiences demonstrate that the ROI from an MBA at a top school like IMD is positive, not only with regard to money but also in terms of developing talents like people management and soft skills that are not so easy to put a price tag on.

This article is sponsored by IMD.