Wait! Don’t Pick Harvard Just Yet!
Over the last decade or so, undergraduate degrees have changed from a differentiator to a near requirement in most business settings. That’s not to say the degree is worthless, however. Those with college degrees can expect to earn nearly 80% more than their high school counterparts. But in a business setting, the degree no longer sets you apart from nearly every person you work with who also has a college education.
Now, many are turning to MBAs to get that extra ‘edge’ over the competition. But there are several questions to be answered before selecting a school and program such as “Should I pick a top ranked school?” or “Which type of program will deliver the best results.” The Graduate Management Admission Council (GMAC) set out to answer these questions in a December 2006 research report titled Examining the Value Added by Graduate Management Education. A few of the things I found interesting:
The overall return on investment (ROI) for an MBA is 177%
The amazing thing about this number is that they only assumed a person would work for 10 years after obtaining their MBA. So for those that are receiving their MBA at a young age, this number jumps dramatically. The payback for the average MBA is 4.5 years.
The ROI for a top 10 school is dramatically lower than other schools
Although the net increase in salary is a bit higher for those graduating from top 10 schools, the total cost of the top 10 schools is dramatically higher. The ROI for top 10 schools came to 118% while their non top 10 counterparts came in at about 185%.
A part time MBA program gives a better ROI than full time or executive MBA programs
The biggest factor for a small return on the full time MBA program is the cost. The average cost of the full time program is nearly four times the cost of the part time or executive MBA program. As for the executive MBA program, the lower ROI as compared to the part time programs is due to the higher salaries of the executive MBA program participants. This is because students in the executive MBA program tend to be more experienced (i.e. executives.)
Public schools beat private schools in ROI
The total cost of the private schools in the report came in almost 40% higher than that of the public schools. This overwhelmed the fact that those coming from private schools tend to generate a higher salary.
From the results of the survey, it appears that obtaining an MBA is a good idea (financially speaking) no matter where you get it from. However, the higher price of private schools (especially those that are top ranked) do not fully equate to an equally higher salary. Unless you are in a position that you absolutely must have an ivy league diploma on your wall, you may be better off looking at less expensive alternatives.
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