A common question we hear at events and from candidates on the site is whether an MBA is worth the investment. Whilst this is clearly highly dependent upon personal circumstance, we wanted to put some numbers on the return on investment of an MBA.
Using the data collated by the FT (FT – 2015 top 100 business schools), we look at the impact on salary 3 years after graduation. We identify key trends coming out of this analysis, before posing a series of questions that you should ask yourself before deciding whether an MBA is right for you.
The picture varies greatly internationally
We pulled out the schools that were resulting in the largest percentage increase in salary, and were interested to see how Chinese and Indian schools accounted for 6 of the top 10 schools ranked by salary increase (3 years after graduation):
- China – Shanghai Jiao Tong University: Antai – 160% growth
- China – Fudan University School of Management – 148% growth
- China – Ceibs – 147% growth
- India – Indian School of Business – 131% growth
- Singapore – National University of Singapore Business School – 127% growth
- China – CUHK Business School – 125% growth
- Spain – Iese Business School – 121% growth
- China – HKUST Business School – 117% growth
- Spain – Esade Business School – 117% growth
- US – University of Iowa – 117% growth
Clearly, 115-160% growth in salary over 3 years is very impressive and gives people an idea of what the potential financial upside to doing an MBA is. It’s important to note it’s not just the smaller schools that are resulting in large salary increases: the mean 2015 ranks of the top ten MBA schools is 31.8.
Two potential drivers behind the high prevalence of Chinese and Indian schools in the top ten are global mobility and faster pay curves. The Indian and Chinese schools are providing a route for national candidates (where salaries on average are lower) into an international market. There’s also potentially an argument that salary increases faster as you progress in Indian and Chinese businesses.
Some familiar names when we look at absolute salary increase
When we looked at a proxy of absolute salary increase (i.e., combining the ranking of mean salary and mean increase) a few familiar names began to appear. The top 5 were:
- Ceibs (ranked 11), China – mean salary after 3 years: $149,504 (147% increase)
- Shanghai Jiao Tong University: Antai (ranked 55), China – mean salary after 3 years: $93,690 (160% increase)
- Columbia Business School (ranked 6), US – mean salary after 3 years: $169,252 (106% increase)
- IESE Business School (ranked 7), Spain – mean salary after 3 years: $144,992 (121% increase)
- Harvard Business School (rank 1), US – mean salary after 3 years: $179,910 (96% increase)
Don’t forget the other side of the ROI equation – cost
The cost of an MBA at Harvard is estimated at $160k. This is considerably more than Ceibs, the top MBA school in China, where that figure is estimated at $62k.
With significantly lower costs, the Chinese and Indian business schools provide a higher return on investment and therefore shorter period to be repaid. According to Forbes, the class of 2010 had a 3.4 year return at Ceibs. It is worth noting that Ceibs is considerably less international than some of the other schools on the list – only 43% of the student body is made up of foreign nationals and only 7% of the total figure are Europeans.
So, is an MBA worth it?
As mentioned in the introduction – this is clearly a very personal choice. Financial ROI is only one part of the equation. An increase 3-years after graduation is also a bit short-termist (i.e., that difference should hopefully keep growing throughout a long career).
We’ve seen that the ROI varies hugely by geography. And as such an understanding of the performance of the schools, you’re looking at is critical.
We wanted to leave you with a series of questions you should ask yourself, or thoughts worth pondering, before deciding if an MBA is right for you:
- Where do you want to be in 5 years? (industry/ function/ geography)? How many people in these positions currently have MBAs? (i.e., in corporate America MBAs are considered far more important than in the UK tech scene)
- Do you want a career break that will still look great on your CV? What’s not in doubt is that going to MBA school is a lot of fun.
- How strong is your current network? MBAs are a great way to develop a network in your industry/ a chosen city. If you already boast an ex-consultancy alumni network, question yourself as to whether this will still provide the same upside
- Are you looking to change your career path? MBAs are great ways to move from one industry to another and can be a great way to stop you being pigeon holed
- What is your cost of capital: the ROI of an MBA is changed hugely if you’ve been offered sponsorship. Without it, it’s a large personal debt to take on. Would your current employer offer you sponsorship (in order to keep you)?
- Unsure about what kind of corporate life suits you? If you know you want to work in corporates but don’t know what options are out there, MBAs are a great place to be introduced to corporate recruiters
- Want to wipe the slate clean? Start-up gone wrong? Could an MBAs help you get back on track?
It’s also worth ensuring you’re not doing an MBA for the wrong reasons. We’d always question people motivated by:
- Learning about business: it’s cliched but we’re regularly told by people have completed their MBAs, that it won’t teach you anything you can’t read in a book.
- You want to do a start-up on the side: you’ll never be able to dedicate enough time to one or the other; we’d suggest you choose and throw yourself at one of these options (potentially start-up first as an MBA can be a good net to catch you if doesn’t work out)
Like our advice? Hear even more at one of our events:
At our last private equity event, we had the pleasure of welcoming 4 private equity professionals to share their experience about the private equity world
Meet the inspiring CEOs of Trouva and LoveCrafts – join Movemeon in London on 22nd June 2017 and find out how they went from consultant to business leader.
At our 1st boutique consulting event with Hunch, CIL, 2020 & Advancy, we heard exclusive perspectives on the unique features of boutiques – read them here