Top MBA ROI: Day 1 Data Shows Huge Returns

by Darwin on November 14, 2010

Businessweek released a pretty comprehensive report on top MBA programs both in the US and abroad.  I like the format they used where they took aggregated data on median salary upon entering the program and starting salary upon exit.  If I make a few very basic assumptions about the program, I can derive some quick MBA ROI data to show the benefit of a top program, if you can actually land a job in this economy upon graduation.

Taking Wharton as an example, let’s make the assumption it took you 2 years for the MBA, you would have paid the same living expenses no matter what (perhaps you don’t have to move, as you live near a top school), and you pay full price tuition and expenses out of pocket.  To be fair, if you hadn’t left work for an MBA, you’d have a salary of say, $5000 more in two years.  However, the print article (my favorite read each weekend!) indicated that the average grad had a $29,000 signing bonus out of a top program as well though.

  • Pre-MBA Pay: $75,000
  • Post-MBA Pay: $110,000
  • Average Signing Bonus: $29,000
  • Non-MBA Pay at 2 yr point: $80,000
  • Tuition over full program is $106,303
  • Spread signing bonus across 5 yrs and conduct ROI on 80K vs 116K
  • Instant ROI is (116K-80K)/$106,303 = 34%

This is grossly simplified for a true ROI, you’d want to consider other factors like a longer duration, the higher salary range with the new job and it would be tough to weigh the additional intangibles like what other doors the degree and networking that are associated with a top MBA bring.

Taking this in a different direction as well, you may have to consider the opportunity cost of leaving the workforce for two years, what kind of raise/bonus you may have had if you stayed and all the immeasurable hypotheticals.  Then again, many of these programs have executive MBAs where you can still collect a full-time salary and do most of the program on Friday afternoons and Saturdays.

Then, there’s always the route I took, which was to have my employer pay for the MBA, albeit, more like a top 50 school, not top 10.  Admittedly, I saw no discernible instant benefit.  When I wrapped up my MBA a few years ago, I didn’t get an additional bonus or raise.  I might be subject to some hidden benefits like being more heavily considered for a future role, being less likely to be laid off (even though it’s a sunk cost, it must sting to lay someone off right after you dropped 5 figures on their education) or being viewed as more attractive to external opportunities.  But that’s hypothetical.  The only measurable impact would have been if my company said, “OK, since you finished your MBA, here’s your extra 15% raise” or something to that effect. My company doesn’t do that, and I’m sure if many do.

Either way, the mere fact that they paid for it is a bonus, so I’m not complaining.  It was totally my choice to pursue and I probably owe much of my blogging success to the program as well :>

What’s Your Take on MBAs?

{ 6 comments… read them below or add one }

Financial Samurai November 15, 2010 at 11:27 am

Did the same, but the school has been in BW and USNWR’s Top 10 for a while now.

It’s helped a lot and moved paths to a mgmt role.


Darwin November 15, 2010 at 11:30 pm

I’ve noticed getting Lean/Six Sigma Blackbelt, PhD and other ways of moving thru management quickly as well, depends on the area. MBAs are pretty common these days, so it’s a slight differentiator but not that huge where I’m at.


Invest It Wisely November 15, 2010 at 3:59 pm

Right now I’m in the stages of evaluating whether it would be useful for me to pursue one. I have the option of trimming some courses and shortening the overall program since I got honours in my B.A, so it’s something worth considering.


Darwin November 15, 2010 at 11:30 pm

If you can get an employer to pay for it, go for it!


Everyday Tips November 15, 2010 at 10:26 pm

I think it depends on so many different factors. My husband and I both got our MBAs from Michigan State (number 20 on the list). I am sure it has helped his career, but I think getting a CPA helped much more.

For me, had I gone to the company I originally considered, it would have meant an instant pay increase. However, I ended up at a different company and they didn’t care what your degree was in, they just wanted you to have a degree. In my situation, the MBA would have mattered further down the road when getting into management. I ended up focusing on family instead of career, so I can’t really say if it was worth it in the end for me or not. I am guessing it would have paid off though.


Darwin November 15, 2010 at 11:34 pm

Hey, you never know though, can use it in the future if/when you go back into the workforce. My wife’s a Master’s level and worked for just 2-3 yrs before being home w kids now. But always good to have options for the future.


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