When you ask the question: ‘Is an MBA worth it?’ the typical answer you’d hear from many friends and colleagues would sound something like this, ‘Yes, dude, an MBA is worth it…but only if you get it from the Top MBA colleges in the world’. Some might qualify it further a ‘Top 10 MBA colleges in the world’.
If you aren’t sure about the specific names they have in mind, check out this list of the best MBA programs in the world. Of course, the list will differ based on how the rankings methodology used to select the top MBA colleges in the world.
But in a world where everything is relative, such absolute truths seldom hold water.
When you are trying to analyse whether an MBA is worth it, there are several factors that come into play.
You could be looking at a career change, higher earning potential (post MBA salary), the opportunity to work abroad, the potential to gain new skills. Many of these are difficult to measure, so for the sake of this post let’s reduce the complexity and focus on one question.
Again there are various ways in which you might evaluate the financial worthiness of an MBA.
An Investment Banker might suggest using the Discounted Cash Flow (DCF) method to calculate the Net Present Value (NPV) of your future income. That doesn’t sound like English!
In simpler terms, it means considering the entire post MBA salaries that you’d get till you retire and finding out how much it would mean in the present day. Still too complex!
Ok, so we simplify it further and use another parameter to answer the question – Is an MBA worth it? We look at the payback period. Or in other words – how many years does it take MBA students to recoup their investment (cost of attending the MBA program including fees and other expenses). Much simpler parameter to understand, right?
Businessweek carried out a survey a few years back (not sure if they have a more recent version) to measure the payback period for the best MBA colleges. And the results were surprising for most MBA aspirants who had taken for granted that the best international MBA universities offer the best RoI.
Some of the best business schools (like Harvard, Chicago, Columbia) had the worst RoI in the survey. The payback period was over 10 years. Whereas for several lower ranked schools, the payback period was over 3 times better than the tier one colleges.
Here’s a list of the best and the worst performers in the survey.
|School Name||Payback (Yrs)|
|London Business School (LBS)||8.91|
|School Name||Payback (Yrs)|
|Texas A&M (Mays)||3.42|
|Michigan State (Broad)||3.51|
|IE Business School||3.90|
|Penn State (Smeal)||3.98|
A few years ago, we published this article – Is Harvard the best MBA program in the world?
We didn’t have hard data to substantiate it then, but this survey by Businessweek seems to be aligned with the message in that post as it adds additional insights about selecting business schools.
Payback discussions aside, there might be other reasons for you to consider only the top MBA colleges in the world. Prestige being one of them. This is important if you have set your eyes on the best strategy consulting firms or the top bulge-bracket investment banks. Employers like McKinsey, Goldman Sachs, several top-notch private equity funds won’t touch if you aren’t from one of their feeder MBA programs.
However, not all Indian applicants want to get into these companies. Their post MBA goals might be more modest. For instance, many engineers might only be looking at moving from a pure technical role into a business oriented role.
In such cases, insisting on sticking only to the Top 10 MBA colleges may not be the best strategy.