The MBA is an investment and there are some factors that need to be weighed before you undertake this qualification boost. Embarking on a Masters of Business Administration is a long-term endeavour that entails more than just making the time for it – it takes effort and may even require leaving a solid job and losing one or two years of salary. So, does the MBA investment pay off?
The cost/profit correlation
Whether you opt for the full two-year degree or decide to enrol in a one-year programme, financing your degree is a part of the MBA process that requires careful planning and thorough research of your options. It has been estimated that in a good school, it would take you approximately three to five years to earn back what you paid for your degree, and only after that period will you start reaping the benefits of your investment, or the so-called return on investment (ROI).
The ROI varies from school to school. For example, the University of Chicago’s (US) MBA programme costs more than USD 100,000 per year (including accommodation and other living costs for the 2016-2017 period) but, according to Poets and Quants, graduates make an average of USD 125,000 per year when they graduate and their signing bonus is USD 25,000. At Harvard (US), tuition and fees come in at about USD 102,000 per year per single student, and graduates end up making USD 130,000 on average, in addition to a median signing bonus of USD 25,000. Whatever the costs incurred, however, the remuneration statistics for MBA graduates show that investing in the degree pays off.
According to a 2016 GMAC survey, 88% of employers said they plan to hire MBA graduates. Salaries are also quite competitive – US-based companies plan to offer recent MBA graduates a starting median base salary of USD 105,000 in 2016, up from a median of USD 100,000 in 2015.
Read: Measuring ROI
The career break
So, in the long run, numbers work in your favour and the investment pays off. But how about your career? Will this break from the real-life business world affect your professional growth? Not for the majority of MBA-holders – stats show that their careers take off after graduation.
The MBA gives you strong foundations in up-to-date academic knowledge and helps you acquire crucial practical skills through various projects and communication with your fellow students. Additionally, the degree gives you the knowhow and the contacts to make a name for yourself in the business world and move up in your chosen professional field. If you are in a top managerial position but still want to grow in the industry and start your own business, the MBA can be a useful tool for setting up a network of business friendships and gaining entrepreneurial expertise. Apart from added value in terms of professional competencies and a network of useful business contacts, the MBA also gives you market flexibility. It allows you to change industries and completely shift your career track.
Jordan Cash is an MBA graduate of the University of British Columbia, Sauder School of Business. After graduation he set out to establish a business of his own and became the owner of Cartems Donuterie in Vancouver, Canada. Cash not only became self-employed but he also made a leap from one field to another. A former equities trader and recruiter, he established a premier gourmet donut shop.
“I was not in the donut world before my MBA. So, my career changed very much in the sense that suddenly I became a business owner. I was an entrepreneur in every sense of the word: leading a team, starting something from scratch – pretty much everything changed. I was basically getting a paycheck for myself and was building a company with other people and that was something that I had never done before.”
Cash is pleased with what he has managed to achieve during the three years after his graduation. For him, the networking was pivotal. “During the programme, I talked a lot about this ‘donut idea’ that I had and I was able to share it with my classmates in a comfortable atmosphere. I got so much feedback and lots of ideas from them and now, as the business is growing, I’ve been leveraging their contacts and their employers to get our product into the right hands. That has been very beneficial in terms of what it is that we want to do here and what our business model is based around.”
Switching careers is common for MBA students, says Murali Chandrashekaran, associate dean of professional graduate programmes at Sauder in Vancouver. “If students are not ready for a transformative experience, then they need to think twice about it [an MBA].” He adds, “It is not just about the pocketbook, it is about the heart.”
All in all, regardless of whether they’ve set up a business of their own, been promoted within their companies or moved to a company from an entirely different industry, MBA alumni report that they do not regret the choice they’ve made. Even though financing an MBA degree is a step that should be carefully planned, the statistics all point to the conclusion that the MBA diploma does pay off and the ROI makes this a worthwhile investment