Is the MBA Still Worth the Cost and the Time?

aThe short answer: If you can get into a top 10 school, hell yes. Absolutely. Positively. Go for it.

If you can get into any top 50 school, the answer is a slightly more qualified yes. It’s worth your time and the considerable cost.

We know it’s not cheap. Annual tuition and fees at the top schools now approach or exceed $50,000 a year. In 1988, when I created the original BusinessWeek ranking for business schools, annual tuition and fees at a best schools averaged $15,000. Academic inflation has been a killer. And when you toss in basic living expenses today, you can add $30,000 or more to the annual total. Wharton now tells its prospective applicants that tuition, fees and living expenses for the first year of its two-year MBA program total $81,100. At Northwestern, that number is $75,194. Tuition at Stanford for the 2010-2011 academic year is a whopping $53,118, although Stanford advises that you should budget an additional $30,000 to $47,000 per year for “living costs, books, and other expenses.”

Then, you need to account for the earnings you are giving up to go to a top school. To get into a highly ranked MBA program, you have to be in a fairly good job that could very easily pay you close to six figures already. Add it all up and the total cost of a Harvard MBA now approaches $350,000. It exceeds $300,000 at such places as London Business School, Columbia, Wharton, and MIT. Other than buying a home, it could be the biggest investment you’ll ever make for yourself.

If you work the averages, however, you’ll graduate into a job that should pay a starting salary and bonus in excess of $150,000. The total first-year compensation of a Stanford MBA in 2008, for example, was $209,407, according to BusinessWeek. At Harvard, it was $205,659. These calculations change dramatically, of course, depending on the school that grants you the degree and the job you get once you’re an MBA. In most cases, simple back-of-the-envelope calculations will tell you that it might take a good number of years before you recoup your investment in lost earnings and tuition. Nonetheless, research has shown that the economic advantage you immediately gain from a full-time MBA program is usually maintained throughout your career.


The last couple of years of economic turmoil have led some to rightly question the return-on-investment. The Graduate Management Admission Council (the organization that administers the GMAT) annually surveys MBA students around the world a few months before graduation. In 2010, 5,274 students responded to the survey from 147 business schools. So the data is less about the Harvard, Stanford, Wharton and the other elites than it is a more general statement on MBA education and its value. Some 73% of the 2010 responding students were attending a B-school in the United States.  Here’s what the survey found–even in the most troubled job market for MBAs in history: Those that received a job offer by graduation were able to command, on average, a 64% increase in salary over what they had been earning prior to attending business school. The median $68,000 pre-MBA earner who received a job offer by graduation was set to earn, on average, $112,000. Those numbers largely exceeded expectations, despite the fact that the increases occurred in this more inclusive survey of business schools (not merely the elite group at the top) and in the depth of a recession that brought comparisons to the Great Depression of the 1930s. The GMAC study found that MBA students who left jobs earning salaries of between $37,001 to $52,000 expected a 61% increase in salary upon graduation. Those in the $52,001 to $71,000 salary range expected a 47% rise, while those in the highest bracket expected a 33% increase in post-degree pay.


There was some less than positive news in this latest report, of course. Job offers to MBAs fell to 1.3 on average from 1.7 in 2009 and 2.3 in 2008. When the survey was conducted between Feb. 10th and March 10th of 2010, fewer graduates seeking employment also had either job offers or jobs to start by graduation. In 2010, the percentage of MBAs with jobs or job offers fell to just 40%, down from 50% a year earlier, and 62% in 2008. The numbers for MBAs who were graduating from one-year programs were much worse. Only 27% of them had job offers or jobs at the time of the survey, down from 29% a year earlier and a recent high of 47% in 2008. The reason for the discrepancy: probably because one-year programs give students less time to get a good job and also because many of the very best schools with the best pay and job offer numbers do not have one-year programs.

For a moment, though, let’s put aside the monetary cost-benefit analysis. There are far more reasons to get an MBA than what it will do to your earning power. The degree will more likely give you a better chance at interesting work, better chances for promotions, clear responsibilities, friendly co-workers, better job security, challenging problems to work on, and a network of alums who can be remarkably supportive of you throughout your career. In fact, the professors and fellow students you meet and get to know will probably be the most valuable contacts you will ever have in business. You also can’t feed into a spreadsheet the increased confidence and psychological comfort an MBA might give you as a business executive or a manager. I’ll never forget the Harvard grad who once likened the investment to a vacation in Europe. “Can you justify the payback? No. But does it broaden your horizons, give you a new perspective on the world? Is it valuable? Of course.”


Indeed. Probably the single best study of the degree’s value was done by BusinessWeek in 2003 when the magazine surveyed nearly 1,500 alums of the Top 30 business schools in the Class of 1992. The goal: to see if MBA grads ten years out thought their investment in the degree was worth it. Their answer? Same as mine: absolutely. Some 89 percent told BusinessWeek they would go for the MBA again if they had to do it over. Nearly 80% said they would actually attend the same school. The study, now seven years old, showed that the average salary for the Class of 1992 was $155,200—nearly three times as much as the $56,600 each earned on average in their first post-MBA job. But salary only tells part of the story. On average, each member of the class also reported making $232,400 in bonus and other compensation.

There are plenty of other impressive stats from the same study that will make you want to fill out those applications forms. On average, each MBA from the Class of 1992 oversaw 93 people. As a group, they have started hundreds of companies that have created nearly 100,000 jobs. Over the ten-year span, each grad had three different post-MBA employers, along with four promotions. About a quarter of the class was able to successfully switch fields since their first post-MBA jobs.

What’s important to remember is that these are very positive and optimistic results and they are from graduates of the top 30 schools. It’s safe to assume that if you have a degree from a school that is not highly ranked, you’re apt to be far less satisfied. That’s why my answer to the question “Is an MBA worth it?” is an unconditional yes if you can get into a rated school. It’s much more complex if you can’t.

Bottom line: The monetary payback of the degree is important, but there are far less tangible yet possibly more profound rewards. A good business school is an energizing marketplace of ideas, filled with people who want more for themselves and others. On a random day at any b-school, you could walk into a classroom and hear a deeply passionate debate over corporate responsibility or stroll into a lecture hall to listen to the CEO of a global corporation concede his or her mistakes and what he learned from them. Those experiences will both inform who you are and who you will become. You can’t always put a price tag on an enriched life.

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