INSEAD | Mr. Future In FANG
GMAT 650, GPA 3.5
Duke Fuqua | Mr. Military MedTech
GRE 310, GPA 3.48
Wharton | Mr. Aspiring Leader
GMAT 750, GPA 3.38
Cornell Johnson | Mr. Advisory Consultant
GRE 330, GPA 2.25
Kellogg | Mr. Equity To IB
GMAT 730, GPA 3.6
INSEAD | Mr. Marketing Master
GRE 316, GPA 3.8
Darden | Ms. Marketing Analyst
GMAT 710, GPA 3.75
Harvard | Mr. Hedge Fund
GMAT 740, GPA 3.8
Stanford GSB | Mr. Deferred MBA
GMAT 760, GPA 3.82
Stanford GSB | Mr. Robotics
GMAT 730, GPA 2.9
Stanford GSB | Ms. Artistic Engineer
GMAT 730, GPA 9.49/10
Yale | Mr. Army Pilot
GMAT 650, GPA 2.90
Kellogg | Mr. Double Whammy
GMAT 730, GPA 7.1/10
INSEAD | Mr. Tesla Manager
GMAT 720, GPA 3.7
Darden | Mr. Tech To MBB
GMAT 710, GPA 2.4
INSEAD | Ms. Investment Officer
GMAT Not taken, GPA 16/20 (French scale)
Cornell Johnson | Mr. SAP SD Analyst
GMAT 660, GPA 3.60
McCombs School of Business | Mr. Startup Of You
GMAT 770, GPA 2.4
Kellogg | Mr. Hopeful Admit
GMAT Waived, GPA 4.0
UCLA Anderson | Mr. International PM
GMAT 730, GPA 2.3
Harvard | Mr. Policy Development
GMAT 740, GPA Top 30%
Ross | Mr. Brazilian Sales Guy
GRE 326, GPA 77/100 (USA Avg. 3.0)
GMAT -, GPA 2.9
Berkeley Haas | Ms. Against All Odds
GMAT 720, GPA 2.9
Wharton | Ms. Finance For Good
GMAT 730, GPA 3.7
Stanford GSB | Mr. Future VC
GMAT 750, GPA 3.6
Wharton | Mr. Investment Associate
GMAT 700, GPA 3.67

Is An Elite MBA Degree Still Worth The Cost?


Which brings us back to the question: Does it pay to get an elite MBA degree? The answer is an unqualified yes.

First off, there’s a massive amount of evidence that anyone who gets an advanced degree in any field is much better off. New research published last year by Robert Barro of Harvard and Jong-Wha Lee of the Asian Development Bank found that the return from investing in a year of graduate education averages 17.9%. “Compare that to the returns from investing in real estate, stocks, bonds, or most other asset classes, and you conclude that investing in your own human capital is about the best investment you can make,” says Robert F. Bruner, dean of the University of Virginia’s Darden School of Business. “The rate of return is high. Some Nobel Laureates and others have examined this, controlling for many attributes. They look at large samples over many years. If you take data from the trough of an economic cycle you will almost always find that the return is lower and the payback is longer than if you look at other points in the cycle. The finding may merely be an artifact of the sample period.”

Secondly, and more specifically regarding elite MBA degrees, the BusinessWeek analysis is so faulty that if the same rigor had been applied to astronomy, everyone would still believe the world is flat.

Dig into the methodology of the study and make your own conclusion. To calculate it’s ROI numbers, BusinessWeek first took the total dollar amount the average student spends on a degree (tuition, fees, living expenses). That sum was added to the total salary a student gave up to attend B-school. The median pre-MBA salary was then subtracted from the median post-MBA salary, and the difference was divided into the total amount spent on the MBA. The resulting number represents the length of time, in years, it will take the average student to make a return on their investments.


That’s it. The analysis failed to account for starting bonuses, year-end guaranteed bonuses, relocation allowances or tuition reimbursement plans. It also failed to figure in the value of pay increases or performance bonuses through those 10 and one-half years during which a Harvard or Stanford MBA is supposedly waiting for the payoff of the degree. Nor does the analysis include stock options or other equity grants.

The impact of these numbers, particularly on MBAs from the top schools, would completely reverse the findings of the study. McKinsey & Co., the largest single recruiter of elite MBAs, typically pays starting base salaries of $125,000 to graduating MBAs. That is the number BusinessWeek is using to make its ROI calculation. But the MBA lucky enough to land a job with McKinsey has total first-year compensation of about $190,000—52% higher than the base pay. That comes from the median signing bonus of $20,000, a performance bonus of up to $40,000 in the first year, and relocation allowances between $2,000 and $5,0000. This higher $190,000 number doesn’t even include McKinsey’s contribution into a retirement fund that equals 12% of the MBA’s salary and bonus—another $19,000 or so.

Then, you have the salary and bonus increases that will occur every year along with the promotions that bring even larger jumps in pay. It turns out that elite MBAs don’t get 3% pay rises. Within two or three years at any major consulting firm, whether it’s McKinsey, Boston Consulting Group, Bain, Booz, Accenture or a dozen others, an MBA’s base salary is usually $175,000 to $250,000—not the entry level base of $125,000–as he or she takes on the role of a project leader or engagement manager.

For MBAs from the best schools, these jobs are not only within reach. They’re fairly common. One in four of the graduates from Harvard’s Class of 2010 went into consulting. At both Stanford and Wharton, roughly 30% of the latest graduating classes accepted jobs in consulting.

What happens when you plug these other sums into BusinessWeek’s math? Currently, BW claims that the average Harvard MBA quit a job that paid him or her $80,000 and ended up with another job that paid $110,000, or just $30,000 more. If you still use the pre-MBA salary of $80,000 to the consulting example above, the gain in annual compensation would be $110,000–not $30,000. And the payback period would shrink to 2.9 years from 10.6. Admittedly, this is back-of-the-envelope math because MBAs headed into consulting could very well have made more than the $80,000-a-year median pay before setting foot on the Harvard campus. They also could have had a small bonus, too. On the other hand, we’re still not adding in the annual payments to the retirement fund, or an increase in the base after 12 months on the job, or larger bonuses in the second year. My hunch is that if you tossed those numbers into the equation the payback period could shrink to about two years or so, especially given the very big upside after your first couple of years.

Interestingly, the latest analysis by BusinessWeek even contradicts another study published by BW last year. In that analysis, done in conjunction with the consulting firm PayScale, BW estimated the lifelong earnings of MBAs. Guess who was at the top? Harvard Business School, Wharton, Columbia, Stanford, Dartmouth’s Tuck School, and Kellogg. The estimated career pay of a Harvard MBA was $3.9 million, and the elite schools completely dominated the top of these numbers: Wharton ($3.5 million); Columbia ($3.3 million); Stanford ($3.2 million); Tuck and Kellogg ($3.1 million). And how do these numbers compare with one of BusinessWeek’s best ROI schools? Let’s take Michigan State, which is ranked seventh in ROI (see below). The estimated career pay of a Michigan State MBA is $2.1 million, according to the BW analysis. That’s not bad–but it’s $1.8 million below Harvard and $1.4 million less than Wharton.


School & RankEstimated Career Pay
1. Harvard Business School$3,867,903
2. Pennsylvania (Wharton)$3,491,372
3. Columbia Business School$3,349,669
4. Stanford Graduate School of Business$3,327,145
5. Dartmouth College (Tuck)$3,146,031
6. Northwestern (Kellogg)$3,085,680
7. MIT (Sloan)$3,031,132
8. Chicago (Booth)$2,970,437
9. Berkeley (Haas)$2,960,527
10. New York (Stern)$2,918,748
11. Virginia (Darden)$2,908,136
12. Duke (Fuqua)$2,858,021
13. Cornell (Johnson)$2,844,421
14. UCLA (Anderson)$2,807,378
15. Yale School of Management$2,750,657


About The Author

John A. Byrne is the founder and editor-in-chief of C-Change Media, publishers of Poets&Quants and four other higher education websites. He has authored or co-authored more than ten books, including two New York Times bestsellers. John is the former executive editor of Businessweek, editor-in-chief of Businessweek. com, editor-in-chief of Fast Company, and the creator of the first regularly published rankings of business schools. As the co-founder of CentreCourt MBA Festivals, he hopes to meet you at the next MBA event in-person or online.