Why The MBA Remains An Awesome Investment

MBA value

A QUALITY MBA STILL BOASTS A SHORT PAYBACK: 4.2 YEARS

An MBA from a quality school has a short payback–4.2 years in 2013. Most statistics only reveal the salary an MBA graduate a year after matriculation. But one year is a short time to measure the real value of a degree that people use over decades. This measure of return underestimates the value of any business school or its alumni network. Attending business school can be lucrative in ways that don’t show up on a paycheck, at least not immediately after graduating.

Another concern widely reported is that there are fewer middle-management positions available for MBAs today. That’s simply untrue. According to the GMAC 2015 Corporate Recruiters Survey Report[i], approximately 80% of companies surveyed are hiring recent business school graduates into middle-management level positions. Many of these firms are attracted to newly minted MBAs because they are skilled in business and marketing analytics, communication, and problem solving. These skill sets appeal to employers across all industries. In addition, the GMAC reports that, globally 84% of employers plan to hire MBA graduates this year, compared with 74 percent that hired them in 2014, and 59% of these companies plan to increase the number of new MBA hires they bring on board in 2015 compared with 2014.

Unfortunately, there are no shortcuts to academic and personal success. Some students have tried alternative, less expensive substitutes to higher education, such as online alternatives. While these substitutes are friendlier on your wallet, they typically fail to deliver the value they promise.

THREE REASONS WHY PURE ONLINE OPTIONS ARE UNLIKELY TO SUCCEED

There are at least three reasons why pure online options are unlikely to succeed: 1) There is huge value to be had by interacting with a faculty member and asking questions while participating in a class. Harvard’s amazing success with the case study methodology amply demonstrates that. 2) At some level, scarcity will cease to exist if we all start trying to scale up by offering online products. In that case, they truly will become valueless and 3) the best pedagogical tool available to us is student groups. Our students learn from each other as much as they do from the professor and it is hard (if not impossible) to replicate that online.

Learning on one’s own is brutally hard. I did this as an 18 year old when I had to spend a year studying physics on my own out of a textbook after leaving high school in order to get into an engineering program. It was an incredibly tough process, on par with the difficulty of the first year of my PhD at the University of Chicago! There is no doubt in my mind that the full-time, in-class MBA along with plenty of feedback and interaction will continue to be the best MBA experience possible for a while to come.

Is business school expensive? Yes. Does it take time to pay off? Yes. But the MBA continues to be by far the highest ROI graduate degree there is, and the full-time MBA has the best payoff of all. And that’s not only true of the “elite” schools; it’s true of at least the top 70 programs. And finally, MBAs gain skills and a network that will last a lifetime, and that’s the most important ROI there is.

Bottom line: Don’t be discouraged by the debates about the value of doing a full-time MBA. A degree from far more than the “elite” schools will deliver incredible, lifelong value. And I beg of those of us that are providing these transformative experiences to our students: please, let’s not be our own naysayers!

[i] http://www.gmac.com/market-intelligence-and-research/research-library.aspx

[i] Boyd, Emma. Is an MBA Worth the Cost? Financial Times, Web. April 29, 2014

[ii] http://ireport.cnn.com/docs/DOC-1180840

[iii] Bones, Chris. The Fading Lustre of the MBA, Financial Times, Web. January 5, 2014

DON’T MISS: STILL MORE EVIDENCE OF THE MBA’S VALUE or A EUROPEAN MBA TRASHES THE DEGREE’S VALUE

  • Duy N Pham

    Look at the different salary between the top program vs third tier online program , please ? Then multiple them to 10 years , or even just 7 years ?
    You see the problem of low educated people, such as you ?

  • Can’t BS a BSer

    These are such misleading statistics that inflate the pay bump.

    The “Post Graduate Salary” is not a salary figure, but a total compensation figure particularly including the signing bonus (which you should never include when calculating annual comp). Wharton’s median post-mba salary was $125K and if you look at non selective schools, it is significantly lower (e.g. Simon: $82K).

    Secondly, now just my hunch, but the Pre-MBA figure is a pure salary figure e.g. no bonuses because I can’t imagine the average matriculating MBA candidate is earning <$50K salary.

  • P Powell

    The arguments and data presented deserve praise. The Simon School dean presents a strong case in support of rising market value for the MBA degree. I think, though, that the same positive arguments that favor the residential MBA also extend to the online MBA. This is based on my experience as faculty chair of online graduate programs (known as Kelley Direct) at the Indiana University Kelley School of Business.

    Past surveys of our online graduates suggest salary acceleration that matches that of a top ranked residential MBA trajectory. Over two-thirds of students report a promotion during their average tenure of 32 months in our program. An increasing number of Fortune 500 companies call the Kelley School asking specifically for Kelley Direct talent. During the current recruiting season, we have online MBAs competitively interviewing for positions with leading consulting firms. These candidates receive top salary offers. Kelley Direct is growing 25% per year, we currently admit 325 new MBAs per year, and our average GMAT has measurably risen in the past two years.

    We teach the same cases online that we teach in the residential classroom, and by adapting pedagogy to the promise of technology (which includes both synchronous and asynchronous delivery of course material), the learning is just as effective. Kelley Direct brings the MBA to a qualified market. The top ranking of both our online and residential programs complement one another – we do not have to enforce “artificial scarcity” of the former to ensure enrollment in the latter. Our students learn in teams and student peer networks. If Fortune 500 companies make billions in profits managing virtual global teams and virtual organizations, why can top ranked business schools not deliver an MBA in the same environment?

    If we practice what we teach, then business schools must embrace the disruptive value of online education and offer a continuously improving portfolio that meets shifting and evolving needs in a dynamic marketplace. The portfolio, of course, will always have a place for solid residential program choices. As technology and preferences evolve, though, online education will strengthen instead of dilute the value of an MBA degree.

  • C. Taylor

    All the quality online programs have face-to-face / immersion components.

    EdX has done studies which show equivalent educational outcomes for students attending an online version of a course–at MIT, for instance. The vaguely targeted online addendum detracts from Ainslie’s otherwise fact-based plea.

    First rate Online MBA programs:
    IE
    Anderson
    UNC
    Marshall
    Carnegie Mellon

  • da

    try online ivy league degrees for fun

  • Francis P. Remengesau

    A smart investor would buy low and sell high. Getting MBA from a prestigious college is not a smart investment. Buying high is not the way to go. Now, getting an MBA online, perhaps a third tier college/university has a better return. Students do interact online rather doing it in an enclosed box. It has a great potential for high ROI, similar to prestigious college/universities. It all depends on a person who utilizes his/her tool – the MBA.

  • GreatScoTT

    Its a way to make profs feel like they have a job. Im sorry – the future is online but for technical skills – coding, data science, algorithms, design. But the intrinsic value that an MBA delivers IS NOT in the coursework. Its in the experience – that human factor that comes from making mistakes, from falling and learning and not being an online goody-2-shoes.

  • TechInsane

    Here we go again bashing the online MBA folk, come one please stop this nonsense, the work is just as difficult as off line schools and yes we do learn off from each other. The future is online no matter how you cut it, because the future is here and some are just not ready for it.
    Overall, it is about what one has learned and how they apply it, in the business world that counts. some people do not even have a degree to begin with and still do well in the business world.
    The debate between the Harvard elite and the group on prison (recent event) is another example of comprehension and application of what a person has learned.
    Yes elite schools are great but not all of us can go to them for various reasons we have to make due with the opportunities that are open to us, I am currently admitted to an online school and I have learned a great deal, case studies and class interaction has been brilliant to my career path.
    Thanks.