Can An MBA Add $1 Million To Your Income? A New Study Says So

GMAC alumni survey

BEYOND MONEY THERE WERE PERSONAL AND PROFESSIONAL REWARDS

Of course, getting an advanced degree, even a professional degree such as an MBA, isn’t only about the money. The survey found that the the majority of graduate business school alumni find their education to be rewarding personally (93% of respondents), professionally (89%), and financially (75%). Nearly all (95%) rate their degree as a good, excellent, or outstanding value. What’s more, GMAC said that the value proposition is strong across all degree types. Full-time two-year MBA alumni were most likely to indicate that their degree increased their earnings power, provided opportunities for quicker career advancement, and improved their job satisfaction compared with alumni of other graduate business programs (see above).

Graduates of full-time two-year MBA programs are, in fact, the most likely to find their degree financially rewarding compared with alumni of other degree programs including the full-time one-year MBA (82% of respondents vs. 74%). Master of Accounting alumni are most likely to find their degree professionally rewarding (94% of alumni). “The findings of this survey are further evidence that a graduate management education delivers strong personal, professional and financial value to alumni,” said Bob Alig, GMAC executive vice president for school products, in a statement. “The ROI numbers illustrate that a business degree is an efficient investment in terms of recouping costs and an effective asset for accelerating alumni careers.”

The study found that the willingness of alumni to recommend their graduate business school to their peers is further evidence of the strong value of graduate management education. “If business schools are brands, then their alumni are their most loyal customers,” according to the study. Using the Net Promoter® (NPS®) system for gauging customer loyalty, alumni across all graduate program types were asked the simple question: “How likely is it that you would recommend your graduate business school to a friend or colleague?” on a scale of 0 [Not likely at all] to 10 [Extremely likely].

Their overall NPS score of +45 is a strong indicator that they are very likely to recommend their program to their peers as not. By program type, NPS scores ranged from +29 for Master in Management to +48 for full-time, two-year MBA programs and a high of +57 for Executive MBA programs. By alumni currently employed, scores ranged from +22 for entry-level employees to +63 for corporate executives (c-suite). Any score over zero is good; a score of +50 is excellent. Even among unemployed alumni, the NPS score (+2) is still positive, although substantially lower.

DON’T MISS: EMBA: THE MOST LIKELY DEGREE TO BE RECOMMENDED BY BUSINESS SCHOOL ALUMNI

  • ABHI CHAUHAN

    is the 1242k salary is one year salary after 10 years or sum of the salary after 10 years

  • C. Taylor

    Financial Modeler ≠ financial modeler

    Financial Modeler wrote: “promises a greater than 1,000% return
    ROI = (payback in excess of cost) / cost
    ROI ≠ compounded return

    Financial Modeler wrote: “$25K wont even get you a part-time
    investment = out of pocket cost + forgone salary
    forgone salary for part time ≈ 0
    out of pocket cost = cost – (scholarships + grants + subsidies + stipends + etc.)

    Financial Modeler wrote: “[1] Am I not understanding something? . . . [2] I’m not sure what this article actually tells us.
    1) This is accurate.
    2) True.

    Financial Modeler wrote: “If [incremental] these CAGRs become quite rich”
    CAGR = Compound Annual Growth Rate
    This is the rate at which something grows. It is defined here accurately for the GMAC’s usage as:
    CAGR = ((current salary / post-degree salary)^(1 / number of years post-degree employment)) – 1
    This is measuring the growth in cash inflows from the first year post-degree to whatever point the survey was filled out.

  • Financial Modeler

    Well hey, if you can’t seem to argue around a $25K part time program or incremental gain, might as well use a one-off anecdotal story.

  • C. Taylor

    25k ‘investment’ for a part time MBA is a tree, not the forest. These guys at GMAC are focused on incoming cash flows (thus CAGRs for post-MBA salaries). Rightfully so. GMAC clearly states in its report that the investment is out of pocket costs + forgone salary as reported by the individual alumni surveyed. I would guess many part-timers are sponsored, in part.

    Some perspective. I read this week a post by a Cambridge (Judge) full time MBA grad. His starting salary was indeed lower than those had by grads of elite programs. However, his starting bonus paid for the bulk of his degree, and his second year salary matched those starting salaries of graduates from the elite programs (Wharton, HBS, LBS, etc.).

    And yes, the same companies recruited at Judge. Cambridge’s FT program cost around him somewhere around 40k+ pounds (post scholarship, I’d hazard). Yes, his starting bonus was the typical one for the company which hired him.

  • Financial Modeler

    @C. Taylor You are missing the forest through the trees. Initial investment is totally wrong. $25K wont even get you a part-time MBA at Phoenix Online. (Am I not understanding something?)

    Additionally, the article would lead one to believe that these results are incremental (greater than what would be experienced without an MBA). If that is the case, these CAGRs become quite rich.

    Between the bunk initial investments and lack of ROI analysis based off of incremental return, I’m not sure what this article actually tells us.

  • Confused

    One thing I don’t understand is, how can the top schools have so low median 20-year cumulative cash compensation. I am 7 years out of a top 3 MBA school and literally all my friends are making easily over 200k a year. Even my world saving ex-girlfriend is banging a 160k salary for cleaning up the seas from micro-plastics.

    I always thought it would be more like 4,5 million by the time we are 20 years out. I mean is there really hundreds of Harvard graduates out there per class making only 70k per year even when they are 40 years old. I doubt it very much.

  • C. Taylor

    Check your assumptions. The ROI is payback. Should be clear (cumulative salary). This absolutely has a base in reality. (590-348)/2 = median base of 121k, four to five years out. Seems a little high for the median, but the data source is expansive.

    I believe you were looking for the CAGR. The CAGR is only 7.1% for two year programs. This does not justify ‘drastically increased’ costs even in a constrained market.

    Ignoring the CAGR, there is ample supply competing for candidates. If HBS increased cost from 200k to 400k, there would be few takers. There are tons more qualified PhDs than spots at HBS. Now look at the MBA program for the median GMAT taker, as GMAC does. Do you see that program having more pricing power than HBS? Hardly. There is little benefit available for grads in doubling the cost.

  • It’s largely because our own analysis, which we commissioned from PayScale two years ago, pretty much proves the same thing. Otherwise, I would be as skeptical as you are.

  • Financial Modeler

    Most importantly, if you cannot understand the very basic assumptions used in this analysis, that are wildly flawed and have no basis in reality, you probably do need more schooling.

    If any of these numbers actually made sense, this would be the best case for MBA programs to drastically increase their cost. Typically any entity that promises a greater than 1,000% return on any investment ends up in jail.

    C’mon, John! Why are you endorsing this crap?

  • Foxtrot

    fantastic article