The fundamental question facing everyone considering an MBA: Is it worth it? MBAs are expensive, and students need to be convinced that they will get a good return on their investment. So which are the top business schools in Europe for ROI? Poets&Quants crunched the numbers and came up with some interesting results that could guide potential students’ decision making.
We took the self-reported salaries of graduates three years after graduation from The Financial Times’ full-time MBA ranking, then we found out the cost of an MBA in the year those students took it. By dividing one by the other, we calculated the cost-to-earnings ratio. And because we thought it was also relevant, we then looked at how long graduates say it took them to pay back their MBA loans. That figure was taken, when available, from the Forbes full-time MBA list.
We should note that this is a survey, not a ranking. The point is not to rank the schools from best to worst, but simply to give potential MBA students an idea of the range of ROI, what drives it, and whether it is an important measure for them. We chose 10 top-notch European schools of various sizes from a range of countries, all with one-year full-time MBAs — which means that top European schools that have longer courses such as London Business School, HEC, ESADE, and IESE are excluded.
As a guide to what follows, it might be useful to take a look at the statistics for London Business School, which often tops the rankings for European schools. Its MBA can be taken over 15, 18 or 21 months, so it is tricky to compare to others. Given that the three-year salary figure was a pretty high $167,897, that gave a course-cost-to-earnings ratio of 2.1. It took LBS students 3.4 years to pay back their loans, the highest of any of the MBAs we looked at, though that could be in part be because of the high cost of renting in London.
A PAIR OF NORTHERN ENGLAND SCHOOLS
Lancaster University Business School, on the edge of the Lake District in the north of England, was top of our list, with a multiple of 3.2. Lancaster MBAs say that they pay back their loans in a relatively short 2.7 years. Next were Mannheim (Germany) and Durham (also in the north of England), with a ratio of 2.9. Cambridge University’s Judge Business School was a whisker behind them with a ratio of 2.8. Mannheim’s students took a relatively long three years to pay back loans, significantly above Judge’s 2.4. We do not have a figure for Durham.
ESMT, based in Berlin, Germany, came next, at 2.5, followed by INSEAD with a ratio of 2.6. This 10-month MBA also had the highest salary on our list, at $177,157, which justifies the high cost, while EDHEC (France), Bocconi (Italy), and Imperial (England) were clustered below them, at a ratio of 2.3. Imperial students took 3.1 years to pay off their debt, compared to just 2.2 years for Bocconi’s and EDHEC’s MBAs. The figure for ESMT is unavailable.
Copenhagen School of Business, in Denmark, had the lowest three-year salary on our list, at just $91,000. An MBA cost of $48,000 meant that this MBA had a ratio of 1.9. Swiss school IMD, in Lausanne, had both the highest cost for an MBA in our list, at $85,000, and the highest three-year salary of $156,908. That gave it a ratio of just 1.8. However, that might be a misleading figure. IMD came top of Forbes’ best MBA rankings in 2017, which measures salary five years after graduation. IMD students also took the second-least time to pay off their loans, at 2.3 years. IMD is famous for executive education, so it is possible that lots of firms are helping students with their fees. We don’t know the payoff time figure for Copenhagen.
CHEAPER MBAs = GREATER ROI
What does this research tell us? The first conclusion we can draw is that cheaper MBAs often have a greater financial ROI, at least in a three-year time-frame. The schools with the biggest ratios have relatively low-cost MBAs. Durham’s, for example, costs just $35,900, while Lancaster’s costs $33,000.
Among all 10 schools, the average reported salary three years after graduation was a relatively low $104,000. Market forces are clearly at work here; a target salary of just over $100,000 is only attractive — or financially feasible — if you are paying less for the qualification. Copenhagen is possibly an exception, for reasons we’ll come to.
The second conclusion is that exchange rates make a difference. (Note that all costs were converted to dollars at the time of writing, early December 2018.) All the UK-based schools in our list had good ratios, and that is largely an effect of the weak pound. British schools such as Judge, Durham, and Lancaster were historically not the bargains they are right now, and a stronger pound would have reduced their ratios.
Many students have told Poets&Quants that sterling’s weakness has made UK institutions attractive, but most say that they see the current cheapness as an additional benefit, not a reason to choose a UK school. If value for money is a factor for a particular student, then perhaps it ought to be a bigger consideration right now – especially if they plan to move into the EU or elsewhere after studying in the UK, rather than earn in pounds.
CAVEATS & OTHER CONSIDERATIONS
The third conclusion we can draw is that the biggest ratios are found at less well-known schools. That could be because people with lower starting salaries tend to go to those schools, then move into higher-paying jobs, for example in consultancy. It is obviously unlikely that if you work in banking an MBA will increase your salary by a multiple of five — but if you are a school teacher, that outcome is more likely. It is possible that other small schools not included in our list also have high multiples.
In fact, it’s more than possible that for the reason above, less well-known schools generally have higher multiples. Small classes at some schools (Lancaster has about 40, Durham around 45) also mean that a few high-salaried graduates could distort the picture. A big-name school like INSEAD or LBS might be better for your personal brand, but if ROI matters — or if you do not have the GMAT score to get into a big-name school — then a smaller one could offer real monetary benefits.
As mentioned, to make comparison easier we have only included one-year MBAs. A 12-month course has benefits in terms of ROI, of course. The opportunity cost in terms of lost salary is lower than with a conventional U.S. two-year MBA. U.S. MBAs tend to have lower three-year multiples than European ones for that reason, and obviously it takes longer to pay back loans.