According to a recent study in Stanford University, “an MBA may be nothing more than an expensive piece of paper”. Although very bluntly stated, this statement throws some very valuable insight into the present mentality of the masses worldwide. Flocking into B-schools seems to be the “in” thing now, with no second thoughts given to the investment made, in terms of bundles of cash and reams of time. How else can one explain the hike in MBA enrollment, from a measly 5,000 in 1960, to more than 100,000 MBAs in the year 2000?
There are a few factors which can be used to consider the Return on Investment on an MBA degree. Firstly, the cash to be doled out in the form of full up-front investment, which includes not only tuition, but also food, lodging, books, travel costs etc.
In terms of time, a major consideration is the number of years invested by an individual which one can commit to a “cash outflow” before the pay-checks start coming in again. Most business schools offer a traditional two-year program, while executive programs consist of just a year intensive course of study.
Looking into the choice of institutes, it makes more sense to choose a Harvard or a London Business School over an IIM Ahmadabad. This is mostly because of the exposure and the contacts available at the colleges abroad, crucial to one’s movement up the corporate ladder.
Looking at the end results, we can point out that an MBA surely opens doors for us, which would have been impossible otherwise. With starting 6 figure salaries, to long-term incentives (like shares, options etc.), firms leave no leaf unturned to keep the MBAs close by.
According to recent figures, an MBA fetches compensation figures, almost twice than a normal Bachelors degree. This gap keeps on widening until the retirement age of the individual, after which it dips slightly. In the recent past, the peak net value of an MBA has been estimated a whooping $700,000 annually. This figure can easily cover all the expenses drawn on the education, along with giving a handsome return.
However, these figures vary according to one’s field of employment, wherein private sectors pay more than their Government counterparts. Also, factors like job location have to be kept in mind; major cities like New York, Paris etc. have higher base salaries than rural areas. Competition in the workplace, current economic conditions etc. also play a crucial role.
So, the bottom line is that while an MBA is useful for future success, it is not necessarily a prerequisite. Every individual needs to chalk out one’s own career plan, and then decide how much value an MBA can add to that process. That being said, there are still a lot of Executive MBA programs, which help people concentrate on their career, while concurrently building new skills.
So that’s it. The answer to the million dollar question, “Is an MBA worth it?” is “Maybe.”