MBA Return on Investment: $1 Million

CareersPersonal Finance
Posted By Terri Williams on June 13, 2017 at 1:10 pm
MBA Return on Investment: $1 Million

The trend toward upcredentialing – requiring employee candidates to have more advanced education than previously – is causing many workers to weigh the pros and cons of attending graduate school. For those considering an MBA, the future looks rosy, according to the Alumni Perspectives MBA Survey Report and the Prospective Students MBA Survey Report, both by the Graduate Management Admission Council.

Evidence of the upcredentialing trend: A recent report reveals that 41% of employers are now hiring college grads for jobs formerly held by high school grads. And, they’re hiring candidates with a master’s degree for jobs that previously required a bachelor’s degree.

Given that, it’s easy to see why MBAs and other advanced degrees have become even more desireable. Following are some highlights from GMAC’s Alumni Survey:

Alumni with an MBA identified three dimensions of value:

  • 93% say earning their degree brought personal rewards
  • 91% say it was professionally rewarding
  • 76% say it was financially rewarding

Compensation among alumni respondents was reported as follows:

Base salary Additional compensation
Entry-level $63,932 $11,581
Mid-level $101,229 $22,721
Senior level $139,265 $38,278
Executive level $197,508 $75,400
C-suite $272,772 $167,350

 

According to Gregg Schoenfeld, director of management education research at GMAC, among corporate recruiters at U.S. firms, the median starting salary for those with an MBA is greater than the starting salary for other types of graduate business programs. “For instance, the median starting salary for a graduate of a master in data analytics program was $85k in 2016, $75k for master in finance, and $70k for a master in management.”

In fact, within 10 years, a graduate with an MBA could be a millionaire. Why are employers willing to pay so much for the skills of MBA holders? Schoenfeld tells GoodCall®, “Employers often are willing to pay a premium for graduates of MBA programs to build their leadership pipeline, to support company growth, and for their innovative thinking and business acumen.”

The benefits of an MBA are numerous. Michael Faulkender, associate dean for master’s programs and professor of finance in the Smith School of Business at the University of Maryland, tells GoodCall®, “For people who already have some exposure to the workforce, this is an opportunity to supplement their ability to contribute to the organization through skills that organizations need to run themselves effectively.”

Job industries and levels for MBA grads

According to the Alumni report, 39% of grads are employed in an industry they never considered prior to obtaining an MBA. The top industries are products and services, technology, and consulting.

Also, 52% are working in a different job from the one they held before entering business school. In fact, 70% who graduated 10 years ago hold senior, executive or C-suite positions. Overall, 75% say getting an MBA has yielded faster career advancement, and 86% say it has prepared them for leadership.

More than 1,500 respondents were entrepreneurs and the majority (35%) work in consulting, and products and services (34%). A distant third (9%) work in finance/accounting, followed by technology and healthcare.

Top skills developed

Across seven industries (marketing/sales, consulting, general management, finance/accounting, operations/logistics, human resources, and IT/MIS), alumni ranked interpersonal skills as the top attribute important to their current job. Managing the decision-making process was ranked the second-most important trait in five of the seven industries, followed by learning/motivation/leadership. These rankings were also consistent across job levels.

“An MBA is very much targeted at the workforce needs of organizations within management,” Faulkender says. “This degree provides students with the skills that they need to understand customer needs, promote products and services efficiently and generate returns, and manage diverse workforces.”

As a result, Faulkender says that investing in an MBA tends to always yield a favorable return on investment. “Whether things are stagnant or booming, obtaining a skillset that will enable you to make a leadership contribution is always a good idea.”

Prospective students report

Among prospective students considering an MBA or master’s program, the vast majority are considering an MBA. Other popular degrees include the following:

  • Master of finance
  • Master in management
  • Master of accounting
  • Master in global management
  • Master of data analytics

Students younger than 24 years of age, and those with no experience, are more likely to pursue a non-MBA business master’s. And that make sense to Faulkender. “The right time to pursue an MBA is after you’ve had exposure to the workforce for a few years so I would not recommend it immediately after undergrad school,” he says. “By taking the time to understand how organizations work, you’re in a better position to apply the skills that you learn.”

So where are these prospective students coming from? 47% have an undergraduate business degree, and 26% come from an engineering background. Other fields, in much smaller numbers, include science, social science, humanities, law, and medicine.

Financing a degree

Obviously, cost is a factor when pursuing a graduate degree, and prospective students evaluate tuition and fees, along with the ability to obtain financial aid when selecting a school. Interestingly, a greater percentage of MBA and non-MBA students rely on grants, scholarships and fellowships than on loans and personal income/savings.

Schoenfeld says the amount of aid varies depending on location, and the increase is more pronounced depending on global location. “Candidates from Africa expect to pay for 47% of their education with grants, fellowships, and scholarships.  In Eastern Europe, it’s 35%. “In Latin America and South and Central Asia, candidates expect to pay for 33% of their education with grants, fellowships, and scholarships.” However, in the U.S., Schoenfeld says candidates expect to pay 22% from these sources.

Terri Williams
Terri Williams graduated with a B.A. in English from the University of Alabama at Birmingham. Her education, career, and business articles have been featured on Yahoo! Education, U.S. News & World Report, The Houston Chronicle, and in the print edition of USA Today Special Edition. Terri is also a contributing author to "A Practical Guide to Digital Journalism Ethics," a book published by the Center for Digital Ethics and Policy at Loyola University Chicago.

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