Paying a massive sum of money for an MBA degree triggers apprehension but many business school graduates experience a substantial increase in salary after they complete the programme from a top rated B-school. The MBA degree also acts as a powerful differentiator in a crowded marketplace. Majority of graduate report having greater job satisfaction and the ability to advance quickly and therefore earn more in comparison with those who do not opt to pursue an MBA. This is one of the prime reason that the CAT 2019 registration number has crossed 2.44 lakh applicants. This marks an upward swing of 3000 additional candidates compared to last year’s CAT registrations. Calculating the Return On Investment (ROI) for an MBA programme is essential and going by the financial rule book, it just requires a simple formula. It is the return from an investment minus the cost of investment, divided by the cost of the investment. Students of two-year MBA programmes typically have the most substantial investment expense because they miss two years of employment. They need to recoup the cost of the MBA degree plus the opportunity cost in order to get a positive return on their investment. Listed below are six benefits of measuring the ROI of an MBA degree:
- The payback time
The value of an MBA degree depends to a large extent on the brand of the business school. The better the brand value of the B-school, the shorter the payback time of the investment made, as the average salaries are higher. The payback time must be calculated based on the median salary as average alone doesn’t give the correct picture while calculating the ROI. Most business schools publish employment records with average salaries for different industries; aspirants can use these numbers to project future salaries. Also, the potential for career growth must also be considered while deciding on the right B-school.
- Tenure of education loan
Apart from tuition fee, students also spend a considerable amount on lodging/boarding and personal expenses while pursuing an MBA programme. Approximately 80 percent of MBA students avail an education loan to pay their fees. Many aspirants take loans from financial institutions and banks to fund their higher studies. These financial institutions give a teasing rate of interest for those B-school students who manage to secure admission in top Indian B-schools. The tenure of education loan must be taken into account while selecting an MBA programme and a B-school.
- Batch size
There are several B-schools which have increased their intake from 60 seats to 1600 seats in a span of just a decade. While they might have the infrastructure required to run the programme, the peer group competition is also very high in such B-schools. Also, if the batch size is small, the class sizes are also smaller, which enable a student to engage in real-time discussions with peers and faculty and build unparalleled personal connections with other students. Also, the batch size and number of students that a B-school admits will define the competition for the best summer internship and final placement offers. So this is an important aspect to be considered while calculating ROI for an MBA programme.
- The curriculum
Today, Industry 4.0, Big Data, Machine Learning and Business Analytics are the buzzwords in corporate circles. Some B-schools have made these disciplines an integral part of their curriculum so that every student irrespective of their specialisation learns about them. The B-school curriculum must help develop key business skills, which can be implemented immediately when a student joins the industry and also must have the potential to help the industry achieve pole vaulting growth. Be it leadership & strategy, project management or technical expertise, the newfound skills that students need in the workplace must be integrated into the curriculum, and this is being done by a handful of B-schools. This is a vital aspect to be considered while calculating ROI for an MBA programme.
- Global exposure
There are very few Indian B Schools which give global immersion experience to its students. The better global exposure that one gets, the better it is for the student. Also, aspects like culture can’t be taught in classrooms and have to be experienced in real-time. Hence global exposure can make students be well equipped to take on corporate challenges successfully. This is an intangible aspect which can help in making the ROI from an MBA meaningful
- Network becomes the net worth
The network that one creates during his / her MBA program become his net worth. The strong alumni base of a B School, the opportunity to interact with corporates, the diversity that the campus provides can immensely help to create this network. This also is an intangible aspect to be taken into consideration while calculating the ROI from an MBA programme.
Authored by Dr. Ramakrishnan Raman, director – Symbiosis Institute of Business Management, Pune.
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