Why it is worth measuring ROI of an MBA degree

Return on Investment (ROI) is used to measure the efficiency of an investment or compare the efficiency of a number of different investments when there are several options available. Many graduates pursue Masters in Business Administration (MBA) degree. Some aspirants opt to pursue an MBA immediately after their graduation but others acquire some work experience before they opt to pursue their post-graduation in management. Any major investment decision requires due diligence.

Having an idea about the financial risks and the returns is important so that one can have an idea of what’s in store so that there are no unpleasant surprises that emerge post the decision-making process. An MBA degree generally needs huge financial investment. Although there are banks and financial institutions that provide education loans, one must definitely evaluate the ROI that this degree offers. Measuring ROI of an MBA is important due to the following:

Power to network with people

One of the most powerful rewards that an MBA programme provides is the quality and size of the network that one can build while pursuing a master’s degree. One has the opportunity to create a network, and it can extend far beyond classmates and peers. The network can also include professors and even business leaders with whom one connected while pursuing an MBA degree. The network is so influential in affecting ROI, that it should be a significant factor to consider while choosing a B schools to pursue an MBA.

Power to repay the debt

Many students take an education loan to pursue their MBA. While the cost of an MBA can be relatively high, it also a fact that MBA graduates from premier B schools get high starting salaries. The salary-to-debt ratio can be helpful in identifying the ROI. This can give a clear picture of the time taken to repay the debt and the risk involved in choosing the B school for pursuing MBA.

Power of knowledge acquired

Acquiring skill sets and knowledge of advanced business concepts is a clear benefit of an MBA degree. This can certainly help an aspirant to become knowledgeable and capable of understanding the fundamental of business. One gets trained to become more productive after completing an MBA programme. This is one vital factor to be considered in calculating ROI for MBA.

Power of soft skills

Any MBA programme emphasises and train aspirants to be effective in teamwork, leadership, problem solving, self-reflection and critical thinking. All of these qualities are critical and mandatory, to be successful in the corporate world. This is an intangible asset that impacts the ROI of an MBA.

Power of alumni connect

The alumni of the B school can help the aspirant in building a database of business colleagues scattered across any and all industries. The alumni of a B school can be of great help and support. Beyond professional relationships, this alumni network could also produce valuable friendships and lifelong encouragement and support. Alumni connect is also an intangible factor that must be considered while computing ROI of an MBA from a B school.

Power to climb the corporate ladder

An MBA graduate generally gets a better salary raise and incentives are much higher. Instead of the starting salary, one can use salary projection for a longer period of time and calculate the salary-to-debt ratio. Also, the chance to climb the corporate ladder is much faster for those who are proactive go getters. If they have an MBA qualification it certainly gives the man impetus when compared to others who don’t have the same. This is also a factor to be considered while calculating ROI

Power to create a start-up

The sense of independence that comes from creating one’s own start-up cannot be undermined. The learning from an MBA programme helps an aspirant to understand the nuances of business and management. B schools also provide the eco-system needed for fostering innovation and entrepreneurship. There are MBA programmes that focus exclusively on innovation and entrepreneurship. Connecting to angel investors or venture capital firms, providing support for incubation are all benefits provided by the B schools offering such MBA programmes. Such avenues and opportunities are otherwise not so easy to access by entrepreneurs and start-ups. Hence from an ROI perspective, all these aspects add immense value to an MBA.

(The author is Director, Symbiosis Institute of Business Management, Pune)