Although not very logical, the popular method of calculating the return on investment (RoI) of an MBA programme is to count the number of years it takes for your post-MBA earnings to equal the fees. That works out really well for top b-schools in India because even if you are paying Rs 12 lakh for a two-year fulltime MBA (a top MBA in India comes at a dirt cheap price compared to internationally prevalent fees) and graduating with a starting salary of Rs 8 lakh, you are going to ‘break even’ after one and a half years.
The world average for recouping return on MBA investment is however four years, according to a survey of 4,135 MBA alumni from the batches of 2000 to 2011 conducted by the Graduate Management Admission Council (GMAC). According to the ‘Alumni Perspectives’ survey, MBAs have typically been recouping one-third of their b-school investments in the first year after graduation, provided they have jobs.
(Courtesy: GMAC)
And going by the survey, the employment rate for the class of 2011 across the world isn’t bad either at 86%, just two percentage points lower than that for the class of 2010 and one percentage point lower than the post-millenium highs of 89% in both 2006 and 2007.
The employment rates for the one-year MBA graduates of 2011 however stood at 75%, a good 11 percentage points lower than those of the fulltime two-year MBAs. In September 2011, when the survey was conducted, nearly half of the respondents completing a fulltime two-year or one-year MBA were employed in the first job they had secured after completing their degrees.
In effect, all the scepticism about the worth of an MBA in the time of unsteady world economies seems unfounded. Or does it?
Peeping below the surface, warts do appear.
(Courtesy: GMAC)
About one-third of the 2011 graduates entered jobs in sectors which weren’t exactly what they initially had in mind while joining the MBA programme. When asked if their first job after graduation was the kind of job they were looking for, 85 percent of those working outside their intended industry responded with a ‘yes’.
But when they were asked what led them to work outside of their intended industry, 53% cited the mere availability of opportunities in that industry as one of the reasons to take up the job — indicating that it could have been a compromise job that was later self-rationalised. The ‘compromise’ appeared to have been the highest among alumni employed in the pharmaceutical and healthcare sector, where half of those surveyed had decided to join the sector only after meeting employers or simply because there were available opportunities, and not because they intended to or any part of the MBA experience strongly motivated them to.
Three out of four employed alumni of the class of 2011 reported they could not have obtained their jobs without their graduate management education. The other way of looking at it is that the MBA degree had proved to be redundant for one-quarter of the graduates, who felt that they could have got their post-MBA jobs even without investing in the MBA.
Only 57% Indians joined work in a sector they had originally intended to join, as opposed to 69% Chinese, South-East Asians and Australians. This could either mean that Indians were the most fickle-minded, unfocussed, or plain unlucky.
(India is categorised in the ‘Central Asia’ region. Courtesy: GMAC)
India was the lowest-paid work destination for MBA graduates across the world in 2011, a far cry from Singapore or Hong Kong where the median salaries paid were nearly thrice as many times. Even the bottom 75% of jobs in the USA (median $72,500) paid at least 1.5 times higher starting salaries than the India-based jobs at the 75th percentile (median $50,880), which one wagers would be based out of Mumbai and New Delhi where the cost of living is the highest.
So even as Asia has been gaining economic mileage in the face of crises in the USA and Europe, Indian doesn’t appear to be anywhere part of the story.
(India is categorised in the ‘Central Asia’ region. Courtesy: GMAC)
MBA graduates of 2011 with Indian citizenship however earned better in post-MBA jobs located outside India, where their median salaries were almost 75% higher than those in Indian jobs.
Which means that even though the RoI proposition of studying an MBA in India might look attractive in isolation, one still gets three times as high a springboard by studying one abroad, simply because of the higher likelihood of getting a job opportunity abroad.
Even though European citizens had the highest starting salaries in the batch of 2011, they were not as satisfied with their initial salaries, with only 79% reporting that their salary expectations were met. Even fewer alumni from Central Asia (including India) (73%) and the Asia-Pacific (including China) (70%) indicated that their starting salaries had met expectations.