MBA Return on investment depends a lot on the return on the brand. Business School reputation among recruiters, student’s previous work experience, and the practical learning experience gained during the program are three primary contributors towards an increase in salary. Business Schools in United States had dominated the best ROI list in early 2000, primarily driven by the IT boom, but recent data from FT charts shows an interesting trend.
The 30-40% International students that have been consistently maintained by Business Schools in United States is not an anomaly or due to restrictions in visa provision. It is primarily due to a learned experience that International Alumni are the lowest contributing group for endowment funds. International Alumni tend to lose contact with their peers and their Alma matter within 3 to 5 years, and it has become increasing tough to raise funds from this group when communication has been limited.
European Business Schools on the other hand have adopted a different approach. They have increased the International student intake to 80%-90% of the class. One reason for such a trend is the low demand for MBA programs among local graduates, who prefer masters program to a General MBA. Although the cost of the program are much lower, most International students apply for loans through their native country or through school assisted financial institutions in the host country. Schools in Europe cannot be blamed entirely as leading Business Schools in Europe – London Business School, INSEAD, and IMD do not offer any undergraduate course, therefore limiting their cash endowment to amounts in the range of $20-25 million, a paltry sum compared to Harvard’s cash endowment of $2.8 billion.
Although the investment costs are much higher for a 2-Year MBA program in US, with the right mix of GMAT Score, GPA and Recommendations, the potential to earn a scholarship increases, especially in top Business Schools where the endowment fund is sufficient. For International students, the 30-40% intake restriction increases the competition for such scholarships, and those who do not have GMAT Score, 20-30 points above the class median are forced to take loans at 6% per annum without a co-signer and 5.5% with one.
Funds are readily available but the risk on return increases in an economic downturn when government are forced to change visa rules to protect jobs, thus deterring International MBAs from staying back for job search. Several International MBAs have to make a compromise on the industry, or consider previous employer, thus failing to reach their post-MBA short-term goals. This often leads to resentment and less active involvement with the Alumni network. With an Economic Boom, US MBA markets become attractive with less restrictive policy and more jobs available in the market. But if we analyze the trends in US Markets, the gap between Boom and Bust have reduced, and the recovery after 2008 Financial Crisis has been a slow.
The scenario is not entirely gloom and doom for International MBAs. Although the Salary growth in US have been in the 1-5% range over the past 5 years for MBAs, leading European MBAs have shown greater increase in salary with 2005 to 2012 data showing 5-31% increase in Salary. In spite of a low endowment fund, European MBAs are catching up with US Schools on post-MBA Salary, and the one-year program offers a distinct advantage when you calculate the cost and return on investment.
