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New data based on GMAC surveys suggest that the MBA offers a significant return on investment for nearly all students at nearly all schools. by Brooks C. Holtom and Edward J. Inderrieden GO MBA B Investment Advice: for the usiness school deans have been rushing to the defense of their graduate degree programs ever since Jeffrey Pfeffer and Christina Fong pub- lished their 2002 article questioning the value of an MBA. Not only did those authors debate the worth of the MBA in general, they suggested that the degree was only valuable if it was earned from a top-ranked school. A recent U.S.-based study shows this is clearly not the case. Researchers employed by the Graduate Management Admission Council (GMAC) surveyed thousands of graduates over the course of five years, collecting data that com- pared the costs and rewards of accredited programs across the U.S. Analysis shows that an MBA yields an excellent return on investment (ROI) for nearly everyone, regardless of the type of program, the race of the student—or even the ranking of the school. Pfeffer himself believes management education has undergone significant changes since his original article was published. (See his viewpoint regarding business schools' possible overemphasis on MBA sala- ries in "What's Right—and Still Wrong—with Business Schools" on page 42.) One thing that hasn't changed is the enduring value of an MBA. Key Findings One of the most striking findings from the GMAC data shows that students who attend lower-ranking schools experience a better ROI than those who attend higher-ranking schools. More precisely, the ten-year annualized aver- age ROI for students from a top ten school is 12 percent; for those outside the top ten, it's 18 percent. Students who attend a top 50 school experience a mean return on investment of 17 percent; those who attend a school ranked outside the top 50 have an ROI of 20 percent. Why the impressive rate of return? It's all about the expense. A highly ranked school costs significantly more than schools with lower rankings. The mean total cost of attending a school in the top ten is just over $198,300, compared to about $123,700 for other schools. Yet the MBA confers so many benefits to graduates of schools across the board that they can take better jobs, earn more money, and quickly recoup the costs of their investments in their degrees. Unquestionably, there are still advantages to attending a top ten school, particularly over the long haul. Students who graduate from those programs are hired at better base salaries—earning a mean of $96,400, compared to $79,700 for graduates from schools outside the top ten. In addition, top ten graduates most likely will continue to receive higher pay increases and bonuses as their careers progress, keeping them well ahead of their peers from lower-ranked schools. While they have paid a higher price for their top ten degree, the net value of their investment over time will be higher. Although the salary bump for students who attend top ten schools is also more—a mean salary increase of about $34,500, which works out to 56 per- 36 BizEd JANUARY/FEBRUARY 2007