Which MBA Programs Deliver The Highest ROI

Choosing a business school is much like picking an investment. You can spend big on a blue chip, looking to compound your money over the long-term. You can sift through discounts, hoping the value turns around over time. You can even plow your money into a low risk treasury bond, to ensure you land a safe return. No matter what: You need to spend money to make money.

Make no mistake: Business school is a long-term investment. For two years, you’ll leave your job and forego an income, costing you anywhere from $100K-$200K. On top of that, tuition and fees can run up to $150,000 – and that doesn’t even include living expenses like rent and groceries.

Earlier this year, The Economist published its list of the MBA programs with the highest first year ROI. Not surprisingly, the most prestigious schools – Wharton, Harvard, Stanford, Columbia, and Kellogg – didn’t fare so well, as Jeff Schmitt reports at PoetsandQuants.com. Then again, it takes time for students to pay off their loans and gradually raise their salaries. When it comes to first year compensation, these are the schools where students are earning $135K-$141K in pay and bonuses to start.

And that brings up a question: Does the gap on return begin to narrow for more expensive schools after the first year out of business school?

The answer: not necessarily.

How The Financial Times Measures ROI

Those were the findings from The Financial Times’ most recent rankings of “Value for Money” (otherwise known as return on investment). According toThe Financial Times, “Value is calculated using the salary earned by alumni today, course length, fees, and other costs, including the opportunity cost of not working [during the MBA].” Overall, Value for Money accounts for 3% of a school’s overall global ranking. Unlike most data points in The Financial Times’ 2014 rankings, which contain three years of data, Value for Money is derived from 2014 data collected from the schools.

Since The Financial Times doesn’t make data like tuition and opportunity cost available, Poets & Quants is also including two data points in its tables. The first is a “Weighted Salary,” which is the “average alumnus salary three years after graduation.” Weighted Salary is based off of an American dollar equivalent, “with adjustment for variation between sectors.” The weighted salary is based off two years worth of data, with each year encompassing 50% of the average. The highest and low salaries have also been removed from the average.

The second data point is a “Salary Increase,” which, in the words of The Financial Times, reflects the “average difference in alumnus salary before the MBA to now. Half of this figure is calculated according to the absolute salary increase and half according to the percentage increase relative to pre-MBA salary.” Combined, these data points comprise 40% of each school’s ranking.

American Schools Fare Poorly

For the second consecutive year, Brazil’s Coppead tops The Financial Times’ ranking for the highest return–if you can actually believe that result. At an average salary of $88,256,The Financial Times ranks Coppead #95 in overall compensation. However, this total also represents a whopping 138% increase in weighted salary (and that’s despite Coppead graduate salaries dropping by $8,365 from 2013 to 2014). Still, these numbers are nearly identical to the $86,410 salary and 132% increase reported by the University of Pittsburgh’s Katz Graduate School of Business. Like most European schools, Coppead students benefit, tuition-wise, from an 18-month program. In addition, over half of Coppead’s graduates flock to the consulting and banking industries according to The Financial Times.

The Lisbon MBA (Portugal), IMD (Switzerland), The University of Strathclyde (UK), and Lancaster University (UK) round out the top five. Seven United Kingdom institutions made the top 25 for schools with the highest return – and two German schools (ESMT and Mannheim Business School) ranked #6 and #7 respectively, reinforcing the growing popularity of the German MBA.

Among American schools, only Texas A&M and the always-underrated Brigham Young University made the top 25. In fact, American MBA programs comprised 44 of the bottom 50 programs for return, with MIT Sloan, Wharton, Stanford, and NYU Stern ranking #97 through #100 three years after graduation.

High Return Schools Generally Rank Low Overall

Here’s another trend: the higher the return, the lower the overall ranking. Take Belgium’s Vlerick Business School. It ranks #17 in value and #100 overall. Another example: Switzerland’s St. Gallen’s ranks #88 overall, yet #9 in value. In fact, few schools buck this trend. The ones that did include Switzerland’s IMD (#12 overall and #3 for value), the University of Cambridge Judge Business School (#16 overall and #8 for value), and Insead (#5 overall and #10 for value). Otherwise, 19 of the top 25 schools for return ranked below the top 50 overall. It is true: The first shall be last and the last shall be first in some contexts.

As you’d expect, the opposite is true too. Seven of the top 10 schools overall (including Harvard, Stanford, Wharton, MIT Sloan, Booth, Columbia, and Yale) were among the bottom 20 in terms of return according to The Financial Times’ metrics. The main culprit? High annual tuition, for starters. Averaged together, the annual tuition of these seven schools comes to $59,041 according to U.S. News and World Report data (with Harvard Business School being the least expensive at $56,175). Excluding scholarships and financial aid, that’s nearly $120,000 over two years (as many schools are using – or migrating towards – 12- and 18-month models).

Stanford and Harvard Grads Earn the Highest Salaries

While American schools may not rank high on return after three years, their graduates do earn the highest compensation. In fact, the five highest weighted salaries belonged to Stanford ($184,566), Harvard ($178,300), Wharton ($170,472), Columbia ($164,181), and Kellogg ($157,719). Cracking the top 12 were MIT Sloan ($157,262), Booth ($156,004), Yale ($150,880), Dartmouth Tuck ($150,754), and Berkeley Haas ($149,487).

Overseas graduates who earned, on average, the fattest paychecks after three years include: The Indian Institute of Management, Ahmedabad ($157,459), the London School of Business ($156,553), France’s Insead ($148,183), Spain’s IE Business School ($146,933), the University of Cambridge ($144,350), Switzerland’s Spain’s IESE Business School ($143,168), and Switzerland’s IMD ($142,446).

To see how all the top schools rank against each other, check out PoetsandQuants.com:

Which Business Schools Produce The Highest Returns

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