A recent study by Bloomberg Businessweek magazine ranking full-time MBA programs on the basis of returns on investment has found that graduates of the Class of 2010 in the top five US schools (according to the magazine's earlier ranking of top 30 US schools) will need an average of 10 and a half years to achieve a return on their investment.  Overall, the average time required by full time MBA graduates of 2010 to recoup their MBA investment was calculated at 6.5 years which is considerably higher than what their peers from earlier years took.

The reason that the top schools have taken a greater hit has to do with the methodology by which the time required to achieve ROI has been arrived at. The MBA ROI figure has been calculated using a number of data points such as the total dollar amount the average student spends on a degree (tuition, fees and living expenses), the salary foregone during the tenure of the MBA, the median pre-MBA salary and the median post-MBA salary. Students in the top programs usually charge the highest tuition and also admit the cream among aspirants who typically have very high pre-MBA salaries. In fact, the recession has meant that the differential between pre-MBA and post-MBA salaries in many of these programs is very low. Coupled with high tuition, this has led to a longer period over which the total investment may be recovered.

Details of Top 5 Schools as per Bloomberg Businessweek Ranking of US Schools 2010

Businessweek 2010 Rank

School

Duration of Full Time MBA

Cost of Study **

Post-MBA Median Base Pay **

     

1

Chicago (Booth)

21 months

$103360

$102000

2

Harvard

24 months

$112400

$110000

3

Pennsylvania (Wharton)

24 months

$106303

$110000

4

Northwestern

(Kellogg)

24 months

$102990

$105000

5

Stanford

24 months

$106236

$120000

** Source: Bloomberg Businessweek

As one would expect, state schools where overall costs of study are considerably lower and schools where the percentage increase in salaries has been higher have fared better in the rankings, with Texas A&M's Mays full time MBA yielding the fastest return in just under three and half years.

European programs also fare better than their US counterparts, partially because most of these are one to one and half-year programs and hence entail both lower cost and a shorter break from earned work. Schools such as SDA Bocconi, HEC Paris, Manchester Business School and Cranfield School of Management usually afford returns on the cost of education within a period of two to three years and top the ROI rankings.

However, one has to keep in mind that the time calculated by the magazine does not take into account salary increases, bonus components or stock-based compensation. Most importantly, one should also keep in mind the non-measurable long-term benefits of an education from a Harvard or a Stanford such as the quality of network, global recognition, breadth of exposure when it comes to the overall real return on an MBA investment.