Take a bold step into the world of business

Tuition fees can be steep, but the rewards are plentiful- from substantial pay rises to valuable contracts, writes Michael Taylor

There are many reasons for doing an MBA. Some people want to change careers; others want to make that next move up the corporate ladder; yet others want to expand their managerial skills or build a broader professional network.

But a key question that is sometimes overlooked is what kind of return you can expect on your investment.

“I wouldn’t think of putting out that kind of money without expecting to get a return on my investment,” said Kathleen Slaughter, associate dean for Asia of the Richard Ivey School of Business.

Tuition fees for a local full-time MBA cost HK$249,000 at the Hong Kong University of Science and Technology (HKUST). The programme at the University of Hong Kong costs HK$280,000, but that includes a semester at the London Business School.

At a top business school in the United States, which continues to boast the overwhelming majority of the world’s most highly ranked business schools, fees can easily exceed US$50,000 for a two-year, full –time programme. And that does not include books, living expense and lost income- assuming you have to quit your job to attend the programme.

So, is it worth the sacrifice?

Edan Lee, who graduated from Stanford University’s full time MBA programme in 1994, said the benefits were not always easy to quantify.

He was inspired by his experience at Stanford to consider entrepreneurial ventures that he might have considered “too risky” if he hadn’t done an MBA. With the confidence and skills he acquired at business school, he joined an ambitious start-up, where he embarked on setting up what he called “power projects” throughout the mainland.

“Apart from learning the basics of being a businessman, I learned things like negotiation that were some of the most useful,” he said. “I learned more about myself in the interpersonal dynamics class, nicknamed by students as ‘touchy feely’, than in any other class, and I’ve used a lot of that since.”

Four years after his course, Mr. Lee was invited by some Stanford alumni to join a newly founded private equity firm called Olympus Capital Holdings Asia. He is now a partner and managing director of the firm.

“It is difficult to pinpoint exactly what ‘return on investment’ I got from the programme because it’s something that continues forever,” he said. “It’s people you meet, the companies who come to talk to you and the alumni and students [ you network with] who are today’s and tomorrow’s business leaders.”

According to the Financial Times, salary increase for MBA graduates at top US business schools can be breathtaking.

Three years after graduation, students from the University of Pennsylvania (Wharton) had as much as 139 per cent salary increases. Figures for the Harvard Business School and Stanford were 123 per cent and 128 per cent, respectively.

Interestingly, former students at some lesser-known schools saw even more impressive increases.

Graduates of Brigham Young University and the University of Iowa , both in the US, averaged increases of 157 and 160 per cent. Graduates of the Instituto de Empresa Business School in Spain averaged 152 per cent increases, and those of the MBA programme at the China-European Institute of Business in Shanghai averaged salary increases of 154 per cent.

HKUST was the only local business school to make the Financial Times’ most recent list of the world’s top 100 MBA programmes. Its graduates averaged a comparatively modest 85 per cent pay rise.

Dan Rudolph, senior associate dean of operations at the Stanford School of Business, said: “The total compensation package of our incoming students is about US$70,000. the average total compensation package after graduation is between US$150,000 and US$160,000.”

Professor Rudolph was quick to point out that the real return on investment often came many years after graduation.

“What we find is that an MBA puts students on a new and higher trajectory,” he said. “The difference after two or three years is significant, but it becomes even more striking after 10,15 or 20 years. As their career progresses, you find people in an entirely different class than they would have been in otherwise.”

Which brings us to a key question: How long does it take to start realizing a return on your investment?

The cost of tuition and books goes without saying, but what if you quit your job to pursue a programme full time? You will then have to factor in lost earnings in addition to out-of-pocket expenses. But some of these- especially at top US school- can be offset by various types of financial aid, including fellowships, grants, loans and part-time employment.

Many of these schools have a “needs blind” admissions policy, accepting students based on merit and then finding ways to finance their education.

Harvard, which estimates total student expenses for a nine-month academic year at US$66,110, says about two-third of its MBA students receive some sort of financial aid.
Some US schools also help students find jobs during the summer break. In addition to getting valuable on-the-job training, they can earn as much as US$14,000 at Stanford, which can help offset expenses.

“We have introduced a loan forgiveness programme this year targeted at international students to promote diversity,” Professor Rudolph said.

“It is designed to attract students from areas where average wages are lower [because they otherwise wouldn’t be able to attend].”

Professor Slaughter said the return on investment for an executive MBA (EMBA) could be even quicker. Despite the higher cost- Ivey’s EMBA tuition for the coming academic year is expected to increase to about HK$570,000 for the 18-month programme- students continue working so there is no lost income to factor in.

More importantly, they are able to apply what they learn right away on the job.

“We have statistics that show that salaries increase 60 per cent within three years of graduation,” Professor Slaughter said. “It takes an average of 2.5 years to recover their investment.”

And once you have recovered your investment costs, the rest-as the saying goes- is pure gravy.

South China Morning Post
August 12,2006