How can we measure the ROI of EMBA programmes?
As serious a step as going back to school is, when the right moment arises there are always enough compelling arguments in favour. It may be a desire for career advancement; it may equally be a need for better pay; or it may be a combination. It may be a more complex urge to enhance a professional profile in terms of business know-how, networking, and impact on society.
Even when the monetary and time costs of executive business education are generously offset by the expected return on investment (ROI) of the EMBA and the professional and personal rewards, the decision to take on an EMBA is rarely taken lightly. Just as at every important stage in life, the preparation and research into finding the best solution and sorting out the financials and other indispensable resources can take time.
A programme that seems to be the perfect fit can manifest itself in different ways. It may be in terms of having the best possible return on investment and financial profitability over time. It may be about the intangible benefits and knowledge that the programme provides. And it certainly depends on our financial capabilities before the start of the programme.
ROI – money talks …
In the world of business education, return on investment (ROI) should be interpreted more broadly than in the purely financial scope. On the one hand, it is a valuable indicator for professionals who have set the bar high and do not intend to compromise with the quality of their studies. The latest numbers about the ROI of the EMBA help aspiring business leaders get a grip on the business education market and filter the schools that truly deliver on their promise. According to the 2017 EMBAC Student Exit Survey, EMBA alumni around the world received a 14.1% increase in compensation in salary and bonuses after finishing the degree, while 41% were promoted while still studying. Overall, the numbers have been more than satisfactory.
On the other hand, some schools appear to have a great ROI due to lower tuition fees rather than their high teaching standards. So how can we measure the ROI of EMBA programmes?
The standard ROI is the number of years it takes for the business education investment to be returned. You add together the tuition fees, additional living and other expenses, any lost income (usually participants study while keeping their job, but the focus on demanding studies can detract from business results during the programme), and other opportunity costs, and divide the total by the remuneration hike after finishing the degree. The calculation is more complicated than that of classical MBA formats. This is because participants rarely give up their income, may spend more years in school, and the salary and bonus raises often start with enrolment and not with graduation. It is also difficult to numerically describe the opportunity cost of combining work with study and balancing this with your personal life.
… but there is more to the story
However, programme aspirants need to keep in mind that ROI is about much more than financial investment. It is also about the knowledge we acquire in the long run and the way that knowledge transforms us and the outside world.
Executive MBA alumni were the most likely (59%) among business school students to recommend their programme or school to a colleague or friend, according to the GMAC 2018 Alumni Perspectives Survey. In addition, 72% of EMBAs around the world say that their executive education was worth it, an Executive MBA Council and LinkedIn Marketing Solutions (LMS) survey of over 1,000 alumni showed.
But contrary to popular belief, making more money is not the main motivation for executives eager to begin their EMBA journey. “Interestingly, the results show that earning potential was not the main factor for prospective students when deciding to attend a programme; rather, it was an increase in business knowledge and skills that could positively impact change for their career course,” further highlighted Michael Desiderio, executive director of EMBAC.
Although a critical perspective is always recommended when working with facts and figures, ROI can be a useful tool when deciding where to study. One way of maximising the indicator is to build up a smart funding strategy from the very beginning. Getting a scholarship, fellowship, or grant can be a good way of achieving this. According to EMBAC, 61.4% of programmes around the world offer scholarships or fellowships.
For EMBA students, the financial awards are usually partial. In the Global EMBA Class of 2017 at INSEAD (France), 31% of participants were funded by some type of scholarship. Almost 35% of students worldwide received partial funding, while about 45% relied entirely on themselves for their EMBA, the Executive MBA Council data shows. The downside of relying on external funding is that it may take more time to prepare a compelling application and achieve competitive GMAT or Executive Assessment scores. However, whatever the effort it is usually worth it financially.
Another common funding option among EMBA participants is arranging corporate sponsorship from their employer. In order for this to happen, you have to be seen as a valuable asset to the organisation and you need to be willing to stay there for a number of years to come. Your employer should deem you worthy of the investment even before you make the decision to negotiate with them. Experts recommend taking the time for such conversations. It is a process which is best started well before the preparation for the programme, let alone its beginning.
Corporate funding, however, comes with strings attached. The candidate usually signs a contract to stay in the company for a pre-determined period of time. Yana Dimitrova, who studied in the London Business School (UK) Executive MBA programme, highlighted for Advent Group: “MBA studies provide many new opportunities for career development, so EMBA applicants should consider in advance whether they are ready to stay another five years with their current employer, and whether they will have the opportunity to implement their newly acquired knowledge and skills there. If this is not the case, then they should maybe look for a different source of funding for their EMBA studies.”
Other ways of financing your degree include relying on your earnings while studying, making use of bank savings, or taking a loan. The latter is a heavier burden, but it may well be worth it. The expected interest payments over the years need to be included in the overall calculation of the executive programme’s ROI.
Indeed, aside from return on investment and other money matters, the factors of overall career satisfaction and being able to contribute to your company, colleagues, family, and society can bring a great deal of enjoyment and contentment into life. Which is what it is all about in the end. Isn’t it?
This article was provided by our colleagues from the Access MBA Tour. It was originally written for and published in their 2018-2019 Access MBA, EMBA, and Masters Guide under the title “Return on Intelligence”. The online version of the Guide is available for online viewing here.