A Look at E.M.B.A. Program 'Returns'

Executives and financiers are consumed by return on investment. So computing the return on investment from executive M.B.A. programs and then ranking universities based on that statistic sounds like a great idea.

Well, it didn't quite turn out that way. After massaging data originally collected for a survey on E.M.B.A. program quality that was published Sept. 30, The Wall Street Journal devoted much of its follow-up report on return-based rankings to explain results that appeared paradoxical at best.

By and large, the WSJ's ROI rankings looked like the quality rankings turned upside-down. The top two ROI leaders - Texas A&M and University of Florida - didn't make the top 25 in the September list that reflected students' judgments of how well each institution develops management and leadership skills. Conversely, Northwestern, whose E.M.B.A. program topped the quality rankings, came in 12th place in five-year return on investment. Wharton's E.M.B.A. program, which placed second in quality, was only 24th in return on investment, as estimated by the WSJ.

Other brand-name institutions fared even worse in the ROI rankings. Columbia Business School placed 26th out of 27 E.M.B.A. programs. New York University's Stern School of Business placed dead last, with a five-year return of 51 percent.

Results Sensitive to Cost and Initial Salary

To compute ROI, the newspaper culled data about salary, raises received after graduation, company-sponsorship figures, tuition and out-of-pocket costs, from the responses to its summer 2008 survey of E.M.B.A. graduates. It combined tuition and out-of-pocket expenses into a single cost figure. Five-year returns were figured by taking the median post-program salary raise reported by graduates, then assuming 5 percent annual raises over each of the next four years. (The WSJ says 63.3 percent of respondents said they received or expected a promotion upon completion of their programs, while 31.8 percent did not receive or expect to receive a raise.)

The results show high sensitivity to both costs and average starting salary levels of each program's students. Thus, Texas A &M's No. 1 five-year return of 243 percent is partly a reflection of that program's relatively low cost - for 2008 E.M.B.A. graduates, $53,000 for a 21-month program.

Top ROI Doesn't Translate To Top Salary

"Graduates of Texas A&M's program reported receiving a median 11% raise upon completion of the program and five years after graduation were projected to earn a median $181,718 (not including bonuses)," the Journal reports.

On the other hand, "some schools had lower returns partly because their graduates' salaries were higher to begin with. Jaki Sitterle, managing director of executive programs at NYU, which posted the smallest return, notes that the school caters to older executives, half of whom already have advanced degrees and many who already earn high salaries."

Notwithstanding lower returns on investment, top-tier programs had some of the highest projected five-year salaries. Graduates of Columbia's separate E.M.B.A. Global program in conjunction with London Business School, which placed 23rd in terms of ROI, reported the highest expected median salary after five years - $272,577.

Still, when considering whether to take an E.M.B.A. program, costs are hard to ignore. More than two of three E.M.B.A. students pay at least part of the tab on their own. And that proportion is growing as companies cut back on supporting their employees' career growth.