A full-time MBA from a top business school is something that most MBA aspirants desire. Such an MBA is not only about the training and curriculum, but also the overall development of a student. But one parameter on which aspirants gauge business schools while evaluating their choices the most is the Return on Investment.
One must always remember that an investment in management education is a life-time investment. The returns pay off well over the course of the next 35 to 40 years. You are exposed to new opportunities to continuously grow, build your network, develop competencies on an ongoing basis and reap the benefit over the course of the rest of your career.
Business schools in India are increasingly offering a one-year MBA program specifically designed for professionals with a certain amount of work experience. The minimum work experience that these programs demand range between 2 to 5 years. The ROI on such one year programs is even more paramount for someone keen on pursuing it. And here’s why:
Let’s Talk Opportunity Cost
Before we dive into the details of how the investment in a one-year MBA pays off, let us understand what an opportunity cost is. Simply put, opportunity cost is the earning that you forego, the next best alternative, in pursuit of something better.
In the context of an MBA, especially if you have been working for a while, the opportunity cost is the salary that you could have earned during the course of your MBA. Now this cost makes it a tough decision for someone who has been working for a couple of years and has to take care of a family or has loans to pay off while they are away from the industry and other important opportunities that may come their way.
A two year MBA costs you two years of earnings. This cost is halved in case of a one year MBA. Your break from the industry and from your family and personal life is halved and you can get back to the industry in a year. The one year MBA is rigorous and makes no compromise in the curriculum delivered. Therefore, in one year, you gain management competences, learn about business and entrepreneurship, and shape your personality for a career in management leveraging the industry exposure and professional experience that you already have.
Now Let’s Do the Math
Imagine you and your colleague each have three years of work experience and are earning 5 lakhs a year. You have two options before you – a two year MBA and a one year MBA program from a renowned Indian business school. Fees for both programs are comparable, let’s assume 16 lakhs. Your colleague decides to go for the traditional two-year MBA while you choose the one-year program. At the end of your program, the two of you get the average package of 12 lakhs per annum. Here is where the two of you will stand at the end of three years:
ROI for your Colleague:
(Note that your colleague has forgone two years of earnings, which is 5 lakhs a year, for two years)
| Earnings Fees + Opportunity Cost |
= | 12,00,000 16,00,000+(2x5,00,000) |
= | 12,00,000 26,00,000 |
= | 0.46 |
ROI for You:
(Assuming that at the end of the second year, you have earned a 10% hike in your salary)
| Earnings Fees + Opportunity Cost |
= | 12,00,000+(1.1x12,00,000) 16,00,000+(5,00,000) |
= | 25,20,000 21,00,000 |
= | 1.20 |
Thus, with a larger numerator and a smaller denominator, you are in a better position and earning a significantly higher return on investment by enrolling for a one-year MBA. In addition to this, you get back to a job and to your personal life while your colleague is still engaged in the program. In addition to this, you can also begin the EMIs a year early for any education loan that you might have taken and save on interest costs. One thing that also really matters, on a non-tangible paradigm, is the significant management exposure that you get during that one year while your colleague is still in the second year of MBA. This puts you way ahead in terms of experience as a management professional.
How do One Year MBA programs differ from Two Year MBA (PGDM) programs?
The one year MBA format is popular among global business schools and is rapidly gaining traction among premier Indian business schools as well. In essence, it’s not a question of one-year versus two-years, but 12 months versus 18 months (course duration of 21 months, minus 3 months of internship).
Summer internships are not a part of one-year programs since the candidates selected already have a certain minimum level of corporate exposure of at least two years. This exposure again plays an important role when it comes to peer learning and steering classroom discussions around management concepts. Experiential learning and live projects give you hands-on experience in dealing with real-world corporate problems and devising strategies to solve them. All of this in exchange for the work experience that you carry.
Admissions to one year programs are mostly profile based. Interview calls are not sent out solely on the basis of entrance test scores, but overall credentials of the candidate. The quantitative and qualitative aspects of your work experience, your past academic performance, the initiatives that you have taken throughout your academic and professional lives, the moments when you have shown leadership potential, the accolades you have earned, and your conviction and intention behind pursuing management education which you will elicit in your essay or Statement of Purpose, all of these will play a role in the decision-making process. Learn more about how a one-year MBA is more beneficial for experienced professionals here.
As you evaluate your choices of MBA programs and apply to business schools of your choice, do consider this very important calculation of where you will stand two years from now. Do a thorough evaluation of your own profile, and what each of these business schools look for. Refer class profiles of the programs of your choice and narrow down to the ones which would be the just right for you. Finally, portray your achievements and track record in the best and most authentic way you can to improve your chances of being selected.
Great Lakes Institute of Management has opened admissions for its Flagship One-Year Post Graduate Program in Management (PGPM) at its Chennai and Gurgaon campuses. Click here to learn more about the course structure of the program and apply. For an in-depth understanding of the selection process and eligibility criteria for the PGPM, click here.
Subscribe now for regular updates!!
