Does a 1-Year MBA offer a Better ROI?

Attending Business school is one of the most important investments made by professionals in their careers. While making a choice in the programs typically the factors are the quality and reputation of the program, the program outcomes and the costs. Just like any other investment, it is important to look at the return on investment for a business program as well.

Given that aspirants now have access to multiple programs with formats, one can select the most suitable one based on his/her own personal priorities. Those wanting to pursue a full-time program can either opt for the traditional 2-year MBA (between 18 – 24 months) or the 1-year MBA (between 10 – 12 months). In India, most of the schools have been offering the traditional two year format since their inception and the shift to the one year accelerated program started only a decade back with schools like ISB and Great Lakes pioneering and offering the one year accelerated full time MBA as their flagship programs for candidates with more than 2 years of work experience. Now many other schools including the IIMs have also started offering one year full time executive programs for candidates with 5+ years of work experience.

For professionals who already have a few years of experience in the industry, the one year program is a great proposition as it allows them to get back to work faster without losing touch with the industry, having more experienced peer groups and developing the ability for high performance while coping with the higher intensity learning. The program also helps them understand the interactions between the various functional areas of a business system better and to develop cross-functional perspectives in business.

An important and tangible advantage over the two year program is the significantly lower opportunity cost while offering comparable results. Students have to take out only a year and get to return faster back to their careers and start earning. While Return on Investment (RoI) isn’t the only way to judge a school, it sure is a key consideration factor for deciding on pursuing an MBA for working professionals, and this is where the 1 year programs stand out on their proposition.

An MBA pays over a lifetime and one should look at the long term returns and not just an increase in salary at the end of the program to do a proper analysis. However for illustration, we can look at a simplified calculation looking at just the immediate salary growth and the costs incurred. Let us take an example of an experienced professional with Rs.4 lakhs of annual income who is seeking to pursue an MBA and has an option of pursuing both the two year and one year programs both costing Rs.16 lakhs in fees and living expenses. Let us say the expected salary at the end of either program is Rs.12 lakhs. In the two years, for the two year program the professional would have invested 16 lakhs in fees as well about 9 lakhs of foregone salary income (considering a salary of 4 lakhs for first year and 5 lakhs for the second year without an MBA degree). Hence the total investment would have been about 25 lakhs. In the case of a one year program, the candidate would have invested 16 lakhs of fees and 4 lakhs of foregone income due to attending the program but on the other hand would have recovered 12 lakhs as salary in the second year. The net balance at the end of two years for the two years program would be minus 25 lakhs while for the one year program it would be only minus 8 lakhs! In addition the student of the one year program would have gained an additional year of experience as well as a potential salary hike. Hence clearly for students with significant experience, the 1 year program offers a better value proposition with significantly lower opportunity cost.

At Great Lakes, the one year program is offered for professionals with min. of 2 years work experience whereas the two year program is offered to fresh graduates for whom the longer duration of the program, summer internship, etc. offers longer time and opportunities for developing their basic managerial competencies while providing the much required exposure to corporate work environment.

Though the RoI calculations do look tempting, candidates must exercise caution before taking a decision as MBA is a once in a lifetime investment and the choices should be made based on the overall suitability of the program in meeting one’s career objectives and lifelong returns that an MBA provides.

The writer is Co-Director of Admissions at Great Lakes Institute of Management and alumni of MDI, Gurgaon.

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