The truth about B-school salaries

IIM Ahmedabad

This is indeed THE longest post on our blog. But this post essentially sums up what we believe in and what actually the aspirants and everyone else ought to know.

Prof Saral Mukherjee, Chairperson, IIMA Placement Committee has expressed his views on  the hype surrounding the inflated and incorrectly quoted salary figures and sensationalism surrounding this created by the media. Professor Mukherjee says,

” Have you ever marvelled at the salary packages being offered at B-Schools? The more they reach stratospheric realms, the more intriguing the news reports become. Recently, a leading daily published an unverified report stating that an IIM Ahmedabad (IIMA) student had bagged a salary of more than 1.44 crore rupees. The news article soon became one of the most read news articles on the newspaper’s website. Stratospheric salaries equal highest readership, the equation seems very clear. The article was misleading and the IIMA Media Cell published a rejoinder in its blog stating the figure as incorrect. As to be expected, the rejoinder did not get as many reviews as the original report.

The publishing of the rejoinder in a blog was in some sense a fundamental yet silent shift. It signalled the unwillingness of the student body to be mute spectators when incorrect information is published. It signalled the use of a new media in connecting to the outside world. It signalled to the world that IIMA students are mature enough to disassociate themselves from a very flattering portrayal if the portrayal is not true. The truth about highest salaries was always known on B-School campuses. You just kept silent when the press glossed over the minor details.

The truth is that the readers are being fed garbage. The highest salary offered in a B-School is typically a dollar denominated salary. The first trick in sensationalism is to convert the dollar figure to a rupee amount. The two are not comparable as the dollar salary would not be earned in India but in a country with a substantially higher cost of living. The second trick is to refrain from mentioning the amount of bonus. Bonus component of a salary package is contingent on performance. Consider a firm which stipulates that performance linked bonus would range from a minimum 40 per cent to 300 per cent. Which number should be used for reporting – 40 or 300 or an average value? Some firms may have a one-time sign-in bonus. The assumptions about bonus component are of course too mundane a detail to grace a front page report. Similarly, I am sure, readers would like to be spared the reporting of exchange rates at which the dollar-rupee conversion was done. Forget the fact that the bonus is likely to be paid, if at all, at a later date and hence subject to currency risk.

The highest domestic salary is also not free from distortion as it may involve substantial performance linked bonus. Additionally, what gets reported is the Cost to Company (CTC), a fuzzy word whose definition varies from one firm to another. The take home salary is sometimes a tiny fraction of the CTC. Not all firms may declare the compensation package or the breakup at the time the press release is circulated, typically the day placements end. Not all firms may want to declare compensation packages. Typically this happens for the PGPX and PGP-PMP programmes where students typically have an average of more than ten years work experience and are placed in middle to senior level positions. At these levels, the salary negotiation is a private matter between the student and the recruiter and can vary considerably from one student to another taking up similar roles in the same firm.

The story does not end with the reporting of highest salary. Soon one B-School is compared to another based on the highest salary offered at the two campuses. Little attention is paid to the fact that there are may be no equivalence of underlying assumptions used for determining the highest salary offered between institutes and even from one batch to the next for the same institute. The highest salary is of course not representative of the entire batch. The fixation with this one figure in turn fuels an aspiration among youngsters to announce to the world they have arrived. What good is it to study in a B-School if you did not get the highest salary on offer? It matters little what is the role on offer, the location concerned or the associated career path. Every job offer can now be safely measured and compared to another based on the salary component. The formal announcement of the highest salary figure and its associated prize winner is the final crowning glory of years of hard work. And in this mad rush to identify the jackpot winner we lose sight of the fact that the campus placement is only the first step in an arduous process of facing challenges and building oneself for a leadership role. It is not the end of the journey, just the beginning.

Strangely, the interest among readers to learn about highest salary figures at B-Schools seems to have an India flavour. I ask the reader to find out from the internet the highest salary package at any elite US B-School last year. You may be surprised at the lack of information. Most schools report median salaries and not highest salaries. The average salary offered has the same deficiencies as the highest salary figure. The only positive is that because of averaging the figure does not ‘belong’ to anyone. It has no claimant since few would want to be called ‘average’ I guess. It is a tolerable nuisance simply because of its impersonal nature.

With the rise in costs of an MBA education, many B-School students are forced to take educational loans for covering their expenses. Hence the salary package post an MBA education is an important determinant of the viability of investing two years of one’s life in an MBA education. To that extent, the media frenzy regarding highest salary packages in the last decade coincides with the hikes in educational fees. My suggestion is to never base a decision to take an educational loan on the highest package but on the average salary figure, that too after making sizeable reductions from the CTC value to arrive at the take home salary. The payback period for an IIM degree is still among the lowest in the world.  Historically there have been little to differentiate among IIMs on average salaries and fees.  Hence there is little justification in looking at the highest salary details coming out of B-Schools for selecting the right school. MBA aspirants should look at the profile of job offers at campuses at their entirety, not just the salary package and definitely not the highest package.

The overriding focus on jobs and salaries and payback periods takes one away from the idea of investing in an education for progress and development, both at an individual and at a societal level. If we need to change this situation we need to stop focussing on the highest salary figure as a first step. At IIM Ahmedabad, we stopped reporting highest salary figures years ago. We report the average salary separately for domestic and international offers, thereby negating the need for currency exchange rates. We dislike IIMA being compared on any salary dimension of an outgoing batch, highest or average or some other measure of central tendency. If compare you must, compare the impact on society by a school’s students and faculty. Unfortunately that is a much difficult proposition than a simple comparison of highest salary of the outgoing batch. “

Advertisements

38 thoughts on “The truth about B-school salaries

  1. Well said, Mr Mukherjee. However, i can’t help but wonder why this article had to come up this Placement season. If such practices are being followed and you had knowledge of it beforehand why such a late revelation? why the Holier-than-Thou attitude now when A couldn bag the highest offer around?

    ~an errata could have been asked from ET rather than a rejoinder on a blog
    ~tis the responsibility of the ER Cell to see that such “garbage” (at least from A) don’t float around in media…else it becomes a case of selective disclosure…like the article in Hindustan Times

    hope A sets a new trend and lives up to it !!

  2. “As to be expected, the rejoinder did not get as many reviews as the original report”
    If it was ‘expected’ i wonder why the rejoinder was put up in the blog and not in the media…maybe it was ‘desired’???
    “What good is it to study in a B-School if you did not get the highest salary on offer?”…errr,pardon me but the analogy might be incorrect but here it goes..do u see anyone asking the question “What good is it to live in a country and rejoice in the victories of its cricket team if u r not part of that cricket team?”…Its all a matter of prestige..that the institute i study in was able to produce a student of that caliber..

  3. The point made here is well taken. It is indeed funny to make comparisions between firms and B-schools where there is little that could serve as a common denominator.

    However two things intrigue me about this whole fiasco.

    First being a leading daily publishing news about IIM Ahmedabad’s placements’ figures quoting ‘sources from within the administration’ that salaries are ‘comparable to….’, ‘almost the same amount as….’ and other phrases which seem to imply an urgency to catch up with the shift in favor of public opinion away from your position. Also, it is difficult for me to believe that there be a ‘news report’ (smoke) without ‘insider leak’ (fire).

    Second: The news was front page read in a leading daily. The clarification was on a blog which at best has a rather moderate readership. What in the name of dear god in heaven makes you think that my uncles and aunts, who were alarmed over this “MBA package deluge” sitting in their comfortable homes in Europe and the US, would ever get the whiff of your clarification? Why this policy of glorification in public and clarification in private? Or is it just a case of “sour grapes”…. which makes me wonder why this enlightenment over packages does not register to you when IIM A ritually makes it to “top-of-the-list” rankings surveys which lay great emphasis on placements and with which you cooperate fully?

    Do not get me wrong. I have great respect for IIM A. And this makes me sad about the current goings-on…..

  4. Most people commenting here seem to be thinking that IIMA’s only responsibility is to be handling the media. The figures published in the media were MOSTLY not provided by the institute, except for when we provided official press releases. The media publishes whatever they would like to, and it is not child’s play to make them publish corrections to something they have so proudly published on their front page.

    Rather than exert pressure on the media about this, IIMA has better things to do.

    The article by Prof Saral Mukherjee here has been carried by Economic Times, and hence we are not just correcting the media in our blog. (Though I am still surprised how the unrelenting media agreed to carry such a corrective article)

    I would leave you with this:
    IIMA does not control the front page of any newspaper. And neither do we have any incentive in increasing their readership. A blog seems to be the best feasible way to publish this correction, and it has come up only after all attempts to correct the media have been made already.

  5. While I agree with some of the ideas presented by Prof Mukherjee, I think the timing of this is very inappropriate. IIM Ahmedabad is an institute which, as I have found from a few Google searches, has a very dubious track record when it comes to driving media hype about B-school salaries. In some earlier years when IIM-A had arguably the best placement figures in India, officials at IIM-A has never shied away from parading their figures before the media.

    For example, consider this:-
    http://economictimes.indiatimes.com/placement-time/IIM-A-student-bags-record-Rs-14-cr-offer/articleshow/2856401.cms

    This link is to a news story in Economic Times (the same publication in which Prof. Mukherjee has published his opinions) from March 12, 2008 – a year when IIM-A arguably had the best placements in India. This news story was indirectly referenced in a thread on Pagalguy for discussions for another IIM’s call getters. This report shows IIM-A proudly declaring and promoting their excellent placement salary figures. In fact, Samir Barua – who was the Director of IIMA then and if I am not mistaken, is still the Director – is directly quoted as saying “Top salary has been in the range of Rs 1.12 crore to Rs 1.44 crore, and this also counts a huge component of bonus, based on performance given after a year. But we can still say the highest salary was Rs 1.44 crore.”

    So, it is quite clear that IIM-A has always found it very appropriate to hype up their placement figures when their figures have been the best in the country. This is exactly the sort of thing which Prof. Mukherjee has spoken against now – a year when, apparently, IIM-A’s figures have not been as good as certain other institutes.

    So, is it really fair for IIM-A to say these things now? Why couldn’t IIM-A have this epiphany in 2008? And can IIM-A really expect people to take these things seriously now, when this sudden change of mind appears just like a case of grapes having turned sour?

    However, like I said, I do agree with some of the ideas which Prof. Mukherjee has expressed. I am an overseas aspirant to IIMs this year, and I have a shot at a few IIMs including IIM-A. I am not completely sure where I will end up, but if I do end up at IIM-A, I hope that IIM-A will uphold these new found principles even next year if they get the best figures next year.

  6. Yes!!!
    One reason for existence of so many myths about every professional field is lack of insider views available in public domain. Thats why people join big companies and then leave them after some time. There is always mismatch between what you expect and what you get.

  7. Think this is a raw truth which need to be more popularized through much more stronger mediums. Such hype adds unnecessary pressure on the IIM and other brands.

  8. Pingback: Placement data ethics: B-schools should change the timing of releasing placement reports - Exattosoft Student Resources Portal

  9. This blog pretty much argues everything that I have ever thought about on the issue. Being from an IIT, I understand all the hype that goes around in the main stream media about the placements and the corresponding offers made. A first hand experience leads me to conclude that these news reports can be very misleading for the unassuming reader. This problem only gets magnified in the case of B schools. Excellent post I must say.

  10. Pingback: School of Inspired Leadership : Admission 2010 - 2011 - Page 18 - PaGaLGuY.com - The Everything of MBA in India and Abroad, CAT 2009, GMAT, XAT, MAT

  11. Real nice and informative article to let MBA grads know the truth within.

    P.S. : By the way guys, adding google adsense code to sites hosted freely on wordpress is against their policy. So please do take the necessary steps. Do not want to see such a good blog being closed down.

  12. Loved the line” bonuses are at a future date and thus subject to currency risk ” !

    Media sensationalize, that’s how they sell and its impossible for anyone( IIMA hardly counts) to stop them but at least attempts to bring out truth should be made.

  13. one more thing which many of you wouldnt have noticed uptil now..
    When IIMA does something good..it comes out saying..IIMA took this initiative and when it commits something bad.,..it starts crying out B-school do this..!!
    why dont you start taking a blame on you and not showcasing it directly , rather putting up a veil by including the wor B-schools.I know…this post will be deleted soon..as many of my similar posts have been deleted..!!

  14. This is indeed THE longest post on our blog. But this post essentially sums up what we believe in and what actually the aspirants and everyone else ought to know.

    Prof Saral Mukherjee, Chairperson, IIMA Placement Committee has expressed his views on the hype surrounding the inflated and incorrectly quoted salary figures and sensationalism surrounding this created by the media. Professor Mukherjee says,

    “ Have you ever marvelled at the salary packages being offered at B-Schools? The more they reach stratospheric realms, the more intriguing the news reports become. Recently, a leading daily published an unverified report stating that an IIM Ahmedabad (IIMA) student had bagged a salary of more than 1.44 crore rupees. The news article soon became one of the most read news articles on the newspaper’s website. Stratospheric salaries equal highest readership, the equation seems very clear. The article was misleading and the IIMA Media Cell published a rejoinder in its blog stating the figure as incorrect. As to be expected, the rejoinder did not get as many reviews as the original report.

    The publishing of the rejoinder in a blog was in some sense a fundamental yet silent shift. It signalled the unwillingness of the student body to be mute spectators when incorrect information is published. It signalled the use of a new media in connecting to the outside world. It signalled to the world that IIMA students are mature enough to disassociate themselves from a very flattering portrayal if the portrayal is not true. The truth about highest salaries was always known on B-School campuses. You just kept silent when the press glossed over the minor details.

    The truth is that the readers are being fed garbage. The highest salary offered in a B-School is typically a dollar denominated salary. The first trick in sensationalism is to convert the dollar figure to a rupee amount. The two are not comparable as the dollar salary would not be earned in India but in a country with a substantially higher cost of living. The second trick is to refrain from mentioning the amount of bonus. Bonus component of a salary package is contingent on performance. Consider a firm which stipulates that performance linked bonus would range from a minimum 40 per cent to 300 per cent. Which number should be used for reporting – 40 or 300 or an average value? Some firms may have a one-time sign-in bonus. The assumptions about bonus component are of course too mundane a detail to grace a front page report. Similarly, I am sure, readers would like to be spared the reporting of exchange rates at which the dollar-rupee conversion was done. Forget the fact that the bonus is likely to be paid, if at all, at a later date and hence subject to currency risk.

    The highest domestic salary is also not free from distortion as it may involve substantial performance linked bonus. Additionally, what gets reported is the Cost to Company (CTC), a fuzzy word whose definition varies from one firm to another. The take home salary is sometimes a tiny fraction of the CTC. Not all firms may declare the compensation package or the breakup at the time the press release is circulated, typically the day placements end. Not all firms may want to declare compensation packages. Typically this happens for the PGPX and PGP-PMP programmes where students typically have an average of more than ten years work experience and are placed in middle to senior level positions. At these levels, the salary negotiation is a private matter between the student and the recruiter and can vary considerably from one student to another taking up similar roles in the same firm.

    The story does not end with the reporting of highest salary. Soon one B-School is compared to another based on the highest salary offered at the two campuses. Little attention is paid to the fact that there are may be no equivalence of underlying assumptions used for determining the highest salary offered between institutes and even from one batch to the next for the same institute. The highest salary is of course not representative of the entire batch. The fixation with this one figure in turn fuels an aspiration among youngsters to announce to the world they have arrived. What good is it to study in a B-School if you did not get the highest salary on offer? It matters little what is the role on offer, the location concerned or the associated career path. Every job offer can now be safely measured and compared to another based on the salary component. The formal announcement of the highest salary figure and its associated prize winner is the final crowning glory of years of hard work. And in this mad rush to identify the jackpot winner we lose sight of the fact that the campus placement is only the first step in an arduous process of facing challenges and building oneself for a leadership role. It is not the end of the journey, just the beginning.

    Strangely, the interest among readers to learn about highest salary figures at B-Schools seems to have an India flavour. I ask the reader to find out from the internet the highest salary package at any elite US B-School last year. You may be surprised at the lack of information. Most schools report median salaries and not highest salaries. The average salary offered has the same deficiencies as the highest salary figure. The only positive is that because of averaging the figure does not ‘belong’ to anyone. It has no claimant since few would want to be called ‘average’ I guess. It is a tolerable nuisance simply because of its impersonal nature.

    With the rise in costs of an MBA education, many B-School students are forced to take educational loans for covering their expenses. Hence the salary package post an MBA education is an important determinant of the viability of investing two years of one’s life in an MBA education. To that extent, the media frenzy regarding highest salary packages in the last decade coincides with the hikes in educational fees. My suggestion is to never base a decision to take an educational loan on the highest package but on the average salary figure, that too after making sizeable reductions from the CTC value to arrive at the take home salary. The payback period for an IIM degree is still among the lowest in the world. Historically there have been little to differentiate among IIMs on average salaries and fees. Hence there is little justification in looking at the highest salary details coming out of B-Schools for selecting the right school. MBA aspirants should look at the profile of job offers at campuses at their entirety, not just the salary package and definitely not the highest package.

    The overriding focus on jobs and salaries and payback periods takes one away from the idea of investing in an education for progress and development, both at an individual and at a societal level. If we need to change this situation we need to stop focussing on the highest salary figure as a first step. At IIM Ahmedabad, we stopped reporting highest salary figures years ago. We report the average salary separately for domestic and international offers, thereby negating the need for currency exchange rates. We dislike IIMA being compared on any salary dimension of an outgoing batch, highest or average or some other measure of central tendency. If compare you must, compare the impact on society by a school’s students and faculty. Unfortunately that is a much difficult proposition than a simple comparison of highest salary of the outgoing batch. “

  15. truly speaking i searched for the highest package in this session….but really happy after knowing all this ctc…etc .thanx for the informaton.

  16. Interesting post and thanks for sharing. Some things in here I have not thought about before.Thanks for making such a cool post which is really very well written.will be referring a lot of friends about this. Keep blogging.

  17. I have seen a couple of guys fresh out of IIM(the most reputed 1 😉 ), who have had no prior work experience( who also happened to be ex-IITians 😉 ) joining my company at 1st line manager level positions with an avg. 35k max starting base salary……..and there ends the GOOD part. 🙂
    I being an IIM aspirant was following their career path closely to get a few pointers…They were living the IIM dream…or so i felt…until i met them personally…
    I was dissapointed when i saw their PPT presentation skills during meetings and their marketing insight which was bookish,amateurish with not much connect with the real world market scenario, which was inevitable due to their lack of field experience…i convinced my self that i was being a bit too harsh and unfair to them by having such high expectations….after all my company recruited them after careful screening…they couldn’t be wrong in spotting talent right?
    And then….it happened…
    The fall from grace…Both the guys were demoted within a few months as they did not meet my companies expectations… :D(Seriously this really happened!!!!!!!!!!!!!!!)…they were then reassigned as trainee managers with an experienced senior manager as their mentor, in an interior region of the country…far away from their plush corner cabins in the Mumbai HQ…This happened in one of most reputed companies in the world….
    So,a degree from a reputed institute will surely hold you in good stead,will open a lot of doors and hasten your progress up the corporate ladder,bring in the moolah, but it in no way guarantees the same……
    If you have the stuff in you even a degree from an average MBA college can take you places….
    So, my dear friends…as the famous Fungsuk Wangdu so aptly puts it…”kabil bano,kamyabi…………” ;D

  18. lol seems the truth cannot be digested when written here so the posts r deleted….WILL POST THE SAME POST IN ALL LEADIN MBA ASPIRANT WEB SITES NOW…STOP ME IF U CAN NOW 😀 😀 😀

  19. The article brings to light a lot of things that a college goer or an IIM aspirant doesn’t know.Yet somehow this message needs to percolate more into the students’ psyche. If IIM could make a press release(with loads of pictorial and graphical depictions) on this kind of awareness it would be really something.

  20. Pingback: That thing called MBA « Deva-statin

  21. Every aspiring MBA graduate should read this. The reason why so many freshers are desperate to get into b schools without using their undergrad (enng/medical) college knowledge in industry is because of the glorification of MBA salaries.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s