The most attractive aspect about MBA is the allure of the fat pay packages that are touted by many b-schools. But how many of you may not know how these salaries are computed or what is the ‘in-hand salary’ (that you take home every month) or the performance-linked pay as compared to the ‘flat’ salary payable every month?
In this article, we will look at details of the salary packages, some careful analysis that you need to do before falling for tall claims of the ‘not-so famous’ institutes and a brief comparison of financial returns from a top b-school with other common careers that aspirants choose.
Myth 1: Average Salary is the best way to evaluate quality of placements
There are three measures of central tendencies in a data group. Mathematically, they are called mean, median and mode. Mean is the average value of the data points. Median is the middle value when the data points are plotted in increasing order. Mode is the most frequent value in the data group.
When b-schools advertise their packages they should ideally give the median and modal salaries as well. But almost all the b-schools publicise the mean salaries only.
In a batch of 50 students, the top salaries are astronomically high – 50 lakh per annum. A few students get 15-20 lakh per annum and many as low as 12 lakh per annum. Due to the few high salaries of 50 lakh, the average of the group will get pushed up by a few lakh – it can turn out to be 18 lakh.
If median salary was used and we plotted the salaries in increasing order, we would get a median of around 14 lakh. If we look at the most frequent data point range, then it is very likely in the above example that the most frequent range of salaries will be 13–14 lakh.
A second possible problem in average salary or mean salary is when the b-school uses the foreign placement packages in U.S. dollars or Euro in Rupee terms. As the exchange rates are not loaded in the Indian currency’s favour, the salary figures become very large in rupees terms and affect the average salary in a big way even though in reality only a few students would have got foreign placements (and salaries). A point to be noted here is that few B-schools (like IIM Ahmedabad ) mention both domestic and international average salary separately.
Myth 2: Foreign Salaries
The lure of foreign placements is very high at top b-schools. The jobs are no doubt very good but candidates should avoid converting the foreign salary packages by literally multiplying with the prevalent exchange rate. Let’s take an example: The annual salary for a foreign placement is U.S.$100,000. When you convert this by multiplying the using rupee-dollar exchange rate, it becomes 100000 x 64 = 64 lakh per annum.
But in a country like the U.S. the income tax is 35% instead of top rate of 30% here in India. Also, the cost of living is also higher. Hence, in real terms the package in rupee equivalent would be more like 40 lakh.
Myth 3: Variable pay packet
Almost all the job offers include parameter of variable pay packet, mostly in terms of performance linked bonus. Many B-schools consider this value to be 100% in order to inflat the average salary figure. Very few B-schools transparently provide this information in their placement reports.
Myth 4: 100% placement claims of B-schools
In many schools, a few students opt out of placements to pursue entrepreneurship. Sometimes the school might not release the clause of 100% placement at all. It is essential to find out if the complete batch got placed or not.
Myth 5: Company Names & Logos in Placement Brochures
Many b-schools want to impress you with a list of recruiters who visited their campus for recruitment. However, many of them do not visit the b-school regularly. Some of the recruiters might be a one-time summer placement recruiter and not a final placement recruiter. The repeat recruiter list is the true indicator of the strength of the institute.
While these caveats and hidden issues are important, none of the top 30-40 b-schools really have anything to hide. The student body is active on social media and press releases and the data is generally clean and trustworthy.
The placement and job quality is also a function of the hard work and skill set you acquire during your MBA. Hence, it is unlikely that you will go to a top b-school, not work hard and still get an outstanding placement.
Some companies visit multiple institutes and offer different jobs and salary packages. Depending upon their own experience with the candidates in the past and also the number of vacancies for different roles, a company might visit college A and offer a treasury job of 30 lakh and in the same year, it will also go to college B and offer 20 lakh for a bank operations role.
These kinds of data are not available even with the institutes. This is so because the companies decide the packages during the offer but reveal the final job details once the MBA is over and the candidates join them and report for the job.
Once a person starts working, the growth and financial returns are directly proportional to her/his performance. The starting salary is no guarantee of future growth. No MBA degree, even from the most prestigious colleges, is going to be any help in this regard.
Tax rules are another factor. Gross packages are advertised. That means depending upon the taxation structure, the ‘in-hand salary’ may be down by 25–30% in India. (Tax liability can be brought down through exemptions on education loan and savings instrument, which can lead to an increase in ‘take home salary’.) All these need to be factored while one chooses to evaluate the salary claims by colleges and companies.
MBA scores over other careers (like science, banking, technical jobs) on the issue of financial rewards. The salary and exponential growth that an MBA offers is unmatched.
Also, an MBA allows you to be an entrepreneur in a more wholesome sense and hence reap rich dividends financially and also achieve better work-life balance. While it is true that government jobs (including banking jobs) are relatively more stable, they may lose out financially and also are open to job relocations that one may not look forward to.
To sum up, an MBA from a top b-school is still the best bet for financial returns and long term growth in life.