It’s an old, rather crude, American cliche that essentially boils down to this: The ultimate measurement of success is how much a person earns. And when it comes to MBA grads, how much alumni of schools three years after graduation make is certainly one way to measure success.
Every year, The Financial Times publishes what it believes to be the average salary of alumni three years after graduation. The numbers are based on surveys the FT sends to MBA alums with the assistance of the schools from which they graduated. The actual figures are reported by the British newspaper in U.S. dollars and are adjusted to allow for differences in purchasing power among countries.
Inevitably, applying a purchasing parity filter on the numbers can lead to silly distortions, especially when comparing North American and European salaries with those in such developing nations as India and China. That is why The Financial Times reports that the average salary of an MBA who graduated three years ago from the Indian Institute of Management is $171,188, a sum higher than what grads are making from London Business School, the University of Chicago’s Booth School, and MIT Sloan. Obviously that is patently nonsense.
Stanford MBA alumni lead all business school in average salary: $195,553 a year
In general, however, the numbers from mature industrialized economies do make sense and are more comparable with each other. According to The Financial Times’ data, the most successful MBAs in the world (at least when it comes to average salary three years after graduation) are those from Stanford University’s Graduate School of Business. Stanford alumni are making $195,553, considerably more than No 2 Harvard whose MBA alums are pulling down $187,432.
The top 20 school with alumni reporting the greatest percentage increase? Yale’s School of Management where alums said average salaries were up 11.3% in the past year alone. Alumni from IE Business School in Spain reported the highest percentage increases over the past five years, a whopping 26.9% gain from 2008.
The worst performance by any top school in The Financial Times’ ranking for both the past year and the past five years went to the University of Cape Town’s Business School. Average salaries reported by their alums fell 2.9% in the past year and 7.8% over the last five years since 2008. Ouch.
Compensation accounts for 40% of the Financial Times’ ranking
It’s important to note that these average alumni salary numbers are adjusted once again by The Financial Times to account for schools that pour MBAs into either more higher or lower paying careers. The so-called “weighted salary” of a school carries a 20% weight in the overall ranking, while the “salary increase” over pre-MBA pay accounts for another 20%. All told, compensation is the single most important factor in The Financial Times’ ranking, accounting for 40% of the methodology.
So it is just about inevitable for salary to be a major factor when a school does either well or not in The Financial Times’ annual global MBA ranking. This year, for example, Cambridge University’s Judge Business School jumped ten places to finish 16th, up from a rank of 26th a year earlier. Spain’s ESADE rose 11 spots to rank 22nd this year, up from 33rd in 2012.
How did those two schools do in average alumni salary? Judge alumni reported that they are making $145,948 a year, up an incredible 10.4% from a year earlier. ESADE alumni are pulling down $127,500 annually, up 10.9% from the previous year. These are outsized increases for both the British and Spanish economies where the human resources firm of Mercer reported that pay for managers had been expected to grow by only 3% in the U.K. and 2.5% in Spain this past year.
Numbers for Cambridge and Esade are oddly outsized for those economies and against rival schools
These figures are also out of line with the data reported by alumni from other schools. The percentage increases reported by Cambridge alumni, for instance, are more than five times higher than those reported by Stanford MBAs. The percentage gains reported by ESADE alumni are nearly six and one-half times larger than those reported by MIT Sloan alumni.
Or consider the MBA alumni from Oxford, the closest counterpart fo Cambridge. Cambridge Judge alumni reported average salary increases that were unexplainably seven times the size of those for Oxford Said’s alumni. Again, Cambridge’s average salary jumped 10.4% versus Oxford’s 1.5% gain in the past year, even those their graduates landed similar jobs in similar geographic locales.
ESADE alumni, meantime, reported salary increases of 10.9% this past year, compared to a measly 0.2% gain for alumni of IE Business School. The upshot: ESADE alumni reported percentage increases that were 545 times than those achieved by alumni at IE Business in the same country.
Is something rotten in Denmark, or rather Britain and Spain?
There’s another American saying that comes to mind here: “Something is rotten in Denmark”. In this case, something smells fishy in Britain and Spain–largely the accuracy of The Financial Times data for schools in those countries, among others.
There are a lot of reasons why this could occurr, ranging from the size of the sample of responding alumni to the natural proclivity for only successful alums to respond to a survey. One European dean suggests that it is even possible for a school to insure that only its more successful alumni are surveyed. Afterall, dissatisfed alums who are not doing all that well in the job market are far less likely to stay connected to their alma maters.
But it confirms what we have said over and over again about any one ranking and any one data point. Don’t put too much credibility in any single ranking or any single metric used in the methodology.
Source: The Financial Times
Notes: Average alumni salary for a school’s MBAs three years after graduation and culled from Financial Time surveys to alumni with the school’s assistance