Ten GMAT Points = $3,000 in MBA Pay?

by John A. Byrne on

Every 10-point decline in a GMAT score will cost a graduating MBA roughly $3,000 in starting salary and potentially hundreds of thousands of dollars over a career, according to a new analysis of GMAT score and job placement data by test prep firm Knewton.

A study by the company found what founder and CEO Jose Ferreira calls “an incredibly tight correlation” between pay and GMAT scores. The link plays out in business school rankings that largely show that schools with higher median GMAT scores and higher starting compensation tend to rank highest in most lists of the best business schools.

“Basically, every ten point (increase) on the GMAT correlates to a $3,000 improvement in average starting salary,” said Ferreira in a video on Knewton’s website. “So if you get 100 points better on the test, the difference between a 600 and a 700 GMAT, that’s $30,000 and that’s just for the first year alone. And that number, of course, widens over time. If you are making $30,000 more in your first year, you are probably making $33,000 more in your second year. Over the course of your career, that 100-point gap could end up being millions of dollars.”

Of course, the study merely plotted the median GMAT scores of highly ranked schools against the reported income freshly minted MBAs made from those same schools. If an applicant fails to get into a higher ranked school with a higher GMAT, all bets are off. Also, the study fails to take into account job performance or advancement over a career so that it’s an over simplification to state that a higher or lower GMAT score could affect one’s earnings over a lifetime.

Nonetheless, Ferreira said he found that three factors tend to correlate to a school’s high ranking—and the compensation its graduates will eventually receive: GMAT score, average starting salary of graduates, and the percentage of grads employed at commencement.

“There’s an almost perfect correlation between those three things,” he said. As to rankings, “there is no dispute whatsoever among your peers once you get into business school. The way business school students judge it, is who’s got the top starting salaries at graduation. And those numbers don’t ever change. That is probably the single best way to rank schools.

“That correlates almost perfectly to GMAT score,” Ferreira said. “There is virtually no day light between who’s got the highest starting salary and who’s got the highest GMAT score all the way down the list (of schools on a ranking) “

DON’T MISS: HOW THE GRE STACKS UP AGAINST THE GMAT or MBA DEGREES THAT EARN $3 MILLION OVER 20 YEARS

  • http://studiobokeh.wordpress.com studiobokeh

    i’m taking this with a grain of salt though, because it’s not based on an individual’s gmat score…it’s the median school gmat score and its relationship with rankings. i think most employers don’t care too much about your gmat score, unless you’re going into consulting and possibly finance.

    and although it will be difficult to get into a top-10 school with a lower gmat, it can be done and the school makes more of a pay difference than the actual gmat.

    and c’mon, it’s a test prep firm…they want to scare you into paying for their services.

  • Bruce Vann

    “and c’mon, it’s a test prep firm…they want to scare you into paying for their services”

    Maybe everyone should just take the GRE :). Isn’t one of Porter’s forces the threat of substitute products?

  • Bruce Vann

    I say that bc the GRE is significantly easier.

  • Sigh

    What a poor attempt to twist the stats to make a sale. This is a classic case of confusing correlation with causation. It completely fails to consider the third variable that is actually the cause of the correlation: % of students pursuing finance or consulting. For many students, this is a career choice made independent of their GMAT.

    This same poor logic is often used to tout Harvards merits over another top school like Tuck, but it is flawed for the same reasons. A school’s ability to attract a higher % of bankers is not necessarily a virtue, but it will have an effect on average starting salaries.

    Bottom line: if you’re really interested in high salary jobs, focus on the real sources of those high paying jobs and work back from there to figure out what it will take for you to get an offer from that particular company or in that particular industry. Don’t think that you’ll be able to ride the wave of correlation and get the same results.

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