The Strange Math In The FT Ranking

How much does an MBA make three years out of business school?

You’d think that the answer to this question would be fairly simple. Ask a statistically valid sample of graduates from each school and then crank out an average, right?

Yet, getting solid compensation numbers, which loom large in MBA rankings, apparently is no easy task. Just look at the numbers published today (Jan. 30) in the latest global MBA ranking by the Financial Times. The FT asks alumni of the top schools how much money they’re making three years after they graduate. The answer to that question–as well as the percentage increase of that answer over an alum’s pre-MBA pay–accounts for the single most important weight–40% of the total–in the newspaper’s ranking of MBA programs.

Forbes is even more reliant on the answer to this question. Every other year, it also surveys MBA alumni and uses the current average compensation of a class at each school to calculate the return-on-investment of the degree. The bigger the return, the higher the rank a full-time MBA program is accorded by Forbes.

So given the importance of these numbers, you would think they would pretty much match up in both surveys, right? Turns out there can often be a significant difference between what Forbes and The Financial Times report. In fact, the differences are often so great that they should give a reader of these rankings great pause. It’s yet another reason why the rankings out today–widely read around the world–should be worth not much more than a grain of salt.

To be sure, comparing pay around the world is not all that easy. The latest figures by the FT, for example, are for the graduating Class of 2008. When Forbes magazine published its latest MBA ranking five months ago, it used numbers for the graduating Class of 2006. So you’d expect some differences for sure. But you wouldn’t expect them to differ by a third or more.

The FT, for example, today reports that the average “weighted salary” of a Harvard MBA in the Class of 2008 was $178,249 last year. A pretty good sum three years after graduation. But Forbes, which also surveyed business school alums last year, found that the average salary of a Harvard MBA was $230,000. The Forbes numbers are for the Class of 2006. When the FT surveyed that class a couple of years ago, it found that average to be $161,887.

The FT’s “weighted salary” for a Chicago Booth MBA was $152,585 last year, some 34% less than the Forbes’ figure of $205,000.

The FT’s number for a Dartmouth Tuck MBA was $151,182 last year, also considerably less than the $200,000 reported by Forbes.

And so it goes. At Wharton, according to the FT, the average salary was $172,353. But according to Forbes, it was a much heftier $225,000. The FT’s number for Stanford was $192,179, though Forbes put it at $205,000.

If you’re noticing a pattern here, you’re right. The Financial Times’ averages consistently underestimate the income of MBA alumni–except when the reverse occurs at a different set of schools that happen to fare quite well in the Financial Times’ rankings.

Consider the “weighted salary” of MBA grads from the National University of Singapore’s business school, which is ranked 23rd on the new Financial Times’ top 100 global MBA list. The FT’s number is $97,625. That’s $25,625 more than the $72,000 annual salary reported by Forbes.

Or how about Ipade, the well-known and respected business school in Mexico? The FT says the average salary last year was $90,900. Forbes pegged it at $65,000, more than $25,000 less.

The salary of an MBA alum from the highly prominent IE Business School in Spain? The FT says it was $156,658. Forbes estimated it at $141,000.

  • Guest

    You’re mistaken if you think IIM grads don’t earn that much 3 years post graduation. I’m not from IIM but I know enough people to know that FTs rankings are not entirely inaccurate.

  • subnay

    There is a logical fallacy in Dr. Sarkar’s agrument. He thinks that MBA is an academic research and candidates with highest scores should get in. On the hand, MBA is reflection of real world business; to be successful in a top MBA program, one needs to have real world business experience and acumen. Case in point is the case study system pioneered by HBS. However I do agree with Dr. Sarkar’s that for PhD programs, the schools need to admit candidates who have strong academic background. And these top US schools do that. It is hell of a job to get into a PhD program at MIT, especially economics. And these PhD candidates are far superior to their counterparts at IIMA.

  • Dr.Sarkar

    FT ranking 2012 was the best ranking based on solid criteria.Sofar american schools were manipulating everything from their selection process to their inflated world ranking.USA is rich and powerful and so it,s people and organisations always think they are the greatest and no.1 in the world in everything.The top US business schools are mostly private organisations and like other businesses they have been marketing their MBA schools.They hire some great faculty who rarely teach in MBA classes.They are mainly for research and consultancy which bring income to the schhol.They have attractive college building but they do not provide hostel accomodation to all MBA students as this is not much profitable.They adopt selection process which can be manipulated to admit rich and influencial students from other countries.They deliberately avoid having minimum GMAT and CGPA and talk about diversity to manipulate selection and full others.Things like eassy written at home and sent online ,recommendation letters are simply stupid.Even conduct of interview is not correct.Only MBA faculty should conduct interview.But this US schools use alumuni or admission staff for interview who are not academics.A number indian students belonging to large business/industrialist family and having a very average academic background,low GMAT score have got MBA degrees from HBS,Stanford,MIT,Wharton etc.Such people can never imagine getting into IIMA for MBA where merit is the only criteria for selection. It is high time these socalled Top MBA  schools are exposed .Lack of transparency in their selection process should disqualify them from any world MBA ranking..FT while ranking MBAs  should take this issue of lack of transparency of the top US schools and put them in their correct place

  • I like the weighting based on the percentage of grads who go into a
    certain industry vs the percentage of grads who respond. For example, if
    i-banking represents 10% of the class but 80% of the respondents, then
    their $200k+ average can certainly skew the rankings significantly. It’s
    not difficult at all to understand how and why they would do this.

    The PPP is another matter, although it also makes sense..in a way.
    Making $200k in NY w/ a overall state & fed 50% tax is different
    than making even $100k in India or China. Although if they do PPP then
    they should do it by city (which is even more difficult and vague). Sure
    living expenses for a family of four in rural india may only be
    $300/mo, but try getting a decent (by western standards) apartment in
    Bombay or New Delhi or Bangalore for less than $1,000/mo. The PPP skew
    becomes significant. I like the exchange-rate conversion better, let the
    readers of rankings decide what $100k in Ghana means vs $100k in San
    Francisco. After all, at that point we’re also looking at standards of
    living differences….Ghana vs SF?

    Definitely very much an eye-opening article though. Was wondering the
    same about HKUST, a top 20 school internationally, though it’s less than
    10yrs old!?

  • gnut.sucram

    John, I believe HrT’s comment is a very strong prove to above article that it is not objective. Are you going to share more views to further support your article?

  • HrT


    while I recognize that like any other the FT ranking is full of flaws, your conclusion that there is a patern hurting the US schools does not stand when we check what happened to some of the most recognized European schools. More than any other school, IMD has suffered with lower salaries reported by FT vs. Forbes (-42%), while for LBS and Insead the delta is similar to the US top schools).
    If we consider that Stanford’s delta is on the lower end at only -6%, GSB might not have achieved the top spot had the salaries been lower by the same 20-25% common to other schools.
    There are some very odd winners in FT’s list, but we should be able to detect those from a distance. Nonetheless, I think FT deserves some merit for creating the only global ranking, even if it includes some very questionable schools.

    Below the comparison of salary data from both FT and Forbes:

    Forbes FT FT vs. Forbes

    Stanford 205 192 -6%
    CBS 198 166 -16%
    HBS 230 178 -23%
    Wharton 225 173 -23%
    Booth 205 152 -26%
    Tuck 200 151 -25%

    LBS 197 153 -22%
    Insead 193 144 -25%
    IMD 247 144 -42%

  • Alois de Novo

    I’m not a fan of large numbers of women faculty and I’m not a fan of large numbers of international students, international faculty or international board members.

    Nevertheless, the most heavily weighted variables in the FT’s ranking scheme are the two variables that matter most to any MBA candidate: salary and salary increase.

    You object to adjustments for purchasing power, but there isn’t any other way to do a meaningful international ranking. If the average graduate of IIM can buy himself more stuff for Rupees than the average Wharton grad living in NYC can buy for dollars, then IIM wins that competition. It is no objection to the methodology that greater purchasing power for dollar equivalent bundles of currency is found in countries with a much larger percentage of poor people. To make this more relevant to our current politics: yes, the 1% will likely be better off when the 99% are much worse off. Cheap servants, that sort of thing.

    There is a similar argument in favor of sector weighting. You say “And so it goes. At Wharton, according to the FT, the average salary was $172,353. But according to Forbes, it was a much heftier $225,000. The FT’s number for Stanford was $192,179, though Forbes put it at $205,000.” That’s not at all incongruous. Wharton sends a disproportionate number of its most successful graduates into finance. The FT believes that Stanford’s grads in other fields outperform Wharton’s grads in finance, though at somewhat lower salaries than they would earn in finance. So they adjust the salary numbers to equate the salaries of people who are equally successful in disparate fields. This is only wrong if you believe that all schools should single-mindedly aim to place their grads in finance. Most people don’t share that view.