The Strange Math In The FT Ranking
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.