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 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.

  • cap

    Personally, i think reporting average weighted salary (PPP) is a joke. It is misleading, and it tells you very little about the school. If the school is good, truly world class, it should be able to compete with the best schools in the world, in the best market in the world, for the best salaries in the world, based on real dollars, not on some imaginary dollar based on baskets of goods in China.

    You go to CEIBS for example and pay real US$ 70,000 in tuition. They report this with relative accuracy. But they report “weighted” salaries. It’s kind of misleading. Some students (not me, but there might be some) that think they’ll make real US$ 120,000 when they graduate from CEIBS, but they don’t. Too bad they rack up real debt, yet make no real money (on average at least, there’s always exceptions).

  • Mathew

    We all know that people who get into the ultra elite MBA programs such as Harvard, Stanford, Booth, or Wharton, are already very accomplished individuals before the MBA and earn very high salaries, so the incremental salary in percentage may be lower than other schools’ candidates.


    Candidate 1: Investment Banker at Goldman Sachs
    B-School: Chicago Booth
    Salary pre-MBA: 150,000
    Salary post-MBA: 200,000 (increase of 33%)

    Candidate 2: Software engineer from local IT company in Europe
    B-School: IIM (or ISB, IESE, IE, etc)
    Salary pre-MBA: 40,000
    Salary post-MBA: 80,000 (increase of 100%)

    Yes, I agree the increase is higher for the second candidate, but does this really mean that school 2 is better than 1? Come on this ranking is a joke and it really hurts badly top schools such as Booth or Kellogg in Europe and Asia, where people read FT rankings (the only ones that appear in the news because it ranks well local schools).

    Thanks John to bring this up, you are doing a great job showing the truth. Hopefully people from Europe and Asia start reading you.

  • b-school guy

    Wow – the IIM-A and ISB figures are completely bogus. Take a look at the official employment report from IIM-A:

    The highest paid domestic package (including non-cash, long term
    and performance linked components) for 2011 was 37 Lakh Rs. (~$75,000) with a mean of around $33K

    The MAXIMUM base salary for IIM-A internationally was $104,525 or $135,643 with bonus,etc. … the average was $85K total … remember only 12 students went international

    So is FT telling us that 3 years out, IIM graduates make more than Columbia, Chicago, etc. that start off at a mean of $110K+ with base salary alone??? Also, this is with unweighted salary (i.e. not adjusted for PPP)

    I’m sorry FT is full of $hit —

    School name Country Sal today ($) Weighted sal. ($)
    Stanford Graduate School of Business US 191,658 192,180
    Harvard Business School US 177,877 178,250
    University of Pennsylvania: Wharton US 176,299 172,354
    Indian Institute of Management, Ahmedabad (IIMA) India 175,077 175,077
    Columbia Business School US 171,647 166,497
    MIT: Sloan US 15,808 157,337
    London Business School UK 154,784 152,982
    University of Chicago: Booth US 154,449 152,585
    Dartmouth College: Tuck US 153,252 151,182
    IE Business School Spain 152,128 156,659
    Northwestern University: Kellogg US 146,136 145,834

  • Quirky things like this are the reason that I personally prefer to take a composite view of a school’s overall “rank” across multiple rankings systems.There are little nuggets of truth in every major ranking methodology out there.

    What I’ve noticed is that the truly high-quality programs tend to hold on to their spots towards the top across all major ranking systems. Further down the chain, there’s a lot more variation.

    P&Q’s ranking seems right on the money to me:

  • Manel,

    Large year-over-year variations in the ranking of a business school when little if anything has actually changed undermines the credibility of a ranking. Why? Because it exposes the single biggest problem with numerical ranks attached to a school: that the meaningful differences between and among these schools are so small that they are statistically insignificant. In other words, there is no real basis for ranking one school number eight and another school number 12. Readers of this site know that I have made similar criticisms against all the other major rankings as well. I’m not singling out the FT, though it’s ranking system is so complex that it’s not clear what the FT is actually measuring.

  • hmmm,

    Actually, both Forbes and the FT measure compensation three years after graduation. Forbes uses a five-year currency exchange average because, like the FT as well, it is also measuring pre-MBA salary. So there are two numbers both publications are trying to get: the current salary three years after graduation and the increase over pre-MBA salary. What makes this comparison somewhat more difficult is the fact Forbes and the FT aren’t always measuring the same five-year period at the same time.

    And yes, all the rankings are somewhat flawed. There’s no perfect way to do this. It is important to help users of these rankings understand the limitations of the systems so they can decide how much a given ranking might matter to them.

  • Manel

    from business pointview: I believe FT ranking is realistic and really reflects the business world at the moment. why surprised by the fluctuations in MBA ranking and accepting the fluctuations in other business related rankings (e.g. Fortune 500, Forbes billionaires list, etc). people mix between academic universities world and business world. MBA is business-related degree and professional training to go to the markets, not to win Nobel in physics. so, the fluctuations in my opinion is just function of the economical state worldwide. and from this point: I think FT ranking is more credible than the others since it change according to the business change.

  • M


    I guess one explanation could be that the average pre-MBA salary at IMD is higher (they are quite older) than the one at other schools, so 78% increase of a higher salary could be more than 100% increase of a smaller amount!!!
    Plus, compare to the US program, with a one year program the MBAs lose only one year of earning!!!! Making the ROI more effective

  • The other thing I don’t understand about the FT ranking is the value for money rank. Intuitively, schools that have a short programme, low fees, and/or have large salary percentage increases will do well on this rank.

    But how does that explain IMD being ranked 7th with only a 78% salary increase after 3 years, and with very high course fees (85,000 swiss francs which is much higher than any of the other one-year programs that are ranked below it in this category, and yet have higher salary percentage increases?

    It is puzzling because two key factors when we set course fees every year are affordability and value for money. And yet, it is not intuitive how the value for money rank is calculated, when it could act as a significant signal to MBA candidates.

    Conrad Chua
    Head MBA Admissions
    Cambridge Judge Business School

  • hmmm

    I don’t understand why you think Forbes’ salary figures 5 years out wouldn’t be much larger for FT’s figures for 3 years out. Let’s figure a 7-10% raise for each of those two years, and that covers most of the ground. Also consider that after 3 years in a post mba job, and grads have the experience and connections to go to the highest bidder. Before that point, they probably would not want to make a leap, for fear of looking disloyal.

    I do agree with your underlying belief that all of these rankings–especially FT and Economist–are quite flawed.

    But the other rankings are equally crazy. SMU’s performance in Businessweek, for example. NYU being ranked pretty much on par with Columbia in USNWR as another example.