Stanford Alums Make The Most Dough

by John A. Byrne on

Money talks. Bullshit walks.

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.

(See following page for alumni reporting the highest average salaries as well as one-year and five-year percentage increases)

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  • Wei

    I think the number for U.S. school is quite reliable, among M7 school,
    we could clearly see the trend that schools place their students mainly
    to finance sector (Columbia, Booth) has far lower salary increase since
    2008 (avg. 5.85%) than remaining M7 schools (avg. 11.84%). It reflects the job market.

    However, for European schools, the number seems arguable. Top 3 European School
    (LBS/INSEAD/IMD)
    only managed to slightly increase their salary from -2.8% to 11.4%
    (avg. 4.5%) since 2008. Surprisingly, two Spanish schools (IESE/IE),
    despite they are located in a country with highest unemployment rate
    among all developed countries managed to
    increased their salary from 23% to 26.9% (avg. 25% from 2008)!

  • Noel Hanssens

    The something rotten in Denmark quote is a paraphrased Shakespeare line from Hamlet “There is something rotten in the state of Denmark.” Copenhagen Business School never stood a chance.

  • Alex Chu

    While a simple average isn’t really useful, if compensation is used as a proxy for performance and progress, I think breaking it out by industry can serve as a very rough guide. For example, averages for those working in financial services, or those in mgmt consulting, those in technology, those in F500/manufacturing, and so forth. And leaving out those in non-profit and those who own their own businesses.

    Comparing averages by industry can be useful because within an industry, MBAs tend to end up in the same kinds of jobs. In financial services for top 16 schools, it is heavily weighted to investment banking, private equity, hedge funds, investment management, etc. In consulting, it could serve as a barometer for those who are on the partner track at a faster rate. In tech, most MBAs end up either in product management, business development, marketing and so forth – all of which have similar levels of compensation (so those who make more are far more likely at a higher job title).

    Again, pay structure varies far too widely across industries that a simple average won’t cut it. But within an industry, it can be a rough barometer (i.e. which grads tend to progress further and/or faster within the same industry?).

    Finally, comparing across countries isn’t really useful, since the decision to live/work in one country over another is more often driven by personal decisions and circumstances than it is by career opportunities (i.e. you may have more folks from developing countries wanting to work in developed countries purely for the career opportunities, but those who want to stay or return to their developing countries tend to do so for personal reasons; and those choosing between developed countries also tend to choose based on personal reasons).

    However, by breaking it out like this (by industry), it may end up revealing something that is “much ado about nothing” — that a few years out of b-school, where you went to school has little to do with compensation and/or performance, especially when comparing grads who went to schools in the same general tier (i.e. top 16, top 30, top 50, etc).

    Alex Chu
    MBA Apply

  • Frank

    MBA programs drone on about ethics yet blatantly cheat on the rankings. This salary thing is just a whopper excuse for manipulation. Honestly the FT is kooky when it comes to rankings, any trained eye can spot gross oddities.

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