I, The Absolute

Archive for March 12th, 2006

Comparisons are odious

Posted by itheabsolute on March 12, 2006

Numerous comments and mails on the salaries grabbed by the grads of IIMs Vs those of ISB.

While at a fundamental level such comparison looks funny, it is but human to commit to comparison.

In Strategy course, one learns that there are two levels of variables – industry level and firm level. Recent research proves that industry level factors explain only 35 % variance in a firm’s performance. The rest is explained by what is internal to the firm.

Similarly, the salaries that a b-school grads grab are explained by both – b-school level factors and individual level factors. And i have no reason to believe that the importance of the b-school will be anything more than 35 %.

There are grads of HBS who have difficulty in getting right jobs. I even hear that IIMs grads low on grades have difficulty finding jobs better than those found by some students of Tier – II b-schools. The lower salary numbers of ISB are not necessarily higher than the higher salaries of Tier II b-school.

Thanks to a fantastic alumni network,excellent brand and a rigorous admission processes, IIMs attract some of the best recruiters. But these recruiters would hardly offer the salaries that we are hearing now, if the students themselves are not good. No recruiter pays salary for the school; it is to the individual that the recruiter pays. Of late, IIMs have started to take experienced students, which has led to steep increase in the salary levels. The mind-numbing salaries are a reflection more of the genius of the person and less of the school.

ISB is a new school. It is yet to complete 5 years. Its alumni network is one of the weakest amongst large b-schools. It has a one year format. It takes only experieced students. It has tried out something new. Its brand is still growing. It will take time for ISB to work all things in its favor. Having said that, what ISB has achieved is by any standards no mean achievement.

Also know that, all b-schools (and firms too) do a lot of jugglery in calculating CTCs of the students. CTCs would include things one would never imagine. So that the numbers do not look skewed, the US b-schools (and magazines / press) reckon / compare salaries that the grads of various b-schools draw during the third year after they graduate.

To end, if people dont care about all these and just want to know numbers, I cannot reveal the numbers. But I am sure when the numbers come out ISB’s numbers will be higher than those of other schools.

PS: CTC could include things as wierd as the rent for the space occupied by the employee, the maximum bonus that he can draw (as against minimum bonus), stationery, utility expenses incurred on the person, training expenses, likely travel allowance, etc. basic things such as gross salary, min or average annual bonus, esops, incentives, sign on bonuses, provident fund, gratuity, superannuation, cash reimbursements can be genuinely included in the CTC.

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