Publication: The Economic Times Mumbai; Date: Mar 12, 2010; Section: Front Page; Page: 3 Truth about astronomical IIM packages HAVE YOU MARVELLED at the salary packages being offered at B-Schools? Especially the crore-plus salary packages which the media never stops talking about? The sceptic in you may have questioned the veracity of these astronomical starting salaries, but there was no way to find out the truth. Many of the top rung management institutes have a policy of not revealing the highest salary package. At IIM Ahmedabad, we followed a policy of neither admitting nor denying any story related to highest salary. The truth about highest salaries was always known on B-School campuses. Media frenzy over high mgmt salary happens only in India TO SOMEextent, we are thus guilty of a collective silence across the campuses on the abuse of this piece of information. Recently, there has been a string of media reports speculating on highest salary figure at IIM-Ahmedabad (IIMA). The IIM-A Media Cell has published a rejoinder in its blog stating the crore-plus figure quoted as incorrect. The publishing of the rejoinder in a blog was in some sense a fundamental, yet silent shift. It signalled the unwillingness of the student body to be mute spectators when incorrect information is published. It signalled the use of a new media in connecting to the outside world. It also signalled to the world that IIM-A students are mature enough to disassociate themselves from a very flattering portrayal, if the portrayal is not true. The truth is that readers are being fed garbage. The highest salary offered in a toprung management institute is typically a dollar- denominated salary. The first distortion involves converting the dollar figure to a rupee amount. The two are not comparable, as the dollar salary would not be earned in India, but in a country with a substantially higher cost of living. The second distortion is to refrain from mentioning the assumptions underlying the bonus computations. Bonus component of a salary package is contingent on performance. Consider a firm that stipulates that performance- linked bonus would range from a minimum 40% to 300%. Which number should be used for reporting — 40 or 300 or an average value? In our analysis many of the eye-popping highest salary figures can only be realised if the highest bonus rate is assumed. This is an overly optimistic scenario which would rarely materialise. Some firms may have a one-time signing bonus. Hence, the highest salary figure may not be the same as a yearly salary, since the signing bonus would not be applicable in subsequent years. The assumptions about bonus component are of course too mundane a detail to grace a front page report. Similarly, I am sure, readers would like to be spared the reporting of exchange rates at which the dollar-rupee conversion was done. Forget the fact that the bonus is likely to be paid, if at all, at a later date and hence subject to currency risk. The highest domestic salary is not free from distortion too, as it most likely involves substantial performance-linked bonus. Additionally, what gets reported is the cost-to- company (CTC), a fuzzy word whose definition varies from one firm to another. The takehome salary is sometimes a tiny fraction of the CTC. Not all firms may declare the compensation package or the breakup at the time the press release is circulated. Not all firms may want to declare compensation packages. Typically, this happens for the PGPX programme where students have an average of more than ten years work experience and are placed in middle- to senior- level positions. The story does not end with the reporting of highest salary. Soon, one management institute is compared by the media to another based on the highest salary offered at the two campuses. Little attention is paid to the fact that there may be no equivalence of underlying assumptions used for determining the highest salary offered between institutes and even from one batch to the next for the same institute. The highest salary is, of course, not representative of the entire batch. The fixation with this one figure in turn fuels an aspiration among youngsters to announce to the world they have arrived. What good is it to study in a business school, if you did not get the highest salary on offer? It matters little what is the role on offer, the location concerned or the associated career path. Every job offer can now be safely measured and compared to another based on the salary component. The formal announcement of the highest salary figure and its associated prize winner is the final crowning glory of years of hard work. And in this mad rush to identify the jackpot winner, the media loses sight of the fact that the campus placement is only the first step in an arduous process of facing challenges and building oneself for a leadership role. It is not the end of the journey, just the beginning. Strangely, the media frenzy about highest salary figures at management institutes seems to have an India flavour. I ask the reader to find out from the internet the highest salary package at any elite US business school last year. You may be surprised at the lack of information. Most schools report median or average salaries and not highest salaries and foreign media houses do not seem to have developed a taste of investigative journalism in this field. Perhaps, they have realised that there are far more important secrets to uncover than highest salaries at business schools. The information on average salary has the same deficiencies as the highest salary figure. The only positive is that because of averaging the figure does not ‘belong’ to anyone. It has no claimant, since few would want to be called ‘average’ I guess. It is a tolerable nuisance simply because of its impersonal nature. In contrast, the identification of the student receiving the highest salary can potentially expose the student to a lot of undesired attention from the underworld. With the rise in costs of an MBA education, many students are forced to take educational loans. Hence, the salary package post an MBA education is an important determinant of the viability of investing two years of one’s life in an MBA education. My suggestion is to never base a decision to take an educational loan on the highest package but on the average salary figure, that too after making sizeable reductions from the CTC value to arrive at the takehome salary. The highest salary figure thus serves no purpose of the reader, except two. One is the harmless delusions of grandeur experienced by a section of current students and alumni of a management institute from the reflected glory of a non- achievement. The second is the potential abuse as an advertisement tool for luring unsuspecting MBA aspirants. The overriding focus on jobs and salaries and payback periods takes one away from the idea of investing in an education for progress and development, both at an individual and at a societal level. If we need to change this situation, we need to stop focusing on the highest salary figure as a first step. At IIM Ahmedabad, we stopped reporting highest salary figures years ago. We report the average salary separately for domestic and international offers. Media needs to understand that there is little merit in comparing management institutes on any salary dimension of an outgoing batch, highest or average or some other measure of central tendency. If compare you must, compare the impact on society by an institute’s students and faculty. Unfortunately, that is a much difficult proposition than a simple comparison of highest salary of the outgoing batch. (The writer is placement chairperson, IIM- A) The truth is that readers are being fed garbage. SARAL MUKHERJEE PLACEMENT CHAIRPERSON
Posted on: Tue, 18 Jun 2013 20:57:38 +0000