A minute for your feedback please

Friday, February 25, 2011

So why are MBA's paid so much anyway?

The IIM-A Final placements are well under progress(newspapers have reported an increase of 10%-20% in average pay packets). Often, these young graduates(me next yr!!) earn more than their parents(in their prime of career/at retirements) had ever earned. This pay disparity(which is what sparks off the MBA rush by applicants who think this is true of all institutes) is the subject of occasional debates where the point is raised-what value does a MBA bring to the table vis-a-vis an experienced graduate(w/o MBA)?

 While this issue will keep simmering, my 2 bits to this issue are:-

  1. Imperfect talent market:- Unlike the West, there is much more of a gap here between the 'best' and the 'rest'. It is not merely due to inputs('student quality' as measured by CAT scores, work experience, grades etc) but due to infrastructure issues(mainly faculty-you can build nice amenities but not faculty!). This, coupled with the first mover advantage and alumni network, gives the top colleges that 'brand'-which allows their graduates a premium relative to other MBAs
  2. Revenue Producers:- Consulting, Sales, Marketing and Investment Banking(the most in demand professions at B Schools) all share a common attribute-YOU are the revenue producer and not merely a support role. So when the performance is easily evaluated, it is linked to pay and a high pay can be justified. Of course, this is why job security is relatively weaker 
  3. Data Analysis/Comfort with ambiguity:- The case method teaches(for those who sincerely work on the cases before class) you how to crunch data and be comfortable with incomplete, conflicting and ambiguous data. While MDPs can cover this, a 2 yr MBA permits this attitude to be ingrained which then gives a better career start. Organizations value someone who can make sense of data AND be comfortable with uncertainty. 
I am not including stuff like communication skills(presentations etc), working with others(study groups are just proxy for real world) which both MBAs and non MBAs can develop with equal ease. So I would attribute the MBA non MBA pay differential to the above 3 factors only. 

No comments:

Post a Comment