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MBA
Pay- Top B Schools, Top Dollar Continued by Geoff
Gloeckler
With few exceptions, Dammon is correct. The top-ranked -- and most expensive
-- MBA programs produce the highest-salaried grads over the span of their
careers, according to research commissioned by Bloomberg Businessweek.
For the second year, Bloomberg Businessweek asked PayScale.com, a company
that collects salary data from individuals through online pay comparison
tools, to use its database of 23,000 MBA graduates at the top 45 U.S.
business schools to calculate their median cash compensation -- salaries
and bonuses -- around graduation and after they have an average of 5,
10, 15, and 20 years of work experience in the same industry. Bloomberg
Businessweek used that data to calculate an estimate of median cash earnings
over the entire 20-year span.
On average, MBAs from the top 45 B-schools will make around $2.5
million in base pay and bonuses over the course of a 20-year career.
But there are great differences between the total compensation of the
schools at the top of the list compared with those closer to the bottom,
especially as MBAs move deeper into their careers. An MBA grad from Harvard,
for instance, will earn nearly $4 million over the span of two decades.
A grad from the University of Iowa's Tippie College of Business will
earn less than half that. Newly minted MBAs at some top programs, such
as Yale, earn high starting salaries but experience only a minimal increase
over time. At other schools, such as the University of Connecticut, MBA
grads more than double their salaries over the 20-year period.
Idiosyncrasies in the Data
The numbers suffer from some inherent limitations -- they don't
include stock or options, and the pay data for some smaller schools
at the 20-year mark may be based on fewer than 100 pay reports. The data
also do not track the same graduates over time; they reflect the
experience
of individuals who graduated at various points throughout the last
20 years. And of course they don't predict the future. The data are useful,
though, to get a sense of how grads from top MBA programs fare
when it
comes to compensation over the span of a career.
Based on the survey data, MBA grads from Harvard earn the most
-- a median of $3,867,903 -- over those 20 years. Harvard is followed
by the University of Pennsylvania's Wharton School, where grads
earn $3,491,371 over their careers, then Columbia Business School,
with a
total career compensation of $3,349,669.
To Paul R. Dorf, managing director of Compensation Resources, a
consulting firm in Upper Saddle River, N.J., that specializes in
executive compensation, it's not a surprise that the best-known
B-school brands
have the highest pay numbers. "The cream-of-the-crop companies hire
the cream-of-the-crop grads," Dorf says. "Someone with an MBA
from Wharton has a better shot not only at getting a job, but also
at getting more money."
On average, grads from the top 45 MBA programs experience a 75
percent pay increase over the 20-year span, almost identical to
the U.S. median for all employees, according to PayScale data.
Salaries for grads
from Georgia Tech and the University of Connecticut more than double
two decades into their careers, and MBAs from George Washington
University enjoy a whopping 114 percent increase in salary over
the span of 20 years.
The total compensation for GW grads over that period, however,
amounts to only half of what a Harvard MBA will make.
Not So Startling Gains
On the other end of the spectrum, MBAs from the University of Michigan's
Ross School of Business get only a 32 percent pay jump, and grads
from Yale, MIT's Sloan School of Management, and Dartmouth's Tuck
School of
Business experience a not-so-impressive 46 percent rise over the
span of their careers.
It's unclear why grads from top schools might not fare as well
as others over the long haul, but one possibility is that the B-school
world has changed. Twenty years ago, recruiting was concentrated
in a handful of top schools; today, big company recruiters may
hire from dozens.
The pay premium awarded new MBAs wasn't what it is today. Investment
banking and consulting were not the default career choices that
they are now. For some schools, those trends may moderate pay over
time. Another
possibility: Some schools, such as MIT Sloan, produce a lot of
entrepreneurs, a career track that by necessity entails a fair
degree of failure. "If
you pulled out the entrepreneurs from our total and focused only
on the grads with a more traditional trajectory, the increase would probably
be higher," says MIT Sloan's director of career development, Jackie
Wilbur.
Overall, salaries for new grads are down about three percent this
year, compared with 2009, because of the economic downturn. "Being
an MBA hasn't suddenly become the same as flipping burgers at McDonald's,
but there has been a downward trend overall," says Al Lee, director
of quantitative analysis at Payscale, who conducted the study for
Bloomberg Businessweek. This is especially bad news for newly minted
MBAs entering
the workforce this summer, as starting at a lower base salary could
have career-long repercussions.
"
The differences might not seem like a lot now, but over time, it
will be very hard to recoup that lost income," Dorf says. "Over
20 years, the difference will grow exponentially."
Variations Among Industries
At Dartmouth, starting salaries dropped 7.5 percent, to $124,000,
compared with last year. Similarly, at Wharton -- the program with
the highest average salary at graduation -- the median compensation
of MBA
graduates fell 5.5 percent, to $137,000. "These are schools known
for investment banking and consulting, areas where salaries have dropped
off a bit," Lee says. The news is more positive for MBAs further
along in their careers. In fact, overall, MBA grads at the 20-year mark
actually experienced a 2 percent increase in pay compared with last year.
The main pay differentiators among B-schools are the kinds of jobs
grads are looking for. "Industry is everything," says Andy
Chan, vice-president for career development at Wake Forest University. "If
you look at the [mix] of industries that schools like Stanford, Harvard,
and MIT send students into compared with everyone else, it accounts for
the biggest difference in salary." At Wharton, 80 percent of MBA
grads go into finance and consulting jobs at such companies as McKinsey
and Bain. Similarly, 76 percent of MBA grads from Columbia get jobs in
the same two industries, pushing the school's median starting salary
to $119,000.
On the other hand, graduates from the Michigan's Ross School --
ranked 5th overall in Bloomberg Businessweek's 2008 ranking of
full-time MBA programs -- brought home a median salary of $107,000,
according to
PayScale, 22nd among the top 45 programs. At Michigan, nearly as
many students go into marketing and sales positions as finance,
with large
numbers of students signing on at companies such as Amazon.com
(NASDAQ: AMZN - News), Kraft Foods (NYSE: KFT - News), and Procter & Gamble
(NYSE: PG - News).
Regional Premiums
Location also plays a role in the compensation differences, or
what Tepper's Dammon calls a "New York premium." While MBAs
from Wharton and Columbia tend to flock to Wall Street, where a cost-of-living
premium further boosts salary numbers, most Ross grads stay in the Midwest.
The same is true at Southern Methodist University's Cox School of Business.
While 45 percent of Cox MBAs go into finance-related positions, three
out of four grads remain in the Southwest, where salaries pale in comparison
with those offered to MBAs in the Northeast. At Cox, recent MBA grads
earned a median salary of $77,200, significantly lower than the $90,860
average median across all 45 programs.
According to PayScale's Lee, a hiring year hasn't been good for
MBAs since 2007. But there are signs of hope: Nine of the 45
top MBA programs experienced small upticks in starting salaries
in 2010, including
Notre Dame's Mendoza College of Business and Boston University.
While the increases -- only a few hundred dollars, on average
--
aren't enough
to usurp any of the top earning B-schools in the near future,
for the MBAs entering the workforce, a small increase this
year could mean a
much larger payoff 20 years down the road.
Highest-Paid MBA Alumni
Harvard University
Median cash compensation for Harvard graduates
Less than two years' experience: $133,000
10 years' experience: $182,000
20 years' experience: $232,000
Career total: $3,867,903
Notable alumni:
James Dimon, chairman, president, and CEO, JPMorgan Chase
Donna Dubinsky, co-founder, Palm; former president and CEO, Handspring
John Paulson, founder and president, Paulson & Co.
Meg Whitman, former president and CEO, eBay
Gary Rodkin, president and CEO, ConAgra Foods
Why students choose Harvard:
"
It's cliche to say that HBS is 'transformational,' so I won't say
it. But the program did fundamentally alter the way I think about the
world and my position in it. There is almost no part of me that it hasn't
touched and affected for the better."
-Consulting student
University of Pennsylvania (Wharton)
Median cash compensation for Wharton graduates
Less than two years' experience: $137,000
10 years' experience: $161,000
20 years' experience: $203,000
Career total: $3,491,372
Notable alumni:
Lewis Platt, former chairman, president, and CEO, Hewlett-Packard
Peter Lynch, vice-chairman, Fidelity
James Tisch, president and CEO, Loews
Peter Nicholas, founder, chairman, and former CEO, Boston Scientific
David Pottruck, former president and CEO, Charles Schwab
Why students choose Wharton:
"
Wharton has a well-rounded program that is particularly good for
those interested in consulting. The school has a great reputation and
is able to attract lots of companies to on-campus recruiting. The diversity
and talents demonstrated by the student body are also unbeatable."
-Consulting student
Columbia University
Median cash compensation for Columbia graduates
Less than two years' experience: $119,000
10 years' experience: $165,000
20 years' experience: $194,000
Career total: $3,349,669
Notable alumni:
Cesareo Alierta Izuel, chairman and CEO, Telefonica
Keith Sherin, vice-chairman and CFO, General Electric
Jerome Chazen, founder, Liz Claiborne
Henry Kravis, co-founder, co-chairman, and co-CEO, KKR
Rochelle Lazarus, chairman and former CEO, Ogilvy & Mather Worldwide
Why students choose Columbia:
"
Columbia is a fantastic finance school with opportunities to connect
with and learn from 'heads of industry.' The adjunct faculty -- particularly
in the asset management area -- is truly amazing."
-Finance student
Stanford University
Median cash compensation for Stanford graduates
Less than two years' experience: $123,000
10 years' experience: $149,000
20 years' experience: $206,000
Career total: $3,327,145
Notable alumni:
John Browne, former CEO, BP
Stephen Ellis, worldwide managing director, Bain & Co.
Richard Fairbank, co-founder, chairman, president, and CEO, Capital
One
Charles Schwab, founder and chairman, Charles Schwab
Scott McNealy, co-founder, chairman, and former CEO, Sun Microsystems
Why students choose Stanford:
"
The small class size and the non-grade disclosure student policy
create a unique collaboration atmosphere in the school that permits you
to maximize learning from your peers. Being in the middle of Silicon
Valley also generates a unique opportunity for anyone interested in entrepreneurship."
-Entrepreneurship student
Dartmouth College (Tuck)
Median cash compensation for Tuck graduates
Less than two years' experience: $124,000
10 years' experience: $142,000
20 years' experience: $181,000
Career total: $3,146,031
Notable alumni:
Peter Dolan, former CEO, Bristol-Myers Squibb
Christopher Sinclair, former chairman and CEO, PepsiCo
Kevin McGrath, former president and CEO, Digital Angel
Roger McNamee, co-founder and managing director, Elevation Partners
Don Wilson III, former chief risk officer, JPMorgan Chase
Why students choose Tuck:
"
There is nothing like being at Tuck. The community is so strong,
and you learn so much about business and about yourself in two years.
I'm leaving with more confidence, more knowledge, and more connections
than I ever expected to get from an MBA program."
-Investment Banking student
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