Monday, January 02, 2006

B school salary figures: Reality Check

The campus placement season is coming towards me like a drunk and unbathed Gulshan Grover staggering towards a cowering and trembling girl who took refuge from the rain in one of his luxurious bedrooms.

That's how IIM Calcutta student Abhinav Jain describes the feeling of hurtling towards the 'final destination'. The all-important, all- essential,all-you-really-wanted-from-the-MBA: the Placement.

In the movies , the girl generally pulls out a seven inch knife from the apple basket lying on the side table , positions it right over her tummy and yells "Kutte , ek kadam bhee aage badaya to main khud ko khatm karr dungi". But I do not feel any amount of artillery positioned over any part of my anatomy can halt the oncoming placements .

Like it or not, that ‘these-are-the-best-days-of-my-life’ feeling you get in year 2 of the MBA is now, inevitably tinged with the worry of what is to come. Will I get placed on day Zero, day One or still be hanging in there like a monkey on day Three?

Well, if placement details so far are any indication, this year you can expect far fewer monkeys. And far more peanuts. Make that pistas and badaams, actually.

The Goa Institute of Management (GIM) is one of the first b schools to announce its complete placement picture this year. The average salary offered at GIM increased this year to Rs. 5.66 lakh as against Rs 3.77 lakh last year. 71 companies were scheduled to participate in the placement process but only 38 companies could recruit students.

Which is great news. The economy is booming, the job market is robust. You are lucky to be passing out this year, folks.

But, a word of caution. Let’s not make placements into an Olympic style competition. This is not a race to be won by any one institute. It’s just about getting off the starting block in the Marathon of life.

And yet, b school after b school – including the best of them – pad up the salary figures in their press releases. As do companies themselves, when making their offers.

The biggest culprit: the concept of CTC or ‘cost to company’.

An annual package of “12 lakhs” (CTC) offered by a well known foreign bank last year actualy included:
* Cash component of salary
* The rental value of the chummery (shared) accommodation provided
* Interest on the deposit paid for your flat
* Allocated cost of furnishings
* Company’s contribution towards your provident fund.
* Your contribution towards PF
... and of course, the taxes that you have to pay.

The joke went, even the toilet paper provided in the loos was accounted for in your package. Certainly, the cost of training in the UK was factored in. So, in hand, the MBA could expect to get about Rs 35-40,000. Which, although excellent, was far less than what the hype would suggest.

One accounting method, please
With tax rules changing, many companies are expected to do away with the CTC concept and offer all-cash-component salaries this year. Which may make the job of adding up apples and oranges - when it comes to salary packages - that much easier.

Either way, b schools must adopt a uniform method of ‘accounting’ for their placements. If one institute reports ‘CTC’ while another refers to actual cash component, there is ample scope for confusion.

Secondly there is the issue of ‘incentives’. A sign-on amount is one thing but otherwise a bonus is linked to performance. How can that possibly be predicted and included as part of ‘salary’?

What’s more, many companies, especially in industries such as insurance, financial products and marketing clearly specify a variable package. Say Rs 2.2 lakhs will be ‘fixed’ while Rs 1.8 lakhs is based on your meeting certain target. Which means it’s more like a commission.

Hence referring to such a package as Rs 4 lakhs p.a. is misleading.

Then, of course, there are blatant lies. A click of a mouse and suddenly figures get transformed. The main thing is that if institute X has released its figures, then we have to look equally good. Or better.

Institute X may have indulged in a bit of exaggeration to begin with - that gets compounded as institute Y also decided to add some lipstick, powder and paint before facing the world.

And so the chain reaction continues. While b school community is not fooled by tall tales – the truth is generally known - the real loser is the prospective student. He who takes the very decision to pursue the MBA based on these fantastic figures...

Will b schools come together and solve this very real problem?


  1. Hi Folks!
    A very happy new year to all of you. Let's hope this new year all the management institutes deliver a bit less of lies, statistics & ADS!

  2. Rashmi,
    A very timely article! This is the time when institutes come out with placement stats and also students apply to institutes based on the "brand value" of the institute. We should educate applicants to consider not the placement statistics as the main criteria. I have personally observed many students asking for placement and highest salary kind of statistics (which are just for the media) and decide to apply to institutes. I appreciate your effort in writing such articles, and ask you to spread the word through JAM that applicants could look outside placement and salary. They could give importance to other factors like intellectual capacity of the institute, faculty, infrastructure etc. because, by the time they graduate the placement scenario may be completely different, isn't it?

  3. Hi!

    Your article has many dimensions- one which I would like to comment upon.

    Your observation on the "foreign bank" which trains you in UK, is a little dated (by about 2 years). Even back then, the bank in question never offered "shared chummery accomodation".

    I might like to add that, I don't hold any blogger responsible for the veracity of their statements, but felt that in this case, since I am in a position to point it out- I might as well.


  4. Your article comes at the right time, GIM has set the tone by announcing its Final PLacement figures, which only will prompt a few more institutes to come out with their figures soon. The Clamouring for a common method of accounting of salaries has been there since long, but here the scene is quite different on the ground, its all about spalshing ur big figues first and catch the attraction.
    The race is not for correct information flow, it si to build more credibility for the college, to attract more students...

  5. Hey!! your blog has been featured in this month's issue of Fast Company magazine.

  6. Rashmi, the ellipsis after your penultimate sentence was intriguing. Care to elaborate?
    I was lured by an article in the Economic Times ages ago, on the fabulous salaries that IIM grads get. This prompted me, an avowed techno-geek, to do a volte-face and pursue the CAT and an MBA. It did work out fine for me. Vast options were opened for me.
    Many young people are not really sure what they want in life. Running after cash is not necessarily a bad goal.

  7. I think now we have reached a stage where quoting CTC salary pacage is considered normal in B-School.
    Most of students take decision keeping this in mind.Moreover even now the Brand image of college plays a much important role in the final decision than the average pacage.

    But i do hope that some form of regulation must be imposed on all the B-school to quote the figures in a standard way so as to allow a fair ground for comparision.

  8. This is no more a problem - it used to be. Now everybody (well most are) is a liar - some big, some small. Others perpetrate the lie. High pitch, high octave, high volume selling has resulted into chaos. No one (well most do not) understands what to make of the noise. And no one cares. All seem to be running/gunning/crawling for an MBA.

    As for the students - this is a consideration in deciding which institute should they choose if they happen to get calls from multiple institutes. Hardly something to worry about.

    The more worrying feature of this hype is the number of students trying to become an MBA - without much analysis of cost they will incur and the returns they might generate.

    The hype on salaries is making every student to pursue an MBA.
    And it is making every businessman to open either an MBA institute or an MBA entrance institute.

    This is a self serving vicious circle. The hype so generated about MBA has attracted a lot of media attention - so everybody writes about, covers live, reports on CAT & B-Schools. This is turn makes the hype a hyperbole.

  9. Your points are exactly what most of my friends in IIM were making...a take-home (or in-hand) salary of more than Rs 50,000 pm is non-existent, which is rather surprising, given the advertised value of highest pay package (~12 lac pa).Makes me wonder: there are better ways of creating brand names. Creating this salary-mirage in the eyes of prospective students is definitely not one of them.

  10. yes Rashmi, u r right that B-school needs to formatise there metod of presentation but we also need to keep it in mind that CTC is cost to company so company take each rupee expense on employee as CTC whereas cash in hand is the net balance in our hand so we should ask to the company to clearly mentioned the cash inflow in our hand & than go ahead instead of just relying on CTC. & B-school can mentioned cash inflow plus perquisites to make it comparable with CTC. but its there choice.

  11. I just can't belive that ... I am a student of IITKGP and is already placed. Its quite astonishing listening the fact that a CTC of 12Lpa for a freshers at IIM has takehome component (obviously -30% tax) is just 50K. Quite a few guyz at IITs have around 6-7 Lpa with take home salary coming around 30-40K. So I wonder why there is such a craze of IIMs even amongst IIT grads. Is it beacuse of the externally appealing 12Lpa CTC, on something other than that. Is it because of the fact of higher-growth-perspective of IIM grads in future (say after 5-10 years). Is it because of the fact of international-placement oppurtunity ??? And what is the avearge, maximum and minimum take-home salary of IIMs???

  12. Hi Rashmi, I have been hooked to your blog ever since i read about it in Business World(the IIPM story), i like it very much as your articles are well researched and you cover recent trends very nicely,but,but about this article i think the real problem is something else ,what i want i write cannot be adjusted in a comment so read it here:

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  14. thts a good arcticle.atleast you helped unfold the realities in mba placements.the real ctc game by companies.good.

  15. Hey gr8 article. The CTC is a big mockery of the present day salary structure.

  16. Hi,
    Can anyone post a full salary structure for someone with a CTC of 14 lakhs. Thanx a ton.

  17. HI,
    can anyone post a full salary structure of someone with a CTC of 14 lakhs?? Thanx a ton

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