P&Q: An MBA Will Make You Richer And Happier

Source: Poets & Quants

by Nathan Allen,
10.21.2016.

[dropcap]F[/dropcap]or those who maintain that money cannot buy happiness, MBAs from the country’s top business schools will beg to differ. New data released exclusively to Poets&Quants reveals that MBAs graduating from full-time programs at the top 50 U.S. schools are 58% happier in their first jobs post-MBA than their jobs right before entering business school.

They’re richer, too–a lot richer. On average, salaries increased by 44% from their final pre-MBA job to their first post-MBA position. Specifically, students entering B-school report an average salary of $90,708 and a post-MBA average of $130,889 — or a $40,181 increase just for earning an MBA. Far more impressive, however, were the total compensation packages. According to the data, an MBA leads to an 82% increase in total compensation — from $101,500 pre-MBA to $200K post-MBA. Total compensation includes performance bonuses, signing bonuses, stock, relocation, and “other compensation.”

The data is self-reported on the TransparentMBA platform and includes hundreds of recently graduated MBAs. All told, more than 1,100 data points were analyzed, says Kevin Marvinac, TransparentMBA co-founder and COO. Marvinac says a 42% median salary increase is “astronomical” but also cautions to consider the cost of an elite MBA. Still, many MBAs reported salaries more than $200K for their first jobs out of B-school.

HIGHEST REPORTED BASE SALARY OUT OF SCHOOL: $280K

The highest reported pay went to one MBA who claims to have made a base salary of $280,000 right out of B-school, which was an astounding $200K increase from their last job before his MBA that paid him $80,000. On the other end, a few graduates also reported salary decreases. One MBA claims to have taken a $155K pay cut from $230K pre-MBA to $75,000 post-MBA.

Marvinac and TransparentMBA broke the dataset into field-specific points. For example, one person reported making $100K in total compensation in a corporate strategy position pre-MBA and jumping to a ridiculous $365K pay package in a post-MBA investment banking role. Another catapulted from a $90,000 corporate finance role to a $290K investment banking position. One engineer used an MBA to leap from a $65,000 a year job to a $317,500 investment banking gig. In fact, the vast majority of the most significant increases were achieved by MBAs going into investment banking. Similarly, most salary increases stemmed from industry changes.

The Financial Times surveys alumni three years out of business school and asks them to report on their annual salary. These numbers are more likely to change year-over-year due to sample size and respondents and they are all adjusted to account for the purchasing power of an MBA in a given country. Despite that adjustment, 10 of the 12 schools are based in the U.S., including the top four

School	2018 Alumni Salary	2017 Salary	Y-O-Y Change	2018 Salary Increase Over Pre-MBA Salary
Stanford GSB	$214,742	$195,322	9.90%	114%
Harvard Business School	$192,133	$178,113	7.90%	102%
UPenn (Wharton)	$190,826	$181,634	5.10%	96%
Columbia Business School	$177,680	$172,624	2.90%	103%
INSEAD	$177,157	$167,657	3.00%	105%
UC-Berkeley (Haas)	$176,167	$168,163	4.80%	104%
IIM-Ahmedabad	$175,801	$181,863	-3.30%	101%
Chicago (Booth)	$174,153	$168,200	3.50%	118%
MIT (Sloan)	$173,095	$165,716	4.50%	110%
Dartmouth (Tuck)	$170,706	$165,414	3.20%	105%
Northwestern (Kellogg)	$168,608	$164,326	2.60%	96%
London Business School	$167,897	$154,567	8.60%	109%

Stanford Gradaute School of Business tops the Financial Times global MBA ranking for the second time in 23 years, nudging aside INSEAD which claimed top honors for the previous two years in 2017 and 2016

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
1. Stanford GSB	2	1	5	4	2	2	1
2. INSEAD	1	-1	1	4	5	6	4
3. UPenn (Wharton)	3	————	4	3	4	3	————
4. London	6	2	3	2	3	4	————
5. Harvard	4	-1	2	1	1	1	-4
6. Chicago (Booth)	9	3	8	9	9	10	4
7. Columbia	7	————	6	6	5	5	-2
8. CEIBS	11	3	17	11	17	15	7
9. MIT (Sloan)	13	4	9	8	8	9	————
10. Berkeley (Haas)	13	3	7	10	11	12	2
11. IESE	10	-1	16	7	7	7	-4
12. Northwestern (Kellogg)	12	————	11	14	15	13	1
13. Cambridge (Judge)	5	-8	10	13	16	15	2
14. Hong Kong UST	15	1	14	14	14	11	-3
15. Yale SOM	15	————	18	17	10	14	-1
16. Dartmouth (Tuck)	18	2	22	23	20	16	————
17. Cornell (Johnson)	27	10	31	28	27	24	7
18. Singapore	26	8	32	31	32	36	18
19. Duke (Fuqua)	24	5	21	21	17	18	-1
20. ESADE	17	-3	23	19	22	22	2
21. HEC Paris	20	-1	15	16	21	21	————
22. Nanyang	24	2	29	40	38	32	10
23. NYU (Stern)	19	-4	19	18	17	19	-4
24. IMD	21	-3	13	20	12	19	-5
25. UCLA (Anderson)	32	7	34	25	26	23	-2

ENTREPRENEURSHIP & EARLY-STAGE STARTUPS DRIVING UP TRADITIONAL PAY

Marvinac, who is working toward an MBA at Chicago’s Booth School of Business, says sign-on and performance bonuses in traditional MBA hiring industries such as investment banking and consulting are what largely lead to the massive compensation increases. “That’s definitely a tactic on their part to get the top talent to commit early,” Marvinac tells Poets&Quants, noting the data backs up what they have heard anecdotally from other MBAs.

While Marvinac says they don’t have the specific quantitative data to back it up, he suspects increasing MBA infatuation with tech, entrepreneurship, and early-stage startups have led traditional MBA employers to sweeten the pot in recent years. Performance bonuses, which can equal base salary, could be the major reason why outsized compensation packages are being reported in investment banking, Marvinac explains. Plus, he points out, “exploding offer” tactics are often used in investment banking to get top talent to commit to a full-time position offer earlier and could be skewing numbers higher.

“There are companies that will say, ‘OK, you’ve finished your internship and we’ll give you an offer and you have until the holidays to decide,’” Marvinac says. “The signing bonus will be $35,000 at first. But if they wait till November 1, it will go down to $20,000 and then $10,000 around the holidays.”

Of course, an impressively high salary for an MBA is not uncommon. For the Class of 2015, some 12 schools world-wide reported having MBAs make at least $200,000 for a base salary. In job reports to surface for the Class of 2016, graduates from Duke’s Fuqua School of Business reported an average total compensation package of $151K, which just includes base salary, sign-on bonus and other guaranteed compensation. At Chicago Booth, graduating MBAs going into consulting this year made a median base salary of $145K with a median signing bonus of $25,000, again suggesting TransparentMBA’s data is congruent with what schools are reporting.

Perhaps most surprising about the data is how unhappy MBAs reported being before going to school — and how happy they were afterwards. On a 1-to-10 scale, MBAs reported a happiness level of 4.94 before entering B-school.

Afterwards, the average jumps to 7.81 — or, a 58% growth in overall job happiness. Marvinac points to the industry and function switching data as one reason for the big increase in satisfaction. According to the TransparentMBA data pull, 89% of MBAs switch either industry or function after graduating. Some 69% switch both industry and function. As expected, the data suggests that people are increasingly using the MBA to make significant career changes.

MBAS WORK A MEDIAN TEN HOURS MORE A WEEK THAN BEFORE B-SCHOOL

In addition to the compensation, function, and industry stats, TransparentMBA asked MBAs that register on the site to report on job impact, company culture, if they’d recommend the company to a friend, and overall happiness. Marvinac says overall happiness is the “overarching umbrella” to the three other measurements. According to Marvinac, the average happiness for all users of the site — including current MBAs — is 6.6.

But all of that extra cash and happiness comes with at least one caveat. Marvinac and TransparentMBA looked at differences in how many hours a week MBAs work compared to before business school. Not surprisingly, on average, MBAs work more after B-school than before, averaging 57.7 hours a week, compared to the 52.8 hours weekly they claimed prior to getting their MBA degrees. MBAs worked a median 10 hours more a week after business school–60 hours weekly versus 50. Particularly interesting, Marvinac notes, is the difference in percentage increases between mean and average numbers. For the average, the percentage increase is almost 15%, compared to the 7.7% median uptick. “It’s reiterating that not all MBA jobs are created equal,” Marvinac says.

When the average increase is a lot is more than the median, Marvinac explains, it’s because the data is top heavy, or there are some amazingly high amounts of hours being clocked by some MBA grads. One MBA, for example, claimed to be working a whopping 110 hours in his post-MBA job. Many report working in the 70 to 80 hour per week range, and a few actually reported working less hours per week.

The University of Michigan's Ross School of Business lost three places to fall out of the top 25, resting just outside at a rank of 26 this year.

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
26. Michigan (Ross)	23	-3	20	24	23	30	4
27. Oxford (Said)	33	6	28	22	23	24	-3
28. Indian School of Business	27	-1	29	33	36	34	6
29. SDA Bocconi	22	-7	25	26	31	39	10
30. Georgetown (McDonough)	40	10	44	42	36	40	10
31. IIM-Ahmedabad	29	-2	24	26	30	26	5
32. Virginia (Darden)	35	3	27	32	27	35	3
33. University of Hong Kong	39	6	44	28	29	31	-2
34. Shanghai Jiao Tong	34	————	39	55	77	NR	35
35. IIM-Bangalore	49	14	62	82	68	NR	36
36. Alliance Manchester	30	6	38	35	43	29	-7
37. Eramus (Rotterdam)	31	6	42	45	39	32	-5
37. UNC (Kenan-Flagler)	43	6	41	39	33	45	8
39. Renmin	NR	————	43	NR	NR	NR	————
40. Carnegie Mellon (Tepper)	38	-2	33	36	34	43	3
41. Warwick	44	3	46	38	25	28	-13
42. Fudan	NR	————	47	55	83	89	47
43. CUHK	36	-7	26	30	NR	27	-15
44. Texas-Austin (McCombs)	46	2	47	40	39	46	2
45. Rice (Jones)	64	19	53	43	35	37	-8
46. City (Cass)	37	-9	37	45	41	40	-6
47. Emory (Goizueta)	51	4	55	59	41	49	2
48. Washington (Foster)	41	-7	49	51	56	78	30
49. Singapore Mgt. University	NR	————	NR	NR	NR	NR	————
50. Washington (Olin)	68	18	80	72	64	64	14

Imperial College in London leads this next group of schools on the 2018 Financial Times global MBA ranking. The University of Florida's Hough School cracks the list at 58th after being unranked for quite some time.

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
51. Imperial College	45	-6	35	34	49	42	-9
51. Sungkyunkwan	54	3	69	59	45	51	————
51. Arizona State (Carey)	57	6	NR	76	87	87	36
54. Georgia Tech	61	7	71	65	71	59	5
55. Maryland (Smith)	52	-3	51	49	50	50	-4
55. Purdue (Krannert)	69	14	NR	48	56	68	13
57. Indiana (Kelley)	47	-10	54	62	47	54	-3
58. Florida (Hough)	NR	————	NR	NR	NR	NR	————
59. USC (Marshall)	48	-11	52	58	65	82	23
60. St. Gallen	59	-1	60	67	88	82	22
61. Mannheim	54	-7	49	55	66	69	8
61. Cranfield	53	-8	57	45	46	38	-23
63. Australian Graduate School	54	-9	66	75	62	48	-15
64. UC-Irvine (Merage)	62	-2	57	43	48	54	-10
64. Durham	75	11	66	79	97	NR	————
66. Melbourne	76	10	87	90	68	62	-4
67. Boston (Carroll)	80	13	69	90	82	93	26
68. Ohio State (Fisher)	63	-5	75	60	70	72	4
68. Brigham Young (Marriott)	65	-3	80	NR	93	NR	————
70. Lancaster	42	-28	35	50	77	71	1
71. Wisconsin	65	-6	68	70	81	91	20
72. Michigan State (Broad)	58	-14	65	54	52	62	-10
73. Vanderbilt (Owen)	79	6	71	61	59	53	-20
73. Edinburgh	91	18	98	NR	NR	NR	————
75. Edhec	74	-1	84	NR	NR	NR	————
75. Penn State (Smeal)	89	14	89	86	62	77	2