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B-School salaries: A reality check
January 12, 2006
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 kar dungi (You dog! I will kill myself if you take one step towards me)". 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 Two 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 badams, actually.
The Goa Institute of Management 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. Seventy-one 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 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'. A salary quoted as CTC may include some/ all of the following:
~ 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
A couple of years ago an annual package of Rs '12 lakhs' (CTC) offered by a well-known foreign bank was the talk of the town. The joke among those 'in the know' went that 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 per month. 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 the 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 targets. Which means it's more like a commission.
Hence, referring to such a package as Rs 4 lakhs per annum is misleading.
Another pointless statistic is the 'speed' with which a batch is placed. Given that two B-Schools are both top notch, the one with a smaller batch will obviously end its placement process faster. Bajaj, with a batch size of 107 students, will easily wrap up placement on Day 1 while IIM-A, B or C, with 250-300 students, need around three days.
What's more, the average salary at FMS, Delhi -- with a batch of 90 -- is likely to be higher than comparable B -Schools with larger batches.
There's also the 'lateral placement' issue. Thirty-eight of the 247 accepted offers at IIM-Ahmedabad last year were 'laterals'. Which means students did not take up entry level jobs -- their previous experience was taken into account by the recruiting company.
At ISB-Hyderabad, which only takes in students with work experience, the lateral placements account for a whopping 97% of offers. So comparing ISB with IIMs (where at least 40-50% of the batch are still freshers) is an exercise in futility.
Looking at solutions
So, the complexity in reporting salaries is ever-increasing. One welcome change is that B-Schools are reporting domestic and international salaries separately instead of lumping both together. But more can, and must, be done!
The trickiest issue to tackle: 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 cycle continues. While the B-School community is not fooled by tall tales -- the truth is generally known -- the real loser is the prospective student. The one who takes the decision to pursue an MBA based on these fantastic figures.
Will B-Schools come together and solve this very real problem?
Rashmi's earlier columns: