The B-School Grads' BIG Bucks (?)

Records are made to be broken.

Very true about Cricket. The record of 'the highest runs scored in an innings' has been broken twice in the same match - by Australia and then by South Africa..What a match it was ?! So true it is with B-School Placements too, with the 'the highest pay package' record being rewritten twice in the same season - by IIMB followed by ISB.

No wonder 'The Hindu' has found the subject interesting enough to publish a cartoon on it. The media is going gung-ho over the placements. A lot of hype is being created. And eventually the number of CAT aspirants( Or should I just call them test takers ) is gonna shoot up...right out of the roof !! Well, '1 crore' is definitely a BIG number. But are the Bucks really as BIG as they appear to be ?

There are three aspects that we must not miss here..those which the media conveniently prefers to ignore( Maybe bcoz considering them wudnt produce the dramatic effect ).

The Gaping Gap between CTC and Take-Home

All the work-ex guys must have been aware of the structure of the pay packages and the difference between CTC and Take-home. For the less priveleged, here's some gaan:

CTC( Cost to the Company) is the figure that appears on your offer letter, The BIG Number. It comprises of various salary components and perks like Basic, HRA, TA, DA, LTA, Medical Allowance, Insurance, Superannuation, PF, Gratuity and XYZ.

The most interesting one is the Variable Allowance. Companies specify so and so amount as the VA( Variable Allowance ), often a big sum. Now you get a part of this amount depending upon your performance. And to rake in the whole amount, You need to get the 100% rating and appraisers seldom give it. "If I give you the top rating, it means that you don't have anything to improve ", they say. So you can hope for 60-80% of VA only, assuming that you are ready to work ur guts out.

So the 'Gross' Monthly salary comes down to a much lesser amount. Now, after deducting the inevitable taxes and other miscellaneous expenses, you get the 'Net Salary' a.k.a Take-Home. This is the final amount that is credited to your bank account on the salary day.

Experience shows that Take-Home generally comes down to 70% of CTC... With the percentage inversly proportional to the CTC. So, all those who have been performing the simple calculation CTC/12, wake up. Those not convinced yet, move on to the other factors.

The Magic of Dollars and Pounds

A quick observation will tell you that the highest salaries are paid by foreign companies. The salaries in dollars/pounds are converted into indian rupees and we go crazy over the figure. In the excitement, we forget the fact that the bills are paid in dollars too. A person might be earning a few thousand dollars per month, but he/she has to pay more than half of it for a comfortable living. So the savings are almost equal to his/her low-paid indian counterparts'.

So, Cost of Living and Purchasing Power Parity comes into picture here. Rashmi Bansal, an IIMA alumnus and Editor of JAM, has written a nice article on this.

The Past Profiles

The Guys who have bagged those hefty amounts are not fresh graduates or 25-year old young executives. They are people with strong profiles, fancy degrees, huge work experience and a proven track record.

The ISB Grad, who finally caught up with the elusive 8-digit figure, is a person with 10 years of work experience. Similarly, Gaurav Agarwal - the IIMB topper, is 29 and has an IIT degree, an MS from Berkeley and two years of work experience in the US.

The median salary in the biggies is about Rs.9-10 lakh. What does that mean ? It means that half of the class end up with less than Rs.9 lakh. And the people who manage to cross over to the higher end generally are the Fin Guys or IITians or Guys with high workex in relevent areas ( Now, 2 year IT workex has become a commodity, Every other guy in the B-School has that ).

So the ordinary chaps with a few years workex in a reputed IT company are gonna end up with just a few bucks more than that they would have earned without an MBA. And that too, after investing an year in preparation, another couple during the course and scrounging their savings to pay for the tuition. Freshers would be in the same rocking boat too, except that, in addition they have a BIG loan to repay.

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So, no dreams, no illusions. And while we are at it, Lemme discuss some statements I have come across..

Fresher : " I want to do an MBA after my Graduation. I want to earn in 7 digits. "
By seven digit, If my friend means Rs. 10 Lakh, Thats an achievable target, though a lil difficult. But If it is 20 or 30 lakh, then I suggest professional help. This guy has a serious dormant illness : Day Dreaming.

An Elderly Person : " Just work hard for an year, get into an IIM and you can enjoy for the rest of your life. "
Hmm...Why don't people understand that If it is so tough to get into an Institute, the course is gonna be tough too. The course is not a cake walk. And If you wish to get anywhere near the median salary even, you need to slog.

A S/W Professional : " I will do MBA and learn about Management. Then I need not worry, I can coolly climb up the hierarchy. "
MBA does give u a leg-up, it helps you in the initial days, but it can't take u all the way. It is ur talent and hard work that matters later on in life. And how exactly does one learn Management !!


Now, I hope everyone will agree with me: That there is nothing called Easy/Quick Money.