The Massive Pay Day For Stanford MBAs + The Big Differences Between U.S. & European MBA Programs
Maria |
December 12, 2023

In this episode of Business Casual, the hosts discuss the high demand for MBAs, referencing the soaring salaries of Stanford MBA graduates. They delve into how these salaries are linked to the school’s admission policies and its focus on high-paying sectors like private equity. The conversation also covers the differences between European and US MBA programs, highlighting the international focus and diverse experiences offered by European schools. Additionally, they address the challenges American students might face when returning to work in the US after studying in Europe, emphasizing the need for proactive job hunting.

John also encourages everyone to visit the Poets and Quants website for more insights into the differences between MBA programs and recent employment reports from top business schools.

Episode Transcript

[00:00:07.210] – John

Well, hello, everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co hosts, Maria Wich Vila and Caroline Diarte Edwards. As you all know by now, Caroline is the former head of admissions, INSEAD, and the co founder of Fortuna Admissions. And Maria is the founder of Applicant Lab. Right around now, one after the other, business calls are basically releasing their employment reports for this year. And I’ll tell you, the big takeaway is clear to me, and the takeaway is that MBAs are clearly in great demand based on the compensation that they’re receiving right at graduation. And we just published a report on the class that is generally the highest paid in the world, and that is the class of Stanford MBAs. And the numbers, frankly, are staggering. The average total compensation for a Stanford MBA this year reached more than $275,000. That’s up nearly 20,000 from 2022. Now, how does that even happen? Well, for one thing, the average base salary is 189. Slightly more the sign on bonus. The average this year grew, actually an astounding 25% to 42,249. And then one thing that Stanford does that a lot of other schools have discontinued doing, is asking its graduates what their expected performance bonus for the year will be.

[00:01:51.430] – John

And the average there, and this is an eye opener as well, is over 99,000. Now, how do you make sense of these numbers? I’ll tell you what. The real secret behind them is private equity. Stanford, more than any other school, and this includes schools known for finance, like Wharton, Columbia, Chicago. Booth, puts more of its class, as a percentage, into the field of private equity, which is without question the highest paying field that an MBA can enter into, PE jobs. And that’s largely because Stanford has an advantage over any other school. And it’s not the instruction in PE at Stanford that makes them stand out. It’s their admissions policies. Stanford is able to bring in a high percentage of people who already work in PE or venture capital or investment management, and then they’re funneled out into PE jobs again that pay very highly. And that is really the secret behind these very big numbers. And it’s just really astounding. I mean, don’t they shock you, Maria?

[00:03:04.110] – Maria

I don’t know. I guess inflation is a real thing everywhere these days, right? It’s not shocking. I mean, the numbers for salaries go up every year for the most part. And private equity and those sorts of similar roles are amongst the highest paying, not just out of business school, but in the world, probably. And so, as you pointed to, I think Stanford, when it comes to letting people in. It’s the exact opposite of the adage of garbage in, garbage out. It’s like gold in, gold out. Right. They let in people who are already extraordinarily accomplished in these fields. And so what employer wouldn’t want to take someone who already has a couple of years of VC or PE experience, then went through the two year Stanford program and is now emerging on the other side of these. If these folks, they might make hundreds of thousands of dollars a year, but if they can bring in millions of dollars a year of profit to their firms in one way or the other, then it sort of seems like a win win situation for everyone.

[00:04:09.150] – John

Yeah, that’s really true. Caroline, you have any perspective on this from sort of a European

[00:04:15.400] – John

lens?

[00:04:16.250] – Caroline

Well, from my perspective of living here in 3 miles from the Stanford campus, a lot of the graduates stay in this area and the cost of living is one of the highest in the world. So I think that also inflates the salaries for these graduates because there’s a huge chunk, I don’t know exactly what the percentage is that stay in the Bay Area, but it’s a very large number and the cost of living is extraordinarily high. So employers have to reflect that in the office that they’re making.

[00:04:45.320] – John

Yes, absolutely.

[00:04:46.680] – Caroline

And that also means that people sometimes take those numbers at face value. And I think sometimes schools in other areas get penalized in the rankings and in how people read those salary statistics because they are feeding into a very different geographical market. And that’s true, I think for some of the US schools as well as for sure some of the international schools where the graduates are not necessarily going into such a concentrated geographical region where the cost of living is so high. So Stanford in some ways benefits from the high cost of living in the Bay Area because the salary statistics look fantastic as a result.

[00:05:31.240] – John

Yes, and I should just put a little granular detail on my comments earlier, which is this year nearly a third of Stanford’s graduates accepted jobs in just PE or venture capital. And the PE base salary for the 18% of Stanford graduate went into private equity was over 200,000, 215,000. Just base salary, median sign on bonuses 27500. But here’s the real eye popping number. First year performance bonuses expected of people who go into PE from Stanford. $160,000. If you want to know why Stanford always does so well in rankings, there’s your proof. Because essentially rankings heavily weigh starting compensation. In fact, pay and placement generally are the two most important metrics in almost all the rankings. And if your MBAs are bringing home the bacon like that, your school is going to do exceptionally well in the rankings no matter what, regardless of how much money these people were earning when they entered the school. And you can bet they’re earning well into six figures to be able to come out and make money like that. And as we have said here before, jobs in private equity are hard to get. And generally they go to MBAs who already have worked in private equity, which is sort of a catch 22 of some kind because many people will see these numbers and say, oh my God, I want to work in PE.

[00:07:05.290] – John

But frankly, if you don’t have prior PE experience in which you will be paid a good sum of money to begin with, your chances of actually landing a PE job post MBA are pretty low. The other thing we want to talk about, and I think this is fascinating, is a column that Caroline has written that’s on her website and it’s on the major differences between the European and the US MBA programs. And I love this piece because it very clearly articulates the things that you may not basically absorb or you might even take for granted, and does so in a way that really creates a pretty stark contrast between what an MBA experience is like in the US and what one might be like in Europe. Caroline, I’ll let you take the lead on this.

[00:07:55.990] – Caroline

Sure. Thank you, John. Yeah, I wanted to write this article for a while because I often get asked by candidates about this. Right. People often come to me as a coach because they’re thinking about an international MBA program and they want to talk to me about INSEAD and other international options. And I’ve lived in the US for many years. I’m very familiar with the US calls as well. So it’s often a discussion I have. So now I will be able to send them the article on your website, read this first and then we’ll talk. So I’m very happy to have that as a sort of primer for some candidates who are asking questions about that. To me, I think the key difference is the international dimension at the European schools. And I think that infuses the whole experience in a way that makes it very different from the experience that you will have at a us school. And that’s something that has really been a core part of the dna of these schools from the very beginning. INSEAD was set up about 70 years ago with the aim of. And it was set up by some former Harvard professors who wanted to set up the Harvard Business School of Europe and really make it a pan European program.

[00:09:12.370] – Caroline

And as the decades progressed, that pan European vision became really a global vision. And other schools such as London Business School, ESA, IE, increasingly Oxford, Cambridge, HEC Paris and so on, have also attracted a very global audience. And so that’s very much part of why you would go to one of these schools if you’re looking for that international perspective. So you will be in a classroom and you’ll be working in teams with people who have incredibly different backgrounds from you, professionally as well as culturally. And that can make it very challenging, right? It can make it extremely frustrating sometimes because you’ll be working with people who just have a totally different mindset to you, who’s come at things from a very, very different perspective. And that can be tough, but it’s also an incredibly rich learning experience. And I’ve talked to professors who have taught both at schools like in Seattle and London Business School as well as schools in the US. And they say it’s actually harder in many ways to teach at the international schools because you have that incredible diversity of perspective that you may have something thrown at you from completely left field that you have not anticipated.

[00:10:34.170] – Caroline

And sometimes I’ve seen professors struggle with that, quite frankly, because it is such an extraordinary mix of backgrounds and experience and perspectives and opinions. And so I think that is very enriching for someone who is looking to be internationally mobile in their career. Sometimes candidates come to me and they are based in the US and they’re know, wouldn’t it be wonderful to go and live in Fontainebleau or Singapore or London or Paris or Barcelona for a year and have a wonderful international experience? And then I’ll come back to the US and their career is completely focused on the US. And in most cases, I would advise those people to do their MBA in the US. Don’t do your MBA as a sort of like international. Exactly. You need to think about where your recruiting opportunities are going to be and where your alumni network is going to be. And if you are focused on staying in the US, in most cases, I think you’re better off doing your MBA here because your alumni network will be stronger in the US.

[00:11:45.410] – John

And Caroline, don’t most of the European schools actually put a cap on the number of students that they enroll from their home country?

[00:11:53.410] – Caroline

Well, so I think they have to be careful about saying if they put a cap or not. But in practice, they are looking to get as diverse an audience as possible. And their marketing efforts are really geared towards attracting an applicant pool that is very diverse. So I don’t think it’s necessarily much harder to get in as a domestic fact, you know, I know, for example, at London Business School, I’ve heard them complain that they have problems getting enough brits to apply because the Brits will want to go somewhere else to do their MBA. So sometimes, in fact, these schools are not getting as many domestic applicants as they would like. So they really gear the marketing efforts to bring in, attract that international audience. And therefore, I don’t think that you’re necessarily at a disadvantage if you come from one particular pool over the other, because the applicant pool is incredibly diverse.

[00:12:51.820] – John

Yeah, I guess the point I’m trying to make is that in us schools, you’re going to find plenty of international students, but always in the top schools, the majority of students will be domestic. And if you go to London Business School or HEC, Paris or INSEAD, you’re never going to find the majority of students coming from the home country, as you always will in a top program in the US.

[00:13:16.130] – Caroline

Yeah, that’s right. I was looking at your article on the Columbia class profile and I think it’s 47% international. So that’s pretty significant. It’s probably the most international program in the US. But if you dig into that, a lot of those students have lived in the US. They’re probably green card holders and a substantial chunk. So their work experience is often from the US, even though they may have an international profile. Whereas if you go to one of these international programs, then you’re more likely to be in a cohort of people who have really literally worked all over the world and are bringing that very diverse perspective. And then another key difference, of course, is that a lot of the programs in Europe are one year programs rather than two year programs. So INSEAD had pioneered the one year format when the school was founded, and a lot of other schools have followed suit. There are some exceptions. So London Business School has a two year program, but they do offer accelerated options where you can graduate after 15 months or 18 months. And then ESA is a two year program. But the majority of the programs in Europe are one year programs.

[00:14:30.210] – Caroline

And that’s a very compelling value proposition. Right? It means that you are paying tuition, fees and living expenses and foregoing your salary for one year rather than two years. And we can see in the salary statistics that a lot of those graduates are commanding impressive salaries when they graduate. So these programs typically do very well when you’re looking at return on investment. And that is often a big reason why people choose these programs, because they may be coming from countries where they don’t have those impressive salaries that we were just talking about, the private equity crowd that goes to Stanford who are earning six figure sums before they go to business school. That is not necessarily the case for many of the students feeding into the international programs. Often they’re coming from emerging economies where the salaries are much, much lower, and so they have not had the saving capacity. Or perhaps they don’t want to take out a loan to pay 200 300,000 to get themselves through a top us program. And in that case, the one year proposition is very compelling, right?

[00:15:40.090] – John

Yes, totally. Maria, do you have any thoughts on the differences in terms of how you advise clients?

[00:15:46.850] – Maria

Yeah, I think one of the things that Caroline pointed out in her article that I have also advised people on is that the European programs do tend to place value on more seasoned candidates.

[00:15:58.760] – Caroline

Right.

[00:15:59.010] – Maria

Candidates who are perhaps a little bit older than what some of the US programs are looking for. And I think it’s a deliberate choice because I think they want to bring in students who have a much deeper professional experience, who can then contribute much more in terms of classroom discussion. And so I think that’s what helps. Caroline notes in her article that, say a one year program covers about 80% of the same amount of material as a two year program, even though it’s significantly shorter. And I think the reason they can do that is because the students are coming in with a lot more lived experience and a lot more professional experience. So I think the European programs are a great choice, especially for people who might be a little bit more seasoned. The US schools, I think, sometimes miss out on some terrific talent by focusing a bit more on folks who have a couple of years less experience. So the European programs can also be great from that perspective as well.

[00:16:54.040] – John

Caroline, the other differences that you mentioned in your article go to teaching style and international exposure. Obviously, if you have a greater number of classmates that are from far flung places all over the world, they’re going to bring a much more international look at every single issue. And you were going mentioning earlier how some of these views are quite divergent and result in pretty stimulating, if disappointing or difficult conversations in some cases. Because obviously we’re in the US here, often accused of jungle capitalism in other parts of the world may even be anti capitalist or have a much more gentle view of capitalism. You’re more likely to be exposed to these various viewpoints in a classroom, right?

[00:17:52.150] – Caroline

Yes, that’s right. And the professors do rely a lot on the input and the perspectives of the students. And as Maria said, that’s also why the schools are offered admitting candidates who are, on average, maybe a year or two older than the average age in the US programs. Because with a one year format, they can’t rely as heavily as the US schools on the case study method. Because the case study method is great, but it’s pretty laborious and it really takes time to teach everything through the case study method. So on a one year program, they will definitely use case studies and that’ll be a big component of the teaching methodology, but they will also have a lot of other formats. Right? It may be lecture and discussion, it may be simulations, it may be team projects, because they are trying to be very efficient in how they are delivering the knowledge and teaching students, and they’re looking to be very time efficient. And so because they’re not relying so much on the case study method, having that experience and richness of professional and cultural experience in the classroom enables the professors to draw on that and rely on that more heavily than referring back to a case study all the time.

[00:19:13.800] – Caroline

Right? So that facilitated discussion is really a key component of the learning experience. And people often comment that they learn more, in fact, from their fellow classmates than they do from the professors. And it’s not disparaging to the professors, it’s just that you are working alongside people, learning alongside people who have such fascinating experience and so different from what you’ve done. And it can be very life changing for some people, right. You will be enticed to, perhaps enticed to a career path that you wouldn’t have otherwise thought of because of the discussions and the learning you have in that very diverse environment.

[00:19:57.070] – John

Right? And of course, this all affects the alumni network and the recruitment opportunities, as you point out in your article. How does it change one’s network that you graduate into?

[00:20:10.390] – Caroline

Yeah. So you have a much more globally dispersed network. So whereas with the US schools, the huge bulk of the network is based in the US and North America, and certainly they do have a global network, especially the bigger schools like Wharton and Harvard Business School. They do have a global network, but it’s much thinner on the ground internationally than schools like INSEAD and London Business School. And so that is tremendously valuable if you’re thinking that you might be internationally mobile in the mean. My personal experience is when I graduated from INSEAD, I went to work in Indonesia, and since then I’ve worked well, I worked in France with INSEAD, I’ve also lived in India. And each time that I’ve moved, I’ve been able to tap into a local INSEAD network and that has been absolutely invaluable. My husband, as you know, did his MBA at Stanford. And so now that we’re here in Silicon Valley, right, there’s no better network to have than Stanford GSB, for sure. When we were moving around, he often tapped into my network because there’s just far more INSEAD graduates around the world than there are Stanford GSB graduates because so many of them, it’s a much smaller program and so many of them stay in the US and in fact, vast majority, as you’ve said, or a big chunk stay in the Bay Area.

[00:21:36.530] – John

Right.

[00:21:37.040] – Caroline

So I think you need to think about where you’re going to be in the future and which network would be useful for you. It’s also, of course, a big challenge for the careers services team because if you are managing career services for a school like INSEAD, you have to manage relationships with recruiters really around the world, right? The graduates are going to work in, not sure how many it is now, but it’s sort of 60, 70, 80 different countries around the world every year straight out of the program. And so that’s much more complex to manage than it is for the US schools, where they’re primarily feeding into a domestic market. On the other hand, that can also be a strength. And I saw that when I was working at INSEAD because we went through an economic downturn. And if you’re reliant on one specific geography, that can hit you very hard. But I remember at that time, recruitment had gone down, for example, in Europe, but it had picked up in the Middle east. And so it means that I guess the schools in some ways have a more diversified portfolio of recruitment opportunities because they are feeding into positions all over the world and in a lot of different industries.

[00:22:55.680] – Caroline

And therefore that can be a great buffer in a time of economic turmoil because graduates may well be able to find, may well find that recruiters from certain regions are still recruiting heavily, even if in some other regions they are not.

[00:23:11.310] – John

Right. Now, Maria, from your perspective, if you’re an American and you want to work in the United States, but you want the kind of global exposure a European MBA would give you, will you have difficulty coming back and working in the US after you graduate with an MBA from a London Business School or an INSEAD or an aces, say, Paris, what do you think?

[00:23:35.460] – Maria

I’m not sure about difficulty, might be overstating it, but I definitely think it would be more challenging. Right. If you are studying, say, in New York City and you are recruiting for companies that are based in New York City, it’s that much easier to not only attend their formal recruiting events, but even informally, perhaps sign up to do a project with a certain company or things like that. So I do know, as Caroline alluded to, the career services offices in these European programs are trying to place students literally all over the world. And so as a result, I do think that the onus will be much more on you if you want to come back to the US. However, the good news is if you’re already an American citizen or a legal resident, you won’t have the worry of the work visa and the h one b lottery and all of that hanging over your head. But I do suspect that you’d have to do a lot more footwork on your own to network your way into that role. Right. I’m not sure if the US offices of, let’s say, the Chicago office of Bain, they might be recruiting at London Business School, for example, but it’s probably a lot more likely that they’re focusing on the schools that are more geographically closer to, you know, as Caroline said, I think, look, if you want that international experience, I think it’s certainly very valuable, but just, I think go in with eyes wide open that you might have to put in a bit more effort and be a bit more flexible in terms of your job opportunities coming back, I suspect.

[00:25:07.900] – John

Yeah. And Caroline, you think that makes.

[00:25:13.570] – Caroline

Mean. I know some of my classmates who’ve come back to the US and made very successful careers here. So people certainly do make it happen. You just need to be aware, as Maria said, that recruiters aren’t going to be recruiting in such large volumes for us offices on those European campuses. Something that you may be able to do is do an exchange program. So, for example, from INSEAD you can exchange for some of the US schools like Wharton and Kellogg. And so often students will do that and spend a semester in the US if they’re looking to target the US market. And that enables them to take advantage of career services while they’re in the US and build their network locally. So people certainly do make it work. And the European schools do have a growing network in the US. You just need to be aware that as Maria said, you may need to be much more proactive in your job search to make it happen if you want to come back to the US.

[00:26:17.050] – John

All right, well, check it out. It’s called the seven key differences between us and European MBA programs. It’s on our homepage. Already over 4500 people have read this story, so maybe you’ll be 4501 and you’ll also see the latest employment reports that are tumbling out of the schools right now. Stanford and Berkeley just came out. We have a host of others that are about to come out, and quite a few before Stanford and Berkeley, including Harvard and Dartmouth, Tuck and others. So check them all out. Meantime, thanks for listening. This is John Byrne with Poets and Quants.

The Massive Pay Day For Stanford MBAs + The Big Differences Between U.S. & European MBA Programs
Maria |
December 12, 2023

Maria

New around here? I’m an HBS graduate and a proud member (and former Board Member) of AIGAC. I considered opening a high-end boutique admissions consulting firm, but I wanted to make high-quality admissions advice accessible to all, so I “scaled myself” by creating ApplicantLab. ApplicantLab provides the SAME advice as high-end consultants at a much more affordable price. Read our rave reviews on GMATClub, and check out our free trial (no credit card required) today!