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The world’s leading network for top careers and education Copyright © QS Research 2005 TopMBA.com International MBA Recruitment and Salary Report QS Research 1990 - 2005 Nunzio Quacquarelli MA Cambridge, MBA Wharton Monisha Saldanha MBA Harvard

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Page 1: Mba Salary and Recruitment Trends 2005

The world’s leading network for top careers and educationCopyright © QS Research 2005

TopMBA.com International MBA Recruitment and Salary Report

QS Research 1990 - 2005

Nunzio Quacquarelli MA Cambridge, MBA Wharton

Monisha Saldanha MBA Harvard

Page 2: Mba Salary and Recruitment Trends 2005

QS Quacquarelli Symonds Ltd1 Tranley MewsFleet RoadLondon NW3 2DGUnited Kingdom

The entire content of this publication is protected by international copyright. All rights reserved. No part of thispublication may be copied or reproduced in any form without the prior written permission of the publisher.

Reproduction: Tables and charts may not be reworked or presented in any other form without written permissionfrom the publishers.

Any excerpts must be sourced: QS TopMBA.com International Recruiter Survey 2005.All charts must be sourced: QS TopMBA.com International Recruiter Survey 2005.

Copyright © QS Research 2005The world’s leading network for top careers and education

Page 3: Mba Salary and Recruitment Trends 2005

The world’s leading network for top careers and educationCopyright © QS Research 2005

Contents

1. Introduction 2

2. Summary of Findings 3

3. Methodology and Credentials 3

4. Companies Surveyed 4

5. Background to Trends - the upswing gathers pace 6

6. MBA Recruitment Trends 2005 76.1 Demand for MBAs 76.2 Demand for MBAs by Region 86.3 Demand for MBAs by Sector 10

6.3.1 Consulting 106.3.2 Banking and Financial Services 106.3.3 Technology 116.3.4 General Industry 116.3.5 Pharmaceuticals and Healthcare 126.3.6 Small Enterprises Entrepreneurship 12

6.4 Functional Roles 126.5 Experience Levels 136.6 Skills 14

7. MBA Salaries and Compensation 157.1 Global Trends 157.2 Salary and Bonus Combined 167.3 Bonuses 177.4 Trends by Region 177.5 Strategies for MBA Salary Analysis 197.6 Regional 20

7.6.1 United States and Europe 207.6.2 Asia 217.6.3 Latin America 22

8. Appendix 24

Page 4: Mba Salary and Recruitment Trends 2005

Copyright © QS Research 20052 The world’s leading network for top careers and education

1. Introduction

Since 1990, QS Research, in collaboration with TopMBA.com, has conducted an annualsurvey of MBA employers worldwide to determine trends in international salaries andrecruitment. The TopMBA.com International Recruiter Survey 2005 is the most extensive everand presents an unrivalled overview of the world MBA recruitment market. Completeresponses were received from 505 companies (301) (comparative figures for 2004 are shownin brackets throughout the report) in 30 (20) different countries, a 68% increase inresponses. This represents approximately twice the response level of the Business WeekEmployer MBA survey and includes five times the number of non-US respondents in anyother MBA recruitment survey.

Who will be interested in the survey?

This research will be of interest to all who follow the international MBA and recruitmentmarket. It will help three groups in particular make informed strategic decisions:

1. Companies that recruit MBAs and recruitment consultants

National and international recruiters will find the survey useful in managing humanresource policies, such as whether to determine salaries globally or locally, and tobenchmark their salaries against peer institutions.

2. Business school administrators and career services worldwide

MBA programme administrators and career services will find the survey invaluable forproviding guidance to students and managing the relationships with recruiters.

3. Current and future MBA graduates

MBAs can use the research to determine which industries and geographies to pursue in theirjob search, and to help negotiate an optimum compensation package.

Page 5: Mba Salary and Recruitment Trends 2005

3The world’s leading network for top careers and educationCopyright © QS Research 2005

2. Summary of Findings

For the past two years, recruiters have foreseen a rebound in the demand for MBAgraduates and salary levels. The TopMBA.com International Recruiter Survey 2005 confirmsthis trend. Recruiters are now predicting that MBA demand will return to pre-recessionlevels by next year, and will carry on growing thereafter.

The number of recruiters taking part in the survey has risen to 505 (301), reflecting anexpansion in interest and demand for MBAs. There is also a growth in the numbers ofvacancies per employer.

The TopMBA.com Index of MBA Recruiting shows an overall 20% (15%) increase in demandfor MBAs in 2005, with the consulting sector reporting a massive 35% (15%) increase,financial services 20% (10%), general industry 17% (12%), and technology 18% (5%).

In the previous eight years, average salaries for graduating MBAs increased by 27%, butthey have increased by 12% in the last two years alone. This matches the pre-downturnlevels of 2001 with a US-European average of US$84,500 (US$82,000). This increase reflects ahigh level of optimism amongst MBA recruiters and increased competition for the toptalent.

Bonuses for 2005 have increased substantially. The average reported bonus is a sizeableUS$27,000 (US$19,000). Financial services firms are reporting a massive average bonus ofUS$40,500 with investment banks, in particular, reporting bonuses of up to US$100,000 forfirst year MBAs. While other sectors will find it hard to compete with these figures, bankingbonuses do tend to be much more volatile than those in other sectors.

3. Methodology and Credentials

The TopMBA.com International MBA Recruitment and Salary Survey collects primary data onthe state of the recruitment market and predictions of future trends from recruiters inindustry, consulting, financial services, and technology. The data includes specific analyses bysector, geography, and year. Time trend analysis and sector/regional variations have beenincorporated into this final report. Unlike many surveys, QS does not rely on MBA graduatesto report their earnings, but obtains the information from the employers who pay them.

QS further differentiates its research by the objectivity of its position as a third partyoperating between recruiters and business schools, by virtue of the long established contactswith recruiters who are willing to share information with QS, and by the bank of data onMBA recruitment and remuneration built up over the past 15 years, which allowsmeaningful trends to be identified over time.

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Copyright © QS Research 20054 The world’s leading network for top careers and education

4. Companies Surveyed

Responses were received from across the globe. 43% of respondents were based in Europe(51%), 41% in the USA (31%), 4% in Latin America (8%) and 10% in Asia Pacific (10%).

Chart 2 Source: QS TopMBA.com International Recruiter Survey 2005

Western Europe

Latin America

Eastern Europe

US & Canada

10%

43%

4%

41%

Asia Pacific

2%

Regional Distribution of Responding Recruiters 2005

The spread of recruiters spans a wide spectrum of industries, reflecting the global range ofcompanies that hire MBAs. Financial services and consulting make up the largest source ofrespondents, followed by healthcare, technology and consumer goods. Respondents fromthe recruitment consulting industry are kept separate – although they have a bias towardsfinancial services and consulting recruitment.

Chart 1 Source: QS TopMBA.com International Recruiter Survey 2005

01020304050607080

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Recruiter Response by Industry 2005

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5The world’s leading network for top careers and educationCopyright © QS Research 2005

The 505 national and international companies that responded to the survey are guaranteedcomplete confidentiality for their individual responses. Chart 3 gives a snapshot of some ofthe organisations that took part in the survey across the world. A fuller list can be found inthe Appendix at the end of the report.

Asia

Europe

Latin America

USA

Consulting

McKinseyCopernicus (Jap)PA Consulting

AT KearneyAccentureBCG

Bain & Co.Roland BergerAMBC

IBM ConsultingMercerBain

Financial Services

CitibankOppenheimerHSBC

Barclays CapitalLehmanJP Morgan

BankBostonChileMerrill LynchBBVA

Morgan StanleyFidelityGoldman Sachs

Industry

ToshibaJohnson & JohnsonCLP

WhirlpoolFord Motor Co.Bosch

MattelCemexSabritas

SonyAmerican AirlinesCorning

Technology

CiscoMotorolaSingtel

VodaphonePhilipsBT

IngeniumPfizerProcura Digital

MicrosoftDellHewlett-Packard

Chart 3 Source: QS TopMBA.com International Recruiter Survey 2005

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Copyright © QS Research 20056 The world’s leading network for top careers and education

5. Background to Trends - the upswing gathers pace

A growing number of companies all over the world now see a top MBA as an essentialmanagement entry-level qualification. Without an MBA, it is almost impossible to becomean analyst at a leading investment bank, or a senior consultant at a top consulting firm. Inrecent years, it has become more common for business development managers andtechnology managers also to study for an MBA, to help them take the next step in theircareer.

From 1994-2001, worldwide demand for MBAs grew at an average of 15% CAGR. Thisgrowth was spread across all the major continents and benefited graduates from all of theworld’s top 100 business schools. Recession in the USA, however, and slow growth in majoreconomies as far apart as Germany and Japan, took their toll from 2002-2004 and demandfor MBAs fell by around 20% from 2000-2003. In this period, on-campus company visits fellsignificantly and many MBA students had to resort to off-campus job searches andnetworking amongst alumni.

However, www.global-workplace.com, a jobs site which is operated by QS on behalf of manyof the world’s top business schools, saw over 14,000 (7,800) new MBA jobs added to the siteduring 2004. According to Adrian Barrett of Global-Workplace, “...the big demand for MBAsis again coming from the service sector – banks and consultancies – including many smallerorganisations. MBA alumni, who are now in a position of hiring responsibility, tend toreturn to their school to pick up new talent.” The growing MBA alumni pool is increasinglybeing activated by career services to create jobs in all sectors.

Anecdotal evidence of the upswing is found everywhere. Kim Keating of Tuck BusinessSchool, USA, sees the MBA job market heating up to levels not seen since 2001. “By April2005, 80% of our class had at least one full time offer. We expect all the class to have offersby graduation.”

Graham Hastie of London Business School concurs: “The MBA job market has transformedover the last two years. In April 2003 only 30% of our students had a full-time job offer. ByApril 2004, over 50% had offers. This year 70% - 80% have offers. We expect most studentsto have offers at graduation. The prospects are outstanding next year’s class.” The surveyresults confirm all these observations.

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7The world’s leading network for top careers and educationCopyright © QS Research 2005

6. MBA Recruitment Trends 2005

6.1 Demand for MBAs

In 2005, 50% (62%) of employers expect to increase MBA hiring in the next twelve months,43% (28%) expect MBA hiring to be at the same level as in 2004, and a mere 7% (10%)expect a decrease in MBA hiring in 2005.

Chart 4 shows the trend in MBA hiring worldwide, by sector. Consulting and financialservices, especially investment banking, have rebounded particularly sharply. These twosectors will account for 50% of MBA hires at most business schools and the rate of growthin demand has doubled since 2004.

The growth in demand in consulting has particularly surged in 2005, with a reported 35%(15%) increase in demand. Financial services have taken slightly longer to recover from themillennium recession but have still increased demand in 2005 by 20% (10%).

The technology sector was worst hit during the recession and only in 2005 is it finallyshowing signs of recovery with an 18% (5%) increase in demand.

For the purpose of simplification, this survey groups together as ‘general industry’manufacturing, logistics, chemicals, automotive, FMCG etc. This sector saw the lowest dropin demand for MBAs during the recession, with many companies using the downturn in theservice sector to pick up talent. During the upturn it is continuing to show a steady increasein demand of 14% (12%).

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Index of MBA Recruitment 1990-2007

Chart 4 Source: QS TopMBA.com International Recruiter Survey 2005

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Copyright © QS Research 20058 The world’s leading network for top careers and education

Recruiters are currently optimistic that this cyclical upswing will be sustained in the mediumterm. All sectors are predicting a continued growth in demand for MBAs. The financialservices sector is particularly optimistic, predicting the first rise in demand above the levelsof 2000. The consulting sector remains the most aggressive, predicting continued growth inexcess of 15% per annum in 2006 and 2007.

The renewed demand by employers is not yet being reflected in applications to do an MBA.Since 2003 there has been a 20% decline in applications. It appears that many youngprofessionals, seeking career progression within their function or industry, are reluctant totake a risk and leave to take an MBA, in case they miss out during their time away. Thistrend has been particularly evident in the US, and in China, where MBA applications havefallen by 50% during a period of economic boom. These individuals seem to be waiting afew more years than average and are fuelling the demand for the more expensive ExecutiveMBAs, which allow them to carry on working during their studies. The result is lesscompetition to gain entry to the best schools than three years ago, in spite of a much moreattractive job market.

However, in most countries around the world, we see a rise in demand for MBA placesamong people who seek a career change or who wish to start their own business. Theseyoung professionals are trying to time their MBA so that they graduate into a ‘hot’ jobmarket, making 2006 start dates look very attractive.

6.2 Demand for MBAs by Region

As Western economies recover, Europe and the US are set to yield the greatest increase inMBA opportunities. Chart 5 shows the growth in number of jobs according to the locationof the headquarters of the responding employer. Traditional MBA employers in the US andEurope are fuelling the growth in demand. Local companies in Asia and Latin America stillaccount for relatively few MBA opportunities and recruiters in such organisations have noimmediate plans for a sharp increase in MBA hiring.

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Chart 5 Source: QS TopMBA.com International Recruiter Survey 2005

Page 11: Mba Salary and Recruitment Trends 2005

9The world’s leading network for top careers and educationCopyright © QS Research 2005

However, this data potentially underestimates the actual number of opportunities in certainregions. For example, many MBAs in Asia, Latin America and Eastern Europe are hiredthrough head offices in the US or Western Europe. Chart 6 reveals that 49% of recruiters inNorth America have some responsibility for recruiting in Europe, Asia or Latin America.

Similarly, as shown in Chart 7, 61% of MBA recruiters in Europe have responsibility for hiringoutside their home country, with 13% having responsibility for hiring into North America,and 11% Asia and 11% Latin America.

The predominance of MBA recruiter headquarters in the US and Western Europe sheds lighton the continued popularity of US and European business schools. International MBAs atthese schools benefit from proximity to these headquarters and being able to meet suchrecruiters on campus before graduation.

Asia Pacific/ROW

US & Canada

Europe

Latin America

13%11%

26%

39% 11%

National

European Recruiter Responsibility by Region in 2005

Europe

Latin America

US & Canada

Asia Pacific

17%

16%

16%

51%

North American Recruiter Responsibilty by Region in 2005

Chart 7 Source: QS TopMBA.com International Recruiter Survey 2005

Chart 6 Source: QS TopMBA.com International Recruiter Survey 2005

Page 12: Mba Salary and Recruitment Trends 2005

Copyright © QS Research 200510 The world’s leading network for top careers and education

6.3 Demand for MBAs by Sector

6.3.1 Consulting

Top 10 Consulting recruiters of MBAs in 2005:Accenture, AT Kearney, Bain & Co, Boston Consulting Group, Booz Allen Hamilton, Diamond Cluster, IBM Consulting, McKinsey & Co, Mercer Management Consulting, Roland Berger & Partners.(Diamond Cluster is new in 2005, replacing Siemens Management Consulting, which leaves the top10.)

The consulting market is re-entering a boom phase. Overcapacity in 2001 saw MBA hiringcut back. A 35% (15%) increase in demand for MBAs in 2005 places demand back to 2001levels and, based on current forecasts, demand will continue to grow. Strategy consultingfirms are strongly back in the market for the 2005 MBA class. All the leading firms havereturned to aggressive MBA hiring.

There are also a growing number of small specialist consultancies looking to hire MBAs.Many such firms are using search agencies, or web services such as www.global-workplace.com, rather than visiting schools. There is also a growth in specialistconsultancies, for example ZS Associates, with a focus on sales and marketing.

The growing number of corporate consultancies are experiencing strong growth in MBAhiring. For example, Siemens Management Consulting specialises in technology and businessoutsourcing. Dell has recently changed its name from Dell Computers, reflecting theintention to build up its business consulting division helping Dell hardware customers toplan their IT requirements. Such strategies follow in the footsteps of IBM, which is, today,the world’s largest provider of consultancy services, by revenue and employment numbers.

The big professional services firms have yet to resume major MBA hiring, but may still createa further stimulus in demand by 2006. Those that have been absorbed into otherenterprises, such as Atos Consulting (acquired by KPMG Consulting), PwC Consulting (nowpart of IBM), Cap Gemini Ernst & Young, still feel the rationalisation implicit in such bigintegration exercises.

6.3.2 Banking and Financial Services

Top 10 Financial Services recruiters of MBAs in 2005American Express, Citibank, Deutsche Bank, Fidelity International, GE Commercial Finance &GE Capital, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley.(Unchanged from 2004, but all have significantly increased hiring numbers.)

Almost all investment banks actively recruit MBAs. This demand collapsed during 2001-2003.Goldman Sachs, Morgan Stanley and others cut MBA hiring by up to 80% in some offices.2005 shows a completely different environment with demand increasing by 20% (10%). Allthe big investment banks are back on campus competing for talent, evidence of which canbe found in this survey in the section relating to salaries. Mergers and Acquisitionsdepartments are returning to strength and hiring is becoming a priority.

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11The world’s leading network for top careers and educationCopyright © QS Research 2005

Many divisions are prospering, such as derivatives, prime brokerage, sales and trading ofdebt and equities, structured finance, public sector and private sector corporate finance,property, private equity and wealth management. Financial services’ MBA hiring is no longerrestricted to banks. GE Capital is now one of the biggest recruiters of MBAs worldwide.American Express is also emerging as a major player.

Insurance hires MBAs steadily at a modest level and has picked up noticeably in 2005. In theUS there are a number of insurance companies that recruit 10 or more MBAs each year suchas AIG, Travellers (part of Citigroup), CIGNA, and Liberty Mutual.

6.3.3 Technology

Top 10 Technology MBA recruiters in 2005Avaya Communications*, British Telecom, Dell, Hewlett-Packard, IBM, Intel, Microsoft,Philips, Samsung*, Vodafone.* = new in 2005. (Cisco, Sprint, included in 2004.)

Recruitment of MBAs into technology companies has finally bounced back, reporting anincrease of 18% (5%). Dell has reported the largest increase in MBA hiring of any company.Telecommunications companies such as British Telecom and Vodafone are very active. Somesoftware companies, like Microsoft for example, have increased their intake. Hardwarecompanies such as Hewlett-Packard and Dell are amongst the most active recruiters atpresent, but we expect some Chinese companies to appear strongly in the research in thefuture. We were unable to obtain significant data from Asian technology recruiters in 2005,but reports suggest that hiring in China, Taiwan and Korea is extremely active. OnlySamsung has confirmed hiring numbers, which exceed over 100 people. Recruiters arepredicting several years of strong growth in demand.

6.3.4 General Industry

Top 10 Industrial MBA Recruiters in 2005Coca-Cola*, Diageo*, Ford, General Electric, General Motors, Johnson & Johnson MedicalEquipment, Philip Morris*, Procter & Gamble, Siemens, Unilever (including Lever Bros USA).* = new in 2005. (Eli Lilly, GlaxoSmithKline, Pfizer, included in 2004 – pharmaceuticalssurveyed separately in 2005.)

This broad grouping of industries covers, aerospace, automotives, chemicals, logistics,manufacturing, steel and, for the purpose of this report, consumer goods and retail. Eachindustry reveals individual trends, but a common theme has been a steady increase in MBAhiring for the last three years with the 2005 survey reporting an increase in hiring of 17%(12%). The increasing globalisation of international trade, growing inter-dependence ofcommon markets and increased international competition has fuelled the interest in MBAsacross the sector.

In particular, those organisations that have fully embraced globalisation understand thatMBAs represent an essential pool of international managers who are capable of working indiverse cultures and business situations. A sizeable number of MBAs who do find roles in theindustrial sector will do so with companies such as General Electric, Ford and General Motorswhere specific MBA induction programmes have been the norm for more than twenty years.Internationally minded European companies like Siemens and DaimlerChrysler haveestablished MBA entry programmes.

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Copyright © QS Research 200512 The world’s leading network for top careers and education

Consumer goods companies have been committed to MBA hiring in the US for many years.Lever Brothers traditionally hire 50+ MBAs in the US and many fewer in Europe. Thissituation is changing. As more and more people graduate with MBAs, they are penetratingconsumer goods companies around the world in ever increasing numbers. It is now commonfor local operations of such companies as Diageo, Procter & Gamble, BAT and Coca-Cola tohire MBAs, in addition to the head offices of those companies.

For local industrial companies, the high level of multinational salaries remains a barrier andcan discourage MBAs from pursuing local opportunities that may bring them rewards in thelonger term. Manel Gasca of Rittal Disprel, a consumer products/retail company based inSpain, has the following advice for MBAs: “Too much relevance is placed on salary straightafter an MBA. Since the year I graduated I had to learn that the true value of my MBA wasthe knowledge I acquired and not the job I got straight after graduation. MBA recruitmentis very sensitive to economic conditions and we should not value studying an MBA by thesalary we obtain after graduation.”

6.3.5 Pharmaceuticals and Healthcare

Top 10 Healthcare MBA Recruiters in 2005AstraZeneca, Eli Lilly, GlaxoSmithKline, Guidant, Johnson & Johnson, Medtronic, Merck,Novartis, Pfizer, Schering-Plough.

Pharmaceutical companies have always been very active MBA recruiters and pay the bestsalaries after consulting and investment banking. They also offer attractive benefits andinternational mobility. They have remained committed to MBAs throughout the last decadeand growth in recruitment numbers is steady rather than spectacular.

6.3.6 Small Enterprises and Entrepreneurship

The Internet revolution has given many MBAs the confidence to start their own business ongraduation. For the first time ever, some schools are reporting that 10% or more havechosen to do so. Technology has reduced the cost of starting a business, even for risk-averseMBAs. At US schools, the percentage of class starting their own business is consistently lessthan 5%, whereas many European schools regularly exceed this level. Schools reportingparticularly high levels of students starting their own businesses include: The Judge Institute,University of Cambridge; EM Lyon; IE Instituto de Empresa; Manchester Business School;Tanaka Business School, Imperial College London.

A growing number of MBAs are interested in working for Small Multinational Enterprises,start-ups or boutique consultancies. Many such firms are owned or managed by MBAs whowant to hire dynamic business developers, marketing specialists, salesmen, financial ‘wizards’and analysts: all classic MBA roles.

6.4 Functional Roles

Chart 8 reveals that marketing 19% (15%) is still ahead of finance 17% (12%) as the rolemost frequently offered to MBAs across our sample of 505 MBA recruiters. Consultingaccounts for 17% (10%) of all opportunities. The e-commerce function, a relatively new role,has fallen dramatically in popularity since 2001 when it represented more than 10% of MBA

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13The world’s leading network for top careers and educationCopyright © QS Research 2005

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Chart 8 Source: QS TopMBA.com International Recruiter Survey 2005

6.5 Experience Levels

MBA recruiters consistently show a strong bias towards candidates in the ranges of 1 - 4 and4 - 8 years experience but there is a trend toward recruiting younger people. Freshgraduates taking an MBA are targeted by an increased 8% (4%), reflecting perhaps agrowing scarcity of quality MBAs with sufficient experience, while MBAs with over 8 yearsexperience are now sought by only 2% (5%) of respondents (Chart 9). This does not implythat either group is not in demand, but that they fall outside the needs of mainstreaminternational MBA recruiters. Inexperienced candidates typically accept lower paid graduatelevel positions and experienced professionals are more likely to use a search company toidentify suitable opportunities.

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Chart 9 Source: QS TopMBA.com International Recruiter Survey 2005

roles. Today it accounts for less than 3%. Roles offered reflect a return to the basics ofmanagement – away from e-commerce and towards marketing, strategic planning, sales,and finance.

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Copyright © QS Research 200514 The world’s leading network for top careers and education

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Key MBA Skills: Importance versus Satisfaction (as ranked by recruiters)

Scale: 3 Highest, 1 Lowest

6.6 Skills

Wise MBAs will seek opportunities to develop skills that are important to recruiters. Chart 10 demonstrates how “soft skills” such as interpersonal, strategic thinking, andleadership are more important than finance abilities, academic success, and knowledge of IT.Choosing opportunities to demonstrate mastery of these skills – perhaps through club orproject leadership, for example, – will help MBAs to differentiate themselves in therecruitment process.

Chart 10 Source: QS TopMBA.com International Recruiter Survey 2005

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15The world’s leading network for top careers and educationCopyright © QS Research 2005

7. MBA Salaries and Compensation

7.1 Global Trends in 2005

MBA salaries are on the increase in almost every country in the world. As demand for MBAssurges in consulting and financial services, recruiters must compete on salary to secure theirpreferred candidates. In the last two years companies have reported a 12% (9%) increase inaverage MBA salaries - matching the levels of 2001(Chart 11). This increase reflects a highlevel of optimism and increased competition for top talent.

The levels of MBA salaries tend to be cyclical and reflect global economic trends. The 1990swas a decade of uninterrupted economic growth resulting in ever-increasing salary andbonus packages. A growing pool of MBA graduates was eagerly recruited by businessesworldwide. Despite the dot.com disruptions in the US market in 2000, the momentumbehind this trend fuelled increasing salaries until 2001. This trend reversed in 2002, however,and salaries fell almost to the 1998 pre-dot.com boom level.

Last year, Mike Holmes of www.global-workplace.com predicted that 2004 would be thestarting point of another upswing in the MBA hiring cycle. “In 2005, we find that demand inthe non-service sector has remained robust throughout the last five years. With so manyservice companies re-entering the market and hiring more aggressively, there will continueto be some upward pressure on salaries.”

In 2005, average consulting base salaries in the US and Europe at US$94,000 have, onceagain, overtaken those in financial services at US$87,000. After many years of the basesalaries in consulting surpassing those in financial services, financial services had edgedahead in 2003 and again in 2004. One US consulting firm has reported a record averagesalary offer of US$117,500 for fresh MBA hires. These salaries look unlikely to slacken off,given the forecast increases in demand for MBAs by consultants over the next few years.Chart 12 tracks MBA salaries in the US and Europe from 1999 to 2005 by key MBA recruitingsectors. Global trends also show a steady increase in salaries in consulting, finance,technology and general industry, since 1993.

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Chart 11 Source: QS TopMBA.com International Recruiter Survey 2005

US$

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Copyright © QS Research 200516 The world’s leading network for top careers and education

40000

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MBA Salaries in US & Europe By Industry 1996 - 2005 (US$)

Chart 12 Source: QS TopMBA.com International Recruiter Survey 2005

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Average MBA Earnings by Sector 2005 - Salaries & Bonuses in W. Europe & US (US$)

7.2 Salary and Bonus Combined

When comparing compensation levels, it is important to consider not just the base salary,but also the likely total earned in one year, including bonuses. Although, as in the 1990s,financial services salaries are typically behind those in consulting, the larger bonusespayable, by investment banks in particular, ensure that they offer the greatest overallcompensation for the first year out of business school. There is significant salary variationacross sectors. For example, consumer products and retail jobs pay almost US$30,000 lessthan financial services. Chart 13 presents average salaries and bonuses reported byemployers, with each industry sector disaggregated to provide greater insight. Differentindustries have their own methods of providing compensation. Some industries offer ahigher base salary, while others offer a high year-end bonus. When deciding between jobs,candidates are recommended to assess their own risk profile and level of financial flexibility.

Chart 13 Source: QS TopMBA.com International Recruiter Survey 2005

US$

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17The world’s leading network for top careers and educationCopyright © QS Research 2005

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W.Europe E.Europe Asia Pacific Latin America Canada United States

85056

3937545962

53125

7525084525

MBA Salaries By Region 2005 (US$)

Chart 14 Source: QS TopMBA.com International Recruiter Survey 2005

7.3 Bonuses

Bonuses for 2005 have increased substantially. The average reported bonus is a sizeableUS$26,949 (US$19,183). Financial services firms are reporting a massive average bonus ofUS$40,500 with investment banks, in particular, reporting bonuses of up to US$100,000 forfirst year MBAs. While other sectors will find it hard to compete with these figures, bankingbonuses do tend to be much more volatile than those in other sectors.

It is important for candidates to understand the fiscal status of their bonus. Maximizingafter-tax bonus value should be prioritised: in some US States, they are taxed at nearly 50%.In the UK, relocation expenses and tuition reimbursements can be claimed tax-free. In suchcases the cost is the same for the recruiter, but the benefit far greater for the candidate.

Furthermore, an up-front start bonus carries greater value than a year-end or performancebonus. Candidates can compare their offers with their peers to ensure they are getting acompetitive offer and communicate this benchmarking to the recruiter. In at least one case,a top-tier consulting firm has increased its offer for the entire entering MBA class in order tomatch competitors. No MBA graduate can count on the promise of a performance bonus,making financial planning, including meeting minimum loan repayments, more difficult.Performance bonuses, whether tied to individual, team or company performance, are ameans for an employer to introduce variable compensation and to ensure they do not makefinancial promises they may not be able to keep.

7.4 Trends by Region

North America and Western Europe have very similar average MBA salary levels. They arelower in Latin America, Asia and Eastern Europe, reflecting weak exchange rates and thelower status of those regions for business development.

US$

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There is a significant differential in salaries across regions. Asian salaries are 14% (8.7%)lower than those in the US, while Latin America typically offers salaries an unchanged 34%(34%) lower than the US. The time trend information in Chart 16 demonstrates that there isan overall trend towards convergence in salaries.

0

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International Employers

Local Employers

W.Europe E.Europe Asia Pacific Latin America Canada United States

MBA Salaries by Region Comparing Local & International Employers (US$)

Chart 15 Source: QS TopMBA.com International Recruiter Survey 2005

Nevertheless, average salaries have risen across the board, globally, and some level ofconvergence is apparent. Multinational companies co-ordinate recruitment on a global level,and do not want to drive top candidates away from key geographies because of a salarydifferential. As international companies set up operations in emerging markets, they areincreasingly willing to pay more for MBAs, who they see as critical for building a foothold ineach region. Over time, it is likely that differentials with local companies will disappear asthey respond by trying to attract talent for equivalent positions with more competitivesalaries. At present, as shown in Chart 15, the differential between local and internationalsalaries is greatest in Eastern Europe and Asia.

US$

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40000

60000

80000

100000

1996 1997 1998 1999 2000 2001 2002 2003 2004 200564349 65878 68109 75231 81125 84321 71512 76953 85348 85933

49375 51250 55250 59290 50625 52538 59750 41271 48070 57067

65862 67477 69109 72384 75231 80177 76324 75366 81214 84000

50618 52875 57300 61500 65500 68500 67500 70182 71732 73100

USA

LatinAm

Europe

Asia

MBA Salaries Across Regions 1996 - 2005 (US$)

Chart 16 Source: QS TopMBA.com International Recruiter Survey 2005Note: Asian salaries exclude China, India and Thailand companies that offer much lower MBA salaries when converted to US dollars.

7.5 Strategies for MBA Salary Analysis

MBA graduates are known for their analytical ability. In negotiating salary offers or decidingon target geographies for a job search, it is important to take a step back from the numbersand think of the bigger picture. Job applicants should consider the cost of living whencomparing salary packages across regions – the real, versus the nominal wage a companyand country offers.

The OECD publishes annual research comparing purchasing power between countries (a good proxy for the cost of living). According to the OECD, the purchasing power inMexico is 24% more than in the US. So, even though the survey reveals that MBA graduatesare paid 34% less in Latin America than in the US, graduates working in Mexico will enjoy astandard of living comparable with that of their US counterparts. By contrast, purchasingpower in Japan is 36% lower than in the US, so the higher cost of living will result in alower standard of living if the same salary is paid as elsewhere. Lastly, Hungary’s purchasingpower is 55% higher than that of the US, which means that an MBA earning 44% less inHungary will still enjoy a higher standard of living than a US graduate.

US$

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0

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Tech

nology

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Retail

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Healthca

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Financial S

ervice

s

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BankingAuto

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Comparison of US & W.Europe By Sector 2005 (US$)

Chart 17 Source: QS TopMBA.com International Recruiter Survey 2005

7.6 Regional Focus

7.6.1 United States and Europe

Within regions, there are substantial differences in salaries offered across industries. Chart 17 shows the salaries offered in different industries within the US and Europe. The close correlation between US and European salaries reflects the close association of thetwo economies and the integration of corporate operations: an MBA graduate will facesimilar prospects on either side of the Atlantic. Salary levels in financial services andconsulting, in particular, are very similar in both regions. Technology salaries and those ingeneral industry are also very similar.

Within geographic areas, there are major variations. For instance, Eastern Europeanrecruiters reported an average salary of just over US$50,000, while Western Europeanrecruiters reported salaries over US$80,000. Within countries, MBAs in major cities canexpect salaries 20% higher than in smaller ones.

Chart 18 compares MBA salaries in companies recruiting in Western Europe and Central,Eastern and Southern Europe, segmented by the location of the recruiter’s headquarters.There is great variation in salaries. French, Swiss and UK recruiters paid more than their UScounterparts surveyed. (The French data may contain a bias due to a high proportion oflocal consulting firms in the sample).

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7.6.2 Asia

Through all the challenges that Asia has faced in recent years, (1997 Asian financial crisis,Iraq war and SARS etc), MBA salaries have continued to rise in the region as a whole. From1996 to 2005, average salaries for MBA graduates have risen an impressive 44% in dollarterms. This contrasts with Latin America, where a series of currency devaluations hasnegatively impacted on the reporting in US dollars.

Regional Headquarters of Recruiter

FranceGermanyItalyNetherlandsSpainSwitzerlandUnited KingdomUnited States

Regional Headquarters of Recruiter

GreeceHungaryPolandUnited KingdomUnited States

Average Salary 2005 (US$)

89,06379,68862,50070,28171,59596,87295,87286,839

Average Salary 2005 (US$)

25,00027,50065,12058,15075,000

Western Europe

Central, Eastern and Southern Europe

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MBA Salaries Asia: Excluding India & China (US$)

Chart 19 Source: QS TopMBA.com International Recryiter Survey 2005

Chart 18 Source: QS TopMBA.com International Recryiter Survey 2005

US$

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China, India, Thailand Japan, Korea, Singapore, Australia

Chart 20 shows average salaries reported by companies based in each country, providing adirect comparison of average MBA salaries in the lower cost countries of China, India andThailand with those in the higher cost regions of Singapore, Japan, Korea and Australia.

Regional Headquarters of Recruiter

ChinaHong KongIndiaJapansingaporeUnited KingdomUnited States

Average Salary 2005 (US$)

25,00050,83322,50087,50059,16778,000

106,750

Asia Pacific

Chart 21 Source: QS TopMBA.com International Recruiter Survey 2005

Comparing Average Salaries in Asia (US$)

7.6.3 Latin America

Average Latin American MBA graduate salaries have increased by almost 20%, the largestpercentage increase of any region in the world in 2005, to US$57,000 (US$48,000). Chart 22 shows how salary levels in Latin America have risen and fallen regularly since 1996,but, based on the trend of the last three years, average MBA salaries should exceedUS$60,000 for the first time by next year. Volatility is, however, a feature of the region. Alittle over a decade ago, it seemed that Latin America had escaped the trap of poverty.Foreign direct investment and trade surpluses buoyed the major nations of the region andprospects for the future looked bright. Latin America did not follow the dot.com boom ofthe rest of the world. Instead, a series of economic shocks and destabilisations hauntedmajor Latin American nations through the turn of the century. Latin America returned in2002 to the salary offers of 1999 only to fall again in 2003.

Chart 20 Source: QS TopMBA.com International Recruiter Survey 2005

US$

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Since then, however, the trend is upward again and, with many business schools in theregion and a growing population, Latin America looks to be set for greater salary gains inthe future. The 2003 Argentine devaluation, against a backdrop of recession andhyperinflation, may have been a temporary setback, but a much-needed correction. Thesettling of the strikes in Venezuela and the success of the war on drugs in Columbia, werepositive outcomes in 2004. So, too, were the rise of President Lula da Silva in Brazil andPresident Nestor Kirchner in Argentina, with their emphasis on building the long-termstability of their nations. 2005 shows further encouraging signs for the region, withemployment rising in Brazil and GDP per capita rising across the region. A weaker US dollarhas helped lift exports and reduce debt burdens, encouraging more inward investment.MBA salary gains have reflected these improved conditions.

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Average MBA Salaries Latin America (US$)

Chart 22 Source: QS TopMBA.com Recruiter Survey 2005

Chart 23 shows variations in MBA salaries in Latin America according to the location of theheadquarters of the recruiter. There is less variation than in Asia and the increase innumbers of US and European companies recruiting MBAs in the region has also had apositive impact.

Regional Headquarters of Recruiter

ChileCosta RicaMexicoSpainUnited KingdomUnited States

Average Salary 2005 (US$)

57,50042,50054,23062,50067,50060,200

Latin America

Chart 23 Source: QS TopMBA.com International Recruiter Survey 2005

US$

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8. Appendix - Some participating companies (total respondents 505 in 2005)

AustraliaAT KearneyChandler MacleodDeloitte Touche TohmatsuHigherEd AppointmentsBelgiumCSC Computer SciencesProcter & GambleBulgariaBulbankCanada3M Canada IncAliantBell CanadaBombardier IncCapgeminiCarpedia International LtdCIBCColgate PalmoliveCommunity Experience InitiativeDell Canada IncFedEx Express CanadaInfinium Capital CorpJohnson & Johnson Medical ProductsKidsFuturesKraft CanadaManulifeMDS IncMezzanine Business ConsultingNational Bank FinancialPfizer Consumer HealthcareRBC Capital MarketsTELUS MobilityUBSChileLanL'OréalMerrill LynchProcura DigitalChinaBo Le AssociatesBOLEDellEducation and Training Centre for Officials andEntrepreneurs, State-owned Assets SupervisionL'Oréal ChinaMotorolaPOD Management ConsultantsCosta RicaCoca-Cola CompanyDenmarkNovo NordiskFranceBooz Allen HamiltonL'OréalMonitor GroupPSD Group SATerra ConnectaGermanyAlphabet / BMWBMW GroupContinental AGDaimlerChrysler AGDeutsche Post World NetDeutsche TelekomDPWNHewlett PackardMorgan StanleyValley Forge TIS GmbHVolkswagen AGGreeceBSH ABE Ikiakes SyskevesCitibank PlcCoca-Cola CompanyColgate Palmolive HellasDHL International (Hellas) SAHellenic PostNestle HellasNOVABANKSfakianakis SAVodafoneHong KongCitibank (Hong Kong) LimitedHsin Chong Construction GroupNoble Group LtdOppenheimerFunds (Asia) LtdHungaryGE Hungary RtIBMIndiaAmrop International Pvt LtdInfowavz International

IntergraphJohnson & Johnson MedicalShilputsi ConsultantsItalyAntal International LtdAT KearneyEli Lilly ItaliaKraft FoodsRoland Berger Strategy ConsultantsJapanNikko CitigroupPRTMLiechtensteinHILTI AGLuxembourgDexia BILRowlands InternationalMalaysiaPAMexicoAmex MexicoCEMEXEli Lilly de México SA de CVEndeavor MexicoGeneral MotorsIngeniumMattelPfizerSabritasNetherlandsAEGONCeBeOn-Europe BVNigeriaWest Africa Popular Foods Nigeria Ltd, Unilever Nigeria PlcNorwayAmrop InternationalPeruAMBC Consultoria Empresarial SACPolandAIMS PolskaPortugalAT Kearney PortugalCapgeminiMcKinsey & CoMicrosoftNestlé PortugalPortugal TelecomRussiaCitibankWHISingaporeAT KearneyAllianz Dresdner Asset Management Singapore LimitedBarclays CapitalCisco SystemsCitibank Singapore LtdDell Global BV, (Singapore Branch)DHL Express (S) Pte LtdHSBCJohnson & JohnsonMcKinsey & CompanyOcttane Pte LtdPSB CorporationRaffles Medical Group LtdSingapore Tourism BoardSingtelST Aerospace LtdTexas Instruments SingaporeSouth KoreaNG LifeSpainBanco ZaragozanoBodegas MelgosaBoschCableeuropaCirculo de ProgresoDeloitte ConsultingDuPont IBERICA, SLEL CORTIJO.SAEndesaErgodecorGRUPO BBVAICEXIOR CONSULTING SAManagement-RatingMG WealthMonitor GroupMORENA FILMSMulticanalMundo EdificioNestlé PetCare EspañaOccidental Hotels & ResortsOticon Espana

Russell ReynoldsSUN PLANETToldos ConilSwitzerlandBBVA Suiza SAMedtronic EuropeMicrosoftPhilip Morris InternationalTessaro & Associates AGTaiwanCiticorp Capital Asia (Taiwan) LtdThailandBo Le Associates (Thailand) LtdThai Laemchabang Terminal Co, LtdToshiba-CarrierTotal Access Communications PLCUkraineWard Howell International-UkraineUnited KingdomAT KearneyABN AMROAdventisAntal InternationalArcadia Group LimitedAstraZenecaAxonBarclays BankBarclays CapitalBeament Leslie ThomasBear StearnsBOCBridgewell Group LimitedBritish ArmyBT Retail plcCapgeminiCB&I John Brown LtdCentrePeople Appointments LtdCitigroupCredoDISCO INTERNATIONAL LTDeasyJetEdengene LtdFidelity InvestmentsFKI plcFMCHedra PlcInformatiq Consultng LtdJPMorganJPW AssociatesLaunchLEA ConsultantsLehman BrothersLogicaCMGLondon Development AgencyMacquarie BankMcGregor Boyall AssociatesMcKinsey & CoMerrow Language RecruitmentModem MediaOxfamPA ConsultingPertemps Recruitment PartnershipPrimeParnershipPRTMPrudentialRichmond & CoRolls-Royce plcSABMiller PlcTeach FirstTescoThe Parthenon GroupThomson Legal & RegulatoryUnileverUPSUnited StatesAcorn Technology CorporationAEGON GroupAIG American GeneralAmerican AirlinesATCiAvaya CommunicationsAvaya IncBain & CompanyBASF CorpBoston Scientific CorporationBrooks AutomationCardinal SolutionsChanin Capital PartnersChiquitaCIGNACIGNA CorporationCincinnati Children's HospitalCisco Systems

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Appendix - continued

CIGNA CorporationCincinnati Children's HospitalCisco SystemsCitigroupCitigroup Private BankCoca-Cola CompanyCorningCorporate Executive BoardCummins IncD&B - Dun & BradstreetDaimlerChrysler ServicesDegussa CorporationDell IncDeloitte & ToucheDeloitte ConsultingDelta Air LinesDiamondCluster InternationalDiscover Financial ServicesEastern Mountain SportsEBSCO PublishingEchoStar CommunicationsEMCErnst & Young LLPEthicon Endo-Surgery, Johnson & JohnsonFederated Dept Stores IncFedEx ServicesFidelityFMC Technologies IncFord MotorFord Motor CompanyGeneral MotorsGeorgia-Pacific CorporationGoldman SachsGreenwich Associates

Hewlett PackardHilti IncHoneywellHRI PropertiesIBMIDEXX Laboratories IncIntelInter-American Development BankInternational Profit AssociatesJohn DeereJohnson & JohnsonJP MorganKatzenbach Partners LLCKBACE TechnologiesKPMGLEK ConsultingLehman BrothersLiberty Mutual GroupLufthansaM&T Bank CorporationManpowerMcGraw-Hill CompaniesMercer Management ConsultingMerck & CoMerrill LynchMichelin North AmericaMicrosoftMorgan Samuels CompanyMorgan StanleyNorthrop GrummanOreck CorporationOversease Private Investment CorporationParkway PropertiesPC Connection Inc

Pfizer IncPPG Industries IncProcter & GambleRecruitMilitaryRussell Investment GroupSara Lee FoodsSchering-PloughSG CowenSiemens Management ConsultingSony Corporation of AmericaSprague Energy CorporationSprintStaplesState Farm InsuranceSWISSJUST CORPTenet HealthcareThe Boston Consulting GroupThe Cambridge GroupThe Gallup OrganizationThe Goodyear Tire & Rubber CompanyThe Midland CompanytravelocityTyco Engineered Products and ServicesUBSUnileverUnited Way of Greater CincinnatiValassisWayne Water SystemsWhirlpool Corporation

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