Why do IIM - MBAs get paid so much?

A fantastic question, that often riles subject experts like Lawyers, Tax experts, Production experts, CAs and IT experts.

"Why, oh why, do these young men and women bag the cushiest of jobs, despite their lack of in-depth knowledge in anything?"

First, some reality check -

An Indian dream

1. Not everyone from an IIM is Tom Cruise - Every student from an IIM does not bag a multi-crore package. In fact, most do not. However, a lot of them start with Rs 10 lac + annual packages, and if they have what it takes, can double / trible / quadruple those in a few years flat. Many start with a low grade - just about more than Rs 5-7 lacs p.a., say.
2. Not every Subject Expert is worth his salt, either - It is a mistake to assume that every single student who clears all the stages of the CA exam (one of the toughest in India), or graduates from the reputed Law Universities (not everyone gets in), is a genuine expert, ready to demolish the world! He/she may not be. They often are good at some topics, average at others, and bad at some. Many of them may be out of sync completely with latest IT tools, communication skills, and presentation / visualisation abilities. [ I say this out of my experience as an employer for more than 2 decades ]
3. What do companies that hire these MBAs really want? - If you check the career graph of the most successful IIM graduates, you'll find them great at these 5 things -



Thus spake Mandela

1. Leadership ability - the strength with which they lead a team, or the full company itself
2. Learning ability - things change, and change itself accelerates, making intense learning ability a key to sustained leadership
3. Smartness - the ability to see what'll sell, and what'll bomb
4. People skills - the passion to connect with team-members, work positively with them, bring the best to the table from everyone
5. Ability to take stress - the strength to consistently put in efforts day in, and day out (needs terrific emotional, psychological and physical fitness)

So anyone who is an MBA from an IIM and is blessed with these traits, or can develop these in time, will reap rich rewards. As long as companies will exist, they will need exceptional leaders to ensure their survival and prosperity.

But are the packages really justified? Yes, and No. Yes - because they help snatch the best talent available on campus, and ensure that competition doesn't get it. No, because they can lull someone into complacency pretty soon.

But do the IIMs really develop the 5 skills mentioned above? A clear anwer - No. Most of the people making it to the best of the IIMs have these latent skills, and the selection procedure just ensures such people get in. And then, they have the environment, the tools, the opportunity to really break through.

But is the selection procedure perfect? Not at all! It's just like all other imperfect examinations in the world, that are great at minimising imperfections, not eliminating it.

So being a domain expert is irrelevant? Not at all. The most successful of CEOs will need the best of domain experts to aid their grand vision.

A simple example - Abraham Lincoln, who never fought personally in any battle let alone the massive US Civil War, is consistently ranked as the best US President ever. He was great at leading, getting the best Generals, and demolishing competition to ensure national unity. He is revered precisely for that.

So how exactly is a leader different from a leader?

The difference between a leader and a manager is often simple -

• a leader knows the goal and can rally people to that. A manager helps manage the journey to that goal.
• a leader can see things in the future (don't ask me "how"); a manager can help convert that into reality through day-to-day operational excellence
• a leader can passionately drum up people's conscience and energies into a unified whole, raring to go; a manager (or a functional expert)

So what should I do? Become a leader, or a manager?

If you were leader material, you would never even ask this question.

So can domain experts like, say, CAs never lead a company?

KMB the rockstar

Not at all! Many with the skills needed to do THAT are doing it. Example of one great CA doing precisely that is the dashing Mr. Kumar Managalam Birla! He has something interesting to say, here -

CAs face major challenge from MBAs: Kumar Mangalam Birla

Finally, are the packages really justified?

The late Sumantra Ghoshal, one of the most clear-headed of management gurus India has produced in a long time, used to say - "... and only 10% of managers have the right mix of energy and focus to make all the difference ..."

Those proverbial 10% are the ones running the show today.

Have a great day :)
~

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