Employee: “Can I ask you something frankly?”
CHRO: “Of course.”
Employee: “What’s really the difference between me and the
management trainees? I’m from a good business school—maybe not a top-ranked
one—but our MBA curriculum is pretty similar. We studied the same frameworks,
the same case studies. Yet they join at a much higher salary and with a
different label. Why?”
I heard this conversation many years ago. I realized that
this was a question many employees think about, but only a few ask out loud. I
also realized that this question deserves a proper response though such a response
was elusive in many organizations as the question hasn’t received sufficient attention,
discussion and crystallization of a response that is in line with the people
management philosophy of the organization. Yes, it is indeed true that many
organizations make such a differentiation between management trainees hired
from premier institutes and other employees at the same stage in their career and
it leads to other organization following suite through the benchmarking route.
Let’s start by acknowledging an uncomfortable truth:
companies don’t pay management trainees more just because they like certain
campuses. There’s a method—if not always a perfect one—behind the madness. Let’s
explore the rationale that underlie this method in some detail.
Predictability and signaling
Hiring is a gamble to some extent. Premier business schools have built strong reputations over decades. For employers, a degree from these institutions acts as a signal—of academic rigor, competitive selection, and exposure to high-quality peer learning. While not perfect, this signal reduces hiring risk. Premier business schools act like a familiar brand. Companies assume—sometimes correctly, sometimes not—that students who survive intense competition, tough grading, and high peer pressure are likely to perform well in demanding roles. The higher salary is, in a way, an insurance premium for reducing hiring risk.
Recognizing the primary value add of b-schools
Another way to look at this is to separate education from
selection. It can be argued that the biggest value a premier business school
offers is not dramatically different course content—it is the quality of its
selection process and the kind of candidates it attracts into that process.
These schools draw thousands of highly driven, capable applicants and then
filter them through rigorous exams, interviews, and peer competition. What
companies end up hiring is not just someone who has completed an MBA, but
someone who has already cleared multiple layers of screening in an intensely
competitive environment. For employers, this acts as a powerful pre-hire
signal: the candidate has demonstrated ambition, resilience, and consistency
long before their first day at work—even if the classroom experience itself
looks surprisingly similar across schools.
This also explains another anomaly. People who do executive MBA
programs/part-time MBA programs from the premier institutes often don’t get the
advantage that regular MBA students from the same institute get. It happens
because while the course content and the faculty can be very much comparable, it
is much easier to get selected to the executive MBA program as compared to the
regular MBA program of the same institute.
Betting on potential
It’s not really about the first job; it’s a bet on the
future - Management trainee roles are designed as long-term leadership
investments - to build a strong leadership pipeline. MTs are expected to take on bigger responsibilities faster, move
across functions, and eventually occupy senior roles. The salary reflects not
just what they do today, but what the company hopes they will become tomorrow.
In a way, companies are paying also for potential and not just for performance. Yes, potential assessment is a much more nebulous area as compared to performance assessment.
The selection processes of many of the premier business schools
give importance to cognitive ability. Cognitive ability, which translates into ‘higher
processing power’ in the job context, is one of the very few psychometric factors that
have a proven linkage to higher performance on the job. Often, it also associated
with ‘conceptual ability’ and ‘metacognitive ability’ that are highly useful in
making decisions in complex and uncertain environments. Of course, there are many other factors (like person-organization and person-job fit, emotional intelligence, functional and behavioral competencies etc.) that impact on the job performance. However, other things remaining the same, the advantage arising from higher cognitive ability can't be denied.
Employer branding and competition for talent
Top companies compete fiercely for talent from elite campuses. Paying a premium is often necessary to attract these candidates, who may have multiple offers. Offers need to stand out. If one company pays less, another will pay more. Over time, these higher packages become the “market rate”. A differentiated salary offer also strengthens the company’s brand on campus, creating a virtuous cycle of visibility and access.
The other side of the coin
The above discussion doesn’t mean that the above approach is
not without faults and side effects. What makes sense on paper doesn’t always
work as neatly on the office floor.
Equal work, unequal rewards: When employees from
different entry routes do similar work—but with different pay, titles, or
access—it creates quiet frustration. People don’t mind starting lower; they
mind staying there without a clear reason.
Pedigree ages faster than performance: A business
school brand shines brightest at the point of entry. A year or two into the
job, results matter far more. When high-performing non-MTs see slower growth
despite strong outcomes, motivation begins to dip.
Invisible walls: MT cohorts
often—unintentionally—become exclusive circles (see Batch mentality for a related discussion). Different training programs,
faster exposure, senior attention. Over time, this creates “us and them”
dynamics that hurt collaboration and culture.
Good talent quietly walks out: When capable employees
feel overlooked, they don’t always complain. They update their résumés.
Organizations then lose exactly the kind of steady, proven performers they
should be nurturing.
The balancing act
The answer isn’t to scrap management trainee programs. It’s
to balance them with fairness and flexibility.
Be honest about the “why”: Employees handle tough
realities better than vague explanations. Clear communication about what MT
programs are—and what they are not—goes a long way in building trust.
Let performance close the gap: Starting salaries can
differ. Staying salaries shouldn’t—at least not forever. Strong performers from
all entry paths should be able to converge on pay, roles, and responsibility
within a defined timeframe.
Open up development opportunities: Leadership training,
mentoring, and high-visibility projects shouldn’t be reserved for a select few.
Potential shows up in many places, not just in campus placements.
Measure outcomes, not just origins: If MTs consistently outperform, the premium is justified. If performance evens out over time (or if the potential doesn't translate into performance over time), compensation and career models should evolve too. Data—not tradition—should drive decisions.
Coming back to where we started
The employee’s question to the CHRO isn’t about money alone. It’s about recognition, fairness, and future possibilities. Companies will—and should—continue to hire from top business schools. But organizations that combine this approach with fairness, transparency, and genuine meritocracy will build stronger cultures—and far more resilient leadership pipelines in the long run. The organizations that truly win are those that remember one simple thing: talent doesn’t stop at campus gates. And once people are inside the organization, what they deliver should matter more than where they came from. That’s not just good HR. It’s good business.
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