This week's release of the Financial Times annual ranking of Executive MBA (EMBA) programs is big news for business schools. Rankings play a crucial role in attracting students and shaping perceptions of program quality. However, a closer look at the methodology behind these rankings, particularly the Financial Times (FT) EMBA rankings, reveals a significant factor that may be distorting the true value of these programs: Purchasing Power Parity (PPP) adjustments.

The PPP effect, while intended to provide a fair comparison of salaries across different economies, can lead to inflated figures for programs operating in or associated with developing countries. This effect can potentially mislead prospective students, especially those from developed economies, into overestimating the financial returns of certain programs.

Consider a European professional contemplating an EMBA. They might be tempted by programs showing astronomical salary figures, often associated with cohorts in developing countries. However, it's crucial to understand that these PPP-adjusted salaries do not reflect the actual earnings they're likely to achieve in their home market.

There is no arbitrage effect here. A graduate cannot simply move to a developing country and expect to earn a salary equivalent to the PPP-adjusted figure. The reality is that local market conditions, industry standards, and individual career trajectories play a far more significant role in determining post-EMBA salaries than the PPP-inflated figures suggest.

Moreover, the PPP effect creates a situation where some schools are potentially over-valued in the rankings relative to their original salary value. This over-ranking can have a cascading effect: higher-ranked schools become more selective, potentially leaving excellent programs underranked and, ironically, easier to enter.

To illustrate this point, let's consider a table of potentially over-ranked and under-ranked schools based on our analysis of PPP-adjusted versus estimated original salaries:

| Potentially Over-Ranked Schools | Potentially Under-Ranked Schools |
|----------------------------------|----------------------------------|
| Ceibs (China) | IMD (Switzerland) |
| Washington University: Olin (China/US) | MIT: Sloan (USA) |
| Fudan University (China) | Wharton (USA) |
| Arizona State: WP Carey (China) | Chicago Booth (USA) |
| ESCP Business School (Multi-country) | London Business School (UK) |
| HKU Business School (Hong Kong) | INSEAD (France/Singapore) |
| Skema Business School (Multi-country) | NUS Business School (Singapore) |

This table suggests that students might find better value and potentially easier admission in some of the "under-ranked" schools, which could offer excellent outcomes without the PPP inflation.

It's crucial for prospective EMBA students to look beyond the headline rankings and salary figures. Instead, they should focus on:

1. Actual salary potential in their target job market
2. Career progression opportunities
3. Program curriculum and its relevance to their goals
4. Quality of the alumni network in their industry and region
5. Overall fit with their career aspirations and personal circumstances

In conclusion, while rankings provide a useful starting point for evaluating EMBA programs, they should not be the sole or even primary factor in decision-making. The PPP effect in rankings can create a distorted view of program value, potentially leading students to make suboptimal choices. By understanding this effect and focusing on more relevant factors, prospective students can make more informed decisions that align with their true career goals and potential outcomes in their target markets.

Remember, the true value of an EMBA lies not in its ranking or PPP-adjusted salary figures, but in how well it propels your career forward in your chosen field and location. Don't let the PPP paradox cloud your judgment – focus on the real-world value and fit of the program for your specific needs and aspirations.

You can see this article with charts at https://www.linkedin.com/pulse/ppp-paradox-why-emba-rankings-may-mislead-prospective-duncan-chapple-zhnzc/