60 Years Later: A GMAT Test With Profit Margins Better Than Apple

An open staircase with a two-story waterfall structure is a feature of GMAC’s headquarters in Reston Town Center, Virginia

FOR NEARLY TWO DECADES, WILSON WAS THE MBA’S MOST VISIBLE CHEERLEADER

One powerful trend that Wilson had in his favor was the meteoric growth in the MBA degree. Some four decades ago, U.S. colleges graduated near equal numbers of lawyers and MBAs. Today, MBA grads outnumber J.D. grads by nearly four to one. And with many law schools struggling to fill classes, that ratio is likely to tip further in favor of the MBA. Outside the U.S., the growth in both business schools and the degree has exploded.

For the past 18 years, until Dec. 31st when Wilson retired as GMAC’s top official, he had been the most visible cheerleader for the MBA degree. As he puts it, “What the MBA allows people to do is to build a foundation. You can use the degree to change your career or to accelerate your career. It’s one of the few programs that a student enters after having made an economic analysis. If you want to study the romance languages, you do so because you are fascinated by romance languages. No one is passionate about Black-Scholes,” he says, referring to the mathematical model for calculating the value of an option on the stock market.

Once in charge of GMAC, Wilson immediately applied his accounting skills to his biggest cost center ETS. Among other things, he noticed that ETS was selling 140,000 copies of three guidebooks with the GMAC imprimatur. “I couldn’t understand how you could sell that many copies each year and lose money,” says Wilson. It was largely because two of the guidebooks—on schools and financial aid—were money losers, and in this pre-Amazon era, ETS was responding to fax requests to ship copies of the books. Wilson also put the organization’s money management to bid and moved that task away from the testing contractor.

Despite the group’s limited resources at the time, he also pushed forward to eliminate the rather limiting paper-and-pencil test and move to a computer exam that would adapt to each test taker’s answers. That effort cost GMAC an investment of between $10 million and $12 million. But once GMAC was able to launch its new test in 1997–less than two years after Wilson came aboard–the organization could deliver the same exam everywhere every day.

A BIG BREAK WITH THE EDUCATIONAL TESTING SERVICE

But the single biggest decision that led to the growth of the organization occurred in 2003 when GMAC broke with ETS. Some 12 years later, Wilson vividly recalls the details of the rupture. On Nov. 11 of 2001, he received a phone call from the CEO of the testing service. “He said they were closing six test sites in Europe and it wouldn’t affect me,” says Wilson. “On Dec. 7, the head of the program and the CFO would come and talk to me about it. When they came down, they said they were closing 116 sites. They weren’t there to seek our input. They were there to advise us.”

The ETS decision undermined a key pillar of Wilson’s strategy to go global. But his contract with the firm required him to give ETS two years notice if he wanted to fire them. The existing contract would end in just three weeks. So he went to ETS’ Princeton, N.J., headquarters to negotiate at two-year extension so GMAC could, in his words, “learn a whole lot more.”

Wilson put together a task force, hired Booz Allen to oversee the study project, and brought aboard 11 MBA interns to take apart every facet of what ETS actually did to administer the test and deliver the scores. “We used to think of this as a black box,” he says. “The tests came in here and the scores came out there. The first time I showed the board how this worked, there must have been 30 things that went on inside that black box. We spent two years learning that.”