Turning the Tables: Ranking the MBA Rankings

1. BusinessWeek. The granddaddy of the MBA rankings, BusinessWeek’s Best-B Schools list made its debut in 1988 with what was then a radical approach to judging the quality of a school: pure customer satisfaction. It was the first to systematically survey recent MBA grads and ask them about their satisfaction levels with their educational experience and the first to ask corporate recruiters their opinions of the MBAs they interview and hire. To adjust for possible one-year bias, BusinessWeek includes in its ranking the two previous MBA grad and recruiter surveys. Why is it still the best? Because it puts otherwise unavailable information in the marketplace to help people with a very important career decision. Applicants can weigh the commonly available information—from average GMAT schools to median salaries—on their own, without the subjective weighting of a journalist. The BusinessWeek ranking is crystal clear in what it measures: How well the schools serve their two primary markets, students and their ultimate employers. Over the 12 biennial rankings published by BusinessWeek in the past 22 years, only three schools have been at number one: Kellogg topped the list five times, Wharton did it four times, and Chicago has been number one the past three times.

In recent years, BusinessWeek has since added an intellectual capital measurement, which gets 10% of the overall weight in the ranking. This latter survey examines the contributions of faculty in 20 academic journals as well as book reviews of faculty books in The Wall Street Journal, The New York Times, and BusinessWeek over the past five years. The Financial Times also adds a similar measurement to its ranking. The ranking is published every other year, in October, in even-numbered years. So the next list will be published in October of 2012. For years, BusinessWeek ranked the top 30 business schools and then listed another 15 “second tier” schools without a numerical ranking. This year, in its 2010 ranking, BusinessWeek ranked the entire list, 57 U.S. schools in numerical order, along with 18 non-U.S. schools in a separate international ranking.

The latest top five in the 2010 lineup:

1. University of Chicago (Booth)
2. Harvard Business School
3. University of Pennsylvania (Wharton)
4. Northwestern University (Kellogg)
5. Stanford University

Pro: The ranking does not rely on less reliable data from schools which are under pressure to report information in the best positive light. It does not include such factors as GMAT scores, undergraduate GPAs, or starting salaries, but makes the case that discriminating graduate students and the companies that hire recruiters are in the best possible position to judge the quality of a school. Its survey of MBA recruiters also is the most credible in the marketplace, largely because BW invests a great deal of time in finding the one person in every organization that hires business school grads who is responsible for MBA recruitment. BW also weights the opinions of recruiters based on how many MBAs they hire—a process that takes into account the valuable experience of the companies in the MBA market. BusinessWeek has come in for criticism over the years for not being transparent enough, particularly about how far apart ranked schools are in terms of quality. In 2010, for the first time, the magazine began publishing index numbers for each ranked school so that users can make their own judgments about the statistical meaningfulness of a given rank. The index numbers represent the sum total of all the factors that go into BW’s ranking.

Con: It’s an entirely U.S.-centric list that excludes some very good schools outside the U.S. (BW publishes a separate list of the top 18 international schools using the same methodology). It’s also possible that a graduating class of MBAs, knowing that their answers will affect the ranking of their school, may be encouraged to report more positively on their experience than is warranted. The upshot: very small differences in MBA opinion could affect a school’s standing. BusinessWeek clearly knows this is a possibility because the magazine employs statisticians who “use a series of statistical analyses to test the responses for patterns that have a low probability of occurring if the students are answering the questions honestly.” If foul play is suspected, the surveys are tossed out of the calculation. There are many indicators of quality, such as GMAT scores of incoming students and post-MBA compensation that are not included in this ranking.

Even though we think this ranking is number one, it’s hardly without flaws that lead to wrong-headed results. Consider, for example, the most recent 2010 ranking that placed Southern Methodist University’s Cox School of Business 12th, ahead of the business schools at Dartmouth, Cornell, Yale, North Carolina at Chapel Hill, and New York University, among others. The finding justifiably stunned many observers. SMU’s unusually high rank from BusinessWeek, is in contrast to its standing in every other major poll: Forbes ranks Cox 33; U.S. News puts it at 49; The Economist at 78, and The Financial Times at 96. Only four years ago, SMU didn’t even crack BusinessWeek’s top 30 list. The reason why Cox did so well in the latest BusinessWeek ranking is due to the surprisingly high score it received in BW’s survey of corporate recruiters—sixth. Yet, a full third of this year’s graduating class at Cox were without jobs three months later. That’s even worse than the 27% jobless number of a year-earlier, despite a fall of $6,000 a year in median starting salaries to $81,000 this year from $87,000 in 2009. It was the worst performance of any school in BusinessWeek’s top 30 list. A spokesman for Cox attributed the continual decline to turnover in its career services office. It’s hardly a record that would warrant a rank of sixth in BW’s poll of MBA recruiters. Whatever the reason for the odd showing—whether it’s polling sample problem or an orchestrated lobbying campaign by SMU with recruiters—it’s a questionable result.

2. Forbes. The magazine has done six biennial lists based on a simple but important metric: the return on investment MBA grads have achieved after five years in the market. Stanford tops the latest ranking because the median salary of an MBA from the Class of 2004 was $225,000, highest among U.S. rivals. Forbes figures that the typical Stanford student from that class paid $235,000 to get the degree, a sum including two years of forgone compensation as well as tuition and fees. What’s ideal about the Forbes methodology is that it, like BusinessWeek, is putting information into the MBA marketplace that would otherwise be unavailable to applicants making important decisions. And let’s face it: the vast majority of people who get an MBA do so for the financial rewards that come from the degree. They seek it to get out of the pile of people competing for better jobs, faster and more important promotions, and greater compensation. If ROI turns you on, this is the ranking for you. The latest top five of this list of 75 ranked schools came out in August, 2009:

1. Stanford University
2. Dartmouth College (Tuck)
3. Harvard Business School
4. University of Chicago (Booth)
5. University of Pennsylvania (Wharton)

Pro: It’s simple and elegant and doesn’t pretend to measure the quality of the MBA experience or the actual education you receive. It’s all about dollars and cents, measuring the worth of a degree five years after graduation. It’s also based not on data supplied by business schools, some of which would be tempted to fudge the information to get a better ranking, but from Forbes own survey of 17,000 alums at 103 schools. The last survey for the Class of 2004 had an impressive response rate of 24%.

Con: Forbes ranking is U.S.-centric, though Forbes does separate lists of non-U.S. institutions that award MBAs in one year and in two-year programs. The biggest problem is that the ranking only measures compensation versus the cost of getting the MBA. Return on investment, while interesting and important, is hardly a measure of the quality of the education or the experience you’ll have.