Business school rankings largely measure prestige. GMATs and GPAs suggest the caliber of classmates. Employment rates and starting salaries reflect the market appeal of graduates. Student and alumni surveys suggest strength of network and degree of delivery. Taken together, they paint a portrait of where applicants may encounter the best minds, resources and opportunities.
As with any big decision, applicants are looking to mitigate their risks and maximize their returns. That’s one reason why the elite MBA programs net the most candidates. Take the “Big Three” – Harvard, Stanford, and Wharton. Combined they attracted 24,816 full-time applications for the Class of 2017. Compare that to Columbia, Northwestern (Kellogg), Chicago (Booth), MIT (Sloan), NYU (Stern), and Dartmouth (Tuck) which collectively accounted for 24,785 submissions. How big is the perception gap between some schools? Just look at Stanford and Michigan (Ross). Each enrolled 407 students, but Ross received 4,692 fewer applications.
And perception is paramount here. The top schools don’t draw the most applications just because they offer the largest class sizes. MBA programs are brands, often defined by intangibles. And students want to be associated with what they represent. The volume of applications may reveal brand appeal. And the percentage of rejected applications may signal brand stature. To understand which school brands are the strongest, you should think conversion rate: How many candidates actually accept school offers?
CONVERSION RATE REFLECTS VALUE PROPOSITION AND SALESMANSHIP
This is called yield. And it’s the market’s stamp of approval on schools. Here’s how this people’s choice rubric works. Say School A sends out 500 acceptance letters and enrolls 100 students. The school’s yield rate would be 20% — meaning 400 admits either chose another program or decided not to go to business school at all. If the numbers were reversed and 400 candidates accepted their offer, the yield would be 80%. In short, yield acts like a sales funnel, depicting each MBA program’s ability to capitalize on opportunities.
Even more, yield is a gauge of a school’s desirability – namely that it is a first choice and not a fallback. A higher yield suggests a stronger deeper commitment (i.e. “stickiness”) from applicants to a particular school. No doubt, adcoms assume a certain percentage of rejections when they make offers. In the end, yield can be a sign of a school’s ability to “walk the talk”– particularly after prospects visit campus and interact with school personnel and students. It can also reveal salesmanship – admissions teams who thrive at targeting the right prospects and sealing the deal with them.
ELITE SCHOOLS HAVE ADVANTAGE IN FUNDING AND GEOGRAPHY
Typically, highly-ranked schools excel in yield. For one, their brands, deeply rooted in tradition and lore, convey exclusivity and excellence. They possess a long track record of producing insiders, influencers, and innovators. Over the years, they’ve mastered the fundamentals and established a cultural identity. Such a foundation creates a virtuous cycle where talent replenishes itself year-after-year.
This cycle is reinforced by deep financial backing. In terms of endowment, Harvard, Stanford, Wharton, Kellogg, Sloan, Columbia, and Booth rank among the wealthiest business schools, with a collective $9 billion dollars between them. When it comes to scholarship funding, Harvard, Wharton, Booth, and Stanford top the list as well. Bottom line: This financing enables top schools to draw faculty, go after the highest ceiling candidates, and invest in the amenities and expertise needed to stay on par with competing programs.
And let’s not forget geography. East coast stalwarts, for example, can pull candidates from a 50-million person megalopolis stretching from Boston to Wilmington. And California and Great Lakes schools enjoy a similar population advantage. In other words, these schools can afford to be more choosey, since they have the talent pool to support them (with international outreach only deepening their advantage). More important, their locales place them in greater proximity to thought leaders, employers, and alumni to further fuel their momentum.