BIGGEST RANKINGS GAIN? VANDERBILT OWEN
The school showing the biggest gain in this year’s ranking is Vanderbilt University’s Owen School of Management which jumped 19 places to rank 30th, from 49th two years ago. William & Mary’s Mason School of Business moved up 14 spots to rank 44th, from 58th in 2017. Besides USC’s 12-place improvement that put the school in the Top 25, Fordham University’s Gabelli School of Business rose 11 places to rank 59th from 70th two years ago.
The double-digit declines were led by Texas A&M’s Mays School which plunged 13 places to rank 33rd, from 20th the last time Forbes did its ranking. Purdue University’s Krannert School of Management plummeted a dozen places to rank 40th, from 28th, while Wisconsin Business School fell 11 places to 35th from 24th.
AN ROI RANKING THAT DISREGARDS THE QUALITY OF THE MBA EXPERIENCE
Unlike other rankings that take into account the quality of incoming students, their satisfaction with the MBA program and their immediate employment and salary, the Forbes list is based on the median return on investment achieved by an MBA class that graduated five years ago. The dollars-and-cents calculations, measuring salary, bonuses and exercised stock options, place no value on the education, the faculty, the alumni networks, or any other factor that would generally measure the quality of an MBA program. In its novel approach, Forbes also assumes that compensation would have risen half as fast as students’ post-MBA salary increases if the graduates had not attended business school.
The numbers reported by Forbes are also adjusted to take into account cost-of-living expenses, and the earnings gains are discounted using a rate of 4.1% which is the discount rate most recently used by large companies in their pension funds. The magazine also discounts tuition to account for students who pay in-state rates and for scholarships and the non-repayable financial aid that schools dole out. Forbes does not deduct taxes from the earnings gains or account for the debt repayments from student loans
The methodology is largely based on self-reported data from MBA alumni who could inflate their compensation to help their schools score better on the list. Schools that place more students into high-paying finance jobs are also likely to do much better than schools where a higher percentage of students accept jobs in lower-paying sectors, including non-profits, the government, or education. The ROI calculation, moreover, is also subject to error based on the percentage of alums who complete and return the surveys to Forbes. The magazine says it had a 25% response rate from the 17,500 alumni it surveyed at more than 100 business schools.
The surveys returned to Forbes show that the ROI on the MBA degree remains strong. Students at the top 25 programs increased their pre-MBA income from $73,000 on average to $193,000. Only two years ago, the equivalent numbers averaged $70,000 before school and $179,000 for grads five years out. Compensation increased by 10% annually since graduation. Forbes also found that scholarship awards to two-thirds of the current crop of students.