Why MBA Rankings Are A Crock

Illustration courtesy of Menlo Coaching

This essay by Menlo Coaching’s David White was originally published on his firm’s website.

As an applicant, you probably use MBA rankings as a big part of your strategy in selecting a business school. We hope to persuade you that MBA rankings are based on metrics that you don’t actually care about, are designed to benefit the organizations that publish them (not you, the applicant), and that focusing excessively on MBA rankings is, therefore, a terrible mistake.

How To Use MBA Rankings?

MBA rankings capture something real, in the sense that an HBS MBA commands more respect than a Columbia Business School MBA, which in turn is respected more than one from UCLA Anderson. If you are totally new to the topic of MBA programs, a ranking can quickly orient you on which business schools are considered most desirable by applicants and post-MBA employers.

The ranking also correlates strongly with the selectivity of those business schools and your chances of admission. You know that you’ll need a great profile in order to be a realistic candidate for top MBA programs since those programs attract large numbers of highly qualified applicants. So if you’re applying with a low GPA, a low GMAT score and average work experience, you should not be targeting the programs at the very top of the rankings.

Beyond that? Once you generate a short list of target schools, you should put the MBA rankings aside.

Why MBA Rankings Are (Mostly) BS

Choosing the right MBA program is one of the most important decisions in your professional career. Before you start using rankings to make this decision, shouldn’t you learn a little bit about how they work?

Rankings are ultimately designed by publications to create controversy and therefore increase readership. If they admitted that the quality of schools doesn’t often change radically from year to year, no one would need to read the article.

MBA Rankings Are Based on Data That Doesn’t Really Matter

U.S. News MBA Ranking Methodology

The largest single component of the U.S. News ranking, worth 25% of the overall weight in the “2020 Best Business Schools” ranking, is the “Peer Assessment Score.”  U.S. News sends surveys to the Deans and Directors of all 475 accredited US business schools asking them to rate all other schools.

First, if you’re reading this article, the odds are that you’re applying to a Top 10 or Top 20 school. Do you really care what Dean Cheney at the Eastern Illinois University Lumpkin College of Business thinks about whether Harvard, Wharton or Booth is the superior school?

I’ll give you a hint: Dean Cheney won’t be spending much time monitoring Harvard, Wharton, and Booth since he’s not competing with those schools. The Lumpkin College of Business serves a totally different student population and will spend much more time monitoring their local peer schools than staying up to the minute about what is going on at Top 10 programs.

Second, do you think that HBS answers honestly when surveyed about what they think about Stanford? Or… might there be an incentive for them to assign Stanford a lower score on the survey in order to secure some competitive advantage for HBS in the rankings? Every school has a vested interest in rating peer schools as low as they think they can get away with.

Between these two issues, the survey data just doesn’t stack up.

The next big piece of the U.S. News MBA ranking, worth 15% of the total weight, is the “Recruiter Assessment Score.” U.S. News sends surveys to corporate recruiters asking them to rate the 475 accredited MBA programs in the US.  This suffers from exactly the same two problems!

Some employers simply won’t know much about the schools that they’re rating. Even large employers often settle into a comfortable rhythm where they recruit graduates from some top schools but not others, which means that they don’t have ongoing contact with the students and staff of every school.

And let’s not forget that many corporate employees involved in recruiting MBA graduates are MBA graduates themselves. The value of their own degree will increase or decrease depending on their alma mater’s performance in the U.S. News rankings. There is, therefore, a strong incentive for alumni to rate their own school highly in comparison to its peer schools.

Forbes MBA Ranking Methodology

The key metric in the Forbes MBA ranking methodology is the “5-year payback,” which compares post-MBA compensation to your hypothetical earnings without an MBA. There are major flaws with this approach, such as:

The value of an MBA lasts much longer than five years.

The soft skills you learn during an MBA will make you a more successful people manager, which will help you to win promotions to executive roles.

The alumni network will help you source business opportunities. Consultants might find new clients. Investors may get access to deals they would have missed. Professionals of all types will receive job opportunities through the network.

Moving from a technical/functional role in your pre-MBA career to a management role in your post-MBA career gives you a much higher long-term ceiling on total compensation.

The Forbes ranking makes huge assumptions about your salary growth without an MBA.

Their ranking methodology states: “We assume that compensation would have risen half as fast as their post-M.B.A. salary increases had these alumni not attended business school.” We appreciate the focus on calculating your return on investment from an MBA, but this assumption about how your wages would grow without an MBA is often wrong. Menlo Coaching has helped countless applicants in jobs with moderate wages — e.g. mechanical engineering, or rotational programs in large companies — to more than double their pre-MBA compensation by joining a management consulting firm like McKinsey, Bain or BCG. These students would never have received a +50% raise without the MBA.

Financial Times MBA Ranking Methodology

The problems with the Financial Times ranking methodology are more subtle: they give a 10% weight to the frequency with which professors publish academic research in peer-reviewed journals and a 5% weight to the prevalence of PhDs among the faculty.

Although each MBA applicant is entitled to their own preferences, the majority of MBA applicants seek to improve their professional career, not to prepare themselves to become an academic researcher. Many students care less about peer-reviewed research and care more about:

Does my professor have relevant contacts within industry?

Is the MBA instruction truly applicable to real-world situations?

So, if you are focused more on your career outcome than on academic research, you probably do not care about these metrics.

MBA Programs Manipulate Rankings

The easiest way for MBA programs to manipulate MBA rankings is to focus on raising their average GMAT and average GPA. There are always candidates in the applicant pool who have great stats, but slightly weaker professional experience. Admitting a few more students with this profile can help an MBA program to boost its ranking, with the school hoping that they can “fake it until they make it” — after the ratings increase, and the increase in applications to the business school, they hope they can make things right by admitting students who have both great stats and great experiences.

Another way to manipulate rankings is to recruit students who obviously have high post-MBA earning potential. The most famous example of this was the Adam Allcock scandal, in which Stanford GSB awarded large financial aid packages to students with extremely high pre-MBA earnings, despite a stated policy that only need-based financial aid was available. The suspected motivation? Stanford wanted to give high earning private equity professionals a reason to prefer Stanford over Harvard, therefore helping Stanford to show the highest post-MBA earnings of any school.

Strategies like these can influence rankings, but don’t make the program more valuable to its students.

MBA Rankings Ignore Fit

If you are having a miserable time during your two years, you will not get the full benefits of the degree. Don’t forget that a lot of the value of an MBA program is the network you build with your peers. It’s easier to build a strong network when you’re surrounded by people you admire and want to spend time with.

MBA Rankings Are Designed to Generate Ad Revenue

The ultimate purpose of MBA rankings is to generate page views and advertising revenue for the organizations that publish them. For this purpose, it’s great if the rankings are controversial, with many schools rising and falling each year so that everyone has to monitor the rankings obsessively for updates.

But, factors that influence the value of an MBA program actually change very slowly. For example, it takes time for an MBA program to recruit new faculty, build relationships with new post-MBA employers, and raise donations from alumni to support expanded resources for the students. This means that the value of a given MBA program changes slowly, with very, very few events actually justifying a dramatic change over a single year.

So How Can You Find the Best MBA Program?

Once you determine roughly which schools you are qualified to attend, we encourage you to focus on the practical questions that will help you figure out which MBA program will provide value to your career. These are simple, practical questions:

Does the school have relationships with your target employers?

Is the alumni network interesting for your post-MBA career field and location?

Is the curriculum, both inside and outside the academic classroom, going to fill the gaps in your skills and experiences?

Are the faculty and research centers relevant to your interests?

Will you fit in culturally at the school?

Answering these questions will help you find an MBA program that can enhance your career.

David White, Menlo Coaching

David White of Menlo Coaching

David White has been recognized as a top reviewed MBA admissions consultant by Poets&Quants in 2017, 2018 and 2019, and is a founding partner at MBA admissions consulting firm Menlo Coaching. This essay was originally published on Menlo’s website. His 15-year tech career included executive roles at startups (Efficient Frontier, acquired by Adobe) and publicly traded companies (Yahoo, Travelzoo), during which time he hired, trained and developed dozens of young professionals. He has been coaching MBA applicants since 2012 with a special focus on developing the right career goals.


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