Should MBA Programs Make The GMAT & GRE Optional?

GMAC headquarters in Reston, VA

THE GMAT IS BIG BUSINESS: TEST OPERATIONS AT GMAC BRINGS IN NEARLY $80 MILLION ANNUALLY

It’s a big question–and a somewhat terrifying one for the Graduate Management Admission Council whose primary existence is to administer the GMAT exam. GMAC’s test operations brought in nearly $80 million of the council’s $95.4 million in total revenue in 2018, the latest year for which figures are available. That is also a drop in the bucket compared to the overall revenue of the ecosystem of test prep classes, software platforms and tutors that exists to boost one’s scores. Overall, students and their parents spent a record $1 billion on test prep services last year, according to one study.

The best argument for the exam is that it offers admissions staff reasonable confidence that an applicant can get through the core MBA curriculum, even though everyone agrees that does not require a GMAT score of 700 or above. “GMAT and GRE scores help to predict an applicant’s ability to take on the rigor of full-time MBA courses,” believes Soojin Kwon, director of MBA admissions and the MBA program at the University of Michigan’s Ross School of Business. “They are an objective and verifiable component of our evaluation.” Besides, Kown maintains, moving to a test-optional strategy may have unintended consequences. “While some candidates may view it as removing an obstacle to admission, it could be a disadvantage, For example, for candidates without business backgrounds or quantitative majors since there won’t be an objective data point that demonstrates a candidate’s potential for academic success in an MBA program.”

In the past, however, critics have questioned the validity of the GMAT test itself. In earlier years, GMAC has conceded that the GMAT can predict less than 17% of the variation in these grades on average. Some independent researchers have put the percentage much lower, at between 41 points before they indicate a difference in the abilities measured by the test. The upshot: A business school cannot rely on the test to determine the better qualified of two students whose scores are 530 and 570. GMAC believes the exam is predictive of a candidate’s ability to handle the core curriculum. “Business schools are looking at a global diverse pipeline and for over 65 years the GMAT has successfully helped evaluate a wide spectrum of admissions decisions in a common measure,” said Vineet Chhabra, senior director and head of the GMAT product at GMAC. “GMAC constantly performs rigorous validity studies to refine the perspective schools gain into how well a candidate will perform in their program and helps candidates gain insight into how well they’ll perform in the classroom. Further, nearly 30% of recruiters leverage the GMAT score in their recruiting process.”

A test-optional admission policy, however, doesn’t mean an applicant cannot submit a GMAT or GRE score. Nor does it indicate that an admissions staff is lowering its standards. Darden, for example, is telling applicants who apply without a GMAT or GRE that “meeting only one criterion is insufficient to receive a test waiver” and that “any waiver be supported by substantive evidence.”

DARDEN’S NEW TEST-OPTIONAL POLICY REQUIRES APPLICANTS TO PROVE THEIR ACADEMIC ABILITY

One obvious “criteria” would be an applicant’s undergraduate transcript. But the admissions staff at Darden will comb through your transcript looking for your performance in analytical coursework to make sure you can handle the quant in an MBA program. An engineering major’s GPA would obviously count more than an English major’s grades.

Darden also notes that if you don’t submit a test score, your grades will loom larger in an admissions decision. The average undergraduate GPA for the Class of 2021 at Darden is 3.5. “So to be ‘strong,’ your undergraduate GPA would likely need to be higher than a 3.5,” according to Darden. “How much higher? Once again, it depends. Being granted a waiver means meeting more than one of the criteria outlined, and the stronger the case you make (both generally and by criterion), the more likely you are to receive a waiver.”

The full criteria for a test waiver?

A strong undergraduate and/or graduate record, including performance in analytical coursework or disciplines
CPA or CFA designation or other professional certification
Master’s or advanced degree in an analytical discipline
Seven or more years of progressive, professional work experience in an analytical field
Strong performance on a U.S. college admissions test (SAT or ACT) or a national exam administered for admission to bachelor’s study in other countries

‘THE MOST SHOCKING SURPRISE FOR US WAS HOW CLOSE TO IRRELEVANT THE GMAT WAS’

Dawna Clarke, Darden executive director of MBA admissions

Evaluating an MBA candidate in the absence of a GMAT or GRE score is likely to be more time-consuming. After all, admissions would have to place greater reliance on other aspects of a candidate’s application. It requires more due diligence as well as a broader assessment of a candidate’s academic abilities, agrees Clarke, executive director of admissions at Darden.”It is time-intensive on the part of our team,” she notes. “It is high touch. The way an admissions committee assesses leadership or work experience is quite broad. But historically the way admissions committees have assessed academic preparedness has been limited to GPAs and standardized tests. We are broadening the criteria. We are not making a statement against the tests. The majority of our applicant pool will still submit them. But this moves acknowledges that there are many other ways to prove your academic ability. If we deny a waiver, we will offer a counseling session for any applicant who requests it to explain why.”

Darden’s new policy also underlines the fact that standardized test scores may not be as predictive as many believe. Five years ago, the University of Toronto’s Rotman School of Management did an extensive study of the admission files and employment outcomes of more than 1,000 MBA graduates at Rotman over a five-year period from 2008 to 2013. The research found that the GMAT was essentially worthless in predicting the employability of the school’s graduates—even though that is exactly why most students enter an MBA program.

“The most shocking surprise for us was how close to irrelevant the GMAT was,” said Kevin Frey, then managing director for the full-time MBA program at Rotman. “The one proviso is that GMAC has never claimed the GMAT exam is predictive of employability. It’s predictive of your ability to perform in the program. But schools that are just trying to measure how their applicants will perform in the classroom are measuring the wrong stuff. We have a moral obligation to these students. They are going to invest a quarter of a million dollars into this degree. When we accept them, we need to feel very confident they are going to get the career outcomes they want. But the GMAT cannot be used as a proxy for employability.”

“What shakes out are a set of five variables that are significantly predictive of employment,” he says—and not one of them is the GMAT. “It’s an exciting finding because the whole industry pivots around the GMAT and it was at best marginally significant. We don’t have hard statistical confidence the GMAT actually matters at all and if it does, it doesn’t matter very much. It had a very small effect size.”

‘WE DON’T BELIEVE THAT ANY SINGLE INDICATOR HAS A MONOPOLY ON EXCELLENCE’

What does matter? The five most significant warning signs that an applicant is most likely to be an employment risk, in order of importance: