Turning Madness Into Order: Ranking The Many Contradicting MBA Rankings

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Forbes says the full-time MBA program at the University of Stanford is best. BusinessWeek say it’s the University of Chicago. U.S. News & World Report has yet another answer: Harvard Business School and Stanford in a dead tie.Say what you will about the lack of consensus on what constitutes the best MBA program in the U.S., but at least three different areas of the country—east, west and mid-west—can claim a No. 1 business school. Meantime, British-based publications seem to prefer MBA-granting institutions not based in the U.S. at all. The Economist claims the best school in the world is IESE in Spain, while the Financial Times begs to differ, preferring London Business School in its backyard. When The Wall Street Journal did an annual ranking, it often put Dartmouth’s Tuck School at the top.

How is it possible that the five major rankings of business schools all have different winners at the top? The different methodologies employed for these rankings have as much if not more to do with where the schools place rather than the actual quality of the institution or the MBA experience. The general problem with most rankings is that they measure what is easy to count, largely statistics on average GMATs and GPAs, starting salaries and bonuses, rather than what really matters. The latter is harder to get at, but essentially what is more important is whether you think the cost of the degree is worth the time and effort.

I created BusinessWeek’s ranking system 22 years ago. I’ve visited the campuses of well over 100 business schools. I’ve interviewed hundreds of deans, faculty, and students. I’ve also studied the core competition.

The post was originally published on PoetsandQuants.com and has been republished with permisison.

1. BusinessWeek

Pros and cons

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)

Pros and cons

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.

3. U.S. News & World Report

The magazine ranks U.S. schools every year, using a vast amount of information and data that ultimately pots Harvard Business School in the first spot. The methodology takes into account its own survey of b-school deans and MBA directors (25% of the score), corporate recruiters (15%), starting salaries and bonuses (14%), employment rates at and shortly after graduation (14% to 7%), student GMATs (about 16%), undergrad GPAs (about 8%), and the percentage of applicants who are accepted to a school (a little over 1%). If you want a ranking that pretty much includes all the obvious factors of quality, this is your best bet. In it's latest survey, released in mid-April of 2010, U.S. News ranked 97 schools. The latest top five in the 2010 survey has Harvard and Stanford tied as number one and Chicago and Wharton tied at number five:

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

Pros and cons

Pro: U.S. News puts a good deal of effort into the ranking, cranks it out on an annual basis, and measures a lot of different factors that are clear indicators of quality. There are a lot of ties in its ranking of schools (four schools, for example, are tied at rank 33, while another four are tied at rank 40). That's to be applauded because U.S. News is acknowledging that the differences are so small among these schools that it would be intellectually dishonest to say one is better than the other.

Con: About 60% of the ranking is based on data supplied by schools who therefore have plenty of reason to present the information in the best possible light to get a better ranking. There's no way to independently check or audit the data provided by business schools. The ranking is completely U.S.-centric when there are many non-U.S. schools with better programs not listed at all. Finally, some of the ingredients in this ranking stew seem a bit silly: Why even bother to include the percentage of applicants accepted when you weight it at little more than one per cent?

4. Financial Times

This 2010 ranking is the 12th year the Financial Times has ranked the best MBA schools. The winner: London Business School. The ranking is based on data collected from business schools and from alums three years after graduation. This survey includes responses from 8,001 alums of the Class of 2006 those most of the results are combined with two previous class surveys. The ranking also includes a research component, weighted at 10%, counting papers written by the faculty of each school in 40 academic journals during the past three years. For my money, it's the best all-inclusive global ranking of the top 100 business schools, far better than The Economist list.

  1. London Business School
  2. University of Pennsylvania (Wharton)
  3. Harvard Business School
  4. Stanford University
  5. Insead in France and Singapore

Pros and cons

5. The Economist

This is probably the most flawed, if not downright silly, of all the MBA rankings cranked out by a major media brand. The magazine is now up to its eighth annual ranking of full-time MBA programs. The ranking is based 20% on student and alumni surveys and 80% on data provided by the schools. There are some incredibly peculiar results in this ranking, which raise significant credibility issues. Pretty much no one in business education would agree that IESE is the best business school in the world or that Berkeley is better than Harvard, Dartmouth or Stanford. Or consider The Economist's ranking for the University of California at Los Angeles. The Economist ranks this school 50th behind Boston University, University of Texas at Austin, and Georgetown University. Yet, BusinessWeek and U.S. News & World Report rank UCLA's business school at 14th and the Financial Times puts it at 33. The Economist list ranks 100 top schools.

  1. IESE Business School in Spain
  2. IMD in Switzerland
  3. University of California--Berkeley (Haas)
  4. University of Chicago (Booth)
  5. Harvard Business School

Pros and cons

Pro: Takes a global perspective on business school education.

Con: The odd results of this ranking raise meaningful credibility issues with the methodology and the accuracy of the data some of these schools are providing to The Economist. Because 80% of the ranking is based on unaudited information from business schools, there's a high likelihood that some data has been fudged. The Economist also throws into its ranking formula criteria that has little to do with the quality of education, such as the percentages of international and female students (giving these two questions alone nearly a 17% of the weight in the ranking), the range of overseas exchange programs (a 6.25% weight), and the number of languages offered (also given a 6.25% weight). That latter would be something more appropriate to undergraduate education.

6. The Wall Street Journal

This prominent business newspaper ranked full-time MBA programs for seven years, but stopped regularly doing an annual ranking with the September, 2007, list, probably because its flawed methodology led to quirky results and significant criticism. We're ranking it nonetheless because many schools (especially those faring quite well on the list) still include this ranking in their marketing materials. The Journal ranking was conducted by pollster Harris Interactive which surveyed recruiters on 21 different attributes, including students' leadership potential and strategic thinking, their previous work experience, the faculty and the curriculum, and the career services office.

Thank goodness the Journal had the sense to drop out of the ranking game because this one was so flawed it lacked all credibility. The top five in the last full-time MBA ranking by the Wall Street Journal:

  1. Dartmouth College (Tuck)
  2. University of California--Berkeley (Haas)
  3. Columbia University
  4. Carnegie-Mellon University
  5. Massachusetts Institute of Technology (Sloan)

Pros and cons

Pro: It's simple to understand, measuring only the views of the recruiters who come to campus to hire MBAs.

Con: The Journal got its list of recruiters to survey from the business schools, which provided the newspaper with the names of the actual recruiters, who showed up on campus. Most major MBA recruiters, however, send alums back to their schools to interview candidates. If you merely survey the recruiters who visit a particular school, you're surveying entirely biased people. Would a Wharton MBA who recruits only Wharton students rate his or her school poorly? Not likely. In fact, what happened is that single companies that recruit MBAs would get numerous votes in the Journal survey--each from the alum of the school they recruit from. The result: this was less a ranking of the best business schools and more a ranking of the loyalty of a school's graduates who happen to recruit MBAs at their alma maters. Dartmouth's Tuck School placed first in this survey four times largely because its small graduating classes and intimate educational setting make its alums more loyal than those from Harvard, which shockingly ranked 14th, or Stanford, which just as shockingly ranked 19th. In the years that the Journal did this study, it would tell readers that it surveyed more than 2,000 recruiters. Problem is, there's less than 300 companies in the world that actively recruit MBAs from enough schools to make a legitimate judgment about the quality of the institutions and the MBAs they produce.

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