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Stanford Tops ‘Modernized’ Businessweek MBA Ranking

Thursday 8 November 2018, by John A. Byrne

Stanford tops the 2018 Bloomberg Businessweek MBA ranking followed by Wharton, Harvard, MIT Sloan & Chicago Booth

On the 30th anniversary of the Bloomberg Businessweek MBA ranking, something happened that had never occurred since 1988 when the magazine began ranking business schools: Stanford University’s Graduate School of Business is in first place. On the inaugural list, Stanford was ninth. To capture the top prize in the U.S. this year, the school moved up four spots from fifth last year.

It’s just one of many changes on the topsy-turvy list this year, made even more volatile due to substantial changes in the way Businessweek is ranking full-time MBA programs. In fact, Bloomberg Businessweek decided not to provide readers comparative scores from last year’s rankings because it said “the new ranking methodology is different from the one we’d used in previous years.”

But comparisons are inevitable. After all, only 12 months ago Bloomberg Businessweek ranked the vast majority of these same schools with as much authority as it does today. And year-over-year comparions, by the way, are not only eyebrow raising, they are also somewhat embarrassing. Just among the top 25 U.S. MBA programs alone, the University of Virginia’s Darden School of Business jumped eight spots to land in ninth place. Duke University’s Fuqua School, once the beneficiary of an earlier change in methodology that boosted the school’s MBA program into first in 2014, slipped nine places to rank 15th. Dartmouth College’s Tuck School of Business plunged 12 spots to 19th, while the MBA programs at Georgetown and Vanderbilt Universities gained big ground, rising 15 and 13 places, respectively, to 20th and 21st.


Stanford GSB claims first for the first time ever

Those wild swings make this year’s top five look boring. After Stanford, the University of Pennsylvania’s Wharton School took second honors, followed by No. 3 Harvard Business School, No. 4. MIT’s Sloan School of Management, and No. 5 University of Chicago’s Booth School of Business. Harvard, the GSB’s perennial East Coast rival, slipped out of first, a place it occupied for the past three years from 2017 to 2015.

Over the 30 years since the debut of Businessweek’s original ranking, the MBA degree became the most popular graduate degree in America. More schools thn ever offer the credential, though applications in recent years have declined at many U.S. business schools. One telling difference: In 1988, Wharton MBAs drew average starting salaries of $55,183, a sum that was just 60.3% of the $30,880 tuition they paid over their two years in the program. Last year, average starting salaries ballooned to $137,717, but total tuition of $153,160 now exceeds first-year salaries. The far more limited debut ranking placed numerical ranks on the full-time MBA programs at 20 U.S. business schools. Kellogg School of Management led the list, followed by Harvard, Tuck, Wharton, and Cornell (see table below).

In this first go-round of the new 2018 ranking, Businessweek assessed only U.S. schools. On Dec. 11th, the magazine will publish a global list, combining U.S. and non-U.S. MBA programs on a single ranking for the very first time. Before this year, Businessweek would publish separate U.S. and international rankings in the belief that its methodology was not easily transferable across vastly different cultures and regions.

The magazine’s editors have put considerable effort behind what can only be called a relaunch of its ranking. After a lengthy listening tour with B-school stakeholders, they reinvented the methodology, organizing round four building blocks: compensation, learning, networking, and entrepreneurship. Besides the overall ranking, the magazine publishes the index scores and rank for each school in all four categories (see table on how the top 25 schools scored).


They gathered responses from 10,473 students who graduated from Oct. 1 of 2017 through Sept. 30 of this year, up 11% from 2017; 15,050 alumni who graduated from Oct. 1 of 2009 through Sept. 30 of 2012, an increase of more than 50%, and 3,698 employers who have recruited MBAs at business schools in 2016 and 2017, a fivefold jump in respondents from last year. The rankings of 92 U.S. MBA programs are based on their responses, as well as year-old compensation and job-placement data from each school.

The result of all this effort? Well, it’s as entertaining as it is informative. Nearly 40%, or 33, (39.3% to be exact) of the 84 schools that appear on both this year’s and last year’s lists experienced double-digit gains or falls. Ten of them, in fact, advanced or declined by 20 or more places. That compares to a mere six schools with double-digit changes last year and just 18 in 2016. If you include the eight newcomers to the list and where they landed, more than 40%, or 36, (42.4%) of the 92 ranked schools would have had to jump or fall in double-digits.

The champagne corks will surely be popped today at Howard University, up 30 places to rank 60th from 33rd from 63rd; North Carolin State, up 23 spots to 47th from 70th; San Diego, which climbed 21 steps to place 60th from 81st, and Utah, up 20 to finish 36th from 56th. Conversely, the Kleenex tissues may be needed today at SUNY-Buffalo, which plummeted 32 places to 78th from 46th; Texas A&M, which had a free fall of 27 spots to rank 49th from 22nd; Oklahoma, which skidded 26 places to 79th from 53rd; Michigan State and Illinois, which both slipped 24 spots to rank 53rd and 69th, respectively.


What can cause that kind of unusually high volatility? Certainly, the major changes in methodology are largely to blame. But like all rankings, the underlying scores behind each numerical rank are often so close as to be statistically meaningless so inconsequential changes that can result from the size of a survey’s sample or a tiny difference in starting salaries can cause outsized changes in rank.

Readers of rankings rarely consume the footnotes and explanations of methodology that results in a school’s actual rank. And this year, the few who wander into that explanation are likely to shake their heads at the complication in Businessweek‘s new methodology, an approach so complex that it is hard to explain why one school is up or down, even in double digits.

“Rather than assign weightings ourselves, as most rankings do, we took an approach recommended by several of the business schools we spoke with: Let the stakeholders decide,” explains Caleb Solomon, Bloomberg senior editor. “To do this, we surveyed students, alumni, and recruiters to learn what was most important to them. Their answers determined the weightings of each of our new indexes. Then, based on our survey results and compensation data, we calculated overall rankings.”


Of all the four ‘indexes’ by which schools are ranked, the clearest explanation for what Businessweek is doing occurs in the compensation category where Businessweek is putting 38.5% of the weight on (there’s 27.9% on networking, 23.1% on learning, and 10.5% on entrepreneurship). For compensation, the editors are placing a 25% weight on survey questions and the remaining 75% on figures provided in surveys and year-old employment reports from business schools (even though 2018 data is pretty much available).

The 75% component consists of median salary after graduation (weighted 30%), median alumni current salary (22.5%), percentage of students seeking employment who were employed within three months of graduation (11.25%); percentage of students reporting salary information who received a bonus (5.625%), and median sign-on bonus (5.625%). For non-U.S.-based schools, local compensation figures were converted into U.S. dollars on or near the data collection cutoff date, but salaries were not adjusted for purchasing power parity. The only data Businessweek is sharing is median starting salary in comparative tables. At Stanford, which finished first in the compensation index, it was $140,000 last year.

This approach puts significantly more importance on pay and placement. Last year, the rough equivalent of this category placed a 30% weight on these metrics vs. this year’s 38.5%. It weighed starting base salaries, adjusted for variations across industries and regions, at 10%, the increase in alumni compensation above pre-MBA levels 10%, and job placement three months after commencement at 10%. By deciding against using purchasing power parity and dropping last year’s region adjustment, non-U.S. schools will likely lose standing when Businessweek combines all the schools in the new global ranking in December.


The post Stanford Tops ‘Modernized’ Businessweek MBA Ranking appeared first on Poets&Quants.

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