An Examination of MBA Rankings

I thought it would be useful to begin a more in depth examination of MBA rankings for GMAT Clubbers. If you are looking for a scathing indictment of the concept of rankings, you will not find it here. Rankings serve a useful purpose as long as one does not take them too seriously.

A few key ideas

1) Clusters tend to provide a better understanding of the relative standing of schools than forced floor to ceiling rankings

2) Examine the methodology of rankings to make sure they are consistent with your own methodology. Better yet, find a methodology that most nearly captures the perspective of actors whose views you value.

US News

US News is a well known rankings, but generally seems to hold a lower status in the US than BusinessWeek's rankings.

First, there are a number of serious questions about the response rate and mechanics of the survey. Let's set them aside for now.

One of the elements that is disconcerting about US News is the peer review ranking which has a nominal weighting of 25% of the total score.

"In the fall of 2005, business school deans and directors of accredited master's programs in business were asked to rate programs on a scale from "marginal" (1) to "outstanding" (5). Those individuals who did not know enough about a school to evaluate it fairly were asked to mark "don't know." A school's score is the average of all the respondents who rated it. Responses of "don't know" counted neither for nor against a school. About 50 percent of those surveyed responded."

Now comes the obvious question- what business school professor in her right mind honestly believes that (say) Harvard, Kellogg, and Wharton deserve anything less than a 5? It seems far more likely that the professors who gave the leading schools lower scores are confused, deluded, or purposely underrating schools.

Next take a look at the mean starting salary which nominally accounts for 14% of the total score.

"The average starting salary and bonus of 2005 graduates of a full-time master's program in business. Salary figures are based on the number of graduates that reported data. The mean signing bonus is weighted by the proportion of those graduates that reported a bonus, since not everyone who reported a base salary figure reported a signing bonus."

Note how there is no reported adjustment for the cost of living in different regions of the US. To stress the obvious, a low salary in NYC or Boston can easily be a generous one in Dallas or Columbus, Ohio. Even a relatively small adjustment for schools in less expensive major metros can easily change ranks of schools.

Another large component of the US News ranking is based on student selectivity (nominally 25% of the total score). Some 16.25% of the total score comes from the mean GMAT score. While there is a some connection between the average GMAT and quality of a school, we should not automatically assume that it is a strong connection.

There are a number of ways that schools can post a high GMAT mean that have little to do with prestige. The most obvious is just select students with the highest GMAT. Since we are using the mean just a few students with very high GMAT scores can have substantial influence on the average. Another important point to keep in mind is the difference between perceived value and prestige. Public schools that charge low in-state tuitions will tend to attract students on the basis of value but not necessarily prestige. Students from outside the state that are not eligible for the in-state tuition would often make a different choice. This might explain the presence of some of the public institutions on the US News list of top schools. To be clear, I am not stating that these are inferior schools, just that they might not rank as high as they appear to rank if we focus on the price-independent reputation of the school.

Another component of the overall score is the mean undergrad GPA.

Mean Undergraduate GPA (.075)
The average undergraduate grade-point average of those students entering the full-time program in fall 2005.

This component is very easy for schools to game- A good starting point is to fill your class with students from "easy" majors from schools with high levels of grade inflation. The underlying idea that GPA are directly comparable across schools is actually a pretty disturbing and unrealistic one- a 3.3 from (say) Caltech probably represents more of an achievement than a 3.5 from many other schools.

Agreed abt GPA...

In Singapore, we didnt have any GPA system! It was grading - hons, 1st class etc etc!

Good analysis Hjort, the US News rankings have made me scratch my head a bit over the years.

I've always felt that they do a great job with the top schools, but as you pointed out, they tend to overrate mid-tier public schools based on perceived value rather than overall prestige of the program.