Posts Tagged ‘rankings’

MBA Rankings Management

Published on November 23, 2008. 98 Comments

The level of rankings management varies dramatically across business schools.  Since improving a schools rank and quality of education are not 100% aligned, each dean must balance these objectives and set an agenda for the organization.  My thinking is that deans who move up through the academic community are probably more biased towards quality of education than deans who are recruited from industry (e.g., previous CEOs).  There is no clear answer on which philosophy is better for students in the long run, and the best practice is likely some combination of the two philosophies.  For now, I’ll hold off on discussing the pros and cons of rankings management and instead use this post to share some of the practices I have observed at schools focused on rankings.

First, in most instances a school can improve its rank and quality of education with the same action.  Take the IT department as an example.  By providing students with excellent service, the students will provide favorable feedback on the BusinessWeek survey which will in turn improve the school’s rank.  The tough decisions come about when an effort to improve a school’s rank has negative consequences on the school’s quality of education.  Below is a list of such practices that I have observed at different business schools.  To the best of my knowledge, most of these methods are not being aggressively pursued at Darden.

Increase marketing – this is an easy way to improve a school’s selectivity metric, which is a key component for several rankings.  With an effective marketing effort many schools are able to increase the number of applicants.  One school has had recent success with a targeted marketing campaign in India.  My understanding is that the school received significantly more applications from the country yet still accepted the same number of applicants – thus improving selectivity.  The downside of this approach is that by spending more money on marketing there is less money available for other uses.

Increase scholarship money – offering scholarships is an effective way to increase yield.  In addition to the direct rankings improvement from a higher yield, there is a secondary effect from the increase in selectively necessary to maintain a specific class size.  Spending more money on scholarships is one way to increase yield.  Another consideration is how to distribute scholarships.  One top ranked business school provides around 90% of accepted students with a small scholarship of around $5k to $10k.  This is well received by applicants and gives them an additional reason to attend the school.  Another top 25 school has been known to bid for students by increasing the value of scholarship offers as the decision deadline approaches.

Increase focus on research – well published research faculty can significantly improve a schools ranking.  Unfortunately, excellent teaching ability and excellent research ability don’t often go together, and there are very few professors with both skills.  Thus, schools with a strong emphasis on research sometimes suffer in teaching quality.  Some schools relieve their best researchers of the teaching ‘burden’ by providing teaching assistants for use both inside and outside the classroom.

Train students to answer surveys – all rankings use surveys and in some cases they survey current students and recent alumni.  It’s generally against the rules for schools to directly advise students on how to complete these surveys.  However, schools can influence the surveys by helping student groups ‘teach’ other students how to best respond to questions.

Modify class demographics – most rankings consider elements of the class demographics and these elements can be easily altered by admissions.  Some approaches that come to mind include 1) increasing average GMAT, 2) increasing international diversity, and 3) increasing share of students interested in consulting.  While these measures are easy to change, there is often a subsequent negative effect from each initial improvement.  For example, a school might reject a ‘well rounded’ applicant in order to accept an applicant with a higher GMAT score.  This decision may come back to haunt the school if the high GMAT student has trouble finding employment and thus negatively affects the placement statistics at gradation.  Increasing the share of students interested in consulting is an interesting opportunity because this is one of the highest salary industries (bankers have lower salaries and higher bonuses) and the rankings do not adjust for differences in industry preferences between schools.  (I’ve written more on this topic in my MBA starting salary post.)

Schools that focus on rankings management may use these and other techniques to improve the school’s position.  One area worth consideration is how each of these techniques aligns with ones’ goals for an MBA program.  There may be vastly different consequences for someone interested in a top ranked MBA degree compared to someone interested in the quality of their education.

MBA Starting Salary

Published on October 30, 2008. 21 Comments

Attending a highly ranked business school does not guarantee a high starting salary.  There is a relationship between a schools’ average salary and its position in the popular rankings (US News, BusinessWeek); however, a schools average salary is not a good predictor of an individual’s expected salary.  Take Wharton for example.  The employment webpage reports that starting salaries for 2007 MBA graduates averaged $110K with a range of $28K to $392K.  Someone expecting to earn the $110K average at Wharton would probably be a little disappointed with $28K.

Now don’t throw the baby out with the bath water.  In the right context, salary data can be useful in selecting a business school.  To help build this context, you may want to consider the following elements when analyzing salary data:

Compare salaries at the industry level – average salaries vary across industries and the mix of industry placement varies by school.  Consider a student interested in investment banking who is deciding between Darden and Harvard.  At first glance, the average overall salary at Darden is $100K (data) compared with $115K at Harvard (data), indicating that the student may prefer Harvard.  However, the average salary for investment banking jobs is the same for both schools: Darden – $95K, Harvard – $95K.  One contributor to the difference in overall salaries is the larger portion of students who enter into investment banking at Darden than at Harvard (15% vs. 11%), which effectively lowers Darden’s average overall salary.  Therefore, salaries should always be compared at the industry level to factor out the effect of dissimilar industry mixes between schools.

Account for geographic trends – in much the same way that a student body’s industry mix will affect average salary, the geographic mix of jobs will impact a schools average salary.  For example, international jobs tend to have a lower salary and can pull down the overall average.  While probably not a major factor, looking at where students accept jobs will provide a better understanding of the schools’ salary data.

Consider student demographics – a student’s work experience can significantly influence their starting salary.  For example, someone who worked in consulting for 5 years before returning to business school will probably secure a higher starting salary than someone with 3 years experience in an unrelated industry.  Business school can help equalize differences in past experience; however, employers will still offer higher salaries to candidates with more relevant experience.  Thus, attempts should be made to identify the impact of a student body’s work experience on the schools’ average salary.  In light of the qualitative nature of work experience, reviewing a school’s class profile and thinking in terms of directional influences might be the most practical approach.

In consideration of these factors, it seems that marginal differences between businesses schools in average starting salaries (less than $10K) could be fully attributed to differences in student body demographics.  Perhaps a research study could attempt to isolate and quantify the impact of ‘MBA brand value’ on starting salary.  In the meantime, we seem to have overemphasized the importance of business school selection in determining an individual’s starting salary.

Darden vs. XYZ

Published on March 2, 2008. 8 Comments

Last year around this time I was looking for opinions on Darden vs. Duke and Darden vs. Ross.  I applied to these schools in the first round and now had to decide between multiple offers of admission.  Although I had already ranked the schools (my rankings), now that I was accepted I wanted to directly compare my options.  This process was long and agonizing.  I solicited input from dozens of people and scoured the internet for articles on “Darden vs. Michigan” and “Darden vs. Fuqua”.  Here is a summary of the feedback I received:

Close friends and family – This group focused on the towns and communities rather than the MBA programs.  Basically, my friends and family thought I should attend the school where my wife and I would be happiest over the next two years.  Important considerations were my wife’s employment opportunities, the city’s attractiveness, and the community within the MBA program.  Darden was favored here as the employment opportunities in Michigan were bleak and Durham (Duke) is not a very desirable city compared to Charlottesville (see City of Charlottesville Awards).

Coworkers – While applying to business school I was working for a management consulting firm and 90% of my coworkers already had an MBA.  When I solicited opinions of coworkers, each would start by asking me several questions regarding my goals and then focus on helping me identify the programs that fit best with my development needs.  I was a little surprised that none of my coworkers felt one program was any better than the other, and the rankings were never mentioned.

Web search – My search of blog posts and internet forums did not provide much insight.  Many of the suggestions I found focused on one or two data points from the class profile and job placement data.  For example, last week I found a post that recommended school X to an Indian student because it had 35% international students compared to 30% at school Y.  However, in this case I happen to know that the international students at school Y are fairly diverse, whereas most international students at school X are from Asia.  While the data in these online posts is generally accurate, it’s not always relevant.  Also, employment data is biased towards the short term and generally provides very little insight on the long term career benefits of different MBA programs.

In hindsight, I had subconsciously picked my school months in advance and was only trying to reconcile my instinct with all the facts, logic, and opinions of others.  Going through this reconciliation process was valuable as I was able to identify my logical rational for attending Darden such that I could easily explain my decisions to others.  Based on my experience, here are some tips for deciding between business schools.

Trust your instinct– Malcolm Gladwell’s book Blink discusses how our subconscious brain is more effective in making complicated multi-objective decisions then our conscious brain.  The argument is that we can consciously identify the differences between options but do a terrible job of assessing the importance of each difference.  The notion of “fit” is just another way of saying trust your instinct.

Visit the campus – this is the best way to assess how well you “fit” with the school.  When on campus, don’t spend time gathering information that’s available through other sources.  Instead, try to immerse yourself in the culture and gauge how well it “fits” with your own personality.

Don’t put too much weight in others’ opinions – these perspectives are the result of someone else’s goals, development needs, and values.  When asking the opinions of others, try to follow up with questions that identify the underlying rationale of the position.

Forget about the rankings – they do not take individual preferences into account.  Furthermore, they change every year.  For example, Darden’s BusinessWeek ranking has fluctuated between 5 and 14 over the past ten years.

Think both short and long term – don’t make decisions based only on short term considerations such as if your target company recruits at the school.  Getting a job is just the first use of an MBA; make sure to consider the 10-30 year time horizon.

Choosing an MBA Program – Why Darden

Published on January 27, 2008. 7 Comments

My first step in selecting an MBA program was retrieving each of the published business school rankings. I then supplemented these rankings with additional criteria which were important to my decision. Finally, using the MBA program data published by US News, I was able to apply my criteria and weightings to each of the MBA programs and produce the following rankings:

Rank School
1 University of Virginia (Darden)
2 Harvard University (MA)
3 Dartmouth College (Tuck) (NH)
4 Stanford University (CA)
5 Yale University (CT)

The criteria and weightings used to produce these rankings are as follows:

Weight Category
30% Reputation
15% Selectivity
15% Learning method
15% Class size
10% Undergraduate degree
10% City size
5% Placement

Before discussing the weightings, let me provide some background on the originally published rankings and my additional criteria. When I first visited Darden it became apparent that the rankings did not capture many of Darden’s key advantages. For example, almost every visitor who observes a case discussion will agree that Darden offers a superior learning method. However, none of the published rankings use learning method as a criteria when comparing MBA programs. I therefore set about developing a more complete analysis that took into account this criteria along with three others. Here is what I choose:

Learning method – captures the teaching style and mix of learning methods employed by the MBA program. My preference was for programs that maximized the use of cases and active learning methods and minimized the use of lectures. This preference would also favor general management programs over more technically oriented programs (see The What and The How)

Class size – getting to know my classmates and having a sense of community within the program was an important objective, and one that would be significantly influenced by the class size. Within the 20 top schools as ranked by US News, the class size ranged from 171 at Emory-Goizueta to 910 at Harvard. Balancing between the advantages of a small and strong network vs. a larger and inherently weaker network, I gave the maximum score to schools with a class size between 250 and 350.

Undergraduate degree – having an undergraduate degree in engineering and a technical mindset, it was important for me to develop the less technical aspects of my business knowledge. Therefore, I preferred MBA programs that had a lower ratio of students with engineering, math, or science degrees. I was a little surprised at how much the MBA programs varied in this category. Within the 20 top schools as ranked by US News, the percentage of students with an engineering, math, or science degrees ranged from 21% at NYU-Stern to 61% at MIT-Sloan.

City size – in addition to the stronger sense of community enjoyed by schools in smaller cities, my wife and I also have a personal preference for smaller cities. Although this criteria is somewhat independent of the MBA program, the comfort of myself and family over the next two years was an important consideration. Therefore, I gave the maximum score to schools with a city size of under 1 million people.

In order to add these additional criteria the weighting of the original criteria must be reduced. This is fine because the reputation, selectivity, and placement scores suffer from measurement error and in some cases intentional rankings management. These are still good criteria, but should only account for about 50% of the total weighting for the following reasons:

Reputation – the US News reputation metric is based on a survey of MBA school deans and corporate recruiters. One drawback of this survey is the lack of a student perspective, which would provide some balance between the research ambitions of the deans and the teaching quality elements important to students. Additionally, corporate recruiters are concentrated on the first 1-2 years of employee performance, which favors more technical schools over the general management schools which are more focused on the long term horizon.

Selectivity – GMAT score and undergraduate GPA are the primary components of this category. From my conversations with professors and admissions staff, there is a fairly low correlation between these scores and a student’s performance as an MBA student. In fact, some admissions directors have expressed that students with the highest GMAT scores tend to have weaker essays. Admissions offices are constantly confronted with the moral dilemma of maximizing selectivity scores to improve the schools ranking vs. selecting the best student body.

Placement – this category is generally dominated by the average starting salary and bonus of graduating students. This metric can be further broken down to show that the mix of industries students pursue significantly impacts the placement score. In 2007, Darden students who accepted consulting and investment banking positions received about $21,000 more in first year compensation then the students who accepted general management positions. Thus, the placement category often reveals more about career interests of the student body then the schools overall placement effectiveness.