In today’s highly competitive business world, MBA rankings play a crucial role in determining which business school to attend. However, the methodology used by ranking organizations has come under heavy criticism in recent years. In this episode Business Casual, our hosts explore the flaws of the US News MBA ranking and the impact it has on students, schools, and the business world at large. This episode delves deep into the inner workings of the ranking system and provides valuable insights for prospective MBA students and business schools alike. 

Whether you’re a prospective MBA student or a business school administrator, this podcast episode will shed light on the ranking system’s inner workings and help you make informed decisions.

Episode Transcript

[00:00:07.050] – John

Well, hello, everyone. This is John Byrne with Poets and Quants. And my co hosts Maria with Villa and Caroline Diarte Edwards. Of course, this is Business Casual, our weekly podcast. Caroline, as you well know, was the former Director of Admissions at INSEAD and is now an admissions consultant and a director of Fortuna Admissions, where she was one of the founders. And of course, Maria is our favorite Harvard MBA grad of all time, and she is the founder of Applicant Lab. We are here to do another one of our rankings analyses. We have a new ranking from US news and World Report. This is among the more interesting US News and World Report rankings, and I’ll tell you why. For one thing, the ranking organization actually delayed the release of this ranking by a full week after sending an embargoed copy to the deans and receiving sort of an outpouring of protest and complaint. Most of those complaints, I believe, in fact, came from law and medical schools, many of which wanted to boycott the ranking. But US News ranked them anyway by getting data from publicly available sources. There was no such boycott in the business school arena.

[00:01:28.230] – John

Nonetheless, we got our hands on what US News sent the schools a week before the release. And there are some dramatic differences between that list and the list that was ultimately published. There is no explanation from US News as to how some of the schools changed the rank in one week. But that’s just one of many mysteries. The number one school this year is a repeat Chicago Booth, which last year tied Wharton for number one. Number two is Kellogg, which had been number three last year. Wharton slid down two spots to three. MIT is next, even ahead of Harvard at five. And now Harvard has been fifth in this ranking for three consecutive years. The big surprise among the top ten is Dartmouth Tuck. Dartmouth Tuck, which was outside the top ten last year, moved up five places to number six, ahead of Stanford. Stanford fell three. In fact, three prominent schools fell three places in this ranking. Stanford down to six. But then, interestingly enough, Columbia and Berkeley both down three and out of the top ten. Rounding out the top ten is Michigan at eight, el tied at eight with Michigan and then NYU Stern at ten.

[00:02:56.470] – John

The one thing that you always know about rankings is you’re going to find people who love them and people you hate them. So I’m imagining if you’re at Chicago booth, you’re loving this ranking. I’m imagining that if you’re at Stanford, you’re completely ignoring it. And if you’re Columbia or Berkeley, you can’t believe you’re not in the top ten, and you know the whole damn thing is ridiculous. Which one of you want to go first on your thoughts?

[00:03:23.580] – Caroline

Well, it is quite a dory, as you say, John, and it’s interesting to read through your articles analyzing the differences as a methodology here. I think schools don’t change dramatically from year to year, right? So it’s kind of crazy to shuffle everything around so much from one year to the next. And frankly, we all know that publishers do that to make a story, right? And to drive traffic and attract eyeballs, et cetera. So if they just publish the same list year after year, then it wouldn’t get any attention. So they need to make a story. But I think they probably got more stories than they bargained for with this one. I’m sure that they’ve had a bigger backlash than they had anticipated with this. But there’s no perfect methodology, right? You’re never going to have a methodology that keeps everybody happy. And I think to me, the value of some of these rankings is the data collection that they do. And I would encourage candidates to dig into those various data tables behind there and figure out what is important to them as an individual. And that can be a very useful data source as candidates think through what are my criteria and what is important for me and what is going to be a good fit for me.

[00:04:58.350] – Caroline

And I would discourage candidates from just looking at those headlines and just looking at the bare facts of that list and taking that as God given truth, right. An MBA is a very complex proposition, right. There’s so many things that go into making an MBA experience, and you cannot distill it into a fixed number of criteria and data that will perfectly represent the quality of a program. And as I said, what suits one person and what is important to one person will be different to another candidate and another student. So it’s a bit of an artificial exercise to start with. And frankly, for the schools, it’s often very frustrating that people care so much about the rankings, right. As you said, schools can get very excited when they do well in the rankings, but they’re also very keenly aware that you should be careful not to celebrate too much one year because you don’t know what’s coming next year. It’s better not to state your reputation on a ranking, right? So it’s a game that the schools kind of have to play, but with gritted teeth.

[00:06:26.190] – John

Indeed. And one of the things you didn’t mention, that I would have expected you to mention, is that this ranking is totally US centric in a world that is very global, particularly the business school community. And that is one major handicap. And even worse, I’m going to just point this out they changed the methodology so that if a school had more than 50% of their enrolled students who are not from the United States, the school gets penalized. So, in effect, this ranking is going to have the really unintended consequence of limiting enrollment of international students at second tier schools. Which is a shame, because as we said here year after year now domestic applicants have been in a severe decline for a number of years. That decline has been made up by a lot of international candidates, many of whom, frankly, are more qualified to attend these programs than some of the domestic applicants that apply. And now us. News has put together a formula that basically discounts students who are international. And I’ll tell you how they do that. They’ve decided that if you’re an international student and you don’t have a 4.0 GPA on your undergraduate transcript, you can’t count that GPA.

[00:07:48.070] – John

And so that is a real big problem, because if in fact, half your or more than half of your international students are in that incoming class, basically those GPAs go out the window and only the domestic GPAs are counted. And then there’s some other adjustment that’s made. So that, in fact, if Chicago Booth had a 60% enrollment of international students, their average GPA for the class would go from something like 3.7 to 2.7. Whiz. Bang. There it goes in the black box. There it comes out. No one knows what really happened, but in any case, it’s not a real number. Maria, don’t you love that?

[00:08:33.040] – Maria

My favorite thing that I love more than real numbers are numbers that are based on completely arbitrary cut offs. So when you were talking about the penalty for the schools that have less than 50% of American students with 4.0 GP, I mean, why 50%? Why not 75%? Why not 20%? It was just such a weird you almost feel like they got some weird results perhaps the first time around, and then went back and said, Whoops. Well, this didn’t quite give us what we were hoping for, so let’s just play with that little number in Excel and see how things show up if we end up changing it. I was initially excited when I heard that the US news was changing its methodology, because as we have said many times before on this podcast, they are all flawed methodologies, and they had had so much outcry with their law school rankings. And so I was excited because I thought, oh, they’re going to take into account what the ecosystem and what the MBA community has to say. And it was really funny because I was reading your article and you said, well, except they didn’t really consult with any of the business school deans in terms of these changes that they made, and I think it really shows.

[00:09:45.740] – Maria

So I was excited when I heard that they were changing the methodology, but then when I saw the changes that they made, I thought, oh no, this is going backwards. This is worse than it was before. And I was sort of cackling to myself, I thought to myself, if US. News were making instead of making an MBA ranking, if they were making a rocket ship and the rocket ship blew up, this is a random hypothetical example, but if the rocket ship blew up four minutes after launch, right? And you go to us. News and you’re like, hey guys, you can’t have a rocket ship blowing up after four minutes. They’re like, okay, yeah, totally get it. How about if we make one that blows up after 10 seconds after launch? And you’re like, no, you’re going in the opposite direction. And so for me in particular, one of the things that I thought was just a real banging my head against the wall was the increase in the importance of the GPA. Not just the international stuff we were talking about, but in terms of like, it’s now 10% of the ranking versus before it was seven and a half.

[00:10:46.020] – Maria

And then the reduction of the GMAT and GRE scores, which used to be sort of 16ish percent, and now it’s 13%. And I understand that in a post COVID world, schools are going test optional, et cetera, et cetera. But as we have talked about ad nauseam here, at least the tests are standardized. Something like a GPA is in fact, not only I think it’s a nonsensical number to even look at because someone with like a 3.1 in electrical engineering from Cal Tech probably frankly has a lot more brain power than someone with a 4.0 in comparative navel gazing from online correspondence school. So it’s such a silly thing to look at GPAs to even weight them at all, I think, because they don’t say anything at all about someone’s academic prowess or their intellectual horsepower, and they made it more important. I don’t even know what to do anymore.

[00:11:47.480] – John

Yeah, it’s true. And I should point out that what they made more important as well is the career outcome piece of this. So starting salary and bonus and then employment at graduation in three months. Those three metrics are now 50% of the weight of this ranking. They have been 35%. And what was diminished is a very controversial piece. It’s their so called peer assessment survey, where they send out surveys to deans and senior faculty members and essentially ask them to rate the schools. And there’s been a long suspicion that’s little more than a popularity contest, if you’re filling out the survey, you’re going to rate your own school very highly. There’s no evidence that us. News actually even corrects for that. And more importantly, what do you know about what goes on at other schools, particularly hundreds of other schools or even dozens of schools? You probably don’t even know what’s going on in your own school, never mind elsewhere, to be able to rate them. So this long held suspicion is that people just take out the previous year’s ranking and more or less follow that well, they diminish that peer assessment ranking. They also diminished to some degree, although less so.

[00:13:04.460] – John

Their corporate recruiter survey, which frankly is from all that I know, it’s not a very good credible survey because of the way it’s done. Not enough due diligence is performed on that survey. And I can guarantee that most of the really good firms that recruit the bulk of MBAs don’t even fill it out. And actually to support that, US News doesn’t even give a response rate and doesn’t even tell you how many of those surveys it sends out, which is a real journalistic no no, and really to me evidence that it’s a garbage survey. So they did diminish that a little bit as well. All these changes, incidentally, do result in even more variation than is typical year over year. And say what you will about the peer assessment survey, which I am no fan of, incidentally, but it was a stabilizing anchor on some level because it prevented more movement than otherwise would occur in this ranking because of the very big changes. And in fact, I believe these are the biggest changes US News has ever made in the MBA ranking since it first came out back in 1989. You see a lot of movement in this ranking.

[00:14:23.650] – John

It’s very topsy turvy. One school actually fell by over 40 places, even though nothing at all has changed. It’s just kind of pretty remarkable, to be honest. Caroline, though, what do you think about this? Penalizing schools with more than 50% of the international student body?

[00:14:47.210] – Caroline

Well, yes, the mind boggles, right?

[00:14:51.060] – John

What do they want?

[00:14:51.710] – Caroline

They want schools to stop admitting international candidates. Great. I mean, apply to there’s a lot of wonderful international schools.

[00:14:59.160] – Maria

They can go to India.

[00:15:00.020] – Caroline

They can go to London Business School. Perhaps they shouldn’t be applying to the top US schools. Is that what they’re saying? I mean, it’s extraordinary. I really don’t get it. And of course it penalizes a lot of schools who are actually admitting probably a lot of the international admits actually have much higher GPAs than some of the American students.

[00:15:20.740] – Maria

Right?

[00:15:21.290] – Caroline

Domestic students.

[00:15:22.740] – John

Absolutely.

[00:15:25.030] – Caroline

It’s a double whammy.

[00:15:26.390] – Maria

Right.

[00:15:26.780] – Caroline

Because they’re being penalized by having that percentage of international students. And then actually those international students are probably coming in with actually higher GPAs than the domestic students.

[00:15:40.410] – John

That’s definitely the truth.

[00:15:41.870] – Caroline

It’s really unfair, especially in the second.

[00:15:44.110] – John

And third tier arena where they’re having more trouble with domestics because the fewer domestics in the pipeline are being scooped up by higher ranked schools. So when you do pick international applicants, you’re going to pick them with they’re going to be very qualified, you’re going to have high GPAs. And then here’s this other issue. This class, in terms of the career statistics that are in this report, is the COVID class. So if you had a lot of international students and many of them weren’t able to get to the program on time because of visa restrictions or travel issues, that meant they actually started the MBA program little later than they typically would. And they took their early classes online, which affected their ability to get a summer internship and all that we know about recruitment at the MBA level. A summer internship for many of these two year programs is absolutely essential because it lines you up for a full time job offer. So then you have this extra whammy put on you if you have international students being this COVID class that may have had a little bit more difficulty landing that job offer after graduation without an internship.

[00:16:58.720] – John

And so then you have your career stats falling apart because this is the worst possible time to change your policy on employment in the ranking because it’s the COVID class. So lo and behold, some of these schools really got whacked and whacked severely in a way that I don’t think anyone expected because no one knew about these changes to the methodology and how they would in fact impact the ranking. Okay, what do you make of Dartmouth Tuck being ranked higher than Stanford? Maria, would that convince you if you were an applicant to both these schools and you were accepted to both to go to Dartmouth over Stanford?

[00:17:46.070] – Maria

No, it wouldn’t necessarily. But in fairness to Tuck, I just hate winter, so that’s a big part of it. But even separating out my ecosystem and temperature preferences, as we’ve talked about before, these are just rankings that are meant to get people talking. Caroline was bringing up this point even earlier in today’s discussion. This is not something that I think is really credible. And as you pointed out in the article, one of the big things that the rankings is really paying even more attention to now is that post MBA salary and the percentage of the class that is employed three months after graduation. And so places like Harvard and Stanford have relatively lower numbers because the students are choosier, because the students are not in a panic, because they know that if they really, really want a certain job, they are willing to hold out for it. They are willing to wait six months. They are willing to take an unpaid internship in their field of whatever their field is that they want to get into. They are willing to do these things in part because they have so many opportunities open to them, in part because I think the career services offices at these schools emphasize that your career is a marathon, not a sprint.

[00:19:04.600] – Maria

And so you might want to make a decision. You might want to join a startup right out of business school that maybe pays you a lot less than what it would otherwise pay, but maybe in the long term that ends up being the smartest decision you could have made. I think that that emphasis on the employment three months after graduation, this was another one that had me sort of banging my head against the wall. Was that’s a metric? That doesn’t necessarily mean anything, right? I could, as a career services office, put the fear of God into people and say, well, you’re not going to get any job offers after April 5. So you better take whatever’s on the table. And I don’t care if you hate it. I don’t care if you quit after three months and have a nervous breakdown. Who cares? I just need this US news ranking number to be higher. I mean, it’s silly. It’s really a myopic viewpoint, but you.

[00:19:52.530] – Caroline

Do it so well, Maria. I think that should be your next career move.

[00:19:59.550] – Maria

It’s going to be my side hustle. Yeah, it’s silly. It’s penalizing schools that have a higher quality student body. What? Crazy talks.

[00:20:14.010] – John

Yeah. And if you think about it, okay, even by all the metrics, okay, so Stanford is the most selective business school in the world. Number one, Stanford has the highest GPA, average GPA for its incoming class. Stanford has the highest medium. There are a few schools that are tied for 740 with Stanford, but if you look to the average, the Stanford average is higher than any other school. Stanford pay, starting pay, and bonus is higher than any other school this year except Harvard. And the difference is negligible. And of course, their peer assessment score and the corporate recruiter score is above Dartmouth. So the only way they lose is by US news changing the methodology so that employment at three months after graduation and at graduation loom large in the methodology. And that’s exactly where, as Maria points out, Stanford MBA doesn’t compare as favorably with Dartmouth. But in every other single metric that’s measured out of the eight metrics, Stanford beats Dartmouth on, let’s see, six of eight and loses on two. And yet Stanford is below Dartmouth Tuck. Just to even put a little ribbon around why those stats are low. Yes, it’s a self confidence of students.

[00:21:46.870] – John

Yes, they’re doing more individual searches instead of just taking what comes across the transom when the mainstream MBA recruiters come. And yes, they place more people as a percentage than any other business school in the world in venture capital and in private equity. Two places where no one does mainstream recruiting. It’s all one on one. It’s a job search. They don’t hire on a specific MBA recruiting schedule. It’s just in time hiring and it’s network hiring. And Stanford kills everybody percentage wise, in the numbers of people who go into those two highly lucrative fields. But guess what? They don’t have the orientation in June or May for the incoming students because that’s not how they operate. They don’t have that many positions open. They’re that selective. So for all this, Stanford gets penalized, which just is insane. But here’s the problem. People look at the ranking and they don’t know what’s behind it. And some people who are misinformed or uninformed entirely will take it for granted and not know that there is a reason why this occurs. And it’s largely due to methodology designed by some mindless journalists who knows little to nothing about business education.

[00:23:16.430] – John

But I will agree with Caroline that there’s a lot of interesting data in here, including the salary and bonus data, the GMAT data, the acceptance rates, which incidentally, are all up, as we would have expected and we’ve reported before based on the decline in applications last year. But still, fascinating reading, fun to talk about and always controversial. Maria and Caroline, thanks so much. And for all of you out there, take a look. We have already four stories on the site. On the ranking, we have our ten biggest surprises story, our overall analysis. We have a piece on the part time MBA ranking that US. News came out with. Berkeley, incidentally, was number one dislodging Chicago booth, which had been number one before. And we have a piece on the rankings on the specialty masters programs. So pretty complete coverage. And guess what? We don’t put it behind a paywall so you can actually see it and read it for free. I love that. All right. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual.