In this episode of Business Casual our hosts delve into the average acceptance rate for the top ten programs. This has recently reached a new high, indicating a shift in the competitive landscape. However, an intriguing twist arises as the number of students enrolling shows a decline. The yield, measuring the percentage of accepted students who ultimately choose to enroll, has thus noticeably dropped. Business schools are adapting by enrolling smaller class sizes, which is reshaping the dynamics of the MBA landscape.

In this episode, our hosts dig into these stats, highlighting notable examples such as Chicago Booth, where acceptance rates have experienced a significant increase. They aim to provide you with a comprehensive understanding of the ever-changing world of MBA acceptance rates and its implications for both applicants and business schools.

Get ready for insights that will reshape your perspective on the journey to your MBA!

Episode Transcript

[00:00:07.130] – John

Well, hello, everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co hosts Maria Wich Vila and Caroline Diarte Edwards. Caroline, of course, is the former admissions head at INSEAD and the co-founder of Fortuna Admissions. And Maria is the founder of Applicant Lab and our resident Harvard MBA. We’re going to talk about acceptance rates. We just ran a story on acceptance rates in last year would be, of course, because we don’t know what the numbers are going to be for this coming year because no one has applied yet, really. And these are us. MBA. Programs that we really looked at. And one of the really interesting things is that the better school saw fairly significant drops in their acceptance rates. Just to give you a quick snapshot of what happened is last year for the top ten US MBA. Programs, the overall average acceptance rate was 22.2%. That’s up from 18.4 the year before, and it’s way up from 14.5 back in 20, 16, 17 years ago. More people are being accepted, and yet yield, that is, the number of people who actually accept an offer and enroll in a school is down.

[00:01:38.510] – John

It’s down to 54% in 2022. Last year. The year before that, it was nearly 58%. And going back a few years back in 2018, for example, it was 65%. So one result of this is that schools have enrolled smaller classes. Many of the best schools, in fact, entered cohorts that were 50 to 40 students less than the year before. And in terms of schools and their actual application acceptance rates, well, Chicago Booth, for example, is an interesting one. The acceptance rate there grew to 30.1% from 22.6. That’s an increase of a third. That was the biggest jump in the admin rate for any top ten school. So, Maria, what do you make of these numbers?

[00:02:33.490] – Maria

It’s funny, I almost want to stop saying things like, well, last year sure was an anomaly because every year for the past three years has just been a more anomalous anomaly than the anomaly before. What I think might have happened last year, just off the top of my head, why were the acceptance rates so much higher? Well, it’s because the number of applicants was lower. And I think that it’s because last year, 2022, the world was, quote unquote, reopening again. A lot of businesses were going back to you have to start coming back into the office. We’re going to start gearing up again to sort of pre pandemic working styles and workloads. And I think a lot of employers, realizing that a lot of talent was not into going back to work, they started sweetening the deal by offering retention bonuses or salary increases. Right. Because the war for talent at some point last year was really a top of mind thing for a lot of companies. And so I think a younger person considering business school might say, well, gee, I was going to go to business school to get an X percent increase in my salary or to get that promotion to that higher level of management.

[00:03:51.390] – Maria

But my employer just offered that to me anyway, if I stick around. So why would I forego a year or two of salary? And why would I do the tuition? I think a lot of people were getting, if not post MBA equivalent job opportunities. They were certainly getting much sweeter job opportunities than what they had had before. And so I think in that environment, looking at the MBA versus staying in your normal job, I think that the MBA lost its luster. And so that’s why I suspect the numbers were down.

[00:04:21.480] – John

Yes. Caroline, your take.

[00:04:23.780] – Caroline

Yes, I agree. So I think that it was a combination of factors. So post Pandemic, as Maria said, a more favorable job market, which means that it’s a less attractive environment for people to quit their job and go back to graduate education. So we know that the MBA market is countercyclical and people are more inclined to head to business school when the job market is not so great, because that could be a good time. If you’ve been laid off or you’re not getting a promotion that you were hoping for, you’re not getting the next job offer that you were hoping for, that could be a great time to go back to business school. And conversely, if you are getting those opportunities, then you may be less inclined to quit and invest in your education at that particular time. So I think it was a combination of the strength of the job market, which has since weakened, of course, but also we did see a deluge of applications during the Pandemic, and so I think it was a hangover after that. The MBA market is cyclical.

[00:05:27.750] – Maria

Right?

[00:05:28.350] – Caroline

I saw that at NCI. Looking at the application volume over the decades, there are cycles that correlate with the economic cycle. The Pandemic was an unprecedented shock, which created just turned on a tap of applications which we’d never seen before. And so some of those people might have applied a year or two later. Has the pandemic not happened?

[00:05:54.560] – Maria

Right.

[00:05:54.850] – Caroline

So effectively, you pulled forward some candidates to a certain point in time, and they applied during that period, whereas they might have applied a year or two later had the pandemic not happened. And so they weren’t applying last year. Right. They were applying the year before because of those particular circumstances. The pipeline had diminished because of that effect. But I do think that the pipeline is now increasing. So I think that these numbers will turn around a bit for this year when we see the next round of statistics from the schools.

[00:06:32.890] – John

Yeah, and I think these numbers confirm what we had been saying all along during last season’s admission cycle, that now is the time to apply because fewer people are actually applying to business school. And I think it needs to be pointed out that, let’s face it, it’s still not easy to get into a great school. So, sure, at Stanford, the Admin rate went from 6.2 to 8.6. Big deal. There’s an awful lot of people who are getting rejection slips with an 8.6 acceptance rate. And at Harvard, 12.6 the year before, and now it’s 14.4. So over 85% of the people who applied the Harvard Business School last year got rejected. And the same is true at MIT, where the admit rate was 14.8%, almost equal to Harvard, and it had been 12.1% the year earlier. So, yes, these rates are up in some places. They’re up a lot more, like a Chicago booth, which I mentioned before, was 23 and has over 30, or a Kellogg, which was 26 and now is over 31. But by and large, it’s still hard to get into these schools. You still need really good application with a good profile to surmount the odds because you are in a very competitive place.

[00:08:03.050] – John

One of the weird things about the data that we’ve discovered is that many of, like, the second tier schools actually became more selective. And I’m not sure why that would be so, but if you look at a number of schools, including Rochester Simon, their acceptance rate actually went down, which I would not have expected. Indiana Kelly, their acceptance rate went down. So Emory went from 53% to 37%, washington Olin in St. Louis from 34 to 26. So it’s not all down. And you wonder how come the second tier schools, many of them actually had lower acceptance rate. I know that, of course, class size has shrunk, so that had played a role in this. But Maria, can you guess as to why this would be the case?

[00:09:06.510] – Maria

I mean, if I had to guess, I would say maybe what happened is that perhaps people who were applying really were committed to the process, and maybe they decided that they were going to try to spread the risk around instead of only applying to one or two programs. Maybe they said, well, I’m going to also throw in applications to an Emory or Washington Olin in order to just be sure that I’m spreading my risk. And so perhaps those schools saw some increases in applicants along with what you mentioned before. I do know that some schools were talking about and in fact implemented smaller class sizes in anticipation of lower applicant numbers. So it could also be some combination of those two things. But it’ll be fascinating. I’m not sure, maybe you, John, someone on your team, one of your intrepid detectives on your staff, can start digging around and really trying to get to the bottom of this, because it really was when Caroline mentioned that, it was quite an observation. And I was like, wow, that’s surprising.

[00:10:09.400] – John

You look at Rutgers, 44% the year before and down to 26%. Now that’s a real head scrub. Now, I wonder if in fact, in 21, because of what happened in 2020, with COVID and many international students unable to start the program because of visa restrictions or travel restrictions, schools just really bumped up their acceptance rates in 2021 and then brought them back to a more normal state in 2022. At least the second tier schools. That could be one possibility, but wow, that is just a weird, weird state of affairs. Caroline, do you have any explanation for it?

[00:10:56.260] – Caroline

Yeah, I think we’d need to look at the longer term trend. Right. As you say, John, we’re looking at acceptance rates for 2021 versus 2022, and so we don’t have that pre pandemic data to compare it to. And it may be possibly that they were harder hit by the Pandemic than the very top schools. And so now that they’ve recovered, their acceptance rates have gone back possibly to the level that they were pre pandemic. So I think we need to dig into that pre pandemic data. But I’m glad that you asked, Maria, before you ask me.

[00:11:38.110] – Maria

You’re welcome, Caroline, anytime.

[00:11:43.970] – John

Let’s attribute it to smaller class size and let’s attribute it to an overcorrection on the Pandemic affected admission cycles in 2021. I think that can only be the possible explanation. But then why would the top ten in the best schools in a ranking at least have the opposite effect? And that is just weird. Just totally weird. That’s just amazing. So what do we expect in this coming year? Because many of our listeners are busy preparing their applications for round one, which will come soon enough in September, or they’re about to begin once they take a little break for their summer. What do you think is going to happen, Caroline?

[00:12:33.640] – Caroline

I think we’ll see an increase in applications in the coming season due to particularly layoffs in various industries, particularly finance and tech. So we’ve seen an increase in inquiries this year compared to last year. So I think that’s indicative of a turnaround in the market that started to happen around the very end of last year. So I think it’s very much linked to the job market and firms that employ young professionals who are very ambitious and potentially very good candidates for business school, who have hit tougher times and therefore have been laying people off or not able to offer them the opportunities that those young professionals would otherwise hope for. And therefore, now is a great time for them to apply to business school.

[00:13:24.500] – Maria

Maria, I almost don’t want to make a prediction because every time I predict something, I’m like, well, we’ve been talking we’ve been talking about a recession now, right? Remember it was like, oh, there’s going to be a recession in 2022, and then it didn’t really happen, but then it sort of started happening, but it happened too late to really impact applications. So I don’t know, I think that it’ll go up again, as Caroline said, because I do think that we are starting to see substantial layoff. I think the ones in the smaller regional banks that are struggling in the wake of Silicon Valley bank collapse, and perhaps some of those banks might be shedding employees who might not be easily able to find other work. In particular, I know a lot of tech people have also been laid off, but there do tend to be maybe not first choice type jobs, but tech. Tech employees, I think, do often tend to find work a little bit more easily perhaps than someone perhaps working at a smaller regional bank. I also think not to segue the conversation, but I also wonder if the release of the newer GMAT, the GMAT Lite, might help.

[00:14:29.030] – Maria

And I think, John, you might have to key this up for you, but I think you mentioned that GRE is also responding with perhaps a shorter version of the test. I wonder if less onerous testing options that are being announced right now might start enticing people into the application process. Because as we know, oftentimes the thing that tends to dissuade people the most is the thought of either taking the test or spending the dozens or hundreds of hours it takes to prepare for the test.

[00:14:59.070] – John

Yeah, that’s really interesting. So the GRE is really going to be cut down dramatically, just as the GMAT was. But the GRE test will now take less than 2 hours to complete, which is roughly half the time of the current test. GRE is removing the analyze an argument task in the analytical writing section. It’s reducing the number of questions in the quant and verbal reasoning sections, and it’s removing the unscored section of the test. Among other things, they’re going to promise to give test takers their official scores in just eight to ten days. Previously it was ten to 15. In other words, they’re really trying to reduce the friction of taking the test and applying to a business school. And that also should have, to some degree, some effect on people applying because the general belief is that standardized tests does hold people back because it takes longer for them to have to prep to get a good score. And as we know, for years the scores have been going up in the class profiles. So even though you have some schools that are test optional or some schools granting waivers, still most of the highly ranked, highly selected schools still require standardized test.

[00:16:24.410] – John

The fact that it’s going to be easier to take it and incidentally, presumably easier to study for it since it’s not as long, could actually open the doors to a lot more potential applicants. Caroline, you think that’s true too?

[00:16:39.380] – Caroline

Well, I’m sure that’s what the test administrators are hoping for in terms of turning around the test volumes. And I’m sure that’s the hope of the schools as well, that it will make it easier for people to tackle the test and therefore lower that barrier to entry to applying.

[00:16:58.860] – John

Yeah, interesting.

[00:16:59.930] – Caroline

Yeah, it seems probable, right? So it looks like it would be less intimidating as a test. So hopefully that would encourage more people to apply.

[00:17:12.330] – John

And the GRE, the shorter GRE will be available to actually take and sit down on September 22. So I believe that actually beats GMAT to market because I think the shorter GMAT test is while you can register for it by then, it might take until the fourth quarter to actually come about. Wow, interesting stuff. I, too expect applications to go up, but not by a lot. I think that the layoffs will put more people in the market for graduate degrees. And while some of them can bounce back quickly from a tech layoff, I think the layoffs have now gone through the entire economy. So you’re seeing more people who are in that perfect window of age, 25 to 28, who may have lost their job. Or the other thing that happens when you see layoffs is people who are in the workforce and doing okay start to think about, well, look, this company has very little loyalty to people that it hires, and next time it could well be me, so I’m going to go out and get some protection through a graduate degree. And we know from the research that people who have higher level degrees tend to be laid off a lot less than those who don’t.

[00:18:45.410] – John

So even if you’re not laid off, there’s also an impact psychologically on those who keep their jobs and then become more willing to go and quit and get a graduate degree almost as insurance for their future careers. So I think we’ll see an increase. I don’t think it’s going to be really dramatic because we don’t have, at least until now, thank goodness, a full fledged recession, which is what really typically drives a significant increase in applications. But it will probably become slightly more competitive next year as we enter this new admission season in September. Well, there you have it. If you want the nitty gritty detail on those acceptance rates as well as yield, which I find fascinating. I didn’t mention this, but this is worth mentioning. A year earlier, Stanford for the first time, had a better yield rate, significantly better than Harvard. Harvard bounced back and had a yield rate this past year that was better than Stanford’s, actually, significantly better. And yield is something that admissions directors really look at closely. Am I right, Caroline?

[00:20:02.260] – Caroline

Absolutely. Schools work very hard to increase their yield, and they monitor it very carefully because, of course, fluctuations in the yields make it very difficult to craft the class. Because if you have wild variations in your yield, how do you know how many students to admit to your class? And of course, if you’re admitting people, you really want them to attend your school and not go to your competitor school, and you want to admit the best people have the best students from your pool coming to your program and not deciding to go elsewhere. So schools have greatly increased their efforts to woo their admitted candidates and make sure that they attend their program and that they don’t go somewhere else. Yes. So they do monitor that yield. That is a critical KPI for the admissions office.

[00:20:52.050] – John

And at Harvard last year, the yield was 85.5%, which meant that only 15% of the people who actually were accepted decided not to go. In some cases, that’s for personal reasons. Something crops up, you get an immediate increase in responsibility or a new assignment that you really want to fulfill. Decide at the last moment, no, I’m not going to go. Or maybe there’s an illness or something. Or maybe the most plausible reason, of course, is you were accepted by another school that you preferred over the one that accepted you. And at Stanford, incidentally, it was 80.3. So 85.5 at Harvard, 80.3 at Stanford. Yale, interestingly enough, is 38.8, which just shows you a lot of people who are applying to Yale are also applying the Harvard, Stanford, MIT and other schools. And when they get in, they seem to prefer those schools for whatever reason. Fascinating numbers, though. Tells you a lot about where schools are, who’s in demand, who’s not. And I love these numbers and eat them up because I’m in the weeds. I’m a little bit of a nerd about all this stuff, frankly. So, Caroline and Maria, thank you so much for your analysis.

[00:22:15.710] – John

And for all of you out there, good luck applying. While these rates may go up a little bit next year, we don’t think they’re going to go up a whole lot, so that probably bodes somewhat well for many of you. Good luck.