UNDERSTANDING THE NEW WALL
STREET JOURNAL B-SCHOOL RANKINGS
By Dominic Basulto
Perhaps the single greatest factor
used in judging the relative strength of a business school is the so-called
ranking. While the primary focus has been on the Business
Week biannual rankings, other business publications such as the Financial
Times, The Economist and now, the Wall Street Journal, have produced
new rankings that promise an authoritative rating system for top MBA
programs. These rankings from the Wall Street Journal released in late
April 2001 are perhaps the most controversial rankings ever released
for business schools- resulting in prestigious MBA programs such as
INSEAD, IMD, Columbia, London Business School, and Stanford falling
out of the Top 20. While some B-schools that ranked in the Top 10 (Dartmouth,
Yale, Michigan, Kellogg, Chicago, Harvard) consistently perform well
in all B-school rankings, there were also a number of new entrants that
were somewhat surprising: Purdue, University of Texas, and SMU. How
is this possible - and what does it mean for applicants in both the
application process and the recruiting process?
DECONSTRUCTING THE RANKING SYSTEM
Every B-school ranking system results from a mathematical
formula that assigns a weight to various factors, which
in turn are given a numerical value. In such a way, two major components
determine the final ranking - the weight (or value) placed on each factor,
and the selection of factors. In theory, some factors will favor certain
B-schools, while other factors will favor yet another group of B-schools;
only MBA programs with broad strength in a number of areas will receive
the highest rankings. Thus, it makes sense that different ranking systems
will produce different leaders. In most polls, an attempt is made to
sample a broad range of factors, both quantitative and qualitative.
However, the Wall Street Journal ranking system was
created solely on the basis of recruiter responses, under the assumption
that MBA graduates are basically products that are purchased
by recruiters. Within this framework, the Wall Street Journal constructed
a consumers ranking based entirely on the opinion
and experience of recruiters, ignoring completely such factors as average
GMAT score, strength of alumni network, average starting salary, and
intangibles such as student satisfaction. Only factors related
to recruiting were included in the final mathematical formula for ranking
the B-schools.
It would be similar to a ranking of the leading Russian
manufacturers of chocolate, in which the only opinions that counted
were those of the people who eat chocolate. Companies that make good
chocolate are rewarded, and companies that dont are not. Moreover,
people who do not consume chocolate would not be asked their opinion.
The opinion of the suppliers and distributors of the chocolate would
not be important. It would not matter what the previous years
net income was at a chocolate company. And it would not matter whether
a company had recently installed a technologically superior new machine
for making better-tasting chocolate.
While the WSJ poll sampled 27 different factors, such
as the strength of the B-schools career placement office and the
strength of the core curriculum in producing talented managers, the
bottom-line is that what is important to recruiters may not be important
to incoming students. For example, recruiters consistently rated faculty,
curriculum, and academic prestige as the least important factors when
choosing to hire students from a particular B-school. In general, recruiters
favored smaller B-schools (incoming classes between 200-400 students),
a collaborative and supportive team-based learning environment, and
real-world projects rather than academic theories. Moreover, recruiters
routinely punished business schools that tend to produce arrogant, aggressive
individuals with no team-based skills. Thus, INSEAD fell to #33, London
Business School fell to #39, and Stanford fell to #45.
PERCEPTIONS INFLUENCE AND SHAPE RANKINGS
One take-away lesson from the Wall Street rankings
is that in the world of elite business schools, image matters. And moreover,
image is a constantly shifting factor that can change rapidly. Recruiters
may choose to boost their allocation of new MBA hires based on their
perception of the business school, or conversely, reduce their intake
of MBA graduates from a particular program.
For instance, the technology boom in the U.S. during
the late 1990s has had a tremendous effect on the image of Stanfords
Graduate School of Business. When the technology market surged, companies
in the Silicon Valley region (located close to Stanford in Northern
California) were eager to hire bright young MBA graduates, pay them
outrageous salaries (usually with stock options or partial equity ownership
of the company), and allow them to work in creative, fast-paced work
environments. However, as the technology boom slowed and actually reversed
itself, Stanford has paid a steep price. Recruiters at many U.S. blue
chip companies now avoid Stanfords MBA graduates, viewing them
as arrogant, unrealistic about salary expectations, difficult to retain,
and impossible to lure away from the sunny climate of California. As
a result, Stanford plummeted to #45 in the rankings, given this recruiter
dissatisfaction.
In fact, some recruiters interviewed for the Wall
Street Journal survey on business schools consistently noted that sometimes
it is more advantageous to focus recruiting efforts solely at second-tier
business schools, where students are less arrogant and more willing
to accept lower salary packages. While B-schools such as Purdue and
SMU will no doubt report an increase in applications and recruiter presence,
it does not mean that Russian applicants should stampede to apply to
traditional second-tier B-schools. It does mean, though, that these
B-schools may be an excellent safety choice for a candidate
not able to attend a B-school such as Harvard or Wharton.
THE LINK BETWEEN RECRUITING, RANKINGS, AND ACCEPTANCE
RATES
The reality is that business schools must pay attention
to an important client base- the recruiters. After all, without an impressive
recruiting program, it would be impossible to attract the best applicants,
and without the best applicants, the ranking for the B-school would
plummet. Thus, it can be expected that the Wall Street Journal ranking
will have some impact on the acceptance profiles of incoming students.
After all, if recruiters wont hire aggressive, individualistic,
high-achievers, then the B-school wont accept them.
Consider again the example with the Russian chocolate
makers. If a chocolate manufacturer finds that Russians no longer love
a particular brand of chocolate, should it continue to produce this
chocolate? If consumers consistently complain to customer service representatives
that a particular brand of chocolate is too sweet or too bitter, will
the manufacturer change the output? The answer (according to economic
theory, anyway) is YES. In much the same way, if B-schools decide that
recruiter satisfaction should be the primary component for judging themselves,
then they will act to accept students that will appeal to recruiters.
So what appeals to recruiters? And more importantly,
to admissions officers? From a broad cross-section of results, it appears
that recruiters are most favorable about the following traits: teamwork,
a strong work ethic, analytical and problem solving skills, interpersonal
skills, and
humility. As one recruiter at Harvard Business School
remarked sarcastically, Some seem to expect to be CEO within two
years. Thus, applicants should emphasize their success within
a broader framework of team-based or corporate success.
CONCLUSION
In the final analysis, the different B-school rankings
are important, but they should be realized for what they are -- an attempt
to place a value on something (an MBA diploma) that means different
things for different constituents. In B-school jargon, there may or
may not be goal alignment between recruiters, faculty, students,
and business school administrators. Moreover, realize that the notion
of ranking universities and graduate programs is a relatively new innovation,
which originally began as a way of increasing magazine sales. Recent
controversy over what should (and should not) be measured by the rankings
even led one university official to declare about the system of rankings:
It is the most successful journalistic scam I have seen in my
entire adult lifetime. A catastrophic fraud. Corrupt, intellectually
bankrupt and revolting.
Dominic Basulto is a 1998 graduate of Yale School
of Management and currently works as a consultant for Pericles ABLE
(American Business & Legal Education) in Moscow. Pericles offers
a full MBA advising program. For contact information, please call: 292-5188/6463.