By Martin Schatz, Ph.D

(reprint by permission of Management Research News 16(7), 1993, pp 15-18)


The ranking of business schools has been a controversial subject for a number of years. It is only recently, however, that they have become popular with the press, publicized and generally accepted. As a matter of fact, one of the principal reasons for the rankings has been the ability of the articles to boost the circulation of the magazines.

There are two basic problems associated with the popular rankings of MBA programs. The two seem to be self-contradictory, but they nevertheless still exist. The first problem is that people foolishly tend to believe that there is significance to the order in which the schools appear. The second problem is that the rankings tend to become self-fulfilling prophecies. Theoretically, the ultimate outcome of these two problems will be the creation of a list of elite schools through the redirection of qualified students and faculty to these institutions, followed closely by recruiters from the corporate world. It won’t matter what - or how well - the schools teach.

Let’s take a look at the two most popular rankings: Business Week and U.S. News & World Report. Business Week reportedly bases its rankings on two factors: a survey of recent graduates from the schools being evaluated, and a survey of corporate executives. It also reports some objective data about each school, such as GMAT (Graduate Management Admission Test) scores, salary of graduates, percentage of applicants accepted, and size. The magazine does not, however, reveal what role these data play in the ranking. Their claim to credibility is the statistical analysis of the questionable data. But to paraphrase the computer term of GIGO (garbage in – garbage out), a good statistical analysis of the wrong data yields bad results. The methodology used by Business Week would not rate a passing grade in any of the schools that the survey ranks, and not even at those that were not “good” enough to be included in the analysis. Of some 700 colleges and universities in the US that offer the MBA degree, Business Week pre-selected 44 schools to be included in their survey! Anything they did with the data after that first decision is irrelevant if there is not a valid way of selecting the initial group of schools. And if there is some validity in their pre-selection process, maybe they could rank all 700 schools, instead of just the top twenty, or the 44 they started with.

The second flaw in Business Week’s methodology rests on the premise that business executives know anything at all about the quality of business schools. As a matter of fact, it is probably safe to say that most of what the executives do know is from reading earlier issues of Business Week. It is also likely that, at best, the executives evaluate the education received by the graduates of these schools on the basis of one or two individual graduates whom they happen to know, rather than on any extensive research. This raises the question of whether the reputation for school quality should then be based on the quality of an individual graduate of that school. Such a system would lead to a “king of the hill” challenge process, not unlike the David and Goliath battle where each side chooses one warrior to determine which army would be victorious. In modern-day competition, perhaps we could have an MBA version of the popular quiz programs Jeopardy or College Bowl. The rankings would then be determined by the order in which the schools’ representatives finished in the competition.

Judging the quality of a school on the apparent popularity of the graduates raises even more questions. Isn’t it likely that a very large school that is not particularly distinguished will turn out more successful graduates who are visible than a very small school with higher standards and expectations for its students, but nevertheless has far fewer graduates? Also, how many of the executive respondents knew graduates from all the schools included in the survey? If the unlikely answer to this latter question is “a substantial number,” then another question becomes relevant. Why not base the ranking of schools on the percentage of graduates from each school that meet some level of acceptable performance? Facetiously, we could devise a scoring system that awards point based on the percentage of graduates who are subsequently rated to be outstanding and good employees, and even subtract points for those who turn out to be duds. Then, of course, we would have to penalize those schools that mass-produce unemployable or under-employed graduates.

To carry the absurdity a little further, if we are really basing the quality of the school on how good its graduates are, let’s get to the heart of the matter. Let’s talk about who is admitted to the schools. It has long been believed by a number of people that the top business schools ensure the success of their graduates by admitting only those students who are guaranteed to be successful no matter which school they attend. Or, for that matter, they will be successful whether or not they receive an MBA. Actually, both Business Week and U.S. News & World Report border on recognizing this by using student selectivity as a screening criterion; they seem to place more significance on the issue of the number of students who are accepted. In both cases, what they are really measuring is not only the difficulty of the school’s admission standards, but also the school’s ability to attract a high number of applications from unqualified applicants.

U.S. News & World Report added to its survey procedure a ranking of the schools by the people who should know: the deans of the 270 MBA programs accredited by the American Assembly of Collegiate Schools of Business. There are problems with that logic. First, based on the very high turnover rate of business school deans, a good many deans are new to the job (approximately ten percent each year) and don’t yet know very much about their own school. Second, except for the few visits that a given dean may take to other schools - for the purpose of evaluating them for continued accreditation - even long-standing deans don’t really know much about more than a handful of schools. And finally, there are no criteria. Even if it’s possible for some deans to say “I know that School A has a more productive faculty than School B when it comes to academic publication,” that same dean may feel that School B has a better student body than School A. The U.S. News & World Report survey did not allow for such fine-tuning.

What all the rankings want to do is understandable; it may just not be possible. They want to measure a number of factors that they think are important, then statistically weight these factors and emerge with a single number depicting the overall quality of the school. U.S. News & World Report includes undergraduate grade point average, average GMAT score, the school’s acceptance rate, and enrolment yield as components of the Student Selectivity criterion. To determine Placement Success, they measured the percentage of students employed after graduation, the ratio of graduates to employers recruiting on campus, and the average starting salary. Each of these factors can be objectively measured, and each of them might well tell something interesting about the school, but it certainly does not reveal the quality of research and teaching that goes on in the school, nor the quality and use of the facilities and equipment. And most of all, it does not measure the culture and values of the school, which are of crucial importance.


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