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It's Thursday morning in Huntsman Hall, and students in T-shirts and jeans are filing into Nicholas Souleles' Finance 101 class. It's the kind of class that, at another school, might take place in a cavernous 500-seat auditorium, with students doodling in their notebooks or texting each other from the back row. But this is the University of Pennsylvania's Wharton School. Here, the class is made up of just 25 sophomores, most of whom Souleles knows by name. And to a person they're so attentive that not a single one has even peered out the window during the entire 90-minute session, despite the beautiful spring weather outside and the driest of topics inside: exchange rates. In fact, the students are transfixed by Souleles, who paces around the room aiming his rapid-fire questions at one victim, then another, brandishing a cheap metal pointer like a conductor's baton to draw their attention to the screen at the front of the room.
Souleles, who always dresses in a dark suit and tie, is one of the most popular professors on campus, and it's easy to see why. Unlike professors at some other universities, who let teaching assistants do much of the heavy lifting, Souleles never does. Between classes, he takes students out for lunch to get to know them better. The textbook makes only a brief appearance early in the course. For the most part, Souleles relies on his own smarts and the pedagogical value of current events to keep his students engaged. In short, he treats the 19-year-olds in his charge as if each one were the only 19-year-old in his charge.
It's the kind of personal attention that landed Wharton at the top of BusinessWeek's inaugural ranking of the nation's best undergraduate business programs. But the school's merits go well beyond that. To succeed in the ranking, which incorporates five measures -- of student engagement, postgraduation outcomes, and academic quality -- schools must be firing on all cylinders. Clearly, Wharton is, landing in the Top 10 on four of the five ranking measures. Small classes, talented faculty, top-flight recruiting -- and a four-year format that allows its ultracompetitive students to delve deeply into business fundamentals -- lofted Wharton to the No. 1 position. "They are extremely accomplished students," Souleles says. "It doesn't get any better."
Wharton celebrates its 125th anniversary this year and for much of its history has been considered among the nation's finest. Like many top schools, it has the best of both worlds: a high-quality undergraduate business program and an MBA program ranked No. 3 in BusinessWeek's 2004 "Best B-Schools" list. Indeed, nine of the Top 10 undergraduate programs have highly ranked MBA programs as well.
In many ways then, Wharton's showing among the undergraduate schools simply confirms its preeminent status. But the new ranking also shows just how much good company Wharton has these days. Schools that had never been thought of as top business programs, such as No. 18 Lehigh University's College of Business & Economics, turn out to deserve more recognition. And schools that have always enjoyed a solid reputation, such as Emory University's Goizueta Business School and the University of Notre Dame's Mendoza College of Business, come in among the top five -- and in many ways rival Wharton for the mantle of best undergraduate B-school in America.
That fact underscores a curious transformation that has taken place in higher education in recent years. As the economy rebounded after the dot-com bust, students have been drawn to college business programs, and recruiters, seeking to ramp up their diminished ranks of middle managers, have followed. Under increased pressure from students and recruiters, business schools have revamped their offerings, putting more emphasis on specialized classes, real-world experience, and soft skills such as leadership. Once a refuge for students with poor grades and modest ambitions, many undergraduate business programs now get MBA-like respect. For many graduates, these programs are now so good that the MBA is almost beside the point, an academic credential for career switchers and those with corner office dreams but unnecessary for mere mortals.
The undergraduate business degree is now clearly on the path to respectability. With 54% of employers planning recruiting trips to undergraduate campuses in 2006 and undergraduate hiring expected to surge by 14.5% -- its third consecutive double-digit increase -- starting salaries for grads in all majors are rising. But business majors have fared better than any other discipline, with starting salaries up more than 49% since 1996, compared with 39% for engineering students and 29% for liberal arts grads, according to the National Association of Colleges & Employers. The typical business grad now earns $43,313, about $8,000 less than engineering students can expect. But for undergraduates at top schools, the average can easily exceed $50,000.
Hot to Hire
Even with rising salaries, recruiters are relying on undergraduate degree holders to fill more jobs. In just three years, Microsoft Corp. (MSFT) has increased its recruiting on college campuses, including some MBAs, by 60%. Defense contractor Raytheon Co. (RTN) plans to hire nearly 1,200 new graduates this year, and 3 out of 4 will be from undergraduate programs. To keep the talent pipeline full, Raytheon maintains close relationships with 26 campuses, assigning executives to each school to work with key professors to identify the best job candidates. Even so, with Raytheon's business growing at a double-digit clip, the company plans to recruit from 120 schools this year, according to Keith Pedon, senior vice-president for human resources.
It's not just Raytheon, either. When the Big East career fair took place at New York's Madison Square Garden in March, there were 81 companies pitching to 1,000 students, and organizers had to turn away 50 more companies for lack of space.
For a better understanding of the shifting landscape of undergraduate business education, BusinessWeek last year undertook an extraordinary research project. The goal: to rank the best college business programs in America. Among other things, the project included a survey with Boston's Cambria Consulting Inc. of nearly 100,000 business majors at 84 of the best U.S. colleges and universities, a second survey of college recruiters, and a third survey of the business programs themselves. If one thing emerges from the data, it's that the programs are, in a sense, all grown up and evolving in ways that mimic the developmental arc of the MBA itself.
Like graduate B-schools, the undergraduate programs are separating into two clearly discernible tiers, with the 50 programs in our ranking standing head and shoulders above the rest. They're also dividing along the same philosophical split that now partitions the MBA world. There are those, including many at or near the top of the list, that are following a rigorously academic model, with a heavy emphasis on economics, statistics, finance, and accounting. Programs like Wharton's fall into this group, which generally do not require -- or give credit for -- internships, even though many students get them on their own. They also use MBA teaching methods such as case studies, simulations, and team projects.
But at the great majority of business programs, students are exposed to less business theory -- too little, in the view of some experts -- and a heavy dose of practical training. A quarter century ago, virtually every business program in America followed the latter model. At top schools that's no longer the case. "What you're seeing is a polarization," says Barbara E. Kahn, director of Wharton's undergraduate business division. "This is different from what it was 25 years ago. It wasn't the academic experience it is today."
Few schools typify the scholarly approach more than Wharton, which landed in the No. 1 spot largely on the strength of its academic quality. But the same could be said for any of the schools near the top of the list. At No. 2 University of Virginia's McIntire School of Commerce, students said the two-year format left them two additional years to explore the school's numerous offerings but made for a tough course load in the junior year and a pressure-cooker atmosphere in which many thrived. At No. 3 Notre Dame, rigorous classes requiring teamwork skills and an intimate knowledge of economics, calculus, and corporate strategy earned the school a high grade for teaching quality. The curriculum works ethics into most classes, requires that half of all coursework be in nonbusiness subjects, and emphasizes group projects.
One reason undergraduate business programs are getting better is because the labor market is demanding it. To make graduates desirable to recruiters, many business programs have begun making changes. Several schools that had two-year programs, including No. 21 University of Southern California's Marshall School of Business, have begun admitting freshmen in recent years. Such moves permit students to take demanding business courses earlier, making them more competitive internship candidates. Students are eagerly embracing these and other changes. When No. 15 Washington University's Olin School of Business, a four-year program, began offering a career management elective to sophomores in 2004, more than 70 students showed up, and a second section had to be added.
Many schools have taken a page from the MBA playbook and have begun offering specialized programs. One, at No. 40 University of Georgia's Terry College of Business, is for aspiring music moguls. Another, at Lehigh, combines computer science and business. This year, every one of the 28 students graduating from the Lehigh program already has a job offer. "The demand for these graduates is phenomenal," says director Jim Hall. "Management is really scrambling for people who know business and technology."
Perhaps the biggest change in the positive direction has been an upsurge in hands-on learning. This is especially true for the schools at the very top of the BusinessWeek ranking, where nearly 3 out of 4 students had internships, vs. roughly 1 out of 4 at the lowest-ranked schools. Real-world learning goes well beyond the internship, though. At Virginia, students team up to consult on a problem affecting one of the program's sponsors, among them Procter & Gamble Co. (PG) and Dominion Resources Inc. (D) The companies even send in executives to grade the students on their proposals and occasionally implement their ideas.
At No. 32 Pennsylvania State University's Smeal College of Business, students hoping to land jobs in the financial services industry get an early taste of that high-stakes world by managing a $4.7 million fund. It includes 69 outside investors who have each ponied up at least $25,000 apiece. John Beberus, a 21-year-old junior who helps manage the fund, says it helped him land an internship at Goldman, Sachs & Co. (GS) last year. In general, he says, recruiters who interviewed him for internships were impressed by his experience. Says Beberus: "One guy told me I knew more than an MBA."
So it goes throughout the undergraduate business world, where improved quality is one reason why enrollment is on the rise. From 2000 to 2004, the last year for which information is available, enrollment at undergraduate business programs accredited by the Association to Advance Collegiate Schools of Business (AACSB) has grown by nearly 25%, from 661,425 to 815,187, according to BusinessWeek estimates based on AACSB data. In all, 482 schools have AACSB-accredited undergraduate business programs, nearly 100 more than there were in 2000.
Undergraduate programs, and undergraduates themselves, are the lucky beneficiaries of a string of events that created an ideal recruiting environment. In the 1990s, MBA programs began requiring applicants to have work experience, making an undergraduate business degree more attractive for people who didn't feel like waiting. At about the same time, the accounting industry changed its CPA requirements -- from 100 hours of instruction to 120 -- and a lot of would-be accountants opted for a less onerous business degree instead.
As talent flowed into the programs at the front end, developments in the business world increased demand for it at the back end. The post-9/11 hiring drought at the big investment banks created, four years later, new demand for entry-level hires in financial services. The Sarbanes-Oxley law of 2002, enacted in the wake of the corporate scandals, spurred need for accountants. And the backlash against offshoring jobs to India has boosted the value of students majoring in management information systems.
With demand surging and student interest high, there has been a flight to quality. In the absence of concrete data on business programs, students have been choosing programs based on the academic reputation of the entire university. But how do the business programs themselves stack up? Clearly, the best schools are distinguished by small classes, effective teachers, and hardworking students.
Consider BusinessWeek's Top 10. Seven of the schools had classes that were smaller than the 58-student average for all 61 schools in the ranking. And all of the Top 5 schools got straight A+s or As from students in teaching, job placement, and facilities and services. Much of the credit for the best programs goes to the students themselves, though. The typical student in the survey reported spending 14 hours a week preparing for class; at the top schools those kinds of study habits would be considered slacking. The typical Wharton business major worked 18.3 hours, while students at the University of Michigan Business School averaged 23.7 hours, giving them the distinction of being the hardest-working business majors in America. It appears to pay off. Michigan, Wharton, and Virginia were among the five programs where the most graduates went on to top MBA programs.
One reason top schools succeed on many of these measures is that they pass the first test of any undergraduate program: recruiting the best high school graduates. It's easy when you have thousands beating a path to your door. Wharton is a good example. Of the 4,200 applicants during the 2005 school year, only 16% won admittance. The result: an average SAT score of 1448, the third highest in our ranking. In 2005, the average for all U.S. test-takers who intended to major in business was 1006, according to College Board.
The competition for the cream of the crop is intense. All-boys St. Xavier High School in Cincinnati produced more National Merit scholars than any other school in Ohio in four of the past five years, and nearly a third of all 2004 graduates went on to major in business. College reps descend en masse on the school each fall, make phone calls to individual students, and host alumni receptions for those who are on the fence. Some go even further. Last year, according to guidance counselor David Coffman, a school flew one of St. Xavier's best students and the boy's father to campus for a private dinner with school administrators. He ultimately turned the school down and opted for the University of Southern California.
In 1998, Washington University's Olin School of Business began a program it calls the "spotlight weekend," though it could easily be called the hard sell. Students who have been accepted to Olin -- and in most cases Wharton, Harvard, Duke, and Yale, as well -- spend two days touring the campus, meeting faculty, sitting in on classroom simulations, even tagging along with Olin students on a typical Saturday night out. For Olin, the time is well spent: Nearly 40% of the prospective students who attend ultimately enroll, vs. about half that for students who don't. Says Gary Hochberg, associate dean for the undergraduate business program: "At the end of the dance, we want them to say yes."
As undergraduate business programs evolve, some see cause for concern. The trend toward more four-year programs, which dominate our Top 50 list, might result in students missing out on a broad liberal arts education by focusing too intently on business. Emory recently decided to stick with its two-year format for this very reason. Says Andrea Hershatter, director of the undergraduate program: "It's a little frightening to think that a 17- or 18-year-old should be committed to a career path and somehow forgo that two-year exploration." University of Chicago B-school Dean Edward A. Snyder, who oversaw the undergraduate business program at the University of Michigan for nearly a decade, agrees. "It may be that as the programs grow up, and there's more focus on honing one's value proposition, students end up focusing less on academics and more on the job search," Snyder says. "What about reading Dostoevsky's Crime and Punishment or figuring out the meaning of an expanding universe?"
As gloom and doom go, it could be worse. In fact, there's reason for optimism. The schools that rose to the top of the ranking have accomplished the near impossible. They have student bodies that are engaged, produce graduates who are highly valued in the job market, and have created academic environments conducive to learning. It's a tall order, but one that will be increasingly within reach of many schools as they use the rankings to improve their academic offerings. That's good news for the schools -- and for the class of 2007 and beyond.
By Louis Lavelle, with Lindsey Gerdes and Fred Jespersen in New York, Geoff Gloeckler in Philadelphia, and William C. Symonds in Boston