The Best B Schools

It's a B-school bull market as applications, test scores, and starting pay hit record highs

There may have been a few moments when Thomas P. Gerrity had second thoughts. This past summer, he was climbing toward the majestic peaks of the Grand Tetons in Wyoming. Some 5,000 feet in the air, he had to crawl on his belly across the face of the mountain, his fingers scrabbling for a grip on the granite. "It was a moment of truth," he says.

Gerrity, dean of the University of Pennsylvania's Wharton School, easily made the maneuver, and later reached the summit to witness a strikingly beautiful sunrise. Now, Gerrity has scaled the heights yet again by leading Wharton to the pinnacle of BUSINESS WEEK's B-school ranking for the second time in a row. And he didn't just hang on by his fingernails. The dean significantly strengthened the school's lead among corporate recruiters and gained the fourth-best marks from Wharton's MBA graduates to stay ahead.

The biggest surprise, though, was the University of Michigan at Ann Arbor's four-place jump to the No.2 spot--ahead of even Northwestern University's J.L. Kellogg School of Management, which slipped another notch, to third, after dominating the BUSINESS WEEK ranking from 1988 to 1992. Harvard University finished fourth, up one place, thanks to an overwhelming endorsement by students of new dean Kim B. Clark's makeover of the school. Graduate-satisfaction scores saw big gains in nearly every category, but especially in the use of information technology, an area in which Clark has invested some $11 million to put Harvard in the lead.

Other winners and losers: The University of Virginia's Darden School vaulted seven spots, to fifth, by gaining ground with recruiters and winning the top prize in graduate satisfaction. Stanford University and the University of Chicago, meantime, lost ground. Stanford dropped to seventh from fourth because of student complaints about the quality of teaching. Chicago plunged five places, to eighth, after MBAs found the school's administration and placement office wanting.

The perspectives of MBA students, who invest as much as $180,000 in tuition and lost earnings to get the degree, figure prominently in the BUSINESS WEEK ranking. Instead of measuring quality by school-reported test scores and starting salaries, the magazine surveys the graduates and the companies that hire them. This year, questionnaires were sent to 7,235 MBAs at 51 schools and 326 companies that actively recruit at the top schools. A total of 4,830 graduates and 227 companies responded.

Graduates, who judge only their own schools, were asked for their views on such issues as teaching quality, program content, and career placement. In the corporate survey, recruiters were asked to rate student skills and rank B-schools on their overall quality and the success rate of graduates in their organizations. Both polls were combined to produce the BUSINESS WEEK list. This year, the ranking has been expanded from 20 to 25 schools. As a result, the list now includes several first-timers, including Southern Methodist University and the American Graduate School of International Management.

Whether the stocks of individual programs rose or fell, it's clear that B-schools are in the midst of quite a bull market. At virtually all the best schools, applications, GMAT scores, and starting-pay packages for MBAs are setting all-time records. An avalanche of MBA wannabes, more eager than ever to have their resumes stamped, has overwhelmed the admissions offices of the leading schools over the past two years. BUSINESS WEEK's top-25 schools processed 80,766 applications this year, up 33% in two years and far higher than the previous peak of 64,647 in 1990. The average GMAT score of the latest incoming class at the top 25 hit a record 644, up 35 points in the past 10 years.

COACHING GAP. Every school posted an increase in applications, and the largest swell occurred at the Massachusetts Institute of Technology's Sloan School of Management, where an applicant pool of 3,012--up 80% since 1992--vied for just 325 seats this year. Applications to No.1 Wharton have soared 46%, to a record 7,329 this year, stunning admissions officials, who scrambled to keep up. At one point, it took the school an entire month just to fulfill a telephone request for an application. To screen candidates, the admissions staff began meeting off campus to avoid the deluge back at the office, alternating at the nearby homes of staffers, where they would work from 8 a.m. to midnight.

The applications avalanche at top programs reflects both a race to quality schools and rising demand among employers for MBAs. "The gap between the top schools and the second tier is widening," says Meyer Feldberg, dean of Columbia University's business school, which rose two spots this year, to No.6, its best showing yet. "It's simply harder to justify going to a good second-tier school for the same costs."

Also critical, however, is that employers believe the wave of innovation that has swept through business schools in recent years has made MBA graduates more valuable than ever. "Ten years ago, these schools made little if any effort teaching leadership or teamwork," says James Gottschalk, who recruits MBAs for US West Inc. "Today, they're doing a much better job in these areas."

Sure enough, recruiters responding to BUSINESS WEEK's survey hired 8,100 MBAs, up 7.6% from 1994. Not only are companies hiring more MBAs, they're also willing to pay them a lot more for their expertise. Median pay for a graduate of a top-25 school jumped 16%, to $81,569; the median package for grads at five schools was $100,000 or more, and the average number of job offers per student rose from 2.6 to 3.

It's no accident that the schools sitting atop the BUSINESS WEEK ranking nabbed the highest grades for innovative curriculums. Michigan's fast-forward has come under B. Joseph White, a former Cummins Engine Co. human-resources exec who took over as dean in 1990. He quickly made curriculum innovation a signature of his deanship, launching, among other things, a business version of medical-school residency in which student teams work at sponsoring companies on specific projects. "We've done more experimenting in the past five years than we had in my previous 13," says C.K. Prahalad, who teaches corporate strategy.

Central to that experimentation is the notion that students are true partners in the educational process. White has gone so far in this direction that he recently lost a popular tenured marketing professor in part because the prof believes White has given Michigan students too much power and influence. Junior professors, for example, must be rated "very good" at teaching in student evaluations to gain tenure.

Corporate recruiters, who favor the school over every competitor except for Wharton, give Michigan raves for its well-trained, no-nonsense graduates. "They do a really good job of admitting students who have their feet planted on the ground," says Saundra Banks-Loggins, vice-president for recruitment services at Wells Fargo Bank in San Francisco. "Michigan knows how to woo employers and also give their students the confidence, but not the arrogance, that they're a hot commodity."

Wharton's overtaking of Northwestern for the No.1 slot two years ago was largely the result of major changes, begun in 1991, to its once-rigid curriculum. Gerrity, a former Rhodes scholar, MIT professor, and consultant who had come to Wharton as dean a year earlier, made the education more relevant and pragmatic. He placed greater emphasis on "people skills," added global perspective, and urged profs to teach business in a more integrated fashion. These efforts are continuing, and a major initiative in globalization will be launched next year. Among other things, the project will employ technology to team Wharton students with others at business schools around the world in assignments and field projects.

Increasingly, though, the hallmark of Gerrity's administration is his efforts to make Wharton, the oldest school of business, a living, experimental management laboratory for its students. "This is a real organization, a model for organizing change out in the real world," he says. "So we're making it a terrific part of the program for students. `Empowerment' is an overused word, but it relates here."

For years, much of academe has viewed students as a necessary but distracting presence from the mission of advancing knowledge through scholarly research. But soon after arriving at Wharton, Gerrity began using market researcher Opinion Research Corp. to survey the views of first-and second-year students every year. The results persuaded him to invest far more time communicating with them. "We were patting ourselves on our backs a couple of years ago, but the surveys showed us that students still didn't feel connected or didn't particularly understand the vision for the school," Gerrity recalls.

Now, Wharton students sit on and regularly participate in virtually every committee, having a voice in everything from curriculum reform to facilities planning. "We have 6,000 to 7,000 hours of work experience sitting around here," says Vice-Dean Bruce Allen, who, together with Gerrity, has met with students in lunches, open forums, and meetings 135 times in the past year alone. "We would be fools not to capture that talent and put it to work."

Over the past 18 months, for example, student committees have worked closely with Gerrity to analyze future space requirements for the business school. One result: Within the next month, Gerrity will propose to the university's trustees a new $100 million B-school complex of classrooms and meeting halls. Gerrity envisions MBAs involved in the actual design of the new building as well.

The dean has also used MBAs to get better performance out of his professors. Each entering class at Wharton appoints a dozen student academic representatives who regularly report "problem" teachers and curriculum miscues to the administration. Many professors now find themselves routinely huddled in "quality feedback circles" with students ready to critique their classroom performance on a weekly basis.

And it's not lip service. Last year, one prof was quickly yanked out of the core finance course after student complaints of poor performance. "I couldn't imagine that happening five years ago," says G. Richard Shell, a Wharton professor. "I have this image of a big hook coming onstage if you fail to perform. We expect to be held accountable."

Wharton could certainly teach the University of Chicago a few lessons in accountability. Chicago's five-place plummet this year is largely the result of lower satisfaction scores from graduates and corporate recruiters. Dean Robert S. Hamada concedes that he allowed too many part-time students to transfer into the full-time program. The result, say students, was a bureaucratic nightmare in which an already research-oriented faculty became even less accessible and good electives filled up in a flash. Hamada says he has since fixed the administrative problems.

Even more troublesome, one of every five recruiters who visit the school singles out Chicago's career-placement office as one of the worst. "They've replaced people at every level over the past year, and the problems are still there," grouses one major recruiter. "They are absolutely the most frustrating placement office to deal with."

Students also tell stories of gathering in the library late at night, trying to prep each other for job interviews because the assistance they got from career services was so poor. "We tried to figure out on our own what the hell to do," says Sonja Hickey, a consultant at AT&T Solutions who graduated last spring. "They just didn't care." Hamada says he expects a new placement director, who assumed the job a year ago, to improve the office.

Stanford also came under criticism from graduates who are less satisfied with the quality of teaching, particularly in core courses. "It's very, very uneven," says Stephen R. Pamon Jr., a recent grad who works at McKinsey & Co. Stanford allows many senior professors to teach specialized courses, letting basic instruction suffer, students note. In some classes, Pamon says: "Kids are basically teaching themselves. You take the syllabus and textbook and go to work."

Such complaints have long been heard at Stanford, and it had seemed that the school was dealing with the troubles. For example, Stanford has paired greener professors with stars to team-teach some classes. But those efforts failed to go far enough, according to graduates. "We have done an enormous amount to try to make sure the teaching is as good as we can make it," says Dean A. Michael Spence. "The fact that we haven't been able to eliminate these incidents is a source of great frustration."

In contrast, MBAs gave the single best teaching grades to the professors at Virginia's Darden School, propelling Darden to No.1 in the graduate survey. Hidden away in the foothills of the Blue Ridge Mountains, Darden is a smaller, intimate and more cooperative version of Harvard. With only one-fourth the enrollment, the school fosters a cozy, close-knit culture where faculty and students know each other by first names. One measure of the esprit de corps is the record $230,000 gift given to the school by 94% of this year's graduating class. Darden's rise in the ranking was also assisted by a major increase in corporate support. Since becoming dean three years ago, former investment banker Leo I. Higdon Jr. has met with nearly 150 corporate recruiters to win them over. "They have a voice and a need to be heard," says Higdon.

That's something Gerrity learned at Wharton, where he regularly surveys the opinions of the companies that hire his MBAs. "You can only move so many widgets down a production line," says Gerrity. "But the potential for people to contribute to an organization is just unbounded." It's something all B-school deans need to bear in mind if they have any hope of toppling Wharton as king of the hill.

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