The Best B-Schools

Kellogg vaults to No. 1, pushing perennial favorite Wharton off the throne it has held since 1994

Dorothee Gutierrez strolled onto Kellogg's picturesque lakefront campus two years ago at a time when gravity didn't seem to exist on business school campuses. It was a world in which grads were getting signing bonuses bigger than some of their parents' salaries and moving from student apartments into glitzy new homes. Today it's a different story. Employers are mounting background checks and doing psychological testing in hopes of sleuthing out the next Jeff Skilling. That is, if they haven't frozen MBA hiring altogether.

Having entered school at the apex of the greatest wealth-creation boom in history, Gutierrez, 30, and hundreds of other students now face one of the worst MBA job markets ever. After years of almost 100% placement rates, nearly a third of the Top 30 schools had only 60%--or fewer--of their MBAs in jobs by graduation. Pay is also taking a beating. In the last recession, in 1992, MBA compensation rose 7% over the previous survey in 1990. This time, it has plummeted nearly 13% since 2000 for grads at the Top 30 schools.

Gutierrez's job hunt has been discouraging, but the support of Northwestern University's Kellogg School of Management has been anything but. In mid-April, Gutierrez got a personal letter from associate dean David A. Besanko, who offered his assistance--and contact-stuffed Rolodex--to help her find a job in high-tech management in depressed Silicon Valley.

It wasn't just Gutierrez who got the white-glove treatment. Out of a total of 515 students, 92 were still jobless in the spring. They all got the same offers of one-on-one help--not just from career-service staffers, but from the deans, who each took on at least a dozen jobless students. Says Gutierrez: "The students are the deans' first and foremost priority."

That kind of go-to-any-lengths culture is one of the qualities that helped vault Kellogg to No. 1 this year on BusinessWeek's eighth biennial survey of the best business schools--knocking perennial favorite, the University of Pennsylvania's Wharton School, from the throne it has held since 1994. Plagued by souring student satisfaction, placement woes, and waning interest from staple banking and finance recruiters, Wharton slipped not one, but a disappointing four spots this year, to No. 5--its poorest showing since BusinessWeek began ranking MBA programs in 1988.

The shake-up didn't end there. Taking over the No. 2 spot from Kellogg was Midwestern rival University of Chicago Graduate School of Business, moving up an impressive eight notches. This is the second time the Chicago cartel has packed the same one-two punch. The two universities also dominated our list in 1992, when the economy was eerily similar to today--still reeling from a downturn and suffering from jitters fueled by fears of a double-dip recession. Both programs are also based in the Midwest, where the MBA labor market hasn't suffered nearly as badly as on the coasts.

Though the two schools are in some respects opposites--Kellogg turns out marketing gurus and stresses togetherness, while Chicago is known for its economic masterminds and students' individualism--both offer the nuts-and-bolts of management education and won raves from recruiters for producing well-schooled grads. Another plus: Both schools maintained vital links to companies in a broad swath of industries, never losing sight of the recruiters' role, even when students were in hot demand.

Chicago's ascendance to runner-up marks a dramatic comeback. In the past decade, the program's performance has been inconsistent, falling as low as No. 10 in 2000. The school was caught in a struggle to find the right balance between a rigorous academic climate and some esprit de corps on a Gothic-style campus long known for harboring intellectual loners. Since he arrived in August, 2001, Chicago's new dean, Edward T. Snyder, has worked hard to change the musty culture, hosting frequent Sunday night student suppers at his home and holding morning coffee meetings in his office. He encouraged professors to be more involved. They did so and then some: A small group of faculty formed a band and played at some Friday night student mixers and more professors opened their doors to students. Snyder also tackled concerns about the school's outmoded technology and lack of study space by pushing wireless access for students and relocating faculty offices. Students rallied behind the new regime.

The result: The Class of 2002 is the happiest bunch Chicago has ever seen, landing the school at No. 3 on the student poll. What's more, grads ranked Chicago professors, six of whom have won the Nobel prize, as the best faculty at any B-school. "Everything began slowly changing at the end of last year," says Aperna Sharma, a 2002 grad. "And things kept changing--the morale, the access to professors, the sense of community, it all changed."

Rounding out the parallel with the 1992 ranking (see table, pg. 100) is Harvard Business School, which holds fast to its No. 3 spot this year. The school took top honors from recruiters, who chose HBS as the B-school that produces the best grads overall--an honor that Wharton had held for the past six years. Harvard's famous pedigree--which boasts a sitting President and 28% of chief-level officers at the country's largest companies--is still the gold standard for Corporate America. Yet grads weren't as favorable, pulling down the school's rating for student satisfaction this year--and keeping HBS from gaining ground overall. Students complained of an aloof placement center where officers were slow to respond to the ever-worsening job market. "I think there's a lot we can do to do a better job in the next several years," admits Dean Kim B. Clark.

Still, Harvard grads have a lot to be grateful for: They're still among the highest paid of all MBA graduates, privy to learning from some of the world's top scholars and part of a famously loyal network--"the Harvard Mafia"--of more than 65,000 alums. "Everybody really is willing to help each other out, even people competing for the same job would help each other prepare," says 2002 HBS grad Grace Wang. The school also earns accolades for achieving one of the most balanced student bodies--34% international students, 22% minorities, and 35% women.

This year's survey comes at a time of unprecedented upheaval in the business world so schools were naturally subjected to a harsher level of scrutiny. Just as investors have turned to bread-and-butter companies with clear measures of value in this uncertain economy, students are praising schools that offer solid general management education. Recruiters have also returned to their old faithfuls, programs that produce grads with broad abilities, including the soft skills that MBAs had sometimes lacked, and the ethical leadership know-how that is now at a premium. That mentality helped push Dartmouth College's Tuck School of Business up six spots, to No. 10, and Yale University's School of Management up five spots, to No. 14. Indeed, many say that the true measure of a school is not during a raise-all-boats boom, but now, when tough economic realities make employers and students far more discerning.

That's why it's not surprising that another member of 1992's Top 10 re-emerged in the Top 5: Stanford University Graduate School of Business. It landed at No. 4 this year, after slipping to No. 11 in 2000. During the Internet heyday--when any flimsy business plan that had "dot-com" in its pages would win funding--companies such as Intel Corp. dumped Stanford recruiting altogether because grads blew off interviews or showed up unprepared in wrinkled khakis, confident they'd be prized no matter how they behaved.

Dean Robert C. Joss responded by holding "town halls" and schooling students on career etiquette, instilling a sense that Stanford wasn't just a calling card but a collective identity. "The balance in the community is so much healthier now," says Joss, who even worked to change his own bookish manner by appearing at lunch in the student snack bar to make himself more approachable.

The result: Though Stanford students still report an uneven MBA experience, they were much more satisfied as a whole with the program in 2002, giving kudos to Joss's increasingly personal touch and to the school's emphasis on leadership and general management. Meanwhile, Stanford student's won back some respect from recruiters, who complained bitterly in 2000 about their arrogance. "It used to be a nightmare experience to recruit there," says one headhunter for a major consulting firm. "Now, the students act more like professionals, and the placement office is much easier to work with."

This year's most startling change, however, was Wharton's tumble from the top. With the finance industry under siege and hiring virtually stalled, the school was shell-shocked, given that it's one of the biggest feeders to Wall Street. To make things worse, students rightfully complained of a rudderless placement office, which for the three months before graduation--and all summer--had no director.

Placement offices like Wharton's were spoiled by the boom's largesse, when all they had to do was hang an open-for-business sign and recruiters would pour in. Like many schools, Wharton was unprepared when its career-services office actually had to hustle for leads and drum up new contacts. Says one miffed 2002 grad: "[The placement office] became complacent. Precisely when we needed them to be innovative and proactive, they were unable to deliver." And for the first time in a decade, the famed B-school lost ground with recruiters, slipping to No. 3 in the corporate poll. In all, a disappointment for Dean Patrick T. Harker, who has been criticized by students for failing to nurture recruiters--and dithering on replacing the career-services director. By contrast, his predecessor Thomas P. Gerrity, who stepped down in 1999, made his reputation on building ties with companies and with students.

Harker eventually hired a new placement director, Peter Degnan. He joined this fall--too late for 2002 grads, but in time, hopes Degnan, to turn things around for the Classes of 2003 and 2004.

Rounding out the top 10: Massachusetts Institute of Technology's Sloan School of Management at No. 6; Columbia University Business School at No. 7; University of Michigan Business School at No. 8; Duke University's Fuqua School of Business at No. 9; and Dartmouth's Tuck at No. 10.

Georgia Institute of Technology Dupree College of Management, which made the list for the first time in 2000, fell out of the Top 30, making room for Notre Dame's Mendoza College of Business, which entered the ranking at No. 29 on the strength of its intellectual capital and growing rapport with recruiters.

This year's survey represents the most comprehensive yet of BusinessWeek's 14 years of B-school rankings. We spent six months collecting the data. Rather than simply rate schools on salaries, test scores, or subjective questionnaires that ask deans to rank the prestige of peer institutions, we exhaustively surveyed companies and students. BusinessWeek also blends in an intellectual capital component, believing that the best B-schools disseminate their know-how and ideas to real-world managers--and therefore can also be judged on their faculties' public reach. To bolster this element of our ranking, we added five more journals this year for a total of 18 publications, including Strategic Management Journal, Operations Research, Journal of Finance, and Journal of Business Ethics. Topping the intellectual capital poll this year: Stanford, MIT, and UC-Berkeley's Haas School of Business.

We have also included more schools than ever before--bringing the number of MBA programs eligible for ranking to 88 overall, 18 of them international. And our second biennial non-U.S. ranking expands to rate the top 10. At BusinessWeek Online, you can find profiles of more than 200 other MBA programs and a wealth of tools to search and compare programs.

What all the constituents told us this year was no surprise. Top of mind for students and deans was one thing: jobs. With MBAs shelling out upwards of $70,000 in tuition and giving up steady careers with meaty paychecks, it's no wonder 2002 grads were far harsher on placement offices this year than in the past. Many grads were frustrated at being left alone to navigate the labor market's perfect storm of corporate scandals, weakening economic indicators, and hiring freezes. Indeed, the shift to the help-not-wanted climate was swift and unrepenting. Companies that signed up to interview students last fall--the equivalent of fraternity rush season for hiring--canceled in droves. Spring recruiting was also sparse. The lackluster hiring among MBAs only helped add to the epidemic of unemployment among the young and educated--the fastest growing group of jobless in the country.

At the same time, these future business leaders had to digest a new reality as a parade of their former heroes was handcuffed and hauled into court, unmasked for their accounting trickery and Gordon Gekko-like greed. In this year of MBA angst, it was the Olympian efforts to give grads a well-rounded education and help them find work that were valued at a premium by recruiters and students alike.

That helps explain Kellogg's return to the top spot--one it hasn't held in a decade. It was also confirmation of new dean Dipak C. Jain's focus on the total MBA experience, from an energetic placement office to plugged-in professors to a high-caliber student body. Says Jain, "We've got a pro-active culture of change and innovation--and we practice what we preach."

The soft-spoken Jain took the reins at Kellogg in July, 2001, replacing Donald P. Jacobs, a legendary dean who revolutionized management education. Tough shoes to fill--and many wondered if he was up to the task. But Jain read the new mood accurately and made aggressive placement his top priority. When jobs started evaporating last year, Jain quickly turned to alums he had once taught, urging them to give temporary work to the 75 or so 2001 grads whose new jobs were suddenly postponed. He was so personally involved in hooking up students with jobs that they sent up his efforts in their annual springtime skit, replacing the chorus to Fame in the song of the same name with Jain. "He will help you find/ Financial gain!/ JAIN! He'll call alums if you're jobless. Or pay you to work here at school--Cool!"

The student applause stems from more than just playing job matchmaker. Jain countered the dismal economy by meeting with 145 recruiters and thousands of alums in 23 cities around the world--and arranging personal dinners with 14 presidents and CEOs of major companies like Target (TGT ), Delta Air Lines (DAL ), and McKinsey. Deans at other schools sometimes make recruiting trips, but Jain carried on his jet-setting schedule with a painful broken collarbone. His travel commenced after September 11, when Jain was often searched and had to take his arm in and out of its sling. All the while, he taught three sections of marketing and kept on top of his duties as dean. His efforts produced real results: The school had the highest placement rate of any of BusinessWeek's Top 30 schools. More than 91% had job offers 90 days after graduation, while 83% had them by diploma time. That's no small feat, considering that the average for the Top 30 schools was 80.6% by 90 days.

While a fortunate 70% of grads from the Top 30 schools had job offers by commencement, their salaries were well off the lofty highs of 2000. Graduate reported median pay packages for the Top 30, which include salary, signing bonus, and other compensation, fell to an average $110,970, from $126,930 just two years ago. That's a 12.6% drop that put 2002 MBA salaries in line with 1998 grads, who earned $111,420. Along with that drop to pre-bubble levels, perks like full tuition reimbursement, racy sports cars, and workplace spa services also disappeared. The 219 recruiters who responded to our survey hired 11,199 MBAs in the past two years. In 1999 and 2000, 247 recruiters hired 15,558. When you add to the mix that there are about 25% more MBAs now than a decade ago at the Top 30 schools, it's easy to see why the odds were stacked against grads finding jobs.

Yet even as consulting and investment banking hiring dropped off some 50%, new recruiters emerged this year. After several years of also-ran status, Old Economy stalwarts received favorite treatment on campus. Take Honeywell (HON ), which hires dozens of MBAs each year. For most of the last decade, the company and others like it could barely fill an interview schedule at elite B-schools. This year, says recruiting manager Mary McGrew, "it's a lot easier to get them to listen."

Schools like Columbia Business School, which relied heavily on Wall Street to employ its MBAs, were also grateful for the Old Economy presence. Dean Meyer Feldberg, in his 14th year on the job, has made an annual habit of telling new students the story of his first post-MBA job in 1965. He was an international product manager at BF Goodrich in Akron, Ohio. During the boom, Columbia students responded to the story with laughter--schlepping to backwater Akron to work for a staid tire company seemed absurd. After all, they had sexier options, with fancy perks, in big-name cities. But last year, students took the story seriously. More than 100 of them attended an on-campus presentation by another Akron company, Goodyear Tire & Rubber Co. (GT ) And two grads actually packed up and headed to Akron for jobs there in marketing and corporate finance. "During good times, many recruiters are going to come to you, but it's during the bad times that you need them," says Feldberg. "Those who show up in the bad times are remembered."

Cornell University's Johnson School of Business had a unique problem: its location. Fewer mainstay recruiters bothered to make the laborious trek to out-of-the-way Ithaca, New York. So administrators took action. Dean Robert Swieringa hired grads from the Class of 2001 whose jobs were deferred to act as mentors. The school held frequent forums to discuss the job market, and staffers met with every student to make sure he or she had a Plan B--and C.

As a reward, the Class of 2002 voted the career-service office as "Johnsonite of the Year," an honor usually reserved for an individual student or faculty member for stellar achievement. Says Beth Watson, a 2002 grad: "I don't think anyone ever felt career services was letting them down." Other schools that won great reviews from the Class of 2002 in the area of career services: Chicago, University of Virginia's Darden School of Business, and Duke's Fuqua.

Those schools perceived as laggards got a lashing from their let-down grads. In addition to Wharton's Class of 2002, grads at Georgetown University's Robert Emmett McDonough School of Business and Vanderbilt University's Owen Graduate School of Management also gave their placement offices poor marks. No wonder: At Georgetown, only 50% of grads had a job offer by graduation, the worst of any Top 30 school. At Vanderbilt, that figure was nearly as bad, with only 53% of grads reporting a job offer before commencement.

With the job market so vexing, many MBA students also shook off the ambivalence towards the staples of B-school that lurked in previous classes. The result was a return to rigor--with students demanding more depth in exchange for their MBA tuition dollars. Deans across the Top 30 report that students are more demanding on faculty than they've been in the last half-decade. They want theory, relevance, and more access to professors outside of class. "I think students are back on the right track," says Stanford's Joss. "They want to learn something of lasting value, not just get an MBA as part of some life checklist."

Business schools such as Kellogg, Chicago, Stanford, and Harvard, among others, never really swayed from their core educational mission. Others have responded willingly to grads' back-to-basics mentality, happy to move away from the fads that reigned in their classrooms between 1998 and 2001. That means more students packing into accounting classes and lectures on Argentina's financial crisis instead of e-commerce seminars and workshops on how to schmooze with venture capitalists.

To quell the growing disdain for management as a profession, many schools also stepped up and reemphasized business ethics, values, and leadership in an effort to prevent more of their grads from becoming the stuff of sordid headlines. After all, former Enron Corp. Chief Financial Officer Andrew Fastow was a Kellogg grad, and former CEO Jeffrey Skilling earned his MBA from Harvard.

The shift was also part of the effort to win over recruiters, who have become far more picky about who they'll hire. University of Michigan Business School, Kellogg, Virginia's Darden, and MIT all topped recruiters' lists when it came to rating which school's grads demonstrated the best business ethics. And students rated Virginia, Notre Dame, Michigan, and Yale as tops in addressing ethics issues inside and outside the classroom.

At Michigan, ethics and leadership training start in the orientation session. And at Yale, a high standard of ethics isn't just part of the curriculum. It's integrated into the very fabric of the business school, says Yale 2002 grad David Larson. The school, known for its nonprofit and public management emphasis, pushes its MBA teaching toward "expanding the pie" rather than just "getting a bigger piece of the pie," says one grad.

Considering the scandal-plagued state of American business, B-schools' return to fundamentals is good news. Corporate America is in dire need of smart, dynamic, and ethical leaders. The managerial class is also suffering from a lack of new ideas. Business schools are attempting to groom the kind of leaders that can fill the vacuum. Now it's up to companies to start hiring them.

By Jennifer Merritt

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