What Makes the Best B-Schools
The University of Chicago Graduate School of Business, winning praise for recent reforms and reconstruction, snagged the top spot for the first time ever, when BusinessWeek announced the results of the 2006 MBA rankings on Oct. 12 (see BusinessWeek.com, 10/12/06, "2006 Best B-Schools").
That wasn't the only surprise. BusinessWeek research disclosed that starting salaries for MBAs are on the rise, and that students can get a quicker return on investment by choosing a mid-tier program as opposed to one in the top five.
In a recent live chat event, BusinessWeek Associate Editor Louis Lavelle (LouisBW) and Staff Editor Geoff Gloeckler (GeoffBW) shared the list of best B-schools, discussed methodology, and offered advice when fielding questions from an audience of over 1,000 chatters.
BusinessWeek.com B-schools community manager and reporter Francesca Di Meglio (FrancescaBW) moderated the chat. Here's an edited transcript.
FrancescaBW: Louis and Geoff, perhaps we should start with having you explain a little bit about the methodology for the 2006 rankings.
LouisBW: Our methodology is made up of three parts. As many of you know, we conduct a survey of graduates. This year, we surveyed 16,000 students, and 9,000 answered. We combine the 2006 survey with past surveys conducted in 2004 and 2002.
Combined, the student surveys count for 45% of the ranking. The second part of our methodology is a survey of corporate recruiters. This year, we surveyed 426 recruiters, and more than 200 responded. The recruiter survey from 2006 is combined with those from 2004 and 2002, and together they account for 45% of the final ranking. The last 10% comes from our analysis of intellectual capital, which is based on journal articles written by faculty members.
GeoffBW: The response rates for both the students and recruiter surveys this year were comparable to the past few years, with about 56% on the student side and 52% on the recruiter side. We were quite pleased with both, I think.
LouisBW: Also, combining three recruiter surveys is new. In the past, we based our recruiter score on just one survey. This year, it's based on three, similar to the student surveys.
libero08: Have the proliferation of other publication rankings affected your results or methodologies? Have they affected the responses you get from your subjects?
LouisBW: The proliferation of rankings, since BusinessWeek launched the first one in 1988, has made it difficult to get the high response rates we want, especially from recruiters. But we've managed to get pretty decent response rates from them for each of the last three rankings—upwards of 50%.
mlh97: For the schools that moved the most (up or down the rankings), can you give the primary reasons for the change?
LouisBW: The school that moved up the most in the ranking was the Haas School at University of California at Berkeley. There were multiple reasons. For one thing, recruiters were seriously impressed with the quality of the grads. One told me that the school has "very strong entrepreneurial innovative" students. But it didn't end there. Career services at Haas made a lot of improvements. They work with recruiters to find them the best grads, and they treat them like royalty when they come to campus.
Antoine: Did you get any insight about the way American B-schools were considered in Europe vs. INSEAD/London Business School?
GeoffBW: This is a good question. A trend that's beginning to show its face is that more students are looking to schools in Europe for an MBA, where in the past, they were looking to the U.S. The main reason for this is the cultural aspect that so many schools, like INSEAD and IESE, are able to offer.
At some of these schools, 80% and 90% of students come from outside of the school's home country. With more and more students looking for a more global degree, it's hard not to look to Europe.
Antoine: What was your biggest surprise while running this review?
LouisBW: One of the biggest surprises was how well this year's grads fared in the job market. We found that the average salary for our top 30 schools was up more than $8,000, or about 9.7%, to $95,000, which doesn't include signing bonuses, etc.
One reason for this was the economy. With applications on the decline for the last few years, there were fewer MBAs to go around. That, combined with a strong economy, forced recruiters to compete with better offers. In fact, offers were up about 20% this year, to about 2.3 per MBA graduate.
vargas: What major characteristics did the top 20 schools have in common?
GeoffBW: It's hard to lump them all into a category and say this is the reason the top schools are the top schools. At some schools, like Berkeley, for instance, students and recruiters both applauded the work of career services, like Louis said. As we all know, jobs are a very important piece of the MBA puzzle.
GeoffBW: At other schools, like Chicago, students liked the reforms of [Dean] Ted Snyder, as well as the new facilities and strong faculty (including one certified genius).
GeoffBW: Other schools are developing new curricululms, like Yale and Stanford, and while these changes aren't reflected in our surveys, students are excited about what they will mean to their schools.
realguy123: Has there been a study done to see if a No. 1 ranking produces a higher number of applications for the No.1 ranked school in a specific year?
LouisBW: There's no study that I know of, but it wouldn't surprise me. Typically, what we see is applications growing after a school receives a very high ranking for obvious reasons. That allows the school to be more selective, which of course increases its appeal even more. That's why generally you see very few massive shake-ups at the very top of the ranking. Each good ranking solidifies the school's reputation even more, making it that much more difficult to dislodge.
boca21: How is quality of the professors determined and incorporated into the rankings?
GeoffBW: One of the unique pieces of our ranking is what we call Intellectual Capital. It's worth 10% of the final rank for a school, and it's calculated by assigning values to the amount of research faculty publishes. We scoured a total of 20 journals over the past five years and add up the number of articles each group publishes.
MarinaG: What's the most important thing for the students when looking for a B-school?
LouisBW: The most important thing for students is to find a school that fits your needs. If you need a marketing program, don't choose a big finance school. If quality of teaching matters to you, don't focus on the faculty's research record. I should say that the rankings, while they matter, are not the ONLY thing that matters. It's generally a good idea to examine them closely and learn what you can from them, but you don't always have to apply to the top-ranked schools.
apachon: Why do you release the rankings one day before the first-round deadline at some of the most important MBA programs in the country?
GeoffBW: It's just a coincidence.
heaths: I'm curious how a school's endowment plays into the rankings, and if future facilities such as those being built atUniversity of Michigan's Ross School of Business are weighted into the rankings.
LouisBW: Endowments actually play a pretty big part in our rankings, but indirectly.
They allow schools like Harvard to spend a fortune on facilities and the very best professors, which leads to higher levels of student satisfaction, which will—all other things being equal—tend to improve a school's place in the rankings.
hoostraveler: Are schools forecasting an increase in applications again this year?
GeoffBW: While we don't have any numbers for this, from talking to deans and admissions folks at various schools, the answer is yes. The MBA is hot again, and application numbers should reflect this.
stwinkle: What are your thoughts on a large portion of the applicant pool and alumni of schools feeling that the U.S. News ranking system is a more accurate depiction of the rankings since they use acceptance rate/GMAT scores?
LouisBW: I'm definitely biased in this regard, but I think they're wrong. Of course, acceptance rates and GMAT scores matter. We use some of the very same measures in our ranking of undergraduate business programs. But when it comes to MBA programs, the most important factors are two in number: They are student satisfaction and recruiter satisfaction. If you're not making students and recruiters happy, regardless of your GMAT scores, you're failing as a B-school.
arupbh: Will you also be providing rankings based on specializations, such as finance, general management, marketing, etc.?
GeoffBW: We will be covering various specializations on the Web site in the coming days and weeks. Be sure to look for that on BusinessWeek.com.
arupbh: How much does method of teaching factor into your ranking?
LouisBW: At this point, so many B-schools make such widespread use of case studies that I don't think teaching method makes that much of a difference. Teaching quality, however, makes a big difference. Regardless of what method the teacher is using, if he or she can get students excited about a subject and learning, that school will fare well in our ranking.
Markitosh: How is the survey from 2006 combined with those of 2004 and 2002? Do they have the same weight in the ranking?
GeoffBW: The 2006 survey counts for 50% of a school's score. The 2004 and 2002 numbers count for 25% each.
rlg196: What's the return on investment of most business schools?
LouisBW: This is a really interesting question. This year, BusinessWeek did something we haven't done for a number of years. We determined just how long it will take grads of each school to recoup the investment they've made in their MBA. We tallied up all the costs—tuition and fees, forgone salary, etc.—and looked at the salary bump that grads can expect when they graduate.
What we found was really interesting. The mid-tier schools like Wisconsin, Notre Dame, and Rochester did very well in this analysis. You can recoup your investment in five years or less. The top-ranked schools, like Massachusetts Institute of Technology, Stanford,, Harvard,, and Wharton all did pretty poorly. You're looking at 12 to 15 years before you break even.
That's not to say the top-ranked schools are a bad deal…they're not. It's just that students come to those programs making a lot of money, so the salary bump is smaller, and the costs are higher, so it will take you longer to recoup your investment.
palencia: Has the number of corporate recruiters increased or decreased with respect to 2004 and 2002?
GeoffBW: The number has held pretty steady over the past few rankings periods. In 2002, we got responses from about 220 recruiters, and in 2004 and this year we heard from 223.
The response rate itself has hovered around 50% each year. The mix of companies has changed a bit based on changes in hiring in various areas, but for the most part, the ones hiring the most MBAs has remained the same.
UTSA: It appears the data submitted from the school itself didn't play an important part. Or am I reading your methdology wrong?
LouisBW: You're right, the data submitted by the schools plays no role in our ranking. Our ranking is based entirely on the student surveys, the recruiter surveys, and the intellectual capital rating.
shanklind: What are some of the questions you're asking students?
GeoffBW: We ask students about every aspect of their MBA experience—everything from classes to facilities to faculty to career services.
GeoffBW: We ask if they're able to get into the classes they want to take, and if they had internships.
GeoffBW: We ask about things like teamwork and leadership, as well as specific areas like accounting and finance.
lambchop: How long was Kellogg No. 1, and what caused the change?
LouisBW: Northwestern was No. 1 in 2002 and 2004. Before that, it was No. 1 in 1988, 1990, and 1992. All in all, it's a pretty impressive record. The only reason it came in at No. 3 this year was a fairly poor showing in our intellectual-capital rating. In fact, Kellogg was the highest-ranked school in the recruiter survey and second only to Chicago in the student survey.
blake: How would you compare the BusinessWeek rankings to those of U.S. News & World Report and the Wall Street Journal?
LouisBW: We're MUCH better! Seriously, they're both fine rankings, for what they are. We just happen to consider our methodology superior.
doconnor11: Has there been any data pointing to a desire among recruiters or students for a greater emphasis on interpersonal, or "soft" skills?
GeoffBW: Again, we don't have any numbers on this, but from talking to recruiters and schools, we know that companies want hires who are going to be able to hit the ground running when they start on the job. They don't want to have to retrain each hire.
This is reflected in many of the curriculum changes that schools are undertaking. Also, at schools like the University of Toronto's Rotman School, recruiters are actually coming to campus and teaching workshops on things like interviewing and networking, so MBAs get a feel for what it is companies are looking for.
MBevington: Now that BusinessWeek offers a ranking of full-time MBA programs, executive MBA programs, nondegree executive education programs, and undergraduate business programs, is the magazine planning to launch an overall ranking of the top business schools globally?
LouisBW: As you know, we already rank schools in Canada and Europe, and we've also surveyed students at Chinese B-schools for a story on MBA programs there. At this point, we have no plans to do a global ranking. It's quite difficult to do that with our methodology.
vargas: What are some of the most noticeable investments made by MBA programs to increase value to their programs?
LouisBW: I don't know if you consider this an investment, but it certainly paid off for Chicago. They recently built a huge new building for the B-school, complete with a fancy new piazza. A lot of students we surveyed really liked it.
Ribbonman5: How is it that a school can make your list as a top undergraduate business program, yet not even make your list of MBA programs?
LouisBW: I'm not sure which school you're referring to, but the fact is that these are two very different rankings. The undergraduate programs are judged on numerous criteria, including test scores and the like. MBA programs are judged on student and recruiter satisfaction. It doesn't surprise me that two programs at one school would fare differently in the two rankings.