The Rankings Race

Why business schools are skeptical about the value of published rankings.

By David Wenger
Director of Communications, Marketing and Public Affairs

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WE ARE WHAT YOU MAKE

More vexing than what the rankings ignore is what factors they include and how they measure them. One criterion that appears frequently in MBA rankings is post-graduation salary. This benchmark, which appears in many guises from starting salary to salary several years after graduation (sometimes combined with return on investment data), accounts for about 35 percent of the ranking score for both U.S. News and the Economist, 55 percent for Financial Times and 100 percent of Forbes’ ranking.

Leaving aside for a moment the question of whether it is fair to judge a job let alone the education that helped one to obtain it purely by its salary, what are the implication for the school attempting to raise starting salaries?

The first quandary is that starting salaries are not equal across industries and functions. For instance, the highest paying jobs are found in major management consulting firms, which, according to Stacey Rudnick, director of MBA career services, currently pay $120,000 or more. In the financial sector, investment banking and sales and trading positions see average salaries in the high $90,000s. Large, brand name, national companies tend to remunerate employees better than smaller and more regional companies.

Conversely, lower paying salaries are found in brand and product marketing and industries such as computers/high-tech, entertainment, food and beverages, health care, manufacturing, retail and transport. Entrepreneurial interests, including start-ups, are the real wild cards, rarely pulling in consistent high starting figures. Real estate development can also vary widely from year to year, but they are generally below the average base salary of a graduating class. Nonprofit jobs, which appeal to an increasing number of MBA applicants, can pay at the lower end of the scale (for the MBA class of 2007, between $40,000 and $90,000) even though these individuals find great satisfaction in their work and consider their MBA preparation to be of the highest caliber.

Here’s the rub. Despite these disparities, only Financial Times attempts to adjust for salary variation between industry sectors. It would seem the MBA degree, which is generally touted as eminently holistic and practical, should be restricted to those seeking future careers as consultants, I-bankers and traders if improving the rankings were the primary goal. Or, the rankings might push a school to solicit recruiters exclusively from large national firms. In order to maximize starting salaries for the rankings, competitive pressure would dictate that we drop our successful and nationally renowned entrepreneurship and real estate programs. Few would argue this is in the school’s best interest.

THIRD COAST CHALLENGES

Geography plays a major role in salary, which is all but hidden in the ranking surveys. According to Rudnick’s salary statistics on the most recent graduating class, the Northeastern U.S. and West Coast provide grads with 3 to 14 percent more income than the same jobs in the South, Southwest and Mid-Atlantic states. Despite this disparity, only one of the major ranking media, Forbes, adjusts starting salaries for cost of living.

About 20 to 25 percent of each MBA class at McCombs is comprised of students who hail from the bi-costal regions, and we place a similar percentage of our graduates in major brand companies in these higher-paying states. But the lion’s share of domestic graduates still come from the Southwest, and these students are interested in taking jobs here. (Face it, most of us love Texas.)This is hardly surprising given that we’re located in the second-most populous state in the union with more Fortune 1000 headquarters than any other state.

What’s more, The University of Texas at Austin is the flagship public school of Texas. According to the most recent rankings by both BusinessWeek and U.S. News, our MBA program is the only top 20 MBA within a radius of 1,182 miles-the distance to the University of Chicago’s Graduate School of Business. See map illustrating our unique geographic position

To continue to expand our national presence, the school has placed more emphasis on recruiting MBA students from outside of Texas. This is a strategy, however, that can only go so far without reducing the opportunities offered to prospective students who live in Texas and want to build their careers here.

ARE YOU SATISFIED OR WELL-SERVED?

Another ranking criterion that appears in surveys is student perception of the program and/or satisfaction with it. This makes up 45 percent of the biennial ranking of BusinessWeek, arguably the most well known of MBA rankings, as well as about 20 percent of that of the Economist.

Student satisfaction is important to assess, and no school, whatever its rank, would take pride in producing graduates who held a dim view of their program. That being said, raising student satisfaction brings its own challenges. A major hurdle for any program is how to appease students without sacrificing academic merit or the student’s ultimate level of preparedness.

Case in point. Grading issues affected McCombs’ 2006 BusinessWeek ranking when the faculty decided to add plus and minus grades to the letter grades for graduate students. Despite the intent, that the new grade distinctions would encourage more engagement and diligence from students in effect, making the program more academically competitive the students were initially less happy, with lower student satisfaction scores.

Student satisfaction can present particular challenges for schools like McCombs that have student audiences segmented into different academic programs. In addition to the full-time MBA, McCombs is comprised of an Executive MBA program, an evening program, working professional programs in Dallas and Houston, as well as top-ranked undergraduate and accounting programs. Teaching and resource allocation is balanced across these programs to ensure consistent quality.

One example of resource allocation arose last fall when the decision was made to allow students in the evening MBA program access to the school’s on-campus recruiting services. Some full-time students disliked this decision, thinking that it created more competition for the same jobs. The reality is that having more students in the pool significantly bolsters recruiter numbers, making the school more attractive to top recruiting firms. Without this depth is supply, McCombs would not be able to attract the number and diversity of recruiters to meet student demand. Obviously, there are times when program administrators must make decisions for program improvement that are not popular in the short term.

PUTTING THE RACE IN ITS PLACE

While there are clear collateral benefits to the rankings, the heart of the matter is: Who should be defining the conversation and setting the goals for program quality the faculty, administration, and industry advisory council or the business plan of a magazine? In a 2005 article for the journal BizEd, Andrew Policano, dean of the Paul Merage School of Business at the University of California at Irvine, argued that what may have begun as a benign attempt for publications “to fill a niche and boost circulation” has had many undesirable consequences for business schools, not the least of which is the “diversion of funds to engineer their MBA rankings” at the expense of other programs, curricular innovation and research.

Improving the rankings per se has little to do with actually improving the program, as counterintuitive as it sounds. In each of these cases faculty productivity, employment and student satisfaction if McCombs were to set its strategy to improve the rankings in and of themselves, there would be disastrous consequences to our program quality.

Because prospective students pay attention to rankings when selecting programs, we do take the rankings seriously and always try to put our best foot forward when taking part. We always consider any worthwhile feedback that surveys may have to tell us about our programs. At the same time, Dean George Gau has established that we will not direct the strategy of the school to raise our ranking in one or more of these surveys, but rather to improve fundamentally the quality of our academic programs.

The ranking race may be big business in the publishing world. But it’s not, in itself, the business of business schools.

Additional reporting and writing by Matt Turner.