You’d be hardpressed to find a business school that can match the University of Chicago’s Booth School of Business’ gains in both excellence and prestige over the past dozen years.
The quality and diversity of Booth’s students has seen singificant improvement, with average GMAT scores for the latest entering class now 719, up from 687 in 2001. Women now represent nearly 36% of the class, up from just 27% some 12 years ago, and international students total a third of the class. Last year’s average starting salary for graduating Booth MBAs hit $113,220, up 33% from the $85,000 average in 2001.
No less impressive, over the past 12 years Booth has tripled student scholarships and doubled its endowed chairs, allowing the school to hire and to retain more senior faculty than ever before. The school’s endowment–perhaps the best single metric of its health–has never been higher: $511 million, more than double the $197 million it had in 2001. And the endowment, no less, doesn’t even include a $300 million gift the school received in 2008 from alumnus David Booth. It is the largest gift ever made to a business school.
Few schools can boast as distinguished or as rewarded a business faculty than Chicago which lays claim to six Nobel Prize Winners. Eugene Fama, widely recognized as the “father of modern finance,” became the first recipient of three major prices for finance research in the past seven years. Booth professor Christopher Yenkey and Ronald Burt captured major awards from the Academy of Management last year for their cutting-edge work on networks. Earlier this year, Booth professors Erik Hurst and Tobias Moskowitz won the prestigious Kauffman Prize Medal for distinguished research in entrepreneurship.
Chicago Booth has dropped eight places to 12th in the FT rankings since 2001
Yet, when you consult The Financial Times’ rankings of the best global MBA programs, you would think Chicago is in a deeply troubled freefall. Booth went from being ranked fourth in 2001, behind only Wharton, Harvard and Stanford, to 12th place this year, its worst showing in the past dozen years. Against the school’s dramatic improvement during this same time span, the eight-place drop defies rational explanation or reason.
That’s especially true when viewed against The Financial Times ranking for the school that has placed ahead of Chicago both this year and last: the Indian Institute of Management (IIM) in Ahmedabad, India. The differences between these two institutions are stark and dramatic, yet they sit next to each other in The Financial Times’ rankings. IIM debuted at a ranking of 11th in 2011 after never having been ranked among the top 100 MBA programs by the British newspaper in the previous ten years. Yet, its graduates reported average starting salaries last year of only $29,181–more than $84,000 less than Chicago’s MBAs. IIM’s graduates who stayed in India made even less: just $25,679, not even as much as the average signing bonus of $27,680 for a Chicago MBA last year.
What’s more, IIM’s student diversity is among the weakest of any business school in the world: only 6% of its students are female and only 7% are from outside India. Its endowment is virtually non-existent. A campaign launched in 2008 to raise $50 million in an alumni endowment fund has reportedly raised less than $2 million in three years. Chicago has 38 MBA alumni clubs scattered all over the world, a testament to its truly global reach, while IIM has a half dozen alumni chapters outside of India. And IIM’s faculty, however good by Indian standards, is no match whatsoever for Chicago with its half dozen Nobel laureates. Even the Financial Times’ own analysis ranks IIM 94th out of 100 schools in faculty research published in the 45 top scholarly journals, compared to Chicago’s research rank of sixth place.
The FT ranks India’s IIM ahead of Booth even though its grads made only $29,181 last year
So how can The Financial Times justify ranking the Indian Institute of Management in the same league with Chicago Booth? Never mind giving IMM a better ranking than Chicago.
It is one of the confounding puzzles of the rankings game. No matter who does the survey or how the ranking is put together, peculiar findings are common. They occur because of methodologies that are rife with metrics that often have little if any relationship to the true quality of a business school or are based on highly flawed surveys that can lead people to very odd assumptions.
The Financial Times, for example, ranks global MBA programs on the basis of 20 different metrics. Some 40% of the weight in its ranking is based on compensation. With the pay gap for freshly minted grads so massive between Chicago and IIM, how could IIM outperform Booth? The first problem is that the FT doesn’t use the official salary statistics. Instead, it uses its own surveys of alumni three years out to estimate what those alums make and how much more they earn compared to the year before they received their degrees. Small sample sizes and the honesty of the respondents can play havoc with these estimates. Then, the newspaper adjusts all the figures to account for what it calls “purchasing power parity.”
How the FT inflates alumni compensation for Asian schools including IIM
Regardless of the actual numbers that show a massive gap between starting salaries of IIM and Booth grads, The Financial Times reports that the “weighted salary” of an IIM grad three years after graduation is $175,076, more than the $152,585 it claims for the typical Booth alum. And the FT claims that the typical IIM alum posted a 140% increase in pay from pre-MBA days, while the Booth alum managed only a 109% rise. These highly inflated numbers for IIM easily account for its higher rank over Booth.
An analysis by Poets&Quants of The Financial Times’ historical rankings over the past 12 years shows that Chicago has plenty of company, particularly among other prestige business schools in the U.S. In the last dozen years, Northwestern University’s Kellogg School of Management fell to 16th from ninth; New York University’s Stern School to17th from tenth; Dartmouth’s Tuck School to 19th from 13th, Cornell University’s Johnson School to 24th from 15th.
Many other highly prominent U.S. schools, whose student quality has improved over the 12-year span, showed even more dramatic declines. The University of Michigan’s Ross School, for example, plummeted 13 places to a rank of 29 from 16th; UCLA’s Anderson School fell 20 places to 32nd from 12th in 2001; Carnegie Mellon’s Tepper School dropped 18 spots to 35th from 17th, and the University of Virginia’s Darden School slid 16 places to a rank of 38th from 22nd.
Many prestige U.S. schools haven fallen on the FT’s list despite significant improvements in quality
Yet, at all these schools, the quality of the students, judged by average GPA and GMAT scores, have significantly improved over the timeframe. At Kellogg, the average GMAT score of the entering class is now 712, up from 700 in 2001; at Dartmouth, the average GMAT is 718, up from 695; at NYU Stern, the average GMAT is 719, up from 700.
If you think those declines seem arbitrary or unwarranted, you’re likely to think even worse when looking at another set of schools that plunged even further during the 12-year period. The University of Southern California’s Marshall School, for example. lost 29 places, falling to a rank of 61st this year from 32 in 2001. Vanderbilt University’s Owen School dropped 36 places to a rank of 61 from 25 in 2001. The University of North Carolina’s Kenan-Flager Business School plunged 35 spots to a rank of 56th from 21st. The University of Western Ontario’s B-School fell 49 places to 68th from 19th.
As U.S. business schools have fallen, European and Asian schools have done much better in The Financial Times. IIM is just one highly visible example, but there are many more. Hong Kong University of Science & Technology was ranked tenth in the world last year from 48th in 2001. The National University of Singapore’s business school zoomed to 23rd in the world from 89th just 12 years ago. HEC Paris climbed to 18th from 52nd in 2001. China Europe International Business School (Ceibs) in Shanghai, China, jumped to 24th this year from 92nd in 2002 (it was not ranked at all in 2001 by The Financial Times).
Wharton tops the FT rankings when they are combined over 12 years
When you combine 12 years worth of Financial Times’ rankings, a process that helps smooth out some but not all of the anomalies in a given year’s list, it turns out that Wharton, Harvard, Stanford, Columbia and London come out on top as the FT’s best global MBA programs. Chicago Booth slides into seventh place, just behind INSEAD.