On Jan. 28 the Financial Times named Harvard Business School the best place in the world to earn a full-time MBA degree. It is the fourth time that Harvard has topped the FT list since it debuted in 1999. Harvard had captured the No. 1 spot in both the inaugural FT ranking in 1999 and again in 2000, but then waited until 2005 to regain its first place finish.
As earlier reported by Poets&Quants, Harvard essentially switched places with Stanford University’s Graduate School of Business to assume the top spot. The FT ranked Stanford second, Wharton third, London Business School fourth, and Columbia Business School fifth.
The Financial Times said Harvard edged out Stanford because it was “top for research and increased the number of international students on its program, both of which are measured as part of the rankings.” Harvard also introduced a global immersion requirement for its MBA students, another factor in the school’s favor due to the Financial Times’ methodology (a detailed analysis on how Harvard beat Stanford appears later in this article).
In the 15 years that the FT has ranked full-time MBA programs, Wharton has been ranked first more than any other school, some ten times. This year’s Harvard win now places the Boston school second, with four wins, followed by London Business School with three and Stanford with one.
The biggest changes and surprises occur lower down on the list
But the bigger surprises on the list occurred outside the privileged top five institutions. Cambridge University’s Judge Business School jumped 10 places to finish 16th this year, from a rank of 26th last year. ESADE, based in Spain, rose 11 places to rank 22nd this year, from 33rd in 2012. Both schools made their moves on the basis of much higher average salaries reported to the Financial Times by alumni. Average salaries at Judge for alumni three years after graduation rose 10.4% over last year to $145,948 annually, while salaries for ESADE alumni jumped 10.9% to $127,500 (see Stanford Alums Make The Most Dough: How Credible Is The Financial Times’ Salary Data?).
Those increases significantly outstripped gains at most other schools, including the very best business schools as well as home country rivals. Stanford alums, for example, who at $195,553 in annual salary are the highest paid in the world, according to the Financial Times, last year saw only a 2.0% increase. Because compensation accounts for the largest single weight in The Financial Times’ ranking–some 40% in total–the reported gains helped to push both Cambridge and ESADE schools up the FT list. The British newspaper ranks global MBA programs on the basis of 20 different metrics, including several measurements that attempt to rate how global or international a school is. That is why most critics say the FT’s global ranking is biased against the U.S. schools.
Exactly 50 of 100 ranked schools had double-digit changes in a single year
In any case, it was yet another year of roller-coaster results. Exactly half of the 100 schools given numerical ranks by The Financial Times experienced double-digit rises of falls in their year-over-year standing (see Winners & Losers in The Financial Times’ 2013 Global MBA Ranking).
One new school on the FT list, The Lisbon School of Portugal, debuted this year at a rank of 61 which implied a jump of at least 40 places in a single year. The school that gained the most ground in the FT’s 2013 survey was UC-Irvine’s Merage School which rose a remarkable 27 places from last year to finish 54th from 81st in 2012.
Wild year-over-year swings in a ranking tend to undermine its credibility because very little can generally change at a business school in a 12-month period. Such changes largely occur because the differences among the ranked schools is so small as to be statistically meaningless. That’s especially true the further you go down a list where the underlying data for each numerical rank can be just fractions of a difference. The Financial Times, unlike BusinessWeek and U.S. News, does not publish the underlying index numbers so readers can tell how close one school is to another.
Indeed, some 33 out of the 100 ranked schools shared a ranking because of a tie. In some cases, as many as three schools were awarded the same rank by The Financial Times. For example, the business schools at Washington University, Indiana University and UC-Irvine all were ranked 54th because the collective numbers from 20 different metrics led to the exact same result.
Other schools in the FT’s top 20 which have made significant progress moving forward include No. 15 Ceibs in China, up nine places from 24th last year; No. 14 Yale University’s School of Management, up a half dozen spots from 20th, and No. 13 Northwestern University’s Kellogg School of Management and No. 16th Dartmouth College’s Tuck School of Business, both up three places from 15th and 19th, respectively.
Progress by several schools is good news for new deans pursuing new agendas
The improvement at Ceibs, Yale and Kellogg is a sign that new leadership is having an impact. At Ceibs, Harvard Business School professor John Quelch had taken over the deanship of the Chinese school in February of 2011 and left this month. But during his two-year tenure, he made significant progress in advancing the school’s quality and agenda. At Kellogg and Yale, Deans Sally Blount and Edward Snyder have been aggressively working to improve their schools’ MBA programs. The Financial Times ranking is among the first to show a payoff from those efforts.
Ceibs, in a news release on the improvement, noted that the FT reported a 157% increase in graduates’ salary three years after they completed the programme (up 7% over 2012); a 25-point jump in value for money (ranked #24 this year, #49 last year); a 19-point increase in alumni’s career progress (#8 this year, #27 last year); 95% of its alumni employed within three months after graduating, despite the increasingly challenging global job market; a 9-point increase (ranked #14) in its international course experience; improved international mobility of students (up 3 places to #38); more international faculty on board (70% of the faculty pool) and they were producing higher quality research (up 15 spots to #66). That gives you a sense for some of the other factors measured by The Financial Times in its methodology.
A tough year for two prominent Indian Business School
The new ranking was especially punishing to India’s two most famous business schools: the Indian Institute of Management in Ahmedabad, known as the world’s most selective business school due to an acceptance rate of below 1%, and the Indian School of Business.
Last year, IIM-Ahmedabad was ranked 11th and ISB was ranked 20th by The Financial Times. This year both schools tumbled out of the British newspaper’s top 20 ranking, with IIM plummeting 15 places to finish 26th and ISB falling a 14 spots to rank 34th.
The drops were caused in part by falling compensation. At IIM, for example, average alumni salaries fell by 2.2% last year to $171,188, making the school one of only two top 25 ranked schools where alumni reported lower salaries last year than the year before. At ISB, salaries dropped by 4.4% to $123,094, a drop of more than $5,700. Those declines, gathered from surveys of alumni by The Financial Times, also had a negative impact on the percentage increase in salary of alumni over their pre-MBA pay, another key metric used by the FT to rank schools. At IIM, the percentage gain fell 30 points to 110%, while at ISB the percentage increase plummeted 25 points to 152%.
The FT said that U.S. business schools continue to dominate the rankings, with 51 of the top 100 schools located there, including six of the top 10. There are 26 European MBA programmes, with London Business School ranked number one in the region and four in the world. Hong Kong University of Science and Technology is the top Asian school, according to the FT, ranked eight. The number of Asia-Pacific business schools in the rankings increased to by two to 14 this year from 12 in 2012.
How Harvard displaced Stanford in the FT rankings
It’s rather telling to examine how Harvard Business School jumped over Stanford this year to finish first.
Source: The Financial Times’ 2013 global MBA ranking
Though Stanford handily beats Harvard when it comes to the weighted average salary of its alumni three years after graduation ($194,645 for Stanford alums vs. $187,223 for HBS alums), Harvard edged out its West Coast rival on 11 of the 20 metrics used by The Financial Times to rank the best business schools. Harvard, for example, did better on another key measure of compensation–the percentage increase in alumni salaries over pre-MBA pay (121% for HBS alums vs. 115% for Stanford MBAs).
By the estimation of its alumni, a Harvard MBA provides greater value than a Stanford MBA (measured by salary vs. opportunity costs and actual expenses to get the degree). In fact, HBS was up 13 places on the FT’s calculation of the value of the MBA, ranking 77. Stanford was down six places this year, ranking 94th out of 100. That could well be because Stanford’s estimated costs of getting a full-time MBA exceed every other school in the world and it gives slightly less scholarship aid to students than Harvard which is the most generous school in that regard.
Harvard also gets more points from the Financial Times because it boasts more women students and faculty
The FT also awards Harvard more points for diversity. The female faculty at Harvard make up 24% of the total, versus 18% at Stanford. Some 40% of the students at HBS are women, compared with 35% at Stanford. Harvard also ekes out slightly better numbers for the percentage of international students and international board members, though not by much.
Source: The Financial Times’ 2013 global MBA ranking
Harvard MBAs are more likely to land jobs outside the U.S. than those at Stanford, allowing HBS to be ranked 43rd in “international mobility” vs. 56th for Stanford (that’s the cost of those palm trees and warmer Northern California weather). The FT also ranks Harvard faculty first in producing intellectual capital. Stanford, according to the Financial Times, is ranked sixth on faculty research.
Still, Stanford is ahead of Harvard are more than just alumni weighted salaries, if you can believe The Financial Times. Stanford outranks HBS on a number of other key career metrics that loom large in the newspaper’s methodology. Surveys of Stanford and Harvard alums show that the West Coasters are slightly more satisfied with what the FT calls “aims achieved,” the extent to which alumni fulfilled their stated goals for getting an MBA in the first place. The FT ranks Stanford fifth on this measure versus 17th for Harvard.
Stanford also does better on alumni perspectives on their ”career progress” and “placement success.” The FT ranks Stanford second in career progress, which calculates changes in seniority at work, compared to Harvard’s rank of fifth. The newspaper ranks Stanford on placement success a 17 versus Harvard’s 22.
Of course, many of these metrics aren’t likely to matter to students. It might be politically correct to have more women as faculty and students at a school, but does it really say anything about the quality of the education or the experience? And some of these differences are so slight that they are quite meaningless or can simply be chalked up sample error.
It’s even possible that some of the data, interpreted in a positive way by The Financial Times, is actually a negative. Having more students and faculty from outside the U.S. can be a telltale sign that a school is having trouble landing the best students and the best faculty domestically where the applicant and professor pools are no longer growing.
So while it’s important to know what goes into a ranking, it’s also important to take it all with a grain of salt.
Stanford Alums Make The Most Dough: How Credible Is The Financial Times’ Salary Data?
Winners & Losers in The Financial Times’ 2013 Global MBA Ranking
The Financial Times’ Historical Global MBA Rankings