Rankings of business schools generally fail to evaluate the inherent quality of an institution, instead ranking the people who choose to attend it.
An MBA student from UC-Davis will graduate, on average, with a starting salary that is $30,000 lower than a graduate from nearby UC-Berkeley. Can we take from this that two similarly-credentialed students at the two schools would have such a high difference in their market values? This reasoning ignores the selection bias. A student accepted by both schools is quite likely to choose the one often ranked in the top 10.
As long as top candidates choose to go to top programs, a higher ranking confounds the quality of students and the quality of a school. The proper interpretation of Business Week’s rankings, for example, is not that Harvard is a better school than Blah College, but that the type of students who go to Harvard do better after graduating from Harvard than the type of students who go to Blah College after graduating from Blah. Thus, a high starting salary for Harvard graduates might imply that Harvard’s professors can polish rough stone into beautiful rubies, but it is also possible that Harvard has the benefit of students who could have very well succeeded anywhere. (Note: I pick on Harvard because it actually does quite well in my rankings, supporting the rubies theory).
Which schools do best with the students they have? Traditional rankings fail to tell a given student with a given skill set which schools are most likely to increase his market value. That’s the goal of these rankings, highlighting that a change in methodology significantly alters the results. Full rankings below the jump. Methodological disclaimers (and there are many) are at the very bottom.
Ranking of Business Schools by Efficacy
|3||University of Virginia (Darden)||$12K||688||3.33||120|
|8||Minnesota–Twin Cities (Carlson)||$7K||661||3.37||99|
|10||Maryland–College Park (Smith)||$6K||650||3.34||98|
|12||Ohio State (Fisher)||$6K||661||3.41||97|
|15||UNC–Chapel Hill (Kenan-Flagler)||$6K||681||3.27||110|
|16||Brigham Young (Marriott)||$5K||661||3.53||93|
|18||Texas A&M (Mays)||$5K||665||3.4||97|
|20||Boston College (Carroll)||$3K||651||3.35||94|
|21||Univ. of Pennsylvania (Wharton)||$2K||712||3.53||130|
|23||Southern Methodist (Cox)||$2K||640||3.3||95|
|24||Arizona State (Carey)||$2K||675||3.44||98|
|26||Michigan State (Broad)||$1K||633||3.22||97|
|30||Penn. State (Smeal)||$-1K||650||3.3||92|
|32||Washington Univ, St. Louis (Olin)||$-2K||674||3.38||95|
|33||Michigan–Ann Arbor (Ross)||$-2K||700||3.3||118|
|38||Carnegie Mellon (Tepper)||$-5K||696||3.32||111|
|39||Georgia Institute of Technology||$-5K||665||3.4||88|
|40||Babson College (Olin)||$-5K||631||3.21||93|
|42||Notre Dame (Mendoza)||$-7K||673||3.2||95|
|43||Univ. of Southern Cal. (Marshall)||$-8K||689||3.3||102|
|44||Univ. of Washington (Foster)||$-8K||679||3.38||92|
|45||U. California–Berkeley (Haas)||$-9K||710||3.57||115|
|46||Univ. of California–Davis||$-11K||674||3.37||87|
|47||Univ. of Iowa (Tippie)||$-15K||652||3.34||76|
|48||U. California–Irvine (Merage)||$-16K||667||3.34||79|
|49||Univ. of Georgia (Terry)||$-16K||653||3.4||74|
|50||Univ. of Florida (Hough)||$-30K||680||3.4||70|
These rankings consider only the 50 schools in the most recent U.S. News rankings. Specific methodological details are available at the bottom.
Adjusted salary (in thousands of dollars) reflects both the starting salary of those employed within three months of graduation, and a downward adjustment for those who are not.
Market value denotes the difference between a school’s adjusted salary and what that school’s students would expect to earn (given their qualifications at admission) at an average business school (for a loose definition of an "average" school in this context, see no. 29). A student with a high GMAT score and an exceptional undergraduate GPA is likely to receive higher offers than one with lower scores regardless of the MBA program he attends (not because of the undergrad GPA, but because of what it reveals about the person). Market value indicates how much a school improves on this given its actual student population.
The notion of market value is akin to the distinction between two corporate tasks: recruiting the best talent, and guiding that talent to its potential. Most of the popular business school rankings are biased towards achievements in recruiting, while the above rankings measure efficacy with the given talent. Of the U.S. News top ten, only Harvard and MIT are also in the top ten in efficacy. Conversely, Stanford and Berkeley, also top ten U.S. News schools, are in the bottom ten here, suggesting that members of their admissions staff deserve sizable bonuses.
By way of example, UT-Austin, Wash U, St. Louis, and UC-Davis admit nearly identical student bodies, quantitatively, yet differ greatly in the market’s value of these students two years later. On the other hand, Yale and Cornell have nearly identical starting salaries, and therefore end up only one spot apart in U.S. News. Yet, given the superior class, in terms of GMAT, GPA, and selectivity, Yale should do better, thus ranking in efficacy 27 spots below Cornell, which takes the number one spot.
So, what’s the goal of this? Perhaps there’s a deep philosophical point about the purpose of education. I adopt market salaries as a measure of value purely because it is available, and is the most common quality measure in business rankings (or perhaps because of my unfaltering adherence to the social philosophy underlying classical economics). There’s also a mundane point: rankings are not difficult to generate, easy to game, and even easier to tailor toward mass hysteria and overreaction. To that end, extra credit ("adjustment factors") will be applied to next year’s rankings for posting a comment below ("brand management and awareness index"), sending me money ("investment index"), or publishing my papers ("scholarship discovery index").