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Making A Good Use of the MBA Rankings

¡DDifferent Methodologies and Different Rankings
¡DChina MBA ranking systems
¡DThe rankings conducted by "Manager" magazine
¡DThe rankings conducted by "Forbes China"
¡DDeficiencies of the two MBA ranking systems in China
¡DMaking the best use of the current ranking systems
¡DDeveloping a better ranking system for China in the future

As the MBA programmes are varied and diversified, prospective candidates are becoming picky when they are aware of their choice as a consumer.
Today, there are well over 100 programmes of business education in Greater China. To make a good choice of the right programme, there are major criteria that are commonly used: reputation of the business schools, nature of the programme, career development and business networking opportunities.

In the West, while incorporating these critical elements, comprehensive, systematic and fair systems of ranking have been developed over the years by major publications to compare and rate different MBA schools. Within the ranking methodologies, the most popular, well-regarded and authoritative ones are six ranking methodologies, which provided by four American and two European publications.

The American Publications:

  • Business Week
  • Forbes
  • US News & World Report
  • The Wall Street Journal

European publications:

  • Financial Times
  • EIU

Different Methodologies and Different Rankings

Different Ranking Methodologies
Publication Scope of survey / Survey method Criteria
Business Week Feedback from recruiters and graduates
45% on student satisfaction surveys of recent MBA programmes
45% on surveys of corporate recruiters based on their experiences with school¡¦s graduates
10% on ¡§Intellectual Capital¡¨ calculated by ¡§Business Week¡¨, which tallies points for appearance of the faculty's research in 18 specific publications
Forbes Ranks return on investment
Average 5-year increase in compensation compared to pre-MBA salary for each school¡¦s graduates
Cost of each MBA programmes, including estimated foregone salary
U.S. News & World Report Using quantitative and qualitative measures
25% on ratings by business school deans and MBA programme directors
15% on ratings by recruiters of the schools at which they recruit
35% on placement statistics provided by each school
25% on school-reported ¡§selectivity¡¨, the percentage of applicants the school accepts for admission
Wall Street Journal Survey on recruiters¡¦ perceptions
Scores are based on how recruiters rated each business school on 26 attributes.
Financial Times Career progression, school diversity and quality of academic research
25% on diversity of faculty, students and board members and the international experience of students, by surveys completed by the schools themselves
20% on research
EIU Using quantitative and qualitative measures
35% on opening new career opportunities
35% on personal development and educational experience
20% on salary increase
10% on potential to network

Given the very different perspectives, assumptions, choice of data, and emphasis of the 6 different ranking methodologies, the ranking results are of course surprisingly very different. For example, a top MBA school ranked number 1 in one ranking might not even be top 10 in another.

For example, in one year, Stanford was ranked number 1 by ¡§US News¡¨ and ¡§World Report¡¨, but it is rated number 11 by ¡§Business Week¡¨. Also Kellogg School was rated number 1 by ¡§Business Week¡¨, but ¡§Financial Times¡¨ rated the school only 17. As such this has fueled much intense debates and arguments amongst the MBA students, alumni, recruiters, and schools.

The reason for this difference is that different organizations use different criteria to rank the MBA schools because there is no such thing as the most objective and comprehensive system of criteria for ranking. Some put more emphasis on student satisfaction while others put more emphasis on salary and alumni data. In addition, the ranking criteria may change from year to year in some publications.

As a result of this, it has created much confusion and worries amongst the prospective students. At the same time, the schools and alumni have been enraged and upset. Meanwhile the corporate recruiters and companies have also been bewildered.

China MBA ranking systems

Following the West, a similar confusing and bewildering situation has slowly been surfacing in China. Since the first ranking was published in 2004, today there are two major publications rating MBA programmes in China. They are ¡§Manager¡¨ magazine and ¡§Forbes China¡¨. Again, they have also very different perspectives, assumptions and orientations in their methodologies.

The rankings conducted by "Manager" magazine

In 2004, ¡§Manager¡¨ magazine was the pioneer as it was the first major publication to rank MBA programmes in China. The ranking was again published in 2006.

The survey was conducted by telephone interviews, questionnaire, face-to-face interviews and collection of secondary data.

Three perspectives are adopted in the survey:

  1. From the angle of the business school: academic strength and teaching method of the schools
  2. From the view point of the students: their satisfaction and their benefits such as salary
  3. From the angle of the employers: the employers¡¦ evaluation of the graduates
Criteria of ranking:
  • Academic strength / faculty quality
  • Internationalism of the student body
  • Percentage of graduates with job offers upon graduation
  • Reputation of the school
  • Diversity of student body
  • Average salary before and after graduation
  • Salary increase - two years after graduation

The rankings conducted by "Forbes China"
On the other hand, ¡§Forbes China¡¨, as compared to ¡§Manager¡¨ magazine, is the late comer to the ranking game. It was published in 2005 and continued in 2007. Its approach is different and the methodology utilized is presumed to be more quantifiable and objective.

This publication selected 10 full-time and 15 part-time MBA programmes in China. Their approach is economic, quantitative and the ranking is based solely on ROI, the return on investment. In particular it is the ROI of the graduate four years after his or her graduation. However, the calculation is slightly different for full-time and part-time programmes:

Full-time programme:
ROI = total income four years after graduation - tuition cost of MBA - opportunity cost since the date of entrance to the MBA programme

Part-time programme:
ROI = total income four years after graduation + total income while enrolled in the MBA programme - tuition cost of MBA - opportunity cost since the date of entrance to the MBA programme.

As they believe that the students look at the MBA experience as an investment project, just like investing in a stock, the paramount importance is in the return from the investment in time and money. Furthermore, only quantifiable numerical ratio such as the ROI would give an objective number for comparison.

Deficiencies of the two MBA ranking systems in China
For the ¡§Manager¡¨ publication, the strength of the methodology is its comprehensiveness as it considers many criteria: academic strength/faculty quality, internationalism, percentage of graduates with job offers upon graduation, reputation, diversity of student body, average salary before and after graduation, salary increase - two years after graduation. However, individual criteria such as reputation, academic strength, etc are very subjective elements subject to debates. They are easily manipulated for the purpose of improving a school's ranking. Moreover, even if we believe that individual criteria are objective, the weighting of criteria in the total measurement is still very subjective and debatable. Should reputation of the school be weighted more important than academic strength?

On the other hand, for the ¡§Forbes China¡¨ ranking system, the ranking is based on ROI, return on investment. In particular it relies heavily on total income of the graduate four years after his graduation. As this ranking system relies heavily on total income, the truthfulness of this data is of paramount importance. As it is almost impossible to verify the salary figures of the surveyed graduates, the draw back or deficiency of this ranking is the verifiability of the salary data and have the actual ROI.

Another drawback of this ranking system is that it relies heavily on salary gains of the graduates. Thus, an MBA school with an emphasis in a particular high paying industry might attract more prospective candidates and graduate more students in this area. Also if an MBA school has an emphasis in a particular industry which has higher than average salary increments, the ROI would also be affected. For example, schools with more graduates in international finance due to the school¡¦s reputation in such area might have higher ROI as salary increase in general is more significant. So these schools would be rated higher in the ranking.

Another important point is that more and more MBA graduates chose to become entrepreneurs and start their own business. According to a recent Forbes report, about 20% of the surveyed MBA graduates have had started their own business. And as start-up companies might not pay very much salary to top executives as the bulk of the economic benefit accrue to stock ownership, a low reported salary might skew the ROI ratio of the ¡§Forbes¡¨ ranking. Thus a particular MBA school with entrepreneurial favor or orientation might as a result report a lower ROI making their ranking lower and less appealing.

What could happen is that finance-oriented MBA schools might be rated higher than entrepreneurship-oriented schools and this is surely not the purpose of any fair ranking system.

So which MBA ranking system is better?
So given the two methodologies existing in China, which is better? Which one should prospective students choose? If there is a discrepancy between them, how should they be resolved? Is Tsinghua University's MBA programme better than Peking University? Can the entire MBA experience be reduced to a ROI (return on Investment) number? If ROI and income is the only criterion for selecting an MBA program, then it is sufficient. But for most students, this might not be the case. On the other hand, can we rely on soft data such as reputation for our judgment? How would we compare a school which is stronger in academic reputation while weaker from the perspective of the employers?

Making the best use of the current ranking systems
Although neither of the ranking system is perfect, we can still gain much benefit from them. The choice of the ranking system depends on the aim, the perspective, the orientation, the utility of the prospective student. If the student aims only at the return of his investment in his education, then surely the ¡§Forbes¡¨ system would suffice. On the other hand, if other factors or elements are useful, then we can utilize and benefit from the ¡§Manager¡¨ magazine¡¦s ranking.

Although both systems have their draw backs, together they are useful sign posts for prospective student. With these sign posts in mind, the students might take into account the learning experience while at the school, the connections and friendship that they might make, opportunity for career change and the long term career impact.

Developing a better ranking system for China in the future
In the future, in order to better guide prospective students in choosing the right programme, an improved MBA ranking system is needed. In developing a more useful and improved MBA ranking system for China, flexible and comprehensiveness should be important themes.

There are some elements might be considered in the future:

  • Enough sample size from the survey of the students and recruiters
  • Enough objective and verifiable data
  • Taking into account connection or network of the alumni is a business environment in China where connection is important and a ranking system incorporating this element would be useful.
  • Geographic location of the school which would affect future connection and job opportunities as certain industries are more concentrated in a particular region. (For example, financial industry in Shanghai region as Shanghai is targeted to be the financial centre of China.)
  • Ranking of MBA schools by department or major as this would help students with particular major in mind.

Finally and most importantly, in developing a better ranking system for China, the Chinese government might be able to play a major role in it. The Chinese government, with its tax and income database, might provide valuable data for the ranking system. With its role, the future ranking system would be viewed as less biased, less political, more objective and authoritative.

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