For only the second time in 23 years, Stanford Graduate School of Business captures the No. 1 spot in the Financial Times global MBA ranking
For only the second time in 23 years, the Financial Times named Stanford Graduate School of Business the best MBA experience in the world. The last time Stanford occupied the top spot on the FT list was in 2012.
Stanford was able to nudge aside INSEAD, which had been ranked first by the FT for two consecutive years in 2017 and 2016, by performing better on the three most important metrics used by the British newspaper to compile its annual global MBA ranking. Stanford handily beat INSEAD on “weighted salary” and “salary increase” over pre-MBA pay, two factors that alone account for 40% of the ranking. And it also outdistanced INSEAD on faculty research, which carries a 10% weight on the list, with Stanford ranking fifth and INSEAD pulling in at ninth place, a drop of four spots from a year earlier when it tied with Stanford.
The bigger news in this year’s ranking, however, is the disappearance of a major European player: IE Business School. Ranked eighth last year, IE didn’t make the Financial Times ranking for the first time because the newspaper could not gather a representative sample of the school’s alumni (see Why IE Business School Lost Its FT Ranking). IE had been ranked by the FT in 22 of the previous annual lists dating back to the list’s debut in 1999. While schools routinely fall in and out of the list, this is also the first time that a top ten school did a disappearing act.
CEIBS in Shanghai gains its highest rank ever, a top ten finish with a rank of eighth place
CEIBS IN SHANGHAI GAINS HIGHEST FT RANK EVER, RISING TO EIGHTH PLACE
Also for the first time ever, CEIBS (China Europe International Business School) based in Shanghai cracked the top ten, moving into an eighth place finish, up from 11th last year. The increase marks a steady improvement in the stature of the school, coming from a rank of 90th 15 years ago in 2013. The only other Asian school to ever manage a top ten finish in this ranking has been Hong Kong University of Science and Technology which placed as high as sixth in 2011. This year HKUST is 14th.
Rounding out the 2018 top ten were No. 3 Wharton, No. 4 London Business School, which rose two places from sixth, and No. 5 Harvard Business School, which slipped one spot from fourth last year. The University of Chicago’s Booth School of Business climbed three places to rank sixth from ninth in 2017, Columbia Business School maintained its seventh place finish, CEIBS was eighth, and improvements in rank for No. 9 MIT Sloan and No. 10 UC-Berkeley Haas School of Business brought those two American favorites into the top ten. Sloan and Haas had been tied for a rank of 13th last year.
This was an especially volatile year for the FT ranking. Besides IE Business School, some 13 schools dropped off the list entirely. Another 14 became new entrants, and 23 schools that remained in the top 100 experienced double-digit increases or falls. U.S. schools made something of a comeback, with seven in the top ten, up from five last year, and with some notable advances by key players.
BIGGEST WINNERS & LOSERS THIS YEAR
Cornell University’s Johnson Graduate School Business jumped 10 spots to rank 17th from 27th a year earlier. UCLA’s Anderson School of Management rose seven places to rank 25th from 32, and Duke University’s Fuqua School of Business improved by six positions to earn a rank of 19th from 24th. The biggest fall for a top ten MBA program was at Cambridge University’s Judge Business School which tumbled five places to a rank of 13th this year from eighth place in 2017.
The volatilty in the FT ranking—which diminishes the credibility of the list because there are few year-over-year changes at schools to warrant big changes—means that there were plenty of big winners and big losers this year. While there is nothing worse than dropping off the FT list entirely, the full-time MBA programs at several schools experienced dramatic drops in rank. Lancaster Business School in the United Kingdom plunged 28 spots to rank 70th this year, from 42nd in 2017. University College Dublin’s Smurfit Graduate Business School lost 24 places to end up at 94th, from 70th a year earlier. And the University of Toronto’s Rotman School of Management plummeted 21 positions to rank 86th, from 65th.
On the other hand, champagne corks will likely be popped today at Rice University’s Jones Graduate School of Business which climbed 19 places to rank 45th in the world, from 64th a year ago. Washington University’s Olin Business School, under a new dean from Britain, zoomed up 18 spots to rank 50th, from 68th. The University of Edinburgh Business School also rose 18 places to achive a rank of 73rd, much better than last year’s 91st place finish.
INSEAD bills itself as “the business school for the world”
MOST OBVIOUS FLAWS IN THE FINANCIAL TIMES METHODOLOGY
The Financial Times global ranking is the most closely followed in Europe and Asia, while U.S. News entirely U.S.-centric ranking has become the most influential in the U.S. The FT’s methodology is based on 20 different metrics, including several that tend to favor non-U.S. schools. Among other things, metrics that add score points to a school’s standing include the percentage of students, faculty and trustees who carry passports from a country where the school is not located, whether students and alumni worked in foreign countries, whether students had an international course experience and whether the school requires students to learn extra languages prior to graduation. What any of these criteria have to do with the quality of an MBA degree is a matter of opinion.
Often, an even greater impact on a school’s rank can be the result of the FT’s decision to use a purchasing power parity (PPP) formula to convert and count actual salary data–the most heavily weighted metric in the methodology. Such currency gymnastics favor schools that supply graduates to countries with high rates of poverty. With the PPP adjustment, for example, it’s probable that CEIBS would not have finished in the top ten. The school’s latest employment report shows that the median base salary for MBAs was $67,282. The FT’s adjusted salary figure for CEIBS alumni is $162,858.
This adjustment has an especially negative impact on all U.S. schools because the vast majority of international students who get an MBA in America want to live and work in the U.S. where their compensation would not be inflated by the PPA filter. Although 34% of this year’s graduating class at Harvard Business School were international, for example, only 13% of the class took jobs overseas and that percentage includes some U.S. citizens. At INSEAD, in contrast, nearly 70& of the MBA students from Asia Pacific (67%), Africa and the Middle East (57%), and Latin America (63%) returned home to regions where a PPP adjustment would inflate their actual compensation.
FT PUTS HEAVY WEIGHT ON SALARIES–BUT NOT TOTAL COMPENSATION WHICH IS MORE IMPORTANT
What’s more, even though the FT is putting a 40% weight on these pay numbers, they fail to account for total compensation—just salary. In the U.S., a good many MBAs from elite schools often get stock options (at Stanford, 32% of the newly minted graduates last year reported stock compensation) and significant annual bonuses that would put their schools well ahead of many of the institutions that are routinely ranked higher by the Financial Times.
Unlike U.S. News, moreover, the FT pays no attention at all to incoming student quality in its ranking–another reason why U.S. schools do less well on this list. GMAT and GRE scores and undergraduate grade point averages, all key components of a business school admission decisions–are ignored. So are acceptance rates which also tend to be lower at many of the best U.S. schools. At Stanford, for example, only 6% of the candidates who apply for admission get into its MBA program. At INSEAD, which does not report this number, the acceptance rate is routinely above 30%, according to insiders.
Despite the deficiencies in how the FT parses salary data, Stanford alums again topped the list for the highest paid MBAs in the world. Stanford alumni three years removed from school brought home a weighted salary—adjusted by PPP as well as for what the FT calls “variations between sectors”—of $214,742, up 9.9% over $195,322 a year earlier. It was the first time MBA alumni reported base pay that tipped over the $200K mark. Those salaries were considerably higher than the $177,157 at INSEAD whose alums saw a smaller 5.7% increase from $167,657. While last year INSEAD was just slightly ahead of Stanford on increases in salary, 95% versus 93%, the two schools reversed places. Stanford alums reported a 114% rise in salary vs. pre-MBA levels, while INSEAD grads had a 105% jump. Along with the higher placement on the 50 academic journals used for the FT research ranking, that was all Stanford really needed to leap over INSEAD to claim first place this year.
As one might expect, given the emphasis on salary in the FT survey, changes on these metrics can have a big impact on a school’s year-over-year movement. Yet, it’s possible that change can be impacted by sample size or the misreporting of the self-reported data by alums.
The iconic Hoover Tower at Stanford University
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