P&Q: Stanford Tops 2018 Financial Times MBA Ranking

Source: Poets & Quants

by John A. Byrne,
January 28th, 2018.

[dropcap]F[/dropcap]or 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 of what the newspaper vaguely called “irregularities” in the school’s submission of information to the FT (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 HIGHEST FT RANK EVER, RISING TO EIGHTH PLACE

Also for the second 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 FT attributed Harvard’s fall to its measurement of academic research based on bylines and citations in 50 scholarly journals. HBS fell to 16th this year from third last year on this part of the ranking. Harvard’s from third to 16th and LBS’s from 12 to 27. HBS had topped the research ranking a dozen times, more than any other school, but the FT noted that “several Harvard faculty last appeared in these publications in 2014, too long ago to count.”

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 12 schools dropped off the list entirely. Another 13 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 achieve a rank of 73rd, much better than last year’s 91st place finish.

Schools With The Biggest Drops On The FT 2018 Ranking

Lancaster Business School in the United Kingdom plunged 28 places this year to rank 70th after a 42nd place finish in 2017. In all, 11 MBA programs fell in double digits but still managed to stay in the top 100.

School	Ranking Decline	2018 Rank	2017 Rank
Lancaster Business School	-28	70	42
University City Dublin (Smurfit)	-24	94	70
Toronto (Rotman)	-21	86	65
Rutgers Business School	-19	89	70
ESMT Berlin	-18	88	70
Strathclyde	-18	98	80
Notre Dame (Mendoza)	-17	67	60
Michigan State (Broad)	-14	72	58
Southern California (Marshall)	-11	59	48
Indiana University (Kelley)	-10	57	47
Lisbon Business School	-10	80	70

MOST OBVIOUS FLAWS IN THE FINANCIAL TIMES METHODOLOGYR

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 IMPORTANTR

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 5% 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.

Another issue with the FT ranking is that the newspaper fails to reveal the underlying index scores that allow it to crank out the numerical rankings. Those scores show whether a school’s rank is statistically different among other schools ranked nearby. In most rankings, these index scores tend to cluster in close bands and often show that there is no meaningful statistical difference between a school ranked 45th and one ranked 50th. The FT concedes that clustering is a reality and that there are four different groups of schools on its list of the top 100. In a footnote, the newspaper points out that the top 14 schools, starting with Stanford and ending with Hong Kong University Science and Technology, are in a top group. The second cluster, headed by Yale SOM, spans the schools ranked 15th to 44th. “Differences between schools are relatively small within this group,” the FT admits. The 48 schools in the next group are “similarly close together.” Just how close is unknown because the FT won’t publish the index numbers for each school.

HOW RICE UNIVERSITY’S JONES SCHOOL CLIMBED 19 PLACES THIS YEAR

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.

“Much will be made of Stanford’s rise to #1,” believes Matt Symonds, co-founder and a director of Fortuna Admissions, a leading MBA admissions consultant, “and with those eye-popping salary figures above $200k, this result was to be expected. INSEAD has had a good run with two years at #1, and we have seen a sharp rise in enquiries over the past 24 months with the global recognition the FT results have brought.The school also benefits from an excellent ROI for the increasingly popular one-year course format, and the much-reported Trump effect that has encouraged a significant number of business school applicants to look beyond the U.S. for their MBA experience. But this result is part of a wider trend that we saw in The Economist ranking last November, where many US schools are in the ascendancy with the strengthening US dollar in 2017.”

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. Rice University’s Jones School jumped 19 places this year after alums’ weighted salary rose to $139,189, from $130,852 a year earlier. That boosted the percentage increase over pre-MBA salary as well to 118%, from 97% last year. The school also did better on a variety of other metrics counted by the FT, including the program’s value for money, up to a rank of 56th from 64th, and career progress as judged by alums, ranking 87th versus 94th last year.

Declines in the FT’s crucial pair of pay metrics can be devastating for a school. At University College Dublin’s Smurfit Graduate Business School, alumni salaries fell by more than $10,000 to $102,643, from $113,094 last year. That helped push down the increase in salary over pre-MBA levels for alums to 63%, eight percentage points lower than the 71% bump a year earlier. In turn, Smurfit also lost ground in the FT’s “value for money” metric, slipping 14 places to a rank of 30th from 16th last year. The impact of these changes on the school’s rank this year? The school’s MBA program very nearly fell off the list for the first time in 19 years, careening 24 places to a rank of 94th from 70th in 2017. It was the second deepest drop of any school that managed to stay within the top 100.

Schools With Biggest Gains On The FT 2018 MBA Ranking

Rice University's Jones Graduate School of Business made the biggest gains this year of any MBA program that remained on the top 100 list. Rice climbed 19 places to rank 45th from 64 a year earlier. A dozen schools rose by double-digits in 2018

School	Ranking Increase	2018 Rank	2017 Rank
Rice University (Jones)	19	45	64
Washington Univ. (Olin)	18	50	68
Edinburgh Business School	18	73	91
IIM-Calcutta	17	78	95
IIM-Bangalore	14	35	49
Purdue (Krannert)	14	55	69
Penn State (Smeal)	14	75	89
Boston College (Carroll)	13	67	80
Durham Business School	11	64	75
Georgetown (McDonough)	10	30	40
Cornell (Johnson)	10	17	27
Melbourne Business School	10	66	76

ALUMNI SALARIES GENERALLY UP

Overall, it was a good year for MBA graduates. Alumni salaries at many schools advanced higher. In fact, reported salaries were above last year’s levels at 11 of the 12 schools where alums report the highest pay. The biggest year-over-year increase was at Stanford, up 9.9%, but alumni salaries were was also up 7.9% at Harvard Business School where they rose to $192,133, from $178,113 a year earlier (see table below).

And despite some worries about the future of two-year MBA programs, they more than held their own against the one-year options in the Financial Times ranking this year. The FT noted that a majority of two-year programs went up or maintained their year-earlier ranks (31 up and 21 down) while their one-year rivals lost ground (14 up and 21 down). The newspaper also published data from its alumni survey which showed that students of two-year programs are far more likely to receive scholarship support than those from one-year programs (52% at two-year programs vs. 39% at one year options. The increase in salaries over pre-MBA levels also was slightly highly for graduates of two-year programs, 110% versus 101%.

Fears that anti-immigration rhetoric in the U.S. along with Trump’s election would have a big impact on the percentage of international MBA students was not borne out by the FT’s data, even though some individual schools have reported declines in non-U.S. applicants and students. A majority of US schools have recruited fewer international students, but the average proportion for ranked institutions is down by only one percentage point to 38%, according to the FT. While there are some variations, the overall number of enrolled students at FT-ranked schools in the U.S. in 2017 remained stable at roughly 12,000. A little more than half of schools enrolled more students last year than in 2016.

ASIAN SCHOOLS ON THE RISE IN THE FT RANKING

Asian schools did especially well this year. Besides the eighth place finish by CEIBS, the National University of Singapore Business School is up eight places to 18, its best performance. Renmin University of China School of Business is back at 39, up four places from 2015. Finally, Lee Kong Chian School of Business became the third ranked school from Singapore and the highest completely new entrant at 49.

“The real story this year is Asia, and China in particular,” adds Symonds of Fortuna Admissions. “CEIBS breaking into the top 10 is the sign of things to come, and I can’t wait to see the FT Global MBA Ranking of 2023. Renmin, Fudan and Singapore Management University have made startlingly high entries into the FT’s top 50, and 2018 has a record number of Asian schools that made the list. The U.S. and Europe cannot afford to rest on their laurels.”

Among the U.S. business schools to completely drop off the list this year were the University of South Carolina, which ranked 77th last year; the University of Illinois at Urbana-Champaign, which was ranked 83rd; the University of Iowa’s Tippie School of Business, ranked 84th in 2017; George Washington University, ranked 86th a year ago, and Temple University’s Fox School of Business, which weighed in at a rank of 95 in 2017.

Besides IE Business School in Spain, non-U.S. schools that disappeared this year include Incae, which had been ranked 89th last year; Grenoble, ranked 92nd; Spade, ranked 97th; Birmingham, ranked 98th, Vlerick, ranked 99th, and Queen’s University’s Smith School of Business in Ontario, Canada, ranked 100th last year.

Highest Dozen Alumni Salaries For MBA Graduates

The Financial Times surveys alumni three years out of business school and asks them to report on their annual salary. These numbers are more likely to change year-over-year due to sample size and respondents and they are all adjusted to account for the purchasing power of an MBA in a given country. Despite that adjustment, 10 of the 12 schools are based in the U.S., including the top four

School	2018 Alumni Salary	2017 Salary	Y-O-Y Change	2018 Salary Increase Over Pre-MBA Salary
Stanford GSB	$214,742	$195,322	9.90%	114%
Harvard Business School	$192,133	$178,113	7.90%	102%
UPenn (Wharton)	$190,826	$181,634	5.10%	96%
Columbia Business School	$177,680	$172,624	2.90%	103%
INSEAD	$177,157	$167,657	3.00%	105%
UC-Berkeley (Haas)	$176,167	$168,163	4.80%	104%
IIM-Ahmedabad	$175,801	$181,863	-3.30%	101%
Chicago (Booth)	$174,153	$168,200	3.50%	118%
MIT (Sloan)	$173,095	$165,716	4.50%	110%
Dartmouth (Tuck)	$170,706	$165,414	3.20%	105%
Northwestern (Kellogg)	$168,608	$164,326	2.60%	96%
London Business School	$167,897	$154,567	8.60%	109%

2018 Financial Times Global MBA Ranking

Stanford Gradaute School of Business tops the Financial Times global MBA ranking for the second time in 23 years, nudging aside INSEAD which claimed top honors for the previous two years in 2017 and 2016

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
1. Stanford GSB	2	1	5	4	2	2	1
2. INSEAD	1	-1	1	4	5	6	4
3. UPenn (Wharton)	3	————	4	3	4	3	————
4. London	6	2	3	2	3	4	————
5. Harvard	4	-1	2	1	1	1	-4
6. Chicago (Booth)	9	3	8	9	9	10	4
7. Columbia	7	————	6	6	5	5	-2
8. CEIBS	11	3	17	11	17	15	7
9. MIT (Sloan)	13	4	9	8	8	9	————
10. Berkeley (Haas)	13	3	7	10	11	12	2
11. IESE	10	-1	16	7	7	7	-4
12. Northwestern (Kellogg)	12	————	11	14	15	13	1
13. Cambridge (Judge)	5	-8	10	13	16	15	2
14. Hong Kong UST	15	1	14	14	14	11	-3
15. Yale SOM	15	————	18	17	10	14	-1
16. Dartmouth (Tuck)	18	2	22	23	20	16	————
17. Cornell (Johnson)	27	10	31	28	27	24	7
18. Singapore	26	8	32	31	32	36	18
19. Duke (Fuqua)	24	5	21	21	17	18	-1
20. ESADE	17	-3	23	19	22	22	2
21. HEC Paris	20	-1	15	16	21	21	————
22. Nanyang	24	2	29	40	38	32	10
23. NYU (Stern)	19	-4	19	18	17	19	-4
24. IMD	21	-3	13	20	12	19	-5
25. UCLA (Anderson)	32	7	34	25	26	23	-2

2018 Financial Times Global MBA Ranking 26-50

The University of Michigan's Ross School of Business lost three places to fall out of the top 25, resting just outside at a rank of 26 this year.

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
26. Michigan (Ross)	23	-3	20	24	23	30	4
27. Oxford (Said)	33	6	28	22	23	24	-3
28. Indian School of Business	27	-1	29	33	36	34	6
29. SDA Bocconi	22	-7	25	26	31	39	10
30. Georgetown (McDonough)	40	10	44	42	36	40	10
31. IIM-Ahmedabad	29	-2	24	26	30	26	5
32. Virginia (Darden)	35	3	27	32	27	35	3
33. University of Hong Kong	39	6	44	28	29	31	-2
34. Shanghai Jiao Tong	34	————	39	55	77	NR	35
35. IIM-Bangalore	49	14	62	82	68	NR	36
36. Alliance Manchester	30	6	38	35	43	29	-7
37. Eramus (Rotterdam)	31	6	42	45	39	32	-5
37. UNC (Kenan-Flagler)	43	6	41	39	33	45	8
39. Renmin	NR	————	43	NR	NR	NR	————
40. Carnegie Mellon (Tepper)	38	-2	33	36	34	43	3
41. Warwick	44	3	46	38	25	28	-13
42. Fudan	NR	————	47	55	83	89	47
43. CUHK	36	-7	26	30	NR	27	-15
44. Texas-Austin (McCombs)	46	2	47	40	39	46	2
45. Rice (Jones)	64	19	53	43	35	37	-8
46. City (Cass)	37	-9	37	45	41	40	-6
47. Emory (Goizueta)	51	4	55	59	41	49	2
48. Washington (Foster)	41	-7	49	51	56	78	30
49. Singapore Mgt. University	NR	————	NR	NR	NR	NR	————
50. Washington (Olin)	68	18	80	72	64	64	14

2018 Financial Times Global MBA Ranking 51-75

Imperial College in London leads this next group of schools on the 2018 Financial Times global MBA ranking. The University of Florida's Hough School cracks the list at 58th after being unranked for quite some time.

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
51. Imperial College	45	-6	35	34	49	42	-9
51. Sungkyunkwan	54	3	69	59	45	51	————
51. Arizona State (Carey)	57	6	NR	76	87	87	36
54. Georgia Tech	61	7	71	65	71	59	5
55. Maryland (Smith)	52	-3	51	49	50	50	-4
55. Purdue (Krannert)	69	14	NR	48	56	68	13
57. Indiana (Kelley)	47	-10	54	62	47	54	-3
58. Florida (Hough)	NR	————	NR	NR	NR	NR	————
59. USC (Marshall)	48	-11	52	58	65	82	23
60. St. Gallen	59	-1	60	67	88	82	22
61. Mannheim	54	-7	49	55	66	69	8
61. Cranfield	53	-8	57	45	46	38	-23
63. Australian Graduate School	54	-9	66	75	62	48	-15
64. UC-Irvine (Merage)	62	-2	57	43	48	54	-10
64. Durham	75	11	66	79	97	NR	————
66. Melbourne	76	10	87	90	68	62	-4
67. Boston (Carroll)	80	13	69	90	82	93	26
68. Ohio State (Fisher)	63	-5	75	60	70	72	4
68. Brigham Young (Marriott)	65	-3	80	NR	93	NR	————
70. Lancaster	42	-28	35	50	77	71	1
71. Wisconsin	65	-6	68	70	81	91	20
72. Michigan State (Broad)	58	-14	65	54	52	62	-10
73. Vanderbilt (Owen)	79	6	71	61	59	53	-20
73. Edinburgh	91	18	98	NR	NR	NR	————
75. Edhec	74	-1	84	NR	NR	NR	————
75. Penn State (Smeal)	89	14	89	86	62	77	2

2018 Financial Times Global MBA Ranking 77-100

Notre Dame University's Mendoza School of Business leads the final quartile of the FT's 2018 ranking. This year, 101 schools are ranked due to a tie for 100th place between Copenhagen Business School and the University of Bath

2018 Rank & School	2017 Rank	Y-O-Y Change	2016 Rank	2015 Rank	2014 Rank	2013 Rank	Five-Year Trend
77. Notre Dame (Mendoza)	60	-17	76	89	NR	NR	————
78. IIM-Calcutta	95	17	NR	NR	NR	NR	————
78. McGill (Desautels)	NR	————	85	100	84	76	-2
80. Lisbon	70	-10	40	36	52	61	-19
81. Babson (Olin)	87	6	90	73	95	80	-1
82. Pittsburgh (Katz)	85	3	98	97	80	NR	————
83. Rochester (Simon)	77	-6	86	85	55	59	-24
84. Connecticut	NR	————	96	NR	NR	NR	————
85. Minnesota (Carlson)	88	3	71	83	54	NR	————
86. Toronto (Rotman)	65	-21	60	53	51	46	-40
86. Boston (Questrom)	82	-4	71	78	75	95	9
88. ESMT Berlin	70	-18	64	63	89	NR	————
89. Rutgers	70	-19	NR	NR	NR	NR	————
90. Western (Ivey)	94	4	88	97	89	78	-12
91. SMU (Cox)	NR	————	NR	76	NR	98	7
92. Leeds	NR	————	98	NR	NR	NR	————
93. Texas-Dallas (Jindal)	93	————	NR	NR	NR	NR	————
94. UCD (Smurfit)	70	-24	79	73	91	64	-30
94. WHU Beisheim	NR	————	NR	NR	NR	NR	————
96. Essec	NR	————	NR	NR	NR	NR	————
97. Univ. of San Diego	NR	————	59	66	NR	NR	————
98. Strathclyde	80	-18	63	80	73	87	-11
99. EMLyon	NR	————	NR	NR	95	92	-7
100. Copenhagen	NR	————	NR	NR	NR	NR	————
100. Univ. of Bath	NR	————	98	84	84	72	-28