Does It Matter Which Business School You Attend?

Updated April 24, 2020

Recent reports suggest that business school rankings might not matter as much as many MBA applicants believe. Several of these articles also imply that when choosing a business school, MBA candidates need not compare measures besides starting salaries upon graduation.

So does it matter where you get your MBA?

Yes, it most definitely matters—and the following guide explains why. This article presents recent controversial reports that attempt to compare MBA programs as investments, analyzes these comparisons’ deficiencies, and explains why winning admission from the best MBA programs still makes sense. Appreciating these reports’ limitations first requires understanding some simple valuation techniques, which is where we kick off our analysis.

Comparing Investments in Education

Most of us are familiar with the phrase return on investment (ROI), the profit from an investment relative to the amount invested. This financial ratio is a metric, or performance measure. Usually expressed as percentages, the results of ROI calculations help investors evaluate and compare investments.

One way to express this ratio is through a simple formula like:

ROI = (Investment’s Gain – Investment’s Cost) / Investment’s Cost

This simple percentage expression permits an easy, standardized comparison of payoffs, the returns from different investments. However, it’s also limited. A key restriction is that unlike powerful approaches such as the usually superior (but more complex) discounted cash flow model, simple ROI calculations don’t account for the time value of money, or interest on the investment. That’s why combining a simple ROI analysis with other metrics valuing an investment over time generally offers more accurate and comprehensive insights.

Nevertheless, simple ROI valuation analysis remains popular because of its straightforward versatility. Accordingly, one can apply simple ROI percentage calculations to help value and compare educational investments like university degrees such as MBAs and specialized business master’s degrees.

Six Studies Comparing MBA Programs as Investments

Return on investment metrics that help to compare MBA degree programs often focus on the salary-to-debt ratio, which compares a recent graduate’s starting salary to their total amount of student loans used to finance the degree. In this way, salary-to-debt ratios provide a standardized way of comparing the value of different degree programs.

The first three reports below focus on salary-to-debt ratios, and the following three reports evaluate other salary metrics.

1. Quartz’s ROI Analysis of MBA Salary & Debt Data

Several articles recently surfaced that applied salary-to-debt ROI analysis to help compare MBA programs in new ways. One such article appeared in Quartz, the upstart business publication owned by the Atlantic Monthly Group.

Using newly reported salary and student loan data from U.S. News and World Report, Quartz reporter Amy Wang sorted the 14 top schools in the U.S. News rankings not by post-graduation salaries, but by salary-to-debt ratios instead. She reports:

When looking at the return on investment (ROI) of various schools, the rankings shift dramatically. That’s partly because the most so-called “prestigious” schools also charge students higher tuition—meaning that an MBA from a lesser-known school might actually have a better payoff. . .So moderately ranking institutions like the McCombs School of Business at [the University of Texas at Austin] and Emory’s Goizueta Business School normally come in at 17th and 20th, respectively, but soar to the top when it comes to financial payoff.

Indeed, on the basis of ROI, Texas McCombs and Emory Goizueta beat higher-ranked business schools like the Harvard Business School, the University of California at Berkeley’s Haas School of Business, the Yale School of Management, MIT’s Sloan School of Management, Duke University’s Fuqua School of Business, UCLA’s Anderson School of Management and the University of Michigan’s Ross School of Business.

In fact, Gregory Yang of Poets & Quants pointed out that “seven of the 10 highest-ranked programs in terms of ROI are ranked outside the [U.S. News] Top 10, including 17th-ranked Texas McCombs, which achieves a near 2:1 pay-to-debt ratio to start.”

2. The SoFi Return on Education MBA Study

The Quartz analysis wasn’t the only recent report that recognized this trend. Similarly, student loan refinancing vendor SoFi considered three years of data from MBA grads applying to refinance loans, calculated their salary-to-debt ROI statistics, then published rankings of the business schools.

In SoFi’s study, the University of Wisconsin topped the rankings, followed by Brigham Young University. Those two schools beat the Harvard Business School and Stanford University’s Graduate School of Business, which followed in the next two slots. In fact, no other U.S. News top-tier MBA program placed in SoFi’s highest ten positions. Rounding out SoFi’s top ten business schools were the Villanova University School of Business, the University of Pittsburgh, Loyola University of Maryland, North Carolina State, the University of Florida, and the University of Houston.

3. The Quacquarelli Symonds Ten-Year MBA Study

Quacquarelli Symonds, the World MBA Tour promoter famous for compiling global business school statistics, also released a return on investment study ranking business schools. Their study focused on comparisons of MBA programs worldwide over ten years.

The QS study’s ROI results kick off with the Stanford GSB, Carnegie Mellon’s Tepper School of Business, Michigan Ross, and MIT Sloan occupying the top four slots. Yet here again, even with return on investment data spanning an entire decade, a pattern emerged bearing similarities to the studies above.

In the QS study, the University of Illinois Gies College of Business, Indiana University’s Kelley School of Business, Pennsylvania State University’s Smeal College of Business, Georgia Tech’s Scheller College of Business and Emory Goizueta all ranked ahead of such top-tier schools as the Harvard Business School, UCLA Anderson, and the University of Oxford’s Saïd Business School.

Suggesting that the generally accepted mid-career milestone of ten years was still too soon after graduation for the prestigious schools’ graduates to dominate the rankings, the QS study’s editors also offered this analysis:

While the names included here can hardly be described as obscure, it’s notable that many of North America’s most prestigious schools do not feature at this stage – give it a few more years, though, and those high salaries will really kick in. At this point, though, this table is an indication of the ability of MBA programs outside the M7 to pay for themselves and offer considerable dividends beyond that.

4. The Value-Added MBA Ratio

Writing in a famous article titled The Case Against Credentialism for the Atlantic Monthly in 1985, the renowned author and former U.S. News editor James Fallows coined a phrase for a new, slightly different ROI metric. Fallows termed this measure the value-added ratio, or VAR: how much an MBA degree adds to a graduate’s salary, relative to the degree’s cost. Even at that time, Fallows pointed out that the business school community paid close attention to the ratio—and it still does.

A recent value-added ratio chart appears at Poets & Quants. Once again, six of that study’s top ten business schools don’t appear among the top ten on the U.S. News list. Those business schools include Rice University’s Jones Graduate School of Business, the University of Washington Foster School of Business, the University of Notre Dame Mendoza College of Business, Texas McCombs, Indiana Kelley, and Emory Goizueta. What’s more, the top four business schools, which also include Berkeley Haas, are all public institutions.

5. MBA Payback Period Analysis

Payback periods express how many months on average it will take graduates to recoup their tuition, plus the opportunity cost (i.e., their forgone salary while studying for the degree).

Although we mostly cover American business schools here at BSchools, it’s interesting to note how world leadership in payback period rankings belongs to European business schools that have placed the most alumni employed in the United Kingdom. That’s because a one-year MBA degree format is standard across Europe, and United Kingdom employers pay MBA graduates some of the highest salaries in the world.

A recent MBA ranking by payback period also appears in the report from Quacquarelli Symonds. In this case, Carnegie Mellon Tepper appears as the only top-tier school listed by U.S. News. The QS report points out that “across the U.S. & Canada, MBA candidates tend to recover their losses in around four and a half years. At a handful of schools, however, candidates can actually recover their losses in under three years.”

Among United States schools, the University of Tulsa leads the pack with the shortest payback period of only 30 months, followed by Illinois Gies, Penn State Smeal, and Babson College with brief 31-month payback periods.

Schools offering payback periods between 32 and 36 months include the University of South Carolina, the University of Texas at Dallas, the University of Georgia, Texas A&M University, and the University of Connecticut. Carnegie Mellon Tepper rounds out the list in 10th place with a 37-month payback period.

6. MBA Salary Uplift Analysis

Salary uplift metrics compare the “bump” in salary between the incoming class’s average salary just prior to admission with the average reported alumni salary. The metric recognizes the schools best able to propel their alumni to higher earnings levels. According to Quacquarelli Symonds:

The U.S. again dominates this metric, with well-reputed schools that sit outside the top-tier offering the greatest increase. While the MBA salary levels might not rival those of the highest-ranking schools, it is clear that these schools can certainly provide a considerable premium for their MBA students.

Three schools deliver the highest MBA salary uplifts in the world. They include Oregon’s Willamette University at 223 percent, Illinois Gies at 176 percent, and the University of Connecticut at 171 percent.

Below that group, the ranking’s top United States business schools include a cluster of flagship state institutions sporting uplifts ranging from 137 to 156 percent. They include Arizona State University’s W. P. Carey School of Business, the University of Minnesota, the University of Georgia, the State University of New York, Penn State Smeal, and Indiana Kelley.

Does ROI Analysis Suggest That School Choice Doesn’t Matter?

By now, astute readers may have noticed an interesting pattern in the study results above. Overall, none of these ROI analyses argues convincingly in favor of striving for admission to a top-tier business school.

The only analysis that convincingly argues in favor of admission to Harvard, Stanford, Wharton and similar business schools in all cases exclusively depends on total compensation. From a return on investment perspective, that’s the only metric that consistently argues in favor of striving for admission to the best business schools. In part, that’s because elite business school alumni often earn larger proportions of their compensation from stock and bonuses besides salary. But in general, valuations that compare salary-to-debt ratios, payback periods and salary uplifts often transform the game into one that the most expensive business schools cannot win.

Factors Omitted by ROI Analysis of MBA Programs

But does that conclusion mean that one’s choice of a business school doesn’t matter? No, it does not. That’s because other issues exist with strictly applying these ROI valuation techniques to MBA programs because this type of quantitative analysis fails to account for all the important factors.

Mid-Career Salary Gains

First, depending on a graduate’s field of concentration, starting and early-career salaries like those used by the Quartz and SoFi studies can be far lower than peak career salaries, and accordingly skew an ROI analysis against the better business schools. In fact, data provided by PayScale to Poets & Quants disclosed that some MBA program concentrations lead to careers that start slowly with rather modest earnings but can more than double their salaries by mid-career.

Such concentration examples include international business (from $62,600 to $121,000); marketing (from $61,400 to $123,000); entrepreneurship (from $70,300 to $139,000), and innovation management (from $62,600 to $134,000—a 114 percent increase and the top growth rate among all concentrations). Similar concentrations displaying 80 percent growth or more include finance, general business, economics, management information systems (MIS), and global business management.

Moreover, even assuming higher mid-career salaries, the QS editors suggest that as much as ten years is not enough time to fully account for peak earnings potential among alumni from the most selective schools. See our BSchools guide, MBA Salary Guide – Starting Salaries for the Highest Paying MBA Concentrations, for more in-depth analysis of these trends.

Classmates as Educational and Networking Resources

Second—and probably most important—attending a better business school affords tremendous benefits in terms of networking opportunities to build lifelong relationships with extremely capable classmates who already have first-hand experience tackling a broad range of key business issues. Peter de Vroede, who earned his MBA from top-ranked Berkeley Haas, explains these advantages:

The school where you get your MBA will determine who your fellow students will be. If you are going to a top MBA program, you are likely to learn as much from your fellow students as you will from your professors.

In my cohort, we had people with an amazing array of professional backgrounds. They were knowledgeable, experienced and extremely smart. We seldom had a case study where someone in the class didn’t have first-hand knowledge of the industry being discussed. And on several occasions, they had direct knowledge of [the] deal or strategic situation being discussed. We had several MDs, and a couple lawyers. We had a couple of PhDs with impressive track records in research — one in computer science and one in materials science. . .

If you go to a mediocre program, the professors may still be there, but that cadre of successful, experienced and informed fellow students probably won’t be. So the textbook part of the education will be there, but that intense, highly collaborative interaction that can be so serendipitous and valuable just won’t be. And for a top-tier program, that’s a lot of the value.

That of course extends to the network you will become a part of after you graduate. A top-tier MBA program will have year after year of cohorts of similar distinction — all there to be tapped into whenever your career requires.

That’s not to say you can’t get value out of a lesser program. There is definitely some amount of an MBA education that really is “textbook” and the value of learning it in the company of a more accomplished cohort of students isn’t as great.

But for the most part, the MBA experience is about gaining those “textbook” principles and learning about how to apply them in a number of business situations from practitioners who have had direct experience doing so.

Yes, the Business School Where You Get Your MBA Matters

Quartz’s Wang suggests that ROI analysis implies that “brand names are not nearly as important to future wealth as many MBA candidates might think.” And in some cases, she may be correct.

Nevertheless, BSchools instead agrees with de Vroede. On balance, and other things equal, the educational and networking benefits from classmates at the best business schools are so compelling that striving to win admission to the best MBA programs remains the wisest long-term strategy.

Fortunately, these days an education at one of the nation’s better business schools falls within reach of vastly larger numbers of applicants than a limiting focus only on the highly selective full-time, on-campus programs might suggest. In fact, one of the biggest secrets in graduate management education involves the way online and part-time programs offer easier “back door” entry into top-ranked business schools.

For surprising research and analysis about these possibilities, see our BSchools guide, Is a Part-Time MBA Program Worth It? Related research also appears in our other guides, especially MBA vs. Professional MBA vs. Executive MBA Programs, and What is a GMAT Waiver and How Does it Influence the MBA Application Process?