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THE BEST B SCHOOLS

Move over, Northwestern--this time, Wharton is No. 1

October 24, 1994

When Thomas P. Gerrity was a Massachusetts Institute of Technology student in the early 1960s, he was a solidly built wrestler who regularly muscled his way into the New England championships. In each of his four undergraduate years, however, he managed to capture only third place--even in his senior year when he went to the mat as captain of MIT's squad.

Gerrity, dean of the University of Pennsylvania's Wharton School, isn't in third place anymore. The onetime entrepreneur has now led Wharton to a No.1 finish in BUSINESS WEEK's ranking of the best graduate schools of business. Wharton unseated Northwestern University's J.L. Kellogg School of Management, which has held the top spot through three consecutive biennial polls since 1988.

Gerrity pinned the opposition by boldly pushing the most dramatic curriculum changes at any elite school. Those changes helped Wharton secure the top grade from Corporate America, which singled out the school for having launched the most innovative curriculum in recent years. And by paying far greater attention to student demands for better teaching, Gerrity also gained the third-best marks from Wharton's own graduates.

Wharton's surge from the No.4 slot in 1992 wasn't this year's only surprise. Harvard University's Graduate School of Business Administration slumped two places, to No.5, its lowest ranking ever. Stanford finished fourth, up from seventh. Dartmouth College's Amos Tuck School of Business Administration fell to 13th from 6th because of lower ratings from this year's graduating class. Two business schools--Vanderbilt University's Owen Graduate School of Management and Washington University's John M. Olin School of Business--fell off the list altogether, largely because of graduate dissatisfaction. They were replaced by the University of Texas Graduate School of Business at Austin and Purdue University's Krannert Graduate School of Management.

Kellogg's fall to No.2 isn't the result of any disaffection with the institution or its graduates. Donald P. Jacobs, arguably the most successful business school dean of this era, established the model of the modern business school in the early 1980s, when such traditional, elite schools as Harvard, Stanford, Chicago, and Wharton were content to ignore market demands for MBAs who could better lead and motivate others. Sure enough, corporate recruiters still praise Kellogg for producing graduates who are best in their ability to work in teams and in their interpersonal skills.

``TURNING UP THE LIGHTS.'' But Jacobs has resisted any pressure to overhaul his program again. ``We've developed a learning organization, and that means we continually change and don't need to have massive changes periodically,'' he says. Still, Wharton was able to nudge out Kellogg as the No.1 school largely because of strong market approval of its innovative efforts.

Wharton is on the crest of a wave of reinvention and change in management education. Schools are tearing apart their programs to rethink ways to educate the next generation of business leaders. As at Wharton, some are trying to teach business as a complex whole instead of a set of disparate functions--even handing out only one grade per semester in the first year. They're adding courses in teamwork and leadership and placing greater emphasis on globalization and quality.

They're also making business education more pragmatic and less theoretical by adding real-world consulting projects and field assignments to the curriculum. Through it all, students are made active participants in the effort to change, rather than passive bystanders. ``The old business-school model was like a Broadway show that students sat back and watched,'' says B. Joseph White, dean of the University of Michigan's business school. ``We're turning up the lights and opening up the curtains so that when students get here, they're going to be actively involved in their education.''

BUSINESS WEEK's rankings are sensitive to such changes because the survey adopts the consumer's perspective in measuring the quality of business education. Instead of evaluating schools on test scores and starting salaries, the magazine sent extensive surveys to 6,353 of this year's graduates of 44 prominent schools and to 354 companies that actively recruit MBAs at the top schools. A total of 4,608 graduates and 254 companies responded (page 70).

Graduates, who judged only their own schools, were asked for their views on such issues as teaching quality, program content, and career placement. In the corporate survey, recruiters were asked to rate student skills and to rank B-schools on their overall quality and the success rate of graduates in their organizations. Both polls were combined to produce the BUSINESS WEEK ranking.

It's not always possible to assess a school's immediate progress by a one-time change in its rank, though. The University of Michigan, for example, slipped one spot this year, to sixth, only because Stanford jumped ahead by capturing the highest accolades from its graduates. However, corporate recruiters said Michigan's MBAs have shown the greatest improvement of any in recent years and also singled out the school for having launched what they regard as the second-most-innovative curriculum--behind only Wharton's. Michigan was also the only school to make the top five in turning out the best graduates in every key category: general management, marketing, finance, and production (table, page 67).

FULL FORCE. And what about all those reports that interest in MBA education has fallen in recent years? Hardly: BUSINESS WEEK found that 1994 was an extraordinarily bullish year for both the leading schools and their graduates. Applications at most of the top MBA programs are rising, along with revenues from executive-education efforts. And companies are charging back to campus in full force. Recruiters responding to BUSINESS WEEK's survey hired 6,569 MBAs this year, up 18% from 1993.

The result: Even before graduating, MBAs from Top 20 schools this year averaged 2.74 job offers each. And they landed positions with average starting pay and bonus of $87,024--up 36% from 1992, thanks largely to the highly aggressive recruiting efforts of consulting firms. Indeed, for the first time ever, graduates at three schools--Harvard, Stanford, and Columbia--averaged starting pay packages in six figures. So much for the MBA glut (page 71).

The good times, however, provided little respite from the continuing battle of the business schools for reputation and prestige. Washington University's Olin School lost its Top 20 status because its graduates groused about the loss of three of the school's top 10 teachers in the past two years. ``Olin leaves me with the impression that it is long on pretensions and short on substance,'' said one graduate. It didn't help that the school has been without a full-time, permanent dean since March of 1992.

Vanderbilt University's Owen Graduate School of Management, No.19 in 1992, also skidded off the Top 20 list. The Class of 1994 believed Dean Martin S. Geisel failed to adequately manage a scandal that erupted earlier this year when an MBA embezzled about $3,000 from the student treasury. Some grads thought Geisel should have either suspended the student, who pleaded guilty to the charge, or withheld his MBA degree. Instead, he was allowed to graduate after returning the money and performing some community service. ``Some students got highly agitated about the matter and felt the guy wasn't being punished at all,'' says Geisel. ``We followed established disciplinary procedures to the letter.''

Harvard's star also plummeted as it placed 17th in the graduate poll, down from No.12 in 1992. MBAs judged the administration the least responsive of any Top 20 program. They also felt less confident about their analytical and technical abilities than other grads. Some MBAs further complained about the slow pace of change at the school and what they called ``exorbitant fees'' for everything from case materials to student housing. ``This school is like an archaic dinosaur that needs to take its own advice,'' said one 1994 graduate.

As for Wharton, founded by Philadelphia industrialist Joseph Wharton in 1881, its ascendancy was no overnight feat. It began when Russell E. Palmer, the former chief executive of accounting firm Touche Ross International, agreed to come aboard as dean in 1983. The charismatic Palmer mounted a campaign to make Wharton ``the world's preeminent business school,'' a phrase he intoned so often that MBAs began to parody it at their annual follies show.

NEW TONE. To meet his goal, Palmer shook up the Establishment by offering hefty salaries to lure dozens of bright faculty members to the classroom. Over a seven-year period, he tripled the school's endowment to $90 million, adding 27 endowed chairs. He put Wharton in the executive-education business by building a plush $25 million center with 19th century Burmese tapestries and Salvador Dali lithographs. And Palmer began an extensive review of the school's MBA program that eventually led to vast changes in its curriculum. ``Palmer provided vision and leadership,'' says Jerry Wind, a marketing professor. ``He was a builder.''

When the dean retired in 1990, all the pieces were in place for Gerrity, a former MIT professor and a founder of the Cambridge (Mass.) consulting firm now known as CSC Index Inc. Gerrity quickly provided the support and leadership to get a new curriculum off the ground, phasing the changes in over a two-year period starting in 1991. ``A lot of the faculty here asked, `Why are we doing this?''' recalls Wind, a principal architect of the new program. ``They said, `Everything is fine. Why should we change?'''

Gerrity had no doubts. Wharton, which had held sway as the school of high finance throughout the roaring Eighties, had not revamped its rigid, analytical approach to management education since the early Sixties. He believed the school needed to place greater emphasis on ``people skills'' and real-world problems, add more global perspective, and teach business not as a set of distinct disciplines but in a more integrated fashion. ``I'm proud that we've had the courage to take the leadership in curriculum change and to move early and significantly,'' says Gerrity. ``I think it set a tone for the entire business-school community.''

To be sure, some schools, most notably the University of Tennessee at Knoxville and Indiana University, have since adopted more radical approaches to overhauling their MBA programs. But Wharton, given its status as one of the elite players, clearly assumed greater risk in remaking its curriculum so dramatically. A plodding two-year-old effort to redo Harvard's curriculum, by contrast, has so far failed to bring about any substantial changes. HEAVY WORKLOAD. Three years ago, Wharton launched a four-week ``pre-entry'' program of courses, computer labs, speeches, social activities, and an Outward Bound-like experience in the Poconos. The usual two semesters a year were tossed aside in favor of four six-week ``modules,'' requiring every first-year course to be reevaluated for content and relevance. A novel series of leadership and ethics programs runs throughout the first year. To integrate the core courses, key faculty are brought together on a regular basis to ensure that what is taught in marketing, say, can be quickly linked to operations. Team assignments, computer simulations, multidisciplinary case studies, a field project, and a four-week trip abroad also were added.

In some ways, however, the makeover has been too ambitious. The changes heaped so much more work on the students that the faculty have since had to scale back additions in course requirements, exams, and leadership exercises. The overseas excursion, initially meant to be a mandatory month-long immersion in the culture, politics, and business of another region of the world, has since become voluntary because not all students can afford the $4,000-to-$4,500 cost. And the much ballyhooed integration of the core curriculum has run into serious obstacles at a school where the faculty is divided among 12 departments and 21 research centers. ``We are used to operating as individuals, managing our own courses, designing our own syllabi, and teaching in our own styles,'' says David J. Reibstein, a former vice-dean.

Indeed, BUSINESS WEEK's graduate survey shows that such schools as Virginia, Indiana, Michigan, and Stanford have achieved far greater levels of satisfaction among their MBAs on the curriculum integration issue. Virginia and Stanford, both much smaller business schools, have no distinct departments. Indiana and Michigan have both made integration a key focus of their revamped curriculums. But Gerrity and at least a core group of Wharton faculty seem dedicated to the mission. ``This is a slow, evolutionary process,'' insists John C. Hershey, an operations professor who is one of four ``cluster heads'' who coordinate faculty within the core. ``But it is changing. As faculty, we meet more often and in smaller groups of people who will see the same subset of students in the program.''

To monitor progress and perhaps keep the pressure on, Gerrity has contracted with Opinion Research Corp. to do comprehensive polling and focus-group interviews of MBAs, faculty, and corporate recruiters. And while Gerrity is much more reserved and cerebral than the gregarious Palmer, he has made himself more accessible to students. Each semester, he holds six brown-bag luncheons in the MBA pub, as well as a more formal forum with students on the state of the school. On the last day of classes, Gerrity hosts a champagne reception on the grassy quad in front of Vance Hall to honor the school's best teachers. ``The ceremony is quite moving,'' he says. ``It's beyond awards and prizes. It's about the spirit of the place, and it shows we value teaching excellence.''

Some say it's about time. For years, Wharton graduates have complained about the quality of the teaching. An initiative to improve it has led to faculty mentors, midcourse evaluations, merit-pay increases pegged to teaching quality, student quality-circles that offer weekly feedback to instructors for every course, and an array of new teaching awards.

Such improvements have helped Wharton attract its best students ever. This year's entering class--from 56 countries--posted Wharton's highest average score--650--on the GMAT (Graduate Management Admission Test). Gerrity has also brought in an additional 14 endowed chairs, helping to lift the endowment to $141 million. And he has implemented Palmer's dream of making Wharton a major player in executive education, which drew $22.6 million in revenues in the past year.

``FRIENDLY ENVIRONMENT.'' While Wharton has emerged as the ``preeminent business school,'' it's still not No.1 in graduate satisfaction. For the first time, that honor goes to its cross-country rival, Stanford, a school less than half Wharton's size. Stanford deemphasizes individual competition and cultivates a highly cooperative learning environment. Unlike Harvard, there's no forced grading curve. Nor are grades publicly posted or allowed to be disclosed to corporate recruiters. ``It's a very friendly environment,'' says Van Ton, a second-year student. ``You could be competing for the same jobs, and you'll still help each other.''

The school has long been the most selective MBA program in the world, accepting only 1 in 10 applicants, and it's known for an exceptionally diverse pool of students. This year's entering class of 364 MBA candidates include two Jesuit priests, a stand-up comedian, and a national powerlifting champion. Students at ``the farm''--the nickname is a throwback to a century ago, when the campus was a racehorse-breeding ranch--often share rented palatial homes equipped with hot tubs where study groups sometimes meet.

More important than the laid-back California lifestyle, the school's location in sun-drenched Silicon Valley makes it a haven for would-be entrepreneurs. One graduate remembers a meeting at which Scott McNealy, founder of Sun Microsystems Inc., agreed to show up at a student's home for an entrepreneurs' club session. With a beer in hand, McNealy regaled 150 students with his insights into the future of technology.

Those attributes have always been a hallmark of Stanford's program. But the uneven quality of teaching had previously held it back from gaining the top spot in BUSINESS WEEK's graduate satisfaction poll. Credit for the improvement goes to Dean A. Michael Spence, who arrived in late 1990 from Harvard, where he headed the faculty of Arts and Sciences. He has developed new teaching workshops to train incoming faculty. All new professors are assigned senior faculty mentors and must now co-teach a course with a more experienced faculty member in their first year.

Stanford MBAs praise Spence for being active and responsive. In the spring of 1993, for example, four students asked the dean for a global management program that would award a certificate to graduating students who completed a sequence of four courses on international topics. Within three months, Spence implemented the proposal. He has also launched 20 new courses in the past two years and forged new links to Stanford's engineering school, a relationship that has created a jointly designed, two-quarter course that brings together students from both schools to design, produce, and market a product.

Besides such efforts, Stanford's ranking also benefited from another school's stumble. Dartmouth's Amos Tuck School, the quaint, New England version of Stanford's cozy, collegial culture, saw its image tarnished when Dean Edward A. Fox was denied a second four-year term by the college. His abrupt departure exposed students to what they called the ``petty politics'' of a few outspoken faculty members who wrote critical letters about the dean to the president. Tuck's small size and its remote location in Hanover, N.H., make it difficult for the school to attract many corporate recruiters--a reason the school doesn't fare better than a No.12 ranking in the corporate poll.

It all goes to show that in the world of business schools, as in the world of business, nothing can be taken for granted. That's something Gerrity learned on a wrestling mat and something he's keeping in mind for the next match of the best business schools.

John A. Byrne and Lori Bongiorno in New York


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