BusinessWeek: October 2, 2000

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 Cover Story: The Best B-Schools

The Best B-Schools
Our groundbreaking survey expands--and measures brainpower to boot

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The Best B-Schools

COVER IMAGE: The Best B-Schools

TABLE: The Top Five

TABLE: Classroom Chatter

TABLE: Who's Listening?

TABLE: Getting the Most for Your Dollar

TABLE: Best and Worst Placement Offices

TABLE: Recruiter's Pick of the Lot

TABLE: Finding the Cream of the MBA Crop

It's a Whole New B-Game

TABLE: The Survey

Keeping Tabs on B-School Brainpower

A Global Report Card

TABLE: C'Est Bon, le B-School!

Building a World-Class Business School in Japan (int'l edition)

It's Not Just about MBAs Anymore

Hatching Success

TABLE: Bringing Up Baby

The Virtual MBA: A Work in Progress

Want an 82% Pay Hike?

TABLE: Returns on Careers

TABLE: U.S. Schools

TABLE: European and Canadian Schools


Call it the Peace Corps meets B-school. When Steven Page enrolled at Wharton, he had his sights set on an investment banking career. But before joining the capitalist ranks, he wanted to do some good. So, like a lot of Wharton students, he signed up for the school's Christmas in April program. For six straight weekends, he toiled in gritty West Philadelphia with about 1,000 of his classmates, divided into teams of sixty. The students worked long days, fixing windows, painting houses inside and out, and doing whatever else needed to be done in the neglected neighborhood. After graduation, Page shipped off to his dream job at Goldman, Sachs & Co. But he says he won't soon forget those Philly weekends. "It's a great experience because you're bonding with your cohorts," says Page. "But you're also doing something worthwhile."

Page's experience goes a long way toward explaining why the University of Pennsylvania's Wharton School once again finished No. 1 in BUSINESS WEEK's ranking of the best B-schools. It has been a remarkable run for Wharton, which has held on to the top spot since 1994. Indeed, Wharton's first-place showing hardly comes as a shocker. Students rave about its can-do culture. And the school shows up near the top of every recruiter's wish list as well. Wharton's innovative curriculum, they say, consistently results in grads with powerful technical skills who can excel in big jobs anywhere around the globe.

But if winning the gold for Wharton is by now a familiar experience, the school and its students had better enjoy that grand top-of-the-mountain feeling while it lasts. Nipping at their heels is Northwestern University's J.L. Kellogg Graduate School of Management, which ranked No. 1 from 1988 through 1992 and which this year greatly narrowed Wharton's lead, thanks to even more glowing reviews from its students. At Kellogg, grads especially like the school's camaraderie and family-like, nurturing atmosphere, which encourages learning and growing as a group. "Kellogg is a culture that reinvents itself based on what students want and need," says recent grad David Peacock from his new post as an associate with Bain & Co. in Sydney, Australia.

Almost as dramatic as the neck-and-neck race between Wharton and Kellogg is the huge gain made this year by Massachusetts Institute of Technology's Sloan School of Management. Sloan leapt all the way into the No. 4 spot from No. 15 in 1998, an astounding jump, making it the most improved of our top 30 schools. Students say Sloan's entrepreneurial environment and small size--about 350 students per class--make it an especially rewarding place to get an education. Camaraderie and connections also played big roles in boosting Harvard Business School to the No. 3 spot after it had fallen to No. 5 two years ago. Rounding out the top five was Duke University's J.B. Fuqua School of Business, which has been on a steady climb since 1994. Students appreciate that Duke has made a big effort to increase the enrollment of women and minorities. This year, 41% of Duke's entering class are women, more than any other B-school, while its 20% minority enrollment is also near the top. The year saw other strides up the list as well. University of Virginia's Darden Graduate School of Business Administration nudged into the top 10 with its No. 9 finish, up from its 11th-place rank in 1998. The school's new dean, Edward A. Snyder, particularly impressed students.

But some schools took a real bellyflop in 2000. The University of Chicago Graduate School of Business got bounced down to 10th place from third, with students complaining about a lack of cohesive community and inadequate facilities. Two other schools, Stanford University's Graduate School of Business and Dartmouth College's Tuck School of Business--where the MBA degree was first invented in 1900--fell out of the top 10 altogether. Stanford, which placed No. 7 in 1996, slid from ninth in 1998 to 11th place as students continued to give low marks for teaching and administrative responsiveness. Dartmouth tumbled all the way from 10th to 16th after both recruiters and students showed their disappointment in the school's placement office.

Ever since we unveiled our groundbreaking B-school rankings back in 1988, we have been improving and refining our methods. This year, we expanded the survey, ranking 30 top schools instead of 25. We did this to reflect rising enrollment and the ever-widening market for a Master's of Business Administration. But expanding the list was hardly the only improvement we made to the rankings. We've pushed the envelope even further with our first-ever ranking of European and Canadian business schools (page 90). We've also made an ambitious stab at measuring the power and quality of ideas generated by B-school faculties. We're calling that part of the ranking intellectual capital (page 89). Duke came out the winner by this measure, with MIT a close second. Cornell University's Johnson Graduate School of Management and Stanford also got a boost in the overall rankings thanks to their intellectual-capital score. Others, however, such as University of Michigan Business School, Virginia, and New York University's Leonard N. Stern School of Business, were penalized by their lower scores.

This year's improvements are important enhancements to a winning formula. BUSINESS WEEK doesn't rely on Graduate Management Admissions Test scores or arbitrary assumptions about prestige to arrive at our rankings. Instead, we go straight to the customers of MBA programs: graduates and corporate recruiters. To that end, we sent lengthy questionnaires to 16,843 MBAs of the class of 2000 at 82 schools, 15 of them outside the U.S. (page 90). It was our largest pool of schools and graduates ever. We also sent surveys to 419 companies that recruit MBAs, including more high-tech and Internet companies to reflect the changes in the business landscape. Of those polled, 10,039 students and 247 companies responded. As in past years, we weighted the student and recruiter survey results equally. This year, because of the introduction of our intellectual-capital component, both counted for 45% of the final results. And in another milestone, this year we will post our profiles of more than 225 schools, along with much more additional data, on our special BW Online B-school edition.

So, what did we learn after culling survey responses and crunching the data? Plenty. What comes through loud and clear from this year's survey results: In the business world, where technology and globalization seem to continually transform the landscape, the schools that rank highest are those that are able to keep up with the changes. More than ever, both students and the companies that hire them are demanding that schools stay on the cutting edge of the technological shifts that are sweeping the global economy. In today's marketplace, where students can get their MBA online, go to a great school overseas, or simply skip B-school and move straight into a high-paying job, the competition for students has never been more fierce.

MENTORS, TOO. That's why students are demanding, though not always getting, more relevant course work taught in more compelling ways by the schools' top minds. And many B-schools agree they need to do a better job on that score. Some, like Duke, have turned to mentoring programs to help professors--who are sometimes better thinkers than teachers. "If we don't teach well, we don't eat," Duke's Dean, Rex D. Adams says.

What's relevant this year, of course, might be next year's stale subject matter, depending on which way the markets go. But for now, at least, students are clamoring for special programs to help launch their careers as Internet and other sorts of entrepreneurs (page 94). And schools are responding. "In my first year, I only remember a few e-commerce classes," says Wharton grad Ashley Fox, 29, who took a job with a technology company in Washington, D.C. "But in my second year, it really caught fire and there were more than you could even have time to take."

Truth is, though, less than 8% of U.S. B-school students surveyed in 2000 went to startups or entrepreneurial ventures--up only a couple of points from 1998. Even so, as Old Economy companies branch out into more Internet-related businesses, they will demand that B-school grads know how to manage amid the new technology. General Motors Corp., for example, is making a push into e-commerce, and companies such as Intel Corp. are cranking up Internet product divisions that are run like stand-alone startups.

Internet jobs at big corporations may prove plenty appealing to MBAs now that the startup boom has cooled. Grads say that they like the kind of intellectually challenging, responsibility-laden jobs that the dot-coms once seemed to promise. Only these days, they're leaning toward a New Economy job with the stability of a brand-name company behind it. Despite all the e-hype, our research shows there are still lots of grads landing in traditional fields such as consulting, finance, marketing, and investment banking. But not as many as before: Today, 74% of those surveyed said they were going into those more traditional jobs, down from more than 80% in 1996.

This year, there were more MBAs than ever hitting the marketplace. But not to worry: There were plenty of jobs--and money--for everyone. The 247 recruiters who responded to our survey hired 15,558 MBAs in the last two years compared with 1997 and 1998, when 259 companies hired 10,348 MBAs. A robust economy and increasing demand for MBA talent meant an average of 3.2 job offers for each student we surveyed at the top 30 schools.

Corporations' hunger for bright MBAs meant fat starting salaries: Grads at the top 30 B-schools saw their median pay packages increased to $126,930, up 14% from $111,420 in 1998. For MBAs at 28 of the schools, median annual compensation surpassed $100,000, up from 18 schools in 1998 and just five in 1996. Corporations are also bumping up relocation packages and throwing in some hefty bonuses. Many employers are even offering to pay off B-school loans when grads join up. Those loans typically range as high as $75,000 for degrees at the pricier schools. All in all, MBAs have never had it so good.

That's especially true for those 740 students talented and lucky enough to graduate from Wharton this year. The school shows up in the top five in each of the skill categories recruiters grade. It garners accolades for an innovative curriculum from recruiters, who also admire Wharton grads' razor sharp financial skills. The school does a good job staying in step with the business world, adjusting its curriculum, and keeping pace with industry doings, according to follow-up interviews with both students and recruiters. And Wharton's career placement office comes out a winner, too, receiving stellar grades from students, who get an average of 3.6 job offers each, among the highest in our survey. Grads marvel that just the word Wharton opens doors.

Students also benefit from first-class faculty, such as finance Professor Jeremy Siegel, whose morning wrap-ups on the markets are standing-room-only, and real estate and economics Professor Robert Inman. Inman tries to schedule extra classes to accommodate demand, but often there's no space. Indeed, both students and faculty complain about the school's outdated and inadequate physical plant. But that will soon be addressed with a new $140 million complex expected to open in the spring of 2002.

SUCCESSION BLUES. Despite its victory, Wharton has nonetheless been steadily slipping in several key measures. Student satisfaction, though still high, is declining, with a greater percentage of respondents saying the program did not meet expectations. Part of the slippage, no doubt, is explained by a transition in deans. Patrick T. Harker, who moved into the dean's office in February, has a hard act to follow. The popular Thomas P. Gerrity led the school to the No. 1 spot in 1994, where it has remained. Says Harker: "The [students] are skeptical of change."

Second-ranked Kellogg will soon face its own succession dilemma. Although its 73-year-old dean, Donald P. Jacobs, has made it clear he wants to stay on, perhaps as a teacher, many on campus wonder if he'll still be dean by this time next year. Whenever he steps down, Jacobs' mark won't soon fade. Kellogg's new Donald P. Jacobs-Kellogg Center, a $25 million, six-story facility, will feature space for a new-business incubator, additional classrooms, and some 50 study rooms.

Other schools, perhaps eyeing Kellogg's success, are trying to make those two years of relentless hard work a bit more user-friendly. That's the philosophy of Virginia's Darden and Snyder, its dean. His openness with students wowed grads, many of whom shared Sunday dinner with Snyder's family at his home on campus. Most grads have chatted with him over morning coffee--a daily ritual for Snyder. "You've got to treat students as colleagues, as part of the community, and as partners in the institution," he says.

Although Kellogg's students were the happiest of any surveyed, students at MIT's Sloan gave the school high marks for encouraging teamwork and for the wide range of on-campus recruiters. Students said they also appreciated meeting with administrators in open forums to work together in redesigning the school's first-year curriculum. Even outings to nearby Boston's Beacon Hill for a beer often turned into a group discussion about the next day's classes. "I really got to know my classmates well," says Sloan grad Elizabeth Lin. "We all worked together, and not just in class."

Schools with a large population of students from other countries, like Sloan, were also viewed favorably. "The international exposure I got from my classmates is helping me in business situations now," says Scott Ball, 30, who took a job in Dallas with I2 Technologies, a software consulting firm, after graduating from Sloan. The former Army cavalry officer recently spent time in Korea pitching his company's services. From his Asian classmates at Sloan, he had already learned that the typical hard-sell pitch that dazzles American companies just doesn't work in Asia. "Because I'd been exposed to so many different cultures," he says, "I knew how I needed to approach it."

Just up the river, third-ranked Harvard got mileage out of its 92-year history and prestigious name. Students love the fact that the school has turned out more leaders than most any other B-school. And they appreciate its network of alumni, which at nearly 40,000, is a powerful tool for them. Grads also praised the quality of teaching and the range of elective courses, though they complained that professors were often unavailable for consultation outside of class. At the same time, recruiters boosted the school three notches in the corporate poll. Recruiters put Harvard in the top five in almost every category, from producing grads with excellent marketing skills to top-notch finance abilities.

Duke's B-school is also on an upswing, capturing the No. 5 spot. With 41% of Duke's entering class women, the school is well ahead of the B-school average of about 30% women. The Durham (N.C.) school has taken the B-school world by storm, climbing six spots since 1994 with steady improvements to its program and its brand. The school also got a small boost from our intellectual capital ranking. Grads gave its placement office the highest score in the survey, while recruiters lauded the school's program as the most improved. Says Dean Adams: "There's no one trying harder than we are: It's our culture, it's our ethic."

A few others also made big strides this year. Virginia's Darden school rallied back, snagging the No. 2 spot in the graduate satisfaction poll, after falling to a dismal 15 in satisfaction in 1998. That pushed the school up two spots overall, to No. 9. Virginia might have gained another notch, but it fell short in the intellectual capital component. Still, students named it tops in teaching. "Even professors I do not have know my name," says Reid Townsend, a 2000 grad who told the story of a professor who came in on a Sunday to give him a personal tutoring session before a tough macroeconomics exam. Grads also praised a slightly lighter workload in what has become known as the boot camp of B-schools.

Some B-schools in our ranking could work a bit harder themselves. One that certainly needs extra help is the University of Chicago, which saw its student ranking plummet after a healthy improvement in 1998. Grads say the efforts the school has made to improve quality of life haven't gone far enough--and they name the school's faculty the least accessible of any B-school in the top 30. At No. 24 in MBA satisfaction, the school has the lowest graduate ranking among the top 10. Dean Robert S. Hamada says the school is doing all it can to satisfy students, but its facilities are admittedly lacking and its efforts to foster team spirit have fallen short. Says Hamada: "Our students, rightfully so, say both need to be improved. But it takes time."

Stanford University was another that got clobbered this year. Stanford students gave the school the lowest marks for teaching and for class offerings. The slide would have been steeper had Stanford not benefited from its high intellectual-capital ranking, produced by professors like Jeffrey Pfeffer and Hau L. Lee for their research in organizational behavior and supply-chain management, respectively. Indeed, Stanford's tradition of academic research is the backbone of the school, according to Robert L. Joss, Stanford's dean. "In the long run, that's what makes us strong," he says, "but that's hard for students to see."

Maybe so. But the school's academic excellence hasn't been enough to impress recruiters. They scored its placement office the worst overall, calling its outreach ineffective. The school has lost many coveted recruiters from its on-campus interview schedule, including Intel and Dell Computer Corp.

Stanford grads, on the other hand, weren't complaining about their paychecks. And why should they? They snagged a median starting pay package, which includes salary, bonus, and other compensation, of $165,000. Even so, they penalized the school for a lack of responsiveness on the part of the faculty and administration and for what they saw as a faculty that compromises teaching for the sake of research. That sent Stanford's student ranking down seven spots, from eighth in 1998 to No. 15 in this year's survey. That just goes to show that when it comes to satisfying this year's crop of demanding B-school graduates, it takes a whole lot more than showering them with the big bucks.

By Jennifer Merritt in New York

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TABLE

The Top Five

1. WHARTON

2. NORTHWESTERN

3. HARVARD

4. MIT

5. DUKE

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TABLE

Classroom Chatter

WHERE THE BEST TEACHERS ARE...



1. Virginia

2. Rochester

3. Indiana

4. Cornell

5. Washington U.

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TABLE

Who's Listening?

SCHOOLS THAT THE ARE BEST AT RESPONDING TO STUDENT CONCERNS



1. Washington U.

2. Indiana

3. Cornell

4. Duke

5. UNC-Chapel Hill

AND THOSE THAT ARE THE WORST



1. Stanford

2. Harvard

3. Carnegie Mellon0

4. Georgia Tech

5. UCLA

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TABLE

Getting the Most for Your Dollar

GREATEST RISE IN MBA SATISFACTION



1. Virginia

2. MIT

3. Harvard

4. Washington U.

5. UNC-Chapel Hill

THE GREATEST DECREASE IN SATISFACTION



1. Chicago

2. Yale

3. Carnegie Mellon

4. Stanford

5. Dartmouth

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TABLE

Best and Worst Placement Offices

Who's got the connections? Who gives the best guidance? Whose departments work best for recruiters?

Ratings are based on a statistical compilation of student and recruiter surveys from the top 30 schools

THE BEST



1. NORTHWESTERN

Recruiters call it the most effective and students rank it in the top 10



2. VIRGINIA

A rebound from the worst in 1998. Grads and recruiters like improvements



3. CHICAGO

School more attentive to recruiters. Grads say more interview prep help needed



4. DUKE

Recruiters say it's No. 3, while grads rank it No. 1, citing non-traditional employers



5. CORNELL

Recruiters rank it seven spots higher than grads, but it stays in the top five

THE WORST



1. STANFORD

Recruiters overwhelmingly rank it least effective, but grads still getting jobs



2. PENNSYLVANIA

Recruiters frustrated and students say it's not aggressive about placement



3. TEXAS-AUSTIN

Grads like independent job search help; recruiters say office is not effective



4. MARYLAND

Still struggling to please recruiters. Students rank it lowest



5. GEORGETOWN

Scores low with grads and recruiters, new placement director may reinvigorate

DATA: BUSINESS WEEK

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TABLE

Recruiter's Pick of the Lot

MOST INNOVATIVE CURRICULUM



1. Northwestern

2. Pennsylvania

3. Carnegie Mellon

4. Virginia

5. Harvard

MOST IMPROVED PROGRAM



1. Duke

2. Chicago

3. Cornell

4. Northwestern

5. Carnegie Mellon

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TABLE

Finding the Cream of the MBA Crop 

The best source for top grads depends on what you're looking for. Here's 
where recruiters say they find the best students by specific skills.

GENERAL MGMT.          MARKETING              FINANCE

 1. NORTHWESTERN       1. NORTHWESTERN        1. PENNSYLVANIA
 2. HARVARD            2. PENNSYLVANIA        2. CHICAGO
 3. MICHIGAN           3. HARVARD             3. HARVARD
 4. PENNSYLVANIA       4. DUKE                4. COLUMBIA
 5. VIRGINIA           5. MICHIGAN            5. NORTHWESTERN
 6. DUKE               6. VIRGINIA            6. DUKE
 7. STANFORD           7. COLUMBIA            7. MICHIGAN
 8. CHICAGO            8. CORNELL             8. MIT
 9. COLUMBIA           9. CHICAGO             9. NYU
10. CORNELL           10. STANFORD           10. VIRGINIA

GLOBAL SCOPE           TECHNOLOGY

 1. PENNSYLVANIA        1. MIT
 2. HARVARD             2. CARNEGIE MELLON
 3. NORTHWESTERN        3. PENNSYLVANIA
 4. CHICAGO             4. NORTHWESTERN
 5. COLUMBIA            5. STANFORD
 6. STANFORD            6. HARVARD
 7. MICHIGAN            7. CHICAGO
 8. MIT                 8. CORNELL
 9. THUNDERBIRD         9. DUKE
10. DUKE               10. VIRGINIA

DATA: BUSINESS WEEK


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It's a Whole New B-Game

Since BUSINESS WEEK began ranking MBA programs 12 years ago, we have worked hard to make our rankings the best they could be. Over the years, we've increased the number of surveys we send out, as well as the number of schools and companies that receive them. We recognize that just as the world evolves, we need to evolve our scoring system to keep up.

With that in mind, this year, we have expanded our rankings in several key ways, which we believe gives our survey even more breadth and depth than our previous six biennial rankings. For instance, we've introduced a measure of a school's influence and prominence in the realm of ideas--what we call intellectual capital (page 89). We've given this new intellectual-capital component a 10% weighting in the overall rankings, with the remaining 90% split evenly between students and recruiters.

That's not all. We've also crunched the numbers to gauge the difference between men's and women's levels of satisfaction with B-schools. And we have conducted our first-ever ranking of European and Canadian schools. To reflect changes in the economy, we added about 70 companies to our recruiter list, including technology and venture-capital businesses. We've also expanded our survey by an additional 21 schools, for a total of 82, resulting in a ranking of the top 30 schools instead of our usual 25.

Finally, we conducted our survey completely online. That enabled us to exploit the power of the Net to produce a vastly more precise poll: We were able to e-mail every graduate at the 82 B-schools participating in our survey, rather than rely on a random sample of responses as in previous years.

We sent our 37-question survey to 16,843 graduates of the Class of 2000 and received 10,039 replies, a superior response rate of 60% (most surveys garner only about a 25% response rate). Instead of asking them to provide a simple yes or no, we challenged students to think a little harder about their responses by asking them to calibrate their answers on a scale of 1 to 10 for most questions. A typical question: "To what extent did your school weave e-business topics throughout the curriculum?"

To help us analyze the data and ensure that the results were not skewed by overzealous students or administrators eager to influence results, we again called on statisticians David M. Rindskopf and Alan L. Gross, professors of educational psychology at the City University of New York.

As in previous years, this year's student survey results account for half of a school's student satisfaction score. The other half comes from the responses of 4,891 graduates in the 1996 poll and 6,020 from the 1998 poll; each of these groups carries a weight of 25%. Spreading the rankings over six years ensures that short-term changes don't unduly influence results. When all this was tallied up, the total student satisfaction survey was given a 45% weighting in the overall ranking.

On the employer side, we sent surveys to 419 companies that actively recruit MBAs. Of those, 247, or 59%, responded. Recruiters were asked to rate their top 20 schools according to the quality of students and their company's experience with B-school grads past and present. Each school's total score was then divided by the number of responding companies that recruited MBAs from that school. The recruiter poll also counted for 45% of a school's ranking score.

To produce the final ranking, BUSINESS WEEK combined the student, recruiter, and intellectual-capital scores, weighted proportionally. This approach accounts for the statistical significance of one school's lead over another in each poll, and gives more credit to schools that achieve a commanding advantage in one area. Because there tend to be greater differences among schools in the corporate survey, recruiter opinion tends to have a slightly greater weight in the overall ranking.

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TABLE

The Survey 

GRADUATE POLL

                    1996                1998                2000
SURVEYS             7,235               9,598               16,843
REPLIES             4,891               6,020               10,039
RESPONSE RATE       67%                 63%                 60%

RECRUITER POLL

                    1996                1998                2000
SURVEYS             326                 350                 419
REPLIES             227                 259                 247
RESPONSE RATE       70%                  74%                59%

DATA: BUSINESS WEEK


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Keeping Tabs on B-School Brainpower
For the first time, BUSINESS WEEK's rankings measure scholarship and the ability to influence thinking in the business world

For more than a decade, BUSINESS WEEK has ranked MBA programs based on a simple standard: customer satisfaction. The schools that got the highest marks from both students and corporate recruiters wound up on top. It's an approach that has worked well over the years, demonstrating which schools offer the strongest programs and produce the most talented and sought-after grads.

Now, to make our survey even more comprehensive, we've added a new component that we're calling intellectual capital. Our reasoning is that it's not just the size of the first paycheck or the talent of the graduates that count. It's also the quality of the scholarship and the ability to influence thinking in the business world at large that sets the top B-schools apart. It's difficult to quantify, but we think we've found a way. This year the intellectual capital score will contribute 10% of a school's total ranking.

So how did we measure intellectual capital? First, we polled a number of B-school deans and academic program directors to determine the scholarly and professional journals that have the biggest impact. We narrowed the list to 12, including Journal of Finance, American Economic Review, Journal of Marketing Research, Operations Research, and Strategic Management Journal.

IDEAS DERBY. Next, we studied each journal going back five years to figure out who the most important thinkers were over the period and where they taught. We gave points based on the length of each article, excluding commentary and editorial pieces. Professors who taught at more than one school during the period had their points assigned to their current schools. We also culled book reviews from the same time period from BUSINESS WEEK, The New York Times, and The Wall Street Journal to find out whose work was reaching a broad audience. Books on the BUSINESS WEEK bestseller list received bonus points. Finally, to adjust for school size, we totaled the scores for each school and divided by the number of full-time faculty members.

The winner of our ideas derby: Duke University, which topped the list thanks to a handful of professors who are leading lights in their specialties. Paul H. Zipkin, for example, published a variety of works on his theories of supply-chain management and inventory policies. Zipkin, who has been teaching for 23 years, has been a professor at Duke for the last five years. Massachusetts Institute of Technology's Dimitris Bertsimas and Lester C. Thurow topped that school's list, giving it the No. 2 spot. Thurow's best-selling book The Future of Capitalism: How Today's Economic Forces Shape Tomorrow's World highlighted his theory that the global economy is to blame for the widening gap between the haves and have-nots in America.

Adding this new factor to our rankings yielded some intriguing results. Some schools, including Stanford University, Duke, and MIT moved a notch or two higher in the overall rankings because of their intellectual-capital scores, while others, including University of Michigan, University of Virginia, and New York University were ratcheted down slightly. After Duke and MIT, the schools that nabbed the highest intellectual-capital scores were Stanford, and Cornell University.

On sheer volume, before adjusting for faculty size, the Wharton School at the University of Pennsylvania, Columbia Business School, Harvard Business School, MIT, and University of Chicago's B-school came out on top, with Wharton taking a commanding lead.

The marketplace for ideas is clearly thriving at the nation's B-schools. That's why we wanted to reflect in our survey that there's more to an MBA than placing students in high-paying jobs. The elite schools also expose students to the best in management thinking and to ideas that will likely influence business long after students pick up their degrees.

By Jennifer Merritt in New York

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A Global Report Card
France's INSEAD tops the list in BUSINESS WEEK's first ranking of European and Canadian business schools

Niall Wass, who graduated from France's INSEAD business school last winter, loves that London-based grads get together once a month in a pub to exchange ideas and contacts. But what really impresses Wass, co-founder of London video-streaming technology company Visuma, is that his alma mater's intricate web of alumni seems to spread from one side of the globe to the other. "Even if they have no idea who you are," says Wass, "when you call senior executives and tell them that you went to INSEAD, they're really helpful and hand off five contacts to you."

Wass has a lot of company. In BUSINESS WEEK's first ranking of European and Canadian schools, INSEAD won hands down, with students raving about its close-knit yet diverse student body. INSEAD may be located on the edge of Fontainebleau, a town south of Paris known for its 17th-century chateau and a forest where France's kings once hunted. But of its 697 students, 90% hail from beyond French borders, with many students attending from the U.S. and others from Africa, the Middle East, and South America.

Indeed, like many other popular European business schools, INSEAD has a distinctly American flavor. With deregulation sweeping through Europe, U.S.-style, market-based business practices have been a fact of life in Europe for some time now. And that's put MBA-trained executives in hot demand. Plenty of American students, moreover, eager to start their careers abroad, are heading overseas for their degrees. For all these reasons, BUSINESS WEEK decided to launch its new ranking of non-U.S. schools. We surveyed close to 1,000 students from 15 schools in Europe and Canada, as well as 247 recruiters from around the world. After crunching the numbers, BUSINESS WEEK was able to rank the top seven schools.

ANYTHING BUT OLD WORLD. A common thread runs through the winners: providing a home away from home for overseas students while offering up top-notch teachers who can impart skills for New Economy jobs. The London Business School and Spain's University of Navarra's IESE in Barcelona won the No. 2 and 3 spots, respectively. London students, 80% of whom are from other countries, liked the wide range of elective courses. Spain's IESE students gave the school high marks for networking.

The sorts of jobs MBAs are landing in Europe these days are anything but Old World. Sure, about 10% of the students surveyed went into investment banking, a fairly traditional post-B-school career choice. But 32% of the students opted for consulting, particularly for technology startups. "We're now competing with entrepreneurs to hire MBAs," says Philippe Masson, vice-president of human resources for consulting firm Cap Gemini Ernst & Young in Paris. That, he says, is a relatively new phenomenon for Europe.

European business schools are competing for students who are increasingly selective. And, on that score as well, INSEAD, comes out strong. Last year, outgoing Dean Antonio Borges capped his seven-year run by overseeing the school's opening of a new Singapore campus. About 100 students are enrolled in Singapore for the upcoming year beginning in January 2001, that's 50% more than the current year. And Borges' successor, veteran INSEAD investment banking professor Gabriel Hawawini, a native of Egypt, wants to push that number much higher. He also intends to open a U.S. campus by 2003. "Our goal is to create a global business school with a worldwide campus," he says.

To lure students, Hawawini is determined to make his school as appealing as possible with the help of $100 million INSEAD raised during a five-year funding campaign. That includes an endowment that has grown from $2.5 million to $36.6 million. Putting those riches to good use, the school has already hired 63 teachers, a 50% increase since 1995. There's also a new multimillion-dollar executive education facility under construction. And a new loan program in 2001 with ABN-AMRO Bank will guarantee that all enrollees will be able to come up with the $25,300 tuition for the one-year program. That's a big deal, students say: Loans for European and Asian B-schools are a lot tougher to come by than they are in the U.S. for American MBA programs.

"INTERNATIONAL CROSSROADS." France, though, isn't the only country with a hot U.S.-style MBA program. Under the direction of Dean John Quelch since 1998, No. 2-ranked London Business School has recruited 21 new faculty members from the U.S. Says Susanna Khavul, assistant professor of entrepreneurship: "I'm in the middle of an international crossroads of thought and of practice." A PhD from Boston University, Khavul says she'll focus her research on Israeli high-tech startups. Indeed, the vibrancy of the school's faculty helped place it first in our intellectual-capital ranking of the non-U.S. schools. London Business School also boasts a hefty endowment of $23 million. And alum Vijay Uttarwar, who recently sold his Silicon Valley Internet business for $360 million, has given over office space at his new company, UnwiredSoft Inc., as a sort of Valley home base for London students and teachers.

THUMBS DOWN. One surprise in the international survey was the relatively poor fourth-place showing of the prestigious Swiss B-school, International Institute for Management Development (IMD). Its students gave IMD two thumbs down for downplaying the MBA program in favor of its executive education program for older students. The faculty spends just 10% of its teaching time on the MBA program, according to IMD Dean Peter Lorange. Students also were dissatisfied that most course work was geared toward Old Economy jobs. As for MBAs landing at high-tech startups, "that seems to be taking care of itself," says Lorange, shrugging of student complaints. Recruiters, however, ranked IMD's curriculum as the best, helping to shore up the school's ranking.

Even with all their strengths, European B-schools could face some tough competition. U.S. B-schools, such as University of Chicago and the Wharton School at the University of Pennsylvania, are opening up or teaming with European and Asian schools. "The competition from U.S. business schools is a wake-up call," says Kai Peters, dean of No. 6-ranked Rotterdam School of Management in the Netherlands. "If you don't grow, you'll be eaten."

That's less of a worry for Europe's top B-schools. Like their graduates, Europe's business schools are, for the most part, thriving in a booming economy. INSEAD grad Wass credits a lot of his early success with his London video-streaming business to the help he got from his friends at INSEAD. And with its diverse and growing student body, a new Asian campus, and a fat bank account, BUSINESS WEEK's top-ranked non-U.S. school will be minting plenty more bright MBA grads before sending them out to all corners of the globe.

By Mica Schneider in London

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TABLE

C'Est Bon, le B-School! 

Where the hot MBA programs are outside the U.S.:

                    CORP   GRAD  INTELLECTUAL     MEDIAN PAY
   SCHOOL           POLL   POLL    CAPITAL    PRE-MB    POST-MBA*

1. INSEAD            1      1        2        $60,000   $124,000
   France

2. LONDON BUSINESS   3      2        1         50,000    137,000
    SCHOOL
   England

3. IESE              2      3        7         40,000     77,000
   Spain

4. IMD               4      4        3         69,000    126,000
   Switzerland

5. WESTERN ONTARIO   5      5        5         35,000     74,000
   Canada

6. ROTTERDAM         7      6        6         43,000     91,000
   Netherlands

7. TORONTO           6      7        4         35,500     66,000
   Canada

                                                   MBA SKILLS GRADED
                                                     BY RECRUITERS
                                                  -------------------
                                                     AS      AS TEAM
   SCHOOL       DESCRIPTION                       ANALYSTS   PLAYERS

1. INSEAD       Students encouraged to travel        A          A
   France       between Singapore and France
                campuses. Generous loan-assis-
                tance program.

2. LONDON       School recruited 21 new faculty.     B          B
   BUSINESS     Lots of e-friendly courses.
   SCHOOL
   England

3. IESE         Business ethics are pushed. About    D          C
   Spain        65% of graduates are non-Spaniards.

4. IMD          New classes on entrepreneurship      B          D
   Switzerland  planned for class of 2001.

5. WESTERN      Only 40% of students are non-        A          C
   ONTARIO      Canadian. New courses on e-manage-
   Canada       ment expected to be popular.

6. ROTTERDAM    More seats for MBAs in 2000. Part-   C          D
   Netherlands  nered with B-schools in U.S.

7. TORONTO      Program gets makeover with new dean. A          A
   Canada       New integrated curriculum.

* Post-MBA pay = Median salary, bonus, and other compensation reported in 
U.S. dollars

DATA: BUSINESS WEEK


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Building a World-Class Business School in Japan (int'l edition)
Hitotsubashi University is the first state-run school in Japan to offer an MBA--and the only one to require work experience

When it comes to educating its most promising young executives, Japan has always farmed them out to the likes of Harvard, Wharton, or the University of California at Berkeley. For Hirotaka Takeuchi and other business professors in Japan, that's something of a national disgrace. "Why doesn't Japan, the world's second biggest economy, have a world-class business school?" he wondered.

As a result of his question, it soon might. The brand-new Graduate School of International Corporate Strategy plans to start classes at Hitotsubashi University on Oct. 2. A satellite of the venerated 125-year-old institution, the new business school has made up its class of 2002 with about 50 students from Japan, other parts of Asia, the U.S., and even Africa. Approved by the arch-conservative Education Ministry, the program will instruct students in English and Japanese.

It's the first state-run school to offer an MBA, and the only institution in Japan to require work experience as a qualification for entry. Takeuchi, the school's dean, has even set up an "intellectual alliance" with two decidedly gaijin players, Morgan Stanley Dean Witter and Andersen Consulting. The companies will contribute technology, databases, and brokerage research to the program and help line up guest lecturers. They aren't directly funding the school, but both hope for a payoff in terms of a more qualified labor pool to choose from.

TALENT WAR. When the university announced its plans to link up with U.S. financial giants earlier this year, some alumni cringed. Hitotsubashi has long focused on theory-based economics, and its alums include Bank of Japan Governor Masaru Hayami and Toyota Motor Corp. Chairman Hiroshi Okuda. Many questioned the need to bring in foreigners in a culture where such collaboration is unusual. But Takeuchi wanted access to data, case studies, and other hands-on information about new technology that just wasn't available in Japan. "We were so far behind and just didn't have the resources," he says.

Now, Takeuchi thinks the program can compete for top students in Asia and the West. More broadly, he thinks there's a need for Japan to keep students at home if Japanese companies are to make the best of a shrinking labor pool. "The war for talent is raging, and it's clear Japan is losing," he says.

The school does have advantages in both luring foreign students and keeping ambitious Japanese at home. As a state-owned and heavily subsidized university, Hitotsubashi's business program costs just $4,500 a year, compared with $20,000 for a more theoretical degree at private Keio University--and a whopping $28,500 at Harvard Business School.

This meshing of East and West was the deciding factor for Mia Kimura, a 27-year-old Japanese American who considered schools in the U.S., but opted for Hitotsubashi. "It's perfectly suited to me," she says, and a bargain to boot. On top of that, Hitotsubashi's faculty boasts professors with real work experience, a rarity in Japan. They include Norihiko Shimizu, a 20-year veteran of the Boston Consulting Group, and ex-Merrill Lynch & Co. investment banker Sherman Abe. The faculty's contacts with the business world are a plus, too, when it comes to landing students jobs. So is the face time with executives at Morgan and Andersen.

For students, though, the program isn't just a schmoozefest. Those used to the leisurely pace of Japan's undergrad programs will be in for a shock. A decade ago, companies wanted schools to turn out "soft white cloth" grads upon whom "they could make an imprint," notes Takeuchi. But now, problem-solving, creativity, and special expertise increasingly are in demand. Students will be encouraged to develop business plans that will be vetted in student competitions. "Harvard is tough, but ours is going to be tougher," says Takeuchi, who taught at Harvard in the '70s.

Rigor, of course, is what a Morgan or Andersen expects from new hires. And Japanese students have waited a long time to have the chance to get it. If this unusual cohabitation between Western business and an educational icon works out, Japan's best and brightest may no longer have to wing across the Pacific for a top-flight MBA.

By Brian Bremner in Tokyo

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It's Not Just about MBAs Anymore
Corporations are bending over backward to get the best recruits--with or without a B-school diploma

Earlier this year, some of the best marketing minds in America trekked to Cambridge, Mass., for one of the hardest pitches they'd ever had to make: convincing Harvard Business School grads--many with more job offers than business suits--to join their companies. In this battle of the PowerPoint presentations, companies spent up to a quarter million dollars creating MTV-style videos with corporation-flattering graphics and racy story lines about the adrenaline rush of working for them.

Flash back 10 years ago and it was the students doing the auditioning. No more. In a labor shortage-induced role reversal, it's the companies who are hustling--and not just at primo business schools. The young and the skilled can pretty much write their own ticket these days, and it doesn't always include a graduate degree.

In fact, business schools' toughest competition may no longer be each other--but all those start-ups and blue chips willing to hand out MBA-sized salaries and job titles to those who've never read a page of Peter Drucker. Applications to the top 25 B-schools fell 7% this year, with the falloff at Stanford University and University of California at Berkeley, both located in dot-com land, down more than 20% since 1998. "I think this industry got a wake-up call," says Rex D. Adams, dean of Duke's Fuqua School of Business.

Today, younger workers with the right stuff can slow down, drop out, and still come back to a hot job. Just ask Lynne LaCascia. She's an MBA admissions director's dream. At 25, she had logged three years as an analyst at Salomon Smith Barney, one of several firms that wooed her after she earned a BS in economics and applied mathematics from Yale University. But B-schools won't be getting her application anytime soon. She left Wall Street for a year of downtime--and then landed a plum assignment as head of strategy at a startup.

Given the booming economy, it's not that hard to do. Younger job seekers are coming to interviews ready to negotiate stock options, signing bonuses, and a list of life-enhancing perks, such as months of vacation, sabbaticals, and 1950s-era hours. "They have a confidence that is unique to not being in the labor force during a depression or a recession," says Healtheon/Web MD Corp.'s senior vice-president for human resources Theresa L. Dadone-Carlsted.

BODYBUILDING, ANYONE? Companies can offer a lot of things MBA programs can't. When recruiters at Minneapolis-based General Mills Inc. attempt to dazzle the CEOs of tomorrow, they brandish pictures of mint condition Victorian houses--ones that junior execs can afford, vs. the dumpy starter homes they'd get in Silicon Valley. They also tell prospects that most days they'll leave work at 5:30 p.m.--and at noon on summer Fridays, leaving them plenty of time to windsurf or boat across one of Minneapolis' lakes. The strategy helped General Mills snag four Harvard B-School grads this year, when most companies are thrilled to get one.

That's nothing compared to what other outfits are handing over. At PricewaterhouseCoopers, twentysomething consultants have brokered deals to play in the Women's National Basketball Assn. and to train for Olympic bodybuilding. At Phone.com Inc. in Redwood City, Calif., Gen X and Y engineers often take time off for flying lessons.

Certainly, a downturn would end the reign of the unwrinkled. When that happens, "We'll still be here," says Michele Rogers, admissions director at Northwestern University's Kellogg Graduate School of Management.

Until then, however, the young are proving that it's possible to have a great job, a great life, and lots of money, all without the hassle of student loans.

By Francesca Di Meglio and Michelle Conlin in New York

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Hatching Success
More and more B-schools are starting "business incubators" to launch startups. Is it education or business? Well, it's both

It's not much to look at, more like a nuclear bunker than a place where businesses are born. There are no windows, and the fluorescent lights cast a dim glow on the concrete walls. "If there were people being tortured with a medieval device down here, you wouldn't be surprised," says 29-year-old James Clark, who toils--and sometimes sleeps--in the space. But don't let the surroundings fool you. There's something less sinister going on in this dungeon, otherwise known as eLauncher, a business incubator started in April at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.

Clark and his partner, David Lapp, 29, both first-year UNC B-school students, launched their e-business, Iontribe, last month after four months in the basement incubator. The pair figures their company, a service to help small businesses interact with customers through wireless communications, can run for six to nine months on its angel funding while they hunt for other sources of capital. The two say they doubt they would have ever gotten their company off the ground without the backing and support of UNC.

Is this education or business? A bit of both, really. For their professors, Clark and Lapp's venture will provide a live laboratory for research. The pair are among the lucky few MBA students who get to spend part of their school experience starting a business. UNC didn't put up a dime in financing, but it did give them something much more valuable: access to free facilities and a rolodex full of contacts that they could have spent years trying to corral in the outside world. Competition for entry into incubators such as the one at UNC is intense. Clark and Lapp, for instance, were among dozens of students submitting some 18 business plans, and only five plans made the cut.

The UNC incubator is hardly unique. B-school hatcheries are a relatively recent but fast-growing New Economy phenomenon. The oldest, including those at University of California at Berkeley's Haas School of Business, Babson's F.W. Olin Graduate School of Business, and University of Wisconsin at Madison's School of Business, have been around for only about three years. Some, like UNC, provide facilities, mentoring, and contacts. Others, such as Wisconsin, invest as much as $100,000 in individual businesses. That's peanuts compared to the sums served up by venture capitalists, but still plenty of money coming from a university. Other schools, such as Babson's, will tailor an entire year's course work for student entrepreneurs who are starting a business.

So what are B-schools doing in the incubator game? Quite simply, they're keeping up with the times. The ultimate goal, unlike that of business hatcheries in the real world, such as CMGI Inc. in Andover, Mass., and idealab! in Pasadena, Calif., is not to hit a home-run investment--or even necessarily make a profit. For them, the endgame is to lure the best students in an era in which the vast majority of B-school students say they eventually want to become entrepreneurs. "We want to get rid of the tension between getting your MBA and starting your own business," says Robert Carraway, director of the Progressive Incubator at the University of Virginia's Darden Graduate School of Business Administration.

VC NIBBLES. For students, getting into an incubator is the opportunity of a lifetime, well worth the price of B-school tuition. Just ask Curt Szymanski, president and chief executive officer of UCLID Software, a company specializing in converting legal documents and land records into digital files. The company was launched in March, 1998, out of the

University of Wisconsin's then year-old Weinert Applied Ventures incubator. The school invested $100,000 in the fledgling venture and took a 5% stake. It's a good deal for Szymanski, who graduated last year.

Szymanski says he didn't enroll in B-school with the idea of starting a business there, but once on campus he realized he would have access to people and resources that would have never been available to him otherwise. "It gave me a foot in the door," says Szymanski, whose company now has 25 employees. Says Wisconsin professor Ted Baker: "It would take a student at least a decade to build the personal network and the resources that we provide to them in their first three months."

Venture firms seem to relish the chance to get a first look at a good idea from B-school incubators, although the investments are so new that venture capitalists are loath to discuss them. Incubator companies tend to already have managers, board members, and some initial funding in place. Moreover, investors have the confidence that businesses hatched out of B-school incubators have been vetted by faculty members and boards of businesspeople, making it a good bet that they have potential. That contrasts sharply with the hundreds of business plans that just come in over the transom. "By the time we get to see these ideas, they are pretty strong," says Andy Russell of East River Ventures, an investment firm focused on early-stage tech and new media ventures.

Russell hasn't yet invested money in any single B-school incubator startup. But he's warming up to the idea. East River Ventures is a seed investor in the Columbia Graduate School of Business' Entrepreneurial Greenhouse program, the incubator that the school launched last year. Such investors don't know which companies their monies go to, but say they're contributing to the creation of ideas. Russell is now in talks with several student-run businesses about making first-round investments.

HAPPY DROPOUTS. It's too soon to know which of the B-school incubator projects may become hits. The biggest success stories so far are those startups that have raised millions more than the few hundred thousand dollars of university seed money. Brightpod, for example, another UNC eLauncher venture, hopes to offer wireless Internet services such as instant messaging. It raised $5 million in funding this summer, partly on the strength of its association with the university. Typically, when an outside investor comes in, B-schools cash in their small equity stake, which often defrays costs of the incubator or even turns into a small profit to be reinvested.

Finding outside investors isn't just good for the students. It's good for the B-schools, too, because it helps them stay free of such murky ethical issues as investing in a business whose owner is still a student paying tuition. And what would be the B-school's role, for instance, if a student startup were to become ensnared in a legal battle? Business schools are still sorting out how much to invest, how big a stake to take, and when to steer clear of an investment altogether. Most of them already have policies prohibiting professors from taking stakes or board positions in companies that are run by current students.

One obvious problem that B-school businesses create is that the founders often become so consumed with running their fledgling enterprises that they don't have time to attend classes. To accommodate such students, some schools, like the University of Virginia, are allowing them to finish their second year in two years instead of one. Others, like UNC, are giving students the option to leave the program and come back to finish within a specified time period, usually three to five years.

UNC's Lapp and Clark count themselves among the happy dropouts--they threw in the towel on their MBA program in August. Both say that they will be missing some skills they would have acquired from an MBA program, but they're not sure they will ever go back to school if their business takes off. Still, those sorts of successful quitters are hardly a problem. One good success story could easily attract scores of applicants. "If students don't see us as a place to pursue their dreams, then we are irrelevant," says B. Joseph White, longtime dean of the University of Michigan Business School, which runs its own incubator. That's why basement incubators will be sprouting up all across the B-school landscape in the months and years ahead. And as for hatching successful companies, the B-schools will just keep crossing their fingers.

By Jennifer Merritt in New York

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TABLE

Bringing Up Baby

In the past three years, more than a dozen B-schools have launched business incubators

UNC-CHAPEL HILL

Two of four businesses in its five-month-old incubator are operational

UNIVERSITY OF WISCONSIN-MADISON

It invests $50,000 to $100,000 in incubator businesses and has seen several take off

UC-BERKELEY

One of the first incubators, this three-year-old program is often copied

BABSON

A second-year program allows students to start a business and get credit for it

DATA: BUSINESS WEEK

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The Virtual MBA: A Work in Progress
Online business schools may be long on convenience, but they don't measure up to conventional ones when it comes to prestige

Anthony Leonard, a 28-year-old management consultant with PricewaterhouseCoopers in Philadelphia, always knew he'd have to go back to school for an MBA if he wanted to rise in his profession. But somehow he could never find the right time to take two years off from work or to sandwich classes into his schedule at night. "The fact that you have to be there at certain times--I just can't do it," he says. Now he doesn't have to. By spring 2002, he'll have his degree, thanks to Capella University School of Business, a for-profit, accredited, online MBA program.

If you believe the cyber-prophets, the future of online MBAs has arrived. InterEd, an Eagle (Idaho)-based research firm that studies the use of technology in higher education, projects that enrollment in virtual MBA programs will jump from 5,000 this year to more than 50,000 in two years.

Maybe so, but don't rush off for that e-degree just yet if you're expecting the kind of salaries and job offers a traditional MBA can bring. What these programs offer instead is maximum flexibility. In cyberspace, students can schedule "classes" at their own convenience and take up to three or four years to finish their degrees, making them attractive to mostly middle-aged, globe-trotting consultants and multitasking career women who want to build skills for their current jobs. Though most programs cost up to 20% more than part-time, on-site B-schools, that may be a bargain given the ability to work around a demanding job.

DABBLING ONLINE. The drawbacks, however, can be significant. Though some traditional B-schools are dabbling in online education, most programs are administered by for-profit universities with little in the way of a track record or recognizable brand name. While the quality of the faculty varies, even the best online professors can't compete with the immediacy and team-building of a traditional classroom. And if you're looking to vault ahead at a new firm after graduation, flashing an e-MBA may not mean much. A BUSINESS WEEK survey of corporate recruiters found that an overwhelming majority haven't even considered applicants who earned their MBAs online. Of the 247 companies who answered our survey, all but a handful said they hadn't considered hiring an MBA with an online degree. And most, skeptical of online B-school graduates' skills, don't plan to start looking.

BUILDING E-BRANDS. Not surprisingly, the few companies open to considering job candidates with dot-com credentials tend to be established tech companies such as IBM and Xerox Corp., which use online education programs as part of their in-house training programs. "If we are taking advantage of the technology ourselves, why wouldn't we consider a person who is doing it?" says Xerox Director of Resource Planning and Staffing Douglas W. Pellino.

Still, the e-MBA companies are determined to build their brands. More are coming online all the time, and many are testing new ways to make a name for themselves. Kaplan Inc. hopes to leverage its reputation as a test-prep powerhouse with Kaplancollege.com, a sister company that will launch its MBA program next year. Other contenders, like Jones International University, are trying to attract non-U.S. students. Their strategy is to use the Web to deliver a highly-coveted American MBA to students overseas. To overcome the lack of brand-name recognition, some online B-schools are establishing career centers to woo recruiters and advise students.

Those initiatives are a start, but good marketing will only take these new players so far. "We're in this for the long haul," says Kaplan COO Andrew Rosen, who's set on building his brand online. "It won't be through Superbowl advertising or full-page ads in The Wall Street Journal. It will be through turning out well-educated students who do well for employers." That, however, could be a tough test to pass in cyberspace.

By Eric Dash in New York

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Want an 82% Pay Hike?
That's the difference between the average salary package of new MBAs and what they earned before attending business school

There's no getting around it: Snagging that MBA degree will take a year or two of mind-numbing hard work. And tuition alone can exceed $60,000 for a two-year program. But once that piece of paper is in hand, MBA grads pretty much have it made, with their pick of jobs and a paycheck that has never been bigger. Students graduating in 2000 received an average of 2.7 job offers and a salary averaging $75,900 before bonuses, according to the latest BUSINESS WEEK survey of MBA students.

The big bucks represent a steady ratcheting-up of post-MBA salaries as the good times continue to roll for B-school graduates. This year, 9,651 students at 73 schools sent us salary data, which showed a 15% jump in pay for newly minted MBAs since our last survey two years ago and a 30% jump since the 1996 survey. The numbers are even more impressive when you consider that this year's graduates of U.S. MBA programs are raking in an average 82% pay hike over their pre-business-school salaries.

The news gets even better. This year, as part of a major expansion of our survey, BUSINESS WEEK conducted a first-ever salary survey of women business students. And no other group improved more than women. The traditional pay gap between genders disappears among MBAs, at least at the start of their post-grad careers. Of the respondents who reported gender, women made about 10% less than the $50,000 median yearly pay that men reported prior to entering B-school. After graduation, the playing field leveled, with men and women who answered these questions earning the same $80,000. Rachel Duncan, 30, a single mother with two kids, doubled her $40,000 salary. "I had climbed the totem pole as high as I could. I wanted more options," says Duncan, who now works for Hallmark Cards Inc.

COLOSSAL INVESTMENT. And this year, for the first time, we crunched the salary data to adjust for regional differences in the cost of living. That's important because reeling in the biggest salary doesn't always translate into the highest disposable income. Look at grads settling in the Northeast. Sure, they're pulling down an average annual pay package of $125,000, but that only gives them the purchasing power of someone making $66,000 in Dallas. Also for the first time this year, we included schools outside the U.S. The grads surveyed by BUSINESS WEEK in Europe and Canada enjoyed salary hikes of 71% over their pre-MBA salaries.

The rosy picture for MBAs fades a bit when you look at the expense side of the ledger. U.S. B-schools are a colossal investment for the average 28-year-old, setting the class of 2000 back an average $126,700 in tuition, fees, and lost salary. And it's not over on graduation day. This year's class left campus with an average debt load of $20,600.

Next, we looked at the numbers to figure out how long it takes to be made whole again after, in most cases, two years of B-school. To determine a return on investment (ROI) for each school, BUSINESS WEEK turned to Jens Stephan, academic director of MBA programs at the University of Cincinnati's College of Business Administration. Stephan, who has been helping calculate our survey results since 1996, found that students will break even in anywhere from 2.8 years to 6.6 years. That's a significant improvement over 1998, when the breakeven period ranged from 3.7 years to 7.2 years.

To make the calculation, Stephan took into account pre-MBA salaries, lost work time, tuition, and the bigger bucks MBAs reported earning. Stephan assumed that a student loses 18 months of income in a two-year program, allotting summer months for a paid internship. He tacked 10% on to the pre-MBA salary during the second year of the program to reflect an assumed raise the student would have received. That lost income was combined with the school's tuition over two years. He then projected what MBAs should earn over the next eight years, including starting salary, extra compensation, and signing bonuses--62% of U.S. grads surveyed said they received an average $8,900 bonus.

So which school gives the biggest bang for the tuition buck? Utah's Brigham Young University snatches the ROI crown in the U.S. with a payback period of 3.5 years. Students at BYU landed jobs with a median salary of $67,000, a 120% increase over their pre-MBA salaries. And tuition of about $7,000 a year makes the school a steal.

CONSULTING IS KING. The reigning 1996 and 1998 champion, the Katz Graduate School of Business at the University of Pittsburgh, dropped into fifth place this year with a 3.7-year payback period for its one-year program because salary increases failed to keep pace with the pack. Florida's Warrington College of Business had the slowest U.S. ROI at 6.6 years. Those grads saw a 68% salary increase after an investment of $136,900.

Not surprisingly, the mostly one-year European schools offer the fastest payback period. France's INSEAD led, with students there breaking even in just 2.8 years on a total investment of about $101,500. Spain's Escuela Superior de Administracion y Direccion de Empresas (ESADE) ties with the University of Toronto's Joseph L. Rotman School of Management for the slowest ROI, of 5.7 years. MBAs from these schools walked away with only about $50,000 in salary and rarely got signing bonuses.

Another big factor in figuring how long it takes for an MBA to pay off is the career choice a grad makes once school is over. About 23% of those surveyed in the U.S. settled on consulting, the category with the highest average annual salary, at about $100,000. That resulted in a relatively fast ROI of 4.2 years. Investment banking was next with 4.3 years. At non-U.S. schools, investment bankers were No. 1, with an ROI of 3.8 years, thanks to signing bonuses, company-financed cars, and other perks.

No matter how you slice the numbers, an MBA remains a better investment than ever in 2000. True, tuition can be huge, and it may take a while to pay off loans. But by then, this year's crop of grads should be well up the corporate ladder, and that $100,000-plus it cost them for B-school will be a distant memory.

By Mica Schneider in New York

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TABLE

Returns on Careers 

JOB                     TOTAL             SALARY          YEARS TO
CATEGORY              INVESTMENT*        INCREASE,        PAY BACK
                                         POST-MBA

CONSULTING
FASTEST Texas          $120,900            108%            3.5
SLOWEST Florida         136,900             67             6.0
AVERAGE                 122,900             95             4.2

FINANCE
FASTEST Pittsburgh       80,600            100             3.3
SLOWEST Florida         141,600             56             6.4
AVERAGE                 123,200             81             4.6

MARKETING
FASTEST Texas A&M        75,200            117             3.4
SLOWEST Stanford        179,300             31             9.3
AVERAGE                 119,600             82             4.9

JOB                       TOTAL           SALARY         YEARS TO
CATEGORY                INVESTMENT*      INCREASE,       PAY BACK
                                         POST-MBA

ENTREPRENEURSHIP
FASTEST Columbia        $156,300           105%            4.2
SLOWEST USC              160,300            39             8.5
AVERAGE                  135,700            77             5.7

INFORMATION TECHNOLOGY
FASTEST S. Carolina      93,600            117             4.0
SLOWEST Stanford        197,400             54             6.6
AVERAGE                 127,100             72             5.4

OPERATIONS
FASTEST Purdue          104,200            100             3.9
SLOWEST Thunderbird     125,700             75             5.8
AVERAGE                 118,500             78             4.9

* Eighteen months of lost earnings plus pretax income needed for tuition. 
Calculated from student survey respondents within each job track. Averages are 
from BW student surveys of 73 schools where 15 or more students responded.

DATA: BUSINESS WEEK, JENS STEPHAN, UNIVERSITY OF CINCINNATI


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TABLE

U.S. Schools 

U.S. Schools

SCHOOL              MEDIAN       PERCENT   MEDIAN     MEDIAN      MEDIAN 
SALARY
                    TOTAL        SALARY    YEARS TO   SALARY AT   ADJUSTED
                    INVESTMENT*  INCREASE  PAYBACK**  GRADUATION  BY REGION***

THE QUICKEST PAYBACK...

BRIGHAM YOUNG       $70,900      120%      3.5        $67,000     $64,200
TENNESSEE Knoxville  77,200      115       3.6         65,000      67,100
IOWA                 83,400      100       3.7         70,000      65,200
PURDUE              102,600      122       3.8         77,000      69,700
PITTSBURGH           82,600       62       3.9         65,000      59,600
GEORGIA TECH         93,500      100       4.0         72,000      70,400
TEXAS A&M            83,000       98       4.0         68,000      64,600
MICHIGAN STATE       94,200      100       4.1         71,000      64,300
PENN STATE           97,100      101       4.1         73,000      59,900
YALE                148,600      100       4.1         80,000      52,000

...AND THE SLOWEST

FLORIDA            $136,900       68%      6.6        $65,000     $62,900
GEORGE WASHINGTON   125,800       67       6.3         67,000      56,200
UC-IRVINE           133,400       68       6.1         75,000      60,900
THUNDERBIRD         129,700       60       5.8         72,000      61,800
STANFORD            179,300       60       5.7        100,000      82,100
BOSTON U.           133,200       83       5.6         80,000      58,700
USC                 144,600       68       5.5         80,000      65,000
RUTGERS             115,400       60       5.5         66,500      35,400
AMERICAN            115,200       60       5.4         67,000      55,800
BABSON              132,500       78       5.4         75,000      55,000
AVERAGE             126,700       82       4.7         75,900      64,400

* Eighteen months of lost earnings plus pretax income for tuition.
** When the pay gain as a result of the MBA equals the total investment in 
B-school. Includes time spent in school.
*** Total compensation is deflated by the cost of living index assigned to 
each school.

DATA: BUSINESS WEEK, JENS STEPHAN, UNIVERSITY OF CINCINNATI


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TABLE

European and Canadian Schools 

European and Canadian Schools

SCHOOL              MEDIAN       PERCENT   MEDIAN     MEDIAN      MEDIAN 
SALARY
                    TOTAL        SALARY    YEARS TO   SALARY AT   ADJUSTED
                    INVESTMENT*  INCREASE  PAYBACK**  GRADUATION  BY REGION***

THE QUICKEST PAYBACK...

INSEAD France       $101,500       60%       2.8       $90,000     $N/A
IMD Switzerland      110,500       63        3.0       100,000     62,800
CRANFIELD England     84,300       56        3.4        75,000      N/A

...AND THE SLOWEST

ESADE Spain          $92,700       73%       5.7       $50,000    $34,000
TORONTO Canada        99,000       50        5.7        57,000     45,100
YORK UNIVERSITY       83,000       67        5.6        41,500     32,800
Canada
AVERAGE              101,500       71        4.4        70,700     62,400

* Eighteen months of lost earnings plus pretax income for tuition.
** When the pay gain as a result of the MBA equals the total investment in 
B-school. Includes time spent in school.
*** Total compensation is deflated by the cost of living index assigned to 
each school.

DATA: BUSINESS WEEK, JENS STEPHAN, UNIVERSITY OF CINCINNATI


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