Rating Agency Begins Grading Business Schools

Posted by: Louis Lavelle on January 11, 2011

With the Dec. 1, 2009 sale of Businessweek to Bloomberg LP, the magazine’s former owner, the McGraw-Hill Companies, officially exited the b-school ranking business. It now appears that the company wants back in. Credit Rating and Information Services of India (CRISIL), a rating agency that’s majority owned by McGraw-Hill’s Standard & Poor’s unit, yesterday announced the launch of a new rating service for business schools.

CRISIL has already graded management education programs at 20 schools, all of them in India, and it appears that the ratings will be limited to Indian business schools. Martin Winn, an S&P vice president, told me that neither S&P or CRISIL have any plans to rate business schools outside of India.

According to the CRISIL press release, schools that volunteer to be rated will be ranked on an eight-point scale, from A★★★ to B using a detailed methodology that “assesses the ability of the institute to impart quality education and to achieve desired student outcomes through the graded programme.” Programs will receive two ratings comparing them to other programs in the same Indian state and nationally. Grading criteria include quantitative and qualitative parameters such as faculty, curriculum, research, admissions, and student outcomes. Grades will be based on school-supplied information as well as a campus visit by a CRISIL team and input from recruiters and alumni.

Unlike accreditation reports, the CRISIL reports on graded b-schools will be made public. In fact 24 already have been. The ones I examined seem to have much the same information about b-schools that can be found online already for well-known MBA programs in North America and Europe. The one on the Alard Institute of Management Sciences, for example, includes details about the class profile, faculty, campus, and the MBA program's placement record. There were also a few things you would be hard-pressed to find anywhere else, such as the faculty's median teaching experience.

With nearly 2,500 business schools, and only a handful that show up regularly in the most popular media b-school rankings, the CRISIL ratings will be filling a void--one that really doesn't exist in the U.S. or Europe, for example. The CRISIL press release notes the ratings' usefulness to students and parents, recruiters, and the schools themselves.

According to the CRISIL website, the school being rated will pay a fee up front, something most media b-school rankings do not require. S&P, Moody's and other credit rating agencies came under intense criticism during the financial crisis for the conflicts inherent in this business model. CRISIL's website describes how it "manages" the conflicts through disclosure, codes of conduct, and firewalls.

But is that enough? If S&P or another rating agency decided to try this in the U.S. or Europe, would it fly? Is the rating agency model a viable alternative to the hodge-podge of media rankings we have now?

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