CHAPTER ONE

WHY GO FOR THE MBA?

A soaring stock market. Tiny start-ups run by pubescent-looking kids who are now worth billions. Jobs aplenty for college grads-even the ones who spent more time poring over Keats (or pouring kegs) than calculus. In the fast-paced, speculative, anything-goes climate of the 1990s, it wouldn't be too surprising if you considered getting your MBA and then concluded that there was too much happening in the real world to risk taking yourself out of the action for two years. Quite the logical decision, if you're Netscape's Marc Andreessen or Yahoo's Chief Yahoos--and billionaires--David Filo and Jerry Yang.

For the rest of us, particularly as the economy shows signs of sputtering, getting an MBA is anything but a move away from the real world. It's a combination of technical and practical skills, a sometimes brutal two-year boot camp in which you learn to deconstruct a balance sheet, negotiate a raise, and make buddies and business contacts everywhere on the planet. Says Donald P. Jacobs, dean of Northwestern University's J.L. Kellogg Graduate School of Management: "Twenty-five years ago, the degree was something that mimicked best practices. Since then, it's become a research-based curriculum that is really at the frontier. It gives you the ability to have life-long education."

As we approach the millennium, the MBA is unquestionably the hottest degree you can hold, particularly from an elite school. The stats prove it: At virtually all of the best schools, GMAT scores and starting pay packages are setting records. Applications are too, although a large part of the boom is coming from overseas. Domestic applications have been relatively flat, in part because so many Americans didn't want to miss out on the thriving economy. The 61 schools surveyed by business week for its 1998 rankings waded through 116,912 applications for the Class of 2000, and the average GMAT score was 667 for those attending the Top 25 schools, up from 649 just two years earlier.

The boom has been all the more surprising because in past decades, MBA education was a countercyclical phenomenon, something you did when the job market was shaky and you wanted to stand out when people were hiring again. "The economy has been strong since 1992, but demand in terms of applications and enrollment has been strong too," says Charles W. Hickman, director for projects and services at the AACSB-International Association for Management Education and the principal MBA accreditation agency. Today, the MBA is on its way to becoming a requirement for anyone who hopes to build a career in Corporate America, and, indeed, much of the world. "Probably our number-one social contribution is compiling great talent," says Dean B. Joseph White of the University of Michigan Business School. Certainly, it's true that corporate recruiters can't seem to hire enough MBAs these days. The 259 recruiters who participated in business week's 1998 survey of the best business schools hired 10,348 MBAs in total, a 28 percent rise from 1996. And they would have hired even more if they could have: Grads of the Top 25 business schools averaged 3.2 job offers each, up from 2.3 in 1992, and compensation exploded. The median pay package (salary, bonus, and extras such as stock options or moving expenses) at the Top 25 hit $111,420, up 19 percent from just two years ago. Another telling figure: Median pay topped $100,000 at 18 of our Top 25-versus 5 two years ago. "The competition for MBAs has definitely quickened," says David L. Reed, director of global recruiting at Andersen Consulting. "It's as fierce as I've ever seen it."

Those numbers come from the top of the heap. Grads of the very best B-schools were able to hold all the cards in the recruiting game in 1998, playing offers off of one another and not being afraid to turn down what in years past would have been a dream job. "I was playing Let's Make a Deal," says Porter F. Erisman, a 1998 graduate of Kellogg. "In most years, you have to turn down doors No. 1 and No. 2, and then you get the grand prize. This time it was like doors No. 9, 10, and 11." Even for those coming out of second- and third-tier schools, however, the sizzling economy had them in the catbird seat as well. That may not last if the economy shifts; most experts expect the gap between the top echelon and the rest to widen. What that means is that you should try to attend the best school possible, as recruiters with fewer slots to fill drop the middle-of-the-road schools from their rosters and target only the very best.

The main reason for the MBA's current success is that the degree has changed significantly over the last decade or so.

B-schools have listened to their customers-their students and the recruiters who hire them-and reinvented themselves as a learning laboratory where, once they get their sheepskins in hand, students can immediately add value to their place of work. The first and most radical change is the injection of real-world experience into the degree program itself. Although you may imagine B-school as a quiet, contemplative experience full of sweater-clad, staid, pipe-smoking profs, think again: B-school is fast-moving, exciting, and more relevant than it's ever been.

Start with your physical surroundings, which are likely to be a lot more comfortable-and more high tech-than you probably could have imagined. A full 18 of business week's Top 25 schools have opened brand new facilities or significant additions since 1996 or are planning to break ground within the next five years. Deans now spend a large part of their time on the road, raising millions so that they can offer their students glistening new buildings (some including everything from showers to a concierge desk to burrito joints), comfy placement facilities, and the best in technology. Indeed, if you haven't been working in Silicon Valley or Seattle, you might think about B-school as a way to catch up with the real world rather than as a way to check out of it. At Cornell's Johnson Graduate School of Management, for example, the new Parker Center offers a simulated trading floor with the same analyst software used by the most tech-savvy professionals.

It's not simply the physical plant. Today, not only do professors spend much of their time consulting with companies, but students do too. At more and more schools, tackling a real-time project for a real-life company-in which a student may have to present his or her findings to the senior management team-is part of the degree. At Washington University's John M. Olin B-school, for example, four-student teams spend a full semester working with client companies such as Monsanto or Apple Computer, and the companies pay the school for the services of its "consultants"-who also can make up to $1200, depending on performance. And with executive education booming on the same campuses that offer the full-time programs, both students and faculty are interacting on a regular basis with working executives. Schools are also grasping the fact that leadership skills and teamwork, ignored in the past by both academic institutions and companies alike, make as much of a difference to a company's ultimate success or failure as a sound financial strategy does.

Another trend that companies are applauding is the slow but gradual move to change the way students learn. Although you are still likely to take a finance course, an accounting course, and a marketing course at different times and with different professors, most schools are putting pressure on their faculties to break down the professional silos and recognize that the real world has very few subject-specific problems. At the University of Virginia's Darden Graduate School of Business Administration, all of the faculty works together to create a truly integrated group of courses. You may spend two weeks learning finance before you stop to integrate a section on commodity trading in different parts of the world. Then you might return to finance to work on both the micro and macro levels of a metals company's capital-raising options, with both professors guiding you.

This breakdown of standard procedure means that more and more students are able to tailor their own programs to personal career goals and interests. It also means, however, that companies play a greater role in this academic arena than ever before-for better and for worse. One somewhat disturbing example is the growing tendency of schools to allow students to take electives earlier and earlier, sometimes before they've had the chance to comprehend the basics relevant to that subject. It's done primarily so that students can show some level of specialization before they leave for their summer internships. The intended result? The student outshines his or her colleagues and gets the final job offer. The responsiveness to customers is a good thing, but some worry that the pendulum is swinging too far away from academic pursuits. "I've always felt that professional schools of business must not allow themselves to become simply a farm system for industries," says Rex D. Adams, dean of the Fuqua School of Business at Duke University. "I think we should have the courage of our convictions." A recent grad of the University of Chicago is more blunt: "I think the MBA experience is rapidly evolving into a two-year job search," he says. "Students are basically paying a $100,000 search fee to their respective schools."

Cynicism aside, it's hard to find a graduate from one of the top schools who doesn't now think his or her investment was worth it. They describe their two years of graduate study as one of the high points of their lives: meeting bright new friends, sharing new experiences, discovering horizons and careers they never knew existed. The skills and knowledge you accumulate in a good MBA program teach you to think and analyze complicated business problems. They open doors to some of the world's great organizations, including the highest-paying public and private corporations, consulting firms, and investment banks. Yet because some prospective students fail to do their homework, they end up wasting a lot of time and money. They don't find out what an MBA can and can't do for them. They fail to properly evaluate a particular school or program to discover what it can deliver. The upshot: Some people find the rewards of their degree elusive. Much to their chagrin, it fails to deliver on a better job, a bigger salary, and a quick climb up the corporate ladder.

You can avoid that disappointment, however, if you take the MBA quest seriously. You are now holding the best possible guide to help take the guesswork out of one of the most important career decisions you'll ever make. Not merely an uninformed ranking or a series of flimsy profiles written by public relations folks employed by the schools, this guide is a tell-it-like-it-is scouting report on the best of the bunch. For years, as many as 50 schools claimed they were among the Top 25, and well over 100 institutions told prospective applicants that they were in the Top 50. We chose the 61 schools we felt were the best in the United States, surveyed nearly 10,000 of their grads (of whom 6020 responded), and then got feedback from 259 important corporate recruiters. The result: The Top 50 B-schools profiled in this book. You can get information about other schools, too, by going to our Web site (www.businessweek.com/bschools/). what are MBA students like?

In the 1990s, business school has emerged as the top draw for the best and the brightest young people-those that might in other eras have become teachers, politicians, or doctors but have chosen business because of its influence and relevance. We are living in an era when, for better or worse, everyone seems to have come down with the capitalist bug. What that means is that there's no longer much stereotyping when it comes to the typical MBA student. Of course, you can still find a group of narrow-minded, competitive folks uninterested in much beyond the almighty dollar. But there are fewer and fewer of them these days, and, indeed, admissions officers aren't very interested in that stereotype.

What the admissions folks prefer-and what those at the best schools have the luxury to choose-are true all-arounders, diverse and fascinating members of society who want an MBA for a multitude of reasons, whether it be to start a lightbulb company or to find a way to make charities more efficient. Although many have known exactly what they wanted to do since they were six, just as many others are career changers, those who never really planned a career in business and grew unhappy with what they were doing for a living. That doesn't mean they're shiftless, however. You can expect to find some of the most focused individuals you've ever met.

More and more, MBA students are not likely to be corporate drones-although you won't see many pierced tongues, either-and they may be planning to start their own businesses, if not immediately after school, then a few years later, after they've paid off some of that hefty debt. Schools have responded to the calls of these students for entrepreneurial training with a bevy of courses, majors, and, occasionally, complete programs in the subject. If you go to a Top 50 school, you should be able to count on such offerings as how to assemble a business plan; raise money from venture capitalists and other investors; incorporate your business; and produce, market, and sell a product. There should be plenty of outside speakers and potential money sources brought in to network with you on a regular basis.

Your fellow students are also likely to be social types who like to let their hair down occasionally. Remember that B-school, unlike other academic experiences you may have had, places nearly as much emphasis on socializing and building teamwork and communication skills these days as it does on your classroom performance. At many schools, such as Kellogg, you won't be admitted unless you show that you can handle a social situation as well as an intricate analytical problem. Says Kellogg's Jacobs: "It's the raw material we start with. We turn down two-thirds of people over 700. It's not just GMATs. What else have you got?"

There is an upside, however-more fun than you probably ever expected to have at B-school. Charity events, salsa parties, international political meetings, hockey or Frisbee games, and formal balls are part of the MBA experience, and some say that the most tiring thing is making a choice about which gatherings to attend. Oh yeah, and despite the reputation of MBAs as being overly concerned with money and not much else, a large part of the socializing is done to support nonprofit charities or other good works. One case in point was a B-school soccer conference organized last year by Kellogg. For every goal scored, money was added to a fund to build a playground in inner-city Chicago. At Notre Dame, the incredible popularity of the university's football team provides opportunities for students to get to know recruiters out of the sterile cocktail party setting. Before every fall game, the school's MBA association holds a tailgate party in the courtyard of the building and gets a prominent company to sponsor the event. "I've had almost entire interviews where I've talked about Notre Dame football," jokes Leah Gardinier, a 1998 grad.

ALL MBAS ARE NOT CREATED EQUAL

The increased value placed on the MBA by Corporate America has led to an explosion of MBA programs, be they full-time, part-time, or evening programs for executives. Many schools are relying on these programs to subsidize a slew of other degrees that are losing funding or are not able to support themselves. Indeed, there are now more than 800 MBA programs in the United States that require the GMAT, and dozens more around the world. Some 40,000 to 50,000 students started full-time two-year programs in 1998. Yet although the MBA has become the graduate degree of choice among the corporate elite, emblazoning those initials on your risumi doesn't guarantee you stardom on Wall Street, or anywhere else for that matter.

Although many MBA programs appear similar at first glance-all offering accounting, finance, etc.-they're not. The quality of the faculty, the fellow students, the buildings, and the level of technology all have a dramatic impact on your education. Also important is how that degree is perceived by the outside world. If your dream company doesn't even know that your program exists, you'll have a really tough time getting a job there. It's not impossible, of course, but you'll have to get hired on your own, rather than using the connections and the historic relationship developed by other schools' placement offices.

The upshot: Little-known institutions with small MBA programs that lack accreditation aren't likely to give you either a quality business education or a hefty starting salary. It's tougher to get those from some part-time evening MBA programs, where the dropout rates are high and you don't get to move through the classes with a cohort of bright students. Certainly many part-time programs are exceptional, but to succeed in them, you need to be incredibly self-disciplined, even more so than those embarking on a full-time MBA plan.

If you want a worthwhile MBA, you need to get it from a school with prestige and a reputation for quality-whether it's known worldwide, throughout the United States, or regionally, depending upon your career goals. Says Meyer Feldberg, dean of Columbia Business School: "The top-ranked MBA programs all share something in common-an outstanding research-based faculty that is not only creating knowledge but able to carry that into the classroom." It's also the students, he says. "You're going to learn a great deal from the faculty, but you'll learn the same amount or more from each other. My advice would be always to go for the quality. You want to be surrounded by people who are going to be as successful as you, if not more successful than you, because it creates the network you will need for so many years."

BUSINESS WEEK customer satisfaction surveys of graduates have found that the greater the reputation of the school, the more likely you are to be happy with your results. Still, you might consider ignoring the big national schools if your goal is to take over the family business or simply to gain basic business know-how. In some cases, an MBA from a local school could be more valuable than one from Wharton, because the relevant business and government contacts to help you in your career would be nearby. It's likely to cost a lot less, too.

When should you think about business school, and where should you go? As flip as it sounds, the answer to the first question is when you've got enough experience under your belt to get into a school that's good enough to have a real impact on you and your career. Although years ago most applicants applied to a huge range of schools, from "safeties" to the truly elite, today a common strategy is to focus only on the very best. If you don't make it the first time, simply reapply. Many schools will meet with rejected students to explain why they didn't make the cut and what they might do differently next time. At Wharton, for example, Robert J. Alig, director of admissions and financial aid, conducted about 1000 "why deny" meetings in 1997-1998.

There is no perfect time for B-school, although applicants are getting older, averaging 26 to 28 years of age when they start school, according to the Graduate Management Admission Council. That's partly due to career changers, who see a pot of gold at the end of the MBA rainbow. But it's also because companies prefer to hire MBAs who already have some work experience and will be able to jump right into a management position as soon as they get out of school. Although it is still possible to get into a good school without much work experience, it's becoming tougher and tougher. At Vanderbilt University's Owen school, for example, 8 percent of the Class of 1998 had less than one year of work behind them, but only 1 percent of the incoming Class of 2000 could make that claim. At the elite schools, admissions officers are asking for at least two and often three years of work experience, although they will make exceptions for truly outstanding candidates. Because so much of your education comes from other students with different backgrounds, it's nice to be able to contribute to the discussion with an example from the workplace. If all of your examples are straight out of your undergrad economics class, your classmates may not be too pleased. That said, you'll get more out of the program if you've already tried to tackle an organizational behavior problem or financial conundrum before going to school. Many MBAs who went directly to B-school from undergrad say they regret not having waited a few years first.

The profile of people getting their MBAs has changed some over the years, although it still tends to skew toward white males in their twenties. According to the GMAC, 57 percent of people taking the GMAT, the standardized test required for most B-schools (usually taken one to two years before entering school), were between the ages of 24 and 27 in 1996-1997, the most recent statistics available. Daphne E. Atkinson, GMAC's director of communications, says that the 22-23 age group has dropped by nearly 5 percent since 1992-1993, while the 26-27 and 28-30 age groups have increased. Only 6 percent are over 40, and 2.5 percent are aged 21 or under. Only 14.1 percent were African-Americans or Hispanic-Americans, and that percentage is even lower for the graduating Class of 1998 at business week's Top 25 schools, where only 9 percent were underrepresented minorities. At Yale, the number was just 2 percent. And while the percentage of international students went from 15 percent to 27 percent between 1988 and 1998, the percentage of women stayed flat, at 29 percent.

A TOP MBA DEGREE RARELY COMES CHEAP

Like most things valued and coveted by many people, the MBA degree isn't cheap and probably won't ever be. Other than buying a house, going to graduate school is probably the single largest investment a twenty- or thirty-something will make. Think about it: In addition to spending more than $50,000 for two years of tuition and another $20,000 in room and board at many top schools, you're likely to give up twice as much in lost earnings from the job you would have held. Indeed, you could practically start a business on what it costs to get through business school today. The average total investment (two years of tuition plus two years of forgone earnings) for graduates of business week's 61 surveyed schools was $120,000, with the costliest total investment the incredible $196,923 spent by members of Harvard Business School's Class of 1998. That helps put into context the fact that those graduates were able to snag the highest median total pay package of all B-schools surveyed by business week when they finished-$145,000, including salary, bonus, and such extra perks as moving expenses, stock options, and computers.

That's quite a pretty penny for a business education and a piece of parchment, isn't it? The exorbitant cost of the MBA helps explain why so many grads flock to the best-paid sectors-management consulting and investment banking. Of the 1998 graduates from the Top 25 B-schools, 62 percent chose one of those two areas, even if they had plans to strike out on their own later on. Ironically, despite the entrepreneurship craze now sweeping through business schools, fewer than 5 percent chose to work in a start-up straight out of school. Perhaps they thought they'd do better if they got a few years of more general experience and paid off some of that debt first. (The average 1998 grad owed more than $39,000 coming out of school.)

Yet all of that expense seems to pay off, both in the long run and-until recently, at least-the short run. According to an analysis done for business week by Jens Stephan, academic director of MBA programs at the University of Cincinnati, the Class of 1998 will take between four and seven years (including the two years of school) to pay back its investment-down from the five to eight years projected in 1996. That class got a running start on the payback this year, with 1998 grads of the Top 50 schools earning a median salary and bonus of $80,830. Offering the fastest return was the University of Pittsburgh's Joseph M. Katz Graduate School of Business, in part because it offers an 11-month program. At Katz, you'll pay back the $75,800 total investment in 3.7 years, compared with an average of 5.2 years for the 61 B-schools surveyed by business week. The slowest return? Case Western Reserve's Weatherhead School of Management. With a total investment of $128,800 and an average salary increase of 79 percent, it will take more than seven years for students to break even.

Although Katz is the only school in our survey whose sole MBA is a one-year program, some top B-schools are now offering, in addition to their two-year flagship degree, the compressed MBA, in which students with lots of prior business experience can get their degrees in one year or less. Now available in some form at six of the Top 25 B-schools, it's often half the price and gets you out into the workplace quicker. The downside: Less opportunity to network, and no summer internship opportunity for those who aren't 100 percent certain of their career goals.

There are other ways to limit the degree's cost. If you're an entrepreneur, Cornell's Johnson School now offers fellowships that help pay off debt incurred in school. And although many public B-schools are moving to boost their tuition to private-school rates so that they can be self-sufficient and break free of many of their parent university's restrictions, there are still deals to be had. If you're a Texas resident, for example, you can get a two-year MBA at the University of Texas at Austin's No. 18-ranked B-school for about $11,000, and one at a Top 50 School, the University of Georgia, for less than $7000. Even if you're not a resident, you can get a better deal than you would at a place like Columbia, where the annual tuition-not to mention New York City living expenses-will run you over $26,000.

Although that's a pretty compelling argument in favor of the public university, keep in mind that one reason people agree to pay inflated tuitions is that they sometimes lead to inflated salaries. Those 1998 Columbia grads, for example, took home a median pay package of $125,000, while Wisconsin MBAs received just $70,000. Not included in the return-on-investment calculations are intangibles such as the added confidence and psychological comfort you get from having the MBA under your belt, not to mention the all-important alumni network-cited by many students at schools such as Harvard and Dartmouth's Amos Tuck B-school as the best reason for going there. Good connections can help you get your first job, but they can also help you make the transition to a better gig years down the road. Cost, then, is certainly one criterion in deciding whether you should go for an MBA and where you should go. But it shouldn't be the only consideration.

SEEK A SCHOOL THAT MATCHES YOUR INTERESTS

As tempting as it is to choose a school on the basis of the business week rankings alone, you should resist doing so. The rankings are a wonderful tool, perhaps the best one available, for those considering a Top 50 program. But not every school is right for every person, and you should study the culture and strengths of each school to determine what best fits your needs. That means that a school ranked No. 8 may, for you, be a better choice than No. 7.

Are you the type of person who needs the buzz and bustle of the big city to be happy? You'd probably do better at Columbia or NYU's Stern B-school than in a wooded, secluded setting like that of Dartmouth's Tuck B-school in Hanover, New Hampshire. By contrast, if you like an intimate, close-knit community with great access to the great outdoors, Tuck's the place for you. If you're a Type A person who thrives on a pressured, individualized, highly competitive atmosphere, Harvard may be your call. But if you want to spend most of your time working in small groups, you might prefer a Kellogg or a Yale, both of whose grads gave their schools stellar marks in the teamwork department. (See Chapter 3 for business week's survey of top graduates and what they say about their schools.)

Certainly, most B-schools offer the same basic curriculum-a group of core requirements with the option to choose your own electives-but there are plenty of variations to pick from. At the University of Chicago, for example, there are no mandatory classes except for a special orientation program. Students are encouraged to branch out on their own, pursuing advanced topics in finance or accounting if they already know the basics. "It's not forced and not spoon-fed," says Catherine McCreary, a 1998 graduate. But the flexible curriculum is fairly unconventional these days at B-school; many schools require the first-year students to move in lockstep through their core courses. The rationale? The CPA in the class will learn more about management and teamwork from helping his classmates to grasp basic concepts than he loses by repeating material he already knows cold. That's the idea at North Carolina's Kenan-Flagler school, where students must work with a single team for the entire first year, and everyone must take the requirements-no substitutions allowed. Areas of specialty are another important consideration in your decision-making process.

Some schools, such as Harvard or Virginia's Darden school, are focused on teaching general management and tend to send forth graduates who work well in areas of general expertise such as consulting rather than narrow technical specialties. Other schools pride themselves on their niche programs, attracting students who know exactly what they want. The University of Texas is now offering a specialization in energy finance, sponsored by Enron Corp. Wisconsin has risk management/insurance and real estate and urban land economics; Babson is world-famous for entrepreneurship; Vanderbilt has an exciting specialization in e-commerce; and Michigan State emphasizes its supply chain management training. Cornell has put into place a unique immersion course in manufacturing, offered in the second semester of the first year. It's the only course of the semester, and you spend much of your time out of the classroom, visiting manufacturing plants, studying live cases, and working on your final presentation.

Before applying to any school, do your homework. Go beyond the slick brochures, Web sites, and promises made by the marketing staffs of these schools. Read the extended profiles in this book, and check out the MBA journals, student survey comments, links to hundreds of school profiles, and everything else that's available on business week's Best B-school Web site (www.businessweek.com/bschools/) or, on AOL, go to keyword BW. Treat it the way an MBA wouldin a typical case study. "You should gather all the information about placement, the quality of the school, and do an analysis of it," suggests Robert L. Virgil, former dean of Washington University's Olin B-school. "If you're investing two years of your life and a lot of money, I think you should visit the school when it's in session. Attend a class or two, talk to the students, grab a recruiter during a coffee break to find out what he or she thinks the place is like. Then look at yourself in the mirror and see if you really match up with the school."

It's not a bad idea to speak with recent graduates of the programs that you're interested in-keeping in mind, of course, that things are changing so quickly in the B-school world that the experience they've had may be radically different from the journey you're about to embark on. If you already have your heart set on becoming a consultant at McKinsey & Co., it would be wise to find a McKinsey staffer who is an alumnus of the school you want to attend. Most alumni and/or admissions departments will help you find recent grads, and Wharton goes so far as to send all applicants a directory of alumni who have volunteered to share their firsthand knowledge of Wharton by telephone. What's more, once students are admitted to Wharton, they gain access to a new system-E-talk-that lets incoming students get to know one another online even before they arrive on campus.

In general, you're not likely to find too many terribly disappointed people. MBAs from top schools generally give positive endorsements of the experience, whether they are recent graduates or not. Most have little doubt that the time and expense of getting the degree were well worth it. They say they forged friendships and contacts that will endure for a lifetime, and they linked up with new jobs that paid better and offered greater opportunities for advancement than the positions they left. Some consider it the most important and formative decision they've made in their lifetimes. Raves one 1998 graduate of Duke's Fuqua School: "I was a huge cynic, and I repeatedly remarked to my parents, who were urging me to go, that I thought B-school would be a waste of time. Well, I was wrong. Real wrong. Fuqua provided a learning environment that was unbelievable. Folks were definitely competitive, but it was friendly competition. We had a job to do, and we did it together. We went in, learned, and had so much fun."