What’s wrong with Wharton?
That was the highly provocative headline on a Wall Street Journal story published Friday (Sept. 27). The article suggested that the University of Pennsylvania’s business school has fallen behind rivals in recent years. The Journal cited a 12% drop in MBA applications over the past four years, a market shift away from Wharton’s strength in finance to technology and entrepreneurship, and a years-long decline in the rankings in concluding that “something at Wharton doesn’t add up.”
Several MBA admissions consultants reinforced the story line by telling the Journal that Wharton’s luster has faded in recent years. Eliot Ingram, a Wharton alum and CEO of Clear Admit, said that one of the firm’s clients turned down a $70,000 scholarship from Wharton this year to attend Harvard Business School because the applicant believed HBS had a stronger global brand. “We’re hearing (applicants say) Stanford, Harvard or nothing. It used to be Stanford, Harvard or Wharton,” the Journal quoted Jeremy Shinewald, founder of admissions consultant mbaMission.
Some Wharton insiders, understandably angry with the Journal’s conclusions, grumbled that the newspaper was looking for a deliberately provocative article on business schools in the wake of The New York Times’ story on gender inequality at Harvard Business Schools. Both media outlets furiously compete with each other in business coverage and clearly the NYT story fueled much discussion and debate.
THE GOOD NEWS MAY OFFSET THE BAD NEWS AT WHARTON
Did the Journal over reach? After all, MBA graduates from Wharton this year had one of the best placement records in the school’s history. Some 97.8% of the class had job offers three months after graduation, up from 95.5% a year earlier, and median base salaries rose to $125,000, up $5,000 from 2012.
This year’s entering class at Wharton, moreover, is arguably its best ever — at least as judged by average GMAT scores. The 725 average GMAT score for the Class of 2015 is a record and seven points higher than the previous year. Wharton’s average GMAT score is now the second highest of any school in the world, behind only Stanford University’s 729 average from last year.
And unlike many other business schools, Wharton has led the way by enrolling record percentages of women, higher than either Harvard or Stanford. This year, 42% of the entering class is made up of women.
Instead of floundering, Wharton is seen by some key observers as a true innovator. “Having met with the Wharton admissions staff and heads of several initiatives a few months ago, I’m impressed by how they’re changing the game,” insists Dan Bauer, founder of The MBA Exchange, a leading MBA admissions consultancy. “Wharton is implementing a more flexible curriculum, improving the overall experience with a new student center, and leveraging their San Francisco campus. The Lauder MA/MBA Program, the Healthcare Management Program, and the Zell-Lurie Real Estate Center are second to none. The concentration in retailing is a well-kept secret. And Wharton’s offer of a free exec ed class every seven years for MBA grads is amazing.”
Bauer says his firm is actually seeing increased interest in Wharton from this year’s current crop of applicants. “Having seen a bump for Round 1 and expecting more of the same for Round 2, we’ve added consultants with Wharton backgrounds to our team at The MBA Exchange,” he says. “A Wharton MBA education is like a ‘blue-chip stock’ with a long history of growth. Yes, the market’s enthusiasm and demand for any investment will ebb and flow over time, but in this case, the long-term ROI is rock solid.”
Yet, the Journal isn’t talking trash about Wharton for nothing. In fact, the newspaper was being somewhat charitable to Wharton by reporting that MBA applications there have fallen by 12% in the past four years. The decline over the past five years has actually been a more severe 17.2%. And this past year’s fall in applicants — 5.8% — occurred as rival Chicago Booth reported a 10% increase. Finance rival and powerhouse Columbia Business School had a 7% rise, and Harvard was also up, with a more modest 4% increase.
Some believe the latest decline at Wharton can be attributed to a new team-based discussion requirement which scared away candidates who speak English as a second language. That is a plausible explanation, though the decline of Wall Street has clearly had an impact on the school which is still considered by many to be number one in finance, along with a fair degree of turnover of leadership in the admissions office at Wharton. The school has had four different admission directors in the past ten years.
More worrisome than the application drop, perhaps, is Wharton’s fall in both the Bloomberg BusinessWeek and The Financial Times’ rankings in recent years. For years, the general impression — though rarely confirmed by independent rankings — has had H/S/W (Harvard, Stanford and Wharton) as the top three business schools in the world.
The No. 1 showing by the University of Chicago’s Booth School in the BusinessWeek rankings since 2006, however, has clearly eroded that positioning. For each of the past three years, in fact, Poets&Quants — which publishes an annual composite rating of the five most influential MBA rankings — has placed Wharton fourth behind Harvard, Stanford and Chicago.
In truth, the differences between Chicago and Wharton are so slim as to be statistically insignificant. But the gap between Wharton and the top two schools — Harvard and Stanford — is more meaningful. The acceptance rates at both HBS and Stanford are about half of what they are at Wharton: Stanford’s 8% and Harvard’s 12% versus Wharton’s 22%. The yield — the percentage of accepted applicants who enroll at a school — also is significantly higher at both Harvard and Stanford. Roughly 90% of the applicants accepted at Harvard enroll, and about 85% of the applicants at Stanford take the school up on its offer of admission.
In contrast, Wharton’s yield — which the school says hit a new record this year — is not much more than 65%, a number more in the company of Columbia, MIT, Chicago, Northwestern, and Dartmouth than Harvard or Stanford. Wharton does not disclose its yield number, though it is easiest enough to calculate. But it’s hardly surprising that a candidate might turn down a generous scholarship from Wharton to attend Harvard, especially if financial aid isn’t that important to the applicant (though it is worth noting that no business school is as generous as Harvard in dangling scholarship cash in front of its MBA applicants).
As evidence of Wharton’s decline, the Journal also noted that Wharton, which once sent more than a quarter of its MBA graduates into investment banking and brokerage houses now only sends MBAs in the teens into those industries. Those numbers, which are misleading at best, are less a reflection of the school’s reputation than the changing dynamics of the financial economy. With the Great Recession, Wall Street has shed tens of thousands of jobs and fewer MBAs — at all the top schools — now go into finance. Most of that slack has been easily taken up by MBA hiring in consulting and technology as well as by hedge funds, private equity shops, and venture capital firms, places that MBAs prefer over the old i-banking and brokerage jobs cited.
What’s undeniable is that Wharton has lost ground in the rankings race and the number of people who annually apply to the school has fallen significantly in the past five years. But those negatives may well be reason to apply to the school’s prestigious MBA program right now.
As Bauer notes, “As with the stock market, when a given investment vehicle is underpriced, demand for it grows and a correction follows. That will happen with Wharton as highly motivated applicants worldwide view the decline in application volume as the ideal time to apply. The list of B-schools with truly global brands is very short. While we don’t see it surpassing Harvard and Stanford in that realm, Wharton’s place on this short list is unshakable. Bottom line: don’t sell Wharton short.”
To see our full analysis on Wharton, check out PoetsandQuants.com:
Is Wharton An Undervalued Stock?
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