H/S/W to M7 to …

I started showing interest towards MBA way back in 2002. During those days only Harvard, Stanford and Wharton (H/S/W in short) were considered top programs. Other schools were considered a compromise. Today the list has grown to become M7 (Magnificent/Magic 7). Kellogg, MIT, Chicago and Columbia have been added to the Top 3 and are considered good programs. Five years from now, is it going to be E10 (Elite 10)? Possible 3 additions could be Tuck, Ross and Haas. Or if the focus is International, the additions could be LBS, INSEAD and IMD. What is the possibility of E10 or S15 (Splendid 15)? And what are the driving factors?

To answer the question, I decided to analyze the applicant pool in 2000 and in 2007.

GMAT Test Takers in 1999-00	190264
GMAT Test Takers in 2007	219077
Increase	28813
Increase %	15.14%

Data from GMAC

The number of GMAT test taker has increased by 15% from 2000 to 2007. But the class size of the top 10 MBA programs have increased only by 5.6%.

H/S/W	2001-2002*	2008-2009 *
Harvard University	1742	1908
Stanford University	730	741
University of Pennsylvania (Wharton)	1566	1640
Total	4038	4289
Increase		251
Increase %		6.21%

M-7	2001-2002*	2008-2009*
Harvard University	1742	1908
Stanford University	730	741
University of Pennsylvania (Wharton)	1566	1640
MIT (Sloan)	717	746
Northwestern University (Kellogg)	1200	1200
University of Chicago	1016	1125
Columbia University	1155	1220
Total	8126	8580
Increase		454
Increase %		5.58%

US News Top 10 schools	2001-2002*	2008-2009 *
Harvard University	1742	1908
Stanford University	730	741
University of Pennsylvania (Wharton)	1566	1640
MIT (Sloan)	717	746
Northwestern University (Kellogg)	1200	1200
University of Chicago	1016	1125
Dartmouth College (Tuck)	398	500
University of California-Berkeley (Haas)	484	486
Columbia University	1155	1220
New York University (Stern)	840	838
Total	9848	10404
Increase		556
Increase %		5.645816

* Data Collected from BusinessWeek and included the class size of first year and second years at campus

Assuming that the number of applicants who could be admitted to the top 10 schools increased at the same rate as the number of GMAT test takers, we can see that the increase in class size is not able to accommodate the number of applicants. If these 9.5% (15.1 – 5.6) applicants decide to go for an MBA outside the Top 10, then quality of the class outside the Top 10 would increase. In the coming years, many of the top 10 schools would reach its maximum capacity and would have to deny admission to many qualified candidates. The directors of admission of many top programs have comment that 60 to 70% of the applicants are eligible for admission but are denied because of limited class size.

The class of top program has be traditionally been hired by the Investment Banking, Management Consulting and other Industry in almost equal portion. The growth of the Private Equity, Venture Capital and Hedge Funds industries in the past few years has taken away most talented away from IB and MC. So some of the lesser know IB and MC have to go to outside the Top 10 programs for hiring.

There is one major problem for the programs outside Top 10. The schools find it difficult to hire and retain quality professors. The number of quality professors has not increased at the same rate as the increase in MBA candidates. There is lots of competition among top programs for hiring good professors. Soon the market forces will come into play and many more would take teaching as a career and fill up the gap.

Better hiring coupled with better incoming class would increase the popularity of the programs outside the top programs. If these programs could maintain a good infrastructure and teachers, they can make it to the E10 or S15 in the next 5 to 10 years.