The Financial Times Global MBA rankings for 2010 see London Business School claim the coveted number one spot, having shared the prize with the Wharton School of the University of Pennsylvania in 2009.

Comments from alumni of the school’s 2006 MBA class, surveyed in 2009 as part of the 2010 rankings process, point to a broad educational experience. “One of the best decisions of my life was to go to LBS for a full-time MBA,” says one alumnus. “[It] has enriched my life, from education to career development, to making new friends and gaining new perspectives.”

Another adds: “You not only learn from the school curriculum but from the deep cultural diversity of the student population. There is no place else that can offer this advantage to the extent that London Business School does.”

LBS is ranked eighth in the world by the FT for faculty research, and it is ranked fifth for alumni recommendations in 2010. Compiled from data collected by the FT from the classes of 2004, 2005 and 2006, this indicator is based on the business schools from which the survey’s participants would recruit MBA graduates.

LBS is almost top of the table for international mobility, too, second only to IMD. This not only reflects the international make-up of the student body, but also the world view of the programme. One alumnus explains: “I believe that this is one of the very few business schools that has really understood what a globalised world means, and one of the few in the world where one can have a real understanding of global business in the classroom.”

The gradual rise of LBS in the FT MBA table over 12 years – it was ranked eighth in the inaugural MBA ranking in 1999 and had attained second position by 2008 – indicates a broader trend: the diminishing dominance of US-based schools over the past decade.

Joining LBS in the top 25 in the 1999 rankings were 20 US-based schools and four other European institutions. The FT rankings introduced a top 100 in 2001 and, again, the top 25 contained 21 US schools.

Since then, the number of US schools in the top 25 has decreased, reaching 11 in 2008, and this year. The remaining 14 schools in 2010 are made up of 11 from Europe and three from Asia.

One important factor helps explain this shift: from around 2005 onwards, the return on investment from studying an MBA, measured in terms of salary increase, fell considerably, especially in the US.

It was once commonplace for MBA graduates to triple their salary between starting their programme and three years after graduation. But such increases are now rare. Between the 2000 and 2003 FT MBA rankings, alumni from at least 20 of the top 25 schools enjoyed a salary increase in excess of 150 per cent [see chart below]. Given the US bias of schools in the top 25 during that period, almost all the big pay increases related to schools based in the US. In comparison, the 2010 table includes just two alumni groups out of the 100 with such levels of growth in income. Neither is based in the US.

Interactive chart: Salary increases for alumni of top 25 business schools - 1999 to 2010, by region

The graphic plots the number of schools in the top 25 for each area (x axis). The y axis shows the number of schools where alumni salaries increased by 150 per cent or more (three years after graduation).

Click the play button below to start the graphic. To view the data as bar or line graphs, use the tabs in the top right-hand corner.

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Why has an MBA become less effective in boosting pay? First, while the calibre of students entering a programme has stayed more or less the same over the past decade in terms of age, experience and seniority, salary data relating to earnings before the degree have increased consistently year-on-year.

At the same time, salaries obtained three years after graduating from an MBA have not increased at the same rate. In fact, the average salary of the class of 2006 is more or less in line with that earned by the class of 1999, a decrease in real terms. Consequently, salary increases have been squeezed, reaching an average of just below 100 per cent in 2009.

In spite of the fall in the number of US schools in the top 25, the league of 100 still has a strong contingent of schools based in the US – 56 of those ranked in 2010 are located there. The UK is the second most represented country, with 17 programmes listed. Overall, the top 100 includes 20 different countries.

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MBA rankings methodology

This is 12th year the Financial Times has produced a ranking of full-time MBA programmes, writes Charlotte Clarke. To be eligible to participate, European or US schools should be accredited by an international accreditation body, e.g., AACSB, Equis or Amba; they must have a full-time MBA programme that has been running for at least four years; and they must have graduated its first class at least three years ago. Furthermore, classes must have at least 30 students.

The rankings are based on data collected from two main sources: alumni and business schools. This year a total of 156 business schools met the criteria for participation and completed the school survey provided. Some 21,328 alumni of the graduating class of 2006 were then asked to complete an alumni survey and 8,001 responses were submitted.

The FT always surveys graduates three years after they have completed the degree, to assess the effect of the MBA on their subsequent career progression and salary growth.

Of the 156 schools, 48 were excluded because of insufficient alumni data. The response threshold that the FT sets is 20 per cent of the entire class with an absolute minimum of 20 responses. The remaining schools were then ranked and the final table shows the top 100.

Three main areas are analysed to create the top 100: alumni salaries and career development, the diversity and international reach of the business school and its MBA programme, and the research capabilities of each school.

Within these areas, there are 20 criteria used to determine the rankings. Eight are based on data from alumni questionnaires: “Weighted salary (US$)” to “Placement success rank”, “Alumni recommend rank” and “International mobility rank”.

The figures for seven of these eight criteria are based on data collected by the FT over three years. The data gathered for the MBA 2010 survey carry 50 per cent of the total weight. Data from the 2009 and 2008 rankings each carry 25 per cent. With the exception of salary data, if only two years’ worth of data are available, the weighting is split 60:40 or 70:30 depending on whether the information is from 2009-2008 or 2009-2007.

For salary data the weighting is 50:50, based on an assumption that the latest data are likely to be higher than in previous years and may distort the average. “Value for money rank” is based on the MBA 2010 figures only.

The first three criteria in the table examine alumni salaries and include the two most heavily weighted components of the ranking: “Weighted salary (US$)” and “Salary percentage increase”. Together these contribute 40 per cent of the rank for each school.

The following process is applied to all salary data before they are used in the ranking:

To begin with, salary data of alumni in the non-profit and public service sectors, or who are full-time students, are removed.

Purchasing Power Parity (PPP) rates supplied by the World Bank are then used to convert the remaining salary data to US$ PPP equivalent figures.

After the PPP conversion, the very highest and lowest salaries are excluded before the average salary is calculated for each school.

For larger schools, the average salary is weighted to reflect variations in salaries between different sectors. The weights are derived by calculating the percentage of all respondents working in each sector. This percentage breakdown is then used in the calculation of an overall average school salary which includes average salaries for each sector.

The salary data shown on the table are all US$ PPP equivalent figures.

The salary percentage increase is calculated according to the increase in average US$ PPP salary for each school from before alumni started the MBA until 2010. This is a period of four or five years.

Eleven of the ranking criteria are based on data from a questionnaire completed by each business school. These include the figures for “Employed at three months (%)”, all criteria from “Women faculty (%)” to “International board (%)” and from “International experience rank” to “FT doctoral rank”.

The final column in the table, “FT research rank”, is based on a database compiled by the FT. This database counts papers written by the faculty of each school in 40 academic and practitioner journals during the past three years. Each school is awarded points per number of papers, the mark is also weighted for faculty size so that schools with small faculties are not penalised for publishing a small numbers of papers. The research rank contributes 10 per cent of the final score.

After the data have been compiled, the results for each field are converted to Z-scores on a column-by-column basis. That is, for each column, a separate set of Z-scores is calculated. Z-scores take into account the differences in score between each school in that column and the spread of scores between the top and bottom school.

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Top schools by subject

Top for international business
1 Thunderbird School of Global Management
2 University of South Carolina: Moore
3 Georgetown University: McDonough
4 Insead
5 George Washington University
6 Hult International Business School
7 IMD
8 Manchester Business School
9 University of Southern California: Marshall
10 London Business School

Top for finance
1 University of Chicago: Booth
2 New York University: Stern
3 University of Pennsylvania: Wharton
4 Rice University: Jones
5 University of Rochester: Simon
6 London Business School
7 Columbia Business School
8 Macquarie Graduate School of Management
9 University of Iowa: Tippie
10 University of Toronto: Rotman

Top for accountancy
1 Brigham Young University: Marriott
2 University of Chicago: Booth
3 University of Texas at Austin: McCombs
4 New York University: Stern
5 Macquarie Graduate School of Management
6 University of Rochester: Simon
7 Cornell University: Johnson
8 University of Pennsylvania: Wharton
9 Rice University: Jones
10 Texas A & M University: Mays

Top for entrepreneurship
1 Babson College: Olin
2 Stanford University GSB
3 Imperial College Business School
4 UCLA: Anderson
5 University of California at Berkeley: Haas
6 MIT Sloan School of Management
7 University of Cambridge: Judge
8 IMD
9 Wisconsin School of Business
10 Insead

Top for economics
1 University of Chicago: Booth
2 Cranfield School of Management
3 MIT Sloan School of Management
4 Yale School of Management
5 University of Rochester: Simon
6 Imperial College Business School
7 Melbourne Business School
8 University of Pennsylvania: Wharton
9 IE Business School
10 New York University: Stern

Top for corporate social responsibility
1 University of Notre Dame: Mendoza
2 University of California at Berkeley: Haas
3 Yale School of Management
4 Ipade
5 University of Virginia: Darden
6 Brigham Young University: Marriott
7 Esade Business School
8 University of Michigan: Ross
9 University of North Carolina: Kenan-Flagler
10 Thunderbird School of Global Management

Top for general management
1 University of Virginia: Darden
2 Harvard Business School
3 Ipade
4 Dartmouth College: Tuck
5 IMD
6 University of Michigan: Ross
7 University of Western Ontario: Ivey
8 Northwestern University: Kellogg
9 Stanford University GSB
10 Duke University: Fuqua

Top for marketing
1 Northwestern University: Kellogg
2 Duke University: Fuqua
3 Indiana University: Kelley
4 Ipade
5 Esade Business School
6 Wisconsin School of Business
7 Imperial College Business School
8 University of Michigan: Ross
9 HEC Paris
10 Cornell University: Johnson

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Top Professors

International management

Julian Birkinshaw

Professor of strategic and international
management, London Business School

A specialist in the performance of multinationals, Birkinshaw is a leading light in Aim Research, the UK’s bid to become world leaders in management thinking

Marketing

Eric Bradlow

Professor of marketing, Wharton, Pennsylvania

An applied statistician by training, Bradlow brings number-crunching to the field of marketing Gulati’s work centres on how to build high-growth and resilient companies. He is one of Harvard’s most prolific Scholars.

Leadership

Ranjay Gulati

Professor of business administration, Harvard Business School

A specialist in the performance of multinationals, Birkinshaw is a leading light in Aim Research, the UK’s bid to become world leaders in management thinking.

Source: FT Research Rankings

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