Why Business School Rankings Have the Wrong Metrics of Success

05/12/2015 09:35 pm ET | Updated May 12, 2016

The 1990s have come and gone and business schools are no longer full to the brim with finance fanatics. Business schools the world over are seeing their hallway posters, student activities groups, career centre questions, and student demands shift far away from a belief that the only value of a business is to bring financial returns to its investors and MBA students are screaming out for, competing for, and paying for the opportunity to learn about the social return on their MBA investment. It's about time the MBA ranking institutions caught up.

You can't measure your improvements towards goals you aren't measuring in the first place. Seems obvious enough, but yet time and time again we measure the wrong things in our striving to be the "best" at something. Working in the field of social change, we often see this problem, where selecting the wrong metrics of success can mean money is poured into the wrong efforts. For example, the micro-finance trend got off-track by measuring "loan repayment rates" as the key metric of success and using that as a proxy for livelihood improvements. In fact, many people who took out micro-finance loans ended up worse off economically while still paying back the micro-finance lenders, it just sometimes meant they had to take another loan from a loan shark to do it.

So what does this have to do with business schools? Well, like micro-finance organizations being judged on "repayment rates" as the wrong proxy for success in their efforts to improve the world through credit for the unbanked, business school rankings are equally flawed. If business schools are designed to shape the future by educating our future global business leaders, then the measurement of success should be on how well those business leaders are doing at shaping the world.

But that is not what we are measuring. As an MBA graduate, I found filling out one of the major business school ranking surveys completely impossible. How is it that, in 2015, when many of the most sought after job placements students are competing for are social impact roles, questions about signing bonus amounts and salary figures are still dictating the "quality" of our business schools.

I recognize that not all people go to business school to "change the world" and the size of one's bank account is still a driving force for many people considering an MBA, but it's time we had rankings that incorporated both sides: the social and economic growth fueled by graduates. The rankings systems are only asking one side of the questions, and though more and more students now believe that the way to improve the future is through businesses that are fueling social and environmental change, the metrics of success of the institutions they are learning within are stuck measuring "repayment rates."

Rather than looking simply at how much students gain from the world as a result of an MBA, business schools should also be ranked by the positive impacts their graduates make on the world, i.e. how much they give to the world. This means viewing a high living standard as a hygiene factor, to ensure that their alumni are both financially successful and more than able to pay back their loans, but to make the distinguishing metrics of success for a business school rest upon if or how their alumni are making our world better off through growing businesses and institutions that are able to scale to the size of our current global challenges, rather than contributing to them. What if we did a study of MBA graduates -- and found out which MBA programs had the most graduates focused on explicitly ethical and socially minded business growth? It would be a more complicated study, but it would provide a more robust look at the social return on an MBA investment.

The best business schools in the world understand this shift in demand. They are teaching their students how to measure social and environmental impacts in their future businesses, they are exposing them to ways to address global threats and challenges, and they are holding up new heroes based not just on their financial success but on their ability to affect positive global change including social "intrapreneurs" who are driving positive impact through improving the practices of global corporations. These business schools are creating the future leaders of a more ethical, interconnected, and values-driven world, and yet, if those schools try to balance between the growing divide of the social innovation education movement and the antiquated business school ranking system they will fall into the pit of mediocrity. "Stuck in the middle" is what we call that in MBA speak.

If we want to grow more ethical and sustainable businesses, we need to measure our education towards that. That means, rather than just measuring the bank accounts of graduates, we also need to be asking questions like: How are you preparing your students to tackle the global challenges they will face as business leaders of tomorrow? How many alumni do you have working in key social change roles in major global institutions and how are you tracking and incentivizing that? What types of role models are you holding up to your current students as mirrors of their success? And in turn, rather than outsourcing the measurement of their worth to the questions asked by ranking surveys, business school leadership can set their own bar: What do we want to measure to know if we are doing our job well? And then let's start measuring that.

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