Yield in MBA Admissions, Part One: Yield Comparisons, Connotations, and Stakeholders

Dating might just be an apt metaphor for applying to MBA programs.

Consider the similarities. Popular people on apps like Tinder, Match.com, Hinge, Coffee Meets Bagel, and OkCupid receive thousands of messages from others each year, just as popular business schools like Harvard and Stanford receive thousands of online applications. Similarly, the message recipients’ evaluations of those dating profiles resemble the schools’ evaluations of those thousands of MBA applications. Moreover, going out on dates with all kinds of people corresponds with the MBA interview process.

In the best cases, dates quickly turn into relationships. For example, a woman in a heterosexual relationship might sense that her partner has big plans. When a man has found the woman of his dreams, he often seeks out friends and family to talk about his relationship plans. His conversations parallel the way an MBA admission committee might confer about whether to propose admission to a candidate.

Finally, the moment arrives when suddenly, it dawns on the woman that right here, and right now, her man intends to pop the question that could change their lives forever.

Before her, on bended knee, he shows her an engagement ring, looks up into her eyes, and asks her, “Will you marry me?”

She screams, “Oh my God! You just asked me to marry you! Oh, thank you so very, very much.”

So far, so good. Right?

But then, there’s a long pause, while she stares at the diamond. Finally, she says, “Um, no. I can’t.”

He’s flabbergasted. “But sweetie, I love you! Why won’t you accept?”

She takes a deep breath.

“Well, I’m expecting a proposal from John. Maybe you could wait a couple more weeks until after I hear from him?

“Then there’s Paul, who’s so popular he actually has me on a waitlist, and hopefully, I can get off of it first. . .

“And hey, listen, how about if you toss in some more cash? George proposed to me two weeks ago, and he gave me a ring with a rock worth about three times as much as yours. That’s making my decision, you know, so very difficult.

“So, babe: what do you say?”

When Business Schools Propose—But Applicants Reject

“Now, how would this make you feel? This would bum you out. And this is the equivalent of what it’s like when a school makes an offer to a candidate,” says Harvard MBA Maria Wich-Vila. She’s the founder of the affordable interactive admissions support platform ApplicantLab, and she also wrote and produced the entertaining video upon which we based our marriage narrative. She continues: “And at this point, this is what a lot of candidates will say: ‘I’m really not that into you,’ or ‘I got this other, bigger scholarship somewhere else.’ This is a bit of a bummer for a school, as well, to be in this situation. They want to think they are your first choice, and why is this? That reason is yield.”

What is “Yield” in University Admissions?

Although many MBA applicants aren’t familiar with yield, it embodies a significant concept frequently on the minds of university admissions committee members, otherwise known as “adcoms.” And as we’ll see, a broad range of stakeholders—from university boards of trustees to the bond market on Wall Street—pay close attention to yield statistics. Also, understanding the implications of yield statistics can reveal useful insights and strategies for savvy business school candidates.

Briefly, yield represents the proportion of students who accept a university’s admissions offers. In other words, yield ratios reflect the percentage of applicants who eventually enroll at a school, compared with the number of admissions offers the school extends. Many observers consider the yield rate to be the ultimate single measure of a school’s ability to enroll the candidates it wants.

Universities strive to “yield” the largest number of students from their finite acceptance pools. A useful analogy relates this concept to agricultural yield: the volume of a crop like soybeans a particular acreage produces, or the volume of milk a dairy cow herd provides. For those readers who find this analogy curious, Alfred University English Professor Allen Grove offers the clearest explanation:

The metaphor may seem a bit crass. Are college applicants like cows or corn? On one level, yes. A college gets a finite number of applicants just as a farm has a finite number of cows or acres. The goal for the farm is to get the most produce from those acres or the most milk from those cows. A college wants to get the highest possible number of students from those in its accepted applicant pool.

Many refer to the yield ratio by another name: the “conversion rate.” In sales, this term represents a seller’s ability to convert qualified sales prospects into buyers. For a university, the applicants who receive admission offers resemble qualified sales prospects, and the candidates who accept are the buyers, who pay tuition.

Moreover, as we’ll see below, a third group of authorities refers to admissions yield by using a business euphemism: “market position.”

Yield Relationships and Comparisons

A higher yield conveys a wide range of other important implications. Consider the following example: in 2017, the Harvard Business School (HBS) offered admissions to approximately 1,000 MBA candidates. About 900 accepted, so the yield rate at HBS that year amounted to roughly 90 percent.

Compare those statistics with Duke University’s Fuqua School of Business. That same year, 433 MBA students enrolled out of the 851 accepted by Fuqua, for a yield ratio of only about 51 percent.

Universities track historical data that allows them to forecast their yields, which typically remain fairly constant on a year-to-year basis. Because HBS can expect 90 percent of admits to enroll instead of Fuqua’s roughly 50 percent, HBS needs to admit relatively fewer students. Harvard can reasonably expect to satisfy their enrollment objectives by only admitting about 10 percent—known as the acceptance rate—of their 10,000 candidates who apply.

By contrast, Fuqua isn’t so fortunate. With a yield rate of only about 50 percent who accept offers, Fuqua needs to accept fully a quarter of their applicant pool. That amounts to about two-and-a-half times the 10 percent HBS needs to accept.

This example highlights several important points. First, this example illustrates the inverse relationship that exists between yield ratios and acceptance rates, since lower yield rates result in higher acceptance rates and vice-versa.

Second, according to ApplicantLab’s Wich-Vila, the ability to depend on such a high yield ratio enables HBS to be extremely selective when choosing the applicants to whom the school extends offers. That selectivity helps uphold the notion that the school is more “elite” than any others through reinforcing that perception among the applicant pool.

Third, super-elite business schools like Harvard tend to exhibit much higher yields compared with less selective schools like Fuqua. That’s because such highly selective schools are often the first choice of applicants. Rather than mere options among several alternatives, schools like HBS are the preferred destinations for tens of thousands of applicants each year.

Yield as a Multi-Index Barometer

Within a single measure, admission yield also conveys a broad range of connotations. Jeff Schmitt of Poets & Quants, who has written extensively on the effects of the yield concept in MBA admissions, argues that one “can think of yield as a barometer for several indices.” These include:

1. Brand Appeal

Schmitt first points out that:

By accepting school offers, MBA candidates reflect the perceived value of a program’s degree in the marketplace. In other words, yield—the conversion rate—is a gauge of a program’s desirability, the degree to which it was the first choice of applicants.

Even without reference to selectivity, many observers and commentators treat admission yield as the best single measure of a school’s attractiveness. According to Wich-Vila, authorities like U.S. News & World Report even factor yield rates into their business school rankings. These authorities view yield ratios as a “vanity metric,” a proxy representing the attractiveness of a school in the opinions of those they want to enroll.

2. Candidates’ Commitment Strength

Schmitt also argues that yield reflects “the loyalty and commitment level of candidates to particular programs.” From this perspective, the yield rate implies that, in the case of HBS, 900 of the best MBA applicants in the world are willing to commit two years of their lives and more than $320,000 in costs—including vitally important opportunity costs from foregoing jobs and lost opportunities. They are willing to put their faith in Harvard University instead of competing institutions to help them optimize their future business careers and earnings throughout the rest of their lives. That tremendous investment in time, energy and resources represents a remarkable commitment to an institution.

3. The Resourcefulness of Admission Officers

Also according to Schmitt:

Yield also shines the spotlight on the admissions department. For example, a low conversion rate may be a sign of lax acceptance standards. In contrast, a high yield may reveal the art of closing the deal. Here, students are buying into school messaging, or adcoms are simply better at leveraging student and alumni connections or dangling inducements like financial aid.

Schmitt’s remarks raise an interesting, related point: evaluating a yield ratio in isolation, without reference to other measures, can be unwise because yield can be manipulated. “Yield by itself is not a good measure of the school’s quality because schools can obtain high yields by offering admission to less competitive applicants,” concludes this Poets & Quants analysis. Nevertheless, many observers who know or should know better focus excessive attention on yield ratios.

Pressure on Admission Officers to Maximize Yield Rates

Admission officers routinely downplay the impacts of yield calculations on admission decisions. Former attorney Melissa Fogerty, who served as director of MBA admissions at the Yale School of Management (SOM), offered some reflections on this during an interview with the Toronto admission software vendor Kira Talent in 2016. Her comments referred to the “party line” espoused by university administrators when questioned about the influence of yield calculations on admissions:

All schools are aware of yield rates, and it impacts their operations to varying degrees. At Yale SOM, our approach is not to play a “yield game”—we’re not making admissions decisions based on who we think is likely to accept our offer at the time of application. Rather, we admit the most talented students. . .It’s a reality of admissions, but the ultimate goal isn’t yield itself—it’s to bring in a fantastic class. If we admit a prospective student, it’s because we really want them to accept our offer.

Wich-Vila offers a different perspective:

As with all vanity metrics, schools like to pretend that they don’t really matter. But they matter. Of course they do!

In fact, probably among the very few business schools where yield calculations don’t matter are the Harvard Business School and the Stanford Graduate School of Business. They don’t need to care so much about yield rates because these two have the highest yield values in graduate management education. Moreover, their yield rates have remained relatively stable during the past few years.

Furthermore, admission committees at the other M7 business schools—like the University of Pennsylvania, Columbia, MIT, the University of Chicago and Northwestern—probably care somewhat more about yield rates. But they aren’t exactly losing sleep over their schools’ yield values, which are nearly as high as those at Harvard and Stanford.

But admission officers at every other business school strive to admit students who will eventually enroll, thereby maximizing the school’s all-important yield percentage. This objective is why the concept is frequently on their minds. Pressure to drive up the yield percentage can come from obvious stakeholders, like rankings authorities, and certainly the university’s chancellor and board of regents. But such pressure can also originate from hidden stakeholders, far from campus, who also wield tremendous influence.

Can the Bond Market on Wall Street Influence MBA Program Admission Decisions?

Few single measures are as crucial to a school’s overall financial performance as admission yield. Moreover, accurate yield estimates are critical to the optimal management and operations of universities.

More enrollees than yield forecasts predicted rarely pose challenges for most universities, even though over-enrollment at a business school can raise a greater concern than at, for example, a typical research university’s undergraduate college. That’s because business schools tend to operate “leaner,” with lower enrollments and much less slack capacity than undergraduate colleges within research universities that can more easily accommodate higher registration levels.

However, should significantly fewer students enroll than yield forecasts predict, the consequences could be disastrous. If the university facing that scenario lacks access to sufficient working capital to operate temporarily at a loss until enrollments rise, layoffs, budget deficits, and cancellations of classes and student activities could result.

To forestall such undesirable outcomes, the university can borrow funds. Consider this excerpt from a classic Wall Street Journal feature which appeared on the front page in 2001:

Connecticut College in New London, Conn., can’t afford to ignore yield. . .it boosted yield to 34 percent in 2000 from 28 percent in 1995 while lowering its acceptance rate to 32 percent from 50 percent. Last November, when Moody’s Investors Service revised the outlook on the college’s A2 credit rating from stable to negative, citing operating deficits, the bond-rating agency nonetheless pointed to the school’s “improving student market position”—i.e., strong yield—as a positive sign.

The Wall Street bond market cares about yield because it regards a high ratio as an indication of a university’s future income—its ability to convert qualified “sales prospects” into “buyers.” If the university cannot convert sufficient numbers of these admits into enrollees and does not have sufficient working capital saved, the school will have to go to commercial banks or to the bond market to borrow money so that it can temporarily operate at a deficit.

In that event, the interest rates that determine the resulting debt service payments will depend on several factors, such as the university’s past creditworthiness. However, lenders will probably regard one of the most important factors to be a school’s recent track record of sales conversions in the form of yield ratios, as the excerpt above points out.

So, can a far-removed stakeholder like the bond market on Wall Street actually influence business school admission officers’ selections of candidates who win entry? Indirectly, by tying yield ratios to the interest rates charged on debt financing through credit rating agencies like Moody’s—yes, it can.

Coming Up in Part Two…

In Part Two of this guide, we continue by introducing the concept of yield management, which almost all university admissions offices practice. Then we present three yield management scenarios that might seem foreign to those who haven’t learned of a related construct known as yield protection. Our scenarios illustrate how a school’s determination to defend their yield percentage against threats can place the candidacies of even top applicants at risk. Finally, we summarize how candidates can exploit their understanding of yield protection to boost their admission odds.

Join us for the conclusion of our report on how yield calculations can determine which candidates win entry to MBA programs.