What’s Up With GMAT Scores? (Part I)

When I started Austin GMAT Review in 2008, I urged my students to study hard and break into “The 700 Club.” Today, the goals are higher. Although a 700 GMAT score will still open doors at most business schools, for the schools that regularly appear at the top of the rankings, 720+ would be better.

For you who are just starting out your GMAT studies with your eye on a Top 10 school, this is probably daunting news. The GMAT is already a high-stakes exam without additional pressure. In this article, I take a look at the trends that have pushed GMAT averages up and up and up.

What happened?

GMAT score averages at top schools have been steadily ticking upwards for years. Twenty years ago, the average GMAT score of Stanford GSB’s entering class was 690, Chicago Booth’s was 680, and Wharton’s was 662. Harvard Business School had started requiring GMAT scores again, after an 11-year hiatus, and HBS’s average GMAT score was 650.

Between 1997 and 1998, the GMAT converted from a paper-based test to a computerized adaptive test (CAT), meaning that questions increased in difficulty as you demonstrated mastery – and there was no going back to change your answers. (It was probably no coincidence that the “gamification” of the GMAT happened in the 1990s, the Golden Age of Video Games.) Still, despite the challenges inherent in a CAT, and GMAT’s sophisticated traps for the unwary test-taker, the GMAT averages at top schools went up, way up.

By 2015, the average GMAT score for HBS’s first-year MBA class had risen to 725, up 75 points from 1996. For Wharton, the average GMAT score was 732, up 70 points. Stanford GSB’s GMAT average was 733, up 43 points. Chicago Booth’s GMAT average of 726 now stands alongside a similar average at its Chicago competitor, Kellogg.

In fact, the U.S. MBA programs that typically rank in the U.S. News Top 10 have, collectively, a GMAT average of 721, an increase of 58 points from the average in 1996. During the same period, the average score for all test-takers increased by only about half as much (35 points).

According to StartClass.com, the GMAT average of all accredited U.S. business schools is 613, which is 108 points lower than that of the Top 10 schools.

Clearly, some of the top business schools have chosen to place more weight on applicants’ GMAT scores.

The ripple effect is two-fold. All top business schools are receiving higher GMAT scores, whether or not they seek such scores – a rising tide lifts all boats. Secondly, some business schools that seem close to a Top 10 ranking are encouraged by school boards, donors, alumni, and career centers to pursue higher GMAT scores in an effort to climb the rankings.

Even the prospective MBAs have a hand in this push, as they chatter on the message boards that “this school is clearly better than that school,” based on GMAT scores and how few people were admitted.

Rankings, rankings, rankings and school pride are at the root of the rising GMAT averages.

The very first business school ranking, introduced by Businessweek in 1988, didn’t even ask for GMAT averages, but the U.S. News MBA Ranking, which came out in 1990, did. Since then, multiple rankings of varying levels of dependability come out each year, many of them using the GMAT average as a measure of a school’s academic prestige. A school’s GMAT average is now a rankings staple and, more and more, a major bragging point.

This is all part of the rankings game. A few points difference between GMAT averages is a poor measure of the relative worth of schools. Still, those few points become crucial in the battle for the No. 1 slot in a ranking. For example, HBS came in second to Stanford GSB in the U.S. News 2015 ranking, and the seven-point difference in GMAT averages might have been part of the reason.

More than half of applications to U.S. business schools came from abroad, and that’s where many of the high GMAT scores come from.

In 2015, 70% of U.S. business schools reported an increase in international applications, with international applications making up 54% of the application volume. Admissions officers pick the cream of the crop, and that includes stellar scores.

Generally speaking, international applicants who apply to U.S. programs focus on achieving high GMAT scores prior to applying; more than 50 nations have higher GMAT score averages than the United States. Two island nations, New Zealand and Singapore, had the highest GMAT score averages, 608 and 605. Should you head off to an island to study? I would suggest, instead, that you plan to study for the similar number of hours as an international applicant. The U.S. test-taker reports, on average, studying for ~40 hours, while the test-taker from India, for example, reports studying for ~100 hours on average, much closer to the 121 study hours reported by those who scored 700+.

The GRE is now accepted at roughly 90% of business schools, and most schools report receiving significantly more GRE scores. This may have allowed business schools to accept a few applicants who had submitted relatively lower GRE scores (in GMAT equivalents).

In theory, a highly qualified applicant who did not do well on the GMAT might try taking the GRE instead; and the admissions committee might decide to admit that candidate with a decent GRE score, knowing that the GRE score wouldn’t drag down the school’s published GMAT average or the MBA ranking.

Thus, the GRE may have propped up some schools’ GMAT averages.

Last year’s U.S. News MBA Ranking factored in GRE scores into its rankings, so if any MBA admissions teams were attempting to game that ranking, those attempts failed. Still, I have heard no word that schools are factoring in GRE scores into the published GMAT averages.

Retaking the GMAT now has few adverse consequences, driving up the average of reported scores.

Last year, GMAC finally started allowing you to cancel a score without a big “C” showing up on the final report sent to schools. You can have a bad test day without it showing up on “your permanent record.”

Yes, each exam costs you money; and yes, you have to wait (a shorter time) before retaking the exam; and yes, you probably aren’t looking forward to yet another four-hour exam. But still, you can take the exam up to five times a year, and I am expecting that many people will do so in order to improve their performance.

Will this cause GMAT scores to rise overall? That is still unclear. Human nature being what it is, I suspect that some people will just take and retake the GMAT without trying to improve their GMAT preparation, and those people will not improve their scores. It’s still the GMAT, not a game, and you only have five-six times to roll the dice before MBA deadlines.

However, for those people who have just entered the 700+ Club, the elite 10% of GMAT test-takers, retaking the exam may move them into the even more elite 5% of test-takers who score a 725 or higher – which, of course, will cause the percentiles to change. It will be really interesting to see how this plays out.

GMAT scores are still soaring, so prepare accordingly. But I do see some hopeful signs of change – and it’s not just because the scores are capped at 800.

In my next article, What Goes Up Must Come Down, I will discuss a few indications that the seemingly inexorable rise of GMAT scores may slow down or stop. In the meantime, keep studying, and we’re here to help.

‍Read "What Goes Up Must Come Down"

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*Sources: GMAC, Poets & Quants, CNN Money and Businessweek