GMAT vs. GRE
ApplicantLab |
February 1, 2022

With an ever-increasing number of MBA applicants applying to business schools, the process is becoming increasingly competitive. The GMAT has long been “the standard” for MBA admissions and was for a long time, the ONLY option for MBA applicants. But the GRE is gaining market attention and more and more students are opting to take the GRE over the GMAT.

In this episode of Poets & Quants, John, Caroline, and Maria will help you figure out which testing option is best for you while you pursue your dream of attending business school.

Discussion points include:

 

  • Why the GMAT is something that we all love to hate
  • Why a GMAT official is accusing ETS, the creator of the rival GRE test, of intentionally misleading people with this comparison tool that has been available on their website for years
  • The differences between the GMAT and the GRE, and how to decide which one to take 
  • Why INSEAD discontinued accepting GRE scores 
  • SHOULD applicants worry about which exam to take, the GMAT or the GRE?
  • The reasons for the decline in GMAT test takers in 2021
  • Whether or not GMAT’s long-held monopoly in MBA admissions can be reclaimed and what they might want to do instead.  

Episode Transcript

[00:00:07.510] – John

Well, hello, everyone. Welcome back. It’s Business Casual, our weekly podcast. This is John Byrne with Poets and Quants, and with my co host, Maria Wich Vila and Caroline Diarte Edwards. Carolina is of course is the former admissions head at INSEAD and a co founder of Fortuna Admissions. And Maria is the founder of Applicant Lab. Now, we’ve missed you for the past few weeks, and I want to explain why. I took a little vacation to Italy to celebrate the new Year. And it turned out that I ended up testing positive for COVID and so did all of my three travel mates. So I ended up in Quarantine in Italy for an additional 15 days. Now, it wasn’t hard duty. It was quite pleasant, and my symptoms were mild, but it meant that I was in a seaside village right next to the Adrianic Sea. It was beautiful, but I was pretty much isolated and couldn’t do a whole lot. But now I’m back, and so is Maria from a snowstorm in Tahoe. Caroline narrowly escaped a snowstorm in Tahoe. And we’re all here back to think about business education and what’s going on and to help you navigate this journey to business school.

[00:01:26.550] – John

The big news really, this past week involves the GMAT, and we know this is the test we all love to hate because it’s one of the major hurdles of getting into a really good MBA program. Some people have the opportunity and luxury of studying for months on end, which gives them tremendous advantage over people who don’t have all that time. Some people can avail themselves of highly expensive tutors and classes and prepare for the test. Others can’t. There are issues about the fairness of it and the use of it by business schools. But what’s going on right now is fascinating. An official at GMAT, which is the organization that administers the GMAT test, is accusing ETS, the maker of the rival GRE test, of deliberately misleading people with this comparison tool that they have had on their website for many years now. Many people in the business admission officials, admission consultants, applicants themselves rely on this comparison tool to plug in their verbal and quant scores on the GRE to basically get a predictive GMAT score, to give you a sense of your odds of whether you can get into a program or not. And this GMAT official is saying that the test that comparison tool is bunk.

[00:02:54.990] – John

He says it can be off by as many as 200 GMAT points. That is nonsense, that it’s a disservice to both applicants and business schools. And yet for years we’ve all relied on it. I wonder, Caroline, what do you think of this?

[00:03:11.790] – Caroline

Well, it is a different test, right? So I understand that you can’t necessarily say there’s an exact equivalent. I have always paid more attention to the percentiles rather than those conversion charts. So if I’m evaluating a GRE score, I always look at where they stand in the GRE percentiles. Having said that, I mean, it’s very strongly worded. Right. Their statement. And given their situation with the downturn application or the a downturn in GMAT testing volume, it does smack of desperation because ETS is eating their lunch.

[00:03:50.350] – Maria

Right.

[00:03:50.960] – Caroline

And this goes back years.

[00:03:53.690] – Maria

From what I remember.

[00:03:54.610] – Caroline

ETS had the contract for administering the GMAT. Right. And then GMAT took it away from ETS and gave it to Pearson View. And therefore to get back into the market, ETS started pushing the GRE as an alternative to GMAT. So that’s how all this sort of started back a few years ago. And GRE has been successful in winning significant market share in this market. And I think that’s perfectly legitimate. Right. I welcome that. I welcome that schools are open to candidates taking different tests. I think it broadens the pool. It increases the diversity and the applicant pool. But there may be some legitimacy in their claim that you can’t say that the tests are exactly equal. Right. I mean, GMAT did design a GMAT as a test for business schools. Right. That’s how it was designed. The GRE is not designed for business schools specifically. It has a much broader application. And therefore, yes, it’s correct to say that they are not exactly equivalent.

[00:05:07.620] – John

Yes, Maria, I’m sure you’ve used that comparison tool with your candidates over the years.

[00:05:12.700] – Maria

Yeah. And it’s funny, it’s really a shame that this critique is coming from someone from GMAT themselves because then it sort of reeks of sour grapes. And I actually think that the critique is a legitimate one. So I wish it would have come from perhaps a less invested party. But I always tell people to look at the whatever, because now more and more schools are actually reporting their GRE scores, and many of them are thankfully breaking it out by the quantitative and the verbal. And so I tell people, just look at what those numbers are and how you compare against them. Because I’ve actually in the past, I’ve sort of given myself a migraine trying to figure out like, okay, I work backwards using that tool. And I’m like, well, wait a minute, this is telling me that it’s a 710. I’ll give you an example. Let me just use a concrete example. So I was looking at a top school and they said, okay, our average verbal score for people who get in is 165, and our average quant score is 164. So when you publish those or you put those into the GRE score converter, it says, oh, that’s the equivalent of a 710.

[00:06:19.180] – Maria

But that schools average GMAT is over 730. And so it’s like, well, first of all, wait a minute. Just based on that alone, it sounds like it’s kind of easier to get in using the GRE. But then I take it one step further. And the Ets’own tool not only said, well, look, this is the equivalent of a 710, but your verbal score like a 165 on the Verbal and GRE is equivalent to a 41 on the GMAT, and the 164 in quant is equivalent to a 45 in the GMAT. But when I reverse engineer that and I plug that verbal score and that quantum score into a GMAT chart, I come back with a 690. So basically, to sort of summarize it like even the ETS’s own tool, they say this is the same as a 710, and this is what it would have been verbal, and this is what it would have been quant. But then when I plug those same verbal and quantum scores back into another chart, it comes out as a lower GMAT score. So I get the sense that it sort of over inflates. Now, the one thing I will say that I think the reason I don’t immediately just think like, oh, ETS is evil.

[00:07:27.950] – Maria

This is some sort of scam is that the quantitative percentiles for the GRE are lower than they are for the GMAT. By that I mean it’s because so many people take the GRE, right? Even people applying to philosophy programs and English literature programs and creative writing programs or whatever, it makes sense that the pool would be less quantitatively driven or less quantitatively. You have less of a background as a result. And so it makes sense that someone who would get the 50th percentile on the GMAT might be in, like the 80th percentile on the GRE, not because they’re smarter and dumber on one test versus another, but just because there are many more poets in the GRE pool dragging that number down. And so I think that there are some definitely some shenanigans. I’ve always questioned how that will work. I don’t think that it should be taken into consideration honestly. And that’s why I tell people, just look at whatever those published averages are for the admitted students and compare your scores against that, because otherwise it’s totally wacky, and I can’t make the numbers tie together, and so I don’t trust it well.

[00:08:50.590] – John

It’S a good point because I think it’s led to the belief that schools are willing to accept lower standardized test scores on a GRE than they are on the GMAT. And that’s because every time a school reports both results and you input these numbers in the comparison tool, the predictive GMAT score is always lower than the actual GMAT score for the class average for the incoming class. This is true at Harvard. As you point out, Harvard’s median GMAT score is 730, but the median verbal score for the GRE is 163 and the quad score is 164. You put it into the tool and it comes out with a 700 score, which is 30 points below the GMAT median for the latest Harvard Business School entering class. And this has been historically true across all the schools, which has led to this belief that, hey, if you can’t do well on the GMAT, you should take the GRE because schools seem more willing to accept lower numbers. And some of that belief occurred because in the beginning, US News did not measure GRE scores. They only measured GMAT scores. So it also led to this thinking, that, okay, admissions officials aren’t going to be as hard on you with the GRE because US News isn’t going to factored into the ranking and it’s not going to hurt their school’s rank.

[00:10:17.810] – John

I don’t know. I mean, all this could be nothing more than crazy speculation, but it has more or less proven out over the years. And now the fact that there is this disconnect on the tool and GMAT is making a big deal of it gives you some pause and makes you think twice about this whole thing. Caroline, when you were at INSEAD, I know that you were only accepting Gmail scores back then. Is that right?

[00:10:42.620] – Caroline

Well, when I was there, we started to accept the GRE with the advice to candidates that they should target the 80% or above on both parts of the test, whereas for the GMAT the advice was 75th percent or above. So I do think that it is easier to do well on the GRE, and that’s where the school is asking for candidates to target a higher percentile. And then at one point after I left, the school stopped accepting the GRE after having had some bad experiences with candidates coming in with the GRE and floundering academically, and now they have started taking it again. But candidates with the GRE, they’re welcome candidates with the GRE, but they will really do a lot of due diligence on the academic ability and other dimensions. Candidates presenting with the GRE because of that experience with the handful of candidates where they had apparently done well on the GRE, but their academic abilities were not up to par when it came to performing on the program.

[00:11:52.870] – John

Yeah. And to your other point, regarding percentiles, I know that Bruce Del Monaco, the admissions head at Yale School of Management and Yale accepts a large number of GRE candidates. It’s like 28 to one third of their incoming class on a regular basis. He looks for that higher percentile on the quant. Exactly. Because of the two things that both Maria and you have mentioned earlier and evaluating. So rather than just look at a blank score doing the conversion, he’s wanting to see an extra few points higher on the percentile on the quant side, when they take someone with a GRE there, what does this all mean for an applicant? Okay, let’s say I take my GRE. Do I forget about this comparison tool because GMAT is questioning its credibility? And do I just look at how my scores compare with what the school is reporting? What should an applicant do about this?

[00:12:58.010] – Caroline

Well, I think it’s important to refer to the percentiles and it’s important to refer to the school averages or the school policies. I mean, the schools have a lot of experience with evaluating these tests themselves, and they know themselves how it correlates with how candidates do academically on the program. So I’m sure they will read with interest what GMAT is saying about this, but I don’t think it’s going to change their attitude to either test. They have their own experience.

[00:13:30.620] 

Right.

[00:13:31.230] – Caroline

And they are accepting candidates with a GRE vast majority, which are doing very well on the program. Great candidates. So I don’t see that changing. So I don’t think candidates should fear that taking the GRE is somehow for the second best. And the schools are going to change their policy because of GMAT making a big fuss about this. The schools understand how these tests work, and they have a tremendous amount of experience in evaluating the candidates with the test and understanding the threshold that they need to see. And it’s not just about these tests. Right. I mean, they’re looking at a lot of other data points to evaluate academic potential.

[00:14:14.880] – John

Exactly. Maria, your take on how applicants you deal with this, just ignore it all.

[00:14:20.230] – Caroline

Yeah.

[00:14:21.230] – Maria

I don’t think it’s one of those things where it’s like when people try to read the tea leaves of like my interview invite came out at 11 13 and yours came out at 11 15. What does it all mean? Just don’t worry about it. I don’t think it’s going to make a difference. Like Caroline said, I think at this point the GRE, maybe 15 years ago, when the GRE was relatively new in the MBA process, it would have made more of a splash or more of an impact. But like Caroline said, we now have several years worth of significant portions in some cases of the class entering with a GRE at a certain level, presumably performing up to par in the classroom. I wouldn’t necessarily use the conversion tool. I do think that the conversion tool. In some cases it underestimates, and in some cases it overestimates. And so I wouldn’t go by that and be like, oh, look, it says that I have a 710 equivalent. So therefore, that means X, I would just look at the individual percentiles and look at what the schools themselves report.

[00:15:20.210] – John

Yeah, exactly. Now, also, to your point, this attack is occurring at a time when GMAT test volume is at record lows. In fact, for the testing year of 2021, which ended in July of last year in the US, test taking fell to a new low of 38,509. Think about that. Only 38,509 tests were taken in the US on the GMAT. And remember that’s test taken. That’s not test takers, because if you actually threw in or a divider on the number of people who take a test multiple times, you’d find far fewer candidates than 38,509, which is pretty darn shocking. To put that number in perspective, in the pre pandemics testing year 2018, there were 73,556 exams taken in the US. So this is like a 48% decline since 2018, three years, which is pretty darn dramatic. And it gets even worse because if you look at the peak year of GMAT test taking, which is way back in 2012, the drop is even bigger. It’s pretty much a collapse, frankly. Back then there were like 117,500 tests taken in the US, 117 five versus 38 five in nine years. What’s going on here? What do you make of this, Maria?

[00:16:53.660] – Maria

I mean, God bless ETS for convincing the MBA admissions officers that the GRE is a legitimate equivalence for the GMAT. I mean, I think that would if I had to say off the top of my head, it would almost entirely be because the GRE is now gladly accepted. And I think the GRE is overall, for the most part, an easier test, or at least it’s certainly easier to score. Let’s say, like I said before, to score in the 80th percentile in quant on the GRE is much easier than to score the 80th percent and quant on the GMAT because of the applicant pool. So I think people are seeing it as kind of a backdoor, so to speak, a way to maybe do a little less work or in prepping or I’m just not a very good test taker. It’s a shame because I do think that the GMAT is by far a much more rigorous test. So if I were in admissions and everything was up to me, I would probably respect it more. But that’s not what’s happening.

[00:18:01.470] – John

Yeah, exactly. There are a few other things going on here, too, Caroline. Right.

[00:18:06.990] – Caroline

Well, yes, it may be that there’s a drop in test takers overall over that period. I do think that the market is weakening a bit right now, and I think that this year we won’t see the same volume of applications to business schools perhaps that we saw last year from the US, given the strength of the job market and how quickly that’s rebounded. So that might be a factor. And, of course, the Pandemic tests were less accessible. So people were concerned about taking the at home test, and there were some glitches with the at home test, particularly with the GMAT version of the at home test. The GRE seem to get that right more quickly than GMAT. So that may have driven a bigger shift towards the GRE because of those circumstances. I think some of it is no doubt pandemic related.

[00:19:03.910] – John

Yeah. And a number of schools have adopted test optional policies. Many more schools are more generously granting waivers of standardized tests. Part of this occurred at the start of the Pandemic as a way to be more compassionate to applicants. But what many admission officials say who have done this is that it didn’t affect the quality of the applicant pool at all. And they believe that there are enough other aspects of an MBA application to judge whether or not a person can do the quant work in the core curriculum. And let’s face it, GPA over four years, particularly one with the transcript of some quant courses in it should give one greater sense of confidence that someone can do the quant work than a three and a half or three hour and 15 minutes test that can be studied for and along with the interview, along with the progress and track record at work, along with what other filters a person had to go through to get into a quality undergraduate institution or to work for a high end employer with heavy duty screen processes. All of those ingredients that go into the holistic assessment of candidates in business schools should give admission officials more information than they actually need, making a standardized test less relevant to them, I would think.

[00:20:37.810] – John

Now, there’s the other argument where you’re looking at a worldwide pool of applicants, and maybe the GMAT or the GRE is something of a leveler because everyone has to take the test. But even that is not true because obviously the tests are in English, and for people who have English as a second language, that’s a disadvantage. Now, I spoke with the President CEO of GMAT this morning, and he basically attributes the decline to this fact, the fact that schools and universities are experimenting with the test optional policies. He also thinks there’s been a natural pandemic induced reduction in test taking. But he’s also seeing a shift to the executive assessment. When GMAT came out with the EA, it was largely for executive MBA programs, and it’s a much shorter, easier test. But more and more full time MBA programs are accepting the EA in lieu of the GMAT or the GRE. And his executive assessment test has had a fifth consecutive year of growth. So he’s seeing that the other thing he’s seen is that worldwide it’s a little bit different picture. It’s not as bad as just the US numbers. Let me tell you, it’s not good because testing volume in China has declined substantially, because in 2020 the government didn’t allow for any form of online testing.

[00:22:13.410] – John

And while it’s recovered a little bit this last year, in 2021, as test centers began to open, it’s still well below historical levels in China. The other issue, of course, is the tensions between the United States and China, which is making a lot of Chinese not want to come to the United States because there are also things like the zero covet policy in China and travel restrictions that make it difficult for Chinese to come to the US. India test lines also have been down. Europe is looking better, according to him, but overall these numbers are not very good and they’re kind of scary. I mean, it does represent something of a collapse in GMAT testing volume. One thing I’ll point out is because the GMAT has long been and still is the dominant test for business school admissions. Oftentimes, testing volume on the GMAT was correlated with application volume. And for the first time ever, that seems not to be the case. And it’s not the case for all the reasons that we’ve sided here, including the rise of the GRE, taking more market share, including test optional policies, and including difficulty in taking the test if you wanted it during certain parts of the time when test centers were closed and before the home test became viable.

[00:23:46.410] – John

So I think there’s now this disconnect where you can look at testing volume and not necessarily see it as an indicator of where application volume is going. Caroline, what do you think about that? Do you think that’s a permanent situation or temporary?

[00:24:02.310] – Caroline

Yeah. Time will tell.

[00:24:04.850] 

Right.

[00:24:05.110] – Caroline

Because there is a lag between customer volume and what happens on the schools. So I think we’ll have to wait and see. But it’s a very interesting point that you made about the executive assessment, I think, and how that could continue to grow.

[00:24:23.750] 

Right.

[00:24:24.010] – Caroline

Because in many ways, it’s a much easier and less intimidating test. It’s a shorter test, there’s less preparation required. So I do wonder if that will continue to be a trend that we’ll see with more and more full time programs embracing the EA.

[00:24:41.030] – John

Yeah. Including Columbia Business School and NYU Stern. We’re among.

[00:24:47.850] – Caroline

Is it really necessary to do three and a half hour test to demonstrate your academic ability, given all the other data points that schools have about you by the time that you apply to business school? Right. Perhaps a shorter form test could be just as efficient at capturing some important data for the schools, and that could be a good thing. Right. Because in some ways it lowers the hurdle for people to apply to business school, and that’s a good thing in some ways.

[00:25:23.160] 

Right.

[00:25:23.410] – Caroline

Then it can broaden the pool. It makes it more accessible to more people. The GMAT is a very intimidating process. Having gone through it myself, it’s not a fun thing to do. Right. So if there is a route that one can take where it’s a shorter test and that enables schools to bring in more candidates, then that could also be a positive evolution. So perhaps that’s something that GMAT should push. Right. Maybe the GMAT is never going to go back to having the volumes that they’ve had in the past because the market has fundamentally changed, and it’s not going to go back to the cozy monopoly that they enjoyed for so many years, where it was just such a wonderful cash cow for them. So perhaps they do need to reinvent themselves and come up with other products, and the EA seems to be something that they could develop further.

[00:26:24.510] – John

Yeah, that’s true. And as you know, there are a number of European schools that have their own tests that they’ve developed in lieu of taking a GMAT or GRE that they’re willing to allow an applicant to take. And it gives them some assurance that the quant work can be done without difficulty in the core, and you probably will see more of that going on as well. Yeah, I think Maria last words.

[00:26:50.370] – Maria

I think that if I were at GMAT, I would rebrand the executive assessment to make it clear that it’s not just for executive MBAs. And I would push that as the GRE Slayer, because I think since it would be less intimidating, I think a lot more people would flock to it. And also, I couldn’t help but notice that they actually charge more to take the EA than they do the GMAT. I think it’s $350 if I’m looking at the right chart, versus $275. Another thing that I noticed, too, is that the GRE is actually a little bit cheaper to take than the GMAT as well, which could also be I don’t think that’s the main thing driving it, but it doesn’t hurt. So if I were GMAT, I would say put the pedal to the metal on the executive assessment, rebrand it, though, so that it sounds like it’s more globally or it’s more applicable to MBA programs or MIM programs or whatever, and then go full speed ahead on that and then just educate the schools on it really is viable. We’ve been telling you for years it was really overkill.

[00:27:52.960] – John

It was a different advice.

[00:27:57.670] – Maria

It’s almost like I’m good at business. Yeah. Otherwise, I think they’re stuck.

[00:28:08.450] – John

A few years ago, when I looked at the numbers, I found out that the actual profit margin GMAT is a so called nonprofit organization, but the actual profit margin on a GMAT test was higher than the profit margin on an Apple iPhone. Now, I doubt that that’s true today, given the dramatic decline in volume. But if they follow your strategy and start rebranding the executive assessment and use it as a Slayer against the GRE, they might very well do better than even before their profit margins that were already better than Apple’s iPhone margins.

[00:28:49.850] – Maria

Dear GMAT, Please send consulting fee to Maria. I’ll give you my address in a private message. I charge very reasonable consulting rate.

[00:29:02.150] – John

What would you call it? Instead of the executive assessment to make sure the express assessment.

[00:29:07.630] – Maria

I had to take it right off the top of my head without thinking about it or something like that, right?

[00:29:14.600] – John

Yeah. Well expressed.

[00:29:16.370] – Maria

At least that was still the EA.

[00:29:21.110] – John

You get it over, you don’t have to study for it as much, and it will give you enough information to help make an admissions decision. I like this.

[00:29:29.300] – Caroline

It’s the antigen test versus PCR.

[00:29:32.570] – John

Exactly right. Yes, it may be less reliable, but you just don’t count on it to some degree, less. All right, everybody, there you have it all about the GMAT this time, whether or not you can trust the conversion tool, whether it even matters, and why GMAT compliance at historic lows. Well, thanks for joining us. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual our weekly podcast.

GMAT vs. GRE
ApplicantLab |
February 1, 2022

ApplicantLab

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