The cost of excellence: The financial implications of institutional rankings

Abstract

Purpose — To examine the relationship between financial resources and variables associated with institutional rankings in the USA. Design/methodology/approach — Pearson product moment correlation coefficient was used to investigate the relationship between endowment funds and variables associated with rankings as determined by the U.S. News & World Report. Findings — College costs continue to increase faster than per capita income. Institutions are relying more on endowment funds to meet their needs. Endowment was positively associated with almost all the variables used for ranking top national doctoral universities with the largest endowment amounts. When endowment per student was used, the association became even stronger with these ranking variables. Endowment was weakly associated with almost all the variables used for ranking top national doctoral universities with the lowest endowment amounts. Relationships of endowment and ranking variables were stronger at medical research schools, business schools, and weaker at engineering schools. Originality/value — Higher education administrators must realize that these variables are cost-inducing factors that cannot be fully satisfied. Unbridled pursuit of ranking variables will increase cost without commensurate increase in educational quality. Therefore, leaders must decide what rankings their resources allow and what position within the ranks is acceptable to them. Ranking agencies interested in quality should realize that money plays a significant role in how an institution is ranked. Therefore, institutions should be grouped according to the available resources before comparative analysis of ranking variables is made. © 2005, Emerald Group Publishing Limited