November 30, 2017Fake News: MBA programs are in the midst of an existential crisis!
There’s been a rash of articles recently talking about the demise of an MBA degree but before removing those hallowed letters from your resume or enrolling in a Master’s of Fine Arts program instead, read this.
To be clear, much is happening in the MBA world, and not all of it is good news for higher education providers. It’s true that a half dozen or so programs have either closed or are considering closing their full-time MBA programs. Wake Forrest and Virginia Tech shook the industry years ago with closure announcements and, more recently, the University of Wisconsin unveiled plans to end its full-time MBA program only to retreat from its decision after an uproar from their alumni. Many other schools are no longer planning for the growth of their full-time MBA programs.
What’s missing from the headlines is that schools aren’t getting out of the MBA business altogether, they’re merely reallocating scarce resources to their most productive use. Business schools are practicing what they preach and managing their programs like a portfolio manager maximizing returns on their investments. Many are shifting resources to flex, online and part-time MBA programs and focusing on new opportunities like Data Analytics, which is now the fastest growing graduate business degree.
What the authors fail to consider is that much of what is ailing full-time programs is not all that surprising. What is clear, however, is that not everyone is feeling the pain. The top-ranked MBA programs are quite profitable and experiencing application growth along with rising GMAT scores, but they are the exception. And there seems to be no end to the all-in cost of attending an elite school, which now tops $200,000.
According to a survey by the Association to Advance Collegiate Schools of Business (AACSB), enrollment in full-time US MBA programs fell by a third between 2010 and 2016. While the decline is dramatic, it’s important to note that full-time MBA applications are countercyclical, rising as the recession unfolds and declining as the economy and job prospects improve.
The drop in US enrollments was masked by a rise in international applicants, which has been the only bright spot in an otherwise bleak picture for US business schools. But in the last year, interest from overseas has declined sharply due to a wave of uncertainty following the inauguration of President Trump. The scrimmage for student visas led many to seek enrollment outside the US. The loss of this large pool of full-paying students has been particularly problematic for full-time programs.
Another cyclical development comes courtesy of the Financial Crisis and the muted recovery. Facing a bleak job market, many college graduates opted to stay in school to complete a Master’s degree in finance or management – programs that typically do not require work experience. This thinking fueled a wave of enrollments into one year Master’s programs, pulling forward demand that might have otherwise opted for a full-time program two or four years hence. According to a 2017 survey by the Graduate Management Admissions Council (GMAC), “Three in four prospective graduate business school candidates who hold a prior Master’s degree are considering enrolling in MBA programs.” It’s unclear how many of them will choose a full-time program.
At some point, the US will experience another recession and a future US President may ease restrictions on international students wishing to pursue a US education but until then it will be tough sledding for full-time MBA programs. However, the ebb and flow of demand doesn’t diminish the long-held view that an MBA is one of the most versatile and coveted business graduate degrees. It conveys to its holder a set of skills, knowledge, and stature that is without equal in the world of business.