Javaree Walker entered the University of Rochester’s Simon Graduate School of Business in the fall of 2011 with a decision to make: Should he pursue the full-time MBA or the one-year MS in business administration with a concentration in marketing? After two months of deliberation, he chose the master’s in marketing. It’s not that the quality of the MBA was lacking, but for someone who knew exactly what he wanted to do when he graduated, the two-year business degree was simply too broad. “I wanted to learn marketing,” Walker says. “I didn’t need to know about stocks and derivatives.”
In the MS program, Walker was able to pack in eight marketing courses, along with a few basic business classes, all at less than two-thirds the cost and in half the time of the traditional MBA. By graduation this summer, the 30-year-old Hempstead (N.Y.) native had already lined up work as a marketing specialist at Menomonee Falls (Wis.)-based Actuant (ATU). “The job fit is everything I was looking for,” he says.
Demand for the MBA is soaring in countries like India and China, but in the U.S. the appeal of the traditional two-year management degree appears to be on the wane. In its 2012 Application Trends Survey, the Graduate Management Admission Council (GMAC) reported that 62 percent of responding U.S. business schools said application numbers were declining for their full-time, two-year MBA programs, even as applications surged at four out of every five programs in Asia. Applications are flat or down even at top schools; New York University’s Stern School of Business and Indiana University’s Kelley School of Business both reported double-digit drops.
It’s not hard to see why Americans may be put off; the media is full of stories about grads overburdened by debt. As for international students—once a reliable source of tuition dollars for U.S. B-schools—they face a greater array of education options at home. “We’re looking at a lot of really exceptional programs around the world that were not here to compete with the U.S. schools 10 years ago,” says Dave Wilson, president and chief executive officer of GMAC. “It’s a world market now.”
To entice applicants, many U.S. schools now offer several flavors of business degrees in addition to the MBA. While few have been as aggressive in diversifying as the University of Rochester, which recently added specialized degrees in business analytics and pricing as well as a one-year MBA, schools are experimenting with new class formats and providing more course content online.
Students’ shift toward specialized business degrees in the U.S. is visible in the proportion of applicants taking the GMAT, the B-schools entrance exam, who send their scores to regular MBA programs. In 2007, 78 percent did so; in 2011, the figure was 67 percent. Jim Dean, dean of the University of North Carolina’s Kenan-Flagler Business School, likens the MBA market to the automobile industry. “In the 1920s, there was the black Model T, and if you wanted a car, that was it,” he says. “Eventually competitive pressures and demand from customers drove differentiation. I think that’s what’s happening here.”
In June 2011, Dean launched MBA@UNC, the first full-scale online MBA program offered by a top business school. For years, B-school administrators hesitated to enter the online market for fear that a Web-based product couldn’t replicate the valuable back-and-forth found in an MBA classroom and would diminish their brands. Those concerns are unfounded, Dean believes. “It’s a small class of about 15 students and a professor, all of whom can see and hear each other and interact in real time,” he says.
The inaugural class for MBA@UNC was 19 students. For the most recent quarter, the number of new admits jumped to 75. The two-year program costs $91,225 vs. $103,380 for the regular MBA. The Web-based format has also been popular among faculty, with some introducing aspects of the program into their full-time MBA courses. Instead of covering textbook learning in class, students watch an online lecture beforehand. In-class time is devoted entirely to discussion. “It’s the flipped classroom idea,” Dean says.
Dartmouth’s Tuck School of Business rolled out a similar hybrid late last year, with online video lectures, quizzes, and discussion boards added to 11 core MBA courses. At University of California at Berkeley’s Haas School of Business, one section of the popular Power and Politics in Organizations elective is now offered entirely online, and when Columbia Business School launches its new core curriculum in fall 2013, online lectures will be used in statistics and accounting courses. Columbia Dean Glenn Hubbard describes the changes as tailoring form to content. “The method for calculating free cash flow can be learned online,” Hubbard says, “but the problem-solving skills required to develop and execute a strategy based on that cash flow will come from the ideas, network, and collaboration that are the essence of the classroom experience.”
Schools are also adding the one-year specialized master’s to their menu of degrees. “There’s a general management trend towards specialization,” says Andrew Lo, director of the Laboratory for Financial Engineering at Massachusetts Institute of Technology’s Sloan School of Management. “Now students and recruiters both are looking for domain-specific expertise.” And there’s no lack of interest: For its newly launched master’s of finance program, the University of Texas’s McCombs School of Business received 222 applications for 30 spots. At Sloan, student enrollment in the finance master’s offering doubled to 120 this year to accommodate student demand.
While a specialized degree may not be ideal for a student with extended work experience who wants the broad general management coverage that an MBA offers, it’s a good option for someone in the early stages of a career. And it’s cheaper. At McCombs, a finance degree costs $48,000, half the price of the full-time MBA. As for the quality of participants, the first group of students that entered this fall boasted an average GMAT score of 704, 11 points higher than that of the school’s full-time MBA students.
The real selling point of the specialized programs, though, is the success grads are experiencing on the job front. “All of our students have gotten jobs every year since we started the program in 2008,” says Sloan’s Lo. The same can’t be said for recent full-time MBA grads. Overall, according to survey data collected as part of Bloomberg Businessweek’s ranking, 18 percent of the Class of 2012 graduated without a job offer, a modest improvement over the Class of 2010, which graduated with 24 percent unemployment.
Millennials are also putting their degrees to different uses. Ten years ago, one out of every three MBA grads went into financial services, and jobs were plentiful. For the Class of 2012 the number heading into finance dropped to 20 percent. With fewer grads heading into ultra-high-paying Wall Street jobs, the median starting salary for MBAs has stalled at around $103,000 for the past three years, even as MBA tuition has continued to skyrocket. Consulting is now king among B-schoolers, with 27 percent of grads entering the industry.
Meanwhile, the number of MBAs targeting smaller technology companies and startups has also increased substantially. “More students are going to companies where they feel that they’re really making an impact early on in their careers in a way that might not be possible at big companies,” says Julie Morton, associate dean of career services at the University of Chicago’s Booth School of Business. In April, Booth hosted an event called Start-up Networking Night where students interested in taking a more entrepreneurial path were able to meet with potential employers and industry reps. In total, 100 students and about 40 companies registered to attend, among them the tech startup Power2Switch and Chicago-based venture capital firm Lightbank. “These are smaller, entrepreneurial companies,” Morton says. “Many are looking to get on students’ radar.”
Most business school administrators, though, aren’t convinced that the traditional two-year degree is on its way out. At Michigan State University’s Broad College of Business, where applications dipped 18 percent in 2012, Admissions Director Paul North is confident that the value offered in the full-time MBA ultimately will keep students enrolling. “What we’re seeing now is just a bump in the road,” he says. “The experience it offers will always resonate with the marketplace. I don’t see it dying anytime soon.”