Online Extra: A Test for B-School Deans

With applications down and tuition up at all of BusinessWeek's Top 30 MBA programs, plus an improved job market and mostly stagnant post-MBA base salaries, B-school deans have a lot to think about these days.

To hear thoughts on the state of the MBA world, BusinessWeek B-Schools Editor Jennifer Merritt recently spoke with Edward A. Snyder, dean of University of Chicago's Graduate School of Business; R. Glenn Hubbard, dean of Columbia Business School; Robert Dolan, dean of University of Michigan's Ross School of Business; Richard Lyons, dean of the Haas School of Business at University of California-Berkeley; Ken Dunn, dean of Carnegie Mellon's Tepper School of Business; and Steve Jones, dean of the Kenan-Flagler School of Business at University of North Carolina-Chapel Hill. Edited excerpts of their conversation follow:

Q: Tuition has soared almost 55% over the last six years, to an average of nearly $34,000 per year at the Top 30 schools. Are we at the point where good candidates are deciding not to leave their jobs after four or five years to attend school? Are they being priced out of the market?

Snyder: We've really raised the cost of people leaving their jobs. And the best people aren't going to leave. People are bumping into their loan maximums -- we had to go to our vendors to ask them to increase the loan maximums. If the loan doesn't cover all the costs, some people literally just cannot put the package together to come.

Jones: You have more and more prospective students who don't have access to full-time MBA education on account of cost. By definition, you are pricing people out of the market, and that's a great shame. You have the people who apply and then find they can't afford it, and then you have the people who don't even apply because of the cost.

And B-schools as an industry are showing no signs whatsoever of reducing those costs. So, you either price these people out of the market or come up with a program that serves them more effectively.

Q: Why do you believe full-time MBA applications are down?

Dolan: Some people realize they'll incur all these opportunity costs -- $75,000 and no income for a couple of years. It's one thing if you're getting a big signing bonus and salary [in banking], but there are people who imagine B-school is a good thing to do. Then they do the math, and it doesn't compute.

How do you begin to address that? On the front end, you do it with scholarship money, but we do have to get more creative about these kind of things.

Dunn: The MBA is much more of a commodity than it used to be. All the schools are doing the same things. Business education is a fairly mature industry at this point. Nobody is innovating, and something has to happen to shake that up.

Q: Although MBA hiring has picked up, starting with the class of 2004, many nameplate MBA employers have shifted their strategies to hire a larger percentage of undergrads and people with industry experience. They seem to be questioning the added value of the MBA hire. Is this contributing to the decline in applications?

Hubbard: A lot of recruiters are asking me if their best people need to go back to business school. I argue they should because B-school will give them the general background they need to succeed. But there will always be people who will be successful without it.

Our challenge with recruiters is to make clear that the MBA is a very valuable degree. For a long time, that was just taken as a given. I think it is very healthy, frankly, for professional schools to discuss their value proposition. If we can't articulate it, there might be a legitimate question about the value.

Snyder: The set of companies willing to hire MBAs with the kind of salary expectations MBAs have is changing. They are saying: "We can hire very good undergrads and train them or PhDs in sociology who will do some very interesting analysis." Hiring non-MBAs is something companies have become more comfortable with.

Still, if you were to take a consolidated result from talking to many recruiters, they're surprised at how well non-MBAs do. But where they see a need for real leadership down the road, they still prefer an MBA. They have to pay extra for that MBA.

Dolan: I don't worry about it too much. Instead, I take it as a challenge. It means that I spend more time going to visit recruiters myself, trying to get an understanding of how our people are being used, trying to understand their business models.

Q: If people are less interested in a full-time MBA, how can or should B-schools respond?

Jones: The challenge in the MBA program is to give students the greater breadth that they now need in order to be capable out in the marketplace, while also giving them enough depth to be productive and useful in their first few years on the job. The pace of change in today's business world means that the people we find are the most successful are the ones with the best leadership capabilities, the ability to get things done and work in teams and communicate. Helping people develop that is a different proposition from teaching students derivatives.

Dunn: We cut the size of our class. We're a small school to begin with, so whether we have 240 or 160 students, we'll never catch up with Harvard in terms of the alumni network. The smaller size creates some slack, and when you have that, then you can innovate. We're also increasing our flexible programs -- our evening MBA and our flex-mode interactive MBA, taught part on-campus, part through video and technology.

Lyons: We have more part-time than day MBA students. Other universities have kept the focus on their day MBA programs. Ten years from now, the day MBA may not be as much in demand but, for the near term, the anchor of the day program will remain.

Hubbard: I'm not sure that compressed programs are the answer. Things might change so the focus early on is on core programs in analytics, and then have a very experiential period -- similar to the clinical rotations used in other professions -- for the rest of the experience.

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