Feature of the Week

June 15, 2014 11:45 pm

Challenging times for the traditional MBA market

James Ferguson illustration©James Ferguson

Illustration by James Ferguson

It has long been a business school mantra that when the economy is strong, managers eschew business degrees to pursue their careers. However, a sluggish economy sends executives to MBA programmes in their droves as they negotiate the next step up the career ladder.

But the length and depth of the recent recession mean all bets are off. As economies in western Europe and North America strengthen, all eyes will be on the number of applicants to MBA programmes this year, particularly in the US.

On the surface the news appears positive. Although most of the bellwether US schools have yet to report application figures, some have revealed heartening increases for the class of 2016. At the Kenan-Flagler school at the University of North Carolina, applications are up by 28 per cent, while at the Anderson school at UCLA the increase is 32 per cent.

What is more, the US Department of Education recently confirmed that for the first time more masters levels students were studying for a business degree than for an education degree.

But these figures are deceptive, say many admissions directors. “It seems that there is a small number of programmes that are doing well, but the rest of the market is flat,” says Niki da Silva, admissions director at the University of Toronto’s Rotman school.

Even business schools from big- brand universities are having to work harder to make the numbers stack up, says Phil Carter at Imperial College in London. “It’s forced us to proactively look for the right leads.”

Words of wisdom

“Applicants should clearly articulate why they want the MBA . . .  have a clear sense of their personal brand, what makes them unique and what they will contribute to the class.”

– Chioma Isiadinso, Expartus

“There is a general misconception that schools are looking for the perfect candidate, when in fact they are looking for candidates with the right fit for their school. Candidates need to show fit, not perfection.”

– Malvina Complainville, Fortuna

“Keep your head down and focus. Don’t get distracted by online rumours, or by what others are doing (their success may be in spite of, not because of, a particular tactic). Develop your strategy and stay your course.”

– Stacy Blackman, Stacy Blackman Consulting

These anecdotes are borne out by figures from the Graduate Management Admission Council, which administers the Graduate Management Admission Test, often seen as the entry test for business school. Over the past six years the numbers taking the GMAT have remained static at about 240,000. But these figures are buoyed by an increased number of test takers in Asia, while the numbers taking the GMAT in the US have fallen steadily over the past four years.

At London Business School, Gareth Howells, MBA programme director, says it would be foolish to believe the MBA market will return to the levels of 2008. “The protracted nature of the downturn ripped up the rule book on a lot of issues,” he says.

As the market for business degrees becomes increasingly complex and fragmented, predicting application numbers has become even more of a black art. As well as an increase in applications to part-time and online MBAs at the expense of the full-time programme, specialised masters degrees and professional qualifications such as the CFA are also eating into the full-time MBA market.

The European business school model is also increasingly threatening the traditional two-year US MBA degree, says Christine Sneva, executive director for MBA admissions at Cornell’s Johnson school of management. “Europe has been the leader in looking at what flexibility meant to people.” One-year MBAs are no longer spurned in the US by those with appropriate work qualifications she says. Cornell recently launched a one-year MBA for those with a science or technology background.

At the Kellogg school at Northwestern University, Kate Smith, head of admissions, confirms there are plans to increase the number of one-year MBA participants on its programme from 106 to as high as 120.

The growing influence of the one-year MBA is apparent throughout the market, agrees Stacy Blackman, an admissions consultant, as applicants apply to both two-year and one-year degrees. “People are just seeing that you can accomplish an MBA in one year and it is very effective.”

A further complication in predicting MBA numbers has been the increase in business programmes for younger students, often giving undergraduates or recent graduates training in MBA-style business knowledge. It is a trend noted by Paul Danos, dean at the Tuck school at Dartmouth College, one of the most traditional MBA schools. “In the future we are going to be teaching an array of programmes,” he says. “Before everybody lived or died with the applications for the MBA, now we’re getting demand at every level.”

A further issue is whether graduates from pre-experience masters programmes will want to study for an MBA in their late 20s having studied for a masters in business or finance at the age of 22 or 23.

But perhaps the real uncertainty behind the figures is that business school applicants now make more applications. In the recent past, candidates applied to two or three schools, says Ms Blackman. Now they apply to four or five, potentially increasing the number of applications – though not the number of applicants – by 40 per cent. Only when students enrol in September and October will business schools know if increased applications have resulted in increased students. The only thing that is certain is that interpreting application numbers is more of an art than a science.

 

Testing conditions

 

Alongside changing demand for business degrees, entry qualifications for business school are changing too.

According to Kaplan Test Prep, more than 70 per cent of business schools now accept the Graduate Record Exam (GRE) as well as the GMAT, the specialist business school test. In Kaplan’s 2009 survey of business school admissions officers, only 24 per cent said they accepted the GRE as an alternative to the GMAT.

Even Chicago Booth, arguably the most staunch defender of the GMAT, now accepts the GRE.

The main reasons for the shift are threefold, says Brian Carlidge, an executive director at Kaplan. Business schools are looking for a more diverse population of students. The GRE is cheaper and is often deemed to be easier. “We advise prospective students to do practice tests in both GMAT and GRE and then to take the test in which they are more confident,” he says.

Other tests and qualifications are increasingly accepted. The Rotman school at the University of Toronto now accepts the CFA Level 3 qualification instead of the GMAT, says Niki da Silva, director of admissions. “Candidates achieving all three levels of the CFA have demonstrated a commitment to challenging content that is also relevant to an MBA,” she says. “To have completed CFA level 3 and
still be in your late 20s is incredibly impressive. It is the right kind of person for us: ambitious and driven.”

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