Feature of the Week

July 20, 2014 11:51 pm

Germany warms to the MBA

James Ferguson illustration©James Ferguson

For once, Jolene Monson is in Berlin. As marketing manager at the European School of Management and Technology (ESMT), she and her colleagues visit more than 30 countries each year, selling Germany as a destination to prospective MBA students. However, she finds that organisers of MBA fairs often omit Europe’s largest economy from the menu of choices.

“There’ll be sections for the US, UK, France and Spain, but rarely one for Germany. We have to sit in ‘Other’,” she laments. “But when students find that in Germany fees are half the price, classes are more diverse and job opportunities more plentiful, they’re pleasantly surprised.”

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The might of the German economy means it is not just international job seekers beginning to knock on the door of German business schools, but also overseas companies seeking to learn “the German way”.

At the same time German employers face acute skills shortages and need international employees who can take their products and services across borders. Yet for decades Germany has been a net exporter of students who choose to study MBAs at schools in the US, UK, France, the Netherlands, Denmark, Spain and Norway, rather than stay at home.

“Germans take MBAs, but not in Germany. That’s good for the outside world, but not Germany,” says Udo Steffens, president of the Frankfurt School of Finance & Management.

Only two German schools are currently represented in the FT’s Global MBA ranking 2014: ESMT and Mannheim Business School.

However, there are signs the German business school sector is finally stirring. Frankfurt, which received a €1m donation from stockbroker Wolfgang Steubing this month, launches a full-time MBA programme in September, while ESMT is rolling out a Master in Management programme. Mannheim recently branched into part-time MBAs and next year HHL Leipzig Graduate School of Management is promising a fast-track version of its part-time MBA programme which will include a healthcare and regulation management elective. Meanwhile, Spain’s Iese business school is muscling in, opening an executive education campus in October next door to Bavaria’s parliament in Munich.

This shift is reflected in the number of candidates who are sending their Graduate Management Admission Test scores to German business schools. Numbers have risen from 5,837 in 2012 to 6,487 in 2013 and have almost tripled in the past five years. Overseas students and companies are attracted by the Germans’ attitudes as much as by their knowhow, eager to learn more of the ethos that values job creation, client satisfaction and product excellence as highly as profit.

At the same time, figures from the Graduate Management Admission Council show that Germany has overtaken the US as the top destination to which German test-takers send their scores to.

It has much to do with the Bologna process, a European Commission effort to harmonise higher education; German business schools are now reporting a rise in applications thanks to the first cohort of post-Bologna graduates with a few years’ work experience.

“Ten years ago German students didn’t even know what the GMAT was,” says Ben Glover, the GMAC’s director for Europe.

Nonethelss numbers remain modest and the worry is that Germany, with Europe’s lowest birth rate and oldest population, is not doing enough to tackle a looming talent crisis. This is a particular dilemma for the Mittelstand, the small and medium-size enterprises that account for 52 per cent of Germany’s economic output. According to the latest SME Barometer report by EY, a shortage of qualified employees is costing those companies €31bn a year in lost revenue.

One obstacle to recruiting international workers is language, but many companies also lack experience hiring non-Germans.

“Our so called ‘hidden champions’ [middle-sized companies] are international in their reach but often located in middle-sized cities, speaking German in their daily operations,” says Prof Steffens.

“They are now forced to look for other sources of recruitment and [are] beginning to consider the international MBA talent pool.”

In Berlin, on a campus once the official seat of power in the German Democratic Republic, ESMT graduates about 60 of these international MBAs each year from its 12-month full-time programme. In their lecture theatre the current class identify themselves by place name holders; Russians, Indians, Chinese, Americans ... but only a handful are German.

“Just 10 per cent of our students are German, which is rather low,” admits Jörg Rocholl, president of ESMT.

“We would like it to be more, but not much higher. We’re happy that we have such a diverse group, particularly since 60 per cent of our graduates stay in Germany. That’s important for the country, as well as enriching the companies they work for.”

Its MBA, which costs €38,000 in tuition and fees, entered the FT’s rankings for the first time this year.

“Germany is seen as the growth engine for Europe, and we’re enjoying that tailwind with increases in the number of students applying to our degree and executive education programmes,” says Prof Rocholl.

He is careful not to refer to ESMT as a German business school.

“Our faculty come from 18 different countries and there are 34 different nationalities on our MBA. We want to be seen as an international business school.

“Germany is in a different position than it was 10 years ago. We’re observing very strong demand from companies and students who want to come to Germany, both for degree programmes and executive education,” adds Prof Rocholl.

“Through that increasing interest, business schools are able to build their reputation.”

Last year ESMT was granted the right to award PhDs and its new MiM will make use of the school’s corporate relationships to offer students an internship of up to six months.

At Mannheim one-third of students on its 12-month, €33,000 full-time MBA are German. While ESMT offers its students technology, sustainability and leadership tracks, Mannheim adopts a regional approach, offering students German, Eurasian, transatlantic, European and global tracks.

“We’re seeing demand for our executive MBAs increase too,” says school president Jens Wüstemann. “German employers are beginning to see an MBA as a way of keeping their best executives and including business schools as an option in their talent programmes.

“With German companies doing better and knowing the MBA world better, they are more open to hiring MBA students,” he adds.

“The market is developing nicely. The only worry is whether it’s high quality or not.”

. . .

Prof Wüstemann has some concerns over the surge in MBA programmes being created and registered by Fachhochschulen, universities of applied sciences, designed with a focus on teaching professional skills

“There is a second tier of MBA programmes in traditional universities that might be a good choice for students who want to work in that region. But then there’s a third tier, just using MBAs as a label to sell masters programmes. An MBA in electronic engineering, for example, is close to ridiculous. It doesn’t help employers understand the value of a real MBA.”

Nonetheless change is in the air and Marion Festing, director for Germany at ESCP Europe, which offers a MiM and an executive MBA from its Berlin campus, expects more programmes to enter the German market in time.

“The question is how they will differentiate themselves from others and where they will gain a competitive edge,” she says.

Mr Glover of GMAC is also upbeat. He believes that German business schools are on the rise and may finally be approaching tipping point.

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