Little and large schools: Why a niche can still be nice

It is easy to make the case for fewer European business schools – and of mergers between them to help achieve this. But not everyone wants to subscribe to the argument.

Across Europe, small- and medium-sized schools are developing strategies to ensure they not only survive but also prosper. They may form links with other schools, but they want to preserve their independence. And they believe their size gives them operational advantages that larger schools cannot emulate.

The past two years have seen mergers between schools in France – often initiated or at least inspired by the local chambers of commerce that control them – and in the Netherlands.

“I think what’s happened is that strategic alliances have not delivered for business schools – they can’t make them work,” says Chris Bones, principal at Henley Management College in the UK.

“So you merge. What’s driving scale isn’t strategic choices, it is the cost of staying in business – that is what you are starting to see.” Qualification fees do not rise, he says, because schools are putting more MBA and MSc programmes into the market, and then have to face the growing costs of accreditation, marketing, bureaucracy and research.

“If you are looking at that as an ambitious dean, you say: ‘I can’t continue with these costs over this number of students, but I could do if I was bigger.’ This is not a strategic choice but is driven out of necessity – the inevitable consequence of the UK and elsewhere in Europe having too many business schools,” says Mr Bones.

Small schools need to have a clear strategy if they are to weather these trends. “Small can be good and certainly [small schools] can have a future, but there are some real caveats,” says Jonathan Slack, chief executive of the UK’s Association of Business Schools. “Having a niche is the key – small schools must have a particularly high reputation for something, rather than just being a small, full-service institution. That is really not the way.”

Mr Slack says the school would need to specialise in executive education, for example, or a particular research area, which it can promote effectively, nationally and internationally, and for which it can attract appropriate faculty and students.

The niche strategy has been applied very successfully at the International University of Monaco, where the postgraduate programmes are focused around three core business areas that suit the setting well – wealth and asset management, entrepreneurship and luxury goods and services.

As associate dean of graduate programmes, and director of the executive MBA and Monaco MBA programmes, Boris Porkovich has both intimate knowledge of individual programmes and is in charge overall.

Having an overview of all the programmes “enables you to have way more synergy between them, helping to make a smaller school viable,” says Prof Porkovich. And with only around 100 students on all the postgraduate courses, Prof Porkovich knows everybody. “If a student wants to change course, the transfer can be facilitated much more easily because I know all the programmes intimately,” he says.

The small country/small business school/small class combination is a huge advantage for students, he says. On the Monaco MBA programme, for example, the upper limit of 35 on the cohort size enables each student to be assigned a mentor in the Monaco business community. This works very well with, say, 30 students, but would be impossible to do with 1,000, says Prof Porkovich.

There are disadvantages, however, of having one person running virtually everything, according to Prof Porkovich. It is not always easy to find someone with the required experience to do it. Also, when a school expands – as IUM plans over the next five years – it reaches a point where one or more of the individual programmes would need their own director.

Small class size can be a double-edged sword, too. In the Monaco MBA, there may be 30 people choosing four electives each, from a list of 14. “You have to be very creative in the way you combine them to offer three different business area concentrations,” says Prof Porkovich.

The result can sometimes be classes of just three or four students, and if some students feel the class could be bigger, IUM has to compensate by offering closer interaction with the professor or more innovative course delivery.

Much larger schools than IUM are keen to retain the benefits of a unified structure, which almost always has to be sacrificed once a certain size is breached. “You get to a critical point at around 100 academic staff,” says Ian Davidson, director of Loughborough University Business School in the UK. “At that point it becomes almost too big to manage as one entity.

“Up to that point you can maintain a fairly collegial type of business school where everybody has a pretty good idea of what’s going on and you can run it in a fairly unified way. With size comes the complexity of managing, and you have to split it into chunks,” he says.

The business school has about 1,500 undergraduate and postgraduate students, and a faculty of 85. At this size, says Prof Davidson, individual faculty can still teach at both levels, ensuring cross-fertilisation. Executive education, which caters for another 1,000 participants, can also be run “pretty much” within the business school rather than put into its own division, he says.

Prof Davidson is wary about business school mergers – especially if the result is a multi-location institution. “There are certain things you can do in common to get scale, such as recruitment activity,” he says, “but I’m not convinced about having people moving from one location to another.” To a large extent, he says, geographical costs outweigh the economies of scale that would derive from a merger.

As Mr Slack at the ABS points out, the business schools that have not yet grown large probably do not want to, and they might find it quite difficult anyway. “In the postgraduate and MBA markets, there is such fierce competition – in the UK and elsewhere – that it is difficult for most schools to grow [student] numbers rapidly.”

Mr Bones at Henley, meanwhile, questions how many niches are truly driven by market demands rather than the “production-led” strategy of many university-owned business schools. He says that, in a mature market, a shakeout is inevitable if university chancellors assume that their business school is a source of future income and insist on staying “in the MBA game”.