Business schools rethink MBA strategy as market demand shifts
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That decision in 2006 triggered a barrage of complaints. “They put me on the rack,” says Saul Estrin, the professor who made that ruling as the founding head of the department. Some of the harshest criticism came from the Americans on the LSE’s governing body, who feared the decision to offer a masters in management degree instead of an MBA would mean the fledgling business school would lack prestige.
But the decision was based on sound evidence, and in the end, it worked out for LSE: it has about 600 masters students and has added a part-time version of the masters in management course to compete with Executive MBA programmes at rival institutions.
Nevertheless, trying to run a business school without an MBA programme remains a controversial strategy.
Anne Massey was just weeks into her deanship at the University of Wisconsin-Madison’s business school in October 2017 when proposals to shut down the full-time MBA programme leaked, sparking outrage among students and alumni. A week later Ms Massey said the proposal was dead. Not long afterwards, she resigned.
The growth in applications for the masters in business analytics run by Tippie College of Business since 2014
The full-time MBA is likely to remain a flagship course for many schools. Of 661 institutions accredited by the Association to Advance Collegiate Schools of Business that answered its latest survey, just 79 did not offer any form of MBA, figures that have barely changed in a decade, according to the AACSB.
But recently, a handful of schools have either dropped full-time courses or opened without MBA programmes.
They include King’s College London, Wake Forest University in North Carolina and the University of Iowa’s Tippie College of Business. These decisions were made as the schools coped with shifting demands in the business education market.
The LSE has proved that a school can succeed without an MBA, according to Prof Estrin. A decade ago, he decided not to offer an MBA because employers told him they wanted to hire students straight out of university, in order to develop them through internal training programmes. MBA students, who typically spend several years working before attending business school, were considered “less malleable”, Mr Estrin says. Employers “wanted more specific sets of skills, such as critical thinking”.
At Wake Forest University School of Business, enrolment on the full-time two-year MBA fell from 123 to 98 students in the five years before it announced the programme’s closure in 2014, making it an unsustainable proposition financially, according to Charles Iacovou, the school’s dean.
Since 2011, enrolment in Wake Forest’s part-time MBA course, which offers study in the evenings and weekends, has risen 44 per cent. There are now 321 students across two campuses.
In 2016 the school launched a specialist masters in business analytics, with initial plans to enrol 25 students. It had so many high-quality applicants that it took on 39. In the second year, applications more than doubled and the school enrolled 67 students. It has since added a part-time version of this course. “We recognised this key change in the marketplace,” Mr Iacovou says.
Sarah Gardial, the dean at Tippie, announced the closure of the school’s full-time MBA in August 2017. She says the deteriorating economics of running the course was critical to her decision. Two previous deans had already considered such a move.
Her decision was initially met with anger from staff, students and alumni, some of whom took to social media to vent their displeasure. “In those first 48 hours it was ugly,” she says. “Telling them that we would be investing in other forms of programme and that staff would not be losing jobs did not wash.”
The mood changed, she says, when she shared data with students and alumni showing that, excluding faculty staff costs, the full-time MBA was losing $1m a year.
Tippie’s MBA will be replaced by a range of specialist masters courses, building on the success of its existing degree in business analytics. Applications for that course have grown 517 per cent since its inception in 2014.
Ms Gardial believes there is a growing market for life-long learning. “A lot of the students for these courses are working professionals who are coming back to enhance their skillsets,” she says.
Since Tippie announced the closure of its full-time MBA, Ms Gardial says dozens of other deans have admitted to her that they are considering similar moves.
“I am not a champion of closing full-time MBA programmes,” she says. “What I am is a champion for responding to new demands in the marketplace.”
Where are all the MBAs?
Full-time MBA degrees have a totemic quality in business education, but account for very small numbers of students at most schools.
Generalist business masters degrees, of which MBAs are a part, make up 15 per cent of the student population of schools accredited by the AACSB. Some 72 per cent of enrolments are undergraduates and 11 per cent specialist degrees, such as a masters in management.
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