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American business schools are reinventing the MBA

by Ace Damon
American business schools are reinventing the MBA

On a visit to New York City in October, Salesforce chief Marc Benioff compared Facebook to cigarettes and supported an increase in corporate taxes to deal with homeless people in San Francisco. Speaking badly about a giant tech colleague and rooting for the taxpayer was not unorthodox enough for a billionaire businessman, Benioff embraced American management education. It "programs" students to favor profit over the public good. This, he noted, is out of step with "new capitalism."

Many deans agree. "We need our students to think about the role of business in society, particularly at a time when capitalism is under attack," says William Boulding of Duke's Fuqua School of Business. Nitin Nohria of Harvard Business School (HBS) reports how younger students and classes wishing to enter higher education want "the workplace to reflect purpose and values." Jonathan Levin of Stanford Graduate School of Business (GSB) speaks of the responsibility of business schools to recognize the social consequences of corporate action. "Companies, their leaders and owners need to act to restore trust," he intones.

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America's business schools still dominate our annual ranking of the world's top MBAs (see table). But the industry is being shaken. According to the industry's Graduate Management Admission Council (GMAC), US MBA programs have received 7% fewer applicants this year than last year. Nearly three-quarters of full-time two-year MBA programs reported declines from coast to coast. Not even the most illustrious were spared: HBS (located in Boston) and Stanford GSB (in Palo Alto) saw applications drop by about 6%. Schools face increasing competition from international and online programs – and, as Benioff's critique implies, questions about hidden curricula. "We're being interrupted left, right and center," says Susan Fournier, dean of the Boston University Questrom School of Business.

American business schools are reinventing the MBA

When business education grew in the 1960s, American schools taught mainly American students. As the world economy globalized in the 1980s and 1990s, so did the American curriculum and student bodies. Sangeet Chowfla, who heads GMAC, now discerns a "third wave": improved schools outside America are allowing foreign students to study closer to home (and future employers). Many offer cheaper one-year MBAs, popular in Europe but unusual across the lagoon. While three out of four US two-year MBA programs saw declines in foreign applicants in the last application cycle, numbers applied to Asian business schools increased by 9% from 2017 to 2018. A recent increase in US anti-immigrant sentiment is accelerating the trend.

Americans are also cooling MBAs. More than half of US schools report fewer home applicants. Rising tuition costs, which far outnumbered inflation, save them as much as foreigners. A high level MBA will cost more than $ 200,000 (including cost of living). Even with financial aid, many students receive $ 100,000 undergraduate debt. The opportunity cost of waiving two years of wages is higher when the economy is booming and labor markets are tight. Weak demand has caused the number of full-time MBA programs in the United States to fall nearly one-tenth between 2014 and 2018, according to the Association to Advance Collegiate Schools of Business, another industry agency.

Geoffrey Garrett, dean of the Wharton School at the University of Pennsylvania, believes that an escape for quality is benefiting important institutions like his – and their graduates. Add non-salary pay, and alumni usually recoup their investments in a few years. Not to mention signing bonuses, the average base salary for graduates of the five highest earning US schools was $ 139,000.

Consulting firms and investment banks, historically the most demanding MBA recruiters, say their appetite for elite degree holders has not diminished. A prestigious MBA "puts a foot in your career," explains Kostya Simonenko, 28-year-old consultant for Oliver Wyman (who is paying for the course at Columbia Business School). Silicon Valley, which used to reject MBAs as overpaid expertise, has become less hostile. As startups become big companies, they need managers to help get things done, not just software engineers to run code. A GMAC survey of recruiters this year found that 80% of technology companies planned to hire MBAs, along with consulting firms (82%) and finance companies (77%).

Even the best schools, however, are not protected from the forces that attack business education. Global competition and new technology platforms allow for a lower cost structure for delivering high quality courses. This forces "a reckoning with the MBA value proposition," says Fournier.

As part of this calculation, Questrom has teamed up with edX, a large online education company, to offer a full online MBA for just $ 24,000, less than a third of the cost of its campus equivalent. Better to cannibalize yourself than to let others do it, as Fournier puts it. MIT's Sloan School of Management offers equally affordable packages of online courses, called MicroMasters, in areas such as supply chain management and finance. These award certificates, but credits will be honored if a student one day decides to pursue a full degree. 2U, an online education platform, is introducing deferred lesson schemes for some hybrid MBA degrees. He will share upfront costs with his business school partners; Students pay only when they get a job.

It is not just how MBA courses are taught that are changing. This is also what they teach. Many rising capitalists agree with Benioff – and demand that business be taught beyond the primacy of shareholder value. At Stanford, Luisa Gerstner, a millennial MBA student from Germany, notes that sustainable capitalism plays a more central role in European schools. Julia Osterman, her American classmate, laments how, despite some social, environmental and ethical topics on her resume, the main classes are still "too much Finance 101".

Some of your teachers are not so sure. One HBS barber estimates that one-third of his teachers (and many older alumni) see the embrace of cuddly "stakeholder capitalism" as a non-strict breath of political correctness. It certainly introduces many gray areas, admits Boulding. But, he says, schools can at least provide students with "structures for making choices." A new course at Duke is entitled "Capitalism and Common Purpose in a World of Differences." HBS has made “Leadership and Corporate Responsibility” (which investigates “business responsibilities in the broader system in which it operates”) a required first-year course, with case studies that evaluate things like morality to look beyond metrics. Government Pension Fund.

Recoding Gyms

Curricula are also being transformed in lower ways. Employers, who fund part or all of half of all executive education, which earns elite schools between $ 100 million and $ 150 million a year, want it to impart technical skills. In response, deans such as Costis Maglaras, the new head of Columbia Business School (and a training engineer), are launching courses on data, analysis and scheduling on schedule. As their popularity increases, they can displace more difficult subjects. Columbia used to offer several courses in the debt markets, but now it offers perhaps one every academic year. Meanwhile, the students gathered for coding classes. The idea is not to turn business types into coffins, but to prepare them to work and manage technical teams, Maglaras says. A recruiter at a large consulting firm says technology-savvy MBAs are "very attractive."

Richard Lyons, former dean of Haas Business School at the University of California, Berkeley, sees the future by providing lifelong vocational education as a service: "Provide students with on-demand, searchable knowledge online." Scott DeRue, dean of the University of Michigan's Ross School of Business, is giving students free access to executive education. "The new material will come from the insurgents, not the big MBA schools," thinks John Kao, a management guru who previously taught at HBS. He wants training references and standardized transcripts to make his skills portable and universally recognized.

At HBS, home to perhaps the most established MBA, Nohria accepts that the market for its traditional offering is shrinking. In a sign of the times, your school froze the tuition fees. He sees a dramatic expansion into the "breakdowns" of online education, which "separate knowing, doing, and being." Over time, he says, they will converge on "packers" like HBS. Far from collapsing, he thinks management education will be richer for it. ■

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