Exclusive Interview: GMAC President Sangeet Chowfla On The MBA’s Future

For many, the GMAT acts like a security guard. You can almost imagine a squinting and scowling figure, whose burly figure cuts you off from heading to business school with the cool kids. But what if the GMAT was really more like your favorite teacher? This person may have pushed you, but you came away far better for it.

Sangeet Chowfla, president and CEO of the Graduate Management Admission Council (GMAC), sees the GMAT as the latter: a tool that provides guidance on what your capabilities are and where you should invest your efforts. In an exclusive interview with Poets&Quants, Chowfla argues that the GMAT – often the most anxiety-inducing part of the application process — should be viewed more as “part of the preparation process for business school” and less as a hurdle to surmount. In fact, he maintains that the GMAT’s real role is to guide applicants to where they will have the best graduate business experience.

“The GMAT is very reliable in terms of telling you the kinds of schools where you will be successful at and the ones where you may struggle in,” says Chowfla. “It is important to have a positive experience and be successful in the school that you go to. Use those GMAT results as a way to understand your capabilities. There’s no right or wrong answer – we don’t see the scores as good scores or bad scores. Scores just reflect a candidate’s capabilities. There is a good business school for every candidate.”

GLOBALIZATION AND SEGMENTATION RE-SHAPING THE EDUCATIONAL LANDSCAPE

You could argue that GMAC has cornered the market when it comes to standardized testing in its niche. Founded in 1954, 1,291 applicants took the first admissions test for the graduate business programs. Back then, just nine schools – including Harvard, Columba, Wharton, Booth, Kellogg, and Ross – accepted test resultts to measure a candidate’s aptitude. Now, more than 200,000 test-takers complete the GMAT annually. It is given in 110 countries and accepted by nearly 2,000 schools with more than 6,100 programs at those schools.

Under the stewardship of former CEO David Wilson, GMAC became the most visible champion for graduate business education. Since 2014, Sangeet Chowfla has followed in Wilson’s footsteps. A former technology executive and venture capitalist, Chowfla is a true local executive with a resume that boasts leadership experience in India, North America, Europe, and Eastern Asia. With demand for business education growing outside of Europe and the Americas, Chowfla’s more international mindset appears to fit with the future of the organization he leads.

“We are seeing high quality business schools being developed around the world,” Chowfla says. “They are going to increasingly attract more-and-more local candidates into graduate management education. You can see it as creating competition to traditional business schools, but you can also see it creating more-and-more awareness for business schools or articulating the value of graduate management education and creating a rising tide.”

At the same time, he adds, business education is being roiled by greater segmentation. “In the year 2000, maybe nine out of ten scores were sent to what we’d call the traditional full-time MBA program,” Chowfla says. “At this point in time, that’s down to 60%, with more scores going to specialized masters programs.” However, this customization of the curriculum could be a boon to business schools in Chowfla’s view. “The world has become a lot more specialized. As a result of that, like any industry, we’ve matured. And as we’ve matured, we’ve segmented. When you segment, you create niches. There are niche opportunities for students. And there are niche opportunities for business schools and programs to differentiate themselves.”

FORECASTING TRENDS BEFORE THEY EMERGE

These days, you could argue that GMAC measures the pulse of business school better than anyone. The organization has developed partnerships with instructors and schools worldwide. And their annual surveys of applicants and employers have augured trends like the emergence of interest in entrepreneurship among Millennials and online education among Gen-Xers and Baby Boomers.

Recently, Chowfla sat down with Poets&Quants to give his take on the state of graduate management education. What have test-takers been telling him? How has GMAC been doing to enhance the test-taking experience? And what trends does he see emerging in the coming years?

Management education, like every industry, is undergoing disruption. If you had to deliver a “State of Graduate Management Education,” how would you describe its overall health and value to professionals (particularly full-time MBA programs)?  

The narrative, for a number of years, has been that the MBA, particularly the two-year full-time MBA format, has been having some challenges. At this point in time, we actually see [the two-year full-time MBA] as the strongest sector of graduate management education industry. And why we say that [is that] we are looking at everything from a point of view of what we call the absorption rate, which is the adoption rate of graduates with a two-year degree into the workforce. We look at it from a point of view of the hiring intent of corporate recruiters, which we publish every year. We look at it from the number of graduates who have jobs. And we also look it from salary bumps, the difference between pre-MBA and post-MBA salary.

All three indicators, at this point in time, are at post-recession highs. If you take a look at corporate hiring intent, and we published that last year, we had growth trends across the world in terms of intention to hire MBAs. We are shortly going to publish our 2015 survey and the early data is that trend is going to continue – if not accelerate. We look at it from the point of view that the number of MBA graduates globally who have jobs before they graduate. That number in 2014 for full-time programs was 60% — and that’s up from 40% in 2010. So that’s a significant increase. From the point of view of salary increase, the salary bump up is now up to about 80% compared to the pre-MBA salaries. Of course, all of that should transfer into applications coming into the education system.

Again, we are seeing, for the fourth year in a row, that full-time MBA programs have been showing growth in applications. Last year, about 61% of full-time MBA programs saw growth in applications. Contrast that to only 28% (of schools) who said that four years ago. We’re seeing recovery at multiple levels. As a result of that, the full-time MBA program, the flagship of the industry, we think is well-positioned. I would tell deans, “Don’t shut down your full-time MBA programs.”