On one level, it was an agonizing decision to shut down the full-time MBA program at the University of Iowa’s Tippie College of Business. On another, it was a no-brainer.
When Dean Sarah Gardial announced her decision in August, she knew the incoming class would total just 54 students. The program had been in the red for years on a $3.5 million budget. With state appropriations falling and budgets tight, it no longer made sense to pour resources into the tiny program. Earlier this year, no less, Tippie’s U.S. News’ MBA ranking plunged 19 spots ito 64th from 45th. It was the proverbial perfect storm.
“We’re seeing clear shifts in what students and businesses need,” Tippie Dean Sarah Gardial said at the time. “Both are expressing preferences for non-career-disrupting options for the MBA, while others are increasingly drawn to the focused education provided by master’s programs in specific subjects.”
OTHER DEANS CONCEDE THAT IOWA’S DECISION MAY HELP THEM SHUT DOWN THEIR PROGRAMS
As a business school in the Big Ten, Iowa’s decision has been something of a wakeup call to many in the MBA market. In the aftermath of that decision, however, Dean Gardial has gotten a surprising reaction from some rival deans. They’ve quietly conceded they have been grappling with the same issue and that her decision may help them deal with the political consequences from alumni, students, and faculty of ending their own money-losing MBA programs.
The backdrop to Gardial’s decision was three consecutive years of declining overall applications to two-year, full-time MBA programs in the U.S., a drop that would have been far more severe if not for the rising number of applicants from abroad. But even that offset has disappeared in the wake of anti-immigration rhetoric and a President who has made many would-be immigrant students feel unwelcome in the U.S.
Then, you had the earlier decisions by Wake Forest University, Thunderbird School of Global Management, Virginia Tech, and Simmons College to walk from the residential MBA market. Only this week, Kings College London, in the midst of opening a new business school next month, revealed that he decided against having a full-time MBA in its portfolio of programs. Kings’ Dean Stephen Bach believes there isn’t enough interest in an MBA program — either among prospective students or recruiters in the London business community. “What we are hearing from employers and some of our advisory group members is that companies are looking for talent at an earlier stage,” he said.
‘THIS IS AN INDUSTRY READY FOR DISRUPTION. THERE IS GOING TO BE A SHAKEOUT’
While the decline in interest in two-year MBA programs may have accelerated due to Trump, the writing has been on the wall for some time. As long ago as a decade, Gardial’s predecessor, Dean William (Curt) Hunter had already been discussing the viability of the program. He thought the school would have to either make heavy investments to keep it alive or would more prudently, perhaps, confront the decision to shut down their involvement in the most successful and most popular graduate degree in the post-war period. Ten years later, with Tippie’s MBA enrollment more than halved, it seemed like an easy decision.
He wasn’t the only dean of a Big Ten business school to seriously consider abandoning the full-time MBA market. Alison Davis-Blake, when dean of the University of Minnesota’s Carlson School from 2006 to 2011, wondered the same thing. She ultimately left for Michigan Ross where she cut an entire cohort out of the full-time MBA program. Over at Ohio State University’s Fisher College of Business, Dean Anil K. Makhija concedes he had that option on the table before deciding to launch a complete review of the MBA that will lead to a newly revamped curriculum to debut next fall.
“What I noticed is that the data on GMAT test takers was declining,” says Makhija. “Iowa is moving away from the full-time market. It makes you think what is going on in this sector? Has the product kept in touch with all the change in the business market? This is an industry ready for disruption. There is going to be a shakeout. I don’t want Fisher to be a victim but rather a survivor.”
‘THE BIG QUESTION IS WHERE IS THAT LINE AND WHAT SIDE OF THAT LINE ARE YOU?’
Has the two-year, full-time MBA market jumped the shark? What’s the confluence of factors that have led to a serious decline in applications? Is Iowa just the latest domino to tumble, a harbinger of still more programs to close? Is the decline of the applicant pool for full-time MBA programs permanent?
The answers to those questions often depend on who you ask. The deans of the most elite schools believe the decline won’t impact their programs. Second- and third-tier deans areopenly worried. What is clear is that there winners and losers are already emerging. “A bifurcation is occuring in residential MBA programs,” believes Michael Lenox, chief strategy officer for the University of Virginia’s Darden School of Business. “There is clearly a lower part of the market that will be disrupted, and the big question is where is that line and what side of that line are you? But the shakeout will take a long time to play out. There is no active exit market in education as there is in business. A roll-up strategy of failing schools doesn’t make a whole lot of sense. So schools will hang on as long as they can.”
There are a number of reasons for the decline in applications. Would-be students now have more options, from online MBA programs to specialized master’s degrees. Since 2007, the Graduate Management Admissions Council data show that score sending to specialized master’s programs rather than M.B.A. programs had nearly doubled by 2016 to more than 25% of all GMAT scores sent. Non-U.S. business schools are providing significant global competition to their U.S. counterparts as well.