Wisconsin’s B-School’s Sacred Cow

The decision today (Oct. 25) to backpedal on a non-sensical proposal to shut down the full-time MBA program at Wisconsin’s School of Business is a welcome relief to many students, alumni and company recruiters of the school’s graduates. The mea culpa couldn’t have been clearer.

“We moved too quickly without the broad consultation and discussion that our stakeholders can and should expect,” conceded Dean Anne Massey in a statement. “We will move forward with discussions on how to grow the undergraduate program and expand the graduate portfolio while simultaneously strengthening the full-time MBA experience (see Wisconsin Backpedals On Plan To Suspend MBA Program.”

Yet, the decision to advance such a proposal at one of America’s premier public universities has been one of the more shocking developments in management education.In the short space of seven days, the school went from telling its students in an email that it was seriously considering a suspension of the full-time to reversing course after mounting opposition from alumni, students and other stakeholders. When faculty go back to the drawing board, it would be a good idea for those professors to take a long, hard look at the sacred cow of academia: The PhD program.

Instead of putting its full-time MBA program on the chopping block, Wisconsin should have proposed to toss its costly, money-draining PhD program under the axe. The annual losses racked up in this hidden cost center vastly exceeds whatever red ink is flowing from Wisconsin’s MBA program. Any truly dispassionate analysis would lead one to this conclusion.

THE $7 MILLION ANNUAL FREE RIDE FOR PHD STUDENTS

For one thing, every one of the currently enrolled 63 PhD students at Wisconsin is on a free ride for four to five years, with full tuition waivers, monthly living stipends, comprehensive family health insurance, reimbursements for travel to conferences, and scholarship support to supplement these already generous academic packages. And that doesn’t factor in the cost of high-priced tenured faculty being paid $300K a year to lead seminars with fewer than a handful of PhDs at a time, the administrative costs of support staff, building space, and tech support, among other costs. The money pit continues with still more payments for those who raise their hands for summer teaching and research appointments.

All in, the cost to Wisconsin’s School of Business for its PhD program may very well approach $7 million a year, with no tangible benefit to the business school, the profession, or society at large. PhD graduates are rarely, if ever, hired by the schools from which they graduate. Their research contributions are scarcely helptul to business managers, especially in the short term. And they hardly ever contribute scholarship that directly benefits society.

Still, those estimated losses are absorbing more than 10% of the school’s annual $69 million budget and are easily more than three times the losses in the MBA program. The gross tuition and fees paid by MBAs at Wisconsin totals nearly $5.9 million a year. Subtract the scholarship discounts on that total of an estimated  $1.2 million and you find that MBA students are pouring something like $4.5 million into the school’s coffers every year. The only reason the program is in the red to the tune of an estimated $1.5 million to $2 million a year–the school has been mum about these financial details–is because the faculty is essentially overpaid.

Yet, none of these short-term numbers can come close to capturing the less tangible benefits of a program producing highly talented MBA graduates. Unlike PhD graduates who tend to disappear with no loyalty to the institution whatsoever, MBA grads routinely give back to the school, contributing to the institution and the community. After all, it was 13 alumni who gave $85 million to the school only ten years ago in what could best be called an “un-naming gift” to retain the Wisconsin School of Business name. MBAs also work for employers that often provide support to the school. They start companies locally. They are far more likely to participate in alumni fundraising campaigns. They are more likely to recommend the school to undergraduate and graduate applicants for years on end. They will eagerly mentor and hire future graduates.

WISCONSIN PHDS: UNDERACHIEVERS COMPARED TO ITS MBA GRADUATES

In fact, the class profile for Wisconsin’s Phd students shows that seven of every ten students is international. Translation: The school and the state are fully funding the doctoral education largely of non-U.S. citizens, and the faculty appears eager to protect that funding at the cost of eliminating an MBA program where only 18% of the students—not 71%—are international.

Beyond the obvious cost benefits of shutting down the Phd program, you can easily make the argument that the school’s PhD graduates have been classic underachievers, especially when compared to the school’s most recent crop of MBAs.

Of the 48 “selected PhD placements” since 2010 cited by the business school, presumably the most prestigious jobs gained by its Phds, only three landed at schools with higher U.S. News ranks than Wisconsin. Some 13 went to business schools ranked lower than Wisconsin’s current 34th place finish, while the vast majority—28—gained jobs at schools that couldn’t even break the U.S. News’ Top 100. Only two of them work within the state of Wisconsin where taxpayers helped to pay for their degrees.

WISCONSIN MBAS ARE ANNUALLY HIRED BY SOME OF THE MOST HIGHLY ADMIRED COMPANIES IN AMERICA

In contrast, the top ten full-time employers of MBA graduates last year were all highly admired, world class companies: Amazon, Dell, Deloitte Consulting, General Mills, Intuit, Johnson & Johnson, Kimberly-Clark, Lands End, PepsiCo and SC Johnson. Other highly respected and influential companies hiring members of the Class of 2016 included Starbucks, Hershey, General Electric, 3M, Microsoft, Citi, Kraft-Heinz, Eli Lilly, and United Technologies.

Compare that lineup to such Wisconsin PhD employers such as Clark University, Drake University, Florida Atlantic University, Portland State, Quinnipiac University and the University of Wisconsin branches in Whitewater and Milwaukee. Sorry. That is no comparision, whatsoever.

Yet, even the notion of killing the PhD program in favor of reinvesting in the MBA program was at unthinkable to faculty who were willing to put the MBA on the chopping block.  Why? That is because the 80 or so tenure and tenure-track professors with a vote are too deeply invested in this antiquated system to examine it more rationally. A more prudent move would have been to cut the PhD program in half and reinvent in the MBA offering, a move that would have at best a neutral cousin’s budget if not a positive impact.

Thank goodness the school’s stakeholders rose up in protest and stopped this self-interested move by faculty who should know better.

Author John A. Byrne is founder and editor-in-chief of Poets&Quants.

DON’T MISS: WILL WISCONSIN’S SCHOOL OF BUSINESS BE THE NEXT MBA CASUALTY? or THE BACKLASH AT WISCONSIN BEGINS