The Politics Behind Wisconsin’s MBA Bungle

WISCONSIN’S MBA PROGRAM IS IN THE TOP 1% OF MBAS IN THE WORLD

Once Ortalo-Magné decided to leave Wisconsin in favor of becoming dean of the London Business School, senior faculty were in a position to undo the former dean’s prized accomplishment. And when the University of Iowa, another Big Ten school, announced in August that it would get out of the two-year MBA market, some senior faculty believed it gave WSB cover to do the same. Dean Massey had only assumed her job at the school two weeks after Iowa made its announcement. Typically, the top associate dean at a school would advise an outsider to avoid the political land mines in favor of gaining a few small and easy victories before taking on a bigger challenge. That apparently did not happen. Reached in his office, Barry Gerhart, senior associate dean for faculty and research, declined comment.

But Wisconsin’s School of Business was in a somewhat different place than Iowa. It is not just another unranked and undistinguished school with a commoditized MBA program impacted by declining applications and lower quality students. Though applications to Wisconsin’s full-time MBA program were down in the most recent year, they were actually higher—by a healthy 15%—than the number of applications received by the school for the years from 2010 to 2014. The average GMAT score for the latest entering class of 104 MBA students is 678, up a healthy nine points from 669 a year earlier. With a full-time MBA program ranked 34th by U.S. News, the school can boast having one of the top 1% of all MBA programs in the world.

While the full-time offering is losing at least $2 million a year, Wisconsin’s PhD program is racking up even larger losses of at least $7 million, if not more depending on how costs are allocated. When programs are completely free, such as Wisconsin’s PhD program or its academic centers, there is no revenue at all to place against the losses. If cuts were necessary, it would have been just as prudent to cut the school’s PhD program or academic centers. Other Big Ten schools, including Indiana and Ohio State, have done just that. With no consequence, Indiana’s Kelley School halved its PhD program years ago, and Ohio State slashed its PHD students to 55 from 120 in the early 2000s. UC-Davis’ Business School, with no PhD program at all, is in the top five in the country in per capita research productivity.

WHY LOSSES IN FULL-TIME MBA PROGRAMS ARE NOT UNUSUAL

Losses in MBA programs, moreover, are not unusual. Many are run with substantial subsidies and heavy alumni support. That is a function of fierce competition among the top schools as well as generous discounts on tuition to buy higher GMAT scores to rise in MBA rankings.  Most deans believe their MBA rankings—given considerable mindshare from five major media brands ranging from U.S. News to the Financial Times—are also the presumed rankings for the entire business school. As such, they have a halo effect on a school’s overall reputation and its other programs. So deans can justify treating their full-time MBA programs as loss leaders, making up losses on part-time and executive offerings, as well as their undergraduate and executive education programs.

Besides, alumni often help to subsidize a business school and its programs. In Wisconsin’s case, alumni have provided unusually hefty financial support. Ten years ago, for example, a group of 13 alumni came together to make an $85 gift to the school–not to name itself. Since then, the alumni partnership behind the gift has expanded to include 17 members and $110 million in investments. If you assign a value to the intangible assets of an MBA program, from alumni hiring from the school to future contributions, it is not all that hard to  to wipe out a paper loss.

At Wisconsin, however, that calculation apparently wasn’t made. Sources suggest that faculty, irked by the previous dean’s efforts to kill their academic centers, now had the chance for payback: To suspend and ultimately kill the former dean’s prized accomplishment. In Massey, they had an inexperienced dean who could be convinced the MBA program needed to be put on the chopping block and with Iowa’s decision they could point to a Big Ten precedent that had been set.

‘OUR VOICES WERE HEARD!’

In ditching the controversial proposal, Dean Massey won some immediate support. “Our voices were heard!” says Ije Obiorah, MBA Class of 2018, who tells Poets&Quants that students credit Massey with the courage to change course. “We appreciate that Dean Massey had the humility to eliminate the proposal,” Obiorah says. “It’s too easy to succumb to an escalation of commitment, and we’re elated that she had the courage to take a step back and recognize that there are alternative solutions that can be explored without undermining the legacy of the full-time MBA program.”

Yet, having created public doubts about the school’s future commitment to its MBA program, applications are likely to fall dramatically this year. It could take several years of marketing and recruitment efforts to undo the damage to the program caused by the bungle.

Massey, meantime, still isn’t talking. She declined repeated requests for interviews, failing to even acknowledge questions posed to her via email from Poets&Quants. Instead, the school released yet another unattributed statement.

“Now, it is time to move forward, together,” it reads. ” Therefore, the proposal was withdrawn. As we continue discussions regarding advancing WSB’s standing as a significant business school, we look forward to working with our broader stakeholder of students, alumni, industry partners, and friends. We will move forward with plans on how to grow and enhance our undergraduate program. We will continue to offer the MBA and MS degrees currently in place. We will continue to seek and invest in ways to strengthen the transformational experience of all students.”

That may well be a tough sell after this very public fiasco of a decision.

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