What Most Surprised GMAC’s Chief In 2019 by: John A. Byrne on December 26, 2019 | 3,339 Views December 26, 2019 Copy Link Share on Facebook Share on Twitter Email Share on LinkedIn Share on WhatsApp Share on Reddit GMAC CEO Sangeet Chowfla When the calendar closes on 2019, Sangeet Chowfla will celebrate his seventh year as CEO of the Graduate Management Admission Council, the administrator of the GMAT test. Since taking over as chief executive on Jan. 1 of 2014 after a four-month transitional stint as president, Chowfla has witnessed a significant drop in applications to the top U.S. MBA programs, among other major trends roiling the business school sector. So in a year-end interview, Poets&Quants asked him what most surprised him about 2019. He had two ready answers. “In this year, the biggest surprises is China,” he says. “For years, China has been a growth story for graduate management education applications in other parts of the world in the U.S. and Europe. This year we saw a contraction in applications and test-taking, particularly as a result of the trade tensions that exist between the U.S. and China. The Chinese government has been sending messages to the market that students should be cautious about studying in the U.S. That caught us by surprise. It is still a decline in the high single digits but that is a swing from growth in the single digits. So the swing is in the teens.” And the other big surprise of 2019? For Chowfla, it’s the continuation of a longer-term trend involving the growing importance of European schools in the mix. “I’m surprised at how quickly they have built acceptability in the minds of candidates,” he says. “We always had the brand name business schools like INSEAD and London Business School which have always had great brand appeal but we are beginning to see significant candidate interest in schools like ESMT Berlin, Rotterdam, and Copenhagen, schools which were not necessarily on the radar of a lot of candidates in Europe. Europe is becoming a more attractive destination beyond the obvious big brand schools. That is a significant change that is going to affect the contours of the industry over time.” A VICIOUS CYCLE IN THE MAKING? A REDUCTION OF GLOBAL DIVERSITY IN THE CLASSROOM Put those two surprising trends together and they spell something of what Chowfla calls a “storm cloud” for U.S. business schools in the new year and beyond. “One of the things we feel is potentially a storm cloud on the horizon is this increase in economic nationalism and educational nationalism,” he adds. “We believe it is a threat to the vibrancy of our degrees. It is particularly relevant in business education because it is so experiential. You are exchanging experiences. As educational nationalism leads to a reduction in student mobility, you end up with less diversity in the classroom. Students lose out on the opportunity to learn from each other. Too often this conversation becomes about letting foreign students into the United States. “We are reducing the opportunity of domestic students to learn from the experiences of others. We are reducing the opportunity For domestic students in the U.S. who would have much richer experiences by having international students in their classrooms. That could really reduce the richness of an MBA degree in the U.S. as opposed to other parts of the world where you do have that diversity. If you really see a reduction in the international diversity of U.S. MBA programs, that will inevitably result in a vicious cycle. A less diverse classroom results in other students looking at the trend and deciding not to come. And that could be a bigger trend.” In a wide-ranging end-of-year interview, Chowfla reveals that GMAC is now piloting an EQ (emotional intelligence) assessment with six U.S. business schools that could be a companion to the GMAT exam. He does not believe that two-year, full-time MBA programs in the U.S. have seen the end of a five-year-long cycle of declining applications overall, a trend that has impacted even the elite MBA experiences for what is likely a third consecutive year. Even a U.S. recession, he says, may not result in the kind of bounceback that had been typical in the past. THE MEDIAN TOP 50 U.S. MBA PROGRAM STILL GETS SIX APPLICANTS FOR EVERY AVAILABLE SEAT “If you think about it from domestic applications, we will see some recovery when the economy turns,” says Chowfla. “People tend to go back to university (during an economic recession) because it is a time to invest in themselves. They are using a forced sabbatical as their companies restructure. There are changes (this time) and you will see some go into specialized master’s programs but broadly they will come back.” The bigger issue may well be the global talent pool. “In international applications, high-quality schools are competing for talent in Europe and Asia and the visa issue along with immigration rhetoric has become a factor. That will not change by itself. We are already seeing some recovery in some markets: In India, there is increased GMAT test-taking volume. As the administration changes, we may see some recovery. But we are not going to see the same recovery. International mobility is declining because of a greater supply of international schools. You have highly ranked European programs and candidates are saying, ‘If I am not going to work in the U.S. after getting my degree we might as well study closer to my home country or in a shorter one-year program.'” Yet, Chowfla isn’t seeing the U.S. MBA market as a glass half empty. GMAC researchers, he notes, recently examined application demand for the U.S. MBA programs ranked in the top 50 by U.S. News & World Report. “I would be remiss to say that regardless of all these effects on application volume, the median top MBA program in the U.S. still received six applicants for every available seat,” says Chowfla. “And eight of 10 of them reported that the applicant pool was of equal or better quality than the previous year. So it is a long way from cutting to the bone for these programs.” RECRUITER DEMAND FOR MBAS REMAIN STRONG ALONG WITH CANDIDATE INTEREST IN THE DEGREE That said, Chowfla points out that both recruiter demand for MBAs and candidate interest in graduate management education overall remains strong. Four out of five candidates, he points, still consider an MBA degree and three out of five prefer an MBA degree globally. “If you look at outcomes, this year we reported that starting salaries were at their highest level ever and a significant majority of recruiters say they want to recruit more MBAs. “We are also seeing some significant shifts. One is a geography shift. Global demand is still strong but stronger in Europe and Asia than in the U.S. where we are seeing a decline. Domestic applicants have been steadily declining due to a strong economy. Candidates are reluctant to give up their jobs to go to a full-time format. So there is competition from shorter formats including online courses.” The cost of the degree is also a factor in the decline in interest of the full-time, two-year MBA in the U.S. “Price is definitely a factor,” believes Chowfla. “We all recognize that the sticker price has grown faster than inflation. In some cases, it is reaching levels that turn off candidates. There are some natural market forces that come into play. We are beginning to see some natural countervailing factors come in, including more interest in one-year MBA programs in Europe. So you see people evaluating the one year in Europe vs. the two-year in the U.S. and you see some people choosing the one-year option.” Continue ReadingPage 1 of 2 1 2