What Most Surprised GMAC’s Chief In 2019

DEMAND FOR THE MBA COULD INCREASE AT DIFFERENT PRICE POINTS

But there are also signs, says the GMAC chief, that there can be increased demand at a different price point. He notes that the University of Illinois’ Gies College of Business now has more than 2,500 students enrolled in its $22,000 online MBA and that a $25,000 online MBA that will be launched in the fall fo 2020 by Boston University’s Questrom School of Management is getting strong interest (see The Low-Cost Online MBA Disrupters).

“What remains to be seen is how they will affect tuition for the two-year programs,” says Chowfla. “We have seen leading schools announce price freezes for competitive reasons and that may lead to some rebalancing of prices over time (see HBS & Booth Hold The Line On MBA Tuition Hikes).

Does he expect more business schools to follow the lead of the University of Illinois and other schools in closing down their full-time MBA programs? “That is hard to predict,” he says. “Individual schools are going to have to make their decisions about their sweet spots or value propositions. If applicants don’t get into those top 50 programs, are those candidates willing to go to other programs? That is the big question. It’s not only dependent on the quality of the program or the quality of the faculty. There are other factors that are not in control of the school including location. A recent study we did indicates that location is a significant driver of applying to a school.”

ONLINE MBA PROGRAMS ARE OFTEN A SUBSTITUTE FOR PART-TIME OR WEEKEND MBA OPTIONS

The growth in online MBA programs, he believes, is probably not cannibalizing the full-time format. “It’s not clear to us that online is a replacement for the two-year MBA,” says Chowfla. “To understand the impact you have to take all GME (graduate management education) programs into account. Students make choices around the continuum of different options: two year vs. one year, part-time programs and Executive MBAs. Often online programs are substitutes for part-time and weekend formats. It allows the candidate to stay in the workforce and stay employed and continue with their graduate management education. In many cases, those students will have opted for a part-time program.”

It is also not a certainty that the explosive growth of one-year, specialty master’s degrees in business, from data analytics to supply chain logistics, has hurt the full-time MBA market. “Globally, we have seen a lot of specialized master’s. They break up into two different categories: one is pre-experienced programs that tend to be more generalist as well as the more specialized programs. When you look at pre-experienced programs they have a very different pipeline. These are people looking for their first jobs, while the MBA pipeline is more defined as a move-up program, not a move-in option. Those are two different pipelines and they seem to complement each other. I don’t think we have accurate data to say there is or isn’t cannibalization when people take a specialized master’s. We do see people coming back but it is entirely possible that when people do a specialized master’s in finance, they would have considered an MBA.”

Chowfla also doesn’t think that the popularity of the business major in undergraduate education has had that great an impact on the MBA market, either. “We don’t have any data that leads to the conclusion that undergraduate business majors have hurt the MBA market. Companies are willing to segment their job requirements much more. Companies hire from a variety of different sources and other degree sources are acceptable at the entry-level. Banks and tech are finding a use for engineering grads and other STEM (Science, Technology, Engineering & Math) students where previously they would have only considered business graduates. STEM graduates are in demand not just in STEM industries but they are attractive in financial services because of their quantitative skills. Traditional functions such as marketing are becoming very quantitative. So they are in demand beyond the narrow confines of their degree type.”

‘SCHOOLS SHOULD NO LONGER EXIST IN A ONE-SIZE-FITS-ALL MARKETPLACE’

What are his predictions for the year ahead? Pretty much a continuation of the trends already roiling the market. “There is a continuation of a long-term trend toward market relevance. That affects our traditional assessment businesses and the segments of the program types as well as the geographic shifts. We encourage our partner schools we no longer exist in a one-size-fits-all marketplace. Student needs are dramatically different and we need to build on the most effective ways to meet those needs.”

Market relevance, of course, also has implications for GMAC. That is why the organization is piloting a new test of emotional intelligence that follows a successful test by rival Educational Testing Service (see GRE Pilots A New ‘Soft Skills’ MBA Admissions Test At Yale SOM). “We are still in the pilot stage on social intelligence,” says Chowfla. “We started with six schools in the U.S. but have a fair amount of interest in other parts of the world so we are putting together plans to expand it.

“We are constantly looking at ways to make any of our products more efficient. For the GMAT, it is to deliver a highly valid and secure instrument to predict classroom performance and it needs to be secure in making sure that the person who took the test was the person whose score gets reported. Two years ago, we reduced the length of the test because we were able to maintain its reliability in a 30-minute shorter test. We also recognize that there are certain instruments or program types where alternate testing instruments would be appropriate. It is market relevance that is important.”

That is an important lesson for business schools as they attempt to adapt to new demands and challenges.

DON’T MISS: 2019 BUSINESS SCHOOL RANKINGS: THE COMPLETE COLLECTION or 2019 SCHOOL INPUTS & OUTPUTS: WHO GOT IN & WHAT MBA GRADS EARNED