At its zenith, the full-time MBA program at the University of Illinois’ Gies College of Business enrolled 74 students. This year the number has fallen to a nadir of 38, a paltry cohort that marks the end of an era for the business school: it is shutting its flagship business degree course after this class graduates.
“The strategic, business and educational case was relatively simple,” says Gies’ dean Jeffrey Brown: applications to traditional MBA programs overall have been on a downward trend for the past few years, and the program at Gies is expected to lose $2m this year.
“[But] the emotional side of the equation was quite difficult,” says Brown. “Many of our stakeholders feel a sense of sadness; a program that was so important to them won’t be delivered.”
The move risks the ire of students, faculty and alumni, who may fear their investment in the degree, both in terms of tuition fees and time out of work, could be devaluated.
But the closure of a highly-rated MBA — Gies’ course is ranked 47th in the US by US News — is not the first capitulation and it seems unlikely to be the last. The University of Iowa’s Tippie College of Business graduated its final full-time MBA cohort this year, after student numbers fell from a peak of 240 to a troth of 35.
Applications plunged at 70 percent of all schools offering two-year, full-time MBAs last year, according to the Graduate Management Admission Council (GMAC), which runs the GMAT admissions exam. Schools point to the high opportunity cost of not working as a key reason for the decline in applications, which hit even the elite schools such as Harvard and Stanford. Prospective students fear missing out on a pay rise or promotion amid a booming US jobs market.
“We are living in a world where people are increasingly time-poor, and despite its many benefits, full-time program delivery is probably most exposed to this trend,” says Mark Stoddard, director of operations at the Association of MBAs. He adds that two-year MBAs are “under pressure”.
As a result, there’s been a thinning of the herd of MBAs, a saturated education market. Statistics from the Association to Advance Collegiate Schools of Business (AACSB) show that between 2014 and 2018, the number of schools it accredits offering MBAs sank nine percent to 1,189. That means 119 fewer schools offered MBAs during the survey period.
Some expect more MBA programs to be closed
Wake Forest University and Virginia Tech are among the business schools to have struck traditional MBAs from their portfolios in recent years. Matthew Myers, dean of SMU’s Cox School of Business in Dallas, Texas, believes this signals the start of a bigger and enduring trend.
“I do believe there will be more closures over the coming decade,” he says. “Many can no longer afford to carry a program in deficit year after year,” adds Myers, due to declining enrolment, cost of faculty and scholarships for students.
“It is questionable whether the traditional MBA will be the true ‘flagship’ program for schools a decade from now.”
Alex Min, CEO of The MBA Exchange, an admissions consultancy, expects lower-profile institutions to be the worst hit, as they cannot rely on their reputation or ranking to attract students to their MBAs. Location is also a factor, with programs that are not by a large city that provides access to corporate recruiters, cultural diversity and convenient air travel likely to suffer.
On the rise: Online MBAs and specialized business masters programs
However, while the full-time MBA is a shrinking market, other business school programs are booming. The high opportunity cost of MBAs has led to the proliferation of shorter and more specialized business masters programs. AACSB data show there were 140 new niche masters degrees launched in subjects such as data analytics last year, a 16 percent increase from 2014, to 981 courses. Also, the number of Online MBAs offered doubled to 390.
Applications to the Online MBA course at Gies have tripled since 2016, with around 2,000 students now enrolled in the digital degree, due in no small part to the relatively cheap fees: $22,000. This compares with $58,000 for the full-time MBA at Gies.
“The future of the MBA is evolving,” says Brown. A one-size-fits-all approach no longer works, he adds. “We’ll continue to see more diverse degree and non-degree offerings. The MBA itself will be delivered in a variety of formats to meet the needs of students” who want to learn on their own terms: when, where and how it suits them.
Myers at SMU Cox believes the value of an online and offline MBA is converging. “When Online MBA programs first began, tech and pedagogical models hadn’t developed enough to make the experience as rewarding as full-time programs,” he says.
“Now, virtual instruction and collaboration have modernized the online experience in ways that were unimaginable 10 years ago.” For example, some schools are experimenting with futuristic virtual reality and hologram technology to make online instruction as close to the real experience as possible.
However, The MBA Exchange’s Min says that interaction with classmates — a key ingredient to a good MBA — is still maximized on campus. “Compared to an on-campus MBA, the online version provides far less intellectual immersion, teamwork and leadership exposure, as well as cross-cultural exchange, social involvement and alumni affiliation,” he says.
“Also, a diploma earned online continues to be viewed as an ‘MBA lite’ by many employers.”
Can full-time MBAs adapt?
Min believes that two-year MBAs could adapt to the application downturn by cutting the length of their courses to one year — several elite US schools have established one-year MBAs alongside their two-year options, including the Kellogg School of Management and Babson College.
He also expects to see a younger incoming class as schools compete to attract students — some offer a pathway for undergraduate students to come straight into their MBAs without accruing the usual several years of work experience first, such as the Yale School of Management.
“At least temporarily, we may see a softening in average GPAs and test scores to help fill seats, as well as an increase in merit-based financial aid to make the two-year MBA more affordable,” says Min, though the former may reduce cohort quality and thus peer learning.
At SMU Cox, Myers says the MBA syllabus will also have to evolve, in addition to program delivery method and admissions requirements, to address the fact that schools are preparing students for jobs that don’t even exist. Indeed, the World Economic Forum predicts that 75m jobs will disappear while 133m new jobs will emerge by 2022, many unidentifiable today.
“The MBA programs that survive will learn to adapt more quickly to the changing marketplace,” says Myers.
He believes the full-time MBA, refreshed and improved, will remain viable for the foreseeable future, but just to fewer people.
Min, the admissions consultant, agrees. “Like vintage wine, fine art and blue-chip stocks, the market value of a two-year MBA degree – even those from even elite business schools – fluctuates over time, but will continue to attract and reward astute buyers for many years to come.”