Downturn forces area business schools to adapt

March 14, 2012

The business school might be facing a new business model.

If one area of higher education was reshaped by the Great Recession, it might be the beleaguered B-school. At the peak of the downturn, applications to programs for a master of business administration hit record highs in the Washington region and across the nation. Then, just as suddenly, demand plummeted.

Applications to full-time MBA programs nationwide dropped by one-fifth, from 48,515 to 38,630, in the 2010-11 academic year, reversing all gains of the previous year, according to the Association to Advance Collegiate Schools of Business, an accreditor. Newer figures from the Graduate Management Admission Council show that two-thirds of U.S. programs saw applications decline in 2011-12.

The zigzagging numbers look much like a volatile week on the stock market. They stand in sharp contrast to the trend in undergraduate college applications, which have drifted steadily up through good times and bad.

Perhaps more worrisome, the number of American students taking the GMAT entrance exam stands at a five-year low. To compensate, business schools are accepting international students in greater numbers.


The fluctuations are of particular concern to graduate business schools in and around Washington. They generally fall outside the top 10 in industry rankings, admit half or more of their applicants and are more vulnerable to market shifts than higher-ranked programs at Harvard University, the Massachusetts Institute of Technology and the University of Pennsylvania.

Business-school admissions are notoriously cyclical, and industry leaders hope new peaks lie ahead. But there is a growing sense among some deans that something has changed for good.

“We still get all the phone calls,” said Edward Lavino, an admissions director at the Robert H. Smith School of Business at the University of Maryland. “But they’re sort of deferring their interest. A lot of them are saying, ‘My company is doing cutbacks. I don’t want to commit to an MBA program in the face of that.’ ”

For the American student, at least, the MBA is no longer a golden ticket. Graduate business schools have become so numerous, and degrees so common, that the letters no longer confer such handsome rewards in rank and pay. Business-school tuition is rising faster than the starting salary of a newly minted MBA.

Business school applicants — who are nothing if not savvy investors — have answered those trends by gravitating away from the traditional two-year, full-time MBA program. Instead, they are enrolling as part-timers, studying on evenings or weekends, for a week or two at a time, or on pretty much any schedule that allows them to keep their jobs.

“Having a paycheck is really nice,” said Jessica Klein, 28, a student in the part-time MBA program at Georgetown University.

Business students talk a lot about “opportunity cost,” a business school term for what is lost in choosing one thing over another. For Klein, attending business school part time means giving up the richness of full-time study: full immersion in a vaunted business program, and all the attendant networking, career counseling and social bonding.

But attending full time would have meant leaving a good job. Klein works as a program specialist in international development at the State Department. In the past six months, she has traveled to Peru, Nicaragua, Thailand, Bangladesh, Nepal and South Korea. It is not a job she intends to lose.

“Like any good MBA candidate, I did a cost-benefit analysis and really thought I was sacrificing a lot to go to school full time,” Klein said. “I really liked my job and wanted to feel like I was still progressing in my career and not taking a two-year hiatus.”

Part-time MBA programs are the only significant growth area at many of the region’s top business schools.

Howard University launched its first online executive MBA program in January, with the first 27 students culled from more than 3,000 inquiries. (“Executive” programs are part-time and designed for mid-career adults.)

“People don’t have that luxury — not even just to quit their job, but to take a lot of time off from their job,” said Kim Wells, director of executive education programs at Howard. “These kinds of programs will accommodate people’s schedules.”

Applications to the full-time MBA program at Georgetown’s McDonough School of Business have declined 18 percent in the past two years. Enrollment growth is coming in the part-time program, where applications are down, but not as sharply. A Global Executive MBA program, launched in 2008 and offering classes in far-flung locales, drew a record class this year.

The University of Virginia’s Darden School of Business launched an executive MBA program six years ago and a global program last year. Both are thriving.

Part-time students now outnumber full-timers in MBA programs at George Washington University, the University of Richmond and the University of Maryland.

Some younger applicants are forsaking the MBA altogether to pursue specialized master’s degrees in accounting and finance, offered at several local institutions. The degrees can yield high-paying jobs without prior work experience.

Business schools have been swift to respond to changing times. That sets them apart from much of the higher-education industry, which tends to move more sluggishly.

“I think the schools are displaying admirable flexibility,” said Simon Johnson, an economist who teaches at MIT’s Sloan School of Management.

Nationally, part-time and executive MBA programs have seen little or no decline in admissions during the downturn, even as applications to full-time programs have fallen, according to the accrediting agency. Industry leaders suspect part-time programs might be recession-proof, untouched by moves in the labor market.

Part-time and full-time business school studies cost about the same, but the part-time student gets to keep a full-time job. The program typically takes three years rather than two, so tuition payments are smaller.

“I’m able to continue working, not lose my day job,” said Jack Saville, 32, a part-time MBA student at the University of Richmond and a project manager at Capital One Bank. “I’ve got a family. I’ve got health-care needs.”

The admission downturn has not spared the MBA elite, the group that includes Harvard and Penn. Those programs remain prosperous partly because their degrees still command comparatively high starting pay, and because applications still far exceed available seats.

But even their graduates are fielding fewer job offers, said David Thomas, the new dean of the Georgetown business school, who previously worked at both Harvard and Penn. Leaders of Northwestern University’s Kellogg business school last month announced a “transformational” shift away from the traditional MBA program, in favor of a shorter one-year program and greater focus on international students.

Apart from the Darden school at the University of Virginia, the strongest MBA programs in Washington, Maryland and Virginia fall well outside the top 10. Some of them have already shifted emphasis from full-time to part-time MBA study.

“I believe that over the next 10 years, we will sort ourselves into about 20 schools” able to maintain full-time programs larger than 200 students, Thomas said. “And those schools will have to offer learning experiences that are truly distinct and powerful.”

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