B-schools are enjoying an A-rating these days.
As the job market has become saturated in recent years with education, law and journalism degree holders, future breadwinners have turned toward business training. The end of campus radicalism and the reality of making a buck during the recession have aroused a new respect for business among the young.
Stiff job competition, the result of persistently high unemployment, as well as women's liberation and the need for managerial experience in emerging nations, have also increased applications to business schools.
Take Brian Hughes, for instance. A graduate of the Massachusetts Institute of Technology and now a student at Harvard Business School, Hughes, 23, of Ottawa, said he considered going to law school.
"Law is helping somebody else to do something, but business is going out and accomplishing something on your own," he said. His interest: economic development of outer space and zero gravity manufacturing.
During the past decade the numbers of law and advanced business grads have both doubled. Yet, since 1974 there has been a 37 per cent rise in the number of master of business administration (MBA) degrees, compared with a 7 per cent jump in law school graduates. The Department of Health, Education and Welfare estimates that 40,600 men and women received MBAs last June. In 1970, there were 19,300.
(Unlike the JD or LL.B, the MBA is not recorded separately, so HEW's numbers include some other advanced degrees in business such as master of science in accounting. These others account for about 10 per cent of the total number of business masters, 45,120.)
In 1976 Fortune magazine polled 800 chief executive officers in industry and banking. More than half had attended graduate schools, mainly to study business. Forty per cent of them received advanced degrees, the majority MBAs.
The oldest B-school in the country is the University of Pennsylvania's Wharton School, founded in 1881. Dartmouth's Amos Tuck School of Business Administration dates from 1900 and Harvard Business School came along in 1908. Until 1965 the 15 top schools awarded two-thirds of all MBA degres; they now graduate only 20 per cent.
Since 1950 more than 500 new business schools have been established. At last count there were some 1,100. All teach the nuts and bolts of commerce - accounting, marketing, production. In addition, 400 of them offer masters degrees in management. The curricula include subjects such as business policy, quantitative analysis, behavioral sciences and international finance.
Of the 1,100 B-schools, 199 are accredited by the American Assembly of Collegiate Schools of Business, the 61-year-old dean of accrediting agencies. Of 400 masters programs, 130 are accredited, so some good schools are necessarily left out. While critics contend that AACSB's strict rules for accreditation stifle innovation (75 per cent of the faculty must be full time, for example), AACSB maintains they are needed to insure quality in the face of a business school boom.
The proliferation of B-schools has naturally led to intense competition among them. To lure applicants they offer innovative curricula, specialities, new teaching methods, hours and locations. Recently introduced electives include subjects such as agribusiness, small business, and non-profit organization management. A California school even specializes in teaching the basics of alternative business to those interested in food co-ops, bakeries, feminist record companies and the like.
For students already well established in their careers, there are so called executive MBA programs that skip the basics (although remedial math and other catch-ups are available) and concentrate on finer points of management. Some schools will even design a special MBA program for employees of a single company, tailoring the courses to particular corporate needs.
B-schools, true to their tenets, are good business. Universities charge students a wide range of fees, starting at California State University's $400 tuition and going on up to the $18,000 in tuition and expenses needed to get an MBA at Harvard or Stanford. At a city campus like Pace University in New York, where campus living expenses are not charged, the fee is $7,000 for the executive MBA. If the student's salary is included, the total cost to an employer can run up to $70,000.
Universities frequently do not break out their business school budgets. In deed, B-school revenues - as well as those of other money-making divisions such as law schools - are sometimes used to help out less prosperous programs.
Forbes magazine reported last year that the four-year-old National University in San Diego had a profit of $200,000 - "nearly as much as the Harvard Business School's surplus."
Tuition pays only a portion of the budget. The rest comes from investments, endowments, and donations by corporations and individuals, many of whom are successful alumni. At Harvard Business School there are 40 endowed chairs, all financed by individuals. At Stanford University in Palo Alto, Calif., it cost $600,000 to endow a chair.
The Council for Financial Aid to Education estimates that corporations gave $379 million in direct grants to universities in 1976, plus another $170 million in indirect aid like scholarships. No aggregate figures exist, however, on the amount of aid to business schools alone. Exxon, for example, gave $308,000 last year. Stanford receives about $2.5 million a year toward its $6 million budget from gifts and corporate programs.
Its Sloan Program gives preference to the employees of favored companies. They receive full salary while working for nine months toward a master of science (MS) in management. Half of the students are placed each year by the same companies.
Pace University in New York has jointly developed an MS degree program with American Telephone & Telegraph for its third and fourth-level managers. Courses are offered on company premises during working hours.
Among those companies regularly paying their employees' tuition in executive MBA programs are IBM, Xerox, General Foods, Union Carbide, NBC, Western Union. New York Telephone, and Johnson & Johnson.
Will the boom in business schools go bust? Are there too many MBAs flooding the market? Will the degree lose its value to recipients and its appeal to employers?
Harvard's Business School Dean Lawrence Fouraker said last spring he expected a leaveling off soon.
"The 26- to 30-year-olds will peak," he told Forbes, "and I doubt that starting salaries will continue to increase as fast as tuition costs rise. I think there will be a collapse in the 1980s."
James Russell, Pace's Director of Admissions, declared, "We may be approaching job market saturation of MBAs." Applications for Pace's graduate programs on its Manhattan compus fell 14.7 per cent in the spring of last year. The largest decline was in MBA programs.
Moreover, he noted, average entrance exam scores for new MBA students were "disurbingly low," falling from 476 (out of 3 possible 800) in spring of 1976 to 461 in spring of 1977. Though he denied that Pace has lowered admission standards, the university's enrollment nevertheless increased 18 per cent this year.
As evidence that the peak has not yet been reached, the Educational Testing Service of Princeton, N.J., which administers the entrance exam required by many advanced business schools, reports that there were 11,000 more test-takers in November, 1977, than in the previous year.
Nearly 200,000 business school candidates are expected to take the test between July 1977 and March 1978, compared with 150,000 candidates for the law school entrance exam.
Whether the MBA wave has already crested or whether there are just more universities trying to cash in on the B-school bonanza, student recruitment has been raised to a new fervor.
"It is clear," pace's admission's officer added in his annual report, "that corporate recruiting and increased college recruiting is necessary to maintain our place in the market."
The top-rated establishment schools still accept only one applicant in seven or more, but how can less-well-known schools, like the University of New Hampshire's Whittemore School of Business, compete?
In its quest for students this relatively young business school advertised last fall in Washington newspapers that its assistant dean of admissions would personally interview prospective applicants in a downtown office suite.
Asked why the university went in for such expensive recruiting, Dean Mary Ann Scher replied, "It's the best way of getting the type of (older, employed) prospects we want." Besides, she added, the office was being lent by the corporation previously headed by the University of New Hampshire's business dean.
In November 1976 business schools held an open Graduate Management Admission Fair in a New York hotel. It marked the first time these schools of higher learning had bowed to using the same group recruiting tactics as colleges. Subsequent fairs, which attracted more than 5,000 persons, were held again this year in Chicago and San Francisco, as well as New York.
To find older, working students, the recruiters have to go to them.
"You can't go to Citibank and sit in the hall, nor can you walk into a Wall Street brokerage house and set up booths," said John Prinz, Director of Admissions of the University of Chicago's business school.
The trend toward the more mature student has several causes. Academically, they are usually highly motivated because they are gambling on changing careers, or are they are making a special effort to get ahead in their chosen careers.
Their work experience makes classroom discussion more realistic, more like the real business world. Their training often relieves professors of the necessity of teaching them the basics and frees the faculty for more research.
But, perhaps most of all, they bring in their employer's dollar, in the form of tuition, and sometimes grants and fees. The university does not have to offer so many scholarships; corporations do not default on student loans.
The fairs also serve as a recruiting ground for minorities. According to the Chronicle of Higher Education, enrollments of blacks and other minorities shot up six years ago, but have since leveled off. The percentage of blacks taking the GMAT has increased only marginally, from 4.7 per cent in 1971 to 4.9 per cent in 1975. And, even if they are accepted, most cannot afford to finance their own advance education.
Since the Bakke case particularly, universities have been gun-shy about quotas for financial aid to minorities. The best way is for their companies to back them, but the numbers of blacks in responsible industry positions who would qualify for higher education still are very few.
Women, on the other hand, are not only taking the entrance exam in larger numbers (6 per cent in 1971 and 17 per cent in 1975), they are enrolling in larger numbers. There is also a small increase in foreigners who now make up 16 per cent of the applicants.
NEXT: How well is business being taught?