The University of Iowa’s Tippie College of Business made headlines when it announced that it would close its flagship two-year full-time MBA program this year. The course was in business for nearly six decades, but falling student applications eventually made it unprofitable to run.
The closure of a highly-rated MBA suggests that many prospective students are unwilling to make the sacrifices required to study full-time for two years — pausing their career, missing out on salary and promotions amid a strengthening US jobs market, and often incurring debt to finance one of the priciest degrees around.
Instead, many would-be MBAs — and business schools themselves — are choosing flexible courses that can be completed faster and at lower cost.
Tippie College, for example, closed its flagging MBA to focus on shorter, specialized degree programs that appeal to cost-conscious and time-starved managers. Less than a year after announcing the closure of its full-time program, Tippie announced that it will add an online MBA to its program roster in 2019. And Tippie College recently introduced two specialized master’s degrees, in finance and business analytics. Both exceeded enrolment expectations.
“Adapting to the market is key for growth in any organization, and we’re seeing clear shifts in what students and businesses need,” says Sarah Gardial, Tippie’s dean.
Is the full-time MBA fading away?
Long considered a must-have for budding investment bankers and management consultants, the traditional MBA has lost some luster. Last year, 70 percent of US schools that run full-time MBAs reported falls in applications to their two-year programs, according to the Graduate Management Admission Council. Applications to business master’s degrees have risen elsewhere in the world, such as Asia and Canada.
The drop-off raised important questions about the longevity of the traditional, full-time MBA. Even the most prestigious institutions, such as Harvard Business School and Stanford Graduate School of Business, reported a fall in application volume in 2018.
As demand dwindles, some expect other US schools to close their full-time two-year MBAs, as they may become unprofitable to run. Schools in rural locations are thought to be most vulnerable, as it can be more challenging for them to access corporate recruiters, say admissions consultants. As are business schools attached to public universities, some of whose finances are coming under pressure as public funding is cut in some US states, such as New York.
Chioma Isiadinso, former Harvard admissions officer and now co-founder of admissions advisory firm Expartus, says that top schools will weather the storm, but a few in the lower tier could be forced to close. “The cost of running an effective MBA, the administrative cost, marketing, at some point it won’t make any sense [to continue],” she says.
Referring to the closure of two-year full-time MBAs, Mark Taylor, dean of Olin Business School at Washington University, says: “The MBA market is a challenging one globally, and we likely haven’t seen the last of the reorganizations.”
Olin will launch a 14-month version of its MBA in 2019. “Some people want to pursue an MBA in a condensed period, because they want to stay in the same industry or company, so their opportunity costs are minimized,” says Taylor.
Yet for those who want to change careers, a two-year program provides time for deeper reflection, he says. Other two-year MBA students covet the summer internship, which is a route to post-degree jobs in industries such as banking and consumer goods.
Some business schools may be reluctant to close their flagship MBAs because they enhance their overall brand. Being ranked by prestigious publications, such as the Financial Times and Bloomberg Businessweek, provides exposure.
Also, closing an MBA could do schools reputational damage. The Wisconsin School of Business, for example, in 2017 abandoned a controversial plan to close its MBA, because of backlash from students, staff and alumni.
Online MBAs and beyond: the growth in alternatives to full-time MBA programs
Instead, many schools have added niche degrees that help students hone their skills for specific roles, such as finance or data science, or part-time online programs.
Indeed, in just the past year, a number of business schools offering highly-regarded full-time MBA programs—including Rice University’s Jones Graduate School of Business, Georgetown University’s McDonough School of Business, and Australia’s Macquarie Graduate School of Management (MGSM)—have all announced online or hybrid MBA programs.
Digital degrees were once seen as second-rate, says Isiadinso. No longer. “We’ve seen a major pendulum shift from that elitist view of traditional MBA programs being better, to more of an embracing of the [online MBA],” she says. “If you can get great career advancement without the disruption [to your career], why get a two-year MBA when the opportunity cost is so significant?”
Online MBAs have grown strongly in number and stature. Cindy McCauley, executive director of online master’s programs at Carnegie Mellon’s Tepper School of Business, which runs an online MBA, says distance learning students have access to the same faculty and career services as full-time students. Tepper’s online learners also connect in-person several times a year, she says, opening up access to the business school’s vast network.
Some US schools blame the fall in MBA application numbers on the negative immigration rhetoric of the current presidential administration — the fall was worst among international students. The difficulty these students face in accessing US work visas is another contributor to the US MBA application plunge.
“As long as that inward-looking rhetoric dominates the US climate, at a minimum it’s a major turnoff for candidates looking at the likes of London Business School and INSEAD [in Europe],” says Isiadinso. “It puts American schools at a major disadvantage.”
It is also becoming harder to tempt US professionals out of the workforce because the American economy is growing so strongly.
However, full-time MBAs still have tangible benefits
Shelly Heinrich, associate dean of MBA admissions and director of marketing at Georgetown, is bullish on the future of the full-time two-year MBA, even though applications to her own institution’s course fell by 16.2 percent in 2018.
“An MBA will be the mainstay of business schools for years to come,” she says, pointing out that two-year MBAs have competitive advantages over shorter programs.
There is, for instance, time to do extra electives, case competitions and consulting projects, which are significant learning and networking opportunities. And two-year MBA students have more time to get involved with clubs and societies, which can develop leadership experience and enhance a CV.
“There are many degrees where you can get in and out quickly, just taking the classes,” says Heinrich. “However, the two-year MBA provides an immersion in career preparation and hands-on leadership activities, in a way shorter programs often do not.”
Heinrich adds that given the decrease in full-time MBA applications, the likelihood of being admitted may be slightly greater.
Yet for a growing number of prospective students, shorter, cheaper online and specialized programs are attractive as a way to advance their career.
But experts agree this does not herald the demise of the two-year MBA. While applications have dropped, the best programs still receive several thousand each year, and the quality of candidates does not appear to have decreased.
“[Online and specialized master’s] programs won’t replace the Booth or Columbia or Harvard or Wharton MBA program,” says Isiadinso. “The people who do still want the two-year MBA, that market is still very robust and healthy.”