MBA Turmoil

MBA Turmoil

The degree, and the local institutions that offer it, are struggling through a period of disruption and renewal.

It seems like you can’t walk anywhere in downtown Minneapolis these days without seeing advertising for an MBA program. The degree that was once a sure ticket to a better salary and a better job has come under fire in recent years with charges that schools are turning out students with more technical skills and less leadership and management ability. Prospective students are reasonably questioning the value of the time and financial investment to obtain the degree. Still, on a national level, schools are churning out more than 100,000 MBA graduates a year.

According to recent research from the Stacy Blackman MBA Consulting Group, career advancement was the No. 1 reason cited by 44 percent of students for getting their MBA and a desire to change careers was right behind that at 38 percent.

The Twin Cities is home to many different MBA programs and there are as many as 23 different programs actively marketing their offerings to potential students and employers, according to Lisa Guyott, director of marketing communications for MBA programs at the University of St. Thomas. Historically the area is home to some of the more innovative MBA programs.

The University of St. Thomas claims to have been the first to offer a part-time MBA program in the early 1970s, and most recently Capella University, known for its online programming, became the first online institution to receive approval for federal financial aid for its master’s and MBA offerings. And lest we forget, the only top 25 program in the state is the Carlson School of Management at the University of Minnesota.

The largest segment of the entire MBA market is composed of evening and part-time programs, which include executive MBA programs that are designed for students with business experience who may already be in management or leadership roles. It’s in this market where applications and enrollment have been falling according to a report issued by the Graduate Management Admissions Council. This has schools scratching their heads.

According to the Graduate Admissions Council, 54 percent of all part-time programs reported a decline in applications in 2013, the largest percentage downturn in five years. In fact, according to the organization that runs the GMAT, the standard test for MBA admissions, the number of people taking the test has declined more than 50 percent from 10 years ago.

The University of St. Thomas, which pioneered part-time MBA programs and saw years of steady increases, has seen enrollment drop precipitously in recent years, although things have stabilized and are now static according to Guyott.

St. Thomas hit the perfect storm. Just as the school went through an arduous process of gaining Association to Advance Collegiate School of Business accreditation, a nationally recognized standard held by programs like Carlson, the bottom began to fall out of the market.

The recession of 2008-09 hit and the result was contrary to what historically occurred at graduate business programs in business downturns. Usually, as business dips and unemployment rises, graduate programs see increases as workers go back to school to gain an edge in a more competitive environment, or to change careers entirely. This time students questioned the time and expense of getting an MBA, and employers reeling from the bad economy reduced tuition reimbursement.

Carlson also saw enrollments decline, while a host of other programs began to pop up at schools like Augsburg, St. Mary’s and Bethel. The more competitive market for students found out-of-state institutions like Northwestern, the University of Chicago, and the University of North Carolina begin to ramp up recruiting in the Twin Cities.

A shrinking student base and a more competitive landscape meant something had to change. It was a big wake-up call for MBA programs across the country, and changes are underway. Spending more on advertising and promotion isn’t the answer. The issue isn’t awareness, it’s relevance.

Capella may be undertaking the most innovative approach of all with its new FlexPath MBA. According to president Scott Kinney, “What it basically does is, rather than a traditional bricks-and-mortar program, you hold the expectations of learning constant, but you vary the time, so students can move faster if they have greater command of the materials, and more deliberately when they have less; in a traditional program you can’t do that—it’s all the same speed.”

The Carlson School reports that enrollment for its full-time program is up, which also reflects a worldwide trend that shows for the second consecutive year the majority of full-time, two-year MBA programs have either risen or remained stable. According to Phil Miller, assistant dean of MBA programs at Carlson, full-time enrollment has been way up for the past three to four years, and applications for the program this year are the highest they’ve been since 2003-04.

Carlson is diversifying by offering more targeted master’s programs, such as a relatively new one that focuses on business analytics, as well as offerings in areas like human resources and tax accounting. So, rather than just relying on its MBA, the school is looking to broader offerings that include more specialized degrees tailored to the needs of the market. If the recent analytics program is a good indicator, the strategy is working. That specialized one-year program saw a 177 percent increase in applications this year versus last. Combine that with increasing full-time MBA enrollments and part-time and executive program enrollment stabilizing, and Carlson looks to be in good shape.

At St. Thomas, Lisa Guyott says that the MBA program is in the midst of exploring new offerings and promises changes led by a recently hired director of program innovation. It has also just launched a marketing campaign with a unifying theme of addressing issues that have broad impact socially and in the business world.

Like any product or service, sometimes a disruptor comes into the market and makes you rethink your business; or, in the case of MBA programs, sometimes the market disrupts your business and forces you to change.

Glenn Karwoski (g.karwoski@creativepr.com) is founder and managing director of Karwoski & Courage, a marketing communications agency. He also teaches in the graduate school at the Opus College of Business at the University of St. Thomas.

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