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2015-10-20 06:15:40
MBAs remain surprisingly popular, despite the headwinds
Oct 17th 2015
THE master of business administration (MBA) is no stranger to damning
criticism. In the 1950s an influential report commissioned by the Ford
Foundation lambasted the degree for being weak and irrelevant. In the 1980s
Business Week reported that firms were bemoaning the inability of newly minted
MBAs to communicate, their overreliance on mathematical techniques of
management and [their] expectations of becoming chairman in four weeks . In the
2000s observers noticed that firms involved in corporate disasters, such as
Enron and Lehman Brothers, tended to be run by alumni from prestigious business
schools.
Yet the MBA remains hugely popular. Nobody knows exactly how many people study
for the degree globally, but 192,000 masters degrees in business were awarded
in America in 2012, making it easily the most popular discipline among
post-graduate students. Worldwide 688,000 people sat the GMAT, the de facto
entrance exam for MBA programmes, in 2014 although this is down considerably
from 2008, when 745,000 took the test.
The reason for this drop is partly cyclical: people tend to apply to business
schools during downturns in an attempt to shelter themselves from the economic
storm. But the MBA faces many longer-term problems. The most pressing is
tighter visa requirements in parts of the rich world. It may seem obvious that
countries would wish to attract and retain the brightest young minds. But to
the despair of business-school deans, both America and Britain the two most
popular destinations for foreign students now place tougher restrictions on
foreign students who want to stay and work in the country after they finish
studying.
In America foreign MBA graduates must find a firm to sponsor them for an H-1B
visa, which entitles them to work for up to three years in the country, with
the possibility to extend to six years. But the demand for these visas by far
exceeds supply. America caps the number of H-1Bs at a total of 85,000 (the
first 20,000 applications are reserved for students of a master s degree).
These are snapped up within days. In Britain graduates must find work even
before their student visa expires if they want to stay in the country.
Such restrictions are a particular problem for MBA programmes because many
students choose a business school based on where they want to work after they
graduate. Predictably, countries with a more welcoming attitude, such as
Canada, are seeing applications from abroad rise. In contrast, the proportion
of applicants interested in American schools fell from 83% in 2007 to 73% in
2015, according to GMAC, a business-school body.
Canada and other countries do not just covet foreigners deciding whether to
apply to American schools. The Canadian government has hired giant billboards
in Silicon Valley reading H-1B Problems? Pivot to Canada to attract
disgruntled foreign graduates (see picture). If [American firms] can t import
the talent, they will export the jobs, says Matt Slaughter, the dean of the
Dartmouth College s Tuck School of Business. Unlike lawyers or doctors, the
MBA qualification is transferable across borders.
Such concerns highlight the fact that MBA graduates are still in demand among
employers. At schools included in The Economist s latest ranking of full-time
MBA programmes (see ranking), 89% of students found a job within three months
of graduating. Their median basic salary is close to $100,000, an increase of
88% compared with their pre-study salaries. But some things have changed:
banks, for instance, have become much less keen on MBAs since the financial
crisis (perhaps because business-school alumni were often singled out as the
culprits).
Western business schools are also losing ground to those based in emerging
economies. The share of students who send their GMAT scores to an Asian and
Australasian business school a good proxy for applications has nearly doubled
to 8.1% since 2007. Eight-and-a-half Asian business schools now make it into
our ranking of full-time programmes (INSEAD has campuses in France and
Singapore). These numbers are small, but they are likely to rise. China, in
particular, plans to improve its business schools to meet demand for local
managers.
Established schools are also disrupting themselves. Over the past five years
the number of master-in-management (MiM) degrees, which unlike MBA programmes
admit students straight from university without prior work experience, has shot
up. In America even schools such as Michigan, Duke and Notre Dame are embracing
what was once considered a strictly European qualification. Despite covering
much of the same ground as an MBA, MiM programmes also tend to be much cheaper.
Every student who graduates from them is likely to be one fewer lucrative MBA
candidate in the future.
Not all business schools are affected in the same way. Students will always, it
seems, want an MBA from Harvard, Chicago or London Business School. It is those
with lesser reputations that face the toughest times. More than two-thirds of
full-time programmes costing under $40,000 a year reported either flat or
declining application numbers in 2015, according to GMAC. In contrast, most of
those charging more than $40,000 said that their applicant pool had grown.
That suggests an oversupply of MBA programmes. Those taking an economics class
in one of them might reasonably expect a shakeout. Alas, in the world of
business schools such laws do not seem to apply. No matter how few people an
MBA programme can attract, few schools will countenance dropping the programme
altogether: a business school is defined by its MBA. As Stephen Hodges, the
president of Hult International Business School, puts it: Is a business school
really a business school if it doesn t offer an MBA?