Monday, April 27, 2009

The future of the MBA

As someone who has a vintage MBA (from 1981) and has taught MBAs for almost thirty years, I have been spending the last few months wondering about the implications of the market crisis for MBA programs globally. After decades of almost uninterrupted growth in business schools, we are starting to look at not just a mature phase but potentially a phase of decline. Using the same principles that we so blithely recommend that companies facing similar challenges should follow, it is time for action. Knowing how slowly academia moves, I am not hopeful. Here are two of the reasons why I think we should be in crisis mode:

1. The growth in the demand for MBAs has been inextricably linked with the growth in the financial services sector. Many of our incoming MBA student have left good jobs as engineers, salespeople or analysts to come back to business school, in order to make the transition to the richer pastures of investment banking. Those pastures are not only looking smaller and less attractive now than they used to be but are likely to stay that way for an extended period.

2. As teachers at business schools, it looks like we failed the test. After all, some of our best students were at the helm of the institutions that drove us off the cliff. While the rationalization that is offered by many of my colleagues is that these individuals were ignoring what they were taught in business schools, there are other influential voices that are arguing that it is what they were taught at schools that caused the collapse.

Here is what I think we need to do:
1. Prepare for much less demand for MBAs looking forward. This has implications for people who are thinking of or are in Phd programs right now, who will be going into a smaller market.
2. We need to incorporate what this crisis has taught us into how we approach whatever we teach. We do not need to over react and throw first principles out, but this is not the time for defensiveness.
3. As individual faculty , we have to think far more seriously about what competitive advantages we have over the hundreds of others who teach the same subject. If all we are doing is delivering a standard product from a pre-set template, why should someone pay tens of thousands of dollars for that product?


John said...

I realize this is a spot for Kaplan University and also understand the perception of the institution in the business world but I think the message is right on...As I was applying for MBA school last fall I became very disenfranchised with the process and all involved. It's about numbers, rankings, test scores etc. and only a minor % are truly evaluated on their goals to change the future of business and actually help others along the way. You hear a message like this and it becomes evident that the old system needs changing.

Anonymous said...

You are right ..current MBA programs have to go in radical change mode in order to stay in business:) but this business will be small one not big one as it was.

I am wondering are need MBA programs at all.

donlsan04 said...

Yeah, I totally agree with you of the near future trends of MBA programs. It is no coincidence that the MBA business has expanded with the investment banking sector. Indeed a lot of people conceived MBA as a golden route of their career, and a lot people got compensated from their beliefs by entering into finance careers. They made disproportionate amount of money compared with their peers, and it functioned as a signal to consistently intrigue new entrants into the school. But the things have changed. While banking still remains as the most highly compensated jobs in the world, and it will in the future, presumably, the demands have shrunken and there are simply too many business schools around the place. Only few MBA programs will remain as hot shot suppliers, and many schools that enjoyed the bull will either disappear or head deep into the south.
This fact gives me a lot of concerns as a MBA wannabe. Although, I’m not yet a full-timer, I am in finance profession, and I was keep thinking about pursuing MBA after two of three years later. My mindset was totally fixated into these beliefs of MBA until the market crash.
What sort of advice would you give to potential MBA students who are highly interested?

fahbah said...

I am not sure i would put the blame on the MBA program for churning students that went on to take excessive risk and bring down companies. I think its more the "investment banking culture" that promotes risk taking behaviour (since the rewards and penalties are not symmetrical. I would get a huge bonus for generating high profits for the company, albeit at a very high risk cost. But when things go sour, the penalties that i face are not huge compared to the bonus). I think good business schools can only provide the tools one needs to be aware of for looking at businesses from different angles but it shouldn't be blamed for producing a "few bad men".

Krasen Yotov said...

The market of MBAs was another bubble that already burst. This year was actually very strong for the business schools in terms of applications but that is about to change. I wonder whether the tuition fees are going to be cut in response to the worse pespectives on the job market.

Unknown said...

Dear Prof.,
In point 2, you have mentioned that the B-Schools profs should own a part of the responsibilities for the financial debacle. I don't think that is entirely correct. It is the greed and the feeling of infallibility of a few people at the top that have led to this fall. I am sure no prof or teacher would have told the students "Go, screw the world". Each one of them were fully aware of the consequences, just that they didn't pay heed to the warnings.


Sana said...

I completely agree with this,
now-a-days MBA is like a small degree, each and every bachelor degree holder person wants to do MBA,
because of this MBA is becoming the most common degree,
i think because of this colleges are becoming so racial

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