EMBA Sponsorship in the Current Economy

Corporate sponsorship of EMBAs has dropped as a result of the contracting economy almost all universities are reporting the same trend.

Some have even reported no-shows from admitted students – mostly from the financial sector – who were unable to secure loans or corporate support. “The number of applicants is slightly more than in previous years, but the number of people who are putting their final decision on hold has risen slightly. Both applicants and companies are holding off for about three months to see if their prospects improve,” says RSM’s Ken Robertson, Director of MBA Marketing and Admissions. Unfortunately, when many companies cut what they see as “costs”, they forget that they are actually mortgaging their enterprise’s future.

Corporate educational reimbursement programs are an easy part of the budget to reduce, but one which companies cut, as Geoff Colvin pointed out earlier this year in Fortune magazine, at their own risk. In an article entitled “How to Manage Your Business During a Recession”, Colvin advises: “Keep investing in the core. For virtually all companies, a critical part of the core is the continual development of employees. Yet it’s remarkable how many businesses cut training and development in a downturn. The best never do.”

The unfortunate short-term perspective of some public companies is also playing a role in the decrease of corporate sponsorship. In addition, certain taxing authorities have become more aggressive and have caused confusion and uncertainty about the value of educational benefits being included in an employee’s income. On the upside, some companies do seem to have learned their lesson when they cut back too far in the 2001 downturn.

Changing trends

The current decrease in corporate sponsorship must also be seen as having been catalyzed by the recession, but also part of what is really a bigger trend, one which EMBA programs have been feeling for years now. Where, on average, ten years ago one in three students were selffunded, today, on average only one in three are sponsored (one in three are self-funded, and the other third has some mix of sponsorship and self-funding). Aggravating the trend is the fact that, with many people out of work, the opportunity cost of full-time education is lower, so more people are looking at full-time study instead of EMBAs.

The long-term trend of reduced corporate funding is due to several factors. First, people simply change jobs more often than they used to. As Tami Fassinger, Associate Dean of Executive Programs at the Vanderbilt Owen Graduate School of Management says: “The average exec will change jobs seven to ten times and the younger generations have an even greater spirit of portability, so the new EMBA programs that are hybrids (execs mixed with working professionals who are younger) have more people in this category.” It’s understandable then, that companies are increasingly reticent about making an investment that looks more and more likely to pay off for another company altogether, perhaps even a competitor.

From the candidate’s point of view

“There is less corporate support for such programs and thus, candidates interested in such programs, are pursuing them as a result of intrinsic motivation. They want to get these degrees for themselves and not necessarily for the company,” as Francis Petit, Assistant Dean and Director of Executive Programs and Adjunct Associate Professor of Marketing at Fordham University, puts it.

As a financing alternative, many EMBAs recommend that students turn to federal education loan programs, which provide a good safety net at a time when corporate educational reimbursement programs might just let them down.

Tami Fassinger, Associate Dean of Executive Programs at the Vanderbilt Owen Graduate School of Management advises: “I tell students to take out government loans and work with their employers on a wait and see basis – ‘if you like what I am bringing to the table with these new skills, incent me (pay me) to stay, which will help pay off the loans.’”

Happily, all is not gloom and doom and some counter-trends are softening the negative impact on some EMBAs. Indeed, many schools are seeing the expected decrease in applications compensated by a large increase in participants from SMEs.

As Nick Barniville, the MBA program director at UCD Smurfit says: “More and more students are coming from small and medium-size enterprises, with the number of entrepreneurial start-up clients continually increasing. There is a significant trend towards self-funding and away from company
sponsorship. Also, some hope that class quality will increase as only the most motivated candidates stick with their decisions.”

The other effect of the recession, and decrease in corporate sponsorship, is the flight towards programs which are perceived to provide better value for money. Francis Petit, at Fordham University, a notable example of a program benefitting from its reputation at present, says: “Some students are attracted to our program tuition. While it is not the most expensive or inexpensive program in our market, some prospective students see real value by our tuition. As a result, some tuition-sensitive students and/or “price buyers” may find our program, and other programs, as a potential alternative.”

Now is the time to invest

As Dr. Ron D. Ford, Associate Dean for Executive Education at the Graziadio School of Business and Management at Pepperdine University says: “Many companies continue to understand that in the new economy, intellectual capital is a tremendous competitive advantage and those companies wisely invest in their talent. Executive education is not only essential to the strength and growth of firms, it is an invaluable retention tool for a firm’s best performers and high-potential people.”

Dr Ford believes there are three main lessons to keep in mind as companies and EMBA candidates figure out their strategies for getting through the recession

1. Employers should recognize that intellectual capital is the key to their future.
2. Contracting economies are the ideal time to invest in their greatest asset (talent).
3. Students should recognize that investing in themselves has a very high rate of return.