The Future of North American Business Schools

What are the prospects for North American MBA programs in light of the financial crisis?

Paul Danos is Dean of the Tuck School of Business at Dartmouth, New Hampshire, USA. In this essay, written for the TopMBA Career Guide, he talks about the outlook for North American MBA programs and what business schools and MBA students need to learn from the difficulties caused by the recession.

The Outlook for top North American full-time MBA programs looks stable as we approach global economic recovery in the next two years.  From what I know of other schools, and certainly at Tuck, the top programs will have outstanding incoming full-time MBA classes for the Fall of ’09.  Most schools report steady numbers of applications as compared to 2008.  Board scores, undergraduate GPAs, quality of work experience, and diversity of the classes all seem roughly on par with recent years and close to all-time highs.

Many colleges and universities do have budgetary problems due to cutbacks by governments, reduced support for part-time programs by companies, reduced endowment earnings and reduced executive education profits; but the budgetary constraints do not seem to have major affects on the actual learning experiences of full-time MBA students in the top programs.

Management education

At Tuck, we will weather the downturn without layoffs or furloughs, and none of our teaching programs are being changed during the crisis.  But, as is always the case in a major financial crisis, there are many lessons to be learned for the betterment of business leadership education.  I discuss several of these “learnings” and what I believe they mean for management education:

1. While I believe that the current crisis is not fundamentally one of personal ethical violations defined in the traditional way, there was irresponsibility on the part of certain CEO’s, regulators, politicians, etc.  They displayed a lack of the full acceptance of and perhaps even the full knowledge of their responsibilities to all constituents.  “Ethics” coverage in business schools must be expanded to embrace the full responsibility span a leader takes on.  Being unprepared, not having sufficient depth of knowledge of certain employed theories, not being brave enough to protest practices that are not fully understood, and in general not taking a broad enough view of one’s responsibilities, should all be construed as violations of a leader’s business ethics.  Business school coverage of the full meaning of ethics therefore must be expanded.

2. Another crucial area of coverage has deteriorated over the last several decades, and that is having MBA students closely and carefully analyze the process by which theories and findings are developed.  Helping students develop a “critical analysis mindset” by close exposure to top thinkers should be a goal of all top schools.  A business leader, in addition to having a broad knowledge of business issues and the confidence to act decisively, must also have an intellectual approach that is continually curious and questioning.  For instance, in the current crisis, accepted theories and findings were given too much unquestioning acceptance—those relating to the value of leverage, free markets being self-correcting, less regulation always being better than more regulation, the adequacy of existing risk analysis techniques, and many more.  An MBA program therefore must give students more personal access to faculty expertise and the process by which that expertise is developed.  This requires a new kind of coverage where the knowledge creation process is opened up to the students.  Students must develop a critical analysis mindset as part of the tool kit they will need in order to grapple with the complexities of the world.

Demographics

Will the crisis change the demographics of the students who apply for full-time MBA programs?  I don’t believe so, because the benefits to a 25-year to 30-year-old in terms of career prospects is so great and the ability to change one’s career and life are so powerful, that there will be a continuing demand at the highest level for this type of program.  I believe that ample loans and scholarships are available and employers will continue to demand mature, experienced and well-educated young leaders.

Of course, employment opportunities will reflect the real world of business.  In bad times for finance, graduates tend to reduce their emphasis in that area as we have seen this last year.  But even in the worst of years for financial services, our placements in that area only dropped from 35% to about 25% of the class.  Areas as important as financial services and strategic consulting will often shrink in downturns, but they do not disappear and they surely will grow in the good times ahead.   In recent years there has been growing interest in health-care related industries and in not-for-profits.  The diversity of employment opportunities has grown considerably in recent years.  One source of new employers of top MBA graduates is the growing number of large and sophisticated global firms, many of which are not based in North America.

One of the great benefits of the North American two-year MBA programs is the paid summer internship in which students are recruited by businesses to work along with permanent employees for two or three months.  MBA students can use this time to test their interest in an industry and quite often interns do get offers of employment after graduation.  At Tuck virtually all of our students get summer internships and about 50% of our students take permanent jobs with their summer intern company.

In general, during this crisis and afterwards, I see full-time MBA programs remaining the “flagships” of business education, because of their very positive return on investment and their providing students with such attractive career-changing options.   In summary, two reforms that I see as coming out of the crisis are: expanding ethics coverage to include the full span of leadership responsibilities and putting more emphasis on exposing student to faculty expertise in a deeper and more personal way.