/Some Schools Shutting MBA Programs….But Don’t Cheer Yet

Some Schools Shutting MBA Programs….But Don’t Cheer Yet

MBA enrollments have been falling, and one of the side effects is that some MBA programs are going the way of the dodo bird. But sadly, this does not necessarily mean that that MBA degree is in decline. Unfortunately, internet MBAs are skyrocketing.

Now it may seem hypocritical for an MBA who clearly benefitted from getting the degree, at least in pecuniary terms, to criticize the degree. But your humble blogger graduated in 1981, when there were far fewer MBA programs and the financialization of the economy hadn’t yet started. 40% of my class had worked in manufacturing, meaning not just for manufacturers but in the “make the trains run on time” part of the operations. About the same proportion of the class were engineers.

I can’t prove these points, but I know they are true:

  • Having a critical mass of engineers (and I mean real engineers, not “software engineers,” since software is shipped at performance standards that are unacceptable in other consumer goods) in MBA programs and corporate-land as a whole considerably reduced the incidence of bad managerialism that is associated with MBAs: thinking they can manage anything (that the intricacies of an industry aren’t that important) by metrics (gah!) and that lower level workers are disposable. Engineers understand that there are physical constraints, that tradeoffs matter and need to be evaluated, and that while production in theory can be made more efficient, there is often a difference between theory and practice, particularly if you keep losing people who have accumulated knowledge.
  • Financialization and the rise of PCs synergized in a pernicious way, also fueling self-serving managerial and executive behavior. Remember how the product that put the PC on the map was VisiCal? If you’ve ever done a financial forecast on green ledger paper with a calculator, it’s torture, because if you make one mistake, everything to the right is wrong. Spreadsheets made it possible to do much more modeling of M&A deals, facilitating the use of more complex financial structures, and it also made it easier to create new products like non-government-guaranteed mortgage securities. But more subtly, the proliferation of spreadsheets led to users treating the spreadsheet as reality, simply fooling with assumptions to make the model produce a needed outcome, and becoming desensitized to the fact that the model wasn’t reality.1
  • The growth in MBA programs led MBAs to colonize non-business fields, like higher education, health care, and not-for-profits, to their detriment. The result has been adminisphere  bloat and a focus on fundraising at the expense of delivery on organizational goals (for instance, more and more universities have become hedge funds with educational institutions attached).

Another problem with too many MBAs, or too many highly credentialed people generally, is that over-investment in education is not good for the individual or society. Jamie Galbraith made that unpopular point in his book The Predator State. The problem with high levels of education is that they greatly narrow one’s career options, so students can wind up with a costly investment in schooling that they feel compelled (or are required to) recoup, yet the financial rewards may not be there, or their chosen career may see great changes that reduce the value of the extra education that they obtained.

The situation has in many respects gotten worse since The Predator State was published (early 2000s) since college then was still a route into lots of entry-level jobs. But as more and more employers were hiring only people who’d done the same job somewhere else, they started looking even for new BAs with education or experience that was directly relevant. No longer was college a place to get a good general education and broad exposure to cultural history. It was now a place to get workplace skills.

Finally, I am highly skeptical of online degrees and wonder how much online MBAs will be valued in the job market.

The Forbes story explains that some universities are closing money-losing, sub-scale MBA programs, since their drain has gotten worse as students are leery of taking on debt, plus foreign enrollments have fallen off thanks to Trump. Key sections:

The University of Illinois’ Gies College of Business has become the latest school to announce that it is getting out of the full-time, on-campus MBA market. Instead, Gies will focus more aggressively on its online MBA option, the $22,000 iMBA, which has seen big growth since being launched in 2015.

Why is Gies giving up on its full-time MBA? For one thing, the school admits it is losing money on the program….

There are a surprising number of schools in this same predicament. They have sub-optimally sized programs that cannot support the expenses required to deliver a quality program. And that is why we have seen a number of schools drop out of the full-time MBA market. The list includes the Univesity of Iowa, Wake Forest University, Thunderbird School of Global Management, Virginia Tech, and Simmons College.

Many are putting more resource behind their undergraduate business programs, specialty master’s in business, and online MBA programs. Today, nearly 32,000 students are studying for an online MBA at the 25 largest programs in the U.S. At the same time Gies experienced declining interest in its full- and part-time MBA programs, interest in its online MBA has exploded. Applications to its iMBA are expected to hit 3,200 this year, up from 1,099 in 2016, even though the program isn’t yet ranked among the best online MBAs in the U.S.

Another “cheaper degree” approach is “specialty degrees” such as in data management and….drumroll…entrepreneurship. I’ll let readers have at that one in comments.

The reason I needed to have a high-powered degree in the early 1980s was that women were only a half a generation into having broken into the professional track at major firms and big companies, and you needed every advantage you could muster. It’s sad that things are so precarious now that the need to go to extra lengths to be able to get your foot in the door has now become widespread.


1 This isn’t just my view. It’s discussed at some length in Michael Schrage’s book on modeling, Serious Play. Admittedly, some parties have a professional incentive to encourage their clients to regard the output of a computer model as more real than it is because it will facilitate a sale.

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