Video
Profitable or Pleasurable?
The biggest of all the revenue boosts has been executive education: short courses that do not lead to accreditation, but offer mid-career training to company managers. They are handily pro-cyclical — companies spend on them in boom years — so that they offset the counter-cyclical swings in demand for MBAs. They have expanded hugely, and now often account for over half of a business school's revenues. Some top schools, such as MIT and Stanford, do little executive education; others, such as Columbia in New York, INSEAD in France and IMD in Switzerland, do lots. Harvard Business School offers no part-time or executive variations on the conventional MBA programme. But it does offer executive education, despite grandly turning down most of the companies that want its academics to work with their staff and refusing the usual quibbling over fees.
Off-the-peg (or open-enrolment) courses are harder to sell these days. They face competition from, among other things, companies' own "universities", of which there are now some 1,600 in America, more than the 1,300 or so conventional universities offering undergraduate business degrees. "There has been a huge swing to custom programmes," says Fiona van Haeringen of IESE, who attended a recent annual conference of business-education providers in America. "The market is very aggressive, very competitive and the power is with the buyer." Don Kuhn, executive director of Unicon, a group of about 75 business schools around the world that offer executive education, says that a survey of about 40 members found that three-quarters of them said overall revenues had grown between 2002 and 2003, but the remaining quarter said they had declined. Looking to this year, most saw growth coming mainly from customised education tailored for one company. "It's just knocking the cover off the ball," rejoices Richard Vietor, who was until recently in charge of executive education for Harvard Business School.
The trouble with executive education is that it draws faculty away from teaching MBAs and doing research. It also brings business schools into territory that is under attack from a host of commercial competitors, such as consultancies, private-education firms and executive coaches. That in turn raises questions about paying faculty. John Quelch, who once ran the London Business School and now teaches at Harvard, points out that Harvard can resolve such conflicts by picking only the clients who raise questions that challenge and intrigue its faculty. Faculty are paid extra for work on customised programmes, but not for teaching open-enrolment courses. Lesser business schools find the dilemmas greater.
And the competition is growing. Mr Kuhn bewails the fact that companies increasingly buy their executive education through purchasing organisations, which treat it like any old commodity and demand complicated contracts with lots of targets and conditions. IESE's Miss van Haeringen frets that companies increasingly want evidence of a return on their investment. "That is really tricky," she confesses. "We can't fully control what people learn and what they come out with."
But it is not just executive education that is becoming increasingly competitive. In future, the market for MBAs may well polarise. At one end will be the elite schools, fighting furiously for their place in the various rankings tables. American schools dominate the 2004 Financial Times ranking, the most European of the annual lists; only five of the top 20 schools were European. The top American schools survive on the strength of vast endowments and lavish gifts from alumni. "We get 30-50% of our budget from gifts," says Paul Danos, dean of the Tuck School of Business. "You lose money on every traditional MBA," admits Tepper's Mr Dunn. "My guess is that no top MBAs cover their costs, because you need outstanding faculty to attract the students, and you need money to finance their research. You make it up out of endowment, gifts and contributions from companies." David Tepper's donation of $55m to Carnegie Mellon persuaded the school to change its name.
At the other end of the scale are the universities of Phoenix and Webster, with modest entrance requirements and no expensive research staff to finance. The schools squeezed in the middle include those attached to American public universities, which often use their business schools as cash cows, creaming off some of the high fees that students pay.
And Does It Pay?
While competition grows, so does criticism. This is not for the first time: in the late 1950s, exhaustive reports by the Carnegie and Ford foundations complained about the inadequacies of MBA programmes. One described business administration, as taught in universities, as "a vague, shifting, rather formless subject", a criticism that still holds in many schools.
However, business schools now find themselves criticised from several (sometimes conflicting) directions: for paying too much attention to the return on their students' investment, for example, and yet for not giving value for money; for being too academic, and for being too concerned with teaching basic practical skills.
Reader Comments» Post a comment