Business school numbers down across nation

Is business school losing its buzz? After a golden era for the MBA degree, new figures show demand for the traditional, two-year master's of business administration program is slumping.

More than three-quarters of programs responding to a recent Graduate Management Admission Council survey reported their applications declined last year. More remarkably, 41 percent reported their applications were down more than 20 percent.

The GMAC, a business schools organization, thinks total applications to business schools were flat or down only slightly. But that figure can be misleading because students can apply to many schools.

A better indication of student interest may be the GMAT, the standardized test for business school admission. As of June 30, 7 percent fewer GMAT tests had been taken compared to last year, and the figure is down more than 25 percent compared to the record year of 2002.

The good news for business schools is that interest in their often more-profitable executive MBA degrees -- shorter programs for older students who continue working -- is strong.

Still, two-year MBA programs remain the primary focus of many business schools. Wharton and Harvard may never have to worry about filling classrooms, but other schools that saw MBA programs as a cash cow and rushed to grow them might.

During the 1990s, business schools were hot as many sought training to ride the Internet wave. They also flourished during the bust, as many people viewed business school as an agreeable way to sit out the economic downturn then return to the job market with a better credential.

Now, the GMAC ascribes much of the decline in interest to the improving economy. Daphne Atkinson, GMAC's vice president of industry relations, said interest is returning to historical norms, and people are more likely to be choosing an MBA because it will help, not because they can't find a job.

"There was some flow into the pipeline driven by some serious externalities: people looking for options in the wake of a meltdown in the economy," she said.

But the numbers also reflect other challenges. GMAT numbers are down more among foreign students than U.S. test-takers, with interest from China and India fading in particular.

That may reflect worries about visa restrictions that have affected almost all of American higher education, not just MBA programs. But more troublingly, it may show international students are finding preferable alternatives overseas, threatening America's position as the leader in management education.

"There's no question that over the last decade places like INSEAD [with campuses in France and Singapore], London Business School, ESADE in Spain have become much more part of the places you would consider going to get an MBA," said Jeffrey Pfeffer, a professor at Stanford's Graduate School of Business. Atkinson said the real change is that Chinese and Indian students are finding better job options, and now even quality MBA programs, in their home countries.

But Pfeffer also says the numbers likely reflect growing skepticism about the value of an MBA -- an argument he has made in a number of academic papers. It's also the topic of a new book by McGill University professor Henry Mintzberg which has received widespread attention in the field.

"I think people are becoming more skeptical about this," said Pfeffer. "It's been in the wind for a long time, the fact that unless you get an MBA from a really top-notch school, the value is not clear."

He also noted MBAs are becoming more expensive. Finishing a two-year degree can cost students $100,000 or more.

Atkinson maintains the degree is still valuable. The latest survey reports no decline in applicant quality, and in the group's most recent MBA graduate survey, 60 percent described the value of their degree as "outstanding" or "excellent" and another 28 percent called it "good."

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