Is a real shortage looming?
Doctoral Faculty Demand Edges Upward Again

A thriving stock market, motivating professorial retirements, and a vibrant business environment, encouraging private sector hiring and revving up interest in MBA careers, seem to be at the source of rising demand for business Ph.D.s.

This year's 1.4 percent rise in Ph.D. faculty vacancies, after a full decade of diminishing demand for business scholars, raises questions about which way the scales will tip in coming years. It also stirs speculation among business deans about factors affecting supply and demand and how to respond to current shortages.

Although the 1997-98 doctoral vacancy rate of 6.6 percent, reported by AACSB member schools, is not close to matching the double-digit rates of the 1980s, the increase is notable compared to recent years. AACSB surveys reported a full percentage decline between the school years of '93-'94 and '94-'95, and then again in '95-'96. The '96-'97 vacancy rate ticked up just .2 percent.

Andrew Policano, business dean at the University of Wisconsin- Madison, and other administrators believe they are on the front edge of a doctoral faculty crunch. Many more schools are bound to feel it before long, they say, unless the economy suddenly slows down, loosening the gravitational pull of private enterprise and lessening the popularity of business education.

Wisconsin, last year, left six positions vacant out of a dozen it was seeking to fill. "We have continuing vacancies from one year to the next. We use visitors, people on sabbatical who will be teaching half time, faculty who are taking a full visit, or younger doctoral students who have just finished dissertations and aren't quite ready for permanent positions," Policano said. "It's almost like what we went through 10 years ago when there was a great shortage. It looks like it's beginning to reappear."

Marty Geisel, dean at Vanderbilt's b-school, said he has had to hire two visiting professors to fill positions where recruiting efforts for tenure-track faculty were unsuccessful. Admittedly, that's not a big vacancy, but his school is anticipating growth in the next couple of years that will call for three or four additional tenure-track professors and he is wondering whether or not he will be able to find them.

"Three to six years ago, there was almost a surplus of entries into the business faculty field. Now, it is going back to where it was 10 years ago. It's not as dramatic yet, but I think it probably will get there," Geisel said.

Even a private school like Duke's Fuqua is experiencing a shortage, said Paul Zipken, senior associate dean for faculty and research. "Last year we aimed to hire 12 people and we hired eight, which was similar to the situation the year before. We have special difficulties filling positions in finance and accounting, but there's also severe competition in marketing, operations and organizational behavior."

Howard Thomas, dean at the University of Illinois, Champaign-Urbana, said he is worried about the shortage he sees shaping up. He has lost a number of promising professors in the last few years to competing schools. "The present market demand exacerbates a situation that has been around for a long time," he said.

The "situation" is the increasing challenge for business schools to put teachers in the classroom who not only have the initials P-H-D after their names, but who also are researchers and teachers of exceptional quality. What this means is that regardless of the actual number of Ph.D.s who may be in the pool, b-schools that consider themselves to be in a "top" echelon are not going to hire someone for their faculty who does not meet their standards. Thus, educators say, it is "stars," young, middle-aged or older, who are being avidly pursued and wooed, not only by the top five, but by the top 10, 20, 30, and 50.

"Compared to five or six years ago, more schools than just the top five now think they are really good schools and they want to only go after the best," said Gautam Caul, associate dean and professor of finance at the University of Michigan. "The fact that there are vacancies left may not be so much an indication of potential candidates having gone down, but quality standards having gone up."

Ross Watts, chair of the Ph.D. program and professor of accounting and finance at the University of Rochester, affirms Caul's assumption. "I don't think there's a problem with the shortage of Ph.D. faculty. I think it's more difficult to hire people who would be acceptable to us. We get enough people looking for jobs here, but we are voluntarily turning most of those people down because they don't meet our quality standards, or we don't think they meet them."

Across the country at UCLA's b-school, the director of doctoral programs, Stephen Lippmann, has the same view. "We have openings and we would like to hire in a couple of fields. It's not that there aren't candidates to hire, it's that meeting our expectations is harder. Everybody wants to hire the same small set."

David Kidwell, dean at Minnesota's Carlson School, is looking for 15 faculty for FY '99. "Everyone has to show promise of doing top-level research, but there also is enormous pressure for faculty to come in and teach well. We cannot hire anyone if we don't have strong expectations that they can teach successfully at the master's level. I think the market is thin for the caliber of people we are looking for," he said. "I expect that if we come up with 12 of the 15, we'll have had an outstanding year."

Kidwell may be more optimistic than some public school administrators that his school will be able to be successful in the hunt, but like most of the educators Newsline talked with, he acknowledged that the competition and the pressure are mounting. And, with thriving MBA programs demanding doctorates, private sector firms rewarding research expertise, and for-profit schools searching for ready-made scholars, more suitors are entering the chase.

Sources of the Shortage

For the first time in U.S. business education, retirement is becoming a factor, as a cohort of faculty who started teaching in the 1950s and '60s approach retirement age.

When the mandatory retirement age was lifted, administrators and faculty alike suspected that professors might stay on well into their 70s, Policano said. "Everyone was saying, 'I'll just keep teaching forever.' Now, they're saying, 'Why would I want to do that?'" In fact, Wisconsin has no one on its faculty over 65, out of 83 tenure-track professors.

In any given year, about 3 percent of Wisconsin's faculty, between 55 and 65 years of age, will retire, and although that is not a big number by itself, it is a new factor in recruiting faculty.

The attractiveness of retirement is fueled by the same prosperity that is fueling a demand for teachers and Ph.D.-trained business people.

"The success of the stock market in the last five years has certainly played a big role," Policano said. "Senior professors recognize that if they are not working, they will be making the same money as if they are working. Even if they want to teach half-time, they still can do better by retiring."

Vanderbilt's Geisel sees the same phenomenon. Most of his faculty who are approaching retirement are wealthy, or at least well off, so they can afford to leave.

And retiring faculty members don't permit a simple one-for-one replacement, said Robert Forsythe, senior associate dean for faculty and development at the University of Iowa's b-school. "These are senior faculty whose salaries in many cases haven't kept up with the market in general. When you lose one of those, sometimes you have to lose one and a half or two to be able to regain enough salary to hire one new person."

At the University of Wisconsin-Whitewater, dean Joseph Domitrz also is feeling the pinch of retirements. "We're beginning to go into the cycle that other colleges and universities hit earlier because we had a younger faculty. Most of our vacancies in the past tended to be people moving from one institution to another. But when you begin to increase the number of vacancies due to increasing retirements, that just compounds the problem."

Several other factors are converging to squeeze the supply of teaching Ph.D.s, educators said. During the retrenchment years of the early '90s, when enrollments were down, many schools decided to reduce the size of their expensive Ph.D. programs, which were turning out an oversupply.

The top 25 Ph.D. producers have all shrunk their programs, said University of Florida business dean, John Kraft. State universities have to find the resources to compete and the Ph.D. program is the place to cut.

"If I have a doctoral program, undergrad programs, MBA program, other professional masters and Ph.D. program, and am trying to compete against schools that only are focusing on their MBA program, I've got to spread my resources," Kraft said. "I'm not looking to add, I'm just looking to maintain quality. And I don't see any incentive for anybody to grow to meet the demand, unless it's part of your mission to be a major research business school, and that is a group that is becoming smaller and smaller as time passes."

UCLA's Ph.D. program offers 10 disciplines, but the school hasn't taken an accounting Ph.D. candidate for at least three years, Lippmann said. "We've closed down the accounting Ph.D. program for a while because we had trouble getting accounting Ph.D. faculty."

Wisconsin traditionally had 100 doctoral students in its program, and now is down to 85, Policano said. Others, including Illinois, cut up to 30 percent in their doctoral production, Policano noted. Now, when the pipeline is emptier, more people are lining up at the tap.

"Ph.D. supply isn't something you can turn around quickly," said Domitrz. At the state-supported schools, legislatures sought to cut the most costly programs, he noted, and internally, b-school budgets were cut to have the least impact on faculty. "We're just not in synch. We'll be dealing with this for the next four to five years."

While some schools, like the University of Rochester's, are starting to expand their Ph.D. programs again, others are hesitant because it is an expense that does not payoff the way MBA program expansions and improvements do.

"There are fewer resources being put into Ph.D. production at the top schools primarily because of the competition for ratings in Business Week and so on," said Watts. "Much more effort is delivered to the MBAs and, of necessity, it has an effect on the training of Ph.D. students. The faculty is just not as available as it used to be. They are putting a lot more effort into their MBA teaching, which isn't inappropriate, but the Ph.D. program becomes the stepsister."

Kraft is emphatic about the double-edged impact of the rankings on Ph.D. programs. When Florida downsized, he said, the school changed the focus of the program to make sure people could be placed. "They had to have the right skill sets, and not just quantitative aspects, but language skills and communication skills because with all of the rankings that go on with MBA programs, schools need people who can perform in the classroom."

Fuqua's Zipken said the rankings have increased the pressure to perform. "It used to be you would say, 'This person's going to make a good teacher in a couple of years. We'll give them a little slack and if they are not up to snuff for a couple years that's fine.' We feel less flexibility to do that now." The loss of flexibility to bring a potentially good prospect along, Zipken said, occurred in 1988, when Business Week changed its rankings format and criteria and started measuring how happy students were with their classes.

At the same time, the rankings were influencing the school's use of resources in favor of the MBA program, Kraft said, particularly in terms of the amount of faculty time devoted to research and working with Ph.D. candidates.

"The situation is going to get worse, and we're probably to blame for it ourselves. In all of the incentives we have, the way we operate business schools, we do not do anything to raise the visibility for people that provide high quality doctoral education," said Kraft.

Florida is trying to grow its Ph.D. program slightly in the next two years, provided it can maintain placements and find the quality of candidates it wants.

"Schools are going to have continuing problems because Ph.D. programs aren't growing," Kraft said. "If you look at the list AACSB puts out on the top 10 producers and take out a couple of schools that don't really provide people for the academic market, you would see almost every major school has probably substantially reduced their Ph.D program, and that's not going to change."

If the pool of high quality, freshly minted Ph.D.s is diminishing, competition for associate and assistant professors is increasing. Institutions that can afford to bid are becoming more aggressive in recruiting faculty from other schools, inflating salaries beyond what some can afford.

Last year, 10 professors on the business faculty at Iowa received 13 offers, and all but two were from other colleges and universities, Forsythe said. "This past year was the toughest I've seen in aggressiveness for faculty. Other schools and, in two cases, the private sector were being very aggressive in coming right after faculty in finance, MIS, marketing, economics and management." The smallest salary increase offered was 10 percent and in some cases the offers were up to 50 percent increases.

Finding faculty is a free market activity, said Minnesota's Kidwell. "My feeling is that if faculty members get a better offer they should take it." But, like other schools that have increased their research emphasis, globalized their curriculum or upgraded their technology, Minnesota also has to deal with faculty members who want to go somewhere else, and pay more for new faculty it wants to attract. "We're definitely bidding against the top schools for top faculty," said Kidwell.

With the boom in MBA enrollments, a well-endowed school might decide to expand its MBA program and start recruiting 20 tenure-track faculty over two or three years. "They are in a situation where they can pick the cream of the crop from any public school in the country," Policano said. The offers include not only higher salaries, but reduced teaching loads and bonuses.

Such recruiting takes talent away from the state universities' pool, which then forces less-endowed schools to reach down into the next tier, which reduces the pool the smaller schools have to choose from. "You just keep putting pressure further down in the pipeline," Policano said.

But it's not just public schools being raided, he added. He cited examples of the private schools pursuing faculty at peer schools, not only with higher salaries, but job offers for family members, apartments and other perks.

Fuqua's benefits aren't quite so extensive. But it does try to attract people with such things as higher salaries, plus allowing a newly recruited professor a reduced teaching load the first couple of years, offering generous moving allowances and computer allowances, Zipken said.

MIT's interim dean, Richard Schmalensee, said, "We're limited in what we can offer, though we have begun to provide more start-up research support than in the past. We have offered two-year teaching load reductions for junior faculty for some time, and this is a help."

Adding to the competitiveness among top schools are those that are driving to attain to the next tier. Schools that are trying to get into the top 25, or into the top 50, have aggressive faculty recruiting programs. "There are a bunch of places that are trying to ratchet themselves up. In all cases, it is with an eye toward making some kind of move in the rankings. A strong faculty is a component of that," Geisel said.

The private sector, especially investment houses, technology companies and accounting firms also are looking for talent; and, they come armed with bigger budgets than business schools.

Interest in the finance faculty is typical, the educators said, especially in good economic times, because of larger investment management firms' need for research expertise. A Wall Street company will readily pay two to four times as much as a b-school when they want what the Ph.D. has to offer. MIS faculty also are an attraction as technical companies hire Ph.D.s to create educational software packages for higher education.

But other faculty also are being scouted. "Our operations management faculty is always consulting with the business community or bringing in teams of students to work with process redesign or looking at the efficiency and effectiveness of cellular manufacturing units," Policano said. "Our faculty members are highly marketable in that area."

Minnesota's Kidwell said he has noted a small, but detectable shift from just the usual attrition of senior faculty into other fields as consultants. "Increasingly, more and more new Ph.D. graduates are going into the private sector," he said. "Those students provide a high level of theoretical and quantitative understanding of their disciplines and research, which is increasingly valuable to high end consulting firms. It's not a huge trend, but it is one that is increasing."

If early entry into private enterprise grows, Florida's Kraft fears, good faculty prospects who have valuable business experience will even be more difficult to track down because they won't be known in academic circles.

A more recent entry into business education, the for-profit schools, also are recruiting for faculty or highly paid consultants. Although not yet a strong presence in the faculty recruiting game, some believe for-profits could become a factor.

"For-profits are going to be stiff competitors in certain segments of the corporate market where they like instant results, where they want to get inside and train people for particular positions," Policano said. "It is a short-term strategy that in the long run will not succeed without a breadth of education, but it will have an impact on this particular situation."

The demand for quality doctoral faculty means that many new Ph.D.s are being pursued with higher than usual salary offers.

"We find that salaries have risen substantially at all levels and for most fields," said MIT's Schmalensee. "We have managed, just barely, to remain competitive."

UCLA is "very aggressive," Lippmann said in recruiting rookies, often paying them more than three-, four-, and five-year faculty. "Not long ago, my 12-month salary was lower than a rookies' and I'm a chaired professor."

Forsythe at Iowa said some of the rising numbers he's seen, especially in finance and MIS, are "daunting."

New accounting faculty can demand in the high $90s or low $100,000 salary range, which, Illinois' Thomas said, is clearly a budgetary stretch for state schools. "People now retiring often have much lower salaries than those of starting professors."

Minnesota's 8-1/2 percent salary increase last year did not create the expected gap between its salaries and peer institutions', Kidwell said. He suspects that schools that do not have the resources to make major investments in infrastructure or technology are putting more of the resources they do have into salaries as a way to improve at least the teaching dimension.

Domitrz experienced "sticker shock," he said, when Wisconsin-Whitewater went looking for people in computing and finance last year, expecting to pay in the low $60s and getting salary demands in the low to mid $70s. He expected to maybe go up by $1,000 to $2,000 in his offers, not by 10 or 15 percent. "It was a big shift in two years and it caught us off guard. We hadn't budgeted for that." Other fields had escalated also, but not as sharply as accounting and finance.

"It's crisis time for the public universities," says Policano. "We are on a razor's edge and at any given moment, if the private schools with heavy endowments come and offer support for top faculty, it would be very difficult to compete."

Another significant source of the tenure-track faculty squeeze is simply the booming popularity of MBA degrees and MBA careers. On campus, the Ph.D. program cannot match the MBA in terms of numbers, enthusiasm and resources.

"A lot of schools are bursting at the seams, and that just drives the need for faculty," Geisel said. "And the demand for MBAs from good schools is very strong and it will continue to be, even with some cyclical fluctuations."

The interest is strong because the job market for MBA graduates is excellent. "Our undergrads are sold out completely," Policano said. "The market is so vigorous and so rich that we are turning recruiters away. Our students are gone."

And, in career futures, business academia pales alongside the bright promise of business itself. A good student with an MBA from a good school can start work at a salary of $100,000 to $125,000. What would be the reason to take three more years of studying and start teaching at $80,000-$100,000, Geisel asked.

"It has to be something you really want to do and are willing to forego a lot of income," Geisel said. "That probably is the biggest issue-figuring out ways to make the profession of faculty member more attractive to some of our top MBA students. That's not easy."

Reaching into other disciplines for Ph.D. candidates in business is a way to bring some people in. UCLA created a post-doctoral program and attracted Ph.D.s in psychology, history and mathematics. Florida's Kraft said cross-discipline recruiting becomes a necessity. "Ph.D. education as a future career path is not anything that excites the type of business students we produce at the undergraduate level," he said. "They are going out to get jobs, they aren't thinking of academic careers."

But, several educators acknowledged, it's not that there is an absolute shortage of doctoral program applicants. What is of concern is the reduction in applicants who have the English-language skills, communication and presentation skills to walk into a classroom and be an excellent teacher immediately.

Business Ph.D. candidates from non-English speaking foreign countries are clamoring for American training in management. Michigan's Caul said that of 150 finance applications he looked at this year, 60 percent were from China alone. Duke's program had 210 applications this year and 156 were from foreign students this year, according to Jim Bettman, director of the Ph.D. program. Two-thirds of UCLA's applicants in the past three years have been from other countries. These applicants may want to teach in American schools, but they are not easy to place on faculties because they lack fluency in English and ease with an MBA classroom style.

"You used to be able to produce an outstanding researcher, and they would get a job at a good school," Kraft said. "You can't do that any more because those schools need these people in the classroom."

Pressure To Find Solutions

The deans and associate deans Newsline talked with frequently referred to the pressures, both internal and external, that accompany the doctoral faculty demand.

To solve the immediate need to fill vacant positions, many schools turn to clinical, adjunct or visiting faculty. UCLA, as well as Stanford, Lippmann said, now hires five to 10 percent adjunct faculty. "These are excellent teachers with top quality experience. Thirty years ago we wouldn't have looked at such a person."

Many business schools in recent years began hiring full-time "clinical professors" as a way to gain practitioners' expertise on their faculty, as well as economize on some salaries. Now, the market pressure is encouraging more such hiring.

Wisconsin is expanding its use of clinical faculty to have qualified teachers in those classes where the Ph.D. who would normally be there has been granted a reduced teaching load. Similarly, new Ph.D.s joining the faculty are offered reduced teaching loads as part of the compensation package. Reduced loads require more non-tenure track faculty in management, finance, accounting, business law and communications, Policano said.

Illinois also is adding some clinical faculty, but very carefully in order to maintain the balance with the high quality research faculty a leading institution must have, Thomas said. "Clinical faculty still have the aura of second-class citizens among doctoral, tenure-track faculty, but I really see them as playing a key role in providing quality, cutting-edge instruction."

Minnesota expects to increase its clinical faculty from five or six percent to maybe 10 percent, Kidwell said. "Our goal is not to decrease tenure or research faculty," he said, "but to reduce our reliance on adjuncts. Clinical faculty are full-time and involved with the students and the school. They provide higher quality teaching and service to students and they also are cost-effective."

But using clinical faculty as a solution can create a problem for deans. "There's not a consensus on the faculty that we should be doing that. We're debating it and looking at it seriously," Kidwell said.

B-school faculty, some deans say, may view any reduction in tenure-track hiring as a budgetary strategy that tries to circumvent the tenure structure. But even though more non-tenure track hiring may occur in this time of higher vacancies, it's not a ploy to avoid awarding tenure, they say.

Alan Light, senior associate dean at MIT, said about 20 percent of the faculty hired at the Sloan School are awarded tenure, and that percentage has remained constant for several years.

Watts at Rochester agreed that he hasn't seen much change in how schools are offering tenure in more than 20 years. He believes neither withholding nor awarding tenure plays much of a role at good b-schools. The underachieving professor isn't protected by tenure because the school doesn't have to grant pay raises or special services if he or she isn't performing well; and, on the other side, Watts said, good faculty members know they can obtain a position somewhere else if they are not satisfied with their compensation.

Standards for granting tenure have been toughened at Iowa over the past five to 10 years, Forsythe conceded, but it has not been for the purpose of withholding tenure. "Most schools are paying much more attention to teaching effectiveness and that has become a determining factor. Twenty years ago, if somebody was a research star, it really didn't matter very much in many places what they did in the classroom. We're beyond those days, and to the extent that that has raised the bar, it has gotten tougher, but I don't think it's a strategic decision to say, 'Gee, in these markets maybe we should make it tougher to get promoted.' That's not the case. It's a matter of being able to have confidence in someone," he said.

It's not only new faculty whose salaries and support have to be tended to. As fresh Ph.D.s or more seasoned faculty come in from other schools, there is the issue of salary compression, or even inversion, several educators noted. Iowa addresses this by gaining private support to create endowed chairs. Of 90 tenure-track faculty, the school has 25 chairs and professors, Forsythe said.

Persuading the university administration of the need for higher salaries creates a pressure that none of the educators has alleviated. A few said that there is a resurgence of some of the bad feelings that used to exist among other schools in the university because of the b-school faculty's higher salaries.

"When you begin to offer such salaries, it creates jealousies and divisions in the campus administration and faculty on other parts of the campus," Domitrz said. The dean is then on the hotseat, and has to exercise diplomacy with colleagues and campus chiefs to try to justify the difference.

Outcomes Of A Shortage

If, as several educators Newsline interviewed believe will happen, the increased demand for Ph.D. faculty grows, and the supply doesn't, the consequences for management education will be serious.

Policano sees it as a trickle down effect that begins with the top schools paying a higher price or offering more perks for a shrinking pool of faculty. Each next layer of schools then reaches down into another tier of quality, with diminishing quality from a smaller and smaller pool.

"The private schools have gotten such a tremendous increase in wealth in the last five years," Policano said. "Think about what happens when an MIT decides to triple its size. Between private fundraising and entrepreneurial ventures that we have under way, we will survive, but I look to the next tier and wonder how they will survive. Ten years from now there will be a small number of high quality, public universities."

As some schools get larger and expand their outreach, the traditional geographical monopolies will breakdown, Kidwell believes, leaving local schools out of the running if they don't have the resources to keep quality faculty.

Kraft at Florida foresees a "severe crunch" in 10 years because of the significant number of Ph.D.s produced in the '70s who will be retiring. At the same time there will be a huge growth spurt in schools.

Several educators noted with irony that they now have to worry about a looming faculty shortage that, in many ways, is caused by success. As one dean said, "Maybe we would have more high quality people applying for the Ph.D program ... if we just didn't have this protracted boom."