MBA vs. Master’s: Why Some Business Schools Are Closing Their MBA Programs
King’s College London decided to open a business school without an MBA program when it established King’s Business School in 2017.
The U.K. university launched a variety of specialized business master’s programs instead, on topics including finance, digital marketing, and entrepreneurship.
But the school’s decision was not taken in isolation. In the United Sates, Arizona State University’s Thunderbird School of Global Management, the University of Iowa Tippie College of Business, and the Wake Forest University School of Business have all shelved their full-time MBA programs.
In March 2019, Henley Business School in the U.K. canceled its full-time MBA for the 2019–20 academic year, pending a “review of the MBA market.”
While the MBA remains the world’s most sought-after graduate management degree, according to a 2019 survey by the Graduate Management Admission Council (GMAC), some business schools are closing their MBAs and focusing on business master’s programs.
Cost and time are among the biggest reservations candidates have when it comes to pursuing graduate business education, the same GMAC study reveals. Candidates want more flexible formats, shorter program durations, and quicker returns.
Consequently, applications to MBA programs have declined. Data from AACSB’s 2016–17 and 2017-18 Business School Questionnaires shows that 59 percent of U.S. business schools reported a decline in MBA applications. A longer-term view shows a culmination of years of slow but steady decline: when comparing survey responses in 2013–14 to 2017–18, 53 percent of U.S. schools reported a decline in applications to MBA programs.
Thunderbird, which first switched from a two- to a one-year MBA program before eventually abandoning its MBA in 2014, saw enrollment drop from 1,500 students in 1990 to 140 in 2012.
Meanwhile, interest in shorter, more affordable business master’s programs has boomed. The 2019 GMAC survey confirms this growth, finding that nearly half of business school applicants globally now consider a business master’s alongside an MBA.
As the market for business master’s degrees expands, it makes sense that business schools shift in that direction.
Employers in the U.S. have entrenched relationships with business schools, hiring thousands of MBA students on campus each year. But in some markets, the move away from the MBA has been prompted by employer feedback.
The decision of King’s College to concentrate on master’s versus MBA programs and Henley’s suspension of its MBA both occurred after U.K. employers expressed a preference for hiring talent at a younger, pre-MBA stage, according to the schools’ leadership.
The changing hiring demands of employers have also brought MBA degrees under the spotlight. Both soft skills and skills in big data analytics were listed among the most difficult to recruit from MBAs in the Financial Times Skills Gap Survey 2018 (subscription required).
While business schools must ramp up their focus on the softer side of management, the need from employers for data analytics skills has seen demand for master’s in data analytics boom. It’s now the second-most considered business master’s program after the master’s in finance, according to GMAC.
The cost of an MBA program is not only the concern for applicants.
Hiring from MBA programs is expensive for employers, forced to pay starting salaries high enough to attract candidates looking to make a return on their investment and pay back their MBA loans. This explains why some employers favor early-stage hires from pre-experience master’s programs.
For schools, the team-building activities, consulting experiences, and varied curricula make full-time MBA programs expensive to run and not financially viable if schools can’t fill their classrooms.
One program administrator once asked me, “What is a business school without an MBA?”
Shelving an MBA program can be damaging to a school’s reputation and its relationship with its alumni. When Wisconsin School of Business at UW Madison announced it was considering closing its full-time MBA in 2017, it faced such a backlash that it reversed the decision. To keep themselves afloat, business schools subsidize the cost of small-scale, full-time MBAs with high-return executive education programs.
However, reputation is also a reason some schools are shifting their focus. In a competitive market, smaller schools have found it tough to compete with the reputation of big-name schools on MBA programs alone.
By shifting their focus to master’s programs, schools can differentiate themselves and rebuild their reputation.
Reports of the MBA’s demise are often exaggerated. There are strong-performing MBA programs; there are MBA programs with specializations and flexible formats. Full-time, part-time, or online, the name “MBA” still means something.
Specialized master’s degrees are not necessarily a replacement for MBAs. The programs offer different things; they have different outcomes; and they tend to serve different kinds of students at different stages of their careers.
However, the winds of change sweeping graduate business education are seeing schools drop MBA programs to focus on master’s degrees—not the other way around.