Are Business Schools Dying?

We asked our Advisor, Cheenu Seshadri, if the growing popularity of online MBA programs will alter the traditional MBA landscape and here are his thoughts...

Not a week goes by without the business press or popular media talking about online degree programs. Business schools themselves are buying into the hype and trying to disrupt from within, with the Marshall School of Business at USC being the latest one to offer an online MBA following in the footsteps of Kelley, Kenan-Flagler and Tepper among the reputed business schools. After reading an interview with Jack Welch, one of the business leaders I admire most pitch his own take on online MBAs, I am tempted to write anything but an eulogy to business schools.

While the possibilities with online education are endless, those who think of an online MBA as a competitor that is going to severely impair the allure of an immersion based MBA from a reputed business school are missing the point. Yes, I agree with the evangelists that further development of the online model will make higher education more democratic, more affordable and shrink the world even further. However, high-potential young professionals around the world do not put themselves through the drudgery of taking the GMAT, apply to multiple business schools (which alone could amounts to several 100 hours of investment), head back to school for 2 years and sit in class with other type-A personalities to get smart on basic business concepts alone!

I went to B-school for 3 reasons and everyone I spoke with while at Booth and since shared with me a version of the same. Based on 1st principles, I believe online MBAs cannot compete on an equal footing on 2 of the 3 dimensions and hence an MBA program that is selective, immersive and forward leaning will run circles around an online MBA.

• Recruiting and career change: Let’s take a look at the consulting industry, the biggest recruiter at most business schools through the economic cycle. Even a few years in top-tier consulting can provide you a shortcut to the corner office and hence the allure for students. While at Bain, I rarely recruited anywhere but at a top-10 MBA program or maybe 1-2 reputed regional programs. The elite management consulting firms make a beeline to the same schools year-after-year, not because these graduates have learnt significantly more in the classroom than at a tier-2 or tier-3 school, but because these schools have filtered their applicant pool to the most ambitious, some might say insecure overachievers. I have a hard time imagining that these firms will open up recruiting to online MBAs in a big way no matter what school offers them the diploma. Additionally, based on the rational, but differential treatment of full-time and part-time students when it comes to recruiting at top-tier schools, such opportunities wouldn’t be available to online MBAs period. The same logic would hold true for other blue-chip recruiters, be it in I-Banking, Private Equity or Silicon Valley.

• Networking with current and future business leaders: While LinkedIn has made it quite obvious to everyone that networking is a far more efficient way to land your dream job, MBAs have known this and leveraged this method for over a generation. The entire executive recruiting industry operates on this model wherein executive roles are rarely if ever posted on job boards and they use their networks to ferret out the right candidates. Unless you are quite advanced in your career and have been an inveterate networker all your professional life and believe tapping into a new network of budding & accomplished leaders is not worth your while, business school offers the best and at the same time a low-risk environment to build this network. While some online MBA programs are mandating some in-class time and will offer networking opportunities, it will always be a poor substitute for the networks most full-time MBAs would have developed during their 2 years at school.

• Master business concepts: Clearly this is what the world thinks business schools spend most of their time with students. Yes, some programs like Booth have a reputation for more academic rigor than others, but all of them employ time-tested pedagogy, case based curriculum and above also else intense team work ensures that no student is left behind!

Now, a critique of the schools that have jumped on the bandwagon believing this is how they’ll compete with what’s next. Kenan Flagler’s online MBA costs 90% of a full-time MBA! Wasn’t an online program supposed to place the degree more within reach of those who can’t afford the exorbitant costs? While this might be messaging about the comparable quality, can’t imagine that the online program costs the school nearly as much as a full-time program. So some schools are approaching this exactly the same way as part-time or executive education programs – cash cows! On the other hand, Kelley, the pioneer in this area, has over 2x the number of students in the online program as their regular 2-year program. Will pumping out 3x the number of Kelley MBAs not severely dilute the brand and everything that comes with an MBA? Time will tell, but I have a strong hunch this cannot end well.

In conclusion, I’d say online programs have a prominent place in educating the world’s talent. But with the current technology and other limitations in place, it is best suited for degrees whose value is primarily derived from classroom learning. It can also be a valuable tool for continuing education. But if you are looking to change the world or make a mark in global business, better start the process of applying to a traditional MBA program

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