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Pandemic Mortality In MBA Programs

COVID-19 has an uncanny ability to take down the frail and the compromised, while those who are more vigorous fight it off, even if they feel crummy for a while.

Yes, this is true for people, but today I’m talking about MBA programs.

Purdue University recently announced that it will not matriculate a new class of resident graduate students in its Krannert School of Management for the fall of 2021. It followed the University of Missouri, the University of Illinois at Urbana-Champaign and the University of Iowa down this Midwestern trail of academic tears (although Missouri called its step a “pause” rather than a cancellation). The misery is not limited to the flagship state schools; the University of St. Thomas in St. Paul, Minnesota, made a similar announcement. Nor is it limited to the Midwest.

If death certificates were issued for university degree programs, the new coronavirus might be listed as the proximate cause of death. Yet the underlying morbidities of the MBA industry are clear contributing factors. Applications for most on-campus MBA programs have been in free fall for a decade, with enrollments at all but the most prestigious institutions following in their path. High costs and improved job opportunities as the world emerged from the Great Recession initiated the decline. Later came the rise of international competition for foreign business students who previously would have studied in the United States, along with the Trump administration’s more restrictive and unsettled policy toward granting visas for foreigners to study, work and potentially reside legally in this country. More than 100 business schools across the country shut down their two-year MBA programs between 2014 and 2018.

Then, finally, COVID-19 came along. The pandemic has thrown planning for the 2020 fall and winter terms into chaos at almost every campus, and in almost every undergraduate and graduate program. Will students attend classes in person and can they live together in dormitories – or will learning be conducted remotely? Does remote learning mean students will live off campus? What about labs, libraries and other resources available only on-camera? How much does the campus experience depend on being on campus, anyway?

The questions apply generically to all of higher education right now, and not just in America. But they have particular resonance for American MBA programs, because business schools have marketed their relationship-building opportunities almost as heavily as their academics. Even if you don’t become the next Mark Zuckerberg or Bill Gates (neither of whom has an MBA, by the way), the programs suggest that there is significant value in meeting them in class. And by “significant value,” I mean the sort that schools use to justify paying six-figure tuition and living expenses while sacrificing a couple of years of post-college earning opportunities.

Now those networking opportunities come wrapped in a thick layer of social distancing, making the value proposition for the upcoming academic year that much more tenuous. Some students expect schools to discount their tuition accordingly. In most cases, that would be a big “no.” But for many schools, the financial viability of the MBA program is either questionable or vaporized regardless.

While some campuses will drop MBA programs altogether, others will emphasize their online offerings. Purdue’s Krannert School has said it will go this route, as has the University of Illinois at Urbana-Champaign. Online programs often allow students to continue working while they study, which improves the economics of MBA programs, at least somewhat. Will schools sell those distance-learning credits, and thus their degree, more cheaply than they did the on-campus versions? That’s doubtful in most cases. Universities are a hotbed of fixed costs. They will pretend they are doing students a favor by not demanding that they fill overbuilt, underused dorms and dining halls.

As I have written before, both my wife and I hold MBA degrees that we completed decades ago. I use what I learned in business school virtually every day, usually without consciously thinking about it. Paying my graduate tuition after we got married is probably the best financial investment my wife ever made, too. (She got her degrees before we met.)

But still, I question the utility and economic value of MBA degrees for many students who studied business as undergraduates, or for those who do not wish to manage large companies or run their own businesses. More narrowly focused and technical graduate studies can be of greater value. I often advise young people to work for at least a few years after college before deciding which graduate field to pursue, apart from those like law or medicine that can’t be practiced with only undergraduate degrees. Even for those individuals, I suggest going to law school or medical school only if they truly want to be lawyers or doctors – not just because of the average paychecks their graduates can report.

The MBA degree became something of a fad in the 1970s and 1980s precisely because prospective students saw it as a ticket to higher earnings. Universities rushed to get in on the action. American economic leadership in the world gave programs in this country an enormous initial competitive advantage.

They proceeded to throw that advantage away in the decades that followed. Schools allowed costs to spiral out of control. They treated international students, in particular, as if they had no other options but to study here and Americans as if they had no reasonable choice but to take on piles of student debt. Now, just like the old steel companies their students examined in case studies, many of the schools have become uncompetitive relics, adding more capacity to an industry that doesn't need it and that has better options.

David Hummels, the dean of Purdue’s business school, wrote in announcing his school’s decision: “We teach our students to engage in rigorous analysis of data when making business decisions, and to recognize the world as it is, not how we wish it to be.” For MBA programs, that reality is stark.

COVID-19 may be what kills a lot of those programs this year. But their preexisting conditions meant they were already doomed.

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