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Bad for Business

September 13, 2011

Two-thirds of full-time, two-year programs offering the master's in business administration saw a decrease from last year in the number of applications they received for the 2011 academic year, reversing several years of growth in application numbers, according to an annual survey released today by the Graduate Management Admission Council.

The declines are not limited to two-year programs. Almost 60 percent of business schools said they saw a drop in the number of applications for executive M.B.A. programs as well. For every category of M.B.A. program surveyed, less than half of business schools reported that they saw growth.

While some programs saw increases in the number of students applying, the sector as a whole did not fare well for the academic year. The average number of students applying to M.B.A. programs declined for all types of programs except the 82 one-year, full-time M.B.A. programs surveyed.

Admissions deans and GMAC officials attribute the decline in applications for these programs to economic uncertainty that is making people reluctant to leave jobs to pursue an education. While application and enrollment numbers have been buoyed over the past two years, officials said the boom in enrollments from people getting laid off and choosing to go back to school is likely at an end.

But GMAC officials said the decline in application numbers should not worry business schools. Most are still hitting enrollment numbers and maintaining student quality, the survey found, and admissions officers said that students are still interested in business school, though perhaps in a different structure. The report found that the majority of specialized master's programs -- in fields such as accounting, finance and management -- saw increases in applications.

Officials said some of the dip in applications to full-time, two-year M.B.A. programs can be attributed to more interest in part-time programs, which let individuals hang on to their current jobs, and in one-year programs, which tend to be less expensive. “They are uncertain about the economic environment moving forward, so they’re basically hedging their bets and tooling up on the education side of things,” said Daniel A. Bens, associate dean and director of the M.B.A. program at the University of Arizona’s Eller College of Management. "But that does mean that they can’t do the classic full-time self-evaluation and career switch that is easier to do in a full-time program."

Graduate school application numbers -- particularly for business programs -- tend to be counter-cyclical, meaning more people apply for school when the economy is bad, and fewer apply when there is more opportunity in the job market. That helps explain the increases in applications since 2008. But the prolonged nature of the current economic downturn, particularly the high unemployment rate, makes the survey's context a little unusual.

David A. Wilson, president and chief executive officer of the GMAC, suggested that the decline is really just a leveling-off from previous years. "We're coming off a peak year and we're in a slow, jobless recovery, so it's not surprising to see this decline," he said.

The survey looks only at the number of business school applications, not total enrollment. Wilson said it’s possible that applicants are simply sending applications to fewer schools. “When you look at the data, you see that a lot more people are sending fewer scores and sending more scores locally,” he said. The average number of schools to which students sent GMAT scores, 2.91, is at its lowest level since at least 2007.

While the mean number of applications for two-year, full-time M.B.A. programs dropped from 951 to 857, most survey respondents said they did not see a decrease in the quality of their applicants.

Bens said the University of Arizona saw a decline of about 10 percent in the number of applications it received for the full-time M.B.A. program, and the incoming class was about 10 students fewer than he would have liked, though he noted that the university maintained its level of student quality. He said applications for the part-time program increased.

Wake Forest University's business school was among the institutions reporting an increase in the number of applications received for all of its programs. The number of applications for the full-time M.B.A. program grew by about 25 percent, said Matthew Merrick, the senior associate dean for students.

Some M.B.A. programs have struggled to cope with the financial downturn. Miami University of Ohio recently announced that it would close its one-year, full-time M.B.A. program, citing budget cuts and a small size that made it tough to sustain.

Merrick partly attributes the increased demand for Wake Forest's M.B.A. program to the school's emphasis on placing students in jobs once they leave. In recent years, the school has developed courses in career management and hired several career management officers to help guide students through the process. "The students that have come here have seen good results with their job search, and we think students are attracted to that in this market," he said. The university's two-year, full-time M.B.A. program has a placement rate of more than 90 percent, and the master's of accounting science program has consistently placed 100 percent of its graduates.

While specialized programs saw growth this past year, admissions officials don't think these programs are stealing applicants from traditional M.B.A. programs. The two degrees tend to serve different pools of students. While full-time M.B.A. programs tend to serve individuals who are two to six years out of college, the specialized master's programs tend to be designed for more recent graduates.

Officials did say that the two trends might be driven by the same economic uncertainty. Employed individuals don't want to give up the safety of their current jobs, and students who are graduating think they might have a better job prospect in a tight job market if they obtain an additional degree and wait a year.

 

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