I read an article in the October 15, 2011 issue of The Economist entitled “Trouble in the Middle.” The article begins by stating that interest in MBA programs at American business schools peaked in 2009 and applications have fallen since then. The author states that some business schools are worried that the trend is related to more than just a slow recovering economy, but in fact a greater change.
The Economist presents data that may back the case that it’s not just the economy. In examining data accumulated in their annual ranking of the top 100 MBA programs, they note that in 2010, the average cost of an MBA for the 85 schools outside of the top 15 was $81,911 while the average starting salary for the graduates of those schools was $81,178. Five years earlier, the two year cost for the same 85 schools was $60,247 while the starting salary average was $78,442. The attached graph shows that the disparity was greater ten years ago when the average starting salary was over $80,000 and the average cost was slightly less than $50,000. The comparison could hardly be more dramatic; increasing costs of tuition have cut the noticeable advantage of attending a residential MBA program outside of the top 15.
Elite schools like Harvard still have an advantage according to The Economist’s survey data. Additionally, the article mentions a recent event at Harvard hosted by a large consulting firm where a member of that firm’s senior management noted while speaking to the faculty that the most valuable player on the Harvard Business School team was the Director of Admissions, a not so subtle reference to the elite students recruited to the school and subsequently recruited by that consulting firm.
While the purpose of the article is to compare costs of high end MBA programs, the comparison can easily be made across the entire continuum of accredited business programs. The Association of Advance Collegiate Schools of Business (AACSB), one of the accrediting bodies for U.S. business schools, estimates that there are 13,670 institutions world wide that offer a business degree. Being able to distinguish your program and your graduates from the masses is more than likely the only way that you can command a premier price going forward. In more recent commentaries on the general state of global higher education, books like The Global Auction: The Broken Promises of Education, Jobs, and Incomes and The Innovative University: Changing the DNA of Higher Education from the Inside Out also stress the need for differentiation, tuition reductions, or both in order for institutions to maintain their competitive edge. My theory is that regardless of your business program’s relative ranking, competing on price and product differentiation is the only safe way to ensure long term success.