Business Schools at Risk

Serious, pervasive forces—such as faculty shortages, pressures to enhance curricular relevance, and intense, worldwide competition—are threatening traditional business schools. A new AACSB International task force may help to find collective solutions.
Business Schools at Risk

Challenges confront the field of management education on all sides, and, in the future, these challenges will radically reshape the way business education is designed and delivered. In fact, that future is now. Prominent issues that are effecting change today must be dealt with immediately by business schools that still want to be staffed, relevant, and funded tomorrow.

In a move designed to help business schools meet the future with all the tools and information they require, AACSB International has created a Management Education Task Force to identify educational priorities and recommend responses. Formed last year as a subcommittee of AACSB’s Board of Directors, the Task Force has met and collected data over the course of the last year. It recently presented a draft report to the AACSB board, identifying issues confronting management educators worldwide and offering suggestions for meeting the problems head-on. While the report is continually being revised, and the committee’s work is still in progress, some key findings from the first report are now available and were discussed at the AACSB Annual Meeting in Chicago last month.

Putting It in Context

Students who want to get business degrees today have a great many more options than they did in the past. In fact, only 24.4 percent of today’s MBA students are enrolled fulltime in a traditional two-year program. Just over 58 percent are part-timers; another 5.2 percent are in executive MBA programs, and 2.5 percent are enrolled in distance education programs. In addition, many of those students are choosing to seek degrees outside of traditional or accredited schools: The percent of degrees awarded by for-profit institutions increased from one percent in 1992 to 6.2 percent in 1999.

The fragmentation of the market is underscored by the fact that these students can go, literally, almost anywhere in the world to get their degrees. Among the top 50 schools ranked by Financial Times, an average of 44.1 percent of full-time enrollees were categorized as “international,” or not from the home country of the school they were attending. Seventeen percent of U.S. students studying abroad studied business and management in 1999–2000, according to the Institute for International Education. According to the IIE, more than 19 percent of all foreign students studying in the U.S. in 2000–2001 were studying business, and more than 14 percent of MBA students in the U.S. were from abroad. Last year, 18 percent of the students at the London Business School were American, and 11 percent of INSEAD’s January 2002 class were Americans.

Not surprisingly, Ph.D. holders who want to teach find themselves in a global market as well. According to Financial Times, among the top 50 schools, 30.8 percent of faculty is international. This globalization of the market for faculty is feeding another major crisis facing traditional business schools today—Ph.D. shortages. When good researchers and teachers have job options anywhere in the world, the pressure to recruit top faculty becomes even more intense.

The No. 1 Problem

In fact, the challenge that surmounts all others in this field is the shortage of doctoral faculty, what the METF’s report calls “the choke point in realizing the future vision for business schools.” Not only has the production of doctoral candidates in the U.S. dropped by 19.3 percent in recent years, fewer new doctorates are expressing an interest in entering academia. Yet as the current faculty ages and retires, and schools worldwide expand their enrollments and staffs, there is a greater need for doctorally qualified faculty.

The Management Education Task Force suggests several solutions for dealing with the shortage. Business schools can consider Ph.D. graduates from other disciplines; they can join with other schools and take advantage of advanced technology to offer virtual seminars to doctoral candidates; they can work to make academic careers more attractive to mid-career businesspeople by focusing on hot-topic areas such as entrepreneurship and e-business; and they can expand executive Ph.D. programs to channel academically qualified individuals into teaching.

More radically, the report advises schools to take a long, hard look at some of their own traditions of giving promotions and granting tenure, as well as their treatment of nontraditional faculty members. “These traditions do not reward clinically experienced faculty and are impervious to market shortages for doctorally qualified business faculty,” notes the report. “The question for AACSB members is the extent to which business schools can alleviate what ultimately may be self-inflicted Ph.D. shortages, while continuing to preserve the research and inquiry values at the core of university traditions.”

As AACSB’s Blue Ribbon Committee on Accreditation Quality is currently considering new accreditation standards, schools need to reassess “whether reliance on a single, uniform ‘doctorally qualified’ metric for all accreditation reviews is still necessary,” the METF report suggests. Such a reassessment is not without its own implications: “If this standard were changed or relaxed, it would place even more burden on accreditation teams to assess whether the intellectual integrity of the various degrees offered by an institution were consistent with the stated mission, with the peer set, and with AACSB’s accreditation imprimatur.”

A Bright Spot

While the Ph.D. shortage is an area of concern for management educators, executive education represents an area of potential growth and vigor. Some business schools are among the major players in the global education and training industry. However, the market is fragmented and competitive, and many corporations offer their own education and training. According to Corporate University Xchange, the number of corporate universities now totals 2,000 and will swell to 3,700 by 2010, presenting significant competition to traditional schools that offer executive education.

It’s important to universities to keep executive education in the mix, because it represents an increasingly valuable revenue stream. Figures from Corporate University Xchange show that schools offering a continuing/corporate education program received an average annual revenue of $4.8 million—in some cases, representing 25 percent of total revenue from all sources available to the school. “For many business school deans, executive program revenue is the single largest opportunity to address the escalating costs of academic faculty and facilities,” according to the METF report.

The report also raises the prospect of greater reliance on faculty with real-world business experience.

Because executive education programs are increasingly important to business schools, they are consuming a bigger chunk of the available faculty and staff resources. In addition, some students are lobbying to get credit for the courses they take in nondegree programs—and some schools are granting it. The authors of the METF paper observe that the demarcation between degree and nondegree education is blurring, and that AACSB accreditation teams will have to consider nondegree education when looking at a school’s strategy and resources allocation.

Relevance and Timeliness

In addition to the pressures caused by doctoral shortages and changes in executive education programs, schools face the challenge of continuing to make management education current, relevant, and timely. To accomplish this, say Task Force members, business schools might need to consider blurring the boundaries between traditional disciplinary silos. They also might have to focus more on core management competencies such as interpersonal relationships and communication—which emerge as the most important yet underdeveloped behavioral skills, according to surveys of business school graduates. The report also raises the prospect of greater reliance on faculty with real-world business experience. If schools focus more intently on the “clinical” content of curricula, the report predicts, they will have to reassess “the second-class status of nontraditional teachers, many of whom may be a source of rich industry experience brought into the classroom.”

In addition, schools are going to need to look at their allocation of resources among programs and priorities. “Despite the fact that full-time, on-campus MBA students represent a minority of overall business degree seekers, these programs are the focus of national rankings and draw a disproportionate share of the financial and human resources” of most business schools, according to the METF report. Not only does this focus shortchange the students in parttime and doctoral programs, it allows nimble and adaptive schools to attract prospective students away from accredited business schools.

Full-time, on-campus MBA students represent a minority of overall business degree seekers.

According to the METF, schools also are going to have to consider the advantages of allying with other educational partners—peers, distance education providers, international partners, or even direct competitors—to offer their own students extensive choice and variety in educational options.

AACSB’s Role

Clearly, the challenges facing management education are many and varied; but because the market is so fragmented, it will be difficult to develop a single set of solutions. The ongoing leadership role of AACSB must be to continue the innovation agenda of the organization and to create mechanisms that generate discussion of the important issues as they appear on the horizon among the faculty and other key stakeholders.

The METF report maintains that two broad problems confront all management education institutions: the need to focus on basic management skills such as communication, interpersonal skills, leadership, and change management; and the need to enhance relevancy by designing outward-facing curricula.

To address these needs, the task force is recommending that an AACSB-appointed group identify core management skills that span traditional functional areas of expertise, and that AACSB develop process requirements that assure the relevancy of the curricula to the needs of employers. Since the issues facing management education today are so closely linked to accreditation standards—which are already under review by AACSB—the METF expects AACSB to assume a leadership role in collecting and disseminating information on issues affecting business management globally.

The organization may have to go outside business schools—to corporations or other partners—to collect some of the necessary data. Especially important to the future of management education are compilations of best practices in these four areas:

  1. Alliances among education providers, with close attention paid to their pedagogical forms, financial and administrative arrangements, and success and failure factors.
  2. Nontraditional business school structures that evolve from an outward-facing focus, as opposed to following vertical silos. These structures may include dual tracks for research and teaching-oriented faculty.
  3. Strategies to leverage experiences and resources from nondegree executive education into degree programs.
  4. Models for leading industrywide change. KPMG’s Ph.D. Project and The Aspen Institute’s Initiative for Social Innovation through Business might both be studied for best practices information.

The Blue Ribbon Committee on Accred itation Quality is considering the report’s recommendations because accreditation is so important in effecting change in a mission-driven context. While the Management Education Task Force has provided a template for the changes that need to be considered, much is left to be accomplished within the AACSB membership. The METF report suggests strategies and infrastructure to support AACSB’s quest to stimulate innovation in the management education field and to trigger debate and attention among deans, faculty, presidents, provosts, corporate partners, and the Blue Ribbon Committee. Schools worldwide also will need to examine their own strategies for confronting the issues facing them—and make hard decisions about zero-sum choices.