Krannert Gets Market-Ready

After a close analysis of the market, Purdue’s Krannert School of Management will phase out its full-time MBA. David Hummels, its dean, explains how the school is positioning itself for the future.

 

IN A JUNE 15 letter, David Hummels announced that Purdue University’s Krannert School of Management in West Lafayette, Indiana, would not enroll a fall 2021 cohort for its residential two-year MBA program. The decision had been percolating at the school for quite a while, as market trends showed declining interest in the residential MBA offering. The program had seen a 70 percent decline in applications since 2009. In fact, last year’s 46-student cohort was the smallest in its history. In recent years, recruitment costs for the program had outpaced tuition revenue.

In the letter, Hummels also pointed to a predicted reduction in international student enrollments, as students choose to study online with local institutions as a result of the pandemic. “In a post-COVID environment,” he writes, it’s time to “consider a radical reshaping of the degree.”

With this decision, the Krannert School joins a growing group of business schools that have paused or discontinued their full-time residential MBA programs, such as the Tippie College of Business at the University of Iowa in Iowa City, the Gies College of Business at the University of Illinois in Champaign, and Wake Forest University’s School of Business in Winston-Salem, North Carolina. At the same time, the business school is gearing up for it fall semester, during which it plans to deliver at least part of its courses in face-to-face formats. What lies ahead for the Krannert School, and where do its leaders plan to focus its resources? Hummels provides insight into the school’s new strategic direction.

David Hummels

Photo courtesy of Purdue University

Before we discuss the MBA, I wanted to ask about Purdue University’s plans for the fall, when it expects to hold classes in person. How will the Krannert School’s strategy fit into that larger plan?

On the undergraduate side of things, we have offered students a fully online semester for all those who don’t feel comfortable coming to campus. We’ll see what the enrollment numbers look like when late August rolls around. I suspect there will be some who will say, “I’ll just defer for a semester or for a year.” But the option is there if they want it.

On the graduate side of things, it’s a much harder situation. Many students come here in order to get access to the U.S. job market, and that really requires them to be here residentially. So, if the students can get here physically, we will either do a January start in residence, or allow students to defer their admission to the subsequent year. For international graduate students, I don’t think an online option will be too attractive.

And if you must move classes fully online again?

The good news is that we have a pretty robust internal capability around online learning. Purdue also has a program called IMPACT, which supports faculty take lecture material meant for one-way communication and moving it online in ways that support rich two-way communication. Many of our faculty are trained through the IMPACT program, which allows us to create resilient classrooms that will be effective this fall. If, for example, some students get sick, or if the instructor gets sick, or if we need to divide the classroom in half, we are very prepared.

Besides the impact of the pandemic, what other factors drove Krannert’s decision to suspend its residential MBA?

It really came down to two decisive factors. The first is, while we were struggling to bring the applications to the two-year residential MBA back up to our previous numbers, our other programs were doing well, both in the number of applicants and in the rankings. The second factor is that we’re rebooting a joint undergraduate program with our College of Engineering called Integrated Business and Engineering. Historically called a BS in industrial management, the degree integrates science, engineering, and management. Internally, we sometimes called it “the CEO maker,” because so many who graduated with that degree have gone on to lead companies. We feel confident that this program will be a flagship for us—we want it to be the hardest degree to get into on campus. It needed to be properly resourced.

How else will you reallocate the resources previously dedicated to the residential MBA?

We plan to use those resources in three places. The first will be the integrated business and engineering program. The second will be our online programs, which need faculty resources. And the third will be our residential programs. This includes our master’s in business information management, which currently attracts ten applications for every spot.

What notes did you take from the experiences of schools such as the universities of Illinois and Iowa that now are two or more years past their decisions to suspend their full-time residential MBAs?

There was a great deal of conversation at the AACSB Deans Conference meetings about this specific issue. Sarah Gardial [former dean of the Tippie College] gave a great talk a couple of years ago, and from that I learned two things. The first is to lead with the data. In our case, to some alumni, pausing the full-time MBA might have seemed like a capricious decision. But we could lay the data out in front of them, and say, “You’re a successful business person. What would you do with this business case?” This helped them see what went into the decision.

I also learned to keep communications coordinated and as transparent as possible so the rest of the university understands what the decision is and is on board with it. I had multiple conversations with my provost and my president. The week before the announcement, I spoke at length with our board of trustees. You don’t want to blindside any of those people in an instance like this.

“WE HAVE TO ASK OURSELVES, ARE WE EVEN GENERATING ANY TUITION REVENUE WHEN WE HAVE TO SCHOLARSHIP THE PROGRAM SO HEAVILY?”

One factor that you say drove the decision was the outsized cost to market and recruit for the full-time MBA. Could you explain that in more detail?

The two-year residential MBA relies much more on holding in-person events and flying recruiters all over the place. But the scholarship piece of it is especially challenging. Strong students increasingly expect to receive generous assistantships or scholarships, and plenty of great schools will offer them substantial financial aid. It gets to the point where we have to ask ourselves, “Are we even generating any tuition revenue when we have to scholarship the program so heavily?” It’s a very different story with programs for working professionals.

Krannert now has five online master’s programs, including an online MBA, one-year programs in business analytics and economics, and two new one-year programs in human resource management and supply chain management. How do you plan to leverage these programs?

We started our first cohort for the online MBA in January and a second cohort started in May. A third will start in August. That program gives us the flexibility to do some really innovative things. For example, it has allowed our faculty in management to collaborate with faculty in engineering and science to offer content on topics such as the business implications of artificial intelligence.

Do you plan to offer more specialized master’s programs, or perhaps offer more certificate programs and short-form stackable credentials?

We have been able to launch new master’s programs so quickly because they all build off the MBA core—for example, we did not have to create 30 credit hours from scratch to build our master’s in human resources management. I think where we really want to see this go next is in terms of disaggregated credentials—as you said, stackable credentials.

One of the interesting challenges here is getting companies to articulate in a very clear way what they want. Some companies rely on low-price, high-volume undifferentiated content for their employee training. We want to find the sweet spot where these companies are willing to pay for disaggregated content that is a little bit higher margin. We also want to take advantage of our relationships with our campus partners in science and engineering to offer things to companies that not everybody can.

No one has a crystal ball to predict exactly what’s going to happen over the coming year. How are you and your team managing that level of uncertainty as you plan for the months ahead?

The first thing I’ve had to do is realize that there are many things that I would have liked to have worked on this summer and fall that I’m going to have to put aside. For example, I would have liked to have worked on a more robust staff development program. But even though that’s important, we’ve had to say, “We’re just not going to get to it this year.” We’ve had to clear the field and focus.

The second thing relates to resilient course design. We want to build into our courses the ability to pivot rapidly. We are building inherent flexibility into our structures.

Finally, we’ve tried to be incredibly transparent within our communications about what fundamental uncertainties we face and what we need from faculty and staff. We’re telling them everything we know—going through our budgets, for example, to say, “Here’s what’s happening with our financial situation, here’s the way we’re going to make decisions, here’s what we’re going to prioritize, here’s what we’re going to do to try and protect everyone’s employment.” That type of transparency, to the extent that we can provide it, has been very well received. We are not pretending like we have all the answers. This seems to buy a lot of goodwill and a lot of hard work from people.

“WE WANT TO BUILD INTO OUR COURSES THE ABILITY TO PIVOT RAPIDLY. WE ARE BUILDING INHERENT FLEXIBILITY INTO OUR STRUCTURES.”

What do you think will be the key to a business school surviving the worst-case scenario? The first piece of this is that, even before COVID, we knew that a number of our revenue streams were highly sensitive to international disruption. When industries are reliant on a particular source country, their relationships in that country can be disrupted by policy changes, exchange rate movements, those kinds of things. Because of that underlying volatility, we kept a significant cash reserve to cushion us through a major disruption in our revenues. It’s not that I knew COVID was coming, but I thought there was a very real possibility something would.

The second piece is that it really helps to have a broad portfolio, in both types of degrees and modalities of delivery. In addition, large high-quality state schools are actually seeing an enormous surge in undergraduate interest in enrollment right now. With students, there is really a flight to quality and a flight to safety. These factors really help us. For example, our enrollment numbers within the business school are probably going to be up 10 percent this year, even with COVID. The fact that we’ve got both residential and online master’s programs, and we’ve got a very robust undergraduate program, gives us a portfolio diversification that stands us in pretty good stead.

What else do you see in the Krannert School’s future?

It’s possible that we will come back in a year or two and re-enter the full-time residential MBA market if it looks like the situation has changed. But to us, it looks like the market wants degrees for working professionals and online degrees. So, we’re going to focus on offering MBAs in a modality that the market wants.

Honestly, I don’t know how this is all going to shake out. But it would surprise me if Purdue is the last out.

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