The case for getting an MBA has always been the same. Sure, it costs a lot, but in return, graduates from elite schools can expect a big salary bump.
But according to NYU Stern School of Business professor Larry Zicklin, who was recently interviewed by the FT, the days when getting an MBA costs well north of $100,000 are coming to an end. He argues that the issue is that these schools spend an enormous amount of time and money supporting research, rather than on teaching, which drives up costs.
Students are subsidizing something that they don’t really value, and that relatively few others do either. But because research brings prestige, has traditionally been the foundation for getting tenure, and is part of rankings, it’s what professors and schools focus on.
And if they don’t change, business schools are going to get killed by their best professors leaving to teach online, with students following them. If great professors can reach 200,000 people instead of a few hundred a year, why should they stay at a business school? And if students can learn from the very best professors online for a fraction of the cost, why not do that?
Zicklin tells the FT that it’s an existential threat:
“Business schools aren’t aware of the tsunami that’s about to hit them. The era of charging $200,000 for an education is over. Research is such an expensive part of business school education that institutions are going to have to cut back on research. On the teaching front, the days of a lecturer standing in front of just 25 students, with little emphasis on quality of teaching or a school’s best professors being absent from the classroom because they’re doing research, are coming to an end, too.”
The case against the MBA is growing. Not only do you have to pay huge fees, you forego two years of salary. That’s a lot for a management consultant or a banker.
And if Zicklin has his way, more students will become aware of how much of their money goes to research that they don’t value.
Further, many of the highest impact jobs with the biggest growth potential are at startups. And according to entrepreneur and Stanford lecturer Vivek Wadwha, not only are MBAs overpriced, their skills don’t match up that well with startups, as schools tend to focus on large companies rather than entrepreneurs.
I no longer advise startups to hire M.B.A.s,” he wrote at the Wall Street Journal, “and I discourage students who want to become entrepreneurs from doing an M.B.A.”
According to legendary Harvard Business School professor Clay Christensen, even established companies are being priced out.
“If you look at who recruits our graduates, there are very few operating companies,” Christensen said in a panel at the Nieman Journalism Lab. “So there’s no General Motors, no General Electric, no General Mills, only one Johnson and Johnson company, no Intel, no Dell, no Motorola.”
The only companies that can afford top MBAs are banks and consultants, so many business schools cater to them.
Companies are starting to invest more heavily in corporate universities, giving young employees the opportunity to keep earning while they learn, and the ability to teach exactly the skills they need.
Right now, most schools are safe because there’s not much in the way of better alternatives. But there are already programs more suited to startups that combine management lessons with engineering, which is just the beginning.
As Zicklin points out, there’s a big opportunity for any school willing to emphasise teaching over research and cut fees at the same time. If they can offer more value for a lower price, other institutions will have to follow.
And online options are getting better all the time.
Business school has all of the signs of an industry ripe for disruption. It’s not serving the needs of its customers, as it provides both students and companies with the wrong skills, expensively.
The degrees are so prestigious that they won’t disappear for some time. But the costs have to come down, or they’re going to drive students away.
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