Crunch This; B-Schools Rebound from an Identity Crisis

By Pepper, Tara | Newsweek International, August 21, 2006 | Go to article overview
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Crunch This; B-Schools Rebound from an Identity Crisis

Pepper, Tara, Newsweek International

Byline: Tara Pepper

One little-known aftershock of the corporate scandals that began with Enron was an M.B.A. backlash. At a time when companies were scrutinizing every penny they spent, they also questioned the value of advanced business degrees, once seen as a ticket to the fast track in the business world. The scandals were the "tipping point," says Joel Podolny, dean of the Yale School of Management. Afterward, as companies began to hire fewer M.B.A.s at lower pay scales, applications to business schools worldwide fell dramatically, by 20 percent between 2002 and 2005. The result was an industrywide identity crisis, which had insiders questioning every aspect of their schools and reaching a brutal verdict: they had flunked Business 101, failing to keep up with change or to respond to consumer demands.

Now there's a sense that the worst is past. After a bout of internal reform that saw, for example, the Yale School of Management unveil an entirely new curriculum last year, the numbers are back up. In the United States, B-school applications and enrollments are rising again, according to an industry survey released this month. Worldwide, corporate demand for new M.B.A.s has risen healthily this year (by 24 percent) for the first time since 2002. So have the salaries paid to newly hired M.B.A.s, which have increased by an average 7.5 percent, according to a survey by of 445 companies, also released this month. "It's been a very strong recovery, with particularly high demand in consulting and financial services," says Nunzio Quacquarelli, editor of

In general, the reform movement has been about bringing the B-school course of study out of the academic weeds and back into the real world. The standard M.B.A. curriculum emerged in the wake of the Ford Foundation's 1959 report "Higher Education for Business," which laid the outlines for a research-based business education. Since most managers spent their careers in one field, whether finance or marketing, teaching focused on specific skills. Business professors, wanting their discipline to be taken as serious "science" by others in the university system, focused on narrow, quantitative courses. The result was ever more specialized M.B.A.s entering a market that increasingly asked them for flexibility, innovation and an ability to work across cultures and disciplines. "There was a major disconnect between what they were taught and trained for, and what they were asked to do by recruiters," says Podolny.

As B-schools were all competing to be more rigorously quantitative, they were also increasingly alike. None had a truly unique brand, even if they all taught the importance of branding. The result was what Frank Brown, incoming dean at INSEAD, the top business school in Europe, calls "the commoditization of the M.B.A." Not only was there little differentiation among the top 12 schools, but they generally did a poor job "delivering value." And that complaint still resonates: "I've spoken to Wall Street CEOs who ask, 'Why should we worry about hiring M.B.A.s--what exactly is it getting us?' " says Brown. "The M.B.A. used to be a credential, a requirement for being a senior manager or a CFO. Now it's nice to have, but people are beginning to ask what it really does for them."

Brown, who came to INSEAD from a consulting career, typifies the trend at top schools, which is to break out of academic niches. Brown says his goal is to make INSEAD a "leadership institution," not a training ground for specialists, and many of his peers make similar noises. Yale's new curriculum breaks down traditional boundaries between disciplines--for example, by focusing marketing courses not on the nuts and bolts of how to calculate a new product's "value proposition," but on how to understand consumer motivations using economics, psychology, sociology and marketing.

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Crunch This; B-Schools Rebound from an Identity Crisis


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