Top Business School Stories of 2009
Top Business School Stories of 2009The global financial crisis hammered the MBA job market, school endowments, and financial aid. Some questioned an MBA's value. Bring on 2010
By Alison Damast and Geoff Gloeckler
Business Schools
To call 2009 an interesting year for management education is perhaps an understatement bordering on the extreme. With the global financial crisis taking its toll on everything from the MBA job market and endowments to financial aid and the reputation of the MBA degree itself, 2009 promises to go down in history as a year to forget.
For students and graduates of MBA programs, 2009 was the year that jobs and internship offers became harder to find, even at the top schools; a year when the scarcity of student loans and visas for international students threatened to derail even the best-laid B-school plans; and a year when programs began to rethink the way they teach such subjects as ethics and corporate responsibility. Business school endowments were hit hard and the high cost of tuition was at the fore of every prospective student's thinking.
Of the 10 most popular business school stories on Businessweek.com in 2009, seven directly related to the financial crisis. The others looked at a new competitor on the B-school admissions test front, a GMAT cheating alert in China, and three top MBA programs currently without deans. Take some time to go back over the biggest stories of the year and reminisce. For better or worse, 2009 will be a year that the B-school world won't soon forget.
1. Job Market: The No. 1 concern this year for current MBAs, applicants, and recent grads was the job market. Students worried about finding internships and jobs after graduation, applicants wondered if joining the ranks of the unemployed to enroll in an MBA program was a good idea, and newly minted BBAs and MBAs wondered if their post-B-school jobs would hold up. These fears came out in comments readers left on the stories, with many weighing the pros and cons of accepting jobs with lower salaries and fewer responsibilities. Readers who earned MBAs in 2008 and 2007 also chimed in to voice their concerns, many saying they had yet to land that "dream job" and didn't expect to find it in the near future.
MBA Job Outlook Dims
MBA Tales: Searching for Work in a Recession
MBAs Confront a Savage Job Market
2. Loan Crisis: International students who planned to study at U.S. business schools had to scramble to find a student loan provider in 2009, when many of the loan programs they had used to fund their education disappeared. For years students had depended on the popular Citi Assist and Sallie Mae loan programs, which allowed applicants to obtain up to $150,000 without a co-signer to assume stewardship of the loan should the borrower default. Due to the credit crisis in the fall of 2008, those financial lifelines for many international students were pulled and many schools spent the first six months of 2009 trying to find alternative loan providers. It was a tense few months for foreign applicants, many of whom expressed their frustration in more than 250 comments on stories we published on the topic. For many, the uncertain H-1B visa situation, coupled with the loan situation, made the prospect of studying in America too big a risk to take.
By the time spring rolled around, many schools had come up with solutions for foreign students—often just in time for the deadline deposit to reserve a seat in next year's class.
Loan Crisis Hits the MBA World
World to U.S.B-Schools: Thanks, but No Thanks
3. MBAs: Public Enemy No. 1? Were B-schools responsible for the global economic crisis? It's a question that has consumed much of the B-school world for the better part of a year. In a story we ran in May, experts from inside and outside MBA programs weighed in on the debate. Philip Delves Broughton, a Harvard MBA and author of Ahead of the Curve: Two Years at Harvard Business School (Penguin Group, July 2008), directed blame at B-schools, calling the three-letter acronym, MBA, "scarlet letters of shame," and suggesting they stand for "Masters of the Business Apocalypse." Others, such as Richard Cosier, dean of Purdue's Krannert School of Business (Krannert Full-Time MBA Profile), defended MBA programs, saying, "It is my opinion that business schools will continue to produce students who will be part of the solution, rather than the problem."
Readers, meanwhile, started a rousing debate on the topic via the story's comments. Some completely blamed business schools for the crisis, criticizing everything from teaching techniques and the competitive environment MBA programs seem to foster to the overall value of the degree. Others defended today's B-schools, saying business schools are about as responsible for the economic crisis as engineering schools are for global warming. In the end, the common sentiment seemed to be that business schools deserved some blame, but not all of it.
MBAs: Public Enemy No.1?
4. GRE vs. GMAT: For years, the Graduate Management Admission Council (GMAC) had a virtual monopoly over the admission testing arena at business schools. Its well-known entrance exam, the Graduate Management Admission Test (GMAT), was the standard test used to get into business schools in the U.S. and many other schools around the world for decades. That all changed this year when the Educational Testing Service (ETS) started to encroach into GMAC territory, courting business schools and encouraging them to allow students to submit the Graduate Record Examination (GRE) for admissions. ETS' efforts are starting to pay off. There are now approximately 285 business schools that allow students to submit the GRE in lieu of the GMAT exam, including the University of Pennsylvania's Wharton School(Wharton Full-Time MBA Profile), Harvard Business School(Harvard Full-Time MBA Profile), and New York University's Stern School of Business(Stern Full-Time MBA Profile). ETS says that it expects more than 300 schools to sign on in 2010.
GRE v.GMAT: Battle of the B-School Gatekeepers
5. The Best Part-Time B-Schools: It was an interesting year to survey part-time and executive MBA students. For many prospective students, the thought of spending tens of thousands of dollars on a graduate business degree was frightening. For those already enrolled, fear of job loss and waning corporate support added stress to already intense business programs. At the schools themselves, application numbers were down considerably, as was student satisfaction. Not surprisingly, most student complaints centered on many programs' lack of career services for part-time students. Because more students were paying their own way, they expected the kind of attention that full-time MBAs get in terms of access to recruiters and job openings. This proved to be a real challenge for most business schools, which were unaccustomed to sourcing positions for ultra-experienced EMBA students. When the economy rights itself, interest in part-time and executive MBA programs is expected to rebound, but the need for increased career support is likely here to stay.
A Brutal Wake-Up Call for Part-Time B-Schools
6. The Harvard MBA Oath: As a way to get MBA students talking about ethics, 33 students from Harvard Business School's Class of 2009 approached classmates and asked if they would be willing to sign an oath to "act with utmost integrity" in their professional lives. The idea caught on quickly at HBS and before long, students at other top B-schools followed suit. To date, 1,784 MBA students and graduates have signed the oath via a Web site created by the Harvard students. Readers thought the idea of an MBA oath was a good one in theory, but were skeptical that MBAs—some of whom were responsible for many of the lapses in moral judgment that led to the financial crisis—would follow through on what they agreed to do in the oath.
Harvard's MBA Oath Goes Viral
7. GMAT Cheating in China: China is the latest frontier in GMAC's campaign to prevent students from cheating on the GMAT. In November, a Chinese court barred a Beijing-based Internet site from selling materials such as questions from the GMAT, test prep materials, and PDFs of actual test books. The Web site was owned by Passion Consultancy, a company that coaches Chinese students applying to the top U.S. business schools. As a result of the court ruling, the Web site had to take the copyrighted GMAC material down, pay GMAC $76,000 in compensation, and post a notice from GMAC about the consequences of cheating. It was a victory for GMAC, which has been aggressively pursuing users of such Web sites as well as "proxy" test-takers who are hired to take the exam in place of applicants. GMAC says it will be keeping a close eye on errant Web sites that promote cheating among Chinese GMAT test takers in 2010. The organization has recently filed about 10 administrative complaints with the Chinese copyright office against Web sites that it says illegally carry GMAT preparation material and is constantly scanning for other suspect Web sites around the world, GMAC says.
Crackdown on China GMAT Cheating
8. College Affordability: With college costs spiraling out of control and family financial resources strained to the breaking point, it's no surprise that the issue of college affordability was front and center this year. Nowhere was that more apparent than in a story we published in March about student debt. The story focused on Robert Applebaum, a New York attorney who finished law school owing $80,000 in student loans. His idea was simple: Forgive student loan debt for those earning less than $150,000 a year, a move that he believed would help boost the economy by putting more money in the hands of the middle class. Applebaum's effort, mounted via a Facebook group he started, struck a chord with millions of people who graduated from college with student loans, Readers were eager to share tales of their student loan debts; the story drew more than 400 comments. Some readers criticized Applebaum's idea, saying that it was unrealistic to expect the government to cancel student loan debt, while others praised the concept and the potential it had to jump-start the economy. Applebaum subsequently created a nonprofit to lobby for an overhaul of how higher education is financed in the U.S. Membership in his Facebook group has nearly doubled.
Asking for Student Loan Forgiveness
9. Deans Wanted: As the year comes to a close, three top business schools find themselves in the midst of a dean search. At HBS, Dean Jay Light recently announced that he would be retiring at the end of the 2009-10 school year. At Northwestern's Kellogg School of Management (Kellogg Full-Time MBA Profile), Dean Dipak Jain left his post in September after eight years at the helm.And at Chicago's Booth School of Business (Booth Full-Time MBA Profile), Ted Snyder announced that he would not be seeking a third five-year term as dean and would step down next June. These high-profile vacancies come just as many are questioning the value of the MBA degree, endowments are hurting, and financial markets are in a state of flux. In the world of management education, these are arguably the three most attractive high-profile jobs available—but are also among the most difficult. In the coming months it will be interesting to see how these schools seek their next leader.
Kellogg Dean Steps Down
Harvard B-School Dean Jay Light Stepping Down
Snyder to Step Down as Dean at Chicago Booth
10. B-School Cutbacks: Business schools were hit hard by the Great Recession, with many facing a series of painful declines in endowment earnings and gift-giving, along with state- and university-mandated budget cuts. The ripple effect of endowment declines was even felt at the richest of institutions. At Harvard Business School, where the university's endowment fell to $26 billion, from $36.9 billion, during the fiscal year that ended June 30; the business school laid off 16 staff members this spring. And at Stanford Graduate School of Business(Stanford Full-Time MBA Profile), 49 employees lost their jobs—about 12% of its 400-person staff.At many schools, the decline in the annual operating budget called for even more drastic measures.At Florida State University's College of Business (Florida State Full-Time MBA Profile), budget cuts forced the school to get rid of 110 telephone lines, shut down a computer lab, and cancel some part-time MBA programs.State universities in cash-strapped states such as New York were forced to raise additional revenue by asking students for more money; at the University of Buffalo's School of Management (Buffalo Full-Time MBA Profile), students had to pay an additional $184 in mandatory fees last spring to make up for a $1 million shortfall in the operating budget.
School officials are hoping 2010 will be a slightly easier year, although it could still offer a bumpy ride. A recent survey by the National Association of College and University Business Officers and the nonprofit Commonfund Institute showed that college endowments averaged returns of -19% during the fiscal year, a sign that the hard times haven't yet ended.
Financial Woes Force B-School Cutbacks
Damast is a reporter for BusinessWeek.com. Gloeckler is a staff editor for BusinessWeek in New York.
