Business Times - 11 Apr 2009
Chicago's hope
The business school market is in for a shake-up, says the dean of the Chicago Booth School of Business. By Anna Teo
WHEN Edward Snyder was dean of the University of Virginia's Darden School in the late-1990s, he secured for the school during his three-year tenure more than US$120 million of much needed funds. Last November, he topped himself. Under his watch, the University of Chicago's Graduate School of Business (GSB) got a record single donation of US$300 million - the largest gift to any business school in the world - and along with it, a new name. It's now known as the Booth School of Business (or simply Chicago Booth), after benefactor David Booth, an alumnus and a businessman.
Financial acumen was not all Professor Snyder brought with him to Chicago, his own alma mater from which he earned a PhD in economics. When he took over as dean in 2001, the school was going through a bad patch and had just slumped to 10th, from third, in BusinessWeek's rankings of US MBA programmes. It soon jumped back up to second in 2002 and 2004, and has since moved, in the next two rankings in 2006 and 2008, to the top spot.
'I've been in business schools for 27 years, so this is getting to be a real long time,' Prof Snyder - who had run Michigan's Ross School and Darden before Chicago - tells BT during a recent visit. And from that vantage point, the affable, soft-spoken dean has some grim prognoses about his industry. The MBA business may have tended to thrive even during downturns - in a sluggish job market, young professionals figure they might as well go back to school and upgrade themselves for the upturn - but this time, the weak will be weeded out, he says.
'A lot of students would say - I only want to a Top Ten school. Now, there might be 15 schools that people think are Top Ten schools,' he says with a chuckle.
'I see a big distinction between the top schools and the schools that are not strong. If you're in the top 15 or so, applications are strong. Outside that, it's surprising to me how clear it is, but the strength of those business schools and their franchises is markedly different. They're much more fragile.
'In the 1980s and 1990s, it was the rising tide; all business schools did better. We had literally thousands of business schools enter and start up; many new business schools in the United States, in Europe, in Asia, in Latin America. And now, with this last nine years, we're starting to see much more of a mature industry; still innovative, but much more separation, much more of a hierarchy, based on quality of faculty, quality of alumni, quality of instruction.'
MBA schools, especially those in the lower or even middle tiers, need to review their strategy or risk failure, he says.
'I think some schools are making a mistake. They've got a budget-driven approach to strategy, not a quality-driven approach. They're saying, 'we need more students, we need more programmes, we need to raise tuition', and there will be schools that just aren't able to do that. I frankly think that schools need to think through their strategies right now because it's an opportunity in a tough economy to reset your strategy - so you have to think through objectives, actions, and say yes to some things, no to other things. I think a lot of schools are just saying, 'let's keep our programmes going', and that, I think, is going to lead to failure.
'Some schools should be shifting towards undergraduate, and rather than wait for failure, they should do it proactively. Some schools should be focusing on specialised master's programmes, and rather than wait for failure with the MBA, they should do it proactively. I don't think there're going to be as many schools trying to be truly global two years from now, three years from now; it's hard.'
The first business school worldwide to offer an executive MBA programme back in 1943, Chicago Booth expanded to Europe in 1994 with a campus in Barcelona (since relocated to London in 2004) and started classes in Singapore in 2000.
Armed with an endowment of more than US$500 million (still only seventh among US business schools, well behind its 'toughest competitors', as Prof Snyder points out a few times), Chicago Booth has the resources to build a global business school.
'I don't think a lot of schools do, and if the schools that are facing budget trouble just say, 'let's bring in more students', even if they can, I think they're risking quality right now. You have two types of failure: Some schools won't be able to bring in more students, they just don't have enough brand, enough market, enough presence, to do it. So they will more immediately drop out.
'Then there are some other schools that may be able to, in the short run, bring in some more students but it won't be the right strategy for even an intermediate period of time.'
Given the economic climate, Chicago Booth will not, for now, add to the size of its programmes, Prof Snyder says.
To be sure, its 24-month full-time MBA course still drew 'a big increase' in applications from the US, though interest from 'certain countries in Asia' is down. 'The big increase in the US is consistent with the idea that students who want to get an MBA expect the market to be better when they leave,' he says.
As for its 21-month executive MBA programme, which typically attracts older, mid-career people, 'applications are down but they are above the level that they were three years ago', he notes. 'I think the reason is that corporate support is not as strong for the executive MBA. Companies can't sponsor students to the extent that they could before. So we have even more inquiries but the actual number of applications has decreased but it hasn't decreased by an amount that is of any real concern to us because, as I said, we're still above where we were just two or three years ago. Doesn't mean that students will stop going; it just means there won't be as many applicants, and they'll be paying for it themselves.'
But the demand for an MBA - from both employer and employee - remains strong, according to Prof Snyder.
'I do believe that the trend in favour of MBAs is manifest in who are in top jobs all over the globe. So that trend is very strong. There are some other factors that go the other way - corporate support is down, a lot of companies right now are asking themselves, 'Can I still pay the wage premium for MBAs and are there alternatives?' So what I see is - companies, instead of saying, here's a set of jobs, I want MBAs to fill all of them, they'll be more selective about which do they want to have MBAs fill. So we have had a lot of conversations with companies along those lines.
'Again, going back to facts: I started in (business schools) 1982; MBA tuition has increased in real terms, meaning the price has gone up faster than inflation, every year for 26 years in a row. It's quite amazing. So, of course, let's not think that business principles don't apply to business schools; they do,' he says, laughing.
'So, MBA education at the high end has gotten more expensive, and hiring MBAs got more expensive, faculty has got more expensive. So we're at a juncture, I think, with business education that I find as a dean very interesting. It's a great time for strategy; a lot of interesting challenges. I think now's the time when schools will probably make more mistakes, and the frequency of mistakes will be higher now than in the past.'
Chicago Booth, on its part, well-reputed for its academic rigour and which counts six Nobel laureates among its faculty, will proceed to beef up its lineup of professors and its career services, but not seek to expand its programmes, Prof Snyder reiterates.
'Sure, we'll get more revenue but any student you bring in now, two years hence, they become an alum, and you need to support that person,' he says.
'We're organising what economists call a two-sided market, where we recruit students and we help place students. I should make clear - we don't get jobs for students, but we work the network, we develop the relationships with employers, we coach. It's the whole Chicago approach in some ways: Let's stretch the students but let's support them. It comes back to a focus on quality - quality of the experience for the students.
'I've never viewed the students as customers, which gets me into trouble with some of my students,' he says, chuckling again. 'But it's good! We have long conversations about that. I see them as students. There's a saying that if you put more into something, you'll get more out. I want them to put more into the programme . . . What I find interesting is - how do we get to a different equilibrium where they want to put more in so they get more out. And I think the answer is - you set high expectations of them, you don't say you're always right, you don't say 'you're a customer', and then you also support them. That's a different approach. So, we love our students, we care for them, but they're not always right, and we set high expectations of them.'
And one big recent controversy that the school ran smack into - not just with students but its wider community - is over its name change to Booth, following the US$300 million gift.
'Yes, oh yes, absolutely, there was and is resistance, and we need to recognise that we're giving up something, Chicago GSB, in order to get on with what we believe will be a better trajectory in terms of brand, and certainly the opportunity to affirm our values and close the financial gap. That's the tradeoff. Some people wish that I could have no tradeoffs, but again, strategy is about choices, and the trustees and the rest of the people involved in the decision felt that this was terrific. But it doesn't mean that there is no resistance; there are a lot of people who wish that we could have just kept on the old path.'
For a school of its academic repute and history - founded in 1898, it's the second oldest business school in the world, and boasts a string of firsts in business education - people were probably surprised that it lagged far behind other schools in resources less than a decade ago, Prof Snyder says.
'We were 10th in the world in endowment. The good news is we moved up to seventh as of June last year, before the Booth gift, so it will really help us. We're still quite far behind some of our toughest competitors.'
David Booth, co-founder and CEO of Dimensional Fund Advisors and a 1971 MBA holder from Chicago, 'really represents Chicago', Prof Snyder says. 'I think it was just an unusual opportunity to affirm the Chicago approach to management education. He's a great entrepreneur, marketeer and finance thinker. In terms of strategy, it (his donation) helped us do two things: one, close a financial gap in part with our toughest competitors, and two, put us on a trajectory where we can address what I call our brand name gap versus our toughest competitors.'
For the record, Prof Snyder names Harvard, Stanford and Wharton as Chicago Booth's 'toughest competitors'. But he hastens to add that the set of competitors is 'much broader than that', saying : 'I consider our competitors any other business school whom we lose a faculty member to, a student to or a staff member to. It's healthy competition, but there are a lot of great business schools in the world but our toughest are those three.'
As for the brand name, Prof Snyder recognises that the school has 'made a lot of progress' as Chicago GSB.
'But when you break that down, Chicago is a city and GSB is . . . something that we could never own. Stanford uses GSB, Columbia used to use GSB, Rochester uses GSB. So even though I and many people have a lot of trouble thinking about giving up 'Chicago GSB', Booth is something that we're really excited about. And just as Wharton is a single-word brand, as is Kellogg, that's where the power is. It will take some time.'
The Chicago approach, Prof Snyder explains, is to emphasise frameworks and data. 'There is a definite unifying character to the Chicago approach whether you're studying marketing or finance. It feels the same. If somebody has a proposed idea, you want to find out how they got to that idea, what will prove that person right, what feedback mechanisms should the firm use to guide it through implementation. It's a very systematic approach to action and leadership.'
The approach extends to 'fundamental issues' that the MBA curriculum does address, he says, such as CEO compensation.
'One of the things that is a Chicago principle, if you will, of how you provide incentives is wrapped up in the idea that it's not how much you're paid; it's how you're paid. So the total isn't so important; it's the structure of the compensation and does it lead to the right incentives.'
The recent fracas over CEO excesses and bonus payouts has 'put everyone who believes in markets on the defensive' and incurred 'significant disappointment', he says. 'I personally don't mind if people get rich; I just want them to have earned it. And that's, I think, the problem with some of the things that we saw recently.'
He adds: 'I think the big role for us is to be a strong reference point, for what's good economics, what's good marketing, what's good accounting, what's good finance. We're into our second century, and economic policy and political views will come and go, and we have people on both sides of the US political world, and as we become more global, I think we'll have people who have different views about, for example, what are the big issues in China right now. But I think the role of the school is to just continue to try to be that good reference point, and focus on quality and principles.'
EDWARD SNYDER
Dean and George Pratt Shultz
Professor of Economics
Chicago Booth School of Business
· Born 1953 in the United States
BA, Colby College, 1975 (Economics, Government)
· MA, University of Chicago, 1978
(Public Policy)
· PhD, University of Chicago, 1984 (Economics)
Previous appointments
· Dean, University of Virginia Darden School of Business, July 1998 to June 2001
· Senior Associate Dean, University of Michigan Business School, 1995-1998
· Director, Davidson Institute at University of Michigan Business School, 1992-1995
· Faculty Member, University of Michigan Business School, 1982-1994
· Economist, Antitrust Division, US Department of Justice, 1978-1982
Other current appointments include
· Editor, Journal of Law & Economics
· Senior Scholar, MacLean Center for Clinical Medical Ethics, University of Chicago
· Member of Advisory Board, Civic Consulting Alliance
· Member of Advisory Board, World Business Chicago
· Member of Board, Argonne National Laboratories
No comments:
Post a Comment