MBA Locomotive Losing Some Steam : Education: Southern California, with more programs than any other area in the country, is apt to be affected if the trend continues. : REGIONAL REPORT
U.S. business schools crank out 75,000 MBAs a year--nearly a quarter of all the master’s degrees awarded annually in the nation and a figure that reflects phenomenal growth since the 6,000 awarded in 1965. And no major metropolitan area has more masters of business administration programs than Southern California.
But the boom may be ending. The increase in the number of people applying to MBA programs nationwide seems to be slowing.
Only 305,000 people signed up to take the test for admission to business school last year, only a tad higher than the 300,000 of the year before. The number of applicants would have declined slightly if you counted only Americans and not the foreign students who took the test abroad.
A more ominous development for local business schools is that key businesses here are feeling the pinch of the economic slowdown and industry consolidations. They are projecting a need for fewer MBAs.
Another troubling statistic for business schools: Only 21% in a UCLA survey of 190,000 freshmen around the nation last year said they intended to major in business. That’s down from 24.5% in 1989 and nearly 26% in 1988.
“If I were at a local business school, I’d be doing some serious planning for a possible downturn,” says William Broesamle, president of the Graduate Management Admission Council in Los Angeles. The council administers the Graduate Management Admissions Test, or GMAT, for admission to business schools.
If a drop in MBA applications is in the offing, most local schools say they have yet to feel the impact. Foreign students, who now account for more than a quarter of those who sign up for the GMAT, are helping prevent a downturn.
But the long-term outlook isn’t bright, Broesamle says. The postwar baby-boom generation--people in their 20s and 30s--have helped business schools because many have attended graduate schools. But that age group is shrinking--proportionately-- and business schools will feel the pinch.
Another reason for the slowdown has nothing to do with demographics. The MBA was the Holy Grail of the 1980s--the way to obtain “more bucks automatically,” as the quip went. But the collapse of the investment banking business means that there are fewer big-bucks jobs on Wall Street and at high-powered consulting firms these days, even for graduates of top schools.
On the other hand, most of the schools in Southern California are smaller, lesser-known institutions where the investment banking flap caused less of a ripple. That’s because most of those at the schools aren’t necessarily angling for a fancy Wall Street career.
With the exception of UCLA--which has a top-flight reputation--and the University of Southern California--only slightly less blue-chip--most of the schools don’t have national images and thus draw their MBA students predominantly from Southern California.
Local MBA earners tend to remain in California, helping to run hospitals, manage factories or crunch numbers for real estate developers.
There’s another thing in local schools’ favor: Nearly half are public. With tuition costs going through the roof at private schools--prestigious Stanford University, for example, charges $15,000 a year for its MBA program--the public schools look a lot more reasonable.
At UC Irvine, a student in the two-year MBA program pays a little more than $3,000 a year.
The high costs haven’t put much of a dent in the number of people applying to the most prestigious private schools such as Stanford, Harvard and Duke.
It’s the smaller, less-prestigious private schools that may have the most to worry about. Chapman University in Orange, for instance, charges its 200 MBA students between $4,000 and $6,000 a year to attend school part time.
Applications, which peaked at 110 two years ago, dropped to 87 this year.
Small schools like Chapman lack the resources to compete across the board with the likes of Stanford. So they have to focus on one or two things and try to do them better than everybody else, says Richard L. McDowell, dean of Chapman’s School of Business and Economics.
Chapman promotes its smallness as an advantage. As McDowell puts it, “smaller classes make for a much more personal experience.”
At USC, another private institution, applications to the MBA program were down 7% this year.
A record number of people applied to the MBA program at San Diego State, a public school, but applications were flat at the private University of San Diego.
Some of the weaker schools that expanded during the MBA boom of the 1980s may shrink or cease operating altogether, experts predict. And even some well-regarded programs could see a decline in the quality of applicants.
Even the big schools have been trying to make themselves more attractive to students and employers. Many are trying to trade a number-crunching stereotype for a more people-oriented approach to managing.
Schools are offering more courses on how to manage people, on ethics and a range of non-quantitative skills that naysayers dismiss as “touchy-feely.”
Much of the impetus for the changes is coming from employers. They’re getting fed up with arrogant MBAs who come out of school knowing a lot about calculus but little about effective management and other people-oriented skills, some academics say.
“The whiz-kid phenomenon is over,” says John Nicks, associate dean of Pepperdine University’s School of Business and Management in Malibu. “People aren’t thinking of freshly minted MBAs as the salvation of their companies.”
That’s fine with Pepperdine. “We don’t want people to think that at age 28 they can go out and save their companies,” Nicks says.
Even UCLA--ranked 10th in the nation last year in a Business Week magazine survey of business schools--has had static from business.
“One of the things employers tell us is it’s important to train people to manage people--how to work with them, how to motivate them,” says Martha Miller, an associate dean at UCLA’s John E. Anderson Graduate School of Management.
UCLA implemented some of the suggestions and, says Miller, “what we hear from employers is that our students don’t have the swelled heads some MBAs have a reputation for.”
Ultimately, of course, the economy will decide how many MBA graduates are in demand by business. And most economists predict that Southern California’s economy will grow less rapidly this decade than last.
The economy has already had an impact on local MBA programs. The region’s big aerospace industry, for instance, is ailing from cutbacks in defense spending. Banks are likely to need fewer people given such mergers as the pending marriage of Security Pacific Bank and Bank of America.
Those industries account for a big chunk of the people studying part time for an MBA at local schools. Part-timers account for nearly half the people who receive MBAs--a higher figure than any other graduate degree.
Employers often pay at least part of the tuition of part-time students, but some have cut back on such help during the recession.
Aerospace isn’t the only local industry that’s in the dumps. Each year, for instance, about 10% of the MBA graduates at UC Irvine go to work in Southern California’s enormous real estate industry.
“They usually get snapped up,” says Dennis J. Aigner, dean of UC Irvine’s business school. “But not this year.”
Times staff writers Chris Kraul in San Diego and Nancy Rivera Brooks in Los Angeles contributed to this report.
Southland’s Five Biggest MBA Programs The 1990--91 enrollment figures for full--and part-time students.
School and Enrollment:
San Diego State: 900
Cal State Long Beach: 607
Source: American Assembly of Collegiate Schools of Business