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A group of MBA students at the Ivey Business School at Western University in London, Ont. (Peter Power for The Globe and Mail)
A group of MBA students at the Ivey Business School at Western University in London, Ont. (Peter Power for The Globe and Mail)

Canada’s MBA problem: How business schools are fighting to stay relevant Add to ...

When Bob Kennedy arrived as the new dean at the Ivey Business School in 2013, the school’s MBA program was confronting a new reality.

Applications from Canadian students were in decline following the economic crisis, and competition for the smaller pool of students was raging with hundreds of other MBA schools across the continent.

In response, Mr. Kennedy pressed ahead with a strategy launched by Carol Stephenson, his predecessor at the University of Western Ontario school: He continued to sharply cut the size of the full-time master of business administration program, which now has shrunk to 131 students from 271 in 2005. And he didn’t follow the strategy of some other MBA schools that have dramatically increased the number of spots for students from around the world.

“I could easily enroll 300 students if I was willing to have half of my class be from China or India,” Mr. Kennedy explained.

“Ivey has very consciously said we think we know what the optimal mix is and we’re going to keep the bar very high. Even if it means a smaller class, that’s fine, because we think quality is more important than quantity. Other schools have made different decisions.”

Indeed, they have.

Universities across the country have adopted new approaches to MBA courses to cope with fierce competition in what has become a mature industry. Some are cutting class sizes while others are significantly increasing their enrolment of overseas students to help cover the costs of new programs and specialized degrees.

The result is that the MBA field today has a decidedly non-academic air of marketing and product experimentation, with universities battling to woo students with shorter degrees, novel programs, alluring opportunities for foreign travel, and new high-tech buildings.

With fewer domestic applicants, many Canadian MBA programs have turned to foreign students to fill the gap, and those students now make up as much as 70 per cent of the classes at some schools. That can help meet the demands of students who want a mix of global experience in the classroom, but it can also change the nature of the course.

The rampant marketing and competition for students have raised questions about what a sustainable model for MBA programs will look like. With more than 40 universities offering MBA degrees in Canada – plus hundreds more in the United States – there are growing questions about whether MBA schools can guarantee high job placement rates to lure students into paying as much as $95,000 for an education, and whether they can maintain their lustre in the eyes of the business community.

“The general MBA model is outdated, and increasingly you have to differentiate yourself,” argued Dezsö Horváth, the long-time dean of the Schulich School of Business at York University in Toronto. “Increasingly, corporations are expecting that people specialize in sectors or markets … The world of management education is changing. General programs are not good enough.”

Rising costs, falling demand

The number of students signing up for MBAs in North America has been in steady decline for years.

Last year, about 87,000 Americans wrote the Graduate Management Admission Test, or GMAT, an aptitude exam generally required as part of an application to MBA programs. That compares with 127,000 in 2010, according to figures complied by the Graduate Management Admission Council, which administers the test. In Canada, 5,926 people took GMAT tests in 2013, a 23-per-cent fall from 7,737 in 2010, GMAC data show.

The reverse is happening elsewhere, particularly in Asia. Last year, 57,783 Chinese citizens wrote the GMAT tests, a 91-per cent-increase in four years.

While enrolment is changing, most students everywhere have become more selective about where they study. Ilian Mihov, dean of the highly ranked European business school INSEAD, located in Fontainebleau, France, said many students have decided an MBA is only worth the escalating cost at a top-ranked university where job prospects are better. Others are turning to different types of business training as an alternative.

“Many people have realized that if you cannot do an MBA at a top school, then it’s not clear that you have to do an MBA,” Mr. Mihov said during a recent interview. “The return on your investment in terms of time and money may not be worth it.”

Students also have more options for MBA programs, including for-profit universities, such as the University of Phoenix, or through online courses and distance learning where students can stay home and earn their MBA from universities located in other countries; 27 per cent of global prospective MBA applications are now seeking online or distance programs, an increase from 4.4 per cent in 2008, according to a report from educational data firm QS Quacquarelli Symonds Ltd.

Another increasingly popular alternative is an undergraduate business degree, which often costs far less than an MBA and is favoured by many parents keen to see their children study a practical discipline with a clearer career path at graduation. In Canada, 20 per cent of all bachelors degrees awarded by universities in 2012 were in business and public administration, an increase from 15 per cent in 1992, according to Statistics Canada data.

“There’s been a big shift toward undergrad education,” Mr. Kennedy, the Ivey dean, said. “So, the typical path used to be to do social science or liberal arts as an undergrad, work a couple of years and get an MBA. Largely as a result of the financial crash in 2008, parents are a lot less willing to fund a [first] degree that doesn’t lead to a job.”

Employer preferences are also shifting.

Leah McGillivray, who heads the Canadian banking and financial services team at global recruitment firm Michael Page, says she has seen demand for MBA graduates shrink in recent years in some sectors.

Investment banks typically used to prefer MBA graduates for jobs at the associate level or above, she said, and would send young staffers back to university to complete an MBA program. Now, many firms are developing undergraduate business students through their own in-house programs. Those hires generally spend three years at the lower-tier analyst category and then move into associate level jobs.

Indeed, Ms. McGillivray said the new system actually makes it harder for MBA grads to move into finance jobs because analyst-level jobs are not traditionally aimed at MBA-level hires, and those jobs have now become the most common path into investment banking careers.

“It’s still possible [with an MBA] – people still do it,” she said. “But there are just fewer opportunities than there once were. Therefore, the best people tend to secure the small amount of positions that are available.”

One recent graduate from the part-time MBA program at York University is dismayed by the changing trend. The 44-year-old said he had hoped to parlay his $55,000 education into a new career in the finance sector, and has been disappointed by the result.

After a long search – and after trying all the networking, job-hunting and résumé-writing support programs he could find – he has returned to his former career in engineering while continuing his search for a finance job. He did not want his name used in case it would jeopardize his current role.

“It was a good learning experience. But given the Canadian job market and my experience and my age, it was quite a gamble,” he acknowledged. “And the money that I spent, I’m not getting a return on that.”

Specialized programs, shorter degrees

Nauman Saeed Anwar considers himself lucky. The 32-year-old graduated from the Haskayne School of Business at the University of Calgary in 2011, at a time when the oil and gas sector was still strong, and had two job offers. He chose to move into the consulting business in Calgary immediately after graduating.

The Pakistani immigrant picked the Haskayne program because of its specialization in the energy sector, which he said meshed well with his interest in the long-running energy crisis affecting Pakistan.

“At that time, there were very few programs that were more energy-centric and very few successful programs. That led me to the decision to move to Calgary,” Mr. Anwar said.

Specialized MBAs have become one of the hottest tickets for attracting students, with many programs now offering students the ability to do a portion of their courses in an industry-specific area to earn a specialized designation.

Mr. Horváth at Schulich said North America is a saturated market for MBA programs, and most now have to start targeting niche markets with specialized courses. He believes the shift will mean an end to the traditional “cookie cutter” MBA, where all students learn all the same basic business skills.

Schulich offers specialized MBAs in 20 subject areas – including mining, retail, health and real estate – which Mr. Horváth said was a response to demand from employers in sectors that have not focused on MBA hires in the past. And it has launched a major advertising campaign to market the MBA offerings.

Students are also demanding shorter programs, and universities are responding.

The Sauder School of Business at the University of British Columbia has a new program that allows students in undergraduate programs to work simultaneously on a Masters of Management degree. Students must do six extra months of study after their first degree is completed to finalize their masters program, earning two degrees in almost the same time as one.

In a similar vein, the Queen’s School of Business in Kingston, Ont., has unveiled an option for students to do two masters degrees in quick succession, completing an MBA along with a master of finance degree or a master of management analytics degree – both offered in Toronto – in a total of just 16 months.

Dean David Saunders says many universities are facing global student demand for a variety of one-year masters-level business programs, which are the norm in Europe. Queen’s is also launching a one-year master of entrepreneurship and innovation degree this fall.

“We get a lot of interest from both Europe and now from China and elsewhere in Asia,” Mr. Saunders said. “I think we’re way in front of the curve on this one. … I don’t look towards the U.S. that much, I really look towards Europe and Asia.”

North American universities have typically offered two-year MBA programs, but many Canadian MBA schools now offer students the option of doing some MBA degrees in less than two years. Both Queen’s and Ivey offer 12-month MBAs as their core full-time programs.

UBC has a 16-month core MBA program, which dean Robert Helsley said is popular with students who want the lower “opportunity cost” of lost wages. “Presumably, there’s some kind of a tradeoff between the educational experience and the length of the program, but students seem to be able to navigate that,” Mr. Helsley said.

Mr. Kennedy said Ivey can teach most of the same program in a shorter time by making the courses more intensive and by eliminating the typical four-month summer break. “I prefer to say it’s three semesters instead of four,” he said. “It’s about 85 per cent of the classroom hours.”

Mr. Horváth at Schulich, however, said he doesn’t believe a one-year MBA is destined to become the main product in Canada, observing that all the top-ranked U.S. programs are still two years. “The two-year MBA with some opportunity for differentiation for industry-specific specialization, I believe is a gold standard today.”

The University of Toronto’s Rotman School of Management, which operates one of Canada’s top-ranked MBA programs, also has not reduced the length of its two-year full-time MBA degree. Dean Tiff Macklem said he believes a two-year program is an ideal length because it allows students to do a crucial four-month summer internship between their first and second years, earning work experience and developing contacts with a potential future employer.

“From our perspective, we think that’s a key part of the success factor for the students and for the program,” Mr. Macklem said. “So I’m pushing back a bit on the idea that we need to go to this very short format.”

But Mr. Mihov at INSEAD believes the North American zeal for two-year MBAs is out of step with global trends, saying graduates from his one-year program have a high hiring rate, suggesting employers support the program length. “Obviously, the program is very successful in transforming people and delivering very high results in terms of outcomes. So I think it’s a one year program that is serious, very deep program.”

The allure of travel

Universities are competing for MBA students with far more than just their degree offerings.

Most MBA schools now have dozens, even hundreds, of affiliations with other MBA programs around the globe, promising students opportunities to do exchanges to study abroad. Many also offer major class trips, giving all students opportunities to visit companies and business leaders in other countries. At the Sauder School, all MBA students go on an international trip where they work at an organization – either for-profit and not-for-profit – using their MBA skills. This year, groups went to India, Europe and Chile.

Another competitive “must-have” for business schools is a new building, outfitted with high-tech classrooms, ample spaces to collaborate on projects, and appealing furniture, fireplaces, cafeterias and even private offices.

Some universities go so far as to hire renowned architects, such as Frank Gehry or Norman Foster, to design their buildings and give their programs more cachet. Rotman’s $92-million expansion, which includes a nine-storey glass tower in downtown Toronto, was designed by KPMB Architects and won a 2014 Governor General’s medal for architecture.

In Southern Ontario alone, business schools such as Ivey, Rotman, Schulich, Queen’s and McMaster all have new state-of-the-art buildings, many replacing far smaller venues that were bursting at the seams. Schulich opened a building in 2003 and is expanding again, breaking ground on a 90,000 square-foot addition that will house graduate programs. A new business school residence is to follow.

Mr. Kennedy at Ivey said buildings are “frosting on the cake” and do not replace quality teaching. But still, he said, “there is a bit of an arm’s race. There are a lot of schools doing it, and it costs a lot of money. But it’s part of being in the game.”

Go global or stay local?

The dilemma for MBA programs is that new buildings are expensive, as are new degree programs that require more specialized teaching staff.

Some MBA school leaders have been confronted with a difficult decision about whether to be a smaller, local player or a global competitor with a full range of specialty offerings. But being a global competitor now requires a large student base to cover faculty and administrative costs, and attract recruiters from global firms.

“If you want to have a strong faculty across multiple areas, that requires a certain scale,” said Mr. Macklem from Rotman.

Rotman, which offers Canada’s priciest MBA with basic tuition costing $91,000 over two years, now admits 350 students a year in the full-time MBA program, a one-third increase from 265 in 2012.

Schulich is planning to enroll 600 full-time and part-time MBA students in the coming 2015-16 academic year, a 13-per-cent increase from two years earlier. Including other popular business masters students in areas such as finance and accounting, enrolment this fall will be up 32 per cent from two years ago.

“You’re either going to be global or local, that’s what you’re finding today,” Mr. Horváth said. “Those schools that are strong and large enough have gone global. How else do you recruit abroad? How do you create all these specializations?”

The dilemma of such growth, however, is that MBA students want management-oriented jobs in business and finance – including the large cohort of international students who often want to stay in Canada after graduation. Despite its size as a business centre, Toronto does not have a limitless supply of new jobs aimed squarely at MBA graduates, and the market is increasingly saturated.

The result is reflected in Rotman’s sliding job placement rate, with 70 per cent of students finding jobs within three months of graduation last year, a steady decline from 85 per cent in 2012 and 93 per cent in 2008, according to Financial Times MBA ranking data.

Although Rotman was the top Canadian MBA program in the FT ranking, at 53, it came fourth lowest among the top 100 programs in terms of job placement. Mr. Macklem said most students get good jobs, and a three-month window was a short measurement period.

“We do have a much bigger program. If you look at the absolute number of jobs, it’s much higher than the other schools, and our absolute number of jobs has continued to go up even as we’ve grown the program,” he said.

Mr. Macklem added that one solution to broaden the hiring pool was for universities to look more widely at non-traditional areas, such as non-profit and government sectors, for their MBA grads.

That alternative path is one that Anne Connelly knows well, and hopes more MBA students will follow.

Ms. Connelly hoped to have a career in the international aid sector when she applied for her MBA at the Degroote School of Business at McMaster University in Hamilton, but said there were few role models making the same choice at the time.

After graduating in 2010, she joined Doctors Without Borders, and has since switched to the medical and research charity Dignitas International, where she is director of fundraising.

“I fundamentally feel that the international aid sector and the charitable sector need more people who have strong business skills and strong management skills, so I’ve found the MBA to be a huge asset,” she said.

For MBA schools seeking new students to bolster demand and stay relevant, Ms. Connelly represents the path forward.

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