1 LAUNCHING A NEW MBA PROGRAM IN A HIGHLY COMPETITIVE ENVIRONMENT: MARKET RESEARCH AND STRATEGIES FOR SUCCESS Kimberly C. Pellegrino Associate Professor of Management Florida Memorial University Robert J. Pellegrino Associate Professor of Marketing MBA Director Florida Memorial University Abstract This research describes the strategies a School of Business chose to pursue in launching a new MBA program in what has become a highly competitive market. Market research from both primary and secondary sources was employed to develop the strategies contained in the article. Strategies included offering a general MBA, as opposed to a specialized MBA, that seeks to develop leaders capable of working well with others and solving problems effectively. MBA delivery strategies included a classroom format in an accelerated program to accommodate nontraditional students in an effective learning environment. Faculty pay levels also had to be adjusted to accommodate the new timeline and accelerated program. Smart classrooms had to be designed and significant capital outlays were required.
2 The 1990 s represented an expansive period for business schools in the United States. The number of Master of Business Administration (MBA) degrees awarded increased by over 46% (U.S. Department of Education, 2003). Due to the expansion of MBA programs, applicants to MBA programs have been able to become more selective (Richards-Wilson and Galloway, 2006). As the market for potential MBA students has become more competitive, many schools of business have been forced to reinvent themselves in terms of new course offerings (Hazelwood, 2004), specializations (Holloway et al., 2003), and methods of delivery (Brown, 2003; Lord 2002) (Richards-Wilson and Galloway, 2006: 96). The competitive environment has become more and more intense as new MBA programs with unique offerings compete with established programs that are reorganizing and refreshing their course offerings. To further exacerbate the competitive environment, online programs, and other unique delivery offerings, have added new competitive pressures to already competitive markets. For example, schools such as the University of Pheonix can offer their MBA program anywhere in the country regardless of whether or not they have a brick and mortar campus in the area. These fully online programs have also begun to successfully pursue accreditations that historically distinguished these programs from their more traditional counterparts. These strong competitive pressures may dissuade many business schools from entering this competitive market but at the same time, business schools without an MBA program face the very real possibility of a significant spillover effect harming even their undergraduate business programs as students become more and more interested in obtaining an MBA degree and going to business schools that have the added reputation and appeal of offering an MBA program. How does a new MBA program position itself in this very competitive environment? The following article describes a private southern university s plan to position its new MBA program in this competitive and challenging environment. Combating the Disconnect The master of business administration was developed in the United States in 1908 and has mostly been a success story (Pfeffer and Fong, 2002). MBA students can expect their salary to increase approximately 18% upon graduation and 53% 3-5 years after graduation, according to the 2005 Careers Survey by the Association of MBAs (Gupta et al., 2007). Graduate programs in business are presently at a crossroads and business schools are torn between offering a general MBA program or an MBA with specialization. In a pivotal study conducted in 1986 by Hunt and Surgi, their research concluded that the general MBA degree was not preferred by corporate employers or MBA students, indicating that the future of the MBA was with specializations. Results indicate that the broad MBA has been largely displaced by an improved bachelor of business administration (BBA) degree and that the future development of the MBA lies in the direction of theory-based professional specialization (Hunt and Surgi, 1986, pg. 159). Elliott et al. stated in 1994 that U.S. businesses would like to recruit managers who are more broadly educated in business, are good communicators and team
3 workers, understand the importance of process, and minimize competition with fellow workers (Elliott, 1994, pg. 5). Despite research indicating that specialization may not be the answer, many business schools, fueled by the research of those such as Hunt and Surgi and faced with the increased competition of recent years, decided to narrow their MBA education with the use of numerous specializations as a way to differentiate their programs from other competing programs. Some researchers disagree that the emphasis on specializations like finance, accounting, operations and IT will lead to success. Instead, these researchers point to abilities such as getting along with others, having deeprooted values, and the experience of a well-rounded education as keys to success (Stanley, 2003). Mintzberg (2004) advocates focusing on a softer approach that emphasizes the importance of people and leadership skills to successful managers. Gavin Staude, Director of Rhodes Investec Business School stated that the competitive advantage of an MBA is that it provides managers with a holistic perspective of management and business (Jordan, 2004). Companies hire MBAs with narrow specialization and then complain that business schools are not producing individuals who will be able to both lead and make practical decisions (Gupta et al., 2007, pg. 308). Since the shift in MBAs towards specialization is clear and now predominates a large percentage of current MBA program offerings, the question becomes, Was this the right approach and do employers and MBA students value the specialized MBA more than the general MBA? Gupta et al. (2007) provided evidence as to which approach was valued more by both employers and students. In their study of 758 employment advertisements and 27 MBA programs, they concluded that there is a disconnect between what employers appeared to want and what business schools offered. Ninety-six percent of positions required or preferred a general MBA and only 4% of these employers asked for a specialization. Further, the results indicated that the level of the position advertised (upper, middle, or lower management) also did not improve the desire for a specialization, an overwhelming majority of the employers did not prefer an MBA with a specialization. Strategy 1: A general MBA designed to create leaders in the business community (whether corporate leaders or entrepreneurs) that are capable of working well with others and solving problems effectively. Learning objectives for this program include general business knowledge with an emphasis on leadership, problem solving, interpersonal skills, ethics and values. Delivery is Everything Web-based education has gained in popularity in recent years and the trend is projected to continue. In the fall of 2002, 1.6 million students took at least one course online and in the fall of 2004 that number increased to 2.4 million students. The major driving force for this popularity is the development of new markets of nontraditional students, especially working
4 adults (Confessore, 1999). Business schools are leading this trend with 48.9% of public institutions offering online programs for a degree and the most popular web-based degree among them was the Masters of Business Administration (Kiernan, 2003; Online, 2003). Interestingly, Beadles and Lowery (2007) indicate that not all learning styles are appropriate for online courses. Further, Marks, Sibley, and Arbaugh (2005) indicate that instructor-student interaction has the most influence on how effective online learning is. As a matter of fact, student-instructor interaction was found to be twice as important as student-student interaction harming a commonly held belief in academia that if you set up chatrooms for online students and require them to interact with each other effective learning will take place. Small discussion groups and student peer-teaching opportunities appear not to have an influence on perceptions of learning (Marks, et al, 2005, pg. 543). Marks et al. also discount a new mantra in academia that the instructor s role in an online environment has shifted from sage on the stage to a guide by the side (Gibson, 1996) by proving that the instructor s role must be far more active for effective learning to take place. Interesting, general knowledge bases and soft skills such as leadership and ethics concepts that cross all areas of business - are being offered in fully online programs. Some of these programs are coming from online schools such as DeVry University, whose online graduate program is introduced with the following passage. As news of business catastrophes and corporate malfeasance make the headlines, public (and stockholder) scrutiny of corporate business practices is increasing. Business ethics, strategic management, risk management and accountable leadership are all hot-button issues in today s business world. If you re considering an MBA program, choosing an emphasis in leadership, can provide the skills and knowledge you need to make it to the executive suite (www.mbabusiness-schools.com/articles/2007/07/business-ethics-questioned-in-mortgagecrisis). An admirable objective in today s turbulent environment but the question becomes can these kinds of soft skills be taught in a wholly online environment? In light of the recent research on the importance of instructor-student interaction in online courses and its significant impact on learning effectiveness, this is an interesting debate. We decided to try to find a corollary with our general knowledge MBA that includes an emphasis on the soft skills of management in the marketplace. Crawford et al. (2002) researched graduate leadership programs and found that many are housed within the school of business. Their research differentiated organizational leadership programs from a more general leadership format, finding that many, though not all, organizational leadership programs reside within the school of business. These new programs often have an emphasis on the practical nature of leadership, instead of the theoretical and historical nature of leadership. These leadership graduate programs tend to lack the quantitative emphasis of a traditional MBA, however as some graduate organizational leadership programs have no indication of research methods in their curriculum
5 Proceedings of ASBBS Volume 16 Number 1 (Crawford et al., 2002). This was an appropriate comparison point as we were interested in examining the soft side of this learning delivery system. This leadership emphasis became an appropriate comparison point for the soft side of our program because organizational leadership skills cross all areas of business. For example, areas such as leadership, ethics and problem solving apply to many current areas of specialization in MBA programs such as finance (as the mortgage crisis indicates), accounting (as Enron indicates), and IT (as the dot.com crisis indicates). Research on graduate programs emphasizing the general soft skill of organizational leadership revealed the following types of delivery. (taken from Graduate Programs in Organizational Leadership: A Review of Programs, Faculty, Costs, and Delivery Methods. The Journal of Leadership Studies, Crawford et al.(2002). Mediation in this study refers to any time, any place learning. As can be seen from the chart, organizational leadership graduate programs are most commonly offered with no mediation and non-traditional scheduling. This could be driven by the niche of non-traditional students combined with the level of instructor-student interaction required to deliver soft skills such as leadership. In other words, soft skills such as leadership expertise, which includes areas such as problem solving and interpersonal skills by definition, may not lend itself as easily to an online format that will necessarily have less face to face student-instructor and student-student interaction. In some ways it is very difficult to imagine true learning taking place as students discuss complex issues with ASBBS Annual Conference: Las Vegas February 2009
6 computer monitors instead of the live, instructor guided discussion that can take place in a classroom. Non-traditional professional graduate students are also likely to look for the following things in a graduate education: Non-primetime hours for learning (5pm to10pm) Less emphasis on research methods, more emphasis on practical professional skills Flexible semesters and condensed semesters and classes Direct application of theory to their practice Class materials presented in a multi-media rich environment Expanded use of technology in lieu of driving to campus for face-to-face classes Exams designed to provide culmination of learning, not just testing of knowledge More hands-on learning, less book learning (Crawford, et al., 2002, pg. 65) Strategy 2: The MBA will be delivered in a classroom format (with future consideration being given to hybrid online courses and synchronous distance learning) with non traditional scheduling blocks (Friday night and Saturday) in an accelerated progam (five and eight week classes) that can be completed in one year (going full time year round) to accommodate nontraditional students in an effective learning environment. This nontraditional format created a situation where graduate faculty would now be required to work in the summer. This had always been a voluntary situation on our campus and necessitated a strategy for motivating faculty to teach in the summer. Summer pay at our institution was low and many faculty chose to take their summers off as a result. A study of ACBSP business schools similar to our own and their summer pay scale became necessary. Schools were obtained from the ACBSP website and only included those with graduate programs. The results are as follows (with the names of the schools omitted): School Summer pay (per graduate course taught)
7 School 1 $2,100 School 2 $2,400 (no one will teach at this rate) School 3 $2,800 School 4 School 5 $3,000 (no one will teach at this rate) $3,000 (no one will teach at this rate) School 6 $4,000 School 7 $4,000 School 8 $4,000 + $500-$1,000 for night or weekend class School 9 Asst. Professor and lower $4,500, Assoc. and over $5,000 School % of salary or $5,250 School 11 $5,400 School 12 8% of salary or $5,600 School 13 1/12 th of salary or $5,833 School 14 9% of salary or $6,300 School 15 1/10 th of salary or $7,000 Based on the survey results, it became apparent that in order to motivate faculty to teach in the summer, the summer pay scale for the school of business would have to be revised. The drop dead number to get faculty to teach a graduate course in the summer appeared to be $4,000. Of the five universities that are below $4,000, three of them cannot schedule faculty for summer graduate courses. Further, all five of these universities had a much lower cost-of-living index than our location. Eliminating those five, and looking at only those schools that pay $4,000 or more, the average summer pay per graduate class is $5, The school of business is not interested in just getting a faculty member into the classroom, we are also interested in motivating them to do a good job in what will be a very time consuming and intensive five week graduate class. In order to alleviate tension between graduate schools on campus and in order to motivate graduate faculty to teach in the summer session, the school of business recommended a 7.5% pay scale for summer graduate teaching per graduate class. Considering the price of tuition, the breakeven point for a graduate class would be four students.
8 Strategy 3: The School of Business requested an increase in summer pay for graduate faculty from the current level to 7.5% of salary. Non-traditional graduate students, the fastest growing niche in the MBA market, also expect their class materials to be presented in a multi-media rich environment with an expanded use of technology that can enable less driving to campus. This requires a significant investment in technology. Unfortunately, our facilities director on campus resigned right before the smart classrooms were about to be designed. The school of business, and in particular, the MBA director had to design two smart classrooms with state of the art technology, each classroom costing upwards of $45,000. Some of the major components included in this large undertaking are in the table below: BRAND DESCRIPTION PRICE Crestron System Control Processor, 1RU $1,931 Crestron 5 Color Touch Panel $2,159 Da-Lite Advantage Electrol 69 x 92 Matte White Screen with LVC Built-in $3,270 Hitachi 17 Interactive LCD Display $3,520 Mulnix Custom Multimedia Desk $7,190 NEC 3500 ANSI Lumens Native XGA LCD Projector $5,458 Panasonic 42 High Definition Plasma Monitor $3,047 Polycom VSX 7400E Video Conferencing Codec with Main Powercam, IRU $15,953 Polycom EF 2280 Vortex Matrix Audio Mixer $6,593 Polycom Auxiliary Pan/Tilt/Zoom Camera with 50 Cable Kit $2,173 Samsung Digital Document Presenter $4,190 Shure Shure Ceiling Mounted Microphone, Cardioid Pattern, White, XLR Type UHF Frequency Agile Wireless Lavaliere Microphone Set with Rack $1,934 $1,058
9 Strategy 4: The School of Business designed and created smart classrooms that provide the students with a multi-media rich environment that can be utilized in the future to deliver asynchronous and synchronous distance learning. Strategy 4: The School of Business designed and created smart classrooms that provide the students with a multi-media rich environment that can be utilized in the future to deliver asynchronous and synchronous distance learning. Hindsight is 20/20: Where are the Leaders? Of the 4% of employers in the study by Gupta et al. (2007) that preferred a specialized MBA, the most common specializations were accounting and finance. Most B-school MBA programs have taken a very quantitative approach to their specialized MBAs. We have chosen a different, more general approach to an MBA program that supplies students with a knowledge base in quantitative areas such as finance, accounting and research but from a broader perspective than today s specialized MBA. A broad perspective that incorporates leadership, problem-solving, and interpersonal abilities into a skill set that we believe will make our students true leaders in the business community. We suggest, based on the market research we uncovered, that perhaps business schools have jumped too quickly into narrowly specialized quantitative MBAs and fully online programs. Lee Iacocca (2007) in a book entitled Where have all the leaders gone? states that Thanks to our first MBA President, Social Security is on life support and we ve run up a half-a-trillion-dollar price tag (so far) in Iraq. Leadership is all about managing change-whether you re leading a company or leading a county. Things change, and you get creative. You adapt. Maybe Bush was absent the day they covered that at Harvard Business School (Iacocca, 2007). Research provides support for the concept that an MBA program should furnish broad leadership skills the kind of leadership and problem solving skills that would have been very beneficial in, for example, the mortgage industry over the last few years hindsight is 20/20. This approach creates an MBA program that will deliver a broad, leadership based education in an effective learning environment.
10 References Beadles, N. and Lowery, C. Self-Selection into degree programs: Differences in preferred learning styles between online students and traditional students. Academy of Educational Leadership Journal, 2007, Vol. 11, No. 2, pg Brown, M. Get in, get out. Canadian Business, November 9, 2003, Vol. 76, Brown, M. EMBA rumble. Canadian Business, October 25, 2004, Vol. 77, 125. Confessore, N. The virtual university. October 4, 1999, The New Republic, pg Crawford, C., Brungardt, C., Scott, R., and Gould, L Graduate programs in organizational leadership: A review of programs, faculty, costs, and delivery methods Journal of Leadership Studies, 2002, Vol. 8, No. 4, pg Elliott, C.J., Goodwin, J.S. and Goodwin, J.C. MBA Programs and Business Needs: Is there a Mismatch? Business Horizons, 1994, Vol. 37, Iss. 4, pg Gibson, D. Toward emerging technologies and distributed learning: Challenges and change. American Journal of Distance Education, 1996, Vol. 10, pg Gupta, P., Saunders, P., and Smith, J., Traditional Master of Business Administration (MBA) versus the MBA with Specialization: A Disconnection Between What Business Schools Offer and What Employers Seek Journal of Education for Business, Washington: Jul/Aug 2007, Vol. 82, Iss. 6, pg Hazelwood, K. The Worst of Times for New MBAs Business Week Online, May 3, Pg.1. Holloway, A., Seccombe, W., Robin, R., Wahl, A., McClearn, M., Gray, J., et al. Nouveau niche, Canadian Business, 76, Hunt, S., Speck D. and Surgi, P. Specialization and the MBA: Is the Broad MBA Passe? California Management Review, Spring 1986, Vol. 28, Iss. 3, pg Iacocca, L. Where have all the leaders gone? 2007, Scribner: A Division of Simon and Schuster, New York, NY. Jordan, D. The competitive advantage: Qualification teaches students to think. July 5, Finance Week. Pg. 40. Kiernan, V. A survey documents growth in distance education in late 1990 s. Chronicle of Higher Education, 2003, Vol. 49, Iss. 48, A28.
11 Marks, R., Sibley, S., and Arbaugh, J. A structural equation model of predictors for effective online learning. Journal of Management Education, 2005, Vol. 29, Iss. 4, pg Mintzberg, H. Managers not MBAs: A hard look at the soft practice of managing and management development. 2004, San Francisco, CA: Berrett-Koehler Publishers. Online, (2003). Chronicle of Higher Education, Vol. 50, Iss. 4., A30. Pfeffer, J. and Fong, C., The $100,000 question. Economist, Vol. 364, Richards-Wilson, S. and Galloway, F. What every business school needs to know about its Master of Business Administration (MBA) graduates, Journal of Education for Business, Washington: Nov/Dec Vol. 82, Iss. 2; pg Stanley, T. The Millionaire Mind. 2003, Kansas City, KS: Andrews McMeel Publishing. U.S. Department of Education, National Center for Education Statistics (2003). Digest of Educational Statistics, Washington, DC.