In rough economy, MBA is safe harbor
One year ago, Wendy Weiss was a marketing consultant for K12nation.net, a dotcom startup that hoped to foster student success by putting parents and teachers more closely in touch.
Like many dotcoms, the fledgling Washington, D.C., company fell to earth last summer. But Ms. Weiss did not fall with it. Instead of pounding the pavement for work, she had already been accepted into a master's degree in business administration (MBA) program at George Washington University's school of business.
"I wanted to get the degree to back myself up," she says. "I'm sure a lot of people getting their MBAs are telling themselves it's safer to be in school right now."
Though it's too early to tell, current economic turmoil may leave people more willing to shell out money for an MBA than to work for company shares. Applications for MBA programs flattened last year. Since then, however, the United States has seen a dotcom bust, a stock market sell-off, and a wave of layoffs - potentially prime conditions for a flood of MBA applicants.
One indicator is the much-watched Graduate Management Admission Test. Last year, the number of GMAT takers grew 6 percent - mostly in the late months. And in the first four months of this year, the number surged 13 percent compared with the same period a year ago, says Karla Lacey, vice president of marketing at the Graduate Management Admission Council, which administers the GMAT.
Some business schools are noticing an uptick in interest as well. Applications for MIT's Sloan School of Business, for example, jumped 9 percent.
Most notable was a reversal in seasonal application patterns. Usually the school sees its biggest influx of applications in December, officials say. This year, the influx in February surpassed that - suggesting that the souring economy late last year might have pushed some previously undecided people to apply.
"Obviously there are forces at play when we saw the reversal," says Paul Denning, a Sloan spokesman. "That was a time when the [economic] indicators were starting to show that things were not as good as they were the year prior. You could make that connection: Maybe this is a better time to go to business school rather than forgo it for a business opportunity."
Likewise, applications were up 5 to 8 percent across all kinds of MBA programs, including in the full- and part-time categories at George Washington University in the nation's capital, says David Toomer, the director of enrollment management for the school of business.
But it's hard to know whether such examples, and the jump in test-taking, translate into a broad increase in applications and enrollments.
The MBA has long been known as a safe harbor in a rough economy. Conversely, when times are good, luring business people back to studying seems impossible. Yet for a decade, such historical rules of thumb have been little help in predicting the future. The economic boom of the 1990s was also a boom time for MBAs: The number of degrees granted annually grew by more than 25 percent, according to the US Department of Education.
Many MBA admissions officers question whether current economic uncertainty will prompt a significant rise in applications to business schools.
Thomas Howard, president of the MBA Roundtable, a group of 200 MBA programs around the world, believes something new is in the works.
"We don't see any big upswing in applications, so I don't know how much credit to put in that old argument," he says. "The traditional rules about recession and expansion and their impact on b-schools are being rewritten."
Alexander Brown, associate director for MBA admissions at the prestigious Wharton School at the University of Pennsylvania, agrees. He says applications for slots in the fall 2001 class were "flat this year."
Despite stagnant growth, the Internet has allowed Wharton to reach farther and maintain contact with more potential applicants. The quality of applicants grew while overall numbers stayed about the same, Mr. Brown says.
Anecdotally, though, there are signs the dotcom debacle and business layoffs have paved the way for a large-scale migration back to b-schools.
"The types of background experiences of our applicants have shifted a bit this year," Mr. Brown notes. "We're seeing ... numbers from the entrepreneurial environment and high tech [that] we haven't seen in prior years."
The weak economy is "a double-edged sword for us," says Kathy Pattison, director of MBA admissions at the College of William & Mary in Williamsburg, Va. "Some will jump ship and go for their MBA - some will just hang tight to their jobs." Still, she's seen "a dramatic increase in interest" for the fall 2002 school year.
Mr. Toomer, at George Washington University, expects a demographic bulge among undergraduates to greatly amplify any resurgence in MBA interest driven by a weak economy around fall 2003.
Lauren Elsner also predicts a wave of MBA applicants. The California native just wrapped up her first year in the MBA program at the University of Texas at Austin's McCombs School of Business, where she was a student member of the admissions committee.
"It wouldn't surprise me at all if it went up significantly next year," she says. "It did seem a significant number of people were saying: 'With the economy weak, now's a good time.' "
Personal experience tells her that many are pondering the possibility of studying for an MBA sooner. "Last year, a lot of people told me I was crazy - that I could make a million dollars in the market," she says of dotcom offers she refused in favor of business school. "I had mixed feelings about it at the time. Now I feel like my position was pretty well justified."
(c) Copyright 2001. The Christian Science Monitor