Sitting down with Sangeet Chowfla, Graduate Management Admission Council (GMAC) CEO, and Bill Boulding, the dean of Duke University’s Fuqua School of Business and, as of July 1st, new chairperson of the GMAC board, the pressure on business schools to adapt to a new era becomes clear.
In the quaint interior of the Zetter Townhouse in Clerkenwell, London, we meet for a fireside chat about the latest developments in business education. It’s a muggy June morning in London. The fire is off, thankfully, but its presence stokes relaxation; an opportunity to talk honestly about the challenges ahead.
Sangeet arrives first, dressed in a black suit jacket, open collared: business. Bill is delayed, but what’s a commute in London without the odd transport interference?
He arrives bespectacled and softly spoken, exuding the charm of an old-school professor modernized for the 21st century.
The two bounce off one another seamlessly, confident that their mission statement is joined at the hip. We speak about the latest business education trends—a geographic shift in demand, for example; why unlocking global human potential is intrinsic to economic vitality; and why they believe business is a force for good.
Sangeet starts with a stat. He tells me that at any given point there are six million people considering business education around the world—an astounding figure.
Thus, the business schools that serve those six million potential candidates have a responsibility to provide the knowledge, infrastructure, and harmony for candidates to meet their goals come graduation.
The global pool of potential candidates now has a wealth of options to choose from, but that wasn’t always the case. We’re now entering the third phase of business education, and supply and demand reach far beyond the roots of graduate management education (GME).
“Over the years, the world of management education has transformed hugely,” Sangeet says.
The “first phase” was primarily a product of western business schools for western audiences; in the post-war era, Sangeet says, the US had 70% of the world’s invested capital and two-thirds of the world’s GDP.
Phase two came when demand became more global—the US remained the prime location and so there was an influx of candidates travelling from the East to the West to assimilate the high-quality supply of business schools there.
Phase three has proven that graduate management education is a “global phenomenon,” Sangeet says. The shift since the turn of the century has displaced the US as the sole guarantor of business education.
In the Financial Times’ Global MBA Ranking 2000, 45-out-of-74 schools were based in the US, with only one from Asia—Hong Kong University of Science and Technology (HKUST).
In the most recent ranking—in 2018—50-out-of-101 schools were based in the US, but there were 10 Asian based schools—seven in China and three in Singapore.
“Now, the US has less than one-quarter of the world’s GDP and less than one-fifth of global invested capital,” explains Sangeet. “Everybody else has caught up, and students now have a choice.”
The MBA is the focal point around which business education orbits. The rise of the one-year MBA has added to woes in America as the two-year programs there are being shunned for shorter degrees overseas.
Sangeet admits to being asked whether the MBA in the US is dead. His response? “The demise of the MBA is exaggerated. It’s not dead, it’s just relocated to Asia.”
In the completed admissions year of 2017, only 38% of Full-Time MBA programs in the US indicated a growth in applications—that’s in contrast to more than seven-in-10 programs in Canada, the UK, and Europe, and eight-in-10 programs in Asia reporting growth. On an aggregate basis, there has been a global increase of 6% in the number of applications to MBA programs.
US Against Them
Politics is pertinent to the business school admissions space—a drop in external applications to the US has coincided with anti-immigration rhetoric and the ‘America First’ policies of the Trump administration since he took office in January 2017.
The latest GMAC Corporate Recruiters Survey (above) also revealed that over half of the respondent companies in the US do not plan to hire international graduates in 2018—only one-quarter said they are committed to international hires.
The current climate is a big issue, says Bill. “When the deans of US business schools gather we feel the number one threat to our vitality is the current issue around students coming from outside the US.
“Historically, we have had diverse communities. But, the MBA has seen growth in every part of the world except the US.”
There was a rumor prior to the election of Donald Trump, Bill says, that a deal was close to make it easier for non-domestic students to obtain visas post-graduation. Of course, that’s been thrown out of the window under the current administration.
International students feel it’s imperative they remain in the US after graduating—higher tuition fees can only be paid off with the higher wages on offer in America. Obviously, if there is no guarantee of a job after graduating, it’s too much of a risk to rely on wages back home to pay off the massive debt accrued while at business school in the US. So, they cross it off their list of options.
On top of that, nationalist rhetoric—a global tide not exclusive to the US—creates a hostile atmosphere for internationals. Families begin to worry, encouraging their children to study elsewhere. Sangeet explains that GMAC have looked at data suggesting it’s no longer the case that international students can take things like safety and security for granted anymore, in places like the US.
That places a lot of responsibility on business schools to enact a change in tone, and to harness an atmosphere of collaboration, and security, on their campuses and beyond.
Bill admits that business schools need to do a better job at communicating the relevance and benefits of globalism. The recent retreat into a nest of nationalistic sentiment shows that opinion against freedom of movement and integration is shifting.
“The storyline that seems to have taken hold in various parts of the world seems to be that globalism means someone else takes your job in another part of the world,” Bill explains, “and that becomes a very negative thing.”
Without a strategy in place to tackle that view, Bill adds that economic vitality is at risk. Take a look at the Fortune 500—a list of America’s 500 largest corporations by revenue.
Research into the origin of the companies’ founders or co-founders by the Center for American Entrepreneurship, a non-partisan policy and advocacy organization, found that 43% of companies in the list were founded or co-founded by an immigrant or by the child of an immigrant.
Among the top 35 companies, that figure rises to 57%. In 2016, the 216 companies represented by the 43% were responsible for $5.3 trillion of global revenue and employed 12.1 million people around the world.
Read more into the back stories of these entrepreneurs and you realize that they found refuge on US soil. The Brookings Institute, a think tank based in Washington, describes them before they reached America as ‘poor, young, and fleeing harsh economic and political conditions’.
“The idea that by closing your doors you make things more prosperous is false,” Bill deplores, “and that opinion is shared by my colleagues.”
The US relies on the innovation and creativity of immigrant entrepreneurs as much as it does its domestic students. There must be room for a unified voice speaking for cross-border collaboration. GMAC can provide that platform—not in the sense of placing the US as the only go-to destination for business school candidates, but by reinforcing the idea that applicants should be able to study and move freely, wherever they wish.
“At Duke, we try to work hard for a diverse student body,” explains Bill. “We work hard with current students and alumni to activate their networks and show prospective students that we have a warm community, and the rhetoric you hear [around immigration] will not have any bearing on the experience you have on a program at Duke—that is very effective for us.”
Business schools need to be the instigators of the free mobility of talent that will drive economic growth. “Fragmenting the global talent market into national boundaries is not good for a nation or for the world overall,” says Sangeet.
“That ability to work in a classroom together on a problem builds cross-cultural sensitivity,” he continues, “that is invaluable over the course of your career.”
Blame The Ex-ecutives
Since the global financial crisis over a decade ago, business has found itself under an intense public microscope. Whereas investment bankers and avaricious executives threw caution to the wind in the build up to 2007’s crash and gave rise to a global hurricane that tore through the proletariat, the new wave of business school graduates are a litmus test that will reveal the extent to which business is worthy of a revamped, ethical epithet.
The behavior of the former executives of a decade ago means we have to change the word ‘business’ from a pejorative hell-bent on selfishness to one associated with altruism, and the creation of jobs and opportunity for the underserved.
“Part of it has to be a focus on innovation, and a lot of innovation today leads to job elimination and the concentration of wealth in a couple of founders, and billionaires who pop up overnight,” says Bill.
“That’s not a very appealing story, so we have to be able to tell the stories about innovation that [show] innovation for underserved markets. How are we shaping the future of work in a positive way that’s not about eliminating jobs, but rather creating new, more interesting work.”
The message must show that things like free trade have societal benefits in the way they reduce the cost of goods and services. Delivering that message needs to be done in a way that the everyday citizen understands. Telling people that this way of operating is making their lives cheaper through verbosity riddled with business jargon will just allow taglines along the lines of ‘business: by the elite for the elite’ to fester.
In the US, Bill says, there is a tug-of-war between Wall Street and Main Street—the latter being the term for the overall economy and individual employee, in contrast to Wall Street’s financial markets and major corporations.
Mistrust is still fired at Wall Street since the crash, which leads Bill to ask what we can do to broadly rebuild the reputation of the world of business as a positive force in society that improves lives?
Must Be Altruistic
Rebuilding begins with business schools and their graduates and ends with the corporations they either enter or build themselves.
The admissions process is going to have to accommodate more than a candidate’s IQ. Last year, BusinessBecause published an article looking at the importance of EQ—emotional intelligence—in the overall application process.
Now, say Bill and Sangeet, there is a third layer—DQ, or decency quotient.
“The current discourse is around hateful rhetoric, and an absence of decency,” laments Bill. “We should and could treat each other with respect and compassion.”
You do, of course, still need the smarts. But, a combination of strong IQ, EQ, and DQ enables leaders to bring the best out of those around them.
People like Apple CEO, Tim Cook, and co-founder of the Bill and Melinda Gates Foundation, Melinda Gates—both of whom Bill taught when they were students at Fuqua School of Business—may have been ethically-minded, but Fuqua had a responsibility to help mold them into the leaders they are today.
Indeed, business schools will employ their own mechanisms to assess EQ and DQ, Bill and Sangeet say, depending on how important they see each trait. But, for the industry to repair its reputation, schools will need to broadly embrace this when screening candidates.
GMAC’s role is less centered on adapting the GMAT assessment to tap into EQ and DQ, but their data can help reveal candidates’ motives for going to business school.
“In the last couple of years, we’ve seen a shift away from the traditional destination industries,” Sangeet says of early screened candidates, “towards social enterprise, technology, manufacturing, and products and services.”
Bill adds that Fuqua School of Business has seen an increase in candidates coming from non-traditional backgrounds. They’re coming from the US Peace Corps, other nonprofits, and even military service.
Then, after graduating, they are transitioning into sectors like financial services. “I’m very happy about putting people into a sector that needs people who can be trusted, and who understand the concept of service,” he says.
Bill explains that he’s also seen many MBA students coming in from private equity, or investment banking, and going out the other side into social enterprise and entrepreneurship.
People entering these jobs with strong EQ and DQ are also giving themselves an added layer of protection in terms of employment. Empathy, morality, and decency are traits that are harder to replicate in robots.
“The reason people are scared of the future is that it seems to be more about replacing humans rather than focusing on the human interface,” says Bill. “What is the human difference; the human values that we retain? We need to harness tech rather than let tech harness us.”
Tech To The Future
Realizing potential is the crux of business school. That is the message that needs to be translated in as human a way as possible—potential and opportunity are not exclusive to the elite.
“We need to effectively tell the story and value of GME broadly,” concludes Sangeet, “so students around the world understand their options.
“It has to be clear that we can build a managerial group of people who can unlock innovation, effectively manage human resources, [and deal with] environmental and ethical concerns—that potential has to be realized!”
Fretting about the future is futile. Adapting to the demands of technology and harnessing its potential to create new jobs, rather than shying away from change, will keep the labor force invigorated.
Bill and Sangeet clearly see the responsibility of GME to ensure the next generation of workers is prepared for that. Business schools need a proactive approach to catch and cultivate human potential before it falls out of the funnel unrefined. Are they up for it? They have to be.