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MBA Applications: Still Skidding

By Louis Lavelle, Francesca Di Meglio, and Whitney Sparks The news for B-schools just keeps getting worse. With interest in management education already on the wane, the Graduate Management Admission Council today released the results of a study that shows applications to full-time U.S. MBA programs down for the third consecutive year.

In 2005, just 19% of full-time programs in the U.S. reported an increase in application volume, down from 21% in 2004 and 84% in 2002, when applications reached an all-time high. The 2005 decline was the least severe of the post-2002 drop-offs -- a sign that perhaps applications have bottomed out.

"NO DOUBT ABOUT IT." David A. Wilson, GMAC's president and CEO, in a conference call with reporters Aug. 9 said the number of prospective B-school applicants taking the Graduate Management Admissions Test (GMAT) was up nearly 4% so far in 2005, an indication that applications may rise in coming years.

"There really has been a decline, there's no doubt about it," Wilson said. "[But] we're seeing a recovery. The market is coming back."

The reasons for the continued decline are complex. GMAC, which publishes the GMAT, cites several.

MUTED REACTION. More students are migrating toward part-time and executive programs in order to remain employed while working toward their MBAs. A strong job market also encourages potential students to postpone graduate study. There has been a surge of interest in non-U.S. programs, which are drawing students -- both American and foreign -- who would have otherwise attended U.S. programs.

Students also appear to be waiting longer to apply to B-school than they have in the past. And with some schools becoming less selective, students are applying to fewer programs, driving overall applications numbers down.

Reaction from B-schools was muted. Some deans say the GMAC numbers shouldn't be interpreted to mean the MBA curriculum is becoming irrelevant or that the value of the MBA is sliding.

"NOT AS BAD." "I don't think the current decline says anything more than that the demographic is smaller, and there are few foreign students applying to U.S. B-schools," says Monica Gray, assistant dean and director of MBA admissions at the Robert Emmett McDonough School of Business at Georgetown University. "The picture is not as bad as many people paint it."

Dean Robert J. Swieringa of the S.C. Johnson Graduate School of Management at Cornell University, says even though it takes longer to recoup the cost after graduation, "MBA programs today are better than they've ever been, considering the technology and curriculum we are able to offer."

Isser Gallogly, director of MBA admissions at the New York University Stern School Of Business, said there will "always be a strong market for business schools." Adds Melinda Allen, assistant dean for admissions and career management at the Owen Graduate School of Management at Vanderbilt University: "The MBA is alive and well and in demand."

WISHFUL THINKING? Looking forward, GMAC says, applications to full-time programs could begin to rise over the next few years, as the percentage of the U.S. population in the age group usually targeted by traditional two-year programs continues to increase.

But that may be wishful thinking, at least in the U.S. Applications fell for the last three years -- even as the number of people in their 20s, as a percentage of the total population, grew.

If U.S. B-schools are going to see significant growth in the next few years, they may need to establish overseas programs in nations with booming economies.

OVERSEAS ACTIVITY. H. Fenwick Huss, dean of the J. Mack Robinson College of Business at Georgia State University, says the number of 25- to 29-year-olds in developing economies like India and China is exploding. "As those economies continue to develop, we ought to see an increase in activity in the MBA," says Huss. "The domestic [B-school application] growth is going to be international."

While full-time MBA programs took a hit, part-time programs saw a slight rise in applications, with 46% of all programs reporting an increase, up from 25% in 2004. One in 10 part-time programs saw gains of 21% or more in 2005. The changes reflect a desire among many MBA students to work full-time as they pursue their degree.

Applications to executive MBA programs -- weekend programs tailored to mid-career executives -- were basically flat, although far fewer programs reported increases: 38% in 2005, compared to 53% in 2004.

WISER STUDENTS. On the upside, more EMBA programs reported that applications were up "significantly," and fewer reported moderate or significant decreases. In the battle for international EMBA students, non-U.S. programs are clearly winning. International students account for 29% of applications to non-U.S. programs, compared to 2% for U.S. programs.

An optimist might view the latest GMAC numbers as a sign that students are getting smarter about when to get their degrees, where to apply, and how best to juggle the demands of work, family, and school.

But it might just be that the market for management education is sending B-schools a message: Even the world's seemingly insatiable demand for newly minted MBAs has its limits. Lavelle is B-schools editor for BusinessWeek in New York, Di Meglio is a reporter for BusinessWeek Online in Fort Lee, N.J., and Sparks is an intern for BusinessWeek in New York

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