COVER STORY PODCAST
Preete Gandhi needed more immediate gratification. Researching new cancer medicines at Pfizer Inc. (PFE ) was important work, yes. But she knew bringing a new drug to market could take more than a decade. So in 2002, Gandhi, then a 26-year-old chemistry graduate from Ohio State University, began planning for a business career. An MBA seemed a logical first step, and the University of Chicago Graduate School of Business, with its outsize reputation and world-class faculty, looked like a good bet.
Slide Show >>
The school did not disappoint. When she arrived, Gandhi found a new building that included an Italian-style piazza where students and faculty congregate and swap ideas. And a spark plug of a dean named Edward A. Snyder was busily figuring out ways to challenge students as they had never been challenged before. One of the aspects of the Chicago program that Gandhi appreciated the most was the opportunity for first-year students to take advanced courses, allowing less experienced students like her to get more attention in the introductory classes. Gandhi selected finance, strategy, and marketing classes, which allowed her to prepare for a summer internship at Abbott Laboratories (ABT ).
Slide Show >>
Before entering the Chicago program, Gandhi's knowledge of finance was limited to balancing her checkbook. By the time she left, she was skilled enough in the finer points of finance that she received lucrative offers from Abbott Labs, Deloitte Consulting, and Washington Mutual (WM ). She ultimately accepted a position as senior financial analyst at Microsoft (MSFT ), where her compensation is about $100,000, double what she was making at Pfizer. Says Gandhi: "If I can come in as a scientist and leave working in finance for a tech company, that's a statement in itself."
It also helps explain why Chicago, for the first time, has vaulted to the top of BusinessWeek's 2006 biennial survey of the world's best business schools. Chicago has always held an esteemed place in the BusinessWeek rankings, landing in the top five a half-dozen times since the rankings began in 1988. After all, the B-school has an award-winning faculty that includes a winner of the MacArthur "genius" grant, Kevin M. Murphy, and two Nobel prize winners, plus an alumni network that includes the former chief executive officers of Goldman Sachs, Morgan Stanley, and Merrill Lynch. But its reputation with students has always been uneven; the school scores high with those seeking a rigorous analytical program but low with those looking for an emphasis on teamwork. Snyder's reforms, which include weekly breakfasts with students and improved support services for them, seem to have made the difference.
The changes at Chicago reflect a broader reappraisal of curriculums at B-schools around the country. For three years, B-school programs have been plagued by declining applications, a lukewarm market for MBA talent, and an epic bout of soul-searching over the value of the degree. Critics inside and outside the academy have criticized the standard B-school curriculum as at best irrelevant and at worst seriously misguided. Recruiters, who in another era would have gladly plunked down more than $100,000 for a top B-school grad, had been getting restless, claiming many lacked basic management skills. With the very future of the degree in doubt, many schools have been forced to make their programs mesh better with the demands and complexities of the real world.
Today the MBA is on the road to recovery. True, demand for the degree is a long way from the 2002 peak. But after a three-year decline, applications to full-time programs surged in 2006. In all, nearly two-thirds of schools that responded to a survey by the Graduate Management Admissions Council reported an increase, compared with just 21% in 2005. And MBA grads are winning lofty pay packages not seen since the bubble years of the late 1990s. "The job market for MBAs is the strongest it's been in many years," says Steve Canale, General Electric Co.'s (GE ) top recruiter. "Supply is tight, and demand is up. It's Economics 101."
The best-ranked programs from previous years continue to dominate the top of the list. The University of Pennsylvania's Wharton School, which moved up a notch, to No. 2, did so on the strength of its core curriculum and extensive elective offerings, as well as unusual approaches to teaching. One program, for example, teaches leadership as students climb a volcano in Ecuador. And even though Northwestern University's Kellogg School of Management lost its grip on the No. 1 perch it has held since 2002, it fell only two places, to No. 3. Kellogg continues to win student plaudits for its rigorous academics, top-flight student body, and support from faculty and career services that one grad called "almost parental."
Fresh thinking from business school deans has also allowed several programs to move up in the rankings. Case in point: the University of California at Berkeley's Haas School of Business, which until now had never broken into the top 10. Haas catapulted nine spots, to No. 8, leapfrogging such perennial favorites as Cornell, Columbia, and Dartmouth. The combination of a small class, exceptional faculty, and a collegial atmosphere impressed students. "What I was looking for in a school was getting a real learning experience, not just getting my ticket punched," says Anders Geertsen, who is pursuing a banking career. "The students at Berkeley are there to learn and connect to one another."
Recruiters, meanwhile, were wowed by the quality of grads. Adobe Systems Inc., (ADBE ) the San Jose (Calif.) software maker, found more than a third of its MBAs at Haas this year. "Haas produces very strong, entrepreneurial, innovative-type thinkers," says Michelle A. Smith, Adobe's manager of university recruiting. "They fit well with our culture and are able to collaborate effectively."
Berkeley's performance this year shows that, when it comes to career services, sweating the small stuff is key. Several years ago, Haas became one of the first B-schools to assign "account managers" to work directly with individual recruiters. One was even dispatched to New York to strengthen Haas's relationship with the big financial services companies. In addition, recruiters who visit the campus now get VIP treatment. Lunch is on the school, and Dean Tom Campbell frequently drops by to ask what the school could be doing better. Parking permits for recruiters are now issued in advance, or someone from the school meets recruiters curbside with a permit in hand. Abby Scott, the school's executive director of MBA career services, says recruiters who'd begun skipping Haas are starting to return.
Indeed, recruiters are noticing the changes. Hieu R. DeShields, manager of corporate talent acquisition for Safeway Inc. (SWY ), says her Haas account manager helped rewrite Safeway's job postings to make them more attractive and identified students who might be a good fit. "She wasn't passive in terms of just posting our opportunities," says DeShields, who made four of her 11 offers at Haas this year. "She was an advocate for our business."
The market for MBA talent is subject to the same laws of supply and demand that roil the business world. With the economy in turmoil following the dot-com bust, B-school applications swelled, and two years later graduates flooded the market, driving down salary offers. But as the economy improved and applications began to skid, the result has been fewer MBAs on the market this year. And you know what that means: plenty of competition for talent and, yes, bigger paychecks.
Offers have been flooding in, giving grads more choices than ever. Among the Top 30 schools, grads received on average slightly more than two offers apiece, up 20% over the previous year. And the number of students without a solid job offer by graduation has declined dramatically. One survey by WetFeet, a San Francisco research company, found that half of the nation's 2002 grads were still looking for work in May of that year. This year, only 14% were.
For graduates of top schools who answered our survey, the average salary is up more than $8,000, or 9.7% over 2004, to $95,000. And the typical grad at nearly a third of those programs now rakes in a six-figure paycheck. Total compensation, which includes signing bonuses and other pay, is even higher. Based on preliminary 2006 data from schools, graduates of Babson College, Vanderbilt University, and the University of Michigan all saw double-digit increases over 2004, with median total compensation for Michigan grads topping out at $130,000. One Chicago grad surveyed by BusinessWeek had seven offers by graduation, and ultimately took a job as a research analyst at an asset management company. Estimated first-year compensation: an impressive $195,000.
For recruiters, a tight market for MBA talent calls for a change in tactics. With more recruiters on campus, and individual students receiving more offers, talent scouts have to work harder to stand out. With new recruits at PricewaterhouseCoopers receiving at least twice as many offers as last year, PwC has launched a branding campaign to put their name front and center on college campuses. At on-campus recruiting events, JPMorgan Chase & Co. (JPM ), which hired 85 MBAs this year, will trot out alumni who work at the company and have risen through the ranks. The message: The company is a true meritocracy where hard work is rewarded. The pitch works, but even so, the competition for the best students makes for a difficult recruiting environment, says JPMorgan recruiter Danielle Domingue. "This definitely feels like the feeding frenzy of 2000," Domingue says. "The students just have more choice."
While the news about the market for MBA talent is almost uniformly good, B-school deans and faculty are not standing still. Many are embarking on some of the most ambitious curriculum reforms in recent memory. Deans around the country have recognized that traditional programs compartmentalized by discipline no longer match the "flat" structure currently in vogue at American companies. What's more, managing has become ever more complex: On any given day, executives must analyze information from all corners of the globe in real time, and coordinate resources across borders and time zones.
Seven of the top 30 programs are planning or undergoing massive curriculum overhauls designed to churn out more competent grads. And at least that many are innovating around the edges, developing new programs or courses, or shifting focus. The changes vary in direction and scope, but many share a common goal: to turn out graduates able to grapple with the competing priorities that managers must confront every day and execute on a plan with little or no help from higher-ups. Today, recruiters say, many grads, weaned on a steady diet of cut-and-dried case studies, are incapable of deciding on a pricing strategy or a marketing approach in the face of unknowns--everything from consumer reaction to the price of oil. And worse: They can't follow through on a decision once it's been made. Having spent two years in B-school working on teams, where everyone and no one is in charge, they don't have the leadership and communication skills they need to take a project from start to finish. Theoretically, the new programs now in the works will create stronger decision makers, better problem solvers, more effective communicators--in a word: leaders.
While such overhauls happen with some regularity, mainly at lower-tier schools seeking a competitive advantage, top-ranked schools are leading the charge now. This summer, Stanford University's Graduate School of Business, ranked at No. 6, scrapped its one-size-fits-all curriculum and introduced a new model that emphasizes flexibility and customization. Tailored to students' individual education, work experience, and goals, courses offered starting next fall will challenge students to understand more than one academic discipline or managerial function and develop the critical thinking skills they'll need to make decisions when information is sketchy and risks are high. In a course called "Critical Analytical Thinking," students will analyze questions such as what responsibilities companies have to society, and develop the communication skills they need to persuade others of their positions. "This is a huge curriculum reform for us," says Garth Saloner, a management professor who headed the committee that recommended the changes. "If you could start with a blank sheet of paper, what program would you put in place that would put your students in the best position to manage organizations? That's what we really want to do."
The centerpiece of the new curriculum at the No. 19-ranked Yale University School of Management is a series of eight courses drawing on the insights of multiple managerial disciplines to solve vexing problems. One example is a new approach to the customer relationship, from a company's first contact with a prospective customer, usually in a marketing campaign, to the last, when the company loses the customer to a competitor--and everything in between, including customer service. Instead of treating the customer relationship as a marketing problem, as most MBA curriculums do now, Yale will treat it as an accounting problem, an economics problem, an organizational design problem, a psychology problem--and a marketing problem. A course that blends these disparate approaches might discuss how consumers choose products, how to identify and keep the most profitable customers, and how to redesign the organization itself so that customer feedback gets channeled back into product design. "Everybody's wrestling with how do we bring management education in line with the demands of management," says Yale Dean Joel M. Podolny. "Everybody recognizes there has to be some changes to the standard curriculum." Similar efforts are under way at Michigan, the University of Rochester, the University of North Carolina at Chapel Hill, Notre Dame, and Kellogg.
Columbia, which ranks No. 10, has a new MBA offering called the Program for Social Intelligence that borrows freely from the management playbooks of such corporate giants as General Electric and Goldman Sachs. The program includes more than a dozen activities--from a brainstorming exercise to a marketing plan simulation--making use of existing study teams to teach lessons on team dynamics. It also includes activities designed to help develop leadership skills and workshops on managing large organizations. "In developing these leadership skills, you don't learn it in a group of 60 or 100," says Michael W. Morris, the management professor who runs the new program. "You learn it by having experiential exercises in small groups and getting results you can interpret with the help of a coach."
Of course, the MBA revival has as much to do with the ebb and flow of the economy as it does the ongoing reform efforts at the nation's B-schools. But many deans are grateful that the sturm und drang of recent years got them thinking about how to build a better manager. They recognize that a reassessment is long overdue and vital if the MBA is to remain relevant for the next generation of business leaders.
By Louis Lavelle, with Paula Lehman in New York