Episode Transcript

[00:00:07.050] – John

Well, hello everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co host Maria Wich Villa and Caroline Diarte Edwards. Caroline, of course, is the former admissions director at INSEAD, cofounder of Fortuna Admissions. And Maria is our resident Harvard MBA founder of Applicant Lab. We have a special guest and a special occasion for the guest today. It is someone who I believe knows more about the MBA and management education than anyone else in the world, and I really mean that. Sangeet Chowfla was the CEO of GMAC, which, as many of you know, is the administrator of the GMAC test. But more importantly, an organization that is an advocate for graduate management education has done a lot of survey work to inform prospective students and school leadership of big and small trends in the field. Sangeet, welcome.

[00:01:10.630] – Sangeet

Thank you, John. And you are too kind.

[00:01:13.360] – John

And Sangeet is just stepped down after a ten year run as CEO, and he made some really interesting changes at GMAC. Of course, he also ran the organization during a very difficult time through the pandemic when the organization had to shift very quickly to online testing. Other thing that Sangeet, which I think was a really smart move, was he began to diversify the organization. He acquired the MBA Tour, which, as everyone knows, is a major player in the admissions fairness business. He also acquired business because in the UK, a website that provides information for applicants all over the world, and also acquired a test in India while he was CEO. Now, one of the things I want to announce today is that we are very lucky and very privileged because Sangeet is going to be writing a monthly column for us, the first of which has just appeared on our site. And we want to talk to him about that because he raises some really interesting issues. And one of them is his view that there have really been  waves of management education. We are currently in the third wave. Sangeet, can you take us through that?

[00:02:31.580] – Sangeet

Yeah. And thank you, John. Thanks for inviting me. When you think about management education, and first of all, let me preface that most of my comments are about the interface between the student or the prospective student and the business school. It’s not about the teaching the faculty, which are all important factors, but it’s about who do schools recruit and what attracts students to particular business groups. And if you think about the first wave, which is sort of think about it as probably the post war era or the early postwar era, business, education or the MBA particularly, was birth in the developed west, and it was largely about creating leaders and managers for the economic growth of the west, the growth of the Western multinational, et cetera. And at that point of time, great schools like Harvard, Lbs in Seattle sort of grew out of that largely with but domestic base, even though there was always some amount of international play. It’s worth noting that the GMAC exam, for example, when it was first delivered, what, 65 years ago, was delivered in a number of places in the US. And two in non us. Cities, London and New Delhi.

[00:03:53.140] – Sangeet

But the flow, student flow, was relatively small. The second way you can really think about the great globalization, the ascension of China to the WTO in 2001, created this tremendous development in other parts of the world, largely Asia or the global east. And what we were really thinking about and seeing at that point of time, was this growth of the middle class, disposable incoming people, a hunger for education, the need also domestically within places like China and India and the Asian Tigers for having trained managerial talent. And the reality was that business schools within those regions, there weren’t enough of them. And the ones that were there weren’t perhaps of the same global caliber. And that was 2.0, if you will, and GREGraduate Management Education 3.0, which I believe we are in right now, is the globalization not of demand, which was in 2.0, but really globalization of supply. We have quality business schools now all over the world. Statistic I like to cite is that in the year 2000, which is not that long ago in terms of higher education, out of the FD top 50 global MBAs, 42 of them were in the US.

[00:05:25.210] – Sangeet

Eight were in Europe, none were in Asia. And last year, the picture has really changed. If you look at the same ranking, 30 are in the US. Eleven, nine Europe, and nine were in Asia. And it’s not because US schools became any worse. It’s just that everybody else has caught up. And what that really means is that demand, which has fueled the growth of management education or graduate management education in the west for the last two decades, is facing competition from business schools within the regions itself, the regions of China, other regions of India, et cetera. And students within those regions now have choices. And that choice basically means that they’re not only looking at, should I go to a highly rated school in the US. And a couple in Europe, they’re actually looking at schools within their own region. So should I if I’m a student in India or a prospective student in India, should I be thinking about US. Schools, should I be thinking about European schools? Why should I be thinking about Asian schools or Indian schools, all of which are globally recognized at this point of time and have excellent outcomes. So it’s creating a whole different competitive environment for schools as they are competing for talent or trying to attract talent to their institutions.

[00:06:51.630] – John

Yeah, very true. And Caroline saw a lot of this, obviously, when she was at INSEAD. She is an INSEAD graduate and directed all of their admissions for many years. What’s your sense of this? Does this resonate with you?

[00:07:09.290] – Caroline

Yes, it does. Something I would add to, and I really like this framework of GM one, GM two, GM . I would say GM one also. I mean, it was not very diverse, right? It was very male dominated. Schools did not have the diversity goals and focus that we have today. So I think that has sort of accompanied this evolution as well. Women are obviously much more clearly represented and reaching equality on many of the programs in a way that just was very far from the case, even sort of 2030 years ago. Schools like INSEAD, I think even from the beginning, the school’s vision was international, so it was not a domestic focus. The school was founded about 70 years ago and was Western European dominated for sure. And given the geography, it’s obviously easier to capture an international population if you’re in France versus if you’re in the US. But that was something that was part of the school’s DNA from the start. And I think it’s interesting to think about, as you said, how we’ve moved towards a multipolar world. And it’s not just local goals that are building an international presence, but it’s also some of those international brands that are expanding.

[00:08:31.950] – Caroline

So INSEAD. Obviously has campuses in Singapore and Abu Dhabi. Some of the US. Schools have developed strong presence in Asia and other locations. So I think we’ll also see that there will be more partnerships. I was talking a couple of days ago with MIT about his partnership with the Asia Business School in Malaysia, and I think we’ll see more schools with those strong brand existing brands that are looking to address that multipolar demand that you’ve been talking about.

[00:09:04.750] – John

Yeah. Another point that Sangeet makes, which I totally agree with, is that there’s so much hand wringing about the maturity of the MBA degree in the US. Its value, and every now and then you get a pronouncement from someone like Elon Musk, who basically says MBAs are worthless. And what I really love is the fact that Sangeet did, in his very first column, points out the high alumni satisfaction of people who gain the advantage of graduate management, education, employer demand across diverse industry sectors and business. Types record high starting salaries for MBAs, the tremendous growth in the quality of business goals all over the world, and the fact that they do continue to grow in popularity with international and domestic students. So, Sangeet, why are people so negative about the MBA, given what you pointed out?

[00:10:02.290] – Sangeet

I think it’s the nature of our time, and media likes a crisis story rather than a success story, if you will. Right. It’s more interesting to write about it. Maybe it just speaks a little bit about human nature, but when you think about it, the various stories that we say upon I mentioned it a little bit in my column about a school that closes down its MBA program in the United States. But that happens and there are winners and losers in any particular industry, but globally that we’ve seen a growth in the MBA and growth in applications in the MBA. And even you talk about Elon Musk saying the MBA is worthless. And I remember back in the early two thousands, maybe the late 90s, during the.com boom, everybody at that point also was talking about management education being irrelevant with the growth of technology and the web, et cetera, et cetera. But remember now, the largest single employer of business education talent in the United States at least two years ago when I looked at that data, was Amazon. So when companies, even when these tech startups grow, they find that they need to deal with the same sort of business leadership challenges that traditional industry where GM or General Electric or IBM used to need.

[00:11:38.990] – Sangeet

So things change, but in some ways they tend to stay the same. The underlying requirements of leading a large organization, of having a multidisciplinary, multifaceted view of the organization, of not being totally too specialized or being able to think strategically, are requirements of any organization in any industry. It may not be the requirement of quintessential tech startup, the two men and the dog in the garage kind of story, but even when the two men and the dog in the garage grows and becomes an Amazon, I think it’s fierce broken. They need management done.

[00:12:24.110] – John

Very true. I was amazed at the stat in your first essay that overall applications to business schools worldwide have been within a 3% ban up or down over the last  years, which is kind of remarkable, but it is true. We’ve had a roller coaster ride. And I want to ask Maria, who has read your essay, what other things may have sprung out at her.

[00:12:50.650] – Maria

Well, I think first of all, we’ve spoken this article was wonderful to read because it really has hit upon things that we have talked about here on this podcast. For example, I remember when Iowa TP had to close down its program. We were talking about it’s such a shame that they given where they are in the country. Why didn’t they double down on something like AG tech and agriculture and how that’s the next revolution of sustainability? And they could have had just by virtue of their location, they could have really had a potential competitive advantage there. I do think that a lot of the schools are missing opportunities to really develop specialties because of the globalization of talent. If right now your school specializes in a particular field, it doesn’t matter if that field is growing quickly in other parts of the world because the students can now come to you. And so I think that that’s a real opportunity. I thought that was a really smart thing that you pointed out. And of course, your comment on the percentage of Hispanic students in business school versus the US population. So Hispanics in business school are roughly around 10% of MBA students, but we are roughly twice that in the overall US population.

[00:14:01.850] – Maria

So that delta that disparity between Hispanics within the broader population versus the ones who are getting graduate management degrees. I completely agree with that and not just because I am Hispanic, but because I do think that it’s a real opportunity for Hispanic population is growing quickly and it’s also one of the younger populations. And so to the extent that the US economy in the longer term will depend upon the success of Hispanic workers, making sure that those workers get a higher level of management education really will benefit everyone in the US.

[00:14:37.450] – Sangeet

The Hispanic pipeline problem is a simple one of mathematics, isn’t it? You mentioned that the Hispanic population, about 20% of the school going population is forecasted to get to about 36 37% by the end of this decay. Because of the changes, the white American population is not growing and the Hispanic American population is growing. So the math just works in that way. And if the fastest growing segment of the US domestic population, paradise consumes management education at a lower rate than the mean, the numbers just work out. It means the addressable pipeline for business schools decline. And at the same time, when we talked about earlier on about GRE3.0, that there’s more competition for international students in their home countries or other regions like Europe, the competition is potentially well, let’s just say it’s not good for US business schools, right? Because your domestic pipeline spray shrinks. You can’t attract international talent at the same rate as you used to. So your targeted market or target table market would shrink if you don’t address participation rates of Hispanic Americans. John, if I may, or Caroline, if I may add one point to Caroline’s comment about diversity.

[00:16:04.210] – Sangeet

Once you were speaking, something struck me that how point was that over this period we’ve seen management education and 1.0 was largely male oriented and we’ve been able to attract a much more diverse population. I think that emacs data shown that something like in the US about 46, 46, 45% of business school classes are female. It’s lower than that in Europe and quite patchy around the world. But there’s another element of diversity too, isn’t there? Back in the times of 1.0, we were largely training people to be managers in large, multi divisional, somewhat global organizations. Also the US multinational, the GM, the GES, the IBM, et cetera, the CPG companies of the world. And it’s become a lot different too. There’s a lot more people trying to work with smaller companies, mission oriented companies. So there’s another nuance that also happened to diversity in diversity of programming also or diversity of England.

[00:17:19.140] – John

That’s very true. And in fact, I mean, this generation seems more interested than any generation in things like social impact, sustainability, racial equality, solving poverty. So in other words, solving society’s big issues, which many business schools are tackling and they’re getting a lot of interest from on these topics by their students. And prospective applicants are looking for schools that kind of have more content on the issues of climate change, the future of health care, and how to help the disadvantage, which is really interesting to me as well. One of the other points you make, and I think this is an interesting one too, is and it’s so true you go to the websites of the different schools and pretty much more or less it’s the same messaging over and over again. And so there’s a surprising lack of differentiation even when schools have programs that could clearly differentiate them. And what I found interesting is your research that really shows that two things matter location and alumni success. And yet schools don’t really leverage those two elements to more effectively recruit applicants. Talk a little bit about that, if you may.

[00:18:48.900] – Sangeet

Yes, I’d be really interested in Caroline and Maria’s viewpoints because they speak to a lot of candidates. But what we sort of found was that candidates are kind of confused, let’s put it, because they want to go to business school, but business schools all speak to them with the same voice. They don’t effectively differentiate themselves. And as a result of that, one of the unintended but powerful consequences is the importance of rankings because students basically say if every school is going to tell me the same thing, then I tend to go to some third party for information because what they are saying isn’t necessarily resonating to my particular interest. And I do mention in the essay a small piece of work that we did where we took the homepages of the top 50 business schools in the US. And put them in the IBM Watson system. Now, IBM Watson in those days it had this cool, what they call the personality monitor. You fed it some amount of text and it tell you what the personality of that text was. And they basically said there was an 80% match, basically 80%. They were saying the same thing.

[00:20:14.070] – Sangeet

And we can see that ourselves. And it’s surprising to meaning that we don’t make enough of an effort as individual schools to differentiate ourselves. And the only reason I can think of is that a lot of what we talk about is about ourselves as a school. We talk about the school or the campus or the new building, faculty awards, which faculty has got, et cetera. But we talk very little about the student, the journey of the student, the success our alumni has had that tends to be buried if it is mentioned at all. And students, as a result said, I don’t get it and I don’t get what you’re going to do for me as an institution, except for if you are a highly ranked institution, when I get it because I just know your brand, right? So we are leaving it to the brand, which really doesn’t work if you’re not in the top 20, 30, 40, or whatever, and everybody else then ends up suffering as a result of that.

[00:21:25.770] – John

Caroline, what do you make of that?

[00:21:27.320] – Caroline

Yeah, so I’m not sure that schools don’t address it was my impression that schools do address and showcase alumni success. My impression was that schools actually talked about that quite a bit and they, you know, there are different components to alumni success, right? There are the career placement statistics for the graduating class. There’s the data on how careers evolve over time. There’s the alumni network and the benefits of having access to that network and that’s sort of part of alumni success as well. So my impression with schools do talk about that, but I certainly agree with your point that there is too much overlap in how schools market themselves. And frankly, that was great point of frustration for me when I was at in that every school says that they’re international, right? And so you sort of spend a lot of time explaining to people how a school like InCIA is a very different international experience versus going to a school where the vast majority of the student population is from that domestic market. And even a lot of the international students would have studied in that particular country or worked in that particular country before attending the MBA program.

[00:22:49.130] – Caroline

So we spend quite a bit of time sort of explaining that. And it’s not always immediately apparent to candidates because they just get the high level message from schools that, oh yes, we’re international, we’re offering a top education. I think there are other things that stand out that you didn’t mention that I think do matter and perhaps increasingly matter students. And one element is cost, right? And the cost of getting a top MBA has increased way beyond inflation over recent years. And so I think it’ll be interesting to see how the market segments in the future and you mentioned in your article online MBAs and how a lot of them are priced at a much lower price point. And it will be interesting to see if over time, that does challenge the model of the especially the traditional top tier two year program that is such an incredible investment. One thing that I would say about the challenge for schools and differentiating themselves, I agree with the point that some schools should focus more on perhaps a specific sector or figure out what their position can be that can really help them to attract that global audience.

[00:24:08.350] – Caroline

But you also mentioned how it’s important for students to get that breadth of education, right? And so it could be off putting for some students to think, okay, well, this school is all about finance, or this school is all about tech, or this school is all about agriculture. And okay, that may be relevant for me now, but we know that so many of the people who are coming out of business school are going to go through so many changes in their career. Right. And that’s always been the case that MBA graduates have had often several careers over a lifetime. Right. Because they switch industries, they switch functions, they switch countries, and that pace of change will only increase. So it’s very hard for someone who’s sort of 25, 26 to anticipate, okay, well, I think this is the thing that I should really focus on, because who knows what skills or what sector will be relevant to them in 10, 20, 30 years? So I think that’s part of the challenge for business schools when it’s risky to focus on a specific area because you could be alienating a population. And is that the right thing to offer?

[00:25:22.120] – Caroline

Is that the right positioning, is that the right value proposition for students who will be facing so much change in their careers in the future?

[00:25:32.570] – John

Yeah. The other thing I will point out is that we tend to deal with those highly ranked, highly selective schools that get a retention. If you’re going to hire an admissions consultant, for example, you’re not going to do that at a school that accepts a higher percentage of graduates. So we see the top of the market, and we don’t see the entire market the way San Geek was able to, because all of these different schools were in his portfolio, all of them partners in GMAC. There’s a fuller view of even the MBA market than we even perhaps have, given the fact that we tend not to focus very much attention on the second or third tier. Maria, any thoughts about this?

[00:26:22.250] – Maria

I mean, I can do you this is not as scientific as putting the top 50 websites into into IBM. Watson but I have been in situations where I have actually heard admissions officers from, I think, six or seven different schools tell almost the exact same story in an information session about how collaborative their students are. And the story goes something like this. People were interviewing for a management, consulting or investment banking gig. And the first person went in and they were asked a really hard case question. And they came out into the waiting room and they helped all of their friends who were in the waiting room thus perhaps helping their friends get the job even though it damaged it. I think I’ve heard oh, my God.

[00:26:59.690] – John

I’ve heard that story, too.

[00:27:01.180] – Maria

Oh, my gosh. Every school has the same story about how great our students are. So I think Caroline touched upon this. The challenge is that the good news about a general management education is that it is good in a general setting in a variety of settings, which is what makes the degree so powerful and so useful. The problem is, though, that then, if you’re trying to attract every single potential type of person then the message gets muddied. And that’s when you end up with websites that just talk about leadership potential and these sort of vague platitudes. So I think that if a school is going to focus, that can be like sort of like the gateway drug that then brings the person in to the broader management education, and then later they’re like, oh, it turns out that AG tech isn’t what I wanted to do at all. But the good news is I’ve gotten this great fundamental education. It’s a marketing problem. It’s so interesting to me and even the schools that do have specializations, how they’re not doing a great job of marketing them. Sloan, MIT, sloan is amazing at sustainability. And I was talking to someone the other day who wants to do agriculture technology.

[00:28:11.420] – Maria

They’re from a developing market. They have worked in like an organic fertilizer type of thing. And I was like, what about Sloan? And they’re like, no, no, I don’t want to do I’m not a digital person, Maria. I want to do agriculture. And I literally sent them like ten articles. I was like, Boom, boom, boom, boom. So it’s interesting, I think you pointed out in your article that the MBA programs themselves don’t seem to have their own marketing professors looking at their own materials because it’s what a wasted opportunity. I mean, thankfully, I think I was able to convince this person to apply to MIT, but what a shame that would have been if they would have just been like, oh, MIT is about digital online stuff, and that’s not me.

[00:28:55.690] – Sangeet

Sometimes if you look at the history of other industries, it’s informative, right? If you look at the automotive industry, started with Henry Ford and the Model T, and that’s the only model you can get, and you can get it in black. And look at the amount of that strategy wouldn’t work any longer. In today’s market, all cars get you from point A to point B. That’s a given now. So to some extent, all business programs get you to point A to point B. The question is, how do you navigate the different segments of needs, desires, aspirations? And strategic marketing is all about speaking to people in some kind of manner that attracts it, particularly in a competitive environment. I mean, even no competition doesn’t make too much of a difference. But now if somebody is looking at, I don’t know, but Georgetown and RSM in Rotterdam and ISB in India and NUS and Singapore as a set of choices, how do you make the difference? Location, outcome, something or the other is going to have to make a difference. Cost, certainly.

[00:30:14.930] – John

Yeah, that’s really true. And I’ve always said, frankly, that geography is destiny when it comes to the MBA. Even when you go to a school with a global reputation, there’s going to be a concentration of alumni and the strongest part of the network is going to tend to be you know, within a certain mile radius of the school. I mean, you look at a school like Stanford, and frankly, their big problem is people go to California, they get their MBA, and they never want to leave California. So at one point, Stanford actually started offering full ride scholarships to people in the Midwest who would go back to the Midwest just to get a greater alumni distribution throughout the country. And that’s often true. There’s no changing or denying that. And I think your research showed the importance of location. And yes, there are a number of schools that can transcend that issue, and they tend to be at the high point in the rankings. But by and large, it is a location geography game for many schools and many students who want to remain close to home, including Hispanics. I think you make a really interesting point about schools in the Southwest who should really be focusing a lot of efforts on the recruitment of Hispanics because they do want to stay locally.

[00:31:40.180] – John

They’re much more family and community oriented. That’s part of the culture, and they prefer not to go way to school. And they are really much the future of America given the size of that demographic and how quickly it’s growing in the United States. Senge, what do you think of rankings? You can’t like them. Say what you will, but we are real critics of rankings. And it may seem odd because, of course, I am responsible for creating the first MBA ranking at Business Week back in 1988, but I’m a real skeptic and if not cynic about them, and I’m quite a critic whenever they come out. But I also know how obsessive people are with rankings. What’s your sense of it? Is it just something that the industry has to live with and deal with, or is there something else that can happen here in the way that law schools got together? Quit the US. News ranking, major law schools, and now US. News is changing this methodology to address their concerns.

[00:32:51.590] – Sangeet

Rankings are far from perfect right instruments, sometimes they’re questionable methodologies. But another question we should ask of them, of ourselves, is why do rankings exist? And why do students go out from ranking use rankings so much? So they must be fulfilling a need, if you take that. So what is the need that they are fulfilling? And one can argue that the need that they are fulfilling is actually going back to our earlier conversation is when is a lack of information and knowledge that is coming out? An example I sometimes use is I live in the Washington, DC. Area. If I’m going out for dinner with friends, I tend to, by and large, know where I want to go, which restaurant want to go. But if I’m in Chicago or someplace, I don’t know, and I go to Yelp or Open Table or someplace to give me information, and I look at reviews. And stars and some form of proxy rankings. So the less I know about something, the more likely I am to use an external source of information. The more I know about what I want to do or what I want to consume, the less I tend to use external products.

[00:34:17.380] – Sangeet

So it sort of comes back to how much did we create rankings ourselves as an industry now? However good we become, I personally think it’s something that we’re going to have to learn to live with, and there may be an opportunity to make them better. Clearly, what the law schools have done has been very interesting, but nor should we try to overconstrain the process. Right. Because then rankings, unfortunately, are one person’s good ranking means somebody else isn’t getting the same sort of ranking. So any methodology will come in for some form of criticism as long as they exist.

[00:35:05.570] – John

Yeah. So true. Well, Sangeet, thank you for joining us today. Really appreciate it. And for all of you out there, I want to invite you to read Sangeet’s first column in Poets and Quants. It’s called a decade of graduate management education. I love you. You’re perfect. Now change. Some of you out there will recognize that it’s from an old 90s musical, and I think it’s an incredibly intriguing read. If you are in leadership in our business, this is a must read if you’re a prospective student or a current student or an alum. It’s a fascinating read and really a good overview look at where the business of business education is right now. So thank you for joining us, Sangeet.

[00:35:56.680] – Sangeet

Thank you for having me, John. And interesting chat. Really nice talking to you Caroline and Maria too.

[00:36:02.770] – John

Indeed. All right, for all of you out there, good luck on your MBA journey or your graduate management education journey, because there are plenty of specialty master’s degrees in every possible field. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual, our weekly podcast.