Numerous tech firms announced layoffs and long-term hiring freezes this year. With around 58,000 layoffs occurring in the past two months of this year alone, business schools are stepping up to assist.
If you haven’t yet heard, Kellogg has decided to waive the GMAT and the GRE exam for laid-off tech workers. If you’re a tech worker who’s been wanting to pursue an MBA but haven’t pursued applications because you haven’t yet taken an exam, this could be the break that you’ve been waiting for!
Are you having a hard time deciding whether to take this opportunity or if you have the right background or the right justifications for not taking the standardized tests? Then this episode is for you. Listen in because our hosts, John, Maria, and Caroline from Business Casual, will give you the advice that you might be needing in your decision-making.
[00:00:07.290] – John
Hello, everyone. Welcome to Business Casual. The weekly podcast of Poets and Quants I’m John Byrne with Poets and Quants with my co host Caroline Diarte Edwards and Maria Wich Vila. Today, we want to talk about a big decision made by Northwestern University’s Kellogg School of Business. In the wake of the bloodbath occurring in Silicon Valley, where there are, at last count, over 6000 tech layoffs since October, Kellogg has decided to waive the GMAT and the GRE exam for layoff tech workers. They’re obviously hoping that the recent declines and applications for MBA programs could be reversed as more people get laid off and these young professionals decide that they should go back to school for graduate education. We also have discovered that MIT Sloan has extended its Round Two deadline for laid off workers as well, also hoping that they can attract a greater number of people who are now unemployed and looking to upskill with an MBA program. Caroline, what do you make of this?
[00:01:18.880] – Caroline
Yeah, I’m not surprised. When we had talked about the fact that Round Two was slow for business schools because of the strong job market, and we had predicted that Round Two would be busier. So, as we’ve discussed before, there’s a negative correlation with the economy and with the job market. And so when the job market is strong and the economy is doing well, applications typically drop to business school. And when there is an economic downturn, then applications increase. And as a recession has been predicted for 2023, it looked like Round Two was going to be busier. So I’m not surprised that we’re seeing these changes. I think that what has happened is that because round one was slow, the schools know that 2023 is going to be busier. But what they want to do is pull those applications forward into this season. Because otherwise, if those workers now start studying for the GMAT and start working their applications, they might not be ready for this season, potentially, and therefore would apply in the following season. And so the schools are trying to pull forward some of those applications so that they avoid being in a situation where application volume is down for this season overall.
[00:02:37.470] – Caroline
And then they get a deluge of applications for the season of 2023 2024, and therefore don’t necessarily get the best of the bunch because they are rejecting people next year who they would have accepted this year. So they’re trying to pull those applications forward so that they can improve the quality of the pool overall for this season. So I understand why they’re doing this. It makes sense. Of course, some people do criticize the schools when they start messing around with the policies and people get concerned that the quality will be dropping. But, I mean, as we’ve seen before with the class profiles, it doesn’t actually have a negative impact on the quality of the candidates that they’re selecting. At the end of the day, it just gives them more choice of candidates to choose from and therefore can actually increase the quality of people they’re accepting.
[00:03:32.440] – John
True. And in my key’s case, it’s worth noting that the latest entering class numbered 408 the year before was 450. So they had nearly a decline in the size of their incoming class as a result of those declining applications. So probably a smart move by MIT to extend its round to deadline. Maria, what do you make of all this?
[00:03:56.580] – Maria
Well, I think it’s interesting because as Caroline said, we have all been anticipating some sort of a recession in some form to be arriving at this time, and lo and behold, it does seem to be arriving. I think that this first of all, in terms of what this meant for Round one, I do think that perhaps we did see a lot of waitlists in round one, a lot of people who may have been either accepted or rejected in round one. I think I just sort of anecdotally saw a number of schools really pushing people to the waitlist to take a wait and see attitude. And I got a number of messages from people saying, well, what does it mean? What does it mean about my application and my candidacy? And I just said, honestly, they are looking to see if something better comes along and around too. Whatever your profile is, if you are a data analyst at some sort of food delivery app or whatever it might be, they’re looking to see, okay, there’s five other food delivery app companies out there. There are a lot of other data analysts out there, whatever that may be, we’re going to look to see if someone just like you, but maybe a little better comes along.
[00:04:56.830] – Maria
And so I think that the schools that lean heavily on wait lists earlier in the season are now relieved that they did so, because they are going to start seeing, I think, an influx of people either people who have been laid off or people who have not yet been laid off but are starting to see the writing on the wall and say, okay, let me get out ahead of this. And I think kudos to Kellogg for striking while the iron is hot. You know, as Caroline said, in a typical world where they would have required the GMAT, it’s very hard to take the GMAT and get the recommendations and write the essays and all that within a span of four to six weeks. So they are thinking to themselves, okay, instead of pushing these people to next year, let’s try to grab a bunch of them, a bunch of them now. Because if you the other reality is that if you if you give them all these hoops to jump through, they’re just going to think to themselves, well, I might as well just apply for another job. Why would I go through all of this?
[00:05:50.740] – Maria
If you make it as easy to apply to business school or maybe just a smid harder, but roughly as easy as it is to apply for another job, then why not? If I’m a tech worker and I’m laid off and I’m thinking of my future and my options is a little bit more of a pain to get those letters and to write some essays, but why wouldn’t I throw my hat in the ring and start considering that as an option? So I think it’s really smart. I thought it was smart what Kellogg did for COVID a few years ago. I thought they were super. They were so innovative in doing that, and I think they were rewarded for it, and I think they’re going to see that again this time. And I wouldn’t be surprised if other schools suddenly decide, coincidentally, to announce similar policies in the world.
[00:06:35.620] – John
It doesn’t make sense because, as we’ve said before, and this is really true, because MBA admissions is holistic, meaning a lot of different metrics and attributes are taken into account. Most admission officials have plenty of information to make a decision on a candidate in the absence of a standardized task score. And if you’re like, incidentally, if you’re from the tech industry and you have an engineering degree, that’s sort of a no brainer. What engineer couldn’t handle the modest quantity in an MBA program to begin with? So it’s pretty much to me a riskless decision, but a very smart one strategically as well. If you’re thinking about how hard it is for a school in the Midwest, as Kellogg is in Evanston, Illinois, to attract tech workers from Silicon Valley, then you also know, strategically, this makes a lot of sense, because the diversity in backgrounds. Work backgrounds of that class could be enriched significantly by getting laid off workers from Twitter, Meta, Amazon or what have you. So that’s really a plus, too. On MIT, I should point out that their original round two deadline was January 18. They moved it to February 23 more than a month later.
[00:07:56.920] – John
Basically to give people a chance to study and take the GMAT or the GRE. I think that’s going to be less effective than Kellogg’s decision, don’t you, Caroline?
[00:08:07.000] – Caroline
Well, as Maria said, it does take quite a bit of time to prepare the GMAT and as well as the application and everything else, I think it’s difficult to do all of those things well at one. So in that case, I’m sure they will get more applications, right? Because some people might be able to do that. As you say. For many of these candidates, the GMAT is not a huge mountain to climb, but nevertheless, trying to get that done in what is really a matter of weeks is still quite intimidating. But nevertheless, I think it’s good that schools are showing more flexibility in the current circumstances. They may well be concerned about attracting criticism for waiving testing requirements. As we’ve said, it’s actually a smart move, but not everybody perceives it that way. And so they may be concerned about reputational implications of going down the Kellogg route, but any additional flexibility that they can offer I think is a good deal in the current circumstances and will make sense for the school and will mean that they have a better class at the end of the day starting in the fall of 2023.
[00:09:21.560] – John
Meantime, let me publicly thank Caroline. I was out on the West Coast last week and Caroline invited me over and I had to do three webinars for an online MBA conference in a row from her office. I arrived, she made me blueberry pancakes, then I would serve several cups of coffee and a delightful spice cake. She wouldn’t even let me go, inviting me for lunch. But I had to go off the Stanford. But I bring that up because one of the things that you mentioned to me, Caroline, was that you at Fortuna are seeing an uptick in interest of potential clients and actual clients, which may suggest now a bit of a turn in the MBA application market, right?
[00:10:12.790] – Caroline
Yes, that’s right. I think that the market for Round One was down about 20%. I mean, that’s my rough finger in the air estimate and that’s what I.
[00:10:23.620] – John
Heard from the different offices too.
[00:10:25.360] – Caroline
Right, okay, so that’s my rough guess. And we have seen, as you say, the market turned this month. So in November, we started getting a lot more inquiries and people signing up. And we even have people signing up now for Round One applications for the fall of next year. So some really early birds there. So, yes, I think that the market has turned this month for MBA applications.
[00:10:51.040] – John
Now, the other thing that I would think would help it turn is some of the employment reports that are coming out from the top schools. Wharton was the last M7 to put out a report and it showed that median salary alone jumped 13% to a starting meeting salary of $175,000. That was certainly helped by a $10,000 increase from consulting salaries. But if you look across the board at where those numbers are coming in, financial services went from 150 to 174. Diversified financial services went from 125 to 162. Hedge funds from 150 to 175. Investment banking, 150 to 175. Just a lot of big increases. Even healthcare. Listen to this. The median salary of our Wharton MBA who went into healthcare this year was 160, up from 131. So we’re seeing some very big increases and Wharton is just one of them. Stanford is yet to report. Stanford typically reports big numbers. Also at MIT Sloan, median salary was up by 10% to total. Comp is now over. MIT Sloan Graduate when you account for sign on bonuses, that’s got to be very attractive to a lot of people, even though, you know, you look at the price tag on a full time MBA and it’s still quite high.
[00:12:34.330] – John
Maria, don’t you think this is going to bring more people out of the woodwork, particularly if you just got a pink slip?
[00:12:40.160] – Maria
I mean, it certainly doesn’t hurt if you’re saying that, okay, you’re at the salary level. I think that the tech workers in question, many of them were probably already making two to $300,000. Perhaps if they were engineers a few years out of college, many of them were probably already at that level. But so I think for them, the pitch Kellogg, if you’re listening and you want to send me a marketing consulting check, the pitch to them is more about their long-term longevity and the long-term options that the MBA gives them and not the immediate post MBA salary levels. Yeah, I mean, it’s interesting, right? Because I think that we’ll have to see if those increases, those jumps upwards, continue. Because I think that salary is slightly a lagging indicator. And so the reason the salaries, I suspect, went up so high this past summer, this past year for the people graduating last summer, is because the employers were hearing all these things about the war for talent. And you have to offer people a lot of money if you want them to come work for you, because we weren’t in a recession. And so if a recession kicks in about, I don’t know, now, I can’t help but wonder if some of that enthusiasm for throwing money at these graduates might start to cool a little if now the employers start having more of the power versus the job seekers.
[00:14:00.670] – Maria
So whether or not it’s 130 versus 160 versus 175, I think.
[00:14:08.660] – Caroline
[00:14:09.280] – Maria
For the MBA is more of that long term, the opportunities that it gives you throughout your life, and not just that post MBA salary. Because I can’t help but wonder if next year we will perhaps see a slight increase because of cost of living and inflation, et cetera, et cetera. But maybe it might not be quite so enthusiastic if the economy does go into a full blown recession and the employers are feeling a little cocky and that they’ve got the power in their hands to call the shops.
[00:14:36.560] – John
That’s so true, and that’s a really good point because there are a lot of people who think, given all the worries about recession and given that these massive layoffs in Silicon Valley, that the balance of power has now shifted back to the employer from the employee. You recall only a few months ago, employees were resisting the call to come back to work, insisting that they wanted to stay remote. I think that they had the power back then to say that, and I think they’ve lost that power now, given the recessionary talk that’s out there, some people think we’re already in a recession, others think it’s around the corner. No matter what you think, it’s a different climate than it was just a few months ago. And certainly a year ago. Caroline, what do you make of all these big numbers? I mean, they do reflect the fact that there has been a talent shortage of young professionals. Otherwise, obviously, these companies wouldn’t be fitting up their starting pay packages for newly minted MBA. Do you think that this is a temporary thing and will likely come down, or we’ll simply stall?
[00:15:51.940] – Caroline
Yeah, we won’t see those percentage increases that you are quoting for the people who graduate in 2023. So, as Maria said, it was partly due to the very strong job market and therefore expect that to weaken next year. The increases, if there are any, will be single digit, I would expect, rather than double digit, if it increases at all. The thing is, because this is a cyclical market, you can’t forecast what the market is going to be like when you come out of business school. And so it doesn’t really make sense to look at the shorter term trends, because you’re going to be graduating in a couple of years, maybe three years, depending on when you apply and which program you’re applying to. And the market may be very different then. So, as Maria said, it’s not about looking at those short term increases. It’s about the long term trend and the impact that the MBA can have on your career in the longer term. Right. Because nobody has a crystal ball and no one can tell you if you apply now or if you’re in admitted to an MBA program now, what sort of job market are you going to be graduating into?
[00:17:04.000] – Caroline
That’s a risk you take. Right. So you may be graduating into a very strong job market, or you may be graduating into a weaker job market, and that can impact the offers and the salaries that you get when there is a strong job market. Candidates often graduate, students often get multiple offers. Right. And they won’t be getting as many offers when the job market is weaker. It’s just the way it works. What you have to think about is how the MBA positions you for the longer term. And if you go to a great business school, you are going to get a great job when you graduate. But don’t pin your hopes on a particular salary or getting a particular increase for that class, because it is a cyclical market as it is for MBA applications.
[00:17:52.780] – John
That’s true. And that’s not a warning, but it’s a good warning label to have on this, because, of course, there are no guarantees. So there you have it. Now I’m going to go back to the MIT and Kellogg’s decisions and just throw out the fact that UVA Darden and Michigan Ross are still waving GMAT for people if they have the right backgrounds or the right justifications for not taking the standardized tests. I am thinking that even if a school has not made this announcement and you really want to apply, it wouldn’t hurt to actually call up admissions and say, hey, I’ve just been laid off. My job at Apple or Microsoft or Amazon or Twitter, and I don’t have the time to take the test. But I’ve always wanted an MBA, and this is no better time for me than now, but I just can’t spend the time to study for the test and make your deadlines and see what happens. I bet you that quietly, more admission offices might be willing to entertain MBA applications from candidates who have solid quantum backgrounds. And I’m talking about tech workers with engineering degrees. I mean, who’s going to turn down a tech worker who has just been laid off, who has an engineering degree from Georgia Tech?
[00:19:19.090] – John
Cal poly Carnegie Mellon. MIT. You just name any great engineering school? No, I would be surprised, frankly, other than maybe Harvard wouldn’t turn it down. But I think people are going to be empathetic and just as they were during the height of COVID So I’m betting that even if schools do not announce a formal change in policy as Kellogg has done, or as MIT Sloan is about to, you could take a shot at some of these schools and just call them up and say, tell them your situation and see if they would entertain an application from you. All right, Caroline, Maria, thank you so much again. This is John Byrne with Poets and Quants, listening to Business Casual, our weekly podcast.