An upturn in the downturn for MBA graduates worldwide

As MBA graduate career prospects recover, the student profile is shifting. Matthew Reisz reports

May 12, 2011

"People with MBAs are being employed," said David Wilson, president and chief executive officer of the Graduate Management Admission Council.

"We seem to be through the worst, and the signals are the market is going to get stronger. Salaries are going up. They didn't dip much and have recovered very quickly."

Speaking to Times Higher Education during a recent trip to London, Dr Wilson admitted he had been "somewhat surprised" by the resilience of MBA graduate salaries during the downturn.

"Because of the breadth and depth of the global crisis I thought it was going to take a lot longer," he said. "But the rewards seem to be coming back, and coming back robustly, which speaks again to the (MBA degree's) value for money."

As the head of the US-based organisation responsible for administering the Graduate Management Admission Test (GMAT), Dr Wilson is well placed to track both the broad trends and the fine detail of what is happening within management education worldwide.

The GMAT is now used as an entry criterion for nearly 5,000 graduate business administration programmes taught at nearly 2,000 institutions worldwide.

More than 260,000 people take the test each year, which Dr Wilson estimated was very close to the annual number of those graduating from all the world's business schools.

However, he said, this did not represent a precise one-to-one correlation, since "some schools in the proprietary (private) sector have no exam or other entry requirements. Some schools won't tell us (what their requirements are), and some will accept but don't require GMAT scores."

Dr Wilson noted that some institutions, such as The Open University, are "philosophically opposed" to such tests, while the fact that the GMAT was given only in English meant that it was not very relevant for courses taught in other languages, in China or Japan for example.

But the majority of MBA courses are taught in English, and the GMAT is by far the most common admission test.

"We estimate that 80-85 per cent of those embarking on graduate courses at business schools have taken the test," Dr Wilson said. Tracking who they are and where they are sending their scores allows some useful analysis of the MBA market.

So what are the broad trends? "We are seeing an increase in the number of women taking the GMAT, driven mainly by Chinese women and, to some extent, German women, and a decrease in the average age of test-takers, although the latter drifted up again last year," Dr Wilson said.

More detailed figures for Europe for 2006-2010 show an increase in the proportion of female applicants taking the test, from 36 per cent to 38 per cent.

Women are currently in a majority only in Russia, where the proportion of women increased from 52 to 57 per cent in the period 2006-10. But the trend has been upwards almost across the board among European nations.

An even more marked trend in Europe has been an increase in younger people taking the test, with the proportion of under-25s rising from 32 to 41 per cent over the period.

The increase is reflected in eight of the 10 individual countries measured, although levels range from 12 and 13 per cent in Spain and Portugal, to 51 and 57 per cent in Germany and Greece.

But if the profile of those wanting to embark on graduate business studies is changing, do they still favour the same countries and institutions?

In terms of personal preferences, the key factors tend to be cost, employers that actively recruit in particular institutions and the places where prospective students want to live after graduating, although inevitably their choices are also influenced by application and visa requirements.

So do Western Europeans, for example, prefer to study within their own countries, elsewhere in the EU, in the US or even beyond? And where are the major European business schools managing to attract talent from?

Stay-at-homes versus adventurers

Again, the broad picture is clear. In common with the vast majority of US and Japanese students, many European students are keen to stay in their own countries, although many others are willing to travel.

The US remains popular - for students from every major country except Russia, the two top destinations are their home territory and the US. For example, 24 per cent of German students submit scores to US institutions, and 23 per cent to those in Germany. (Russians choose business schools in the US, the UK and four other countries in preference to their own.)

Other nationalities have more marked preferences. Far more Dutch citizens want to stay in the Netherlands (49 per cent), although 18 per cent are interested in the US.

The Spanish, by contrast, largely look to the US (56 per cent), while only 15 per cent opt for business schools in their own country.

Yet within this overall picture, there are some highly significant trends. The total number of GMATs taken by European citizens has risen by 42 per cent - from 17,189 to 24,324 - in the period 2006-10.

These pools are getting larger, according to Dr Wilson, "because employers are finding it very attractive to hire MBAs and, as demand and compensation go up, so does supply".

At the beginning of this period, close to an absolute majority (49.83 per cent) of GMAT score reports were sent to schools in the US. This has now slipped to 37.29 per cent.

In the meantime, several European countries have moved to take up the slack. The UK and France continue to top the list and have increased their percentage shares of a larger pool from 12.82 and 9.94 per cent respectively, to 13.88 and 12.67 per cent. The Netherlands, meanwhile, has doubled its share, from 3.04 to 6.35 per cent.

Looking beyond European candidates, the proportion of all GMAT scores worldwide that are sent to European schools has risen from 7.5 per cent in 2006 to 10.9 per cent in 2010. Of these, two-thirds came from non-European Union citizens, with more than one third from India (24.12 per cent) and China (10. per cent) combined.

No single European country gets a greater share than Germany, with 7.13 per cent.

Perhaps inevitably, this impressive growth has not been uniform across Europe. Around two-thirds of those GMAT scores that are sent to institutions in Europe go either to the UK (40.78 per cent) or to France (24.06 per cent). However, some countries, including Sweden and Germany, have shown significant increases from a low base.

A world of competition

In the context of this success story, the Association of MBAs' recent warning that visa restrictions could cut off the supply of overseas students to British business schools is particularly alarming.

None of this means, of course, that Harvard Business School is about to collapse.

But it is evidence, said Dr Wilson, of "many serious global competitors in Europe, as well as in Asia, which weren't around 10-15 years ago".

Although it normally takes a decade or two to create a really good business school from scratch, world-renowned universities that "come with a foundation of academic excellence and where the name is going to attract people" can sometimes speed up this process, Dr Wilson said.

For any institution interested in accomplishing this feat, the key, he added, was "to be really open to other perspectives and ideas, to recruit your faculty from all over the world, and to show creativity around employment contracts".

matthew.reisz@tsleducation.com

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