Business schools object to scale of cross-subsidisation

Underinvestment blamed on funds siphoned off for loss-making courses, writes David Matthews

October 6, 2011

Almost a third of business school heads believe that the financial contributions they make to their universities to subsidise other subjects are too high, according to a survey.

The poll, carried out by the Association of Business Schools for Times Higher Education, found that 22 out of 31 respondents said that their schools were cross-subsidising other courses.

Of these, 10 said that the subsidy was too high, 10 thought it about right, and two said it was too low.

The findings come in the wake of a study published in May by consultancy firm The Parthenon Group, which found that up to half of all university courses made a loss and were subsidised by small numbers of popular courses with large margins, such as business studies.

One anonymous respondent to the latest poll said that the subsidy was "bearable now" but it had caused "several years of chronic (and unacknowledged) under-investment in the business school due to funds being siphoned off".

"It took a complete revamp of our financial regime with the university to fix this," the respondent said.

Two other heads said that their schools could suffer as they faced "aggressive competitors" that offered only business courses. Consequently, the subsidies available for other courses could decline.

"I suspect that business programmes could be subject to greater competition from private providers (so) we may find that this subsidy does not remain as large as before," said one.

Five schools have plans to absorb various departments from their main universities. Three were looking to subsume law, one information systems, and another media and law.

At a roundtable discussion of business school heads, hosted by the ABS last month, attendees questioned whether students or parents would accept their tuition fees being used to subsidise other courses.

"Parents, under the Freedom of Information Act, really wanted to ask about the quality (of the courses) and the resources available," said one participant at the event.

Another roundtable participant added that "in 30 years' time, current (courses) will fall by the way" unless they managed to turn a profit.

Whether many business schools would continue to cross-subsidise other courses depended on "institutional management" and whether there was a "monolithic" leadership that redistributed money across the institution, or an "internal market", the second participant argued.

But a third roundtable participant argued that there was a "non-monetary value" to many loss-making courses that could enhance the reputation of the overall institution and the business school.

Contraflow system: economy up, applications down

Global applicants for Master of Business Administration programmes are down as the world economy starts to recover from crisis, according to the latest data.

The Graduate Management Admission Council's Application Trends Survey 2011 found that for two-year full-time MBAs - the most common type - 67 per cent of institutions surveyed reported a drop in applications, with just 28 per cent reporting a rise.

The report says that "MBA application volume historically trends counter-cyclical to economic conditions" and notes that as the economy improves, potential applicants are less likely to leave their jobs to attend a full-time programme.

The Asia Pacific region was particularly badly hit, with 78 per cent of those surveyed reporting a fall in applications for full-time MBAs.

In Europe, 68 per cent said that applications had decreased, while in the US, the figure was 61 per cent.

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