Harvard Business School Dean Fights to Keep M.B.A. Relevant

Harvard Business School Dean Fights to Keep M.B.A. Relevant

Golden Age of Business Education Is Over, Asian Institutions Rise

Demand for MBAs is cooling in the U.S., but not in Asia. The WSJ’s Wei Gu talks with Harvard Business School Dean Nitin Nohria about what has surprised him on his Asia tour.

By Wei Gu in the Wall Street Journal

The golden era for U.S. business schools is over. Gone are the days when a master of business administration degree was essential for a career at Goldman Sachs or McKinsey & Co. Young professionals now balk at the $100,000 price tag and two-year commitment needed for an M.B.A.

The rise of Asian business schools poses another challenge. Although applications from the region are still strong at top U.S. schools, many Asian students and successful entrepreneurs have opted to stay closer to home to hone their skills. Business schools have mushroomed in India and China, offering courses and networking opportunities that are more relevant to their home markets.

Top U.S. business schools have responded by introducing shorter and more specific business programs, and adding international business cases for study.

Indian-born Nitin Nohria, the first Asian dean of Harvard Business School, talked to The Wall Street Journal in Hong Kong about the new environment of business education. Edited excerpts:

WSJ: Tell us, why are you on this Asia tour?

Mr. Nohria: It is part of our global strategy. We opened our first research center in Hong Kong 15 years ago. That was a time when we felt we didn’t offer our students a truly global education. About 10% of our business cases then were international. Now we have eight research centers around the world, including Mumbai, Tokyo and Shanghai, and 60% of our cases are global cases. This allows us to pursue a global strategy in a far more lean way.

WSJ: Have you seen some big donors from Asia?

Mr. Nohria: Today if you look at the top echelon of donors at Harvard Business School, we don’t have yet an Asian donor in that category. But we have people who began to give us $5 million and $10 million gifts, which is pretty significant. I have started this global leadership circle, the aspiration is to have 100 people who can give me $1 million each to support the international activities of the school. I want to build a broad base. My dream will be 30%-40% of that group will be from Asia.

WSJ: Can you describe the changing mix of students?

Mr. Nohria: They used to be from Europe, but Europe has developed its business school scene, so we see fewer students from Europe. We see students from Latin America, they tend to not to just go to HBS but also other business schools. So we see a more competitive market.

With Asia students, we see them from everywhere. The growth is explosive. One of the anxieties we have is we used to see 30 to 40 Japanese students out of 900 M.B.A. students every year, now it is down to four to five. Japan is only part of Asia that’s in retreat. They were so engaged in the global economy in the 1980s, now they have become more insular. Japan is the third largest economy in the world, it’s important for us to find a way to reach out.

As for Greater China, our mix has shifted to mainland. Now a quarter of the students are from Hong Kong, and three quarters from China. It used to be the vast majority of Chinese students were from Hong Kong.

WSJ: Has a stronger U.S. economy affected applications this year?

Mr. Nohria: We are [in a] countercyclical sector. This year I have been surprised by a sudden jump in applications from the energy industry. We still see 10 applications for every student we are going to admit.

Tuition has been going up by 4%, we are matching that with increasing financial aid, at a rate of almost 5%-7%. Almost 28% of our tuition is now given away as scholarship. Last year 50% of students receive some forms of financial aid. Twenty years ago it was almost impossible to imagine.

WSJ: What’s your biggest challenge?

Mr. Nohria: The biggest challenge is a lot of people are asking the question whether they need to go to business school at all. The golden era of business education ... is 1950 to 2000, where it was almost considered, if you want to accelerate your career, you’d better have an M.B.A. That sense of necessity of an M.B.A. has shifted. Even McKinsey has people from Ph.D.s and other backgrounds, they train them themselves. You go to an investment bank, they will tell people that you can just stay and become a managing director, you don’t have to get an M.B.A.

WSJ: Is there pressure to do short courses?

Mr. Nohria: The rise of [executive M.B.A.] has been the answer to this pressure, and the rise of one-year M.B.A. programs as supposed to two-year. The U.S. demand for two-year M.B.A.s has declined 20% from year 2000, so that space is shrinking. Demand for specialized master’s program is growing faster than two-year M.B.A.

WSJ: What do you think of the business schools in Asia?

Mr. Nohria: India might be a bellwether, demand for business education grew so rapidly so 1,000 business schools were open. Suddenly people realize just getting a degree from any school isn’t enough. Consolidation is happening. Same thing is happening in the U.S. People are more conscious that quality of education matters.

WSJ: What surprises you about Asia on this tour?

Mr. Nohria: Both in India and China, for the first time the conversation is about something that’s not growth. We got so obsessed about growth and forgot we have to build a stronger foundation. Now there is desire to build stronger foundation, more transparency, a greater focus on governance, and less corruption. You hear a different conversation, and there is a level of seriousness about that conversation.

—Jake Lee, Deborah Kan and Anjani Trivedi contributed to this article.

Résumé

Career: Mr. Nohria became the 10th dean of Harvard Business School in July 2010. Prior to joining the HBS faculty in July 1988, he received his Ph.D. in management from the Sloan School of Management, Massachusetts Institute of Technology, and a B. Tech. in Chemical Engineering from the Indian Institute of Technology.

Extracurricular: He and his wife are collectors of contemporary Indian art. He loves to cook vegetarian and he is an avid fan of Boston sports teams