Bad for business? One in five global MBAs runs at a loss

They are seen as the lucrative money-spinners that help to keep university budgets afloat. But a new survey indicates that one in five MBAs offered by business schools around the world is, in fact, run at a loss.

In a survey of global business school leaders conducted by the Association of MBAs, the results of which have been seen by Times Higher Education, 24 of 121 respondents said that their MBA did not make a profit.

Many institutions continue to offer a loss-making course because of the “prestige” associated with the qualification, the study found, with 20 of these 24 schools citing it as a “jewel in the crown” for a business school’s offerings.

An MBA programme director from a Europe-based institution said that if you are a “fully fledged business school you should also have an MBA”, but noted that the global market has been “declining for years”.

Gregory Whitwell, dean of the University of Sydney’s Business School, said that MBA programmes can “place a greater demand on resources”, particularly when schools are pursuing “top 50 rankings positions”.

“In schools, such as Sydney, which offer multiple postgraduate programmes, funds allocated to MBAs can drain resources from other areas, causing internal friction,” he told Times Higher Education. “Having said that, I believe that all of these issues can be managed successfully but require some fine judgement.

“MBAs remain an important element in the executive education mix irrespective of whether they return a profit or not. They also deliver a range of more subtle benefits: they reflect well on the school and its postgraduate programmes in general, help to generate closer links to industry, and produce a highly supportive alumni network with high-level connections in the international corporate world.”

Of 17 UK-based business schools that answered the question on profitability, seven said that they made a loss on MBAs.

Overall, 173 of AMBA’s 240-plus accredited schools, based in 43 countries, answered the online survey, conducted in association with global strategy consultancy, Parthenon-EY.

Andrew Main Wilson, AMBA’s chief executive, noted that three-quarters of respondents said that their MBA generated a profit for their school or university. He added that the programme’s revenue fitted into everything offered by a given school – including undergraduate and postgraduate courses, executive education, alumni income – and should be taken in context.

“It’s a strong indicator of how powerful the MBA is worldwide. If you look at the education sector across the world, the MBA still is the most recognised and respected business qualification,” he said.

john.elmes@timeshighereducation.com