Issue link: http://www.e-digitaleditions.com/i/80527
At JWMI, it's built into our DNA to provide education for working professionals. Indeed, many would suggest that the primary role of the dean at a traditional school is "friend rais- ing"—lining up donors whose gifts supplement an endowment. Even if that's accurate, the vast majority of business schools depend overwhelmingly on tuition revenue to pay the bills and fuel growth. For example, for the 2010–2011 academic year, Johnson at Cornell received 78 percent of its revenue through a combination of degree program tuition and non- degree executive education fees. Even Harvard Business School's 2011 annual report shows that endowment distribution contrib- uted less than 20 percent to total revenue over the same period. Outside of the United States, in The biggest increases have been in master's degree programs—not sur- prising, given the growing number of executive MBA, global MBA, and fully employed MBA programs that cater to working professionals from international cohorts. In 2001, among specialist master's programs at AACSB schools, only 0.6 percent were offered online. Ten years later, that number was 3.3 percent. In generalized master's pro- grams, the numbers rose from 0.5 per- cent to 3 percent. countries where the tradition of alumni and corporate giving is not as strong, endowment distributions can be even smaller. For instance, at Queen's University in Canada, where I previously worked, outside gifts accounted for only 4 percent of revenue in 2010–2011; the 2009 annual report for London Business School puts the figure at 7 percent for that school. Strayer University, including JWMI, does not collect any dona- tions from alumni or benefactors, making our institution 100 percent tuition-revenue dependent. Therefore, it appears that all business schools—both traditional and for-profit—must depend to a large extent on the tuition their programs generate. Certainly when I was at Johnson, I was directly responsible for ensuring that my programs brought in enough tuition to sustain them. Interestingly, at Strayer Univer- sity and JWMI, the organizational structure separates the academic and administrative operations of the school. Ironically, this means that, as the chief academic officer of a for-profit institute, I focus less Some traditional schools are fight- ing hard to make their marks in the virtual world. For instance, several prestigious schools, such as Duke University and Indiana University in the U.S. and IE in Spain, offer MBA pro- grams that have only limited residential requirements; most of the content is delivered online. Even so, the digital space is largely owned by for-profit providers such as the University of Phoenix and Kaplan University. For instance, total enrollment on the financial performance of the school than I would as dean of a traditional institution. Whether they call it a profit, a surplus, or a "net positive cash flow from operations," all business schools are working hard to gen- erate tuition revenue in excess of expenses. These extra funds will not simply sustain them, but will allow them to pursue new opportunities and make strategic investments. Vive la Différence! If these are two important common- alities between the traditional and for-profit business school settings, what are the important differences? The analogy that comes to my mind is the airline industry. Before deregulation, airlines could assemble a portfolio of routes and services and set rates that would cover all their costs. Of course, that meant pas- sengers on some popular routes were essentially subsidizing routes that were less popular or more expensive to service. But deregulation allowed competitors to effectively unbundle the complex portfolios of the estab- lished giants and eroded the incen- tives for cross-subsidizing. in the University of Phoenix-Online was 115,053 in 2010—which was a huge leap from its 2000 number of 11,908. (Figures were supplied by the National Center for Education Statistics using its Integrated Postsecondary Education Data System.) The data suggest that, when it comes to digital delivery of business education, traditional business schools aren't just facing tough competition from alternative providers. At the moment, they're barely in the game. BizEd September/October 2012 29 PHOTO BY MATTHEW JACKSON