Kellogg To Shrink Two-Year MBA Program

by on February 13th, 2012

Kellogg Dean Sally Blount

Northwestern University’s Kellogg School of Management said on February 6 it plans to shrink the size of its two-year MBA program by up to 25% and double or triple the enrollment in the school’s one-year MBA program for business undergraduates.

“It’s very clear that growth in demand for the two-year MBA is going to be slowing and that growth for one-year programs will be growing,” said Blount in an interview with PoetsandQuants. “We have to be realistic about the market in which we find ourselves. We think the market for two-year MBAs is going to get very elite.”

The changes are the result of a sweeping strategic review by Dean Sally Blount, former dean of New York University’s undergraduate business school, who took over the leadership of Kellogg in July of 2010. Some 30 faculty members at the school were engaged in the review, along with consultants, alumni and students. Kellogg is putting the word out with a new website.

Kellogg also will expand its global footprint, offering executive education courses in both Shanghai and San Paulo with partner schools as a result of the review. The school decided, in fact, to no longer launch additional degree programs abroad.

Among other things, the review revealed that one of the school’s under-appreciated assets is its 12-month MBA program for students who already have an undergraduate business degree. The class size for the program has increased in recent years to 85 students currently from 74 in 2007. Applications also have risen for the one-year MBA to 326 last year from 250 in 2007. In contrast, applications to Kellogg’s full-time program fell 5.6% last year to 4,974 from 5,270 the previous year,

“We are going to market it harder and push it harder because we think there is going to be more demand for it,” added Blount. She predicted that over the next five years enrollment in Kellogg’s one-year MBA program would grow to perhaps 250 students, while enrollment in the school’s two-year program would fall to about 850 students from 1,115.

Enrollment trends in Kellogg’s 12-month MBA program

Source: Kellogg School of Management

“The two-year MBA is a stunning product that we are very proud of,” said Blount. “We are definitely staying in that market, but we are preparing for a world where the best students may not want that and they have options. We don’t think 20-something people from China are going to come to the U.S. for a two-year degree. The opportunity cost is just perceived to be too high.”

Booz, BCG AND Deloitte were enlisted to help with the strategic review

As a result of the school’s strategic review, done with the assistance of three consulting firms (Booz & Co., Boston Consulting Group and Deloitte), the school also has created four “impact areas” of focus that has major implications for how the faculty conducts research and what gets taught in an MBA classroom.

“It is an alternative model of general management education,” said Blount. “We’ve created these four impact areas because the problems businesses need to solve don’t fall into a single disciplinary bucket anymore. We will reorganize how we do our research and what we have in our curriculum. We are trying to get out of this 20th Century, overly-siloed way of teaching business.”

Moving away from a silo-based research and teaching model

The four areas, imposed over the school’s traditional discipline-based organization, is a bold attempt to provide a framework for expanding and deepening the school’s thought leadership. They are:

1) Markets, customers and growth. Kellogg is building on its traditional strength as the top school in marketing by trying to define that asset more broadly.

2) Innovation and entrepreneurship. The review found that companies are keenly interested in both innovation and entrepreneurship. Kellogg wants to consolidate its current assets in this field to make a bolder statement about these subject areas.

3) Architectures of collaboration. It’s a fancy new way that Blount is using to both broaden and deepen Kellogg’s highly collaborative culture steeped in teamwork.

4) Private enterprise and public policy. Increasingly, believes Blount, business leaders need to be prepared to work to deal with public policy issues.

These four areas will be overlaid on top of the school’s six core academic departments: finance, accounting, marketing, strategy, organizational behavior, and managerial economics and decision sciences. ”Like other schools,” said Blount, “we have a lot of centers but they don’t have a lot of impact. Each center has to join one of these impact areas. And conferences will be held around these four topics. When we do partnerships, it will be on these impact areas.

“We don’t want to lose the rigor nor our focus on the power of collaborative systems,” said Blount. “It’s expanding them in dynamic ways.” Blount said a concrete example of how the new approach would work could be glimpsed in finance. In addition to the standard finance approach of looking at historical cash flows to project what an organization’s cash might look like five years forward, the faculty would now use financial concepts to help project growth trends in customer segments. “It’s about how do we make conversations happen about the customer.”

Blount said that globalization was not thought to be a key impact area because “we are assuming it. We have intentionally not put it in because to have a global requirement is a 20th Century way of doing it. Right now, the old Kellogg has a global requirement. The new Kellogg won’t. We’ll ask the faculty to have a certain amount of content in globalization. Almost 50% of our faculty have been born abroad and global content in class is 40% to 50% generally.”

The review and the changes that will result from it comes on top of a decision to build a new $200 million modern home for the business school on the waterfront of Lake Michigan, a reorganization of the top leadership team, and the creation and launch of Kellogg’s new branding campaign–all initiatives driven by Blount since her arrival some 18 months ago.

‘Everything we’re talking about is a little controversial,’ says Blount

All told, the review took a full nine months to complete, and some Kellogg faculty weren’t convinced it was necessary. ”Everything we’re talking about is a little controversial,” conceded Blount. “The biggest thing I had to fight against was everyone was game for me to come in and rethink how to operate. And that’s a lot of what we did last year. But the biggest counter push was, ‘This is all great. You can stop now. You have the reorganization, the building, the rebranding.’ I had to convince them that the world had changed and we couldn’t go back.”

Blount said she believes the school’s positioning has eroded over time. In the late 1980s and 1990s, under its visionary Dean Don Jacobs, Kellogg regularly won acclaim for its highly collaborative culture, its team-based approach to learning, and an unrivaled marketing faculty. Kellogg MBAs were known as a group with the emotional intelligence and interpersonal skills that set them apart from others. As more schools began interviewing applicants before extending invites and then loaded on teamwork and leadership exercises, Kellogg’s distinctiveness began to fade.

To gain buy-in and support for a more ambitious change agenda, Blount held countless sessions with the school’s key stakeholders. “I had more conversations with students, faculty and alumni in the fall than I care to remember,” she said. The faculty left a couple of those meetings and said, ‘I get it.’ You have to give people the burning platform and it has to be data-driven. It can’t be, ‘I feel.’ And that was why having the partners to get us the data we needed was so important.”

The consulting firms, who worked on a pro bono basis for Kellogg, studied the full-time MBA, part-time MBA and executive education marketplace. They also examined a dozen of Kellogg’s top competitors and their positioning in the market.

Blount presented the results of the review at a faculty meeting in January. “The biggest question was, ‘What does this mean for me and how does it affect my research?’ Then, people asked, ‘How do we put this into action and not just make this lip service.’”

To execute against the new framework will require both structural and mindset changes, including a curriculum review. In some cases, however, it will mean consolidation. In the area of innovation and entrepreneurship, for example, Kellogg already boasts five centers with nine staffers and annual budgets of up to $4 million. “We need to bring them together and better deploy those people and funds,” Blount said. “The world doesn’t know what they are doing. We have these great assets that we are not getting credit for. We were too fragmented. Bringing the five centers together and rationalizing them will be huge.”

Blount said the broad nature of the changes are necessary to insure that Kellogg remains one of the premier business schools in the world. “If you had told me in 2000 that the Twin Towers would fall, we would elect a black president, and Bear Stearns and Lehman Brothers would disappear, I wouldn’t have believed it,” says Blount. “So the world has really changed and management education has to be in line with these changes. Where we think the world is going aligns with Kellogg in unbelievably exciting and interesting ways I didn’t expect going in.”


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