The Rise of the Specialty Master’s
Practically every twenty-something has a “five-year plan,” an idea of where they want to be by the end of that timeframe and a rough idea of how they are going to get there. And, like all plans, they are never as straightforward or simple as they may seem initially.
Tyler Louie’s five-year plan was as straightforward as they come. He graduated from Northwestern University in 2007 with an engineering degree and went to work for Motorola as a software engineer. He figured he’d get the extensive professional experience he’d need to have a fighting chance at a top business school, keep his contacts in the technology industry, and “go from there.”
It took about 20 months for Louie’s plan to change.
In January of 2009, Louie heard about a specialty MBA program at Duke University’s Fuqua School of Business and applied that April. He would be a member of the Master’s in Management Studies (MMS): Foundations of Business program’s first graduating class. A specialty MBA was, and somewhat remains, a nominally known degree on the whole. Yet despite having a position as a software engineer at Motorola and even a competing offer from another software company, Louie applied to the program as soon as he caught wind of it.
“It offered a good blend of what I needed to get to go where I wanted to quicker,” says Louie, now vice president of user experience at BNY Mellon. “It did end up being an alternative to an MBA but just in terms of what I wanted to get out of it.”
Some 148,299 U.S. students now enrolled in specialty Master’s programs in business
Louis is hardly alone. According to a survey of U.S. business schools conducted by the Association to Advance Collegiate Business Schools, some 148,299 students were enrolled in these specialized business master’s programs in 2010, a whopping 50% increase over year-earlier numbers. Enrollment is expected to rise again in 2012 because 73% of last year’s GMAT test takers indicated they intended to concentrate on a specific area of study.
Schools are responding to the demand by dramatically increasing the number of available seats for these programs and launching new master’s in everything from Management in Clinical Informatics at Fuqua to Financial Engineering at UC-Berkeley’s Haas School of Business. There were 2,444 specialized master’s programs worldwide in 2010, a 21% increase from a year earlier, according to the AACSB.
At Johns Hopkins University Carey Business School, for example, enrollment in its Master of Finance program has tripled in one year. This fall the school will admit some 120 students in the program, including 80 full-time students, up from what had been merely a part-time program with just 40 people enrolled. “We might have to launch another cohort next spring just because we have limited classroom space and have had to turn people away,” says Phillip Phan, a Carey professor who had been interim dean.
Demand fueled by companies and trend toward specialization
The increasing interest in specialty MBAs is a direct result of a growing acceptance of the degree by universities, applicants, and employers alike. “We’ve become highly specialized in the corporate world,” said Joe DiAngelo, Jr., Chairman of the Board at AACSB. “Information systems, for example, started providing bonuses for employees with specialized skills. Corporate technology has become easier to use so business strategies have changed. Now it’s business intelligence, not creating the data but analyzing and organizing it.”
For the Master of Finance degree, adds Phan of the Carey School, “A lot of big companies are trying to build an internal capability to work more effectively with Wall Street. General Electric and General Motors are putting more emphasis on the asset management aspects of their business. The large industrials are not going to do financial management and derivatives for themselves but having an in-house capability helps them work with Wall Street more effectively.”
Running the numbers
While the MBA degree is largely an American invention, specialty business programs have been a part of the European university landscape as early as the mid-20th century. The London School of Business offered a 12-month Masters in Leadership and Strategy for higher-level executives in 1968. By the 1990s, companies such as Goldman Sachs, Morgan Stanley, Google and Apple were approaching the school with requests for “highly relevant academic and technical skills and knowledge transferable to any career,” according to a statement provided by a London School of Business representative. London’s Master’s in Finance degree was first offered in 1993 and was the first of its kind worldwide.
U.S. business schools have put up a significant effort in the game of catch-up in the area of specialty MBAs. The Master’s in Finance degree in the U.S., according to a study conducted by the Graduate Management Admissions Council which manages and tracks applicant data based on the GMAT exam, is currently the most rapidly growing of all domestic specialty MBA programs, attracting an 83% in interested applicants over the past four years. MIT Sloan received 1,441 applications for just 120 available seats in the latest cohort its Master’s in Finance program that entered this July. Only four years ago, when MIT started the program, its pilot class was composed of just 27 students.
The abridged programs are growing, moreover, at a time when applications to full-time MBA programs have been in decline for at least two years at many schools. They’re obviously shorter than an MBA, generally accept younger students with less or no work experience, and cost much less than a two-year MBA experience. In some cases, however, the qualifying scores on the GMAT exam can be even higher than they are for MBA programs. For MIT’s Master of Finance program, students have an average GMAT of 731, 21 points higher than the school’s MBA class. At Johns Hopkins’ Carey, the average GMAT for students in its Master of Finance program is 720, considerable higher than the 660 for Carey’s MBA students.
In any case, the programs are exploding. St. Joseph’s University in Philadelphia, for example, has doubled the graduate population of its business school from 600 to 1,200 over the span of a decade since it launched its specialty programs. This jump solely has to do with programs such as the school’s MS programs in food marketing, pharmaceuticals, and risk management. According to DiAngelo, who, in addition to sitting on the board of AACSB, is also the education dean at St. Joseph’s Erivan K. Haub’s School of Business, the population of full-time MBA students has remained the same.
‘Students get a bigger bang for their buck’
“We had to carve out niches where there were concentrations in corporations,” he says. “Students get a bigger bang for their buck. They find more opportunities because they have advanced training in those areas. The MBA is really a generalist degree. The specialty MBA makes an entrée into various companies.”
The demand for these programs is coming from company executives who sit on the various executive boards of the business schools themselves or who are long-term, consistent recruiters and provide yearly feedback.
Most business schools have a board of representatives from different industries who provide insight into current corporate trends. For example, at St. Josephs the “Board of Governors” has dictated which specialties the schoolhas invested in.
Conversations with companies and recruiters sparked many programs
Dean Daniel Smith at Indiana University’s Kelley School of Business says the school’s MBA in Accounting was a direct result of conversations around the table of the Dean’s Advisory Council, a group of senior managers from a wide variety of industries represented based in the greater Bloomington area. Smith recalls the buzz that started about 15 years ago among the council’s accounting firm representatives firms. According to Smith, these companies and the Big Four firms that recruit heavily at Kelley were willing to go beyond the traditional hiring of MBAs with extensive work experience in order to hire students with deep technical skill sets in specific areas, including auditing, forensic accounting, and information systems.
“We found that accounting firms were implementing more specific, in-depth consulting practices,” Smith said. “Transaction services like mergers and acquisition require deep knowledge of certain accounting practices, such as fraud detection.”
That’s a world apart from the typical general management MBA education. In general, the career paths of MBA students are much different from those attracted to these specialty programs. MBAs, who already have between three and five years of professional experience on average, have already made a mark on their career and plan to use a higher degree to either transition to a new are of expertise or leverage themselves into more senior positions with their current employers.
Specialty program students, on the other hand, generally enter grad school with liberal arts or engineering undergraduate experience and are looking for specific business knowledge in order to land more narrowly defined jobs. MIT’s Master of Finance grads, for example, typically head into asset management, quantitative trading, financial risk assessment, and investment banking.
The specialty effect
No one is predicting that specialty MBAs will eventually cannibalize the traditional MBA degree. In fact, Kathie Amato, the associate dean of Fuqua’s MMS program, is hoping that 90% of the members of Louie’s class will soon return for their full-time MBAs, now that they have the prerequisite experience.
Amato believes a specialty master’s will only whet the appetite for a more immersive two-year MBA experience that allows students to apply more of their work experience in the classroom. Additionally, while the MMS program can open many doors into analyst roles, for example, it has yet to develop into a catalyst for more senior level—and, therefore, higher paying—positions.
Still, Louie’s new five-year plan does not include returning to school. When he worked at Motorola, his interests and curiosity underwent a major shift. Louie wanted to be more involved with implementing the technology he was working on rather than developing it.
He started interviewing for product management positions at various technology companies whose hiring managers, he recalls, appreciated his background in engineering and the way he thought about business, but believed he needed more academic training in business.
“They told me, ‘We love your background. We usually bring in MBAs who have a technical background like yours but they have gone through core marketing classes,’” Louie recalls. “I don’t think the MMS ended up being a replacement for an MBA. But it did give me that core skill set that allowed me to augment my tech background in the business world.”
Based on the job interview he had with his current employer, Louie’s concluded he most likely won’t have those kinds of conversations again.