Specialty MBAs: Faster and cheaper than the 'real thing'

July 31, 2012: 5:00 AM ET

Abridged business master's programs are growing at a time when applications to full-time MBA programs are declining at many schools.

Duke University's Fuqua School of Business

Duke University's Fuqua School of Business

By Paula Lehman

(Poets&Quants) -- Practically every 20-something has a "five-year plan," an idea of where they want to be by the end of that time 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 initially seem.

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 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 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 foundations of business program's first graduating class. A specialty MBA was, and basically remains, a nominally known degree. 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, who is 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."

Louis is hardly alone. According to a survey 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, as 73% of last year's GMAT test takers have indicated that 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 Duke 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's Carey Business School this fall, its master of finance program 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.

The spike in interest in specialty MBAs is a direct result of the degrees' growing acceptance by universities, applicants, and employers alike.

"We've become highly specialized in the corporate world," says Joe DiAngelo, Jr., chairman 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, "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."

Cheaper, faster, and growing

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 started offering a 12-month master's in leadership and strategy for higher-level executives in 1968. By the 1990s, companies such as Goldman Sachs (GS), Morgan Stanley (MS), Google (GOOG), and Apple (AAPL) were approaching the school with requests for "highly relevant academic and technical skills and knowledge transferable to any career," according to a London School of Business representative. London's master's in finance was first offered in 1993 and was the first of its kind worldwide.

U.S. business schools have played a fierce game of catch-up when it comes to specialty MBAs. The master's in finance degree in the U.S. is currently the fastest growing specialty MBA degree, with 83% of programs reporting an increase in applicants in 2011, according to a study conducted by the Graduate Management Admissions Council, which administers the GMAT entrance exam. MIT Sloan received 1,441 applications for just 120 available seats for its latest master's in finance cohort that started classes this July. 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. These degree programs are shorter, generally accept younger students with less or no work experience, and cost much less than traditional MBAs. 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 Joe 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 during that time.

Following Corporate America's lead

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 that provides insight into current corporate trends. For example, at St. Josephs, the board of governors has dictated which specialties the school has invested in.

Dean Daniel Smith at Indiana University's Kelley School of Business says the school's MBA in accounting was formed as a direct result of conversations among the Dean's Advisory Council, a group of senior managers from a wide variety of industries basedin the greater Bloomington area. "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 MBA curriculum. In general, the career paths of traditional MBA students are much different from those who are attracted to specialty programs. MBAs, who already have between three and five years of professional experience on average, have already made their professional mark and plan to use a higher degree to either develop a new area of expertise or land a more senior position 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 to land more narrowly defined jobs. MIT's master's of finance grads, for example, typically head into asset management, quantitative trading, financial risk assessment, and investment banking.

The end of the traditional MBA? Not so fast.

No one is predicting that specialty MBAs will 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 Tyler Louie's class will return for their full-time MBAs, now that they have the prerequisite experience. And while Duke's specialty program can open many doors into analyst roles, for example, it has yet to develop into a catalyst for more senior 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 feels he'll do just fine with the education he already has.

More from Poets&Quants:

Join the Conversation
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.