With the extraordinary demise of “the Big Five” investment banks in September and the turmoil in the global economy that followed, the casual observer might be forgiven for thinking that this would be a lousy time to be enrolled in a business program.
But pundits say it’s far too soon to hit the panic button.
“I don’t pretend to be an expert, but I see this as being a very temporary hiccup,” says Bernard Milano, president and trustee of the KPMG Foundation, the KPMG Disaster Relief Fund and the Ph.D. Project, which since its founding in 1994 has tripled the number of minority business professors from 294 to about 900.
“Even though you hear of 10,000 jobs lost here, 15,000 there, you are still going to need the same number of people” to tend to the nation’s finances. “Think about it: over $250 million has been poured into banks and mutual funds recently. Because of the regulatory structure, banks can leverage that 10-to-1, so that’s $2.5 billion that has to find its way somewhere. It can’t sit in a drawer or in a mattress — it has to be invested.”
Nicole Chestang agrees. She’s the chief client officer for the Graduate Management Admissions Council, sponsor of the Graduate Management Admissions Test, or GMAT. “Even in down economic times, people are looking for talent,” she says — and that talent has to be trained.
Business schools, “to their glee, are seeing that applications to full-time programs are way up for 2008. Seventy-seven percent of them report that their volumes rose, from 64 percent of schools a year ago,” Chestang explains.
In addition, 2008 is shaping up as a record year for the GMAT exam. As of Oct. 31, some 211,149 tests had been administered — a nearly 12 percent increase over the 188,856 tests administered as of October 2007. These developments come as no surprise to John Fernandes, president and CEO of the Association to Advance Collegiate Schools of Business — or AACSB International. “It’s absolutely correlated that when the economy begins to turn down, people look to returning to graduate school. So, of course, applications are affected, the GMAT exam is affected.”
Graduate school is a great place to take shelter from the storm and to retool one’s skills for the recovery that always comes, Fernandes says. Of course, “The next couple of years look a bit soft (for the job market). If I were graduating this year, I’d be thinking about getting a doctorate — especially if I didn’t have a great offer.”
Indeed, Milano argues that the doctorate is a particularly good bet this year.
“It used to be that people would take a vow of poverty if they really wanted to be a professor, but now finance professors are getting well over $200,000 a year right out of the doctoral program. In accounting, I was talking to a legend in the accounting industry, a professor in his 80s — and he said: ‘Bernie, you won’t believe what we just offered this guy!’ It was like $205,000 after five years in a Ph.D. program,” Milano explains.
The Ph.D. offers considerable advantages over the MBA as a destination degree, Milano says. “The MBA, no matter which university you go to, costs a lot of money. And, yes, you have only two years of the opportunity costs of being out of employment, but you also have out-of-pocket costs that are substantial,” he adds. With a Ph.D., you’re talking four or five years of opportunity costs, but you don’t pay tuition and fees and you get a handsome stipend which is usually not taxable.”
In addition, emerging professors are remarkably well-positioned to score a plum job when they graduate because the shortage of business professors nationwide is acute. Indeed, accounting and auditing professors are in such short supply that the major accounting firms and the American Institute of Certified Public Accountants joined forces to create the Accounting Doctoral Scholars Program — an $18 million program aimed at growing a new generation of accounting professors through targeted recruitment and funding of their stipends.
In any event, it appears that the financial meltdown may recall that old chestnut about the Chinese word for crisis being composed of characters meaning both “danger” and “opportunity.” The dangers of the current environment are clear, but there are also remarkable opportunities for individuals to use education to retool and rebrand themselves.
There’s no need to cry for the former high flyers in finance, Fernandes notes. Finance majors “are well-schooled in business fundamentals,” so even with the demise of the Wall Street investment banks, they’ll be able to “rebrand themselves in close, proximate fields,” he explains.
Accounting is and will remain a hot ticket, particularly in the wake of the passage of the 2002 Sarbanes-Oxley accounting reform act, Milano says. And consulting will be a major field once the new regulations and new governance structures start to come on line.
Chestang, meanwhile, doubts that salaries will erode — newly minted MBAs without job experience should still expect to earn in the $90,000 range.
For the short term, however, the experts emphasize the importance of calm. “We’ve been here before” as an economy and as a nation, Milano says. “This is a temporary dislocation of the chairs.”
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