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In an effort to make their MBA programs more competitive on an international stage, many publicly supported schools are exploring a privatized model. In a privatized model the school would stop receiving government funding and seek alternative methods to raise capital, such as tuition. Prospective students often refer to the cost of the program as one of the determining factors in their ultimate choice to attend the school. The higher the price tag the higher the perceived level of quality. In order to meet this perceived value the school must deliver. Schools compete on the quality of faculty, technologies, learning environment, curriculum and value added services. One school exploring a privatized model McGill’s Desautels School of Business.
Students at McGill currently pay $1,600 a year in school fees, a cost that is drastically below the industry average of approximately $26,000. Administrators feel that the cost is not enough to entice students unfamiliar with the quality of the program. They propose an increase in tuition, a 1,663% increase in tuition, which is significantly higher than the average annual 4-10% increase to offset inflation.
The increase is necessary argues Peter Todd, Dean of Desautels. The annual cost to put a student through the program is $22,000. “We’ve been running deficits and were not able to make ends meet.” “The economics of it just doesn’t work with the government system,” says Todd. The government is not willing to support the drastic increase, which Todd says is high because the cost was so low before, the increase will bring the program to $29,500 leveraging it within the range of a Canadian MBA. The proposed increase is garnering support from some and bitter protest from others. Some feel that the price hike will alienate prospective students looking for a quality program for less and provincial residents who receive a subsidy in the government model looking for alternative choices. The infusion of capital will allow the school to implement an integrated approach to teaching core courses, with multiple professors in the class at one time, invest in career services and experimental learning opportunities outside of the classroom, money for student aid and over time new physical infrastructure.
Queen’s University was the first Canadian institution to shun provincial support in 1996. It wanted to raise tuition fees to that comparable of the U.S. David Saunders, Dean of Queen’s School of Business says, “Deregulation allowed Queen’s to compete – and win – on an international stage.” BusinessWeek Magazine recently named Queen’s. Other schools to successfully privatize are the University of Western Ontario, Michigan State University, York University’s Schulich School of Business and UBC’s Sauder School of Business.
Bricks and mortar campuses in North America are faced with multiple challenges including decreased endowments, reduction in provincial/state funding and of course an economy in recession. However, MBA admissions are countercyclical in nature in regards to the economy. This is forcing schools to compete on the level of quality. Yet some schools still choose to wait for markets to recover in order to expand and grow. This may prove to be detrimental says John Fernandes, President and CEO of AACSB. “When the competitor is making changes now and not waiting for the markets to heal, this will put them at a quality advantage. Waiting for the financial markets to turn around could be disastrous. These schools are most likely concerned about making sure their programs are viewed well and are received well by students. Therefore if they don’t make the investment now, it’s going to be worse long term. At that point, maybe they won’t be able to turn it around.”
