MBA Applications Are Down, What's Up?

Reprinted from PoetsandQuants.com
At Stanford's Graduate Business School, applications to its prestigious MBA program are down 8.9%. At Harvard Business School, they've fallen by 4%, and at Wharton, applications dropped by 5.9%.

What's up? Most admission officials attribute the declines to an uncertain economy that has led more people to hold on to the jobs they already have rather than quit and go to graduate school for two years.

"The economy plays a big role in how risk adverse people feel after leaving a paying job and going to business school," says Christine E. Sneva, director of admissions and financial aid for the Johnson School at Cornell University. It's applications were down by 8% this year. "The most interesting trend is that the domestic pool has fallen slightly. Those taking the GMAT in the U.S. are down 2% year-over-year through August. And more test takers are sending their scores to local schools."

Overall, full-time MBA application volume fell for the third consecutive year despite continued growth in applicants from China and India, according to the most recent report from the Graduate Management Admission Council (GMAC).

About two-thirds of two-year, full-time MBA programs reported decreases in applications this year compared to 2010, according to GMAC. Larger programs seem most affected by the decline. GMAC said that half of the MBA programs with 50 or fewer students reported increased applications, compared to only 20% of larger programs. The average number of applications received by the reporting schools fell to 666, from 695 reported in GMAC's 2010 survey results.

GMAC said that MBA application volume historically trends counter-cyclical to economic conditions. "There appears to be a reverse cyclical effect," one unidentified B-school respondent told GMAC researchers. "In other words, as the economy improves the number of applications goes down. We also had a very strong application year in 2010, so it may just be a balancing of our applications to a more typical number."

Surprisingly, however, GMAC said the quality of applicantsâ€"judged by GMAT scores, undergraduate transcripts and work experienceâ€"are the same or higher in 2011 compared with last year for 89 percent of full-time MBA programs, where 39 percent of programs reported that applicants were more qualified than the previous year and 50 percent said applicants had the same qualifications. Despite the decline in applications, acceptance rates across the GMAC sample of responding schools remained the same as 2010: 47%, just one percentage point above the rate in 2009 and 2008.

"The caution in this year's survey for full-time MBA programs is unsurprising in the current economy as students weigh the financial and time commitments required to pursue a graduate business degree," says GMAC President and CEO Dave Wilson. "It's also worth noting that registration volume for GMAT testing has grown sharply over the last several months, one indication of student demand that might benefit schools as they head into the next admissions cycle."

Interestingly, full-time MBA programs in Asia Pacific reported the largest decrease in applications. GMAC said 78% of the programs in the Asia-Pacific region had falls in application volume, compared to 68% in Europe, 64% in Canada, and 61% in the U.S.

Uptick in Foreign Applications
The application declines, moreover, would have been worse if not for an influx of foreign talent in the application pool. Full-time MBA programs overall saw a significantly higher percentage of foreign applicants in 2011 than in 2010, GMAC said. Nearly three-quarters of 2011 two-year full-time MBA applicants were from outside a school's local areaâ€"with 45% of the applicant pool coming from outside the country.

"This is a significantly larger proportion than in 2010, when only 39% of the applicants were international," GMAC said. "Applicants from Asian-Pacific countries accounted for 57% of all international two-year full-time MBA applicant volume at U.S. programs. U.S. programs reported an average of 28% of their 'international' applicant pool consisted of foreign citizens already residing in the United States."

A total of 649 programs from 331 business schools and faculties worldwide, representing 45 countries, 42 states and the District of Columbia, participated in the annual GMAC study, which is conducted from early June to mid-July every year.

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