Are business schools fit for the future?

The growth of business education over the past 60 years has been phenomenal, with more than 16,000 business schools operating worldwide, according to an estimate by AACSB International (the Association to Advance Collegiate Schools of Business). Yet a growing range of challenges will mean that in 25 years’ time, many of our business schools will not exist, and none will exist in their current form.

Business schools have grown to meet the rising needs of businesses and management professionals for education and training. In the UK, some 130 business schools teach more university students (both undergraduate and post-graduate) than any other subject area, and are responsible for attracting one in three of all international students at British universities. Business schools contribute £3.25bn to the UK economy and are major sources of university income, supporting other departments in many UK institutions, for instance through cross-subsidy.

Changing markets and new competitors, combined with multiple pressures such as faculty shortages, as well as the need to achieve research excellence, high-quality teaching and stakeholder engagement, all mean the standard business school model is becoming obsolete.

At the same time a more fundamental challenge is emerging: the credibility, even legitimacy, of business schools as the dominant source of ideas, expertise and training for business and management professionals.

Changing markets and new competitors

Successful business schools have expanded their portfolio of programmes, revenues and staff numbers by riding several waves of market demand. Some began with a focus on the MBA as their distinctive product and main earner, others have evolved from undergraduate to postgraduate provision. The rise of tuition fees created a new source of income - but pushed up the need for support services, tutors, and careers advisers.

International students have been the main source of growth across the UK business school sector for the last fifteen years, driving the proliferation of specialist courses and increasing revenues. But the position taken by the Home Office on international students, alongside Brexit and a growth in competitor schools outside the UK, has led to a decline in international students coming here in recent years e.g. -8.6 percent in 2014/15.

International competitors have been on the rise for several decades, threatening the dominance of the Anglo-American business school model, but only recently, with a surge of new contenders in Asia and mainland Europe, has this begun to seriously affect the UK sector. Many UK institutions have responded with internationalisation strategies, through partnerships, dual-degree programmes, online delivery and overseas campuses, leveraging respected UK degrees and brands abroad.

Alongside this, private sector providers, enabled by changes in Government legislation, can now gain degree-awarding powers in the UK and are targeting lucrative management and business degrees. Pearson, which has a business school at its Pearson College in London, also has relationships with established providers , such as King’s College London and Manchester Metropolitan University. Internationally, McKinsey Academy, Korn Ferry and PwC, LinkedIn’s Lynda.com, as well as an alliance between the Financial Times and the Spanish business school IE, are examples of a growing number of new entrants.

Despite this increasingly competitive environment, there is evidence that institutions are adapting to these challenges, as evidenced by the Chartered ABS study of the different strategic groupings across the UK business school sector. Rather than gravitating towards a standard business model, they are pursuing different strategies - leveraging scale, focusing on specific programmes or markets, or adopting distinctive themes and partnerships that encompass both research and teaching.

Top business schools, in the UK and worldwide, manage a ‘premium positioning’ strategy, investing in high-quality facilities and support staff to attract students (and leading professors) at a high price point. A high ranking and strong brand is always underpinned through investment in research. This provides a clue to what underlies the overall growth of the sector: the credibility of business school professors as a source of knowledge and expertise that adds value to individual managers, companies and policymakers. This is where the biggest challenge of all is emerging.

Can business schools maintain legitimacy?

The dominant position of business schools as thought leaders is under threat, for two key reasons. First, a large and perhaps growing proportion of academic papers, the main research output of business academics, are irrelevant - literally useless -  in any real business context. Academics receive strong incentives to publish and the competitive drive for technical sophistication in the world of the peer-review journal has overtaken the drive to focus on solving real-world problems.

Second, a wide range of non-academic experts, practitioners, consultants and journalists - some credible and some less so - are challenging this hegemony. They are riding the wave of social media and benefiting from a general disillusionment with established experts. Demand for informed input to shape business and management practice grows relentlessly, with new challengers filling a vacuum left by business school academics, many of whom prefer to stay in their ivory towers.

At a fundamental level legitimacy underpins an organisation’s reason for being. It stems from appropriateness, worthiness and trustworthiness, allowing it to have influence and impact and secure resources. The future of business schools is tied up with their future legitimacy. Without it they will have a declining influence on the next generation of business leaders and will fail to shape the behaviour of businesses or tackle the grand challenges facing the economies and societies that host them.

One solution to this relevance challenge lies, ironically, in business schools stepping back from being overly market-led. While new competitors are emerging to serve the current needs of students and managers, the long-term perspective of business school researchers may give them an important advantage.

Much of the knowledge and many of the skills appropriate for today’s workplace will not be applicable in the future. The very nature of work is undergoing rapid and significant change, partly because of automation but also because the global economy is evolving to value different kinds of expertise.

Business school academics have considerable experience in teaching students how to learn, to derive meaning from information, to question, collate evidence, frame and debate complex issues. This serves them well when information is not only readily available but increasingly transient. Education that enables students to adapt beyond the current context and immediate occupational demands, provides enduring skills that will differentiate career paths.

Similarly, research that looks beyond the immediate fads and fashions to understand the long-term shifts and the forces that are driving them, has considerable value in a world increasingly dominated by short-term thinking and sound-bites. The world needs more robust insights from the social sciences, to match those from scientists and engineers.

This has always set academics apart from consultants, policy advisers and amateur commentators, and may well be key to the survival of business schools.

Clearly, business schools need to improve their efforts on both of these fronts – to provide more ‘future-proof’ education and relevant research – to keep ahead of the competition. This will entail more explicitly and forcefully demonstrating their value and legitimacy in a challenging world.

This article is adapted from ‘Rethinking Business Education’, a collection of articles produced to celebrate twenty-five years of the Chartered Association of Business Schools.