By John A. Byrne
February 7, 2012

(Poets&Quants) — Northwestern University’s Kellogg School of Management said today it plans to shrink the size of its two-year MBA program by up to 25% and double or triple the enrollment in the school’s one-year MBA program for business undergraduates.

“It’s very clear that growth in demand for the two-year MBA is going to be slowing and that growth for one-year programs will be growing,” said Kellogg’s Dean Sally Blount in an interview with PoetsandQuants. “We have to be realistic about the market in which we find ourselves. We think the market for two-year MBAs is going to get very elite.”

The changes are the result of a sweeping strategic review by Blount, former dean of New York University’s undergraduate business school, who took the reins as dean at Kellogg in July 2010. Some 30 faculty members at the school were engaged in the review, along with alumni and students.

Kellogg also will expand its global footprint, offering executive education courses in both Shanghai and San Paulo with partner schools as a result of the review. The school decided, in fact, to no longer launch additional degree programs abroad.

The review revealed that one of the school’s under-appreciated assets is its 12-month MBA program for students who already have an undergraduate business degree. The class size for the program has increased in recent years to 85 students, from 74 in 2007. Applications also have increased for the one-year MBA to 326 last year from 250 in 2007.

“We are going to market it harder and push it harder because we think there is going to be more demand for it,” added Blount. She predicted that over the next five years enrollment in Kellogg’s one-year MBA program would grow to perhaps 250 students, while enrollment in the school’s two-year program would fall to about 850 students from 1,115.

“The two-year MBA is a stunning product that we are very proud of,” said Blount. “We are definitely staying in that market, but we are preparing for a world where the best students may not want that and they have options. We don’t think 20-something people from China are going to come to the U.S. for a two-year degree. The opportunity cost is just perceived to be too high.”

With a little help from your management consultant friends

As a result of the school’s strategic review, which was done with the assistance of consulting firms Booz & Co., Boston Consulting Group, and Deloitte, the school has created four “impact areas” of focus that has major implications for how the faculty conducts research and what will be taught in an MBA classroom.

“It is an alternative model of general management education,” said Blount. “We’ve created these four impact areas because the problems businesses need to solve don’t fall into a single disciplinary bucket anymore. We will reorganize how we do our research and what we have in our curriculum. We are trying to get out of this 20th-century, overly-siloed way of teaching business.”

The four areas are:

1) Markets, customers, and growth.

Kellogg is building on its traditional strength as the top school in marketing by trying to define that asset more broadly.

2) Innovation and entrepreneurship.

The review found that companies are keenly interested in both innovation and entrepreneurship. Kellogg wants to consolidate its current assets in this field to make a bolder statement about these subject areas.

3) Architectures of collaboration.

It’s a fancy way to say that Blount wants to broaden and deepen Kellogg’s collaborative culture.

4) Private enterprise and public policy.

Increasingly, believes Blount, business leaders need to be prepared to work to deal with public policy issues.

These four areas will be placed on top of the school’s six core academic departments: finance, accounting, marketing, strategy, organizational behavior, and managerial economics and decision sciences.

“Like other schools,” said Blount, “we have a lot of centers but they don’t have a lot of impact. Each center has to join one of these impact areas. And conferences will be held around these four topics. When we do partnerships, it will be on these impact areas.

Blount said a concrete example of how the new approach would work could be glimpsed in finance. In addition to the standard finance approach of looking at historical cash flows to project what an organization’s cash might look like five years forward, the faculty would now use financial concepts to help project growth trends in customer segments. “It’ about how do we make conversations happen about the customer.”

Blount said that globalization was not thought to be a key impact area because “we are assuming it. We have intentionally not put it in because to have a global requirement is a 20th-century way of doing it.”

The review and the changes that will result from it comes on top of a decision to build a new $200 million modern home for the business school on the waterfront of Lake Michigan, a reorganization of the school’s top leadership, and the creation and launch of Kellogg’s new branding campaign — all initiatives driven by Blount since her arrival some 18 months ago.

Managing resistance to change

All told, the review took a full nine months to complete, and some Kellogg faculty weren’t convinced it was necessary. ”Everything we’re talking about is a little controversial,” said Blount. “The biggest thing I had to fight against was everyone was game for me to come in and rethink how to operate. And that’s a lot of what we did last year. But the biggest counter push was, ‘This is all great. You can stop now. You have the reorganization, the building, the rebranding.’ I had to convince them that the world had changed and we couldn’t go back.”

Blount held countless sessions to gain support. “I had more conversations with students, faculty and alumni in the fall than I care to remember,” she said. “The faculty left a couple of those meetings and said, ‘I get it.’ You have to give people the burning platform and it has to be data-driven.”

The consulting firms, which worked on a pro bono basis for Kellogg, studied the full-time MBA, part-time MBA, and executive education marketplace. They also examined a dozen of Kellogg’s top competitors and their positioning in the market.

Blount presented the results of the review at a faculty meeting in January. “The biggest question was, ‘What does this mean for me and how does it affect my research?’ Then, people asked, ‘How do we put this into action and not just make this lip service.’”

Putting these new ideas into action will require both structural and mindset changes, including a curriculum review. In some cases, however, it will mean consolidation. In the area of innovation and entrepreneurship, for example, Kellogg already boasts five centers with nine staffers and annual budgets of up to $4 million.

“We need to bring them together and better deploy those people and funds,” Blount said. “The world doesn’t know what they are doing. We have these great assets that we are not getting credit for. We were too fragmented. Bringing the five centers together and rationalizing them will be huge.”

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