Why Wake Forest Pulled the Plug on Its Full-Time MBA

Wake Forest University was faced with an unenviable task over the summer that ultimately led to the decision to do away with its full-time MBA program.

On one hand, the school had the option of continuing to pour resources into the program, continuing a practice that had been going on for years. In fact, administrators and the board of visitors ramped up investment last year, about the same time that a new $50 million building had opened its doors.

But those investments yielded marginal results, as Wake Forest flirted with top- 50 status rather than rising dramatically up the national rankings. (The full-time program fell from #44 in 2012 to #58 in this year's rankings.) And, to hear Dean Charles Iacovou discuss it, the full-time business school sector is showing general signs of secular decline.

The other option, the one that the school ultimately chose, was to shut down the daytime program to allocate funds and other resources to its other programs, including a part-time MBA and two undergraduate programs. The goal is to have all three programs in the top 15 nationally, which seems feasible if things fall into place.

Charles Iacovou

“The MBA market has changed” in recent years, Iacovou told students and alumni during an hour-long conference call Friday to discuss the changes. “The full-time MBA market is oversaturated and in decline. There are many reasons, including changing student preferences and how they want to access education. Few are willing or able to forgo income for two years.”

Initially, I was shocked at the decision, but after listening to Iacovou’s reasoning and thinking broadly about graduate level education, I am willing to give him the benefit of the doubt and see where this new initiative takes the university.

Sudden and decisive change isn’t easy, and it certainly rankled enough alumni on yesterday’s call. But good managers have to realize that, in order to achieve long-term success, everything must be on the table.

There are no sacred cows, right? This is particularly true when there are shifts in the marketplace. That is why publishers are shutting down newspapers to turn to online journalism and why scores of banks are shutting down branches in the face of rising technology use. It is the reason why manufacturers close U.S. plants in favor of lower-cost production facilities overseas.

Why should Wake Forest behave any differently?

To his credit, Iacovou handled himself well during the call, giving over a dozen callers ample opportunity to ask questions and, at times, vent about the decision. He also took full ownership of the proposal and the decision and, I’m sure, will take full ownership over execution as it takes place over the next two to three years.

“I came here to teach the [full-time] MBA,” he told one particularly upset caller. “For me to make this decision, with the advice of my board and the rest of the administration, was not an easy one emotionally … but I feel that this is the best decision for our school.”

Iacovou gave a timeline that reveals the frustration felt when an increased investment last fall failed to produce desired results in the full-time program. Steve Reinemund retired as dean shortly after the board of visitors gave mixed reaction to plans to keep investing the program, and Iacovou was charged when he succeeded Reinemund in July to take a broad look at all programs.

After having private conversations in August and September, Iacovou made the proposal on Oct. 2 and the board unanimously supported it. The announcement was made less than three weeks later.

This phase of planning is perhaps the one that upset alumni the most, given the secretive nature of the talks and the fact that broader buy-in wasn’t sought in advance of an announcement. Iacovou’s response to that criticism was quite simple – he didn’t want the plan to get leaked before he had a chance to announce it.

Eric Wiseman

“We had to approach this in a way that didn’t make it public that this choice was being discussed,” Eric Wiseman, chairman of VF Corp. who also chairs the board of visitors, added. “It would have created a big communication problem for this school.”

While that makes sense, alumni certainly have the right to be upset that they were approached about donating to the program last year. As part of the Wake Will campaign, alumni were given the impression that $10 million of the $100 million targeted for the business school would go to the full-time MBA program. (In comparison, $20 million was earmarked for the other three programs, including just $2 million for the part-time program.)

Bear in mind that the Wake Will initiative was unveiled while Reinemund was in charge. Iacovou was brought in with a different mandate from the board of visitors. He examined scores of data, both internal and external, and made a bold call.

Iacovou noted during a call with recruiters Monday that only two demographic groups are growing at U.S. business schools: international students and so-called pre-experiential students, or those that are 24 and younger. Wake Forest clearly remains committed to the second group, through its MA and MSA programs.

Obviously, the university will no longer court foreign students the same way it did when it offered a full-time program. 

That is unfortunate since international outreach was a key part of that program, with each class typically having 10 to 12 foreign students. (It was certainly a priority for me when I was running the school's social media platform.)

Still, Iacovou said during his conference call with students and alumni that Wake Forest has international students in its undergraduate and part-time programs. "We have a very diverse student population, and we'll continue to invest in it," he said.

Diversity, in terms of students and faculty, "is an extremely critical component of our educational approach," Iacovou added, noting that the existing part-time programs have a broad range of social, economic, educational and racial representation.

Recently released data suggest that full-time MBA applications are rising, at least at 61% of business schools polled by the Graduate Management Admission Council (compared to 28% in 2011). Wake Forest must be among the 35% of respondents that are seeing applications decline. Iacovou and the board of visitors strongly believe that any broad increase will be short-lived and that the long-term trend will be skewed toward decline. Only time will tell if they are correct.

Could Wake Forest compete in other areas?

My better half, Vaishali Shah, made another salient point while we were listening to the conference call, noting that Iacovou could change the game for MBA recruiting in North Carolina. True, Wake Forest will be unable to compete with candidates who are intent to leave work for two years to attend Fuqua or Kenan-Flagler. 

But the school will be in a better position to target candidates who are on the fence about leaving work, or those who can’t afford to do so. The administration could also have a chance to recruit prospects who, given the opportunity to attend a quality university part-time over a top-25 school full time, would choose Wake Forest.

Maybe it is a family situation. Perhaps it is undergraduate student loans or other forms of debt. Or it is a change in employers’ preferences. But, as Iacovou noted, twice as many business school students are choosing part-time programs over full time. There is more demand – and now we're telling those prospects that there are options for them if they are unwilling, or unable, to walk away from their jobs.

Indeed, there are risks. One thing that concerns me is the recruiter situation. Administrators said during the call Friday that nine of the 38 recruiters for its MBA candidates only want full-time graduates. That is nearly a quarter of our recruiters who could pull out because of the decision. However, Wake Forest has six recruiters in Charlotte who only want part-time grads. It is a question of tradeoffs and whether Wake Forest’s staff can fill the void left by vacating recruiters.

And now we wait. I am looking for two things to take place to validate what Iacovou, Wiseman and others said on the call.

I'm looking for other programs to follow Wake Forest’s lead. Iacovou said Virginia Tech and Miami University in Ohio have already gone this route, but higher-profile schools will need to do so to validate Wake Forest’s directional shift. Iacovou said deans at a number of well-regarded schools are having this discussion. It will be interesting to see how many turn talk into action.

Execution is critical. Iacovou said he plans to boost enrollment at the MA and MSA programs by 29% and 20%, respectively, while getting the undergraduate program in the top 10. He wants the part-time program, which cracked U.S. News & World Report’s top 20 this year, to make it into the top 15 in short order. Iacovou wants to establish Wake Forest’s hybrid model before expanding part-time enrollment.

Alumni will also be keeping an eye out for recruiter additions and departures, along with any announcements associated with faculty. Keeping people in the fold will be important, and Iacovou is confident he can do so.

All targets and objectives will be closely watched. And the administration must now stick with the course it has set for the business school. There is a thin line between embarking on a bold strategy and employing a series of tactical moves in an effort to follow the marketplace.

It will also be interesting to see if Wake Forest remains committed to the strategy. It will be tempting to add an online degree, which Iacovou said isn’t in the plans for now. Still, he made it clear that the administration and the board are willing to make other bold, decisive moves if they believe it will better serve the business school.

“I don’t believe any business school, including ours, will remain relevant and become successful unless we ensure that whatever we do is with an eye to satisfy emerging needs in the marketplace,” he said. “We are a school of business. We are a school for business. Our brand will continue to be enhanced as long as what we do is market relevant.”