“The thing I would say is, the financial services industry is not dead. Full stop.” That’s a view shared by INSEAD Dean Frank Brown and his counterpart at The Wharton School, Tom Robertson.
The two deans spoke to INSEAD Knowledge at Founders’ Day – INSEAD’s 50th anniversary celebration in Fontainebleau on September 12 – about the INSEAD-Wharton partnership and how their schools’ MBA programmes have been altered to suit the changing financial industries landscape.
“There are many financial institutions, in addition to investment banks,” Wharton’s Robertson points out. So students may be looking at hedge funds, private equity or, perhaps, boutique investment banks. “What the crisis has done, is forced people to re-evaluate what their objectives are. They may stay in finance but they’re looking more broadly. Many of them still want to be investment bankers, but fewer of them than last year, obviously. There’s been a reality check”
INSEAD’s Brown sees still other possibilities. “I think there are fundamental changes taking place (in the world economy) that will excite MBA’s and create opportunities,” he says. “Not just in private equity but also on the regulatory side. When you look at markets, you look at government involvement in financial institutions, you look at the stock markets … I think there’s tremendous opportunity there.”
Both schools reacted to the financial upheaval immediately, endeavouring to involve students in discussions while re-vamping the curriculum. “Professors couldn’t just pull out last year’s notes and continue,” says Robertson. “We began doing ‘teach-ins’ - bringing students together with professors to discuss ramifications, what might happen. The first one had about 1,200 students. Then we had to have overflow rooms because 1,600-1,700 students actually showed up.”
“We have had some terrific debates at INSEAD,” adds Brown. “I’ve been fortunate enough to be moderator for at least one of these. We get a large group of students together in an amphitheatre with several teachers from different specialties. It’s all about dialogue, multi-discipline. The other thing we’re seeing at INSEAD is faculty members from different fields getting together and taking a look at ‘What does this mean for me? What does this mean for us?’ It’s a fabulous opportunity for research - (such as Banking and Finance Professor) Jean Dermine’s significant research on the banking sector,” he adds, referring to Dermine’s book ‘Bank Valuation and Value-Based Management,’ which has just been published.
On the first anniversary of the economic crisis, Wharton’s curriculum reflects change. “We also created courses – the first one we created was ‘causes and consequences of the financial crisis.’” We had 15 faculty teaching it; we offered it last spring and we’re offering it as we speak this autumn. We even have a committee looking into the total MBA experience and how it should change, in terms of bringing in more government relations or risk management … we’ve been hard at work ever since Lehman’s collapsed.”
INSEAD is looking to develop a joint degree programme as a result of the crisis. “We’re very focused on looking at public policy and at the impact of public policy,” says Brown. “Particularly for the MBA programme. And our MBA committee is planning some partnerships where we might look to offer some joint degrees: MBA and PA (public administration.”
Technology has facilitated the two schools’ being able to enhance their alliance which was created in March 2001. “There’s a sharing of technology for the classrooms,” says Brown. “The ‘Prices & Markets’ course that was shared between the Wharton faculty members and the INSEAD faculty members is a good example,” he adds, describing a course taught by both schools using each other’s faculty. Technology – being able to visit websites or, in the case of INSEAD, to tour the school’s virtual campus in ‘Second Life’ also enhances the real-life exchange student experience. And it doesn’t stop there.
“We have I think 90 or so student exchanges in a year,” says Wharton’s Robertson. “There’s joint research; we have looked at Wharton’s ability to use INSEAD cases and for INSEAD to use research coming out of Wharton, and there’s certainly potential at the PhD level and at the Executive Education level. I’m not sure we’ve figured that out.”
“Executive Education is the toughest nut to crack,” says Brown. “That’s because of the natural competitiveness between the two institutions.”
And so how are the two leading business schools finding their own business models in these turbulent economic times, cooperation and competition notwithstanding? What’s it like running a business school in 2009? And where does the money come from?
“For us, 50 per cent of the budget comes from tuition; 20 per cent is Executive Education, 20 per cent is fund-raising, and the rest is research grants and various other things. So in a difficult period such as this, you have to look at your portfolio, you have to make sure you hit all your admissions numbers,” says Robertson. “We’ve admitted a few more MBAs than we normally would and that’s to some extent for budget reasons, and because we’ve had a lot more applications. You have to balance the budget. A business school just can’t lose money. It’s maybe okay for arts and sciences to lose money, but if Wharton at the University of Pennsylvania were to lose money, that would be most embarrassing.”
Unlike Wharton, which is a part of the well-endowed Ivy League University of Pennsylvania, INSEAD is independent. “We’re flying without a net,” says Brown. “We’re much more reliant on Executive Education – usually close to 50 per cent of our revenue. Today it’s down closer to 40 per cent.” The school’s MBA programmes run on its campuses in Europe and Asia are helping to balance the books. “We actually added a section in Singapore based on demand and because that was one of our objectives – to increase the offerings. We’re much much much less reliant on fund-raising (than Wharton) because we can’t; we’d like to change that over time. What all this means is that you’re very, very careful about what you’re spending, very careful about managing the infrastructure. It’s certainly a crisis but it’s not a disaster.”
There is also some competition between the schools for women students.
“We’re at 40 per cent this year and we’re really happy with that,” says Robertson about the percentage of women students in Wharton’s MBA programme. “But we wish it were higher – 50, 60 or even 70 per cent.”
A gracious “congratulations” from INSEAD’s Brown. “We’re at 32 per cent and I was really happy with the increase. When I started we were at 17 per cent. The number is very slow to pick up in Europe, but we see very good percentages of women MBAs in most parts of Asia. There’s also a big focus on the education of women in the Middle East at our Abu Dhabi facility. A much higher percentage of applications from the US and Canada are women – close to 50 per cent. And if you look at that over one year, that’s roughly 15 per cent of our 1,000 MBA students, and that’s a good number.”
The crisis has changed the funding, the course structures, and even the student body make-up of INSEAD and Wharton. What then does the future look like?
“We’re big on lifelong learning,” says Robertson. “Reaching out and translating research and keeping our alumni up to date. They say they want these programmes, but then they don’t necessarily show up. It’s a logical idea, but it’s a tough nut to crack.”
INSEAD’s Brown is more optimistic. “I’d like to see more of a commitment to organised continuing education,” he says. “There’s a bit of a disconnect between granting an MBA and then someone holding that degree for life and never doing another course of study. I see this additional study as a necessity and I see that as an opportunity for business schools into the future.”