If you look at enrollment figures (class size, in other words) of MBA programs, you’ll notice variations from year to year – mostly small, but few large.
Why does class size change?
Is it planned? Is it impacted by external factors? Or, sometimes it’s just random?
Let’s look into the reasons behind:
Strategic long-term growth
Sometimes long-term growth strategy combined with strong demand (otherwise the increased capacity may lead to dilution of entry standards) for their program, drives MBA programs to increase their class size. In such cases, the increase in class size is usually significant (upwards of 10%), permanent, and accompanied by commensurate addition to the school’s infrastructure.
Haas, for example, is planning to increase its class size (of 240) by 15% from next year in tandem with a new $60-million building.
Rotman School of Management, University of Toronto, has periodically increased its class size from 130 in 1998 to nearly 400 next year, improving the infrastructure all along.
Said Business School, University of Oxford, too, has decided to increase its class size from 240 to 320 from next year.
If you notice, all three schools had small class sizes before they decided to expand.
On the other hand, some MBA programs change their class size, usually by 1-5%, to generate more revenue in years of high demand (for an MBA degree) and sometimes out of financial compulsion.
In the aftermath of financial crisis in 2007-08, even HBS, despite its largest endowment fund of all MBA programs, was forced to increase its class size from a usual 900 to 937 to get additional dollars. To quote the then HBS Dean, Jay Light:
… So let’s talk some facts. Typically, we target 900 to 910 students. I don’t see the class size increasing to anywhere near 1,000. This year the target was 2% higher, and we have about 937, for a few reasons:
First of all, the number of applications we had was up, with great quality applicants. The first round last year was up 25%. So we said wow, our admit rate is going to be one of the lowest we’ve had; does that make sense?
Secondly, we needed to because of what was going on in the financial markets and the endowment, to cut back on expenditures in the budget. So the question is, how do you reduce the net expenses of the MBA program while still holding fellowships steady? And our solution was to admit a few more students, and that allows you to keep the fellowships. In fact, we increased fellowships by $1 million last year. It was not necessarily an easy thing to do [emphasis added].
If HBS can feel the pinch, others can most certainly.
Difference in actual vs. expected yield
During the admission process, MBA programs have a certain target-yield (proportion of admitted students who enroll in the program) in mind, determined mainly by past trends. Though, by continually adjusting acceptance rate through various application rounds and by waitlisting applicants, they progressively adjust the yield in case of any departure from the expected yield, there can still be minor difference between expectation and reality, which can lead to small fluctuations in class size.
Significant increase in class size of an MBA program usually happens as a result of long-term growth objectives, whereas small change happen more because of expedient measures triggered by external factors. Yet, minor fluctuations can happen because of difference in actual and expected yield.
Question: Do you think there are other reasons as well for change in class size of MBA programs? Are you aware of more examples where MBA programs have changed their class size significantly? Please leave a comment in the space below.