Thursday, July 19, 2012

MBA Diversity: A Constant Effort to Catch Up

For the past three decades, top business schools have hustled every way they can to improve levels of diversity on their campuses. They have aggressively recruited under-represented minorities (URM) and women. They have participated in pipeline programs like the Consortium. They have sponsored scholarships and funded fellowships.

But two weeks ago, a Wall Street Journal article suggested that for many schools it's a one-step-forward, two-steps-back effort. Graduate business schools from Harvard and Stanford to the Consortium 17 have made praiseworthy progress among some segments (Asians, internationals), but insubstantial progress in others.

"While many top programs boast that ethnic or racial minorities comprise a quarter or more of their student bodies," the Journal's Melissa Korn wrote, "most of that population is Asian-American, a group that is statistically overrepresented at business schools when compared with their proportion of the U.S. population at large." Among blacks, Hispanics and Native Americans, the numbers are still low, she reported, "a sign, some say, that b-schools have much more work to do to attract students."

So what's the trend? In what statistical rut are business schools mired? At some schools, why have there been disappointing trends in URM applications?

The Journal reports that many of the top schools promote proudly the fact that in recent years in any given class, minorities make up over 25 percent (over 30 percent at many schools). Yet for under-represented minorities (excluding Asian-Americans), the percentages hover near 10 percent and below with little discernible improvement over the past several years.

The Journal and others, therefore, refer to "degrees of diversity."  Certain ethnic groups, nationalities, and geographies are well-represented. Other groups are not.

Take a peek at recent numbers.  Almost all top-tier business schools provide updates and class profiles and report the information in a similar manner, which makes for fair comparisons. Some schools, such as Yale and NYU, report the percentages of both minorities and under-represented minorities.  Minorities (U.S. residents only) comprise 25% of last year's first-year class at Yale (SOM). Under-represented minorities (blacks, Hispanics and Native Americans), however, consisted of only 7% of the class.  At NYU, the percentages were 34% and 16%, respectively. 

Consortium CEO Peter Aranda was interviewed in an accompanying Journal article about the same topic and challenge.  "(Business schools) have a role in preparing future business leaders to succeed in the environment we live in, where someday soon everyone will be a minority," he told the Journal's Korn. "One of the things that troubles me about the MBA curriculum is that it pays attention to diversity from an employment perspective only. We need to look at diversity as a strategic initiative. How do we develop goods and services for niche markets? How do we communicate through marketing vehicles that resonate with those communities?"

The original article touched nerves and attracted a flood of comments, many from anonymous readers making careless, insensitive statements regarding the value of diversity. Some readers harshly criticized business schools for bothering to make it priority.  Some respondents swore off diversity and wished people would stop the discussion or apparent obsession. Aranda explained why businesses must care.

The deans of the same prominent business schools might admit among themselves that a whining chorus of anti-diversity makes it harder to improve statistics. Many in this chorus prefer business schools to admit solely on the basis of GMAT and GPA scores and let the numbers and percentages fall where they may. To their credit, the schools' admissions offices remain steadfast in their effort to "compose" a class of excellence, competence, diversity and variety.

The diversity challenge also incorporates business schools' ongoing struggle to ensure women are sufficiently represented on campus. Whether it is women or URM, some schools see progress in some years only to see a sudden, inexplicable downturn in other years. Many schools are not quite sure whether success is a 50-50 male-female ratio or success is ensuring the percentage of women never falls below 30%.  At UCLA, NYU, Dartmouth and Yale (all Consortium schools), women comprised at least 33% of recent classes. At Harvard, 40%; at Columbia, 35%.

What are the ongoing problems and challenges for business schools? Why has there been this statistical rut among URM? What can business schools do to encourage more applications?

1.  Convincing URM of the value of an MBA. MBA candidates must address a list of introspective questions before they launch the long process to apply and get admitted to a top school: Do I need an MBA? How I can use it to reach certain professional goals or achieve success in business? Can I pursue the same goals without it or with other degrees or certifications (JD, CPA, MS, or CFA)?  Can I gain similar knowledge in other ways (other graduate courses, part-time programs, online programs, in-house corporate training)?

Business schools seek to convince women and those from URM that the MBA has long-term (or life-time) value and is worth every bit of pain it takes to apply, get in and get out. Sometimes schools stumble and fail to get candidates to apply. The numbers show it, as applications from URM groups haven't increased significantly over the years. Moreover, all candidates (especially those from URM) wrestle with other troubling factors (salary loss, opportunity costs, relocation, getting reacquainted to rigorous academic study), factors that undermine any value they determine the MBA has.

2.  Convincing URM there will be opportunities after graduation and a fair chance to pursue them. Most candidates who apply to top schools understand the difficulties of getting admitted, the chores in preparing and submitting applications, and the tough course load.  Applying to Dartmouth, Chicago, Northwestern, Stanford or Virginia business schools is an exhaustive process, although programs such as the Consortium and MLT make the process easier. Applicants study for the GMATs, arrange for recommendations from reluctant bosses, write a batch of essays about their career visions, and arrange for interviews, knowing the chances for admission at top schools is slim.

They know, too, business school at Michigan, Virginia, Dartmouth or Yale will be hard. The hours are long. Students have little down time. They don't know, however, if the hard work, time, strain and perseverance will pay off.

Those in URM groups don't want guarantees that an MBA from Cornell will win them six-figure entry-level spots at Merrill Lynch or McKinsey; they usually just want assurance there is a fair chance and reasonable opportunity that two solid years immersed in school will lead to something promising.  Pursuing an MBA involves taking a risk. Candidates assess that risk in the same way they might assess an investment opportunity. If they perceive (as some minorities do in some industries, such as private equity, venture capital or hedge funds) they won't have a fair chance or they won't be able to establish contacts within those networks to earn a spot, then they will be less likely to apply.

This phenomenon is especially important when current economic times induce doubt in the minds of many who consider an MBA at top school:  Why pursue the degree, when the chances of getting a job at Merrill Lynch, McKinsey, BlackRock or Blackstone are remote? Why pursue the MBA if I'm told it takes special ties and connections to get on board at Kleiner Perkins or Booz Allen? Or if I get the job, will a topsy-turvy economy force me out a year later?

3.  Convincing URM that the sacrifices and costs are indeed worth it (or can be offset by fellowships or long-term rewards). The costs to attend a top school are exorbitant. Add to that the two years of salary, bonus and possible advancement the student won't accrue, while she is away from current employment. There, too, will likely be relocation, time away from family, and a lingering anxiety that they might have made a wrong decision. 

For some, especially among URM groups, the costs (tuition, living expenses, and travel) are too much. They can't make the numbers make sense. Why, they may ask, should I pursue an MBA at Harvard, if I must move a thousand miles to Boston, find a place to live, and spend over $70,000 and then be engulfed in scrambling to pay back student loans for decades to come? Many outstanding URM candidates curtail all efforts to apply right at the moment they assess costs. The sacrifices and costs can't be rationalized.

Business schools and pipeline programs such as the Consortium, Toigo, and MLT have done an outstanding job over the past three decades helping candidates overcome financial hurdles--especially by providing fellowships, scholarships or other forms of financial aid.  Often, believe it or not, many in URM groups are not even aware of this assistance and candidate support.  Business schools perhaps can do a better job explaining to candidates how going to Emory, Carnegie Mellon or Chicago is affordable.

4.  Convincing URM there will be realistic chances to advance far in business.  Some justify the time in school and appreciate the contacts, knowledge, networks, and experiences during those two years. Some are confident they will do well and find lucrative entry-level opportunities once they get to where they want to go.

But many may have doubts about their chances to get far beyond entry levels, get promoted, be fairly recognized and advance to high rungs in an organization.  If I get into Virginia or Michigan, they perhaps ask, and if I am fortunate to gain an offer in private equity, corporate finance, venture capital, or real-estate development, will I have fair chance to advance to the top--become a principal, partner, senior vice president, chief financial officer, or part owner? Should I bother, if I know the chances for advancement to the top are remote?

5.  Convincing URM there are others like them who have succeeded.  Often blacks, Hispanics, women and Native Americans gain confidence in their ability to advance when they see others like them achieve. If Hispanics and women are scattered at the highest levels at the most reputable consulting firms and banks, then Hispanic and women applicants would be encouraged to pursue graduate school--if they know others with similar backgrounds are there.

In some industries or segments of finance, women and minorities have advanced to the highest levels of management, but often at a slow, sluggish pace. Still, some women and URM have quietly ascended to less-visible, yet important roles as sector heads, corporate-function heads, subsidiary heads, or substantial contributors to business goals, deals, transactions, acquisitions, and new products.  Potential candidates are aware of these achievements, but not as much as they should, at least sufficiently enough to be confident they can follow right behind.

6.  Most of all, convincing URM they have the ability and aptitude.  They hear and read about the suffocating workloads of students in top schools (the courses, the problem sets, the cases, the group discussions, the projects, and the exams). Sometimes they fear they lack ability and time-management skills to thrive in school. Often they have the academic breadth, experiences and backgrounds to do well, but aren't confident enough they can handle the work and time pressures. Hence, they shy away from applying.

Other factors may also have an effect on the number of candidates from URM groups and women.

1.  International students.  While business schools eagerly pursue diversity, they also pursue international students. They are devoting time and resources to both efforts. Notice the numbers in recent years of students from India, Europe and China. Schools sell themselves to prospects, recruiters and other professors and deans on the basis of diversity, geography and foreign flavor.  In a recent year, at UCLA, NYU, Dartmouth, Yale, Wharton, Columbia, and Harvard business schools, foreigners comprised at least 32% at each school. While schools are pounding the pavement to increase the numbers of women and URM, they are also criss-crossing the globe to admit international candidates.

2. The lure of other professions.  There remains the possibility that lagging growth in applications among women and URM is due to the attractiveness of other professions. Business, finance, marketing and the uncertainties or whims of corporate life may be less attractive to some than, say, positions in government, education, non-profit activity, medicine, or law. A financial crisis in recent years certainly has discouraged some candidates from pursuing careers in banking, finance, and capital markets.

The admissions offices at business schools at times feel they are panting while climbing a steep uphill path. They continue their efforts, nonetheless. They are rewarded when they observe the thrilling success stories of the women, blacks, and Hispanics who do find their ways into the corridors of Cornell, Carnegie Mellon, Wisconsin, Indiana, Michigan or USC.

They applaud themselves (and the pipeline programs that climb side by side with them) when they learn their URM applicants-turned-students go on to become campus leaders and eventually outstanding deal-doers at Morgan Stanley, investment researchers at BlackRock, financial managers at American Express, business managers at John Deere, managing directors at Goldman Sachs, CFO at Eli Lily, or president of a blazing new start-up.

Tracy Williams

See also:
1.  CFN:  Diversity and Venture Capital, 2011
2.  CFN:  Diversity, Top 50, 2012

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