ROI with Chinese characteristics

Once every month or so, a group of MBA program managers and others working in business-specific education and training meet in Shanghai to share professional perspectives, dish dirt and otherwise have fun. Members of this group, which we may call the BizEd Warriors, are overwhelmingly local and include people working at the leading b-schools in the city, as well as in private-sector entities and industry-specific media.

In a lunch meeting on January 30, the Warriors talked about the relative lack of popularity of full-time programs in China, compared with such programs in the West. We concluded that the ROI calculation for full-time MBA programs here is less compelling for two reasons:

1. On the risk side: Given the country’s 20th century history (revolutions and civil war, famines and ideological pogroms), rising managers in China are reasonably more risk-averse than their Western counterparts. Moreover, the pressure on the late 20- and early 30-somethings to produce economic results (savings, home ownership, support for parents) seems more intense – we often read about young local guys bemoaning their inability to attract marriage partners if they don’t own property. So the risk-reward balance for locals considering whether to step away from their salaries to take full-time programs has a few more stones on the risk side of the scale.

2. On the reward side: Compared with Western MBA programs, the relative value contribution of various components of Chinese MBA programs is different. Because the faculty, curriculum and overall academic environment of MBA programs in China are dramatically lower in quality than those of their Western counterparts, the value of the school’s brand and the network with other students and alumni, represent a higher percentage of the total value proposition for a domestic MBA program. Since the value of the brand and network can be gained almost equally in part-time vs. full-time programs, the part-time programs here offer an incrementally higher value proposition than part-time programs do in the West. (But see this editorial on the potential downside of such an environment for China’s overall economic development.)

No surprise therefore that, while aggregate enrollment in MBA programs in China is increasing faster than GDP, all the growth is in part-time programs. Some leading b-schools have closed their full-time programs, others have let them become merely a sideline.

Does the market environment suggest that no full-time program has potential? Professor William Hua Wang speaks eloquently in this column about the rigor required for a Sino-foreign MBA program to succeed here. “If Kentucky Fried Chicken can sell congee for breakfast here, foreign MBA programs need to think how they can add a Chinese touch to their business programs.” On a larger scale, Professor Wang’s words suggest the importance for any program, whether full- or part-time, or any school, or indeed any business entity, to ensure that their value proposition is relevant to the China environment. KFC is an excellent case – through a commitment to localization, and the consequent increase in the value proposition to the local market, it has trounced McDonald’s in China for years. (Warren Liu’s KFC in China, Secret Recipe for Success, tells the story well.)

Full-time programs that address the unique China environment, and provide a relevant, powerful value proposition, can and do thrive. Leaders of such programs recognize the China-specific MBA environment, and prove that, unlike the off-the-shelf full-time programs, their niche offering has more stones on the reward side of the risk-reward balance.

The BizEd Warriors, being experienced professionals in the space, can provide any b-school leader with some sound advice on how to create and deliver ROI with Chinese characteristics for full-time programs – or others, for that matter. Just buy us lunch!

John D. Van Fleet works in the university sector in China. He lives in Shanghai.