BusinessWeek Online -- Distance Learning Closes the Gap

BusinessWeek Online -- Distance Learning Closes the Gap

by Mica Schneider

Will McKendree is hoping to finish up an MBA from Indiana University's Kelley School of Business by August, 2005, and then earn a master's of finance the following year. The 26-year-old mid-Atlantic regional assistant for J Crew hopes the two degrees will make him more marketable as he moves up in the retail world.

But unlike most MBAs-in-training, McKendree is attending lectures about 520 miles from his professors, in Indiana's Kelley Direct Online MBA program. Were it not for the Net, a master's would be out of reach for McKendree, whose bills include monthly payments on his BMW. "I can't afford to stop living the way I'm used to just go back to school," he says.

QUIET-TIME STUDY. McKendree is among a growing number of workers who are turning to the Net for commute-free online business-degree programs. In a survey by BusinessWeek Online in 2001, 81 schools reported MBAs studying via the Net or correspondence. In 2003, the number of schools with MBAs studying online rose by about 10, and the average number of students in each distance program increased to 81 MBAs, up from 45 in 2001.

More flexibility is the No. 1 reason professionals are choosing the Net for B-school. Instead of racing from work to an evening class, online MBAs can attend class and study wherever they are and whenever they have free time. "It's challenging enough to have a full-time job and to do additional classroom work," says 41-year-old Robert Miller, chief of clinical medicine for air education and training command in the U.S. Air Force. When his children are asleep, Miller logs on from Texas to study with the University of Massachusetts' Isenberg School of Management.

Corporate America's embrace of distance learning is giving these degrees more credence. General Motors (GM) has about 150 people studying for online MBAs. At United Technologies (UTX), more than 30 employees are earning online MBAs at Kelley Direct, and a dozen have already graduated. Stephen Bieglecki, director of technical education at United Technologies, estimates it will spend $12.9 million on business master's programs in 2004, of which 28% will completed via distance learning. That percentage should grow a couple of percentage points per year, he adds.

PROVEN SUCCESS. Corporate backing also has fueled enrollment at many Net-based programs over the last couple of years. Kelly Direct, which started with 14 MBAs in 1999, now enrolls about 500 students. An additional 250 students study through corporate MBA programs or other master's of management degrees.

Revenues from the program topped $7 million in 2003, up from a few hundred thousand in 1999, says Richard Magjuka, faculty chair of Kelley Direct. The online MBA at U-Mass has seen enrollment more than double since 2003, to 240 students. U-Mass now counts 10 applications to the online program for each application to the on-campus part-time program. And around 400 part-time MBAs at U-Mass have signed up to take some MBA courses online, up from 235 last summer.

As a result, the school has been able to reduce the number of night classes it offers around the state. "You respond to the demands of the market, and that's what online education is demonstrating," says Erik Berkowitz, associate dean for professional programs at U-Mass.

QUESTIONS OF QUALITY. But not all online programs are the same. Programs with a for-profit model like the University of Phoenix, which is owned by Apollo Group (APOL), usually rely on regional education accreditations. Academic programs, such as U-Mass, seek more stringent, management-specific accreditations, including AACSB-International. AACSB-approved schools must employ a certain number of qualified faculty, which some for-profit centers view as unnecessary. "A school with a nontraditional model has a harder time justifying that the model meets our quality standards," says Milton Blood, managing director of accreditation services at AACSB.

Accreditation isn't everything, though. The University of Phoenix doesn't have AACSB certification, but it's performing quite nicely. With a stamp of approval from The Higher Learning Commission, an organization for educational institutions, the university has enrolled 15,047 MBAs online in 2003, up 65% from 2002. For-profits also are more adept at meeting higher growth rates because they can hire easier-to-find working professionals to teach classes, instead of professors, which saves schools money.

"Practitioner faculty...have a lot of benefit for our students," says Daniel Hamburger, president and COO of DeVry University's Keller Graduate School of Management, a for-profit with about 680 MBAs studying online. That way, he says, the MBAs get a "real-world education."

TOUGH ACT TO FOLLOW. Academic programs say they're less willing to sacrifice classroom quality to boost their numbers. They also must contend with requirements that are imposed on them by the university and accreditation boards. As a result, enrollment suffers.

At the University of Florida Warrington College of Business, the 150-student Internet MBA is profitable, but limited. "We can only start one [new class of MBAs] per year," says John Kraft, dean of Warrington. Also, the Internet MBA runs over two years and requires two days on campus per semester for testing and presentations. To raise interest in its program, Kraft he says the school may soon launch a new cohort of students based in Asia or Europe.

"APPLES AND ORANGES." While traditional on-campus MBAs often ask students to complete both core and elective courses, some Net-based ones, like the The University of Georgia's WebMBA, chose to cut electives from its curriculum. Georgia's WebMBAs can finish the program in 18 months, instead of two or more years. The University of Maryland's University College also requires only core courses.

"It makes it easier for our MBAs to finish in a timely fashion," says Sal Monaco, department chairman for the MBA department at U-Maryland's University College. "Comparing a 30-credit MBA with a 50-credit MBA is comparing apples and oranges."

Those online programs that require the full 50 or 60 credits have to work harder to convince the public that their degrees are equivalent to on-campus ones. At the W. P. Carey MBA-Online Program at Arizona State University, faculty director M. Johnny Rungtusanatham says he spends extra time each semester comparing grades given to on-campus students with those earned by online students -- they're the same, he says. "We [require] the same [number of credits] as we do on campus," he says. "The consumer has to do their due diligence in investigating the pros and cons of online MBA offerings."

EXPERIENCE COUNTS. The caliber of students who attend online MBAs varies quite a bit, too, making it difficult to judge how much experience and intelligence a classmate will contribute. Maritza Alvarez, 37, who attended the University of Phoenix' online-MBA program, says while she "expected people to have a certain level of experience and education," she noted some classmates turned in subpar papers for projects.

True, being accepted to Phoenix' MBA program is easier compared to other Net-based programs, where applicants must complete the Graduate Management Admissions Test and show a high undergraduate grade-point average or a certain level of work experience. Even so, the graduation rate at Phoenix is closer to 65%, vs. 81% at the Internet-MBA at the University of Florida. And Phoenix -- which offers the majority of its MBA degrees online -- doesn't see a need to increase that figure. "We're doing nothing [about it]," says Brian Mueller, CEO of University of Phoenix Online. "That's where it should be -- because of our status as a more open university. Who you are as a 35-year-old isn't necessarily reflective of who you were at age 21," he adds.

Surely, convenience counts, but Internet MBAs have a few drawbacks. For starters, online MBAs aren't much cheaper than on-campus ones. The average cost for a Net-based MBA in 2003 was $29,000, vs. about $30,000 for an on-campus part-time program, according to data complied by BusinessWeek Online. While students can apply for loans to pay for the degree, few institutions will extend their scholarships and fellowships to onliners. And unless the program includes face-time on campus, students rarely meet their classmates.

NO PERSONAL TOUCH. Fewer resources are another problem. For instance, when Alvarez found out she had breast cancer in April, 2004, and would have to undergo a series of operations and chemotherapy, she didn't know where to turn at school. Just four courses into her 15-course MBA, she had one helpful conversation with an administrator before receiving a standard e-mail saying she would be dropped from the MBA if she didn't return to class within a week. "The impersonal part started coming through," she says. "Nobody bothered to call."

Alvarez plans to pick up classes again in August to finish what she started, and in typical online-learning fashion, she knows what it takes to finish the degree. "It's up to me to make the best of it." With that in mind, B-school applicants who seek the independence of an online degree may want to pull up a chair and log on.

Date: 08/20/04