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Analysis & Opinion
14.04.10 The Best In The Business
By Tai Adelaja

After a devastating global economic crisis that left many businesses either closed or in limbo, business schools around the country are preparing their students for big changes in the post-crisis financial industry. The market for business education in Russia shrank by 40 percent last year as the crisis dealt its blow, and enrolment in various business schools around the country was down by about 30 percent, experts say. Business schools offering Executive MBA programs, where most of the students are top and middle-level managers from various enterprises, were particularly hard-hit, as companies cut back on sponsorship.

“Last year was quite difficult for both the evening and modular MBA programs in Russian and Western business schools, because many companies stopped subsidizing and funding staff training,” said Alexander Yanchevsky, the director of the St. Petersburg campus at the Vlerick Leuven Gent Management School. “During the crisis, employers ask questions about the quality, utility and correspondence of courses and evening programs that are run by many business schools.”

Russia joined the club of capitalist nations offering Masters in Business Administration in 1988 with the opening of the Higher Business School at the Ministry of Foreign and Economic Relations and the Graduate School of International Business at the Academy of National Economy. This was followed in the same year by the opening of the Moscow International Higher Business School (MIRBIS), which started running an MBA program in 1990, and the School of Business Administration at the Moscow State University.

After a slow start, business schools offering MBA programs have mushroomed in both Moscow and St Petersburg, grooming entrepreneurs and top managers to take advantage of the nascent business scene in the country. Among the country’s prominent schools modeled after American B-schools is the Graduate School of Management (GSOM) at St. Petersburg State University, which started offering executive MBAs for Russian managers in 2000, the Moscow School of Social and Economic Sciences (MVSHSEN), the St. Petersburg International Institute of Management (IMISP), and the Moscow School of Management SKOLKOVO. With the possible exception of SKOLKOVO, which started offering the first full-time MBA program in Russia at its state-of-the-art campus in September last year, most Russian business schools still offer short-term executive MBA courses for Russian managers and entrepreneurs.

Buoyed by the country’s nascent market economy, many young Russians are queuing in, spending thousands of dollars in pursuit of a refined business future in the hopes of getting their educational investment back in terms of better paid jobs in a better organized business environment. According to some estimates, the volume of Russian business education rose from $2.27 billion in 2003 to $4.89 billion in 2007 (the last time it was evaluated), and experts at MBA Strategy say the market value could hit $10.1 billion by 2015.

One reason for the popularity of business schools is that the overwhelming majority of Russian students largely see an MBA degree as a passport to better paid jobs and a tool for career advancement, a poll of 1780 people conducted by E-xecutive at the height of the crisis last spring found. “An MBA increases confidence in their abilities and capabilities, which allows them to take on more challenging and better paid projects within the company," Konstantin Khomkin, deputy dean of the department of Innovation and Technology Business at the Academy of National Economy under the Government of Russia (FITB ANE) said. “Despite the shrinking job market, many students still see an MBA as a magic pill that can suddenly solve all the problems in their careers.”

High expectations aside, only a few Russian employers consider an MBA degree to be an asset when recruiting. Research conducted by MarksMan, a personnel recruitment agency, found that only eight percent of personnel managers at large from Russian and foreign companies claim that an MBA is a prerequisite for employment. Dmitry Bondar, a managing partner of MBA Strategy, said that such confusion stems from the fact that neither the MBA students nor their future employers are certain as to what an MBA program entails, let alone the quality of one B-school or another. "Most candidates choose a B-school on one parameter alone – whether it is accredited or not.

Whereas accreditation does not always guarantee that a business school can give its students sound business knowledge, a prodigious network of business connections or increase their value on the labor market,” Bondar said.
Another drawback, he said, is that the international labor market continues to regard degrees awarded by Russian B-schools as “local,” regardless of their accreditation. Khomkin said that some Russian B-schools have tried to solve this problem by issuing dual degrees, one in Russian and the other from an affiliated Western institution. But this could come at a price, he said. "Western business schools do not give out their diplomas for free. Usually, the more popular the B-school, the more expensive is its diploma,” Khomkin said. “The surcharges grow because of additional training modules, which are usually carried out by Western teachers, and because of the need to organize international exams. These expenses are ultimately transferred to the student in the form of tuition fees.”

With most indigenous MBA programs already costing between $50,000 and $70,000, a dual MBA degree is hardly a better prospect, as the credit crunch has also indirectly resulted in a decline in B-school enrolment by dealing a blow to those willing to take student loans to further their educational pursuits. Maria Vlasyuk, a development manager for youth programs at Bank Societe Generale Vostok, said that many banks have stopped issuing education loans or completely revised their terms of providing student loans.

The fact that Russian B-schools rely entirely on tuition fees for functioning, unlike most of their foreign counterparts which rely on grants and donations from alumni and companies, has made matters worse during the crisis, Khomkin said. Imperfections in the laws on sponsorship have prevented Russian B-schools from adopting the same practice, he said. However, some experts like Tumanov warn that MBA programs must not become cheaper in Russia in the near future, arguing that "quality education should not and cannot be cheaper than a certain level." According to Dmitry Bondar there is another reason to maintain the current prices: "In Russia, all things that are cheap are perceived as substandard. Therefore reducing the cost of an MBA program could mean losing more candidates than you’d be gaining.”

One upside of the financial crisis is that it has flushed out the “non-serious players” who were offered the program under the brand name “MBA,” Anders Liljenberg, the rector of the St. Petersburg-based Stockholm School of Economics in Russia, said. “For solid schools, such as the Higher School of Management and Skolkovo, demand for MBA programs will be even higher than before,” Liljenberg said. “The main task today is to increase awareness among Russian consumers about what an MBA program really is. I also believe that it is important to continually modify the content of the program to adjust to the trends of time.”

Vladimir Tumanov, the director of the Open University Business School MBA Program in Russia, agreed. “The crisis has had a sobering effect on various institutions offering MBA programs, but has also sanitized the programs in Russia by weeding out those schools with poorly designed programs and bad management,” Tumanov said. “Recruitment has actually gone up for mainstream schools even as the economy struggles with recovery,” he said.
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