The Impact of AACSB Accredited Education on Market Wages: Does it Matter - Research Paper Example

 The Impact of AACSB Accredited Education on Market Wages: Does It Matter? Abstract Kurt Badenhausen of Forbes magazine claimed, in 1988 already, that, “…an MBA is a winning situation financially…no matter where they get MBAs, they’ll make back their investment.” (Policano, 2005, p. 27) The question remains today, and will be addressed by this paper, as to whether this is strictly true. Accreditation and the ranking of business schools in the media may fundamentally have changed the parameters of Badenhausen’s claim. More specifically, this paper will address the relationship between the accreditation of business schools, by institutions such as the AACSB, and the economic value of a qualification from an accredited school for a student–most particularly, in the starting salary such a student is able to command. Keywords: accreditation, ranking, AACSB, graduates’ starting salary, economic value The Impact of AACSB Accredited Education on Market Wages: Does It Matter? The first noted business school rankings were published in “Business Week” in 1988, and evaluated fulltime MBA programs. (Policano, 2005) Subsequently, most institutions of this kind, internationally, have sought to be included in such rankings, prompting internal performance measurement, and record-keeping of performance, as evaluated against predetermined, external standards. It is interesting to note that the published rankings of “Business Week”, “US News” and “World Report” between 2002 and 2004 all corresponded very closely to surveyed public perceptions of business schools. The public identified seventeen of the twenty top schools as identical to those ranked by the publications. It is evident that the public believes in the rankings of business schools and the accreditation status of such schools. More currently, and for about the last one hundred years, one organization has focused on the development and measurement of objective standards for business schools: the Association to Advance Collegiate Schools of Business (AACSB). Through its processes, the AACSB evaluates and measures the performance and results of business schools throughout the world and hence awards accreditation–or withholds accreditation–based on the quality of the school. This accreditation enables the individual school to gain status, among parents, students, and the business community, as a provider of exceptional business education. The Association to Advance Collegiate Schools of Business Fewer than 5% of business schools internationally have been awarded accreditation by the AACSB: This despite the fact that the organization has been active and recognized in the field since 1917. (AACSB, 2009) This may, in part, be explained by the organization’s rigorous criteria. Schools are required to give evidence of continuous improvement, exceptional academic standards, relevant and current curricula, and positive relationships between faculty and students. Assessors will evaluate each school applying for accreditation, and based on peer-review mechanisms and ongoing assessment, will recommend accreditation where appropriate. (AACSB 2009,and 2007) In its Mission Statement, the organization stipulates that it aims to promote quality management education through accreditation and thought leadership. (AACSB, 2009) The Value of AACSB Accreditation Becoming accredited, however, is an expensive process. A survey of ten business schools, (Heriot, Austin & Franklin, 2009) delivered an average of $20 954 for preparation and consultancy fees. Schools that had to implement changes to their infrastructure to increase eligibility, spent between $5 000 and $60 000. These figures represent once-off costs. Thereafter, costs relating to faculty recruitment and retention, technology upgrades, professional development, and student resource enhancement further escalate expenditure, and, consequently, the tuition costs for students. (Already in 2002, an AACSB task force reported in “Management Education at Risk”, the variance in fees at business schools–London Business School: $100 000 annually, and Lingan College, China: $3000) Additionally, AACSB dues and attendance at seminars and meetings place additional strain on the school’s finances. Heriot, Austin and Franklin reported that such costs often became significant in preventing schools from completing the accreditation process. It is clear that the value of AACSB accreditation should be greater than its expense. And this should hold true for all stakeholders: Other schools, employers, students, and faculty. (Trapnell, 2007) Certainly, high educational standards have to be maintained and schools do gain from AACSB strategies for maintaining and retaining excellent educators, building effective resource bases for students, and assuring good relationships between students and faculty. Should the school be accredited by the AACSB, stakeholders have reasonable guarantees of a school that manages resources well to ensure vibrancy and relevance; that promotes knowledge of current business and management practice through a highly competent faculty; that assures high-quality teaching; that encourages meaningful interaction between students and faculty; and that produces graduates who have achieved very specific and desirable learning goals. (AACSB 2009,and 2007) Effects of Accreditation v. Non-accreditation When accreditation is seen as essential, however, the effect on non-accredited schools can be notable. For example, firstly, faculty at accredited schools receive higher remuneration, generally, than those at non-accredited school. (Fernandes, 2005) This makes it difficult for non-accredited schools to attract and retain teachers. (LeBlanc, 2009) Secondly, the AACSB encourages research from the faculty–an argument regarding the maintenance of the balance between research and teaching relevance may be raised, relating to the high research productivity of accredited schools. (Iossifova, 2008) Curriculum relevance may be hampered by a constant emphasis on research. In contrast, the AACSB has instituted programs to ensure the quality of faculty. Already mentioned in this essay, are the higher salaries for entry-level appointments. This is further qualified by the Business School Doctoral Faculty Initiative, which states that the attraction and retention of new-doctorate faculty are underpinned by such higher salaries. (e.g., Fernandes, 2009) The report of the Management Education Task Force (Trapnell, 2002) indicated that, according to statistics from the National Science Foundation, the number of business doctorates was annually decreasing and that only 62% of graduates in 2002 were planning careers in educational institutions. The consequent effect on education provision (a reduction in quality) prompted the immediate action by the AACSB, and hence, the Doctoral Faculty Initiative. Advantages for Students For students, seeking a school of business, AACSB accreditation should guarantee interactions with other outstanding students and a highly qualified and motivated faculty. Retention and graduation rates at accredited schools are 23% and 15% higher, respectively, than at non-accredited schools. (Esperitu, 2007) More importantly, success is predicted for the student to be employed according to expectations, after graduation. (Trapnell, 2007) Policano (2005) reports that the “US News” ranked Top 10 business schools’ graduates earned the highest starting salaries; those graduates from 8 of the next 10 ranked schools, earned on average, the next highest. Also according to Policano’s article, essential criteria in the establishment of rankings for business schools, is the salary the graduate earns over 5 years, as compared to the cost of the program, and the rates of job placement feature prominently in students’ responses to surveys regarding their perceived educational experience, as well as their career opportunities after graduation. (e.g., Policano, 2005) It has also been found that, although the business community and business schools agree, in principle, on the skills and competencies required by successful managers, business schools often do not focus on these identified skills and competencies. (Abraham & Karns, 2009) As part of the accreditation process, the AACSB proposes that a school should prepare its students to be valuable to their potential employer organizations, the larger society, and to develop personally and professionally throughout their careers. (AACSB 2009, and 2007) Intel, a prominent company on the world economic stage, has implemented what must be seen as a vote of confidence in the AACSB programs: in order for an Intel employee to qualify for the company’s tuition re-imbursement program, the course attended has to be offered by an AACSB-accredited institution or the institutions providing training for Intel employees have to gain that accreditation. Conclusion To substantiate the writer’s belief that AACSB accreditation is valuable and necessary, this paper examines the entry and mid-career salaries of graduates from AACSB accredited schools, to those of graduates from non-AACSB accredited schools, upon completion of an undergraduate degree. 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