What’s an Online MBA Worth?

You’ve seen the ads in pop-up windows and in the borders around your e-mail inbox: “Earn an MBA online for $7,000, no GMAT required!” If you’ve ever been tempted to apply for an online MBA or hire someone who had one, come-ons like these are enough to squelch the urge on the spot.
But then there are stories like that of Jim LeMere, 39, an insurance-company executive who earned an online MBA from Indiana University’s Kelley School of Business. The institution (No. 15 in Business Week’s B-school rankings) held him to the same admission and grading standards as its full-time MBA candidates, taught him with the same curriculum and same teachers, yet allowed him to attend class on his schedule. Oh, and he got to keep his job. “I traveled a lot, was relocated to Atlanta, and was eventually moved back to Indiana. Kelley moved with me the entire time,” LeMere says. When he graduated in 2004, a rival firm poached him, promoted him to vice president, and doubled his salary.
In addition to the Kelley School, Carnegie Mellon’s Tepper School of Business (No. 19 on Business Week’s ranking) now offers an online MBA, and Duke University’s Fuqua School of Business (No. 8) offers a hybrid course that combines online and classroom learning. The online MBA neighborhood is gentrifying even at the mass-market end, dominated by for-profit B-schools like University of Phoenix and Kaplan University. In January, Jack Welch lends his name and prestige to the new Jack Welch Management Institute, a $21,600 MBA track that doesn’t require test scores for admission or on-campus attendance.
In short, the lingering image of online business schools as diploma mills is oversimplified, to say the least. True, no virtual MBA can make a recruiter’s heart race the way a Harvard or Wharton sheepskin can, but that’s an exceedingly high hurdle. The real point is this: In the right circumstances, an online MBA can indeed boost your career (and hiring someone bearing one can indeed help your company). It’s all a matter of matching your skills with the right program at the right stage of your career. Not All Online MBAs Are the Same
In the hierarchy of virtual MBA programs, there is one key caste distinction. On the mass-market end are online-only schools like University of Phoenix — for-profit businesses that admit anyone who can pay the tuition of $20,000 to $30,000. On the elite end are online programs at brick-and-mortar educational institutions, including Duke’s Fuqua and Indiana’s Kelley, which have equally stringent entrance requirements for their online tracks as for their residential ones, including GMAT scores and minimum years of work experience. Their programs cost anywhere from $7,065 (Chadron State College in Nebraska) to $135,500 (Duke’s Fuqua School). Note that online MBAs at brick-and-mortar schools aren’t any cheaper than full-time programs at the same school; in fact many are more expensive because of technology, lodging costs during campus visits, and extra hours required of faculty.
As resume-polishing credentials, the Kaplans and Phoenixes have two crucial drawbacks. The first is their lack of selectivity — with all that implies about the quality of the student body. Recruiters assume that candidates who could ace the GMATs, deliver a straight-A undergraduate transcript, and produce a sheaf of glowing recommendations don’t go to schools that ask for none of these. Add to that the online-only schools’ inability to win accreditation from AACSB International — the Association to Advance Collegiate Schools of Business, the gold standard of business-school endorsements. These schools consistently come up short on their investment in recruiting and developing faculty, according to John Fernandes, president of AACSB. “They spend a lot less on faculty than a traditional, AACSB-accredited school,” he says. “They’re trying to manage volumes of students, and top programs are about the opposite. They’re about limiting access to a few potentially outstanding students and placing them with outstanding faculty.” (Some for-profit schools are accredited by regional boards, but those agencies are not specific to business programs. For more on accreditation, see “Choosing an Online MBA Program.”)
The online MBA tracks at brand-name business schools are a different story. In order for a school to be AACSB accredited, every business program it offers — including online degrees — must adhere to the board’s standards. To keep their accreditation, these schools must make sure their online curricula mirror that of their brick-and-mortar programs and are taught by the same faculty. Most of the programs also require students to spend a few days on campus every year. Such schools now account for nearly one in three online MBAs awarded, but their market share is growing: The number of AACSB-accredited business schools offering some kind of online MBA track has grown from 19 in 2002 to 68 today.
Why would a respected business school go online? Because that’s where the money is. Corporate middle managers who would rather not leave their jobs to attend a full-time MBA program are a huge, barely tapped market. Kelley launched its online MBA 10 years ago, according to Eric Richards, chair of the school’s online MBA unit. “Since then,” he says, “we’ve grown from 139 students to more than 1,500.” And those 1,500 are a rewarding addition to the student body: They pay roughly $54,000 for their online degrees while Kelley’s 470 residential students pay $51,000 (in state) or $89,000 (out of state) for theirs.