Crunch time for MBAs: What effect does an economic downturn have on business schools and their students?

It used to be a rule of thumb in the business education world that when the economy was heading downhill, applications to MBA courses would experience a healthy upswing. Redundancies often increased the pool of people with the time and inclination to do a period of study. And beefing up one's CV made sense, in preparation for the upswing that (inevitably) followed leaner times.

So far, so logical – at least during what might be called normal fluctuations in the economic cycle. But what has happened in the last month – perhaps even in the last 24 hours – is emphatically not normal. So violent was the jolt that has hit the world's financial systems, and so unpredictable its aftershocks, that no normal rules can be relied upon.

However, at the time of writing, business schools seem to be holding their breath and, for the moment at least, are enjoying a welcome surge of interest among potential MBA participants.

This was certainly the case as we entered September, when the Graduate Management Admission Council (GMAC), whose members include some of the biggest business schools on the global stage, reported that 77 per cent of full-time MBA programmes starting this year were enrolling more students than they did in 2007. This constituted the biggest rise for five years.

The anecdotal evidence is that this trend continued through September, as courses were starting and students were turning up to lecture theatres for the first time. This was just the period, of course, when the turbulence in the financial world really started to go seismic and when thousands of employees were contemplating short-term futures without a daily commute.

"Schools are being very flexible in trying to accommodate these people, and proactive in encouraging people to sign up," says Jonathan Slack, chief executive of the Association of Business Schools, which represents more than 100 schools in the UK.

Admissions offices are helped by the fact, of course, that many of those who lost their jobs are taking redundancy payments, which can be used to meet course fees and living costs during a year or so of study. Also working in schools' favour is the increased variety of course timetables, which have become a feature of the MBA landscape in recent years.

"Many schools have, over the last few years, deliberately staggered their starting dates, so that programmes, including full-time ones, start in the new year or the spring," says Slack.

One such programme is the full-time MBA at Ashridge Business School, in Hertfordshire, where the dean of graduate studies, Dr Narendra Laljani, expects to see a benefit from the current economic difficulties.

"It's generally recognised that individuals use the downturn to develop themselves and learn new skills," he says. "This is a pattern we've seen before, and we expect a surge of interest in our full-time MBA which starts in January."

In addition Ashridge, like numerous other schools, is reporting a healthy uptake in participation in its executive part-time MBA.

"Perhaps companies are becoming smarter about how to manage talent in a downturn," says Laljani, "and rather than seeing it walk out of the door, they are willing to invest in it instead."

Jeanette Purcell, chief executive of the Association of MBAs, suggests another equally plausible explanation for the widespread increase, over the last 12 months, in enrolments on all types of part-time MBAs."I guess this is all about people lucky enough to still be in work making sure that if they do find themselves losing their job, they know they've enhanced their CV and experience, in order to give them a good chance of getting another position," she says.

That's certainly the hope at Cambridge University's Judge Business School, which just a few weeks ago invited applications for its inaugural executive MBA programme. The degree is due to start in autumn 2009, but the school's director, Professor Arnoud De Meyer, denies there's a risk associated with launching the programme during the current topsy-turvy business climate.

"I'm an optimist," he says, "and I wouldn't be surprised if, in a year's time, we are looking at a market where businesses are looking for talent."

Regardless of how accurate that prediction proves, no one will be able to ignore the undulating fortunes of the business world over the next year. Perhaps it's just the time to be a student of business theory as well as, or instead of, a participant.

'I wanted to plug some gaps'

Chris Taylor, 30, is IT Director of EMAP, the magazine publisher and event organiser. Last month he began the executive MBA course at Ashridge Business School, which involves 14 week-long residential sessions spread over two years.

"I wanted to do an MBA to plug some gaps in my knowledge of general management theory – such as finance and strategy – as I'd followed a largely technical route into this role.

I was attracted to the unique Ashridge study format of residential weeks away from work, as this will really allow me to immerse myself in the learning experience. But, equally, the part-time format means I can take the things I'm learning away and test them in live situations.

As for starting an MBA while the credit crunch is in full swing, I know it'll be hard not to take my eye off operations back at the office, but I'd find that anyway. That's the kind of person I am.

I would in fact argue that, when every spending decision has to be thought about twice, there are strong arguments in favour of a company spending a figure of around £30,000 on sending a senior manager on an MBA programme.

This sort of money might be spent on getting consultants in for a fortnight, but the short-term benefits from something like that are far outweighed by the long-term benefits that a manager with an MBA can deliver to a company, in terms of enhanced knowledge and experience from practical assignments."