Germany catches up with MBAs

Germany is home to some of the world’s leading companies and universities but, when it comes to business education, its institutions have lagged behind many in Europe and the US.

For years, the country’s educational and corporate establishment did not recognise the MBA and remained doggedly attached to its traditional Diplom-Kaufmann qualification. These programmes tended to emphasise business theory and analysis, took five years to complete and did not require professional experience.

The MBA, therefore, with its emphasis on work experience, came as something of a shock to German graduates, schools and companies. Many did not recognise the logic of someone in their late 20s with at least three years’ work experience returning to school to study business. As a result, German business schools have struggled in the international rankings.

“It’s not that we have bad managers here in Germany. We simply missed the boat,” says Udo Steffens, president of the Frankfurt School of Finance and Management.

 In 1999, the European Union’s Bologna reforms – it plans by 2010 to have harmonised Europe’s disparate higher education system – finally introduced the concept to Germany of the three/four-year undergraduate degree, followed by the opportunity of a further one- or two-year masters programme. 

The prospect of a new generation of German graduates returning to their university studies after a spell in business has encouraged a range of domestic institutions to set up MBA programmes.

About 1,500 students now graduate from one of 270 German MBA programmes every year but only a handful of providers maintain real hopes of breaking into the rankings.

German institutions have in part been held back in the rankings by their relative inexperience (a programme must have been running for four years to qualify for the Financial Times rankings) and the small size of their programmes (the FT full-time MBA ranking requires a minimum of 30 students on the programme).

German business schools have had some success attracting candidates, but a lack of demand from domestic students is underscored by the country’s Graduate Management Admission Test statistics. In 2007, about 2,000 Germans took the business school exam but 90 per cent of the scores were sent to schools overseas.

“The market is extremely small. There will be more domestic demand in three to four years’ time when there are enough bachelor graduates with sufficient workplace experience,” says Andreas Hackethal, dean of Goethe Business School in Frankfurt.

Germany’s schools have also been hampered by a lack of awareness among domestic companies about what an MBA signifies.

“In the past, it was very difficult for [German] companies to hire MBAs because they did not have employment models for people coming from university who already had five years of job experience,” says Christian Homburg, president of Mannheim Business School.

The elite MBA market in Germany is dominated by a handful of private or quasi-private institutions, including the WHU-Otto Beisheim School of Management, Mannheim Business School and the HHL Leipzig Graduate School of Management. Like their international competitors, they have discovered that accreditation from agencies such as the Association of MBAs, the AACSB, or Equis of the European Foundation for Management Development is essential to attract the best students.

Mannheim is the first German institution to have been recognised by all three accrediting bodies.

“It takes a huge amount of work but it’s very important. You have to prove to the market how good you are. Accreditation is key to that,” says Prof Homburg.

The emergence of an elite group of German schools has been helped over the past decade by the deregulation of the domestic education market, which allowed universities to levy tuition fees and gave schools greater autonomy.

Mannheim’s MBA programme began in 2002 after the state-funded university created a private company. This independence also allows it to pay the salaries demanded by top faculty.

“I’m convinced that it’s not possible to run an international quality business school within the German state system,” says Prof Homburg. “There you have no freedom or flexibility. Salaries have to be competitive on an international basis.”

he relative youth of most German schools means they do not have the donations from alumni, which schools traditionally rely on to fund facilities, research and chairs.

“It takes an enormous amount of investment to enter this market. The question is always whether that’s a good allocation of resources,” says Prof Steffens.

One of the few German institutions with deep pockets is the European School of Management and Technology in Berlin, thanks to its €67m corporate endowment. The school was founded in 2002 by a group of 25 leading companies, including Allianz, Daimler and Deutsche Bank, and was swiftly (some say prematurely) proclaimed Germany’s answer to Harvard Business School.

The companies were dissatisfied with the theoretical emphasis of the Diplom-Kaufmann qualification and frustrated with the need to recruit candidates from schools outside Germany.

The MBA programme took four years to get up and running, however, and the class of 2009 has 26 participants, which is small by international standards. Lars-Hendrik Röller, president, acknowledges: “It takes a long time for a new business school to achieve a critical mass” – but he says the school’s close relationship with industry will allow it to continue growing.

To gain lustre and international exposure, some German business schools have agreed partnership deals with big-name international institutions, such as WHU, which runs an EMBA with the Kellogg School of Management at Northwestern University in the US.

However, these partnerships are fraught with difficulty, not least because of the vast gulf in size and experience between US and German institutions. In 2004, Goethe Business School established a dual degree EMBA with Duke University’s Fuqua School of Business. But the programme was recently watered down after attracting only about 30-35 participants a year.

The two schools still operate a joint programme but it earns a certificate rather than a Duke degree.

Those who retain high hopes for German business schools point to expectations that domestic demand will pick up as the first bachelor graduates enter the MBA market after a few years in the business world and as the MBA qualification gains greater acceptance.

But they acknowledge it is a long road ahead.