Coming big bang for French Business Schools

Posted on 25/01/2015

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This post is a translation from an article written by Olivier Basso, Associate Professor at CNAM and Thomas Durand, Professor of Strategic Management at CNAM and published in Les Echos on 23/01/2015 and available here: http://www.lesechos.fr/idees-debats/editos-analyses/0204092637475-le-big-bang-annonce-des-business-schools-francaises-1085992.php#xtor=CS1-2. All rights reserved by the author and the publisher. This translation is only aimed at non-French readers who would like to know more about French Business Schools

As announced in an upcoming seminar of the French Society of Management, the French business schools are at the dawn of upheavals that may surprise the public. Several factors are hitting the traditional model of schools, including funding sources. There is first a withering of financing by chambers of commerce: following a domino effect, the reform of the collection of the apprenticeship tax, decided in late 2012, led to a drying up of resources for schools. Second flow of weakening resources, registration fees collected from students: the employment climate is gloomy , the attractiveness preparatory classes is declining, with competition from other quality programs (eg the IAE), cheaper, in France or abroad. Third usual source of resources, continuing education. It suffers from austerity in businesses, the now global competition and the emergence of new entrants such as counsulting or coaching companies that bind managerial training and skills development. Finally, raising funds from foundations created with former students has certainly progressed, but it is only the interest generated by these assets that contribute to operational expenditure. The most important foundation to date, that of HEC, apparently contributes to only about 3% of the institution’s annual budget.

To these factors add strategic moves that will affect the industry: the development of private investors, such as the Laureate International Universities group or the group Apax Partners, which bought the Inseec group for 200 million euros in 2013. These operators with strong financial capacity anticipate a consolidation of the sector and develop groups of schools that combine the effects of scale and a flexible offer. Moreover, the entry of the leading schools like ESCP Europe or EM Lyon in the segment of post-baccalaureate candidates (undergraduate) will cause a vacuum effect that will suffocate other schools that were previously recruiting those good quality candidates.

The football clubs model

In this context, the business model of business schools seems to be closer to that of football clubs. First, the international recruitment: just as the market for football players has become global, today there is a real mercato for management research professors. In return, there are fewer and fewerhome-grown” teachers, and loyalty and dedication to the club diminish as it happened for all “pro clubsthat have become businesses. Then, the irruption of information technology in teaching reminds of commercialisation of broadcasting rights. The concept of Mooc already passé, symbolized and popularized the digital switchover and announces a worldwide distribution capacity via the Internet and its inevitable corollary, monetization. Finally, business schools are investing heavily to develop their reputation through the influence of their research, the rise in the “rankings

Two hypotheses of evolution seem to emerge. First, a series of drastic restructuring is likely to come: mid-table schools will face, probably within a year or two years, a liquidity wall with a drop in recruitment and a weaker notoriety to generate executive education. As in football, there will be those able to play in league 1 (HEC, ESCP Europe, ESSEC, EDHEC and EM Lyon …) and a fall for the rest..

Finally, it is not unthinkable to imagine that, like in football, some creative financial engineering and investors will invadethe field. Why, for example, not considering raising funds in the market via a specialized stock exchange or crowdfunding

Has the management of higher education institutions become a business?

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