Apollo, the largest for-profit higher education company in the US, has its sights set on the UK MBA market and it has big plans.
The company, which operates the University of Phoenix — the world’s largest provider of MBAs — bought BPP Holdings, the UK-based professional education company, for more than $600m last April.
BPP’s primary business is financial training and test preparation, but it is also home to BPP Business School, the UK’s only for-profit business college with the power to award degrees. BPP is a newcomer to the world of management education — it began teaching its first course a year ago with a modest cohort of 27 students — but the company expects that within five years, the school will see solid year-on-year profit and a total enrolment of more than 2,000.
“We are very excited about the entire BPP platform, but where we can have the most impact is post-secondary, degree-granting higher education,” says Gregory Cappelli, the co-chief executive officer of Apollo.
Apollo’s planned investments include designing a curriculum from scratch, creating overseas study opportunities and enhancing its online learning platform.
For-profit business schools are, in general, less expensive than traditional schools but they have been under fire recently for enrolling students who subsequently cannot find well-paid jobs, leaving them unable to repay the loans they borrowed to fund their education.
Tuition at BPP Business School will be about £16,000 for the MBA. By comparison, on the one-year programme at Cambridge’s Judge Business School, tuition is £35,000 while in the US, tuition at Harvard Business School this year is about $48,000 for each of the two years, while tuition at a public institution is about $36,000 a year.
The return on investment for students in the for-profit model is vastly different from that of traditional schools. At traditional business schools most students are in their mid-to-late 20s and attend full-time. After graduation, they use the credential to move into a new career and usually a higher-paying job. According to data collected for the 2010 Financial Times MBA rankings, alumni from 37 of the top 50 schools report that three years after graduation they have doubled their pre-MBA salary.
Students in programmes owned by Apollo, however, tend to be employed full-time while they study and use their degree to improve their promotion prospects at their own companies.
According to 2008 data from Apollo, students enrolled at the master’s degree reported earning an average annual salary increase of 9.7 per cent, compared with a US national average annual salary increase of 3.8 per cent.
Chris Brady (above), dean of BPP Business School, says that at least for now, the school encourages prospective students to measure the return on investment by the learning experience. “We’re going to be better because we’re hungrier and we’re not going to have massive classes with hundreds of students,” he says.
He admits that future students will want to be shown the money. “In five years time, we will hope we have a reputation and brand to sell return on investment in terms of salary increase,” he says.
Apollo is not the only for-profit education provider in the US. Other notable big hitters include Corinthian Colleges, Career Education Corporation and ITT Educational Services.
Apollo’s acquisition of BPP comes at a time when the for-profit sector has come under fire from critics charging that the degrees on offer are sub-standard. “The for-profit model is based on cheap labour providing a fixed curriculum,” says Henry Levin, a professor of economics and education at Columbia University’s Teachers College. “They go after a particular kind of student at a fairly low level of instruction. Does it provide a degree equal to even a middle range business school in the US? I don’t think it does. I call it MBA lite.”
John Fernandes, president and chief executive officer of the Association to Advance Collegiate Schools of Business, the US-based accrediting body for business schools and accounting programmes, is also critical. Mr Fernandes says: “There is a big quality differential [between traditional and for-profit MBA programmes].
“Students tend to look at the convenience of the schedule and the ease of admission, but students need to look long-term. They need to look at the other graduates – how they’re doing professionally, they need to look at the credentials of the faculty and see which other schools accept credits.”
Mr Cappelli, however, insists that the quality is “high” and that the company provides an important service to a population previously left out of traditional higher education. The University of Phoenix was founded in the mid 1970s in response to the growing number of working adults seeking formal higher education. Today, Apollo has total enrolments of more than 450,000 students and last quarter reported revenues of $1.3bn.
Apollo is a “highly regulated” and intensely scrutinised organisation Mr Cappelli adds, because it receives the most government-granted student loan funding of any education provider. For-profit education providers derive the bulk of their revenue from federally guaranteed student loans.
“Whether you’re making a profit or not has nothing to do with the quality of instruction,” says Mr Cappelli. “The student comes first. Returns to our shareholders can’t be higher than the returns of our students. We have to do what’s right for the student always.” He says the severe global downturn has heightened the need for the services Apollo and BPP provide. “Many of the jobs being lost today may never come back again. People are figuring out that the skill set they have is no longer relevant for the economy of the future. They realise that to move up in their career they need other qualifications and more levels of higher education such as an MBA,” he says.
BPP Business School last year launched an in-house MBA with Simmons and Simmons, the London law firm. The school plans to run similar tailored programmes for other corporate clients and will start in September its general MBA programme. The curriculum was designed by industry leaders, academics and the company’s advisory board.
During the next year, the company will roll out courses on sports management, running small- and medium- sized enterprises, and classes that relate to the leisure and hospitality industry with specific material focused on preparing for the 2012 London Olympics.
It is also boosting its online operations. By the academic year 2011, every class BPP Business School offers will be available over the internet. Mr Cappelli says most University of Phoenix students opt for a hybrid approach, where they take some classes at physical campuses and others online. This appeals to the company’s target market of busy working professionals who place a premium on convenience.
“We don’t care whether you’re on the ground or online,” says Mr Cappelli. “We want to allow people the opportunity to do both. It’s their choice. We think that ultimately more people will realise they have the capability to learn online. Convenience is not another word for easy.”
A May 2009 study by the US Department of Education, found that students who took all or part of their class online performed better, on average, than those taking the same course through traditional face-to-face instruction.
Chris Brady, dean of BPP Business School, expects most students to select a hybrid system. He dismisses concerns that online courses minimise class participation. Similar to traditional business programmes, BPP will foster a collaborative learning environment where students will often work in teams, he says and students will be expected to interact virtually via global video conferencing and chat rooms. “We try to align form with function and deliver business education the way that business is delivered,” he says.