With Typical Vigor, Jack Welch Sets Out to Upend Online Business Education

Can a high-profile program backed by a legendary business magnate lure students?

Elise Amendola, Associated Press

Jack Welch teaches a management course at the Massachusetts Institute of Technology in 2006. His new online business school will be aimed at working people looking for a practical education at a good price.
November 01, 2009

Jack Welch doesn't sound like a man poised to shake up online education. He sounds like a man in pain.

The former chief executive of General Electric is speaking to a reporter just nine days out of the hospital, after suffering a serious spinal infection that has delayed the start of classes at his new Jack Welch Management Institute at Chancellor University.

But in this telephone conversation, he's mustering the old corporate-chieftain bravura. Boosting. Blustering. Squelching skepticism that his upstart M.B.A., to be offered online and in person at for-profit Chancellor's Cleveland campus, is just a vehicle to milk money off the Welch name.

"I've never done anything half-assed in my life!" he says, his Boston accent a weak rasp. "I don't intend to start now."

This January, what he does intend to start is something that could boost online education and threaten competitors. The Welch institute plans a marriage of investment capital, minimum admission standards, online reach, established academics, and the global brand of Fortune's Manager of the Century. That contrasts with other for-profit online colleges that offer open admission, including a brand whose reputation was recently mocked on Saturday Night Live. The Welch program's cheaper tuition may also lure students away from some traditional business schools.

Richard Garrett, a managing director with the consulting firm Eduventures, calls the School of Welch "a combination that is unprecedented—and very potent and challenging."

"This is a for-profit online school saying, 'We're not content to just have a bunch of nameless adjunct faculty and an anonymous M.B.A.,'" he says. "It challenges online to think bigger. But it also challenges traditional M.B.A.'s to not write off online as irrelevant."

But right now Mr. Welch, 73, faces challenges beyond his own health. First there is the health of Chancellor, formerly Myers, a 546-student university that had been on the verge of extinction before it was bought out recently—and that remains on probation with its regional accreditor. Chancellor expects to get off probation, says George Kidd Jr., its president, though that won't happen until at least early February.

Second, the institute has to convince students and employers that it is a quality program even though it lacks the endorsement of the leading accreditor in business education, the Association to Advance Collegiate Schools of Business.

"There isn't a business school that's worth anything that's not accredited by them," says Darin T. Kapanjie, faculty coordinator for online initiatives at Temple University's business school. "If I'm a business employer, and I'm looking to see where a student got their M.B.A. from, if it wasn't AACSB-accredited, then I would think less of it."

But Edward A. Snyder, dean of the University of Chicago's Booth School of Business, argues that the value of accreditation varies "depending on the person you talk to." The view that it's "everything," he says "is clearly wrong."

Perseverance Pays Off

So how did a senior statesman of American business who spent the past four years teaching at MIT end up hooking his reputation to a no-name Rust Belt college that holds classes in a converted warehouse?

Mr. Welch answers with a name: "Michael Clifford."

Michael K. Clifford is Chancellor's lead investor, a California-based deal maker who oversaw an earlier buyout of Grand Canyon University, in Arizona. Watch him work a conference of suit-and-tie investors, as The Chronicle did recently in New York, and the entrepreneur sticks out, with an appearance as atypical as his résumé: a former R&B bandleader with a penchant for wearing his gray hair puffy, his glasses trendy, and his shirts baggy.

Mr. Clifford chooses a polite expression to describe what happened when he first began courting Mr. Welch several years ago: "A heated exchange."

The setting was a retirement party at a posh Connecticut country club. "You need to do an online business degree called the Jack Welch M.B.A.," Mr. Clifford recalls telling him. "I know you don't need any money, but you need to create your legacy. And this is the way to do it."

Mr. Welch looked at him and started to yell.

As Mr. Clifford tells it, mimicking the Welch accent, his quarry shouted, "You don't know what you're talking about. Give me numbers. Give me facts. Give me data. No one can teach on a computer. I can't even use a computer!"

But at the end of the conversation, Mr. Welch pointed a finger at Mr. Clifford and said, "Can you be in my office tomorrow?"

"Yes," Mr. Clifford said, though he had no idea where the office was.

It is one thing, however, to persuade Jack Welch to put more than $2-million behind a start-up. It is another thing to convince the business world and educators that online videos and PowerPoint slides are a valid way to train managers of the future.

Business schools seem split on how to deal with online education. At the upper crust of super-elite colleges, you generally cannot get an M.B.A. online. A mind-set has prevailed that students need to be physically present for management training that entails interaction and collaboration. In the classroom at a place like Stanford University, sessions feed off live discussion, says Paul Oyer, an associate professor at the Graduate School of Business there. "I can't get up and give a lecture in class," he says. "I'd be booed off the stage."

But plenty of people think technology can work. Until this fall, for example, Temple had refrained from offering an online program because it couldn't ensure the same quality, Mr. Kapanjie says. He argues that technology has now matured to the point where you can replicate a live, interactive classroom experience with Web conferencing and desktop sharing.

As Temple's shift shows, the growing list of colleges granting online M.B.A.'s isn't limited to for-profit colleges like the University of Phoenix and Kaplan. Among the 570 institutions accredited by the Association to Advance Collegiate Schools of Business—a group that includes the University of Pennsylvania, Harvard, and Chicago—71 offer online M.B.A. programs. You can earn an online M.B.A. from Indiana University's Kelley School of Business, ranked 15th by BusinessWeek, or the Fox School at Temple, ranked 72nd by Forbes.

Now along comes Mr. Welch. During his tenure at the helm of GE, from 1981 to 2001, its market value grew by about $400-billion. If Mr. Welch considers online education good enough to teach the fundamentals—if straight-from-the-gut "Neutron Jack" now praises online students for their grit—what does that mean for those who resist?

"Now these other programs have to defend their position against a customer who says, 'Why aren't you guys doing this stuff online?'" says A. Frank Mayadas, a program director at the Alfred P. Sloan Foundation who is considered by some the father of online learning. "And the answer cannot be, 'Well, you can't learn this way.' The answer to that is, 'Mr. Welch thinks you can.'"

'Is This Just a Name?'

Chancellor University's business students will be hearing plenty about what Mr. Welch thinks. His management philosophy will lace the curriculum, and his views on current topics will be heard in online videos. For academic heft, he has brought on two veterans of GE's Crotonville, N.Y., management-development center: Steve Kerr, who led the executive-education program at Goldman Sachs and used to be dean of the faculty at the University of Southern California's business school, and Noel M. Tichy, who is a University of Michigan management scholar.

But Chancellor won't build a research-based faculty. Its model is to hire respected professors to design courses that can be taught by adjuncts, says Mr. Welch. Plenty of people want to sign up, he says, but recruitment can be a challenge. "Some want to know how committed I'm going to be," Mr. Welch says when pressed to describe his talks with professors. "Some ask the question, 'Is this just a name?'"

The students will probably be working as they take classes, and what they'll get is a practical education that they can apply on the job. The degree will cost about $21,600. Students will need a 2.8 GPA to get in, but they won't have to take a GMAT or GRE exam. The target audience, as Mr. Clifford describes it, is a 35-year-old woman with two or three kids who manages a Verizon store in Tuscon, Ariz. The program won't attract twentysomethings who seek out programs to build up their personal brands by stamping Wharton or Booth on their résumés.

"You don't think for a minute that someone who has got accepted and has the money to go to the University of Michigan is going to choose this?" Mr. Tichy says. "What are you smoking? C'mon! This is not going to compete with the top 10 business schools."

Chancellor had previously trumpeted Mr. Tichy as leader of the institute's faculty. In an e-mail message last week, however, Mr. Kidd wrote that "Noel remains with us but his personal schedule at this point prevents him from being as active as all of had hoped." Chancellor announced in a press release last week that Mr. Kerr would serve as executive director of the institute, working with Mr. Welch and the faculty "on all aspects of the academic program."

Chancellor isn't the first for-profit university to spruce itself up with the gloss of a respected "brand." Kaplan teamed up with Newsweek to offer an M.B.A. Walden University named its college of education after former U.S. Education Secretary Richard W. Riley. And Grand Canyon University boasts the Ken Blanchard College of Business, after a well-known consultant whose book The One Minute Manager has sold more than 13 million copies.

For a sense of how big and how fast these programs can grow, take a look at another Clifford project, Bridgepoint Education. In 2005 Bridgepoint bought Iowa's Franciscan University of the Prairies. It had 333 students at the time. As of June 30, Bridgepoint's enrollment was 45,504, almost all online.

And while the Welch program won't poach from Michigan's applicant pool, it may compete at higher tiers of the B-school hierarchy than you might think.

Many traditional business schools are in trouble, the result of what Mr. Snyder calls a "strategic mess." Too many have tried to replicate the same model, with expensive faculties, expensive facilities, and expensive tuition, he says. They compete for a narrow slice of students globally and try to place them in jobs globally. Many are finding that a difficult path. You see manifestations of this in top students from countries like India staying home, in the use of more and more scholarships to fill classes, and in the overenrollment of students to cope with budget problems.

If Mr. Welch can pull off a quality program, Mr. Snyder says, students considering traditional colleges may ask themselves, "Why go to a pretty good school that charges a very high price?"

"I think this has the potential to not only be successful," he says, "but to be a competitive threat to schools that have hopes to be in the top 50."