Back to B-school: CEOs are turning to custom-designed programs at top schools to educate the senior ranks.
After 10 days of leadership and management training, one "virtual" team of managers--who had not worked together previously--were tasked with presenting their concept of a key company strategy, with specific solutions, to the company's very real board of directors. It was the time of reckoning, and Franz admits he was nervous.
He needn't have worried. The chairman of Osram Sylvania's board was thrilled. "I would have paid $1 million to McKinsey for each of these ideas," he said at the time. Given what the company paid, Franz notes, "I saved him a whole lot of money."
Those numbers are music not only to Franz's ears but to those of Tom Hambury, who directs the executive education programs at Cornell University's S.C. Johnson Graduate School of Management. His school helped develop and facilitate the global program for Osram Sylvania.
Hambury, like business school program executives across the country, faced a whole new world several years ago when the economy tanked, travel dried up after September 11, 2001, and companies decided they didn't need to send their budding executives to fancy business schools for extra training.
Those so-called open-enrollment training programs--weeks or months of on-campus, course-driven executive training--had a lot of empty seats starting in 2001. "With airfare, that week on campus was a $12,000-per-employee expense," Hambury says. "If you were running in the red, that was something you'd cut out pretty fast. And the companies did."
So MBA programs of many stripes--including prestigious, high-ticket programs like the University of Pennsylvania's Wharton School, up-and-comers like the University of Maryland's Smith School of Business, and regional powerhouses like the University of Wisconsin's School of Business--decided to funnel more of their efforts into what are known as custom or tailored executive training programs.
The nation's business schools began marketing these client-driven programs to CEOs, often starting with those who were alumni or with whom the schools already had working relationships. The strategy seems to be working. The custom programs are making money for the business schools, and executives are finding a rich vein of affordable training expertise that often has benefits beyond price.
The programs vary widely in terms of focus, but generally land in one of three areas: leadership development, specific strategic or core business issues (and these often involve case studies) or general management training.
Such customized programs offer a host of benefits, including training targeted specifically to the issues facing the company. They also allow the firm's top executives, including the CEO, to be involved in program development and presentation, and in determining such variables as the size and training location, depending on needs and budget. They can also control the follow-up once the course is concluded.
It's a package Hambury says outclasses training offered by consultants. "I can give a CEO a much better deal--because I don't have to advertise--than I can in a regular executive education program, and I can truly customize it for you," he says. "And, unlike with consultants, you can have a role in the development of the program and have your senior officers on the floor."
Though custom programs can sometimes be more affordable than hiring top-flight consultants, they range widely in price--between $12,000 and $70,000 a day--depending on the level of up-front customization sought, says Steve Feld, director of executive education at the Smith School of Business. The programs become more expensive, he says, when case studies and company-specific assessment tools are included, as they consume more high-paid faculty members' time in preparing the program.
There also can be downsides other than expense. For one thing, although program directors don't like to acknowledge it, the schools don't always have the specific expertise that companies need, particularly when it comes to technical training. Osram Sylvania's Franz said he stopped sending executives to one business school program because its faculty lacked expertise in manufacturing and supply-chain management, which was critical to the company's strategic development. "It didn't focus enough on what we needed," he said.
So what kind of program might work best for your company's needs? As one business school executive says, "there are as many programs as there are companies," but here are some of the most typical custom or tailored approaches to executive education.
Send Them to Boarding School
These custom, on-campus programs, often a week or 10 days long, are increasingly popular with companies, especially those that are "in transition" and seeking to coalesce a management team and establish a common management culture and language. The University of Virginia's Darden School of Business holds many of its custom programs on campus, partly owing to the beautiful geography--and the out-of-the-way location--of the rolling campus in Charlottesville, several hours from Washington, D.C. "It's a self-contained environment. People come here to get away from the hustle-bustle activity of their week and all the conflicting demands," says Lou Centini, senior director of the executive education program for the Darden School.
Darden works with about 20 companies, many of which are repeat customers, in setting up custom programs. Often, Centini says, these companies are changing direction, seeking a new customer focus, for instance, or looking to improve the bench-strength of their management team. In training sessions, companies will often examine case studies on strategic business issues that managers focus on during the week, and they bring the solutions back to the company to implement. "Many of our programs really are about transformational change," says Centini. "How do they bring into the fold new lines of business or new managers and have as smooth a cultural transformation as possible?"
PepsiCo, the world's fourth-largest food and beverage company, has been working with the Darden School in developing customized executive training programs for several years. CEO Steve Reinemund, having received his MBA from Darden in 1978, began in 2002 by bringing 40 vice president-level executives to the Charlottesville campus annually for strategic and leadership development training. (The most recent round was held in late April.) The program is built around 17 leadership competencies, 10 of which are especially important for executives, focusing on such things as innovation and "change leadership." Case studies are presented. Reinemund is a huge supporter of the program; not only does he present at it--CEOs often kick off such programs--but he attends each of the sessions throughout the week. "They are blown away that Steve is there the entire week," says Paul Russell, PepsiCo's vice president of executive learning.
Though Russell calls it a "PepsiCo program," developed with Darden, the partnership between the school and the company provides executives with a better program than they would have developed on their own. "We've taken the best of what we do, and the best of what Darden does, and combined it to create a meaningful development experience for our leaders," says Reinemund.
Follow-up is extremely important for such programs, Centini and other program executives say, and PepsiCo has taken that advice to heart. "Steve is trying to build a community of leaders to keep them together so it's not a one-time deal," says Russell. The PepsiCo program has scheduled benchmarks: a follow-up six months after the session, a major conference call on a specific topic within a year to 18 months, and for the class of 2002, at the two-year mark, a follow-up session in London.
On-campus sessions have the benefit of helping establish a team of leaders, especially if they are geographically diverse or have differing strategic roles within the company, program executives say. "Our programs are designed to equip those leaders to go back to their units and be able to achieve the goals that the CEO and his or her top team have established," says Ethan Hanabury, associate dean for executive education at Columbia University's business school.
Such programs, though not intended as perks, can raise morale, particularly among up-and-coming executives, who enjoy access to corporate leaders they may not otherwise have. "They get the CFO for a whole day," says John Kenyon, senior vice president of engineering at Hughes Network Systems in Germantown, Md., which holds programs at the Smith School. He adds that on-campus training can communicate just how seriously the company takes the exercise. "If you send them to campus for a week, that says it's important," he says. "And they can't be interrupted."
These custom, on-site corporate programs can be more affordable, and often are sought by companies when there is a specific management need or logistical application. Many enterprises work with business schools to set up such programs when they are facing a shift--say, in a product or service line--and want to educate their management quickly, and then pass along the information to others in the company. One of the benefits of such programs, says Feld of the Smith School, is that they're replicable. "Companies get a program that's exactly what they have defined, and they can do it again and again."
With in-house programs, companies tend to use more of their senior executives in training, which can be a plus, business school executives say. And it's usually easier to bring together teams of employees from different disciplines--sales, marketing, the technical side, human resources--for broad-based issues.
Many firms seek specific training from business schools when they are in transition, following a consolidation, for example, or after a significant shift in focus in the business. Centini recalls one Darden client, a large bank that had been on an acquisition binge, buying small community banks. The training focused on bringing the smaller banks into the fold while ensuring as smooth a cultural transition as possible. "A lot of it is very strategic," he says.
While it's natural for companies to seek custom training when they are at a critical transition point, several business school executives warned against this tendency. "Generally, we hear from companies when they are in crisis," says Feld, who, before joining the faculty at the Smith School three years ago, was on the faculty of Wharton's executive education program. "That's actually the worst time to do it; the best time is when you're not in chaos, because that's when you can best plan for the company's future."
Learning in a Global Setting
Increasingly, as U.S. companies become more globally oriented, they are seeking training in international locales, and business schools are happy to help set up these customized programs. Custom programs work particularly well for bringing together diverse groups of employees from around the globe who seldom interact because of their geographic distance but who are working on common programs or strategies. Some firms that seek custom training on campus often branch into international training for overseas managers. United Technologies, the multinational technology firm, runs programs through the Darden School in Europe and Asia, as well as at the company's headquarters in Connecticut.
Centini of the Darden School says that United Technologies was hoping to improve its management bench-strength through the global program, and to further identify future leaders for international sites. The two main reasons that companies turn to business schools for help in global training, he notes, are because they want to highlight a global dimension or strategy or they want to bring together a "critical mass" of managers in various European and Asian locales. Germany, he says--a popular site for such sessions--makes more sense than Charlottesville, Va.
Companies like Sony and Volkswagen have opted for programs at the IESE Business School in Barcelona, which takes students on a whirlwind tour of the world's tech capitals, from Barcelona to Silicon Valley to Shanghai. (See sidebar, page 44.)
Pharmaceutical companies, which tend to have many sites around the world, are large users of custom global programs, said Bill Klepper, academic director of executive education at Columbia's business school. Often such firms bring executives together to coalesce a strategy for introducing new drugs. "The question is, what will it take to align the various functions of the business to make for a powerful launch of the product?" he says. "We bring together a team of executives from each of your function areas, and we develop a session focusing on the strategic priority of a successful launch."
Whatever the strategic purpose of executive MBA education, CEO involvement can help keep it on track.
RELATED ARTICLE: CUSTOM CLASSES
* Columbia University Graduate School of Business
Executive Education Program
New York, N.Y.
* S.C. Johnson Graduate School of Management
* Robert H. Smith School of Business
Executive Education Program
University of Maryland
College Park, Md.
* Darden Graduate School of Business
Executive Education program
University of Virginia
877-833-3974 or 434-924-3000
* University of Wisconsin Graduate School of Business
Executive Education program
RELATED ARTICLE: BANG FOR THE BUCK
A few tips for making your custom executive MBA program work for you:
* Get involved. The CEO and/or other senior executives should be involved in the key aspects, such as the choice of school, design of the program and whether to hold it on campus or off-site. Be specific about your needs and goals, and help design the program.
* Negotiate price. Business schools need this income stream to replace lost income from open-enrollment executive education programs. To win your future business, they may be willing to make some deals.
* Shop around. Don't rely only on contacts with business schools with which you already have relationships. A business school's specific expertise could be critical to a specific project. Solicit contract proposals. Interview key faculty members to make sure they'll be a good fit with your management team.
* Be a student in the program. Or have your most senior executives participate if you cannot. Business schools are nearly unanimous on this point: If the CEO visibly supports the programs, they have a much greater chance of delivering results. "Without senior support, the returns of the program drop dramatically," says Ted Beck, associate dean for executive education at University of Wisconsin's business school.
* Follow up in measurable ways at regular intervals. Incorporate such follow-up and feedback from participants into the design of future sessions. If the business school is reluctant to make those changes, look for another program. After all, in this case, you're the customer.
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|Publication:||Chief Executive (U.S.)|
|Date:||Jul 1, 2004|
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