Obtaining a master’s degree in business administration has placed Carolyn Sweetapple on the executive fast track at North Shore-LIJ Health System.
The Great Neck, New York-based hospital network provided full tuition payment so she could pursue an MBA in quality management at Hofstra University in nearby Hempstead. Sweetapple has been promoted twice since earning the degree in 2008. Her latest climb up the corporate ladder came in May when she was named the assistant vice president of operations at North Shore-LIJ’s system project management office.
More so than the promotions, though, Sweetapple said the “cohort-centric” nature of an MBA program — small groups of upwardly mobile, like-minded executives across varied sectors learning together — proves invaluable. “You’re networking with different people and are immediately challenged to apply what you learn. I know it’s enhanced my critical thinking and my ability to synthesize complex ideas,” she said.
Sweetapple is one of more than 300 leaders to be given a full ride since Hofstra launched its MBA program in 2006. North Shore-LIJ’s generous investment in executive education stands in stark contrast to the prevailing corporate attitude. Only 26 percent of students in executive MBA programs received full sponsorship from their employers in 2012, according to a survey by the Executive MBA Council, a trade group based in Orange, California. That’s down from 33 percent who received it in a similar survey taken in 2008. The survey is based on responses from 3,200 students at more than 100 MBA programs.
Seventy years have elapsed since the first executive MBA was unveiled by the University of Chicago’s business school (now known as the Booth School of Business) in 1943. Yet companies appear to still be searching for a formula that connects the dots to the bottom line. “What’s the return on investment? It’s the question we get asked the most,” said Sarah Perez, executive director of EMBA programs at the University of North Carolina’s Kenan-Flagler Business School.
It also could be the wrong question to ask, she said. “Do employers reward and motivate their high potentials after they finish the program? Are they being challenged and given growth opportunities? If not, those new MBA grads may not stay for long — and that’s a real ROI issue for companies,” Perez said.
There is value in cohorts of leaders learning together, but more and more companies are unable to wait for an executive to finish a degree, said Jim Kauffman, a consultant with Development Dimensions International, a human resources consulting firm based in Pittsburgh.
“The key word is acceleration. Companies know if they wait around for leaders to mature, they’ll never be able to grow fast enough,” Kauffman said.
The recession is partly to blame for short-term declines in full corporate funding, although the changing nature of the employee-employer relationship is the biggest factor, said Michael Desiderio, the Executive MBA Council’s executive director.
“Executives are saying, ‘Listen, we want our people to have some skin in the game.’ The days of taking any class you want and having your company pay 100 percent are pretty much over,” Desiderio said.
Executive Education Minus the MBA
Only 18 percent of companies say they have sufficient leadership depth for sustained growth, according to “Global Leadership Forecast 2011,” a report by human resources consulting firm Development Dimensions International.
Adding MBA grads is one strategy, although the demand exceeds supply. Plus, lack of visibility may discourage companies from sponsoring an executive toward an MBA, said Jim Kauffman, an executive consultant at DDI. “If an executive is taking an MBA program, you can’t really see what it is he’s learning or how it’s relevant to his job.”
To accelerate the development of leaders, Kauffman said companies want their existing training to be reconfigured to “address specific business themes that drive growth,” such as speed to market or business agility. Chief executives want their top leaders to learn collaboratively in settings that mimic the “cohort” approach favored by MBA programs. That includes project teams charged with tackling real, pressing business issues.
Another trend: rising use of assessment centers — a method that uses simulations, in-basket exercises, case studies and feedback — to give leaders a “day in the life” experience.
Return on Retention, Recruiting
Still, North Shore-LIJ illustrates that companies in fast-moving sectors or disruptive markets are willing to make sizable investments in up-and-comers. Joe Cabral, the health system’s chief human resources officer, said the MBA program at Hofstra is one component of accelerated development of high performers. The initiative arose from the need to rapidly identify future executives, particularly with 20 percent of senior leaders nearing retirement. North Shore-LIJ plans to launch in January 2014 a similar MBA program in conjunction with Baruch College in New York.
“Getting an MBA gives them the three things they need: an understanding of the business side of health care, strong leadership skills and technical proficiency. In that order,” Cabral said.
The high-potential program includes first-time leaders all the way up to decision-makers, Cabral said. MBA candidates, though, are primarily experienced leaders at the team, operational and strategic levels. Cabral said 311 employees have earned an MBA at the company’s expense thus far. The diverse group includes physicians, nurses, allied health care professionals and administrators — even engineers who manage the infrastructure for North Shore-LIJ’s 16 hospitals and 400 ambulatory and physician practices in the New York metropolitan area.
Keeping the pipeline filled is a priority. Each year, 80 to 100 leaders are methodically chosen and encouraged to get their graduate degree, with North Shore-LIJ paying full freight. Those tapped for the program can elect to pursue an MBA with a focus on quality or health care, respectively, Cabral said.
He added that North Shore-LIJ spends an estimated $500,000 annually on MBAs alone. “For us it’s well worth the investment. If they don’t have it already, we encourage our high-potential leaders to go get their MBA — on us.”
The sizable investment is more than a nice gesture, though. The retention rate of newly minted MBAs is 96 percent, and 8 in 10 grads have advanced to positions of expanded authority, enabling the company to pivot quickly when planning for succession, Cabral said.
“Anytime you can reduce turnover, it’s a great thing. It’s also a great thing to be able to promote from within. And because we’ve seen such incredible growth in a short time, being able to deepen our leadership bench makes this program a no-brainer,” Cabral said.
While North Shore primes internal leaders, Deloitte Consulting LLP is trying to skim the proverbial cream off the annual MBA crop. The New York-based professional services firm is in the midst of aggressive MBA recruiting.
Approximately 500 full-time MBAs will be hired in 2013, along with up to 250 MBA interns in 2013, said Chris Franck, a principal at Deloitte who leads national MBA recruiting for its strategy and operations practice.
“We’ve seen an increase in our demand for MBA talent year over year, and we expect that trend to continue,” Franck said.
Deloitte is recruiting MBAs across all of its businesses, including positions in its human capital, strategy and operations and technology consulting practices, Franck said. MBA graduates with leadership skills, the ability to think analytically and outstanding communication skills are highly prized.
“And we’re always looking for people who have the ability to collaborate and work effectively on diverse teams,” Franck said.
Decades ago, sponsoring companies often paid full freight, but that is less and less common, experts say.
Tuition costs have been on the rise for several decades, prompting companies to review how, and in whom, they invest precious MBA dollars, said Patty Keegan, the associate dean of the executive MBA program for North America at the University of Chicago’s Booth School of Business.
“When we see companies invest in an MBA student, it’s typically done as part of an integrated long-term development plan for high potentials. It’s not a perk: Companies are much more selective than they used to be about whom they send through these programs,” Keegan said.
Keegan and other MBA program directors trace the drop in full funding to the early 2000s — around the time the dot-com bubble burst and sent the U.S. economy into a tailspin. It got jolted again when a global recession hit in 2007.
As they are wont to do in tough economic times, many companies slashed corporate training budgets, including MBA programs. They focused on short-term goals such as trimming expenses and finding new revenue, “and the idea of long-term succession planning kind of became an afterthought,” said Kristin Polito, director of the executive MBA program at Suffolk University’s Sawyer Business School in Boston.
Polito said MBA programs also may be a victim of their own success. MBAs graduate and return to work prepared to take on additional responsibilities, yet too often their employers haven’t mapped out a career path. The frustrated grads leave for greener pastures, which in turn causes frustrated companies to pare back sponsorship or pull the plug altogether.
“I won’t name names, but I know of some pretty blue-chip companies that have begun to question the value. Some even consider it a distraction for an executive, as opposed to really helping advance their leadership development,” Polito said.
Paying Their Own Way
Before receiving tuition, North Shore-LIJ’s MBA students are required to sign a contract that binds them to the company for two years. It’s actually a pretty common practice, although Perez said it can present a challenge for some organizations.
“A lot of students at UNC-Flagler prefer to self-fund,” Perez said. “That way, they don’t have to make a multiple-year commitment to a single employer” in exchange for full funding.
According to the EMBA Council, 39 percent of students self-funded their MBA pursuits in 2012, meaning they received no corporate financial sponsorship. That figure is up from 32 percent who self-funded in 2008, although the number is skewed by the inclusion of entrepreneurs who typically bear the full burden of tuition.
Chris Thomas bootstrapped his way through an MBA at Smeal College of Business at Penn State University, using competitive merit scholarships, a graduate assistantship and personal loans. Thomas said he has no regrets: It helped him land an internship with General Electric Co., which hired him full time as a marketing associate in 2007.
Thomas spent 2008 to 2010 learning a number of different sales and marketing functions at GE as part of a rotation-based development program known as the Experienced Commercial Leadership Program — the same program he now leads as global recruiting director. The ECLP, as it’s known at GE, is an accelerated leadership program for commercial professionals with five to eight years of experience.
People recruited for the ECLP are required to have already obtained an MBA or a relevant master’s degree. “GE has such a diverse product line that it’s important to find high potentials with both a business education and good consultative selling skills, especially in emerging market,” Thomas said, noting that roughly two-thirds of candidates recruited for the ECLP come from outside the U.S.
Do Raises Equal ROI?
Companies may not be providing the same level of financial backing as in previous years, but they are willing to pay for the brainpower associated with earning the degree.
The EMBA Council says the average salary and bonus package for an executive starting an MBA program was $141,000 in 2012. At its conclusion, the combined pay climbed to $165,000.
The increased earning power may not be a direct connection to bottom-line return on investment, but it does suggest companies still recognize the important role an MBA plays in a leader’s career.
“The fact that an employer is willing to pay these people more speaks well about the value of the degree,” Desiderio said.
That’s the case at Deloitte, whose aggressive MBA recruiting is being fueled by surging demand for services globally. People who have the tenacity to finish an MBA possess skills that are highly valued, Franck said.
“Because we are in a client-service business, we need professionals who have the confidence, curiosity and intellect to innovate solutions that solve the complex challenges organizations face,” Franck said.
North Shore-LIJ, meanwhile, is gearing up to assess its next batch of internal high-potential candidates. Cabral said the company solicits nominees each year from department heads, a process that generally yields 150 to 175 candidates. The list is whittled to about 80 to 100 finalists following a three-month vetting window. “We put a lot of rigor around the process,” Cabral said.
It’s the same process North Shore-LIJ used to identify Sweetapple, who was among the first 100 leaders handpicked to receive the fast-track development. She said it was both humbling and empowering. “Getting an MBA has had an immediate impact on my career and, of course, it makes me extremely loyal to North Shore-LIJ. Now it’s my turn to give something back to the company.”