"We are now seeing the real impact of globalization," Malefakis says. "Major U.S. business schools, to compete, have to reach globally."
Going global is one among a number of strategies that have helped U.S.-based executive education and executive MBA programs score gains despite shifting priorities by corporate sponsors. Some schools are trying to boost enrollment by actively recruiting more women, particularly to male-dominated executive MBA programs. Others are offering more distance learning options like online lectures. In non-degree offerings, custom programs designed for specific corporate clients continue to multiply.
Such efforts have helped non-degree executive education programs regain much of the income and participation lost during the long slump that followed the technology bust and the terrorist attacks of September 11, 2001. The latest survey of 43 executive education programs by the International University Consortium for Executive Education found that 84 percent saw revenue gains from 2005 to 2006, with 43 percent reporting increases of 10 percent or more.
"It came back very slowly and gradually, but it is back and it is doing quite well," says Bill Scheurer, executive director of the consortium. "Schools that stayed with it are in good shape right now."
Executive MBA programs, meanwhile, have seen applications rise despite a sharp cut in corporate sponsorship for students. The reason: Students are increasingly paying their own way, convinced that an MBA will advance their careers. According to the Executive MBA Council, about 35 percent of students in executive MBA programs were fully reimbursed by their sponsor companies in 2006, down from 40 percent in 2003. About 32 percent of students footed the entire bill in 2006.
The shift away from company sponsorship has been dramatic at many schools. At Columbia University, Ethan Hanabury, associate dean for executive MBA programs, says about half the students in the program now pay their own way. In 2000, the program was almost 100 percent company-sponsored.
The cost is not insignificant. The bill for tuition, fees, lodging and other expenses for a two-year EMBA program at Columbia runs $127,000. But the degree commands a premium in the corporate marketplace. Students who graduated an EMBA program in 2006 had a mean salary of $129,740, about 20 percent more than those entering the program, according to the Executive MBA Council.
With the drop in corporate sponsorship, self-funded EMBA students, who continue to work while pursuing their degrees, frequently jump to higher-paying jobs at different companies upon graduation. Columbia, like a number of other schools, now offers career counseling and coaching aimed at helping graduates land new jobs or use their degrees and new knowledge to win promotions within their organizations. In response, some companies that still pay require their EMBA students to sign contracts promising several more years of service after graduation.
"I think the big change [in EMBA programs] in the last seven years has been the decline in company sponsorship," Hanabury says. "It has had an impact on how we service our students."
Non-degree programs, on the other hand, continue to be paid for by companies looking to hone leadership and management skills or to address specific company issues. And while satellite campuses of U.S. programs in places like London and Shanghai have brought fresh recruits to executive education programs, the domestic situation faces some long-term challenges.
Fewer traditional students
Stephen Burnett, associate dean for executive education at the Kellogg School of Management at Northwestern University, says the recovery in non-degree executive education obscures fundamental demographic changes in the workforce that affect executive education programs. Those changes are one reason why the downturn lasted as long as it did.
"It’s taken far longer to recover than anyone expected," Burnett says. "When you look at the numbers, you begin to see that the traditional market for executive education has been declining in the U.S. since about 1999."
Historically, executive education programs, both degree and non-degree, have drawn from a pool of midcareer executives, typically males 35 to 39 years old, Burnett says. But the number of 35- to 39-year-old men peaked at about 10 million in 1999 and has since dropped by about 1 million. In addition, the number of MBAs granted each year has grown from 55,000 in 1980 to 140,000 today. Burnett says that suggests there are fewer executives without MBAs, who are the main targets of non-degree executive education courses. Finally, large corporations, the primary source of candidates for executive education programs, have shed more than a million jobs this decade.
"We as an industry have to face the fact that the sweet spot for executive education has declined very dramatically," Burnett says. "What’s really depressing is that it is not going to change for a while."
Despite those negative demographic and business shifts, demand for executive education remains strong as companies face an increasingly complex and competitive global business climate that requires highly trained and effective leaders. Indeed, the field of executive education has become more crowded as private providers, often linked to business consulting companies, launch or expand executive education programs. One of the largest private providers, Mercer Delta Executive Learning Center, reports its business grew 40 percent in 2006, thanks largely to its expanding international programs.
"What companies want is, ‘Tell me what the frontier is. Tell me what the best practices are. Help me change,’ " says David Dotlich, president of Mercer Delta Executive Learning Center. "The provider who does that the best will grow the fastest."
While Mercer draws much of its clientele from overseas these days—40 percent of its business is now outside the U.S.—the underlying interest from most clients is similar. Dotlich says companies want help identifying, training and preparing new executives for future leadership roles. That is particularly true in the U.S., Dotlich says, where corporate boards have begun pushing CEOs to identify future company leaders.
The emphasis on tying executive education to a company’s specific needs gave rise to custom non-degree programs designed and run for a single company. Those programs continue to expand, with 78 percent reporting growth in custom offerings for 2006 in the International University Consortium for Executive Education survey.
More than half of all executive education revenue now comes from custom programs. But traditional, open-enrollment executive education programs that teach broad management subjects to groups of executives from a number of different companies remain healthy, with 70 percent of open-enrollment programs reporting growth in the survey.
What that suggests to Grant Ackerman, associate dean of executive education at Columbia, is that companies are not so much interested in whether a program is open or custom, but rather in how it meets a specific need. Columbia has adopted a new approach in which it works with corporate clients to develop blended programs of open and custom programs. If, say, a company has a group of executives in which some need basic training in corporate finance and others in marketing, but all would benefit from a group project on managing change, then Columbia might develop a blended program of several traditional open-enrollment courses plus a custom course.
"My sense is that there will always be a need for open and for custom programs," Ackerman says. "Now it is just a matter of what is the best mix."
How programs are delivered is also changing. While classroom instruction remains the primary method of delivering lessons, many programs are adding ways of providing content and contact using computers and the Internet. In the Executive MBA Council survey, 43 percent of schools reported replacing some classroom hours with alternative delivery methods like online lectures or DVDs.
At the University of Michigan’s Ross School of Business, executive MBA students get a laptop as part of their tuition. The computer is preloaded with software that ties into university systems over the Internet, allowing students to do library research, chat with professors and work on class team projects. They can also view on their laptops DVDs of course lectures that the school produces. The distance learning methods have replaced some classroom sessions, although students still come to campus for a major part of their degree work.
Paul Velasco, director of instructional technology at the Ross School, says the program recognizes that EMBA candidates are midcareer executives holding full-time jobs who are trying to complete a degree in a relatively short period of time. "The mixture of residential and online or distance learning helps working professionals complete the program in a 20-month time frame," Velasco says.
Other schools are trying to tap into the online social networking trend to link students, professors and alumni. At Harvard Business School , the use of computer-aided communications is branching out from course team projects to broader networks involving the school’s faculty, staff, executive education students and alumni. The idea is that students would continue to participate in Harvard Business School online networks and sites after completing courses, sometimes serving as resources to others, sometimes tapping into knowledge that others might have, and sometimes just staying in touch.
"You have areas where people can go to get content," says Ralph James, executive director of executive education at Harvard Business School. "You have areas where people can comment on content. You have areas where people can ask questions and get answers. It’s a virtual meeting space. The critical part is facilitation. There is somebody there making sure that people who ask questions get answers."
A key asset for the school in its networking endeavors is its base of 60,000 alumni who are scattered around the country and the world. The school is trying to use the concept of social networking to knit together alumni and professors while also providing business content online, all aimed at promoting lifelong learning for its executive education graduates.
"Social networking takes place when people need to get together to form a community," says Lynda Applegate, a Harvard Business School professor of business administration who is developing the school’s Global Entrepreneurship Knowledge Network. "It has been very popular for meeting and sharing interest on a broad basis. What we are doing is tying it to business needs and curriculum that we develop. We are helping to form those groups and then we are providing tools and support so we are upgrading content."
During the next few years, schools like Harvard Business School and commercial executive education providers like Mercer plan to continue exploring new ways of using technology while also expanding geographic reach and adjusting to meet the needs of corporate and individual clients.
But while the demand for programs is solid at the moment for both degree and non-degree programs, so is the demand for quality instruction that can deliver clear results. New programs and new players in the private sector have sprung up to compete, giving consumers of executive education a wider universe from which to pick.
"In the past, executive education was restricted to the business schools," says Elaine Eisenman, dean of executive education at Babson College. "Now we have consulting firms going into it, private executive education firms and hybrids. Companies have many more choices today."
Workforce Management, January 15, 2007, p. 19-23 -- Subscribe Now!