State of the Sector: Executive Education

    Now things are looking up. After more than three lean years, university executive education programs are welcoming back corporate customers, with most schools reporting anywhere from 3 percent to 10 percent revenue growth in the 2004-05 year. Much of that growth is coming in this pronounced trend: custom programs tailored to the needs of individual corporations.

    And with this trend comes a greater expectation for some form of ROI measurement. "The first thing they want is an ROI," says Stephen Flavin, acting dean of executive education at Babson College in Wellesley, Massachusetts. "It’s tough (to measure)."

    Flavin notes that ROI is one of the first things companies want to know when they shop for schools. Like most executive education program directors, he has become adept at equivocating on the subject. Learning, he tells clients, is not something that can be easily quantified, like profits and losses.

    On the global front, expanding Asian economies, particularly those in China and India, are sending an increasing number of executives to U.S. universities for training. The University of Michigan reports that about 30 percent of its executive education enrollment is now foreign, with more than half of that total coming from Asia. At Stanford University, the total is even higher; about 50 percent of its participants come from outside the United States.

    (This increase comes at a time when colleges are seeing a drop in foreign enrollment in advanced-degree programs. A study released in January by the Council of Graduate Schools found a 6 percent decline in first-time enrollment of international graduate students from 2003 to 2004.)

    Asian companies tend to have a different focus from their American counterparts. While U.S. firms increasingly want customized programs for exclusive use by large groups of their own executives, foreign companies are more interested in standard, open-enrollment programs that can be attended by a few executives at a time. The trend reflects the difference between the mature U.S. economy and the emerging ones in countries like China and India.

    The rebound in executive education and the rise of custom and global programs reflect both a strengthening economy and a shift in how corporations use universities for training and development. Another major trend is increasing demand from corporate clients for accountability. Companies want to know what they get for their investment besides better-educated executives. Schools across the country have tried to develop ways of measuring results while also pointing out that education is not something that can be easily or accurately quantified.

    Corporations are turning to universities to help prepare managers for higher-level jobs. But instead of relying solely on open-enrollment courses, in which executives from different companies convene for lectures and work on projects directed by faculty members, companies are choosing custom programs crafted to meet their specific needs and open only to their employees.

    Another expectation of U.S. companies is for hands-on help from university faculty, including long-term mentoring. Columbia University, for example, offers follow-up coaching as part of its leadership-training programs for top executives.

    "We have had a huge growth in coaching," says Ethan Hanabury, associate dean for executive education at Columbia. "I think it has become a fairly common practice."

    Columbia recognized the trend early and shifted emphasis and resources from its open-enrollment programs to custom programs. The result is that the school managed to ride out the recession with almost no loss of revenue.

    The use of custom programs is the result of a long evolution in executive education that began with non-degree management courses offered by business schools. As companies got more experience in executive training, some developed their own in-house "universities" to offer company-specific training in addition to open-enrollment programs at outside universities.

    Schools began adapting to the new demands. Stanford University first offered custom programs four years ago and now has about 30 percent of its classes in that field. Many other universities currently do more than 50 percent of their work in such programs.

    The trend toward custom programs has made business school executive education operations look increasingly like training and development consulting firms. The University of Michigan, for example, spent nearly eight months studying Spectrum Health of Grand Rapids, Michigan, before designing a custom program that used a combination of university professors and Spectrum’s top executives as lecturers. Groups of 20 to 50 Spectrum students now spend 10 days on campus over a period of six months learning both business management methods and the particular strategies employed by Spectrum.

    "We are their outsourced provider of in-house education," says Raymond Reilly, Michigan’s associate dean for executive education.

    The push for more company-specific training reflects an increasing demand for concrete, measurable results, a demonstrable return on investment. But even with custom programs, measuring ROI is tricky.

    The University of Pennsylvania’s Wharton School of Business, for example, offers a computer-based tracking system for its clients that lists goals and projects they hope to advance. Participants are asked to continue updating the database after they complete their course work, noting not just what was completed but also what the results were. Company officials can then access the data.

    "Our business is booming," says Katie Wiesel, director of Wharton’s custom executive education programs.

    Jon Spector, vice dean for executive education at the university, is one of many who point out that business results are more qualitative than quantitative. "But when you step back as a senior vice president of strategy and look at 250 activities and see that a large percentage resulted in a good job, then you can feel you had an impact on the business."

    Babson clients have used systems similar to the one employed by Wharton to help track results. Siemens, the worldwide electronics company, sends executives through a custom program at Babson where they sift through project ideas and strategies. Some end up being funded by the company, some are dropped. Siemens tracks them all with a database to determine whether the Babson experience helps launch successful and worthwhile initiatives. The results have so far been good enough for Siemens to remain a Babson client.

    While that kind of tracking can provide corporations with some concrete feedback, it is still a long way from true ROI. The bottom line, Flavin says, is that the benefit of executive education--even programs tailored to the needs of companies--cannot be neatly quantified.

    "This is a cost of doing business," Flavin says. "It is very important to future managers."

    At Columbia, one of the most expensive programs is the senior executive program, a one-month course for top-level executives that comes with individual coaching for every participant. The price: $36,000.

    In many major universities, $7,500 to $10,000 will buy a week of instruction in an open-enrollment program. Schools charge extra for custom programs.

    And prices have been going up. At Stanford, prices for open-enrollment courses have been rising an average of 2 percent to 3 percent per year for the last two years. But that hasn’t stopped program growth.

    "I’ve been here seven years and we increased prices every year," says Gale Bitter, Stanford’s associate dean and director of executive education. "We did a study three years ago where we asked the question, for the price, what is the value? Everyone said the value was greater than the price."