THE FIRST AMERICAN EXECUTIVE EDUCATION PROGRAMS began in the 1930s, as world events began reshaping all aspects of business. One of the first was launched at the Massachusetts Institute of Technology in 1931, the same year that Herbert Hoover dedicated the Empire State Building and Joseph Stalin threw Vladimir Lenin out of the Soviet Union’s Central Committee of the Communist Party. A few years later, as the world braced for a post-World War II economy, Harvard, Stanford, and the University of Chicago followed with their own offerings. By 1958, universities were home to around 40 exed ed programs in all.
Today, exec ed is big business—Chief Learning Officer magazine recently noted that companies spend about US$200 billion annually on corporate learning. However, by many estimates, business school programs account for less than $1 billion of that amount. A recent benchmarking survey conducted by UNICON, the International University Consortium for Executive Education, indicates that about half of its 110 member schools worldwide have exec ed revenues below $7 million. One quarter of its members have revenues that fall below $3 million.
Moreover, recent research from AACSB, the EMBA Council, and UNICON—conducted in partnership with talent management firm Executive Core—suggests that business schools’ share in the exec ed market is actually decreasing. According to the report, “Future Trends in Business Education,” business schools are losing market share to corporations’ internal development initiatives and agile professional development firms using innovative delivery models and customer-focused strategies to meet companies’ increasing demand for proven results at lower cost. Many companies are opting to use these firms over business school programs. (For more on the report’s findings, see “Response to the Future” on page 50.)
Companies spend about US$200 billion annually on corporate learning. By many estimates, business school programs account for less than $1 billion of that amount.
The report emphasizes that business schools must adapt to these emerging challenges if they are to protect and grow their market share. While just a few schools have made this jump, others can build competitive exec ed programs—but only if they follow six essential guidelines.
1. RUN EXEC ED LIKE A BUSINESS.
One reason that business schools are capturing so little of the market is that too many are running their exec ed programs like academic departments in what is a highly competitive business space. Exec ed currently is dominated by corporate universities; programs offered by consulting firms such as McKinsey, PricewaterhouseCoopers, and Deloitte; and a handful of business schools with established exec ed programs such as Harvard, Duke, and IMD.
To be successful in exec ed, business schools must use the same pragmatic approach as the leading providers in this market. But business schools generally don’t act like businesses. They focus on constituents, not customers, and they don’t pay as much attention to revenues and profits. Instead, administrators must shield exec ed from university bureaucracy and keep their decisions for the exec ed program separate from their decisions for the business school as a whole.
2. CREATE THE RIGHT CULTURE.
An exec ed operation should look and feel like an actual business, with clear objectives, measures, and accountability. After all, corporate clients expect to send executives to programs that complement the cultures at their own companies. The staff and faculty working in the exec ed business also must be passionate about serving clients and do whatever is necessary to delight them—just like the staff at any customer-oriented business must.
3. ACCURATELY ASSESS YOUR BRAND AND CAPABILITIES.
To be successful in executive education, schools must know their true capabilities and have realistic views of how their customers perceive their brands. In 1995, for example, the University of Chicago didn’t offer executive education, but its administrators recognized that the school had a powerful brand and access to a robust executive market. They built a program based on those capabilities, and today the U of Chicago has a $20 million global exec ed business.
To see similar success, schools must ask these fundamental questions:
How far does the school’s brand reach? Is the brand regional (like the University of Minnesota), national (like the Moscow School of Management Skolkovo), or international (like INSEAD)? A regional player that tries to serve a national market likely will waste time and resources chasing clients that won’t materialize, while a national player that focuses too close to home will leave a lot of value on the table. The school needs to calibrate its business to fit its brand.
Will the program emphasize open-enrollment courses, custom programs and services, or online delivery and simulations? Schools that adopt an open business model—a shrinking category—always will be searching for new applicants, which requires a sophisticated marketing function. Those that focus on the custom business—a growing category—will seek out corporate clients, which requires consulting expertise. Programs that include online courses, simulations, 360 feedback, and webinars require technological capabilities. Most schools with established exec ed programs offer a combination of these categories, but many emphasize one over another.
Will the program focus on a specific niche? When a school is strong in a particular industry or area of expertise, it makes sense to capitalize on that in an exec ed business, much like Babson specializes in entrepreneurship, Michigan State in supply chain management, and the University of Texas in energy.
4. RECRUIT AND SUPPORT THE RIGHT LEADER FOR THE BUSINESS.
Major professional service firms hire CEOs with great leadership skills and strong backgrounds in business management—they compensate those CEOs fairly and provide them with adequate support. Business schools should do the same. A practitioner with a business consulting background will know how to maintain a business culture but might need help understanding an academic culture. A faculty member will be comfortable with the academy but might not know how to create a disciplined business culture in a scholarly setting. Leaders need the freedom and budget to invest in the right staff and infrastructure to launch and grow the business.
5. DEVELOP YOUR FACULTY.
One of the biggest challenges to developing a strong exec ed program might be motivating and enabling professors to participate. Many will say that they don’t have enough time, or they don’t feel it is an important part of a research professor’s role. Others will argue that their teaching loads are too great or that they don’t have the skills. When faculty aren’t enthusiastic about exec ed, it can be tempting to rely on outside expert practitioners to deliver courses—but no one can represent a school like its own faculty.
In that case, schools need to provide the appropriate incentives to motivate faculty to participate in exec ed, such as additional compensation or reduced teaching loads. Schools also need to provide peer coaching, workshops, action learning projects, and self-directed learning activities to help prepare faculty for the exec ed classroom. In the process, their faculty’s teaching will improve across all of their programs.
6. LEARN FROM THE EXPERIENCES OF OTHERS.
Schools that want to launch or expand exec ed programs can seek advice from peer schools, study operations at successful corporate universities, or join organizations like UNICON, which presents conferences, sponsors research, and conducts benchmarking surveys on best practices in exec ed. Boutique consulting firms also can assist with assessments, strategy, faculty development, marketing, and operations.
I’ve seen too many schools ignore these fundamental guidelines, leading to failures in their exec ed businesses. However, administrators who incorporate these guidelines into their strategies will position their schools to build strong exec ed operations and take full advantage of the opportunities that this $1 billion market has to offer.
William Scheurer serves as the executive director of UNICON. He also is the former director of the Executive Development Center at the University of Minnesota, where he served for 20 years, as well as the founder of the consulting company 3E - Executive Education Expertise (www.execedexpertise.com).
RESPONSE TO THE FUTURE
Not too long ago, business school graduate and executive education programs were the go-to source of training for corporations. But over the last few years, competing providers such as professional training firms, MOOC certification programs, and competency-based for-profit schools have been collectively capturing larger portions of corporate training budgets. This reality leaves business schools rethinking their offerings to better fill employers’ hiring needs.
Establishing what employers expect from business schools is the purpose of a new report conducted by AACSB International, the Executive MBA Council (EMBAC), and the International University Consortium for Executive Education (UNICON). With the help of Ohio-based talent management firm Executive Core, the organizations gathered information from 70 public companies and the HR professionals within them to learn the most significant trends affecting talent management—and the implications of those trends for business schools.
The report, “Future Trends in Business Education,” highlights just what companies want to see happening inside the classroom. For instance, those interviewed indicate that they want more customized training options, via online and face-to-face delivery, and more experiential learning opportunities. They also think that business schools needed to invest more in assurance of learning to make sure that students are learning the skills that employers need.
They note other trends that reached beyond campus, including increased demand for stronger partnerships with corporate universities and better alignment of content with companies’ existing providers.
In addition, these companies perceive that business schools invest “less time than corporations in finding new ways to increase the representation of women and other minorities.” They want to see business schools do more to promote greater diversity in their programs and in the workplace.
What do these professionals view as one of business schools’ biggest upcoming challenges? Program consolidation. As more competitors enter the market, many employers believe that the exec ed services at many business schools could merge into others—or could disappear altogether.
The main conclusion? Business schools need to adapt—quickly. The report noted that none of those interviewed said that they intended to spend more money on business school programs. Instead, they plan to allocate resources to internal training opportunities and partnerships with professional service firms, in amounts equal to—or more than—what they currently spend on business school-based training.
Visit UNICON's website to read the full 64-page report, which also offers business schools next-step recommendations for action.