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Can Executive Education survive the downturn?

(article published in Forbes, April 2009)
For many in business education, the worldwide recession may perversely end up being good news. According to a global survey of more than 500 MBA programs by the Graduate Management Admission Council, 77% have reported a rise in applications from potential students this year, up from 64% last year. Harvard Business School, Kellogg at Northwestern University and the Sloan School at MIT have all reported double-digit rises in applications.

Elsewhere, though, the picture may not look quite as rosy. Many observers are suggesting that executive education, where organizations, rather than individual students, usually foot the bill, will be hit hard as corporate budgets come under ever tighter scrutiny. But is that really happening?

Not according to Susan Cates, associate dean of executive development at the University of North Carolina’s Kenan-Flagler business school. “Executive education isn’t a luxury in tough times,” she says. “When economic times are difficult and you’re asking your team to do more with less, it’s even more important to invest strategically in your best people. Innovative companies use executive development to tackle strategic issues, and that approach shows clear return on investment on the bottom line, as well as on the human side.”

But are companies actually doing that? They are at UNC, Cates says: “Custom program revenues for our fiscal year ending in June will be up more than 15% over last year.”

At Yale School of Management, Jeffrey Sonnenfeld, an associate dean, takes a similarly positive, even bullish, attitude. “Executive education will remain alive and well as long as schools can forge a dynamic learning partnership to embrace changing strategies,” he says, “rather than try to squeeze more pennies from traditional learning models.”

Both in the U.S. and abroad, executive education’s apparent resilience seems to come at least in part from the changes it has undergone in recent years to adapt better to client needs.

“The role of executive education is shifting,” says Paul Kirkbride, associate dean at Melbourne Business School, a leading institution in the Asia-Pacific area. “In the past, its focus was to provide managers with management knowledge and prepare them for promotion, and it was also used for reward and recognition, as a staff retention tool. Today, customized executive education is about moving the needle in terms of business outcomes. It starts with organizational strategy, followed by developing people to achieve that strategy. Thus we see the current market as a business opportunity rather than a threat. Our clients see developing their people as a way to motivate and retain talent and create a competitive edge to help attract new talent.”

His optimism seems to be translating into reality. His school’s revenues from executive education in the first quarter of 2009 were at roughly the same level as a year before, despite the downturn.

Yes, executive education may help attract and retain key employees, as well as serve to focus them on the future rather than the difficult and demoralizing present. But how effective is it, really? According to Tony Goodwin, who heads up Antal, a global management recruiter, such a tool for motivating high-potential staff is more important now than ever.

“Straight financial remuneration is under pressure right across the world, and that means employers have to think more cleverly about how they secure the best talent,” he says. “Despite the downturn, the war goes on for talent that can help businesses not just survive but actually flourish. But with costs under pressure in most companies, the most able and enlightened professionals aren’t just looking at the number on the paycheck or the model of company car. They’re looking for evidence that a prospective employer is genuinely committed to their career development. Ongoing executive education can definitely help get that message across.”

Many business schools expect open enrollment courses – readymade exec ed classes offered throughout the year – to be hurt by the downturn. “Demand for that type of business education won’t come to a halt,” says Bertrand Moingeon, deputy dean of executive education at HEC business school in Paris. “But I do expect it to be relatively flat, at least for the rest of 2009. That said, our flagship courses on leadership and strategic financial management are being seized by firms both large and small that need strong and capable leaders and are committed to effective succession planning.”

Professor Moingeon believes that the emphasis for the foreseeable future will be on custom programs tailored to specific groups and businesses. Rather than fearing retrenchment, he is forecasting growth. “In this sort of business environment it’s vital that companies take a step back, evaluate the big picture and work out how to react to extraordinary circumstances. Our role is not to try to provide some sort of toolbox for fixing individual problems but to give an opportunity to reflect on a company’s current practices and circumstances and then work out a future strategy and how to implement it.”

Still, isn’t that a tough sell right now? “Absolutely not,” Moingeon says. “To be honest, it used to be, but not anymore. Because of what has happened over the past year or so, more enlightened organizations see that it makes perfect sense to reinvent the way they manage themselves.”

So for top business schools the financial crisis may be a catalyst, affecting not just how their clients operate but how the schools themselves operate. As Moingeon puts it, “If what we provide is viewed simply as training, then in this environment we are vulnerable. We have to be seen as integral to clients’ strategic development, a true business partner that creates real value. If we can communicate that message effectively, 2009 may end up offering a whole new range of opportunities.”

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About symondsgsb

Matt is chief editor of MBA50.com, a website dedicated to the world's outstanding business schools. He is an internationally recognised business and graduate school expert, consulting to the world’s top business schools, and has written for many of the world’s leading publications including : Forbes, The Economist, BusinessWeek, BBC, Newsweek, CNBC, America Economia, Washington Post, The Independent, Boston Globe, Handelsblatt, 21st Century Herald, South China Morning Post, Vedomosti, San Francisco Chronicle, Expansion, Beijing Daily. Matt was Co-Founder of the QS World MBA Tour Matt is co-author of Getting the M.B.A. Admissions Edge, a B-school admissions bestseller sponsored by Goldman Sachs and McKinsey. His new individual school guides will be available in the fall.

Discussion

2 thoughts on “Can Executive Education survive the downturn?

  1. I think so. A lot of programs have developed additional channels of delivery, such as 1on1 coaching with executives and on site corporate trainings. More in http://www.execedprograms.com

    Posted by lightlumina | May 3, 2009, 9:29 pm
  2. I would have to agree that executive education demand is up. We have seen significant increases in our profits over the last 6 months.

    Posted by Shaun Killian | June 20, 2009, 3:14 am

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