Business schools weather the economic crisis by offering targeted, relevant leadership training.
Travel, top-class restaurants, even taxicabs. Discretionary expenses have been hammered in the last 18 months as companies look to cut costs and claw their way back to profitability. The chastened boards of AIG and others are forgoing their luxury retreats and private jets, and analysts estimate that such spending has been trimmed by as much as 30% in some sectors, and even higher in the financial services industry.
But what about training? Traditionally, executive education has been seen by many as a perk, a reward for past efforts and a bargaining chip for future loyalty. No longer. Both open-enrollment courses and customized training solutions are now an integral part of corporate strategy, as business schools and other corporate providers develop courses that are mission critical.
“Executive education is now an essential tool for implementing strategy”, explains David Newkirk, CEO of Executive Education at the Darden School of Business. “Take the example of a company like Westinghouse (now Toshiba) Nuclear. Their business is maintaining nuclear plants, an important, but limited market. They need to innovate in order to expand their services, and prepare for a future that may include new nuclear plants. Growth requires leadership from the middle, the teams of managers and engineers who are technically expert and operationally focused, and importantly are the ones in touch with the customer.
This is where executive training can make all the difference, developing in them innovation capability that includes customer understanding, business judgment, and a mindset of controlled experimentation. A new strategy requires new knowledge and behavior from employees. Changing knowledge and behavior is what we call education,” says Newkirk.
Despite an overall downturn in the industry (the Center for Creative Leadership was forced to cut 25% of their workforce earlier this year, and Columbia and London Business School have seen business falter), Darden has seen business slow by only 6%. The school has strong ties in the aerospace and defense industries and hasn’t been hit as hard by cutbacks in the finance and automotive industries. “I’m relatively optimistic for the return to growth,” says Newkirk. “Our faculty ensures that what we teach is absolutely relevant and applies to today’s problems.”
The economic downturn is providing as many new opportunities for business educators as headaches. Mannaz, one of Europe’s leading training firms, provides executive development for global clients, and has seen increased demand for training that addresses the current crisis. “It is essential that an institution’s development is directly linked to the agenda of how to survive,” says Executive Vice President Jørgen Thorsell. “The greater the challenge and change you face, the more call for leadership throughout the organization.”
It’s a formula that seems to work. Mannaz’s international revenues are up 10% year over year, and the firm has been commended by the European Foundation for Management Development for its leadership development programs at companies including IT firm Fujitsu. According to Thorsell, the success of these programs, even in an economic downturn, is based on keeping the learning absolutely relevant to day-to-day circumstances. “The key to the approach is to tackle employees’ real-life challenges in real-time, so that they can apply lessons learned to the workplace not just at the end of the program, but right the way through it.”
Darden’s Newkirk says there is also a growing opportunity for business schools to compete cost effectively with strategic consultancy firms. “We are able to teach strategy that applies to today’s problems, and the line between business schools and consultancies is blurring,” he says. “Just think how much would you pay a consultancy firm to develop and implement a brand new business plan.”
Many open-enrollment courses are now designed specifically to respond to current economic circumstances and evolving business models. Harvard Business School has developed a course called “Building Business in Turbulent Times.” HEC Paris and Oxford’s Saïd Business School now offer a course called “Reinventing Management,” which challenges existing organizational and social models, based on the premise that we have reached a watershed moment in business history.
And as the financial system begins to pick up the pieces, NYU Stern just completed a timely three-day course called “Integrated Risk Management,” taught by risk expert Ingo Walter, author of Restoring Financial Stability: How to Repair a Failed System. The course offered a general focus on risk management, and includes substantive content on the financial crisis. This sort of innovation appears to be working: NYU Stern reports a 60% increase in attendance from last year.
Interestingly, almost three-fifths of the attendees for the Stern course came from outside the U.S., indicating that businesses are ready to open the travel purse strings when a course offers the right content. But educators are also using technology to shape their training solutions for tighter budgets. Mannaz uses virtual coaching and e-learning modules as a component of their courses, minimizing the need for travel. And at Darden technology is being used to prepare students to get the most out of a classroom learning experience. “We’ll be working with a student for at least two or three weeks before a course begins to analyze their issues,” explains David Newkirk. “It means that on the first day of class we hit the ground running. In times like these we just can’t lose Monday morning.”
And that may be the most valuable lesson of all.