Exec Ed: Learning To Lead

Technology is driving the demand for executive education--and creating lots of new options for companies

On a dark day in December, 1998, when the price of oil had fallen to its lowest level in decades, Archie W. Dunham, chairman and CEO of energy company Conoco Inc., made an unusual decision. Rather than close plants or cut spending at Conoco, Dunham decided to make a major investment--in his company's managers. He approved a new, comprehensive leadership-development program, called Trailblazer, for his senior executives. "Even though oil was at $10, it was the right decision," says Dunham. "You're going to be successful long-term if you have good people."

Once seen as an extra doled out in flush times for top managers, executive education is suddenly every CEO's favorite strategic weapon. At a time when profits are high but the ability of companies to attract and hang on to managers is low, Corporate America has concluded that investing in people is the way to stay ahead. These days, winning executives' hearts requires a lot more than ponying up a raise; it means letting managers develop on the job. "[Executive education] is an investment," says Martin G. McGuinn, chairman and CEO of Mellon Bank Corp. "Employees want it because it helps them to grow in their own careers."

FAKING IT. Executives are also looking for help managing the speed of change. Although hardly new, that trend has been exacerbated by the nagging fear of becoming obsolete in a world transformed by technology. "I've never seen businesspeople have to fake it more," says B. Joseph White, dean of University of Michigan's B-school.

But if technology is driving the demand for executive education, it's also revolutionizing the way it's delivered. Companies once had a simple choice between sending execs off to attend classes on a leafy campus or doing it in-house. Today, they have a plethora of options, many of them thanks to the Net. Even such traditional providers as Harvard business school and the Wharton School at the University of Pennsylvania realize that they must go online to compete.

Yet the new options aren't just coming from the elite B-schools that have long filled the demand for high-end exec ed. Today, the B-schools face an army of new rivals--consultants, Web-based learning companies, and freelance professors--eager to offer up "lifelong" learning. The surplus of choices means that sorting the wheat from the chaff can be a full-time job. "I get about six pieces of mail a day from exec ed vendors," says Stew Friedman, director of Ford Motor Co.'s Leadership Development Center. "It's hard to assess the quality."

That's why this year, for the first time ever, BUSINESS WEEK's executive education survey includes the key private and nonprofit companies in the market, along with our traditional B-school universe. Although still influential, B-schools are no longer the only game in town. Yet until now, little has been known about the scores of nonuniversity providers offering to educate Corporate America. To fill that gap, we've expanded our survey to include evaluations of 63 exec education providers, up from the 35 university programs we ranked in 1997. And to insure the broadest coverage possible of this rapidly growing market, our Executive MBA survey has also grown to take in 100 schools, 39 more than last time.

The insights gleaned from the expanded survey make one thing clear: The unquenchable thirst for learning means that it's a great time to be in the executive education business. The average company spent about $10 million on internal and external executive development in 1998. Of those responding, 76% said they were sending the same number of execs or more to B-school programs than they did five years ago, while 79% said the same about private companies. Overall, spending on U.S. corporate training and education for managers rose to $16.5 billion, up 17% from last year, according to Training magazine. Moreover, 1998-99 revenues at the 63 providers surveyed by BUSINESS WEEK averaged $11.9 million, up 97% from 1994, with 43% of revenues coming from custom programs designed for one or a group of companies.

With the increase in spending, however, has come a new sophistication on the part of companies. They are much savvier about the changes they want to accomplish through exec ed--and not shy about calling the shots. Take the Trailblazer program, which Conoco University manager David J. Nelson set up by melding together four unlikely partners--London Business School, private firm JMW Consultants Inc., the nonprofit Center for Creative Leadership (CCL), and Conoco University, whose faculty includes executives such as CEO Dunham. The three-year program will put some 180 fast-trackers through three customized sessions in London and Houston over nine months, with Net-based projects in between. "We never got the sense that [one provider] had what we were looking for," Nelson says.

ONLINE RUSH. Conoco isn't the only company happy about the expanded possibilities being created. Some 78% of those responding to the BUSINESS WEEK survey said the quality of executive education had improved from five years ago. But the elite B-schools who have long dominated may have greater reason for concern: Asked for the first time who is the most effective provider of executive education, some 53% of those surveyed said that consultants were tops. Only 39% said the same of B-schools. It's a dramatic statement by companies, who are increasingly looking for the same bottom-line results out of their educational spending as they expect out of any other investment. That sentiment is forcing some B-schools to act like, well, consultants. At Indiana University, the executive education arm of the Kelley B-school spun off into a separate organization last January. "It will allow us the opportunity to run more like an independent business," says Camden C. Danielson, President of Kelley Executive Partners.

What other trends stand out? Among the providers, the biggest change may be the rush to go online. Through its Wharton Direct arm, for example, the prestigious Wharton B-school now teaches courses such as "Using Financial Statements" to students in 19 cities who interact via satellite and computer. It's quite a shift for teachers like John R. Percival, adjunct professor of finance, who must put on makeup and lecture into a camera these days.

Like many of the executives who turn to them for help, the universities approach the advance with some trepidation. They know that their basic "business model"--campus-based teaching--could someday be threatened by today's "clicks and mortar" strategy. But if they don't do it, someone else surely will. "We have been functioning and operating in the ultimate elitist environment for 1,000 years," says Meyer Feldberg, dean of Columbia Business School. [The Internet] "is the instrument for democratizing intellectual capital."

Online or off, who best meets the training needs of corporate management? Focusing exclusively on companies--the end users of all exec ed--we asked heads of executive development at 587 large global companies to rank the best in an online survey. We received 273 surveys back, for a response rate of 47%. The resulting rankings can be found on page 78 and above. A host of other information, including school profiles and extensive survey data, can also be found online at http://www.businessweek.com/bschools/exec_ed/index.htm.

For now, the B-schools remain atop the charts, although their perch is not as lofty as it once was. For the second time in a row, the winner in nondegree executive education was Harvard B-school, with Michigan Business School as runner-up. Coming in third was Wharton, followed by Northwestern University's J.L. Kellogg Graduate School of Management, and Stanford business school. Harvard's repeat as No. 1 comes in part from its vast array of choices. Even as it opens a new exec ed residential center on its lush Boston campus, it is also getting set to offer open-enrollment courses at its Menlo Park-based California Research Center. Moreover, Harvard has rapidly expanded custom programs, to 25% of revenues. And in a bold move, it is considering offering much of its exec ed to alumni and others on the Web.

The big surprise was the seventh spot, taken by the Greensboro (N.C.)-based Center for Creative Leadership (CCL), the only non-B-school to crack the Top 20. A nonprofit group with $51 million in revenues, CCL has long been highly regarded for its focus on strengthening leadership skills. Clients include such companies as General Motors Corp. As people skills have become top-of-mind, demand has soared. "The interest in developing leadership is very broad and very significant," says John Alexander, CCL's president.

The rankings in specific subject areas contained some surprises as well. In leadership, CCL also cleanly beat its B-school rivals. Elsewhere, the universities retained their lead: Harvard dominated in general management, Massachusetts Institute of Technology's Sloan School of Management took e-commerce, and France's INSEAD led in global business. But in the hot market for custom programs--those tailored to a company's specific needs--private company AchieveGlobal, a unit of The Times Mirror Co., took the No. 1 spot. Although primarily known as a training company that works with low-to-mid level employees, its tailored courses that also apply to higher level execs have wowed clients. "We feel like we got a product that was customized to exactly what we needed," says Glen C. Sunnergren, director of human resources at The Clorox Co. "We didn't get things shoved down our throat because it was prized research."

NET EDGE. Wherever they send their execs, the companies surveyed by BUSINESS WEEK were consistent in naming the subjects they want them to learn--how to become a leader, how to act entrepreneurially, and, especially, how to deal with the Net. That spells opportunity for those providers able to offer answers to e-questions. One example is PricewaterhouseCoopers' three-day program on e-business, designed with the University of Virginia's Darden School. Darden created eight live e-business case studies for the program, bringing in CEOs from the likes of Value America Inc. and Lending Tree.com to discuss their e-commerce strategies. PwC is now exporting the program to other B-schools so more partners can attend.

Will the renewed emphasis on exec ed outlast a downturn? In part, that may require companies to come up with a way to measure its impact in dollars and cents. Already, 30% of the companies surveyed by BUSINESS WEEK have tried to quantify their programs' success, though few report solid results. Yet Raymond V. Gilmartin, chairman and CEO of Merck & Co., thinks reduced turnover could be one measurement of his two-year leadership training program. "We are very pleased with our ability to keep talented people," he says. "You have to believe this effort is working."

Other qualities--such as improved leadership abilities--are surely no less valuable, even if not measurable. John W. Humphrey, chairman of The Forum Corp., a private-sector exec ed provider, thinks that the investment in people will pay off as they reach top management levels. "I think these are the golden years," he says. "We'll look back and say this is when companies tuned in to learning." In a world desperate for leadership, he may be right.