The Education Edge

After several bleak years, companies are jumping back into exec ed programs -- but they want them their way. Plus: Based on surveys of alums and program directors, BW ranks the best programs

Back in 1997, when Habitat for Humanity International's Ted Swisher returned to his Americus (Ga.) office after a six-day executive program at Harvard Business School, he had only one regret: that his vast network of colleagues hadn't attended, too. The insights and perspective he gained would be invaluable for senior staffers who manage the housing nonprofit's 2,100 worldwide chapters, but Swisher figured the program's cost -- thousands of dollars per person -- was way out of reach for the largely volunteer organization.

So Habitat continued to hold its training sessions in church basements and community centers, plodding through the nuts and bolts of raising money and selecting families to build homes for. Every few years, the group sent another exec to the Harvard program and again, the idea of partnering with Harvard would tantalize. But Swisher, Habitat's vice president of U.S. affiliates, wanted more for his staff. So last fall, Swisher decided to plunge in and ask the prestigious school to cut Habitat a deal. It worked. Harvard offered the group a three-day program at cost, nearly all 20 faculty members involved agreed to teach for free, and a grant helped Habitat winnow the cost to just $500 per participant. This June, Harvard played host to its largest exec ed crowd yet, some 400 of Habitat's senior staffers and field advisers. "We wanted to step back and look at the big picture," says Swisher. "The experience was enlightening and affirming."

It's that flexibility and impact that thrust Harvard into the No. 1 spot for executive education again this year, a perch it has held since 1997. Since then, the school has increased the number of open enrollment programs it offers from 56 to 80 and continues to wow the corporate world's most senior managers with its Advanced Management Program, a sort of mini-MBA. Harvard also has remained a powerhouse in leadership, strategy, and general management, according to the companies that rated executive education providers for BusinessWeek's biennial ranking, which for the first time ranks open-enrollment and customized programs separately.

Corporate managers and human resources directors from 134 companies in 20 countries responded to BusinessWeek's survey of executive education this year. Their responses helped form the basis of the rankings of the open and customized programs. All told, the companies sent more than 21,400 employees to courses and spent some $210 million in training dollars at B-schools and non-university-affiliated organizations such as the Greensboro (N.C.)-based Center for Creative Leadership and the American Management Assn. in New York. That comes to about one-third of total revenues reported by exec ed providers, or $662 million in 2002-2003. BusinessWeek again presents an exclusive ranking of the Top 25 Executive MBA programs. Both rankings were completed in collaboration with Boston-based Cambria Consulting Inc.

WANTED: RESULTS. Next on the exec ed list is the University of Pennsylvania's Wharton School, ranked No. 2 in open enrollment. The school's partnership with INSEAD (No. 5) has strengthened its position with global companies and its longstanding reputation as a finance powerhouse continues to woo managers to its Philadelphia campus.

At No. 3, the University of Michigan Business School gets credit for helping manage change and teaching companies to think through new ways of competing. And Michigan may have some of the freshest ideas about executive education, as the school revamped its offerings and has begun to link up with other campus departments and professional schools to offer jointly taught courses, like its new program in health-care management and leadership development given by faculty from the business school, School of Medicine, and School of Public Health.

For corporate respondents, getting tangible results from executive training was more critical than ever. After several bleak years, many companies have been pressed for profits and have scaled back their once-robust training budgets. That's particularly true for open enrollment programs, which can cost anywhere from a few hundred dollars for a day-long class to more than $50,000 for a six-week intensive seminar for senior managers. Those are often offered as perks for up-and-coming managers -- only to be cut when budgets are tight. Still, schools say the half-empty classrooms of the past two years may not stay that way for long. At many schools, including Harvard, University of Michigan, and Northwestern University's Kellogg School of Management, for example, open-enrollment courses for the fall are filling up -- and some are even selling out again. "[The numbers] are beginning to build back up as companies are starting to look for help," says Stephen Burnett, associate dean for Kellogg's executive education programs. Two new programs that the school has started in the past year -- Kellogg on Branding and Women Director Development -- are fully subscribed in their first go-round.

But some companies, feeling huge financial pressure, are upending decades of corporate tradition and slashing their training spending nearly completely. Ford Motor Co. (FORD ), for one, canceled many of its executive education programs 18 months ago and decided to hold back spending until managers could decide what exactly they wanted to get out of executive training -- and how it would help their business lines. Some other companies, like Boeing Co. (BA ), are bringing leadership training and other programs in-house, hardly using outside providers at all. Some employers, though, reluctant to gut everything, are demanding more from the schools. They're asking for coursework to be custom-designed and for exec ed providers to home in on internal business challenges, rather than have their execs spend days away from headquarters with managers from other companies.

In fact, nearly 42% of respondents said they were sending fewer employees to open-enrollment programs than they did five years ago, citing an unclear return on the investment and courses that are too generic and therefore not helpful enough once an employee is back on the job. But rather than abandon training altogether, some 50% of respondents said they were sending more people to customized programs. These programs can take weeks or months to design and are typically focused on a company's particular problem, challenge, or leadership goal. Examples are tailored to a company's industry and circumstances, coursework asks participants to tackle real problems, and employees attend with their peers.

As more and more companies are turning to such programs, B-schools and other exec ed providers are scrambling to meet their needs -- and employers are increasingly shopping around for the provider with the best deals. It's not unusual, say exec ed program directors, for a company to ask for proposals from a dozen or more schools.

That's why, for the first time, BusinessWeek was able to rank the Top 20 programs in each category. This year saw huge momentum for providers of customized executive education -- with full programs that can cost $5,000 to $10,000 per participant for a weeklong course. For the Top 20 providers on our list, custom programs were often more than 50% of revenues, topping $190 million.

Atop the new customized-curriculum ranking is Duke Corporate Education, the for-profit spin-off of Duke University's Fuqua School of Business, which handles all of the customized programs for the university. Not too shabby for a company that last year -- despite good reviews from clients -- looked as if it might have to fold itself back into the university because of sagging revenues and a slump in the executive education market. But President Blair Shepard was able to persuade administrators to give him more time.

The wait for a better climate may be paying off. Now, Duke Corporate Ed. takes in more revenue than all but two other schools on the list and has wooed some B-school professors to come work for the group full time. "We are to a business school what a university [teaching] hospital is to a medical school," says Shepard, adding that Duke Corporate Ed. is made up of 60% academics and 40% experienced managers. That mix allows for a successful melding of theory and practice. Duke Corporate Ed. won high praise from clients who say the group has helped them with everything from transforming strategies to integrating disparate cultures after business units have merged. For the 2002-03 fiscal year, the group made money for the first time and raked in $24 million in revenue, up from the $8 million it took with it from the university in the spin-off three years ago.

Harvard took the No. 2 spot in the custom ranking, winning kudos from clients for its extensive online tools, called Harvard Manage Mentor, helpful lessons on management and leadership, and courses and lectures by its marquee faculty, such as always-in-demand innovation guru, operations management professor Clayton M. Christensen. Also available to corporate clients: Coursework and notes are posted online after they complete their program. At No. 3 on the list is Switzerland's IMD, which served 70 clients last year and was cited for its global business and leadership courses.

NEEDED: LEADERSHIP. A number of exec ed providers, including Harvard, Wharton, Northwestern University's Kellogg School of Management, and University of Virginia's Darden School, excelled enough in both custom and open-enrollment programs to show up in rankings. The Center for Creative Leadership is the only private provider on both lists. In open enrollment, it climbed from No. 13 to the No. 4 spot. And, impressing custom clients with its depth of offerings in leadership and management development, it made the No. 7 spot in the custom ranking. "The work they do there is like no other school or organization. It's well thought out, and the programs have impact," says Deepak Sethi, vice-president for executive and leadership development at publisher and financial information company, Thomson Corp. (TOC ), which handles much of its training in-house but occasionally supplements with outside coursework.

Unlike a B-school, CCL focuses only on corporate leadership issues, skipping the hard-core academic lessons. Over the past two years, what with the spate of corporate scandals and profits in peril in many industries, "there has been a lot of interest in leadership development as a strategic imperative," says CCL President John R. Alexander. CCL offers more than 400 open programs per year but almost half its revenues last year came from its custom programs, designed for more than 170 clients in 2002-2003. What are custom clients asking for most? Development of "bench strength" to take future leadership roles in their companies, and assistance in stimulating innovation and creativity, particularly coming out of a recession.

That's a trend that plays out across industries, from high-tech to manufacturing to consumer-goods companies. And scuttling executive development altogether because of tough times is a mistake, say some. "The economic marketplace and challenges [for business] are different than anything we've experienced in a decade," says Roseanna de Maria, a corporate consultant and former head of executive education for Merrill Lynch & Co. (MER ) "So, for corporations, the training becomes critical for...profitability."

That idea is sinking in as companies slowly start to sign up again to exec ed programs. Managers who slashed executive education spending over the past two years are finally rethinking their budgets. Sure, that's good news for the B-schools, but it could also offer a much-needed boost to corporations trying to steer through still-challenging times.

By Jennifer Merritt

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