May 9, 2011 12:10 am

Business school strategy: customer becomes king

 
Business school clients become king

For corporations, there is just one message to come out of the recession about business school executive development programmes: it is a buyers’ market where the customer is king. And for most business schools, there is also only a single message: rethink your business model if you want to survive.

Customer responsiveness, total quality management and global sensitivity – all topics on which business professors can expound at length – now have to be part of what business schools practise as well as what they preach. Gone are the days when a business school could run a course because it had a professor who understood the subject; customer need has now become paramount.

With both training companies and management consultancies encroaching on the patch of the traditional business education providers, schools have seen 2-3 years of painful decline in revenues from executive education programmes. Now they hope that business is returning. But getting back to the glory days of 2006 will take time, says Steve Burnett, associate dean of executive education at Kellogg School of Management at Northwestern University, Illinois. Executive education “tends to tank fast, then take a few years to recover”, he says. Following the terrorist attacks of September 11 2001, “it took us 4-5 years to dig ourselves out of the hole”, he adds.

Where business is returning, demand has clearly changed. Companies – which pay on average $1,000 per person per day for business school programmes – are putting themselves squarely in the driving seat in the design and delivery of programmes. They are demanding the kinds of performance measures that inform other aspects of their businesses.

Business schools have talked for years about the best ways of measuring corporate return on investment for short business school programmes, and concluded that it could not really be appraised. Now some companies have decided to impose their own measurement systems, and are withholding payment for programmes until they are convinced that they have been successful.

Jaume Hugas, executive director for executive education at Esade business school in Spain, says that, depending on the success of a corporate programme, the school is paid up to an additional 15 per cent on the fee – or has up to 15 per cent deducted. For programmes that are designed to make managers more effective, tools that can be used to measure success include 360-degree feedback – from subordinates, peers, and supervisors – and the implementation of individual action plans.

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Corporate clients are also less likely to fly their managers to overseas business schools, now requiring the professors to travel instead. In both open-enrolment and customised programmes, the schools that are proving their worth are those that are prepared to take the programmes to the clients. Even Harvard Business School, the doyen of the industry, now teaches programmes in China and India.

The Cranfield School of Management at Cranfield University in the UK is just one of the schools that have been successful in reacting to company geography. “We have one or two clients who are not [headquartered] in China or South America, but they want us to train their people there,” says Bill Sheddon, director of the Centre for Customised Executive Development. “We have to go where the business is. You have to give end-to-end service.”

Some schools have set up offices, or even campuses, in areas of growing business such as Latin America and the United Arab Emirates. The UK’s Ashridge Business School is the latest to set up in the UAE, following in the footsteps of Duke University, London Business School, Manchester Business School and Insead. Queen’s School of Business in Canada has invested over several years in the UAE, and now 10 per cent of its executive education revenues come from the region, says Tom Anger, executive director of the school’s Executive Development Centre. And, he says, the school has growth targets of 10-20 per cent a year in the Middle East.

This need for global management skills, which largely relates to the customised education market, is also fuelling growth in open-enrolment programmes, says Josep Valor, professor of information systems at Iese Business School in Spain. “Large companies realised during the crisis that they had to be global. They realised they had to move their assets around to sell to different markets. The global reach programmes for top executives are a great growth market.”

Other open programmes that have proved successful are those that address niche markets: Cranfield has maintained a strong interest in its supply-chain management programmes in the UK, and London’s Cass Business School has launched Islamic banking programmes on its Dubai campus, for example.

At Kellogg, programmes that run for two or three days are now being packaged together to attract participants from outside the region, who are more likely to travel if they are studying two programmes over the course of a week. But for many of the traditional open-enrolment programmes – Finance for Non-Financial Managers, for example – business schools are increasingly being replaced by training companies, which can do the job at a fraction of the cost.

The distinction between consultancy services and business school teaching is also beginning to blur. Companies are frequently asking business schools to move into areas such as participant assessment and coaching, says Cranfield’s Sheddon, placing additional pressure on programme directors. The Cranfield approach is to focus faculty attention on teaching, then manage the other services through outside agencies, he says. “What I deliver to the client is a guaranteed level of assessor [or coach].”

So how can business schools differentiate themselves from management consultancies? Prof Valor says consultancies solve problems, while business schools teach managers how to solve their own problems. “I would like to think we can develop skills and attitudes to solving problems instead of solving the problems [themselves],” he says.

Technology is also much in demand, to save time and money. “Money is an issue,” says Prof Valor. “But time is money, too.” Companies are increasingly replacing elements of classroom programmes with internet-based sessions – web seminars and online study groups or learning tools.

What is clear is there are some regions of the world where business continues to grow, particularly the Bric countries (see Special Report, page 31). In Brazil, for example, Paulo Resende, associate dean at Fundação Dom Cabral, says his school had its best year yet in 2010, as Brazilian companies cut their training budgets by reducing the number of top executives they sent to overseas business schools. Instead, they used the local supplier.

“During the crisis, we saw a jump in the level of executives in our programmes. It seems that we did the job pretty good,” reports Prof Resende. “Because now they keep sending these executives to us.”

What are the particular executive education challenges for companies in your region?

Kai Peters
Chief executive, Ashridge Business School, UK

“In Europe and elsewhere, the challenge for executive education is to be directly aligned with organisational strategy and to effect behavioural change rather than simply focus on knowledge acquisition. To accomplish this, executive education must transcend the classroom and continue into the workplace of participants to embed the learning.”

John Quelch
Vice-president and dean, Ceibs, China

“In fast-growth Asian markets – especially in booming China – our corporate clients cannot spare their best people for long courses. At Ceibs, we must deliver actionable learning and high-impact executive development efficiently to maximise client return on investment. We do this by delivering our unique combination of ‘China depth and global breadth’.”

Judy Olian
Dean, UCLA Anderson School of Management, US

“How do you build global leaders? The challenge for our North American clients is to grow their businesses in emerging markets and to protect their very diffuse value chains from political and ecological disruption. They look to us as their partner in developing a generation of executives with a truly global mindset.”

Marcelo Paladino
Dean, IAE Business School, Argentina

“We must ensure that business is equipped to achieve sustainable growth. Domestic markets are changing, with a middle class that demands new products and services but has a limited economic capacity. Business leaders must be innovative and flexible, work effectively in multicultural environments and learn how to plan for the long term in spite of uncertain, shifting circumstances.”

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