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Anyone who doubts that the demand for executive education is growing, and growing among an increasingly diverse bunch of organisations, need look no further than the custom client list of the Kellogg school at Northwestern University. Listed between the names of the usual corporate blue-chips are the FBI and the US intelligence community.

“Big federal agencies really have to change,” says Stephen Burnett, associate dean of executive education at Kellogg. “They are so needy.”

The need to embrace executive development is a lesson corporations have been learning for the past decade. Gone are the days when non-degree programmes involved a middle manager attending a week’s programme in marketing, say, and spending every evening schmoozing in the business school bar.

Out is the executive short programme as a perk; in is consultancy style teaching as a driver of strategic corporate change.

With this increased focus came an increase in the demand for customised programmes - those designed for one company - and a gradual drift away from traditional open enrolment programmes. Recently, however, these two worlds have begun to diverge sharply, says Douglas Ready, President of ICEDR (International Consortium for Executive Development Research).

This split means that while a business school’s brand is still critical for open enrolment programmes, it is less so in custom. “Brand is not the defining factor any more . . . companies are savvy. They don’t just blindly go with Harvard because it’s Harvard.” What is important, he says, is that schools deliver what the client wants.

Three things are clear from the data collected for the Financial Times Executive Education 2005 survey. First, after several shaky years the market for executive education is growing; second, corporations are developing stronger and deeper relationships with the business schools they use; and third, an increasingly high number of customised programmes are being specified at board level to handle strategic issues.

In open enrolment programmes the market has grown in revenue by 10.5 per cent over the past year. In custom programmes, the 45 business schools that have participated in our custom survey for the past three years reported that they ran 5,309 custom programmes last year, compared with 4,259 in the 2004 survey and 3,905 in the 2003 survey.

The number of programmes developed or taught for existing clients has increased dramatically. This year 4,204 (79 per cent) of programmes were for established clients. This compares with 73 per cent in 2004 and 70 per cent in 2003.

Of the 445 corporations surveyed for the Financial Times this year almost half (49 per cent) were specified by a chairman, president or other corporate top dog. And of the 445 companies, 321 (72 per cent) said that their programmes were strategic. This was particularly true for North American companies (78 per cent of programmes were strategic).

Only in the Asia-Pacific region did the percentage of general management programmes outweigh the number of strategic programmes (by 77 per cent to 63 per cent). One reason for this is that the market in Asia is less developed than those in the US and Europe. There is still a particularly strong demand for open enrolment programmes in Asia, for example, says Soumitra Dutta, dean of executive education at Insead.

Insead is taking advantage of this through its two campuses, in Fontainebleau and Singapore. “It’s not about being here and being there. It’s about leveraging the two campuses,” says Insead dean Gabriel Hawawini.

Making the leap between Europe and US has proved more difficult for Insead, however. Prof Hawawini believes it is simply a case of investing time and money.

But US schools travelling outside their home market are also experiencing resistance, says Ethan Hanabury, associate dean for executive education at Columbia Business School.

Four or five years ago partnerships between schools in different locations were supposed to be the answer to these problems - Columbia teamed up with London Business School, Insead with Wharton and MIT with IMD. But Mr Hanabury concedes that partnerships may not be the answer.

When such partnerships work well they can be highly effective, though, says Eduardo Sanchez, senior vice-president for the drinks company Bacardi Martini. His company works with the Darden School at the University of Virginia and Iese in Barcelona. “The real benefit is that we get an extremely global and well-rounded programme,” he says.

This year, companies have refocused their aims in the executive education market. Chicago, Kellogg, Michigan and MIT all report that demand in programmes that concentrate on organic growth and increasing the top line through innovation. After the downsizing of the 1990s there is also now an increasing demand for programmes that will develop a new generation of leaders. “Young people need to be developed for increasingly sophisticated jobs,” says Marie Eiter, Executive Director for executive education at MIT’s Sloan school. “There’s much more of an emphasis on getting middle managers up to a higher level.”

Identifying the next generation of corporate leaders is a theme in US companies, says Steve LaCivita, associate dean for executive education at the University of Chicago, while the need for growth through innovation is a theme across Asia. The demand for companies to show a return on investment from programmes is universal, though.

Although custom programmes are seen as future cash cows for business schools, there is still a lot of mileage in older style open enrolment programmes. At Michigan, for example, Ron Bendersky, associate director of executive education, says the Ross school “cannot keep up with the demand” for HR programmes.

As to the size of the world market for customised programmes, Blair Sheppard, president of Duke Corporate Education, reckons there is about $34bn of market and today’s players have scooped less than $1bn of that.

Business education has to be seen as a strategic asset, not an expense, he says. “If we can get sophisticated executives and sophisticated HR people to think that way, that’s in everybody’s interest.”

Copyright The Financial Times Limited 2019. All rights reserved.

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