Back To School: Executive Education In The U.S.

Troubled U S business schools must pursue partnerships with business if they are to survive. Businesses must meet them halfway if they want to keep the pipeline filled with management talent.

March 1 1994 by Peter Lorange


The way people and organizations learn is changing. As a result, there is a growing recognition that knowledge, the result of learning, and competence in technological and managerial skills are key competitive advantages-perhaps the only sustainable advantages a company can have. Business schools, too, are inching ahead on the learning curve. Even so, many have failed to respond to the needs of their customers-businesses and students. Particularly in the U.S., this has led to declining enrollment and to a more general discussion about the relevance of executive education. To survive, B-schools must not only work to understand businesses better but to pursue alliances with them and adopt some of their responses to challenging economic conditions, such as leveraging information technology, flattening the management hierarchy, and developing a more global perspective. We believe that the Lausanne, Switzerland-based International Institute for Management Development, begun under a direct partnership with industry, offers a successful example of such an approach.

Schools that continue to ignore the market mandate to modify their programs risk losing the brightest faculty and students to competition abroad. CEOs must move now to help schools plug the leaks, partly by communicating their business needs more clearly. Most would not allow the exodus of competence from their own organizations. They should not consign to this fate the schools they rely upon as a key source of talent.

THINGS TO COME

One driver of change in business schools is demographics: The average MBA student is now in his late 20s or early 30s. He has several years of work experience and thus seeks a curriculum grounded in leadership skills. Many students enroll in part-time programs that allow them to work and attend school simultaneously; or they participate in executive education programs for the same reasons. The point is that new MBAs are not wet behind the ears; they are often seasoned managers looking to enhance their careers, not to change them.

In 1992, U.S. B-schools minted 75,000 MBAs-most experts believe that number will decline. According to The American Assembly of Collegiate Schools of Business, fewer students are taking the GMAT test. The number of Ph.D.s, too, is declining as business schools retrench because of spending cuts.

One result is that business schools today are fighting tooth and nail to survive. But on the bright side, this competitive environment has made business schools take a hard look at themselves. Some are even hiring outside consultants to evaluate their programs, such as the University of Texas at Austin, which hired McKinsey & Co.

THE EUROPEAN WAY

Even so, one thing seems clear: In a number of ways, European business schools are leading their U.S. counterparts. From 1966 to 1990, the number of schools in Europe jumped from 25 to nearly 300; and enrollment soared from less than 1,000 to nearly 12,000. Some attribute the increase to the policy priorities of local, national, and international governments-executive education is seen as a means of reshaping business in some countries, including France. The British government’s entrepreneurial initiatives were built on strategic links between businesses and schools.

During the past decade, such partnerships emerged as a key theme in European business education. Some schools, such as IMD, were even begun by industry. Several state-supported schools have moved away from national funding, soliciting involvement of companies and individuals and ceding to them an increased voice in policy. Further, European schools typically are not constrained by faculty who feel that close ties with business muddies the theory they are trying to convey to their students.

European schools also have taken the lead in internationalizing their courses of study, while U.S. institutions have come in for criticism. For example, in its annual survey, “Which MBA?” The Economist recently took Harvard to task for its lack of international emphasis. The magazine’s most recent analysis of MBA programs spotlights the subject of “internationalization,” concluding that most major U.S. B-schools don’t know what it is or how to achieve it. Most define it through an international student body, international faculty, or international course content. IMD, however, says it is an international program that trains managers to recognize, accept, and build on cultural differences, and to work in a free-market, borderless world. It responds to the needs of the global marketplace.

Although not a panacea, internationalization has helped some schools to become more responsive and to revitalize their programs. Witness the fact that European business schools are still growing, while the U.S. market is tapped out. Other advantages: Because of their nearness to the vast market that encompasses the former Soviet Union, European schools are in a strong position to begin the Western education of Eastern European managers. The London Business School and France‘s Institut Europeen d’Administration des Affaires (The European Institute of Business Administration) are both set to appreciably increase their faculties. You can be sure they will be looking at the best and brightest from Europe, Asia, and, of course, the U.S. “The future is in Europe,” one European B-school administrator boldly proclaims.

Though this administrator might be accused of boosterism, few would deny that U.S. schools seem to be in danger of losing their relevancy, and that many are desperately trying to play catch-up. American business cannot allow this to happen. Knowledge is a competitive advantage, and business schools are a key supplier of this resource. They are in the forefront of the evolution toward competence-based organizations. They provide both the practical and theoretical knowledge that business needs to stay competitive. They are the centers of intellectual analysis.

THE IMD MODEL

IMD is an independent, non-profit international business school, the product of the merger of two institutions, IMI Geneva (the first B-school in Europe) created by ALCAN in 1946, and IMEDE Lausanne, created by Nestle in 1957, with active support from Harvard Business School. If the school’s student body is any indication, the 1990s are producing a different business leader. MBAs are more concerned with the content of the job and how the organization will help them apply what they’ve learned. They want quality time with family and quality work experiences. On the corporate side, there is a marked demand for senior executives who can combine sensitivity to local realities with an understanding of the wider, global marketplace.

IMD has responded by forging an alliance with business and by using these ties to revamp its curriculum. Almost 130 international firms are registered in IMD’s partnership scheme with commitment at the senior level. As IMD’s stakeholders, the firms engage in the development of the institute, as well as in the development of their own international management education and practice.

Some characteristics of this scheme include: Easy access to IMD’s president and senior faculty members by chief executives, personal attention from an individual faculty member for each client relationship, possibilities to influence IMD’s strategic direction through membership on boards and advisory bodies, priority access to public programs and the IMD MBA program, and corporate involvement in consortia research projects.

On the classroom level, students learn by participating, not just by listening and reading. There is no room for theoretical models in our programs. Presentations of real-life situations developed with industry-case studies-are preceded and followed by group discussions and classroom debate. Face-to-face with others from different nations, cultures, religions, and industries, executives defend their analysis. This leads to the formulation of general principles and practical solutions that can be applied to individual situations.

Programs are taught by faculty teams, not by isolated functional stars. Every program seeks to integrate business functions into the development and implementation of overall corporate strategy.

FOLLOWING THE LEADERS

IMD succeeds partly because it was born of industry and deals with client corporations on a “joint learning” basis. It applies strategic processes to the business school environment. Interestingly, this is one area where U.S. business itself excels. The McKinsey team at the University of Texas immediately recognized that a “galvanizing event,” in the form of corporate profits and losses, was needed to kindle a major overhaul. Academics would do well to study the six major competencies developed during such an overhaul:

€.Cooperation. How can the organization work together and learn from real-life situations and processes?

€.Vision. The capability to take initiative-to seek possibilities, to be a pathfinder, to be able to see the niches and possibilities, to seek support through global networks and organizations.

€.Global perspective. It’s an open world with no borders; we need to break down the barriers between cultures.

€.Educability. The ability to learn from our own work how to avoid old ways of thinking.

€.Flexibility. Proficiency at mobilizing for change and adjusting cross-culturally to form power bastions.

€.Resilience. Coming to believe there are no problems or mistakes, just possibilities and learning opportunities. This includes the capability to give most to those who contribute most.

In addition, several other factors are essential in shaping B-schools into businesses: customer-driven focus; competence in stakeholder management; the effective use of individuals and expertise in information technology; the ability to remain competitive under time pressures, flat organizations, and entrepreneurial initiative.

These are the same factors I recommend when addressing boardrooms and upper management seminars. Many business schools are awakening to the fact that ties must be developed with business if they are to survive. Some are better at establishing those ties than others. Harvard, despite its recent criticism, has a strong tradition of involvement with business, as seen in its successful case publications. And schools in ever-increasing numbers understand how the patterns of learning are changing for their customers, the students. Just recently both The Wall Street Journal and Business Week almost simultaneously ran articles on executive education. The statistics are startling; nearly 50 percent of some schools’ revenues come from this source. There is no doubt that this will continue to grow.

What can CEOs do to push B-schools along the learning curve? Though many complain that schools are out of touch with their needs, they are partly to blame for any shortcomings. B-schools must act as consultants to companies. Instead of waiting for companies to identify their perceived needs, schools have to help them identify and define their true needs. Only an on-going dialogue can generate the necessary symbiosis.

PUSHING THE ENVELOPE

Necessary or not, obstacles abound for schools seeking to become more relevant. Traditionally, academics have turned away from the business world, because it is too unscientific. Moreover, the recognition system in the profession primarily rewards publication on narrow topics in hard-to-read journals. Add to this the resource limitations facing today’s schools: It is expensive to keep up with the current knowledge explosion, and the revenue base-the student population-is shrinking.

What is needed is to find a new balance between teaching and research-not a revolution, but certainly a dramatic evolution. Academics must be encouraged to initiate two-way communication, aiming to underpin their teaching with real-life examples. Businesses must jump in with both feet. B-schools must forge these partnerships if they are to maintain their relevance and, ultimately, to survive. Businesses must do so if they wish to keep the pipeline filled with superior management talent.

Senior executives-working practitioners-must visit the classroom, and teachers must venture beyond the classroom into business, even if they find themselves teaching on the shop floor, in executive suites, or at sales meetings.

If schools and academics are to be relevant, we must meet you in action.


Peter Lorange is president of Lausanne, Switzerland-based IMD, and a professor of strategy. Previously affiliated with the University of Pennsylvania‘s Wharton School, MIT’s Sloan School of Management, and the Stockholm School of Economics, he also serves on the boards of six corporations, including Norway‘s Norsk Hidro and Royal Caribbean Cruise Line in Miami.