To cut costs and improve the returns on executive-education programs, companies are looking for better ways to measure their effectiveness.
With its impressive offerings of non-degree and M.B.A. programs, executive education is luring an increasing number of employees back to school. From the tree-lined campuses of institutions such as Harvard Business School to the busy streets surrounding city-based schools such as Columbia University, today's prestigious academic institutions are promising to help companies develop their talent, teach employees crucial leadership skills and carefully guide C-level executives along their career trajectories.
The sales pitch seems to be working: According to BusinessWeek's Executive Education report, enrollment in such courses increased nearly 30 percent last year.
But cracking the books can cost big bucks: A one-week course may run as high as $10,000 and that's not including the less-tangible expenses associated with temporarily removing a productive employee from the workplace. Given the staggering price of executive education, more and more companies are demanding assurances of a clear-cut return-on-investment. It's a reasonable demand but one that industry experts say is extremely difficult to satisfy.
"We've been talking about measuring the ROI for executive education for at least 30 years and it is a slippery thing to do," says Peter Topping, director of executive education at Emory University's Goizueta Business School in Atlanta and a board member of the International University Consortium for Executive Education (UNICON). UNICON is an organization representing 75 top business schools whose mandate is to research the delivery of executive education.
The difficulty, according to Topping, is that "most companies that send people to executive-education programs intuitively know it's of value. What they don't know is more tangibly what value they get for it -- that's definitely an issue."
While it's easy for a business to quantify the value of newly purchased computer hardware, attaching a monetary figure to abstract gains such as new skill sets, expertise, knowledge and industry connections is far from cut and dry. At the same time, HR executives are now faced with mounting pressure to deliver hard evidence of executive education's overall impact on a company's bottom line.
Says Jaki Sitterle, director of custom programs and new business development at the Columbia Business School in New York: "HR and senior executives are increasingly being tasked with providing substantive data to show the value of what are very expensive initiatives." As a result, Sitterle says, today's HR professionals are taking stock of a company's competency gaps and demanding proof as to how a university program is likely to influence and improve such shortcomings before signing on the dotted line.
Measuring the Return
Fortunately, a growing number of academic institutions are rising to the occasion by offering courses that measure the return on investment for an executive's participation in a particular program. Take, for example, Columbia Business School and its Learning Impact Initiative. Used in conjunction with the Columbia Senior Executive Program and select custom programs, the Learning Impact Initiative uses performance measures to track participant success.
Performance is measured in the months leading up to a participant's enrollment as well as up to 12 months following a program's completion. Through self-assessment, manager evaluations and peer reviews, performance levels are evaluated and compared between these two periods of time based on metrics including leadership skills, team building and strategic thinking.
Northwestern University's Kellogg School of Management in Evanston, Ill., is another academic institution that has stepped up to the challenge of ensuring executive-education enrollees get the most bang for their buck. Kellogg offers a series of one-day programs, such as "Creating a Culture of Innovation," for senior-level executives. The program addresses the leadership tools executives need to help employees challenge the traditional ways of doing business and to apply the knowledge they acquired through executive education to think creatively.
By providing senior-level executives with insight into what employees are learning through executive education and teaching them how to help employees make the most of their newfound skills, such courses help "increase the effectiveness of executive education," says Stephen Burnett, Kellogg's associate dean of executive education.
Not all academic institutions offer programs specifically designed to help companies maximize their investment in executive education. Nor is there one single and definitive formula for calculating a course's value and overall impact on a business' bottom line. Rather, it's up to HR professionals and senior-level executives alike to pick and choose the ways in which they wish to measure the worth of executive education.
"You need a balanced approach that looks at not only some financial metrics . . . but factors like the retention of the individuals that you sent to training and retention of the people they manage," says Ted Beck, associate dean of executive education at the University of Wisconsin-Madison's School of Business. The university offers more than 200 executive-education programs a year covering approximately 80 subject areas.
Emory University's Topping, on the other hand, recommends evaluating a program's effectiveness by forming two groups of employees -- a control group consisting of those who demonstrate high-level potential for becoming corporate leaders and a treatment group of employees who complete an executive education program. Senior managers then conduct comprehensive interviews with members of both groups. By comparing gaps in knowledge and expertise between the two groups, Topping says, companies can gauge the overall impact of executive education.
Lou Centini, senior director of executive education at the University of Virginia's Darden Graduate School of Business Administration in Charlottesville, prefers a heavily documented evaluation approach. Graduates of the university's executive-education program are handed follow-up surveys approximately three months after the program's completion. Survey questions include: "Did the executive-education program provide you with practical insights about how to lead change?" Responses are ranked on a scale of 1 to 5 and answers are aggregated and then used to determine overall program impact as well as guide program improvements.
Applying What's Learned
But that's not all. Darden's executive education faculty also works with clients in building action-learning models. Employees outline the challenges they're facing and work on these issues throughout the program. After completing the course, participants conduct a presentation for senior-level executives demonstrating how executive education has helped them tackle these issues, thereby enabling the company "to measure the bottom-line impact by transferring the lessons of the educational program into action," says Centini.
Such follow-up activities are crucial to ensuring the application of newly acquired skills, according to Peter Degnan, executive director of The Wharton School's Aresty Institute of Executive Education in Philadelphia, "People show up, it's a jam-packed one-week course, and as soon as they go back, they're stuck with e-mails and they don't really think about how they'll apply it," he says, noting the importance of reinforcing the key concepts taught through an executive-education program.
Nevertheless, Burnett of Kellogg says, many companies spend too much time trying to calculate return-on-investment in the aftermath of executive education rather than investing in up-front planning. By discussing educational objectives with HR professionals and senior-level executives and establishing a plan for applying course materials to real-life situations beforehand, Burnett says, companies can better align executive education with corporate objectives.
"Let's stop being obsessed with trying to find some internal rate of return. Stop looking for some sort of magic-bullet measure and start being a much more intelligent user of executive education," says Burnett.
Another way to guarantee executive education's value is to ensure buy-in from upper-management and the participation of a company's HR team from the get-go.
"HR plays a critical role in managing the process, in setting up the systems and identifying the opportunities [for executive education]," says Charles Breckling, marketing director of executive education at Harvard Business School in Boston. From forming an executive education advisory board to conducting peer reviews in order to identify competency gaps, an HR team can ensure a company enrolls the right employees in the most appropriate courses.
This is especially important in today's executive-education climate in which many businesses are discovering greater value in internal custom programs rather than open-enrollment courses. Programs with curricula tailored to suit the needs of a company and its unique corporate culture are gaining popularity among today's businesses.
For example, custom programs already account for one-third of the University of Wisconsin's executive-education revenue. HR professionals who take the time to investigate such educational options can help ensure payback, says Breckling.
However, the high price and tough-to-quantify nature of executive education is prompting many companies to turn their backs on academia-driven programs altogether. Dearborn, Mich.-based Ford Motor Co. recently put an end to its full-scale executive-education efforts in favor of in-house training. And although IBM still occasionally partners with academic institutions, the Armonk, N.Y.-based computer giant is focused on offering its own "continuum of programs" that are IBM-content specific and built on competencies IBM has identified as critical success factors for strong leadership, says Frank Persico, director of learning partnerships.
"No one externally has the range of programs we offer -- from basic managerial level all the way up to our very senior executive-level programs. You might be able to bite off bits and pieces of this externally from different vendors but our continuum has a complete suite of programs intended to take a person from one level to the next," Persico says.
With in-house educational programs, IBM can easily track the impact of such initiatives by conducting managerial and peer assessments of participants in accordance with metrics such as personal derailment factors, executive maturity and interpersonal skills, according to Persico. And in the long-term, IBM can also evaluate the effectiveness of these programs by tracking retention rates and carefully examining which programs spawned the greatest number of employee promotions.
Another advantage of in-house education is the ability to involve senior-level management in the process without added expense. According to Dennis Donovan, executive vice president of HR for Home Depot, the Atlanta, Ga.-based home-improvement retailer often invites senior leaders to participate in course activities to help guide employees on how they might incorporate newly acquired skills into the company's "business planning processes."
Says Donovan: "I'm not sure you can replicate that in a typical program in colleges and universities." In addition to offering in-house executive-education courses, Home Depot also partners with academic institutions such as Emory and Dartmouth to provide executive-education programs both on- and off-site.
But companies that fail to recognize the benefits of academia-driven executive education aren't looking at the whole picture, says Degnan of the Wharton School. "There's value to taking employees out from their safe environment and putting them someplace else. Not that it's better, but it can offer a different perspective," says Degnan. What's more, universities allow participants to forge ongoing relationships with business-school faculty members -- direct access to some of today's most progressive intellectual capital.
In the end, however, industry experts say that whether you opt for in-house training or turn to a university, the focus of executive education should be on creating better leadership, not ascertaining ROI. Evaluation programs offered by institutions such as Kellogg and Columbia can help assess value, as can employee surveys and peer reviews. But ultimately, companies have to invest a little blind faith that their employees will benefit from today's executive-education programs.
Says Degnan: "You're making an investment in an individual and this investment is hopefully going to pay off in a lot of ways -- some of which you can see; others of which you're not going to be able to see."