Executive Education
As A Growth Industry

Photograph by Iraida Icaz

Corporations are sending their top managers back to school in record numbers as business schools scramble to meet the demand. How does Stanford view its role in this growing market?

By Barbara Buell

When wall street investment banker James D. Wolfensohn took over the World Bank in 1995, it was in disarray. The bank was failing to meet its mission: to combat poverty in the developing world. Faced with changing markets and customer needs, the institution was struggling to adapt. Complacency, born of a long tradition of success, and an entrenched bureaucracy made change difficult. The bank was rapidly losing market share to nimble nongovernmental organizations and private-sector lenders.
       Wolfensohn knew he had to ignite change on a massive scale-- and then manage it effectively. Among other key initiatives, he embarked on an executive education program aimed at refocusing the bank's top 300 managers. The project taps the business school faculties at Harvard, Stanford, and Insead. Coordinated by Harvard, it consists of three 2-week sessions in the classroom, followed by a seventh week in the field, conducted over six months. By the end of 1998, all 300 managers will have cycled through the program. "We were the integrators who brought various parts of the program together," says GSB professor Margaret Neale, who taught at the World Bank and directs the Business School's Negotiation and Influence Strategies executive program.
       The Stanford team looked at the issues of innovation, culture, power, group relations, and the implementation of change. GSB professor Charles O'Reilly III, who coordinated Stanford's role in the project, researched material for a new case study describing the challenge faced by the president of the bank as he tried to transform the institution. The bankers have proved to be a tough audience. Sixty percent of them are PhDs. "They are analytical, cynical, threatened, anxious, smart people," says O'Reilly. "The most interesting part of the experience was using in-company executive education to create integrated change at an important global institution." Adds Neale: "It reflects a move toward collaboration among universities. I expect you will see more multischool efforts in the future of executive education in general."
       Indeed, the World Bank program is just one example of the burgeoning demand for executive education across the United States and internationally. Increasingly, companies are going to business schools for guidance that will help them plan, solve, or change. They are sending more managers than ever to executive education. In 1996 the number of people enrolled in executive programs increased 17 percent to 48,000 from just three years earlier, according to Brickers Executive Education Service, which tracks the field. The total number of programs offered surged nearly 30 percent over the last three years to 810 programs in 1997. And that doesn't include custom programs like the World Bank project. The Business School's own executive education offerings have reflected the international trend with a growing number of courses and applicants: In fact, over the past five years the number of gsb executive courses has doubled. While most participants are housed and taught on the Stanford campus, two courses are currently held in London and Singapore.
       Driving the growth of executive education internationally is corporate recognition that management education is good for business. "There's a great awareness on the part of companies that it's very important to keep current and to continue education in a way that wasn't the case in past years," says Don Kuhn, executive secretary of the International University Consortium for Executive Education (Unicon) in Millington, N.J. With technology pushing decision making down through the organization, "corporations want to develop people who feel free to take initiative and drive whatever piece of the business is theirs."
       John Barton, MBA '74, a partner with human resource consulting firm William M. Mercer Inc. in San Francisco, recently made time for an executive course in negotiation at the Business School. "More and more organizations are trying to create a working environment in which people collaborate rather than one in which orders are given and taken," says Barton. "If you're trying to get the culture to coalesce around team progress, the old hierarchical processes won't work. You need to keep learning or you get very rusty, very quickly."
       Companies are also much more selective about what their managers study than they used to be. There was a time when an executive training program in California was considered a perquisite for loyal managers. Com-panies no longer think of it that way. At $5,000 to $30,000 per program, human resource officers now pay more attention to where they send their executives. "They are very focused on getting some benefit from these programs," says Gale Bitter, director of the Business School's Executive Education Program. "They want to make sure they get value for their money."
       In the face of growing competition, Stanford's strategy has been to bring together the best in faculty and participants in its executive programs. The School has purposely kept its programs small. In contrast to other institutions that offer much larger sessions and must sometimes pad their teaching staff with faculty from elsewhere, Stanford draws almost exclusively from the ranks of its 84 tenured and tenure-track faculty members to teach its executive participants. Despite the faculty's small size, it is home to two Nobel laureates as well as members of the National Academy of Engineering, National Academy of Sciences, and American Academy of Arts and Sciences. "The thing we have to offer is that our business school is at the cutting edge of research," says Bitter.
       One of the chief advantages of executive education for any participant is the opportunity to brainstorm with other top managers who are encountering similar problems in their own companies. To that end, Stanford takes great care in selecting its executive students to get the mix just right for each session, even if that means some people don't get in. In 1997 the school turned away 30 percent of the applicants for its 16 executive programs. Entrants usually had a minimum of 10 years of management experience in similar professional roles.
       Despite the swelling numbers of applicants to its flagship six-week Stanford Executive Program (SEP), aimed at CEOs and senior-level executives with 15 years of experience or more, the School deliberately cut the number of sections a few years ago so that professors could spend more time interacting with participants rather than teaching back-to-back classes throughout the session. Applications for SEP have continued to rise steadily (25 percent over the last three years), but entry is tougher. Forty-two percent of the applicants are turned away. "The people who come here represent the best corporate practice," says David Brady, associate dean for executive education. "At Stanford, they work with the best academics."
       Like business schools at other universities, the gsb has started offering custom programs in selected cases, such as the World Bank. Indeed, custom programs already represent as much as 50 to 60 percent of the executive education offerings at some top universities, says Unicon's Kuhn. "The advantage is that you expose a group of managers to the same concepts; then they can be more forceful in making changes since they all have worked together," adds O'Reilly.
       In 1997 Stanford's Garth Saloner conducted a course for a group of about 30 executives from the Hewlett-Packard business unit that markets to the financial services industry. By applying management concepts to its specific circumstances, the group refined a strategic plan for the year during the course. This fall Saloner plans to hold another 10-day strategy course tailored for a group of executives from different companies in Thailand.
       Stanford plans to move cautiously in custom programming, mainly because of its small faculty and the demands on it of mba teaching and research. However, both the faculty and administration continue to explore special programs on a case-by-case basis. Stanford's idea of a custom program is to keep learning at a conceptual level-- teaching concepts, not specific tools or best practices. "Conceptual teaching is the most val-uable because those concepts can be applied to many situations," says Saloner.
       The School remains strongly committed to its open-enrollment programs, which include short courses as well as the six-week sep. While custom programs give managers a chance to home in on one pressing issue, open-enrollment courses offer different benefits. For one thing, the courses attract participants from many industries and companies who share similar responsibilities and challenges. "It's a great way for an executive to get exposure to others and to network," says Bitter. "That's a tremendous ad-vantage you don't get in a custom program."
      

Photograph by Iraida Icaz

Several of the open-enrollment programs encourage managers to use ideas and material presented in the classroom to solve real problems they've left behind at the office. George Foster, who directs the Executive Program for Growing Companies, asks executive students to fill out a form detailing a problem, which is then addressed during the session. Similarly, Jerry Porras has participants develop a written action plan before they leave his Leading and Managing Change executive program. "What differentiated the experience I had at Stanford is the focus on personalizing," says former participant Leanne Wagner, vice president for business development and strategic planning at Whitehall-Robins, a division of American Home Products in Madison, N.J. "They make sure that what's delivered is applicable when you go back home," says Wagner, who attended basic negotiation and then later returned for the advanced course.
       In the past there was one area in which Stanford's executive programs did not receive good grades: housing. Summer participants sweltered in a non-air-conditioned, pre-World War II student dorm. Executives had to share bathrooms down the hall, when business school competitors like Wharton offered hotel-style residences. During the school year participants had to stay in hotels off campus, which flew in the face of Stanford's commitment to on-campus residential learning.
       Fortunately, all that changed with the completion of the Schwab Residential Center, which opened in 1997. The six-acre compound for 280 executive and MBA students contains two residential buildings that include private rooms and baths with shared kitchens (one for every two rooms), courtyards, study rooms, and a dining hall. The center, a short five-minute walk from the classroom, is a place where executives can immerse themselves in study, with opportunities for both privacy and networking.
       During the academic year, 60 rooms are set aside for executive participants who are on campus for short courses. "It's ideal because the level of service is much higher than in previous locations," says Alice Sheehan, assistant director of executive education. She is not surprised participant ratings on accommodations are way up. "It's a whole lot more convenient being on campus," says Wagner, who used the exercise room daily to work off the center's "fabulous" food. "The phone system is great, and you have your own voice mail."
       All around, Stanford executive education aims to keep scoring good grades. The Business School expects to stay true to its traditional form--select students taught by regular GSB faculty--even as it explores new trends such as custom programming and corporate alliances aimed at encouraging the continuing development of human capital.

For information about executive education programs please visit www.gsb.stanford.edu/exed/programs.html or email executive_education@gsb.stanford.edu