Back to B-school: CEOs are turning to custom-designed programs at top schools to educate the senior ranks

Chief Executive, The, July, 2004 by Jodi Schneider

Bill Franz recalls the moment with clarity. As director of training and development for Osram Sylvania, the global lighting company, he had just spent about $400,000 to put four teams of six managers through the firm's Global Managers Institute.

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After 10 days of leadership and management training, one "virtual" team of managers--who had not worked together previously--were tasked with presenting their concept of a key company strategy, with specific solutions, to the company's very real board of directors. It was the time of reckoning, and Franz admits he was nervous.

He needn't have worried. The chairman of Osram Sylvania's board was thrilled. "I would have paid $1 million to McKinsey for each of these ideas," he said at the time. Given what the company paid, Franz notes, "I saved him a whole lot of money."

Those numbers are music not only to Franz's ears but to those of Tom Hambury, who directs the executive education programs at Cornell University's S.C. Johnson Graduate School of Management. His school helped develop and facilitate the global program for Osram Sylvania.

Hambury, like business school program executives across the country, faced a whole new world several years ago when the economy tanked, travel dried up after September 11, 2001, and companies decided they didn't need to send their budding executives to fancy business schools for extra training.

Those so-called open-enrollment training programs--weeks or months of on-campus, course-driven executive training--had a lot of empty seats starting in 2001. "With airfare, that week on campus was a $12,000-per-employee expense," Hambury says. "If you were running in the red, that was something you'd cut out pretty fast. And the companies did."

So MBA programs of many stripes--including prestigious, high-ticket programs like the University of Pennsylvania's Wharton School, up-and-comers like the University of Maryland's Smith School of Business, and regional powerhouses like the University of Wisconsin's School of Business--decided to funnel more of their efforts into what are known as custom or tailored executive training programs.

The nation's business schools began marketing these client-driven programs to CEOs, often starting with those who were alumni or with whom the schools already had working relationships. The strategy seems to be working. The custom programs are making money for the business schools, and executives are finding a rich vein of affordable training expertise that often has benefits beyond price.

The programs vary widely in terms of focus, but generally land in one of three areas: leadership development, specific strategic or core business issues (and these often involve case studies) or general management training.

Such customized programs offer a host of benefits, including training targeted specifically to the issues facing the company. They also allow the firm's top executives, including the CEO, to be involved in program development and presentation, and in determining such variables as the size and training location, depending on needs and budget. They can also control the follow-up once the course is concluded.

It's a package Hambury says outclasses training offered by consultants. "I can give a CEO a much better deal--because I don't have to advertise--than I can in a regular executive education program, and I can truly customize it for you," he says. "And, unlike with consultants, you can have a role in the development of the program and have your senior officers on the floor."

Though custom programs can sometimes be more affordable than hiring top-flight consultants, they range widely in price--between $12,000 and $70,000 a day--depending on the level of up-front customization sought, says Steve Feld, director of executive education at the Smith School of Business. The programs become more expensive, he says, when case studies and company-specific assessment tools are included, as they consume more high-paid faculty members' time in preparing the program.

There also can be downsides other than expense. For one thing, although program directors don't like to acknowledge it, the schools don't always have the specific expertise that companies need, particularly when it comes to technical training. Osram Sylvania's Franz said he stopped sending executives to one business school program because its faculty lacked expertise in manufacturing and supply-chain management, which was critical to the company's strategic development. "It didn't focus enough on what we needed," he said.

So what kind of program might work best for your company's needs? As one business school executive says, "there are as many programs as there are companies," but here are some of the most typical custom or tailored approaches to executive education.

Send Them to Boarding School

These custom, on-campus programs, often a week or 10 days long, are increasingly popular with companies, especially those that are "in transition" and seeking to coalesce a management team and establish a common management culture and language. The University of Virginia's Darden School of Business holds many of its custom programs on campus, partly owing to the beautiful geography--and the out-of-the-way location--of the rolling campus in Charlottesville, several hours from Washington, D.C. "It's a self-contained environment. People come here to get away from the hustle-bustle activity of their week and all the conflicting demands," says Lou Centini, senior director of the executive education program for the Darden School.