B-school advantage: top schools are letting CEOs tailor programs to get the most bang for their buck

Chief Executive, The, July, 2005 by Rebecca Fannin

Alan Hassenfeld, chairman of toy maker Hasbro, says executive leadership training programs don't work unless top management gets involved. He ought to know. He has been instrumental in starting a customized one-week program with the Amos Tuck School of Business Administration at Dartmouth College to train 200 of Hasbro's best and brightest from around the globe.

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The program, begun two years ago, includes case studies and leadership exercises and covers subjects such as best practices for the developing world, overall strategy, branding and marketing. It aims to give harried managers and executives a break from the stress of the corporate campus, put them in an environment that inspires creative thinking and problem-solving, and return them to work with a fresh perspective and a new set of tools. Hassenfeld attends the sessions, as does president and CEO Alfred Verrecchia--who teaches a class on ethics--along with a handful of other top managers.

Now that universities are offering tailored, goal-oriented curricula, such programs are becoming the norm. Ideally, they allow CEOs to harness the best of B-school brainpower without wasting time on theoretical models that have only questionable application to real world challenges. But given the relatively soft return on investment, CEOs have to ask, is it worth it?

Absolutely, proponents say. The ROI from working with business schools is not easily measured or quantified, they concede, but over the long term, cultivating universities as a resource for training can save money over more conventional business service outlets. And when the school is nearby, it often makes common sense. Relying on executive education programs to train the next generation of talent can beat paying an expensive headhunter commissions to bring in an outsider. With customized executive education programs becoming the norm at universities, such sessions can lead to more direct results at a lower cost than uniform in-house training programs run by full-time human resource staff or outside training specialists.

As an added plus, leaning on a business professor or dean for regular professional advice can be more economically palatable than bringing in a high-priced management consultant for a one-shot quick fix. Soliciting expertise from business school professors who have Ph.D.s in specific subjects can lead to deeper and more intellectual insights on strategic decisions. And with business schools focusing less on theory and more on real-life business scenarios, corporations can more readily apply lessons learned on campus.

Of course, all that's not cheap. Hasbro's program costs about $1,000 to $1,500 per person per day; all told, the company will have spent $1 million-$1.5 million to train the 200 handpicked managers. Hassenfeld says he can point to tangible returns, explaining that the program has led to a redesigned consumer marketing Web site and a new process for managing operations in India and China. "It has been a wonderful return on investment," he says.

Still, for other companies, the results will be neither that immediate nor obvious, and CEOs have to believe in the long-term pay-off. "The biggest issue is whether this is money well spent," says Mike Morris, chairman of American Electric Power, the utility company in Columbus, Ohio. Since 2002, AEP has sent more than 230 employees to its sponsored leadership program at Ohio State University, at a cost of $150,000 per session for 50 students, excluding hotel and airfare.

In addition to the training and skills development afforded, the nine-day program, held over a six-week period, has boosted loyalty at the company and has allowed Morris and other senior leaders to identify "the bright bulbs," though he says it's still too early to single out promotions or budding CEOs from the trainees.

So far, the promise of future return is enough to keep the program going. "I have walked away each time saying that this is an investment in people and is like any important investment that we make," says Morris, who personally spends one half-day observing each nine-day program.

Finding Time at the Top

The cost of the CEO's time might well be the biggest expense of the program, since experts say they aren't nearly as successful without direct CEO involvement. "We don't want executives coming here to spend two hours on campus and then going away," says Joseph Alutto, dean of Ohio State University's Fisher College of Business.

Other senior executives must be involved as well. Hassenfeld learned that firsthand when graduates of Hasbro's leadership training program were returning to the corporate corridors using new terms that their managers couldn't understand. For example, graduates began referring to projects being in different "boxes"--"box 1" for tasks done on a daily basis, "box 2" for projects that are to be moved forward, and "box 3" more broadly defined as the vision of the future. Not having the common terminology made it difficult for students to implement what they had learned. It was then Hassenfeld realized the program couldn't just be "the chairman's plaything," he says. He extended the program to Hasbro's top 10 executives, who now attend an abbreviated three-day version.