Return on investment in executive education

Companies spend huge amounts of money educating their executives. A four-week open-access programme at a top business school can cost over $50,000 and customised programmes for a whole series of senior or middle managers can be a lot more. Do companies get value for this money? Do they even want to know if they do? In other words, is there any way of measuring the return on investment (RoI) of executive education-a measure companies apply regularly to most of their other activities? The answer seems to be mixed. Companies that are heavy investors in executive education are often already "converted" to the cause of management development and do not need proof of value-for-money. But those that have a deep-lying distrust of management programmes are more likely to insist on hard evidence that their money is being well spent. "This is a topic that comes up regularly, especially when economic times are a little tight," says associate dean, executive education, at the University of North Carolina's Kenan-Flagler Business School, Professor Jim Dean. "And demand for [proof of RoI] is usually inversely related to the [scepticism] of the CEO."

Know what you want
According to chief executive of the Advanced Management Programme of Edinburgh Management School in the UK, Graeme Fraser, the key to RoI assessment is the delivery of expected benefits-what organisations and individuals want to get out of it, whether it be improved performance, improved retention or reward for a high-potential individual. Without such a definition, RoI will prove problematical. "Most fail to carry out this 'due diligence' thoroughly beforehand in relation to the needs of the organisation and/or individual," says Mr Fraser, "and so, after the event, they tend to focus on alleged value, which they base mainly on some financial calculation often intended to show that the 'investor' or sponsor did well." But what companies want to see are real changes within their organisations as a result of management development. This may be a new corporate organisation structure or even a new product. Accordingly, a business school programme, developed in close consultation with a company, will probably be geared to just that. For example, a company might provide an internal 'case study' for the programme that it wants solved.

This is something that director of executive education at Manchester Business School in the UK, Professor Paul Sparrow, recognises. "I think there have been two shifts in this area," he says. "The first is that the boundary between education and the other things business schools do is becoming blurred. We are increasingly working with change situations, and education is only part of what we are delivering. The second is that schools are becoming more involved in the internal strategy of companies and the education element is increasingly about helping companies execute that strategy." Although this means that the agenda is moving towards strategy support-areas such as personal coaching based on pre-assessment-Professor Sparrow says this type of approach to management development remains firmly educational. It is also, however, about forcing people to think more clearly about where they can add value in their company. "The idea is that we get them to buy into the issues and then lead them to think about what they can do about it," he says. This, of course, pretty much describes a custom programme designed specifically for a company and, according to Professor Dean at Kenan-Flagler, "that's one of the reasons custom programmes are on the increase; working out the RoI on open courses is much harder to do". The reason for this is that open courses have traditionally been judged immediately by delegates through direct evaluation of things like content, relevance and presentation, in effect leaving companies to evaluate the courses they pay for by the reactions of their employees.

A UK-based global construction and agricultural equipment group, JCB, is committed to custom programmes and insists on a great deal of its own input. In general, it does not send managers on open programmes because, as head of learning and development at the company, Paul Pritchard, says, it regards them as "generic and unfocused".

Recruitment on the cheap
JCB has just completed a two-year Global Leadership Development Programme (GLDP) for 10 high-potential senior managers, designed in partnership with Manchester Business School. Eight of the ten have now been promoted to executive director positions in the group and the company is considering beginning the course again in September this year. Although the course cost JCB around £300,000 (US$570,000), Mr Pritchard says that recruiting eight directors from outside would have cost at least the same and there would have been additional cost in introducing them to the culture, retaining them and so on. And, although the primary purpose of the GLDP was to prepare managers for senior positions, there were other benefits. Because it included managers from all over the world and was held at various locations-both in JCB offices and facilities belonging to other companies-there was, according to Mr Pritchard, a great increase in communication and understanding between the various geographical parts of JCB and a lot of networking.

Measuring this kind of change is the current challenge. According to Chicago's associate dean, Steve LaCivita, the traditional follow-up approach has been to ask people before they come on a course what their goals are. After the course, they are asked to set out an action plan to achieve those goals based on the course. Then, in subsequent follow-ups, the school will ask them if they achieved those goals. Now the emphasis is much more on assessing changes in behaviour. "If behaviour is changed, it's likely to be as a result of the management development experience," says Professor Dean at Kenan-Flagler, adding that what companies have to do is set out the behaviour changes they want and then have a learning experience designed around that. However, companies are generally reluctant to take evaluation of executive education seriously. "We know how to do it, but very few companies are prepared to go along," he explains. "You take a group of high-performing middle managers, split them in two groups and send one to a management development course and keep the other group away as a control. Then you measure which one has progressed more. Companies just will not do that. "What they usually do is divide people into low-potential and high-potential groups and then send the high potentials to business schools. Obviously, that is pretty useless."