Cheryl McManus’s work at Duke University’s Fuqua School of Business is academic–but not entirely so. The senior manager of finance and control for ABB Inc., based in Norwalk, Connecticut, has been collaborating this spring with three colleagues on a classroom assignment that has real-world implications for ABB: designing a financial model to help utility companies assess power-plant investments in the new era of international deregulation. Utilities are major customers of ABB, the U.S. arm of Zurich-based electrical-parts maker ABB Ltd.
“The whole purpose is to develop a business idea that can be implemented,” says McManus, who is among 41 high-potential managers selected by the company for the specialized executive-education session on the Durham, North Carolina, campus. They spent a week there in April, returned to their regular jobs at ABB, and will go back to Fuqua this month for another week.
McManus and her associates will finish their course with a full-blown presentation before both ABB president Howard Pierce and CFO Daniel Kuzmak, arguing the benefits to ABB from aiding utilities with their investment decisions.
“What we try to do at Fuqua is combine the theoretical with the practical,” says ABB treasurer Barry Wentworth, who teaches a finance segment in the three-year-old program. This year, ABB will spend $2 million on the courses.
For executive education–in the finance arena, and across the range of university-based trainings–companies like ABB are choosing custom programs much more often these days. Of the roughly $3 billion that U.S. businesses devote to executive education, more than 40 percent goes to such specialized offerings, a survey by CFO magazine indicates. And educators say corporate demand for that type of training is growing at a 25 percent annual clip.
The CFO survey, which included 34 university business schools, found that, on average, less than 30 percent of executive-education revenue had come from custom programs in 1993. At some–Fuqua, Indiana University, and Babson College among them–three-quarters of the revenue comes from custom programs. (See chart).
In many cases, the interest in custom education starts with the premise that all employees should understand more about corporate finance. Brunswick Corp., the Lake Forest, Illinois, maker of marine and recreational products, sent executives to its first finance and strategy course at Northwestern University’s Kellogg Graduate School of Management a decade ago. Today, Brunswick employees from all areas, including finance, travel to half a dozen business schools.
Microsoft Corp. began its venture into custom training last August, with a basic finance course that it designed with a University of Washington professor. Since then, Microsoft has developed an entire six-course custom curriculum, mainly for finance people, with the results reviewed by CFO Greg Maffei.
Perhaps surprisingly, a few of the best-known business schools are only now getting into the custom game, or are deliberately keeping their programs small. Some fear that custom programs will conflict with the consulting work of individual faculty members, while others haven’t wanted to take resources away from open-enrollment teaching. The Stern School of Business at New York University didn’t formally pursue custom business until last year. Stanford Business School claims only two custom clients. The University of Chicago’s Graduate School of Business limits clients to a small, boutique group with which the school can work closely. “My mission is to deliver a very targeted, focused, high-level custom program,” says Linda Ginzel, Chicago’s academic director of corporate education. “We don’t try to do volume.”
Harvard Business School has grown from two to a dozen or more custom programs since 1993, producing $15 million in revenues, according to one estimate. It limits its corporate clients, too–to companies that seek top-level change through custom education, and that can produce major returns for Harvard’s faculty and for case-study research. “We’re using this to be on the leading edge,” says Earl Sasser, Harvard senior associate dean for executive education.
But companies can still find a wide range of regional and national schools willing to tailor finance and other courses to special corporate needs. Indeed, the competition for this outsourced training is increasingly fierce. Custom training “is being marketed like a business, and it’s high-stakes poker for a lot of these schools,” says Douglas Ready, president of the International Consortium for Executive Development Research, in Lexington, Massachusetts. Companies sometimes encounter aggressive business-school sales staffs pursuing them.
Tailored programs allow corporations to draw on company-specific examples that may be part of a current strategic push, or that may have special historical meaning. Of course, participants miss the chance to interact with peers from other firms, as they do in open-enrollment university programs. “There’s a lot of value in talking to people from different companies and industries,” says Michael Duffy, vice dean of the University of Southern California’s Marshall School of Business. But, generally, students exploring problems against a familiar backdrop, within their corporate culture, have an easier time learning, professors say.
“You can really go faster,” says Washington accounting professor Jim Jiambalvo, who is conducting several trainings for Microsoft employees. “When you’re talking about cost structures that they can relate to, for example, they understand your points much more readily.”
A Tool of Restructuring
Custom programs “address the culture and social dynamics of the company, and help foster new capabilities,” says Carolyn Woo, dean of the University of Notre Dame’s College of Business, in South Bend, Indiana, which counts AlliedSignal Inc., Bayer Corp., and Excel Industries among its major clients. “We look at custom programs as a way to help management internalize change as part of a broader organizational problem or strategic initiative,” adds Cam Danielson, director of executive education at Indiana University’s Kelley School of Business, in nearby Bloomington.
Companies grappling with reengineering and downsizing, mergers, or the search for new strategic directions often are among the biggest users of custom programs. For ABB Inc., the Fuqua trainings were a way to help fuse the four diverse cultures that had been brought together in the 1990s to make up the domestic arm of ABB Ltd. “We had no synergy,” says Cheryl Sulborski, ABB Inc.’s vice president of human resources. “We wanted to bring executives from all these companies together to focus on common ABB principles and get a chance to network.”
ABB treasurer Wentworth kicks off the two-week program with a day on basic corporate finance, teaching alongside Fuqua finance professor Dan Laughhunn. Wentworth offers insights into why cash flow and working capital are important in various operating departments, and in the corporation as a whole. “People from operations don’t understand why we keep this company thinly capitalized,” he says. “I give them a better feel for why we beat on them to collect receivables, stretch payables, and work their working capital. It is a way of heightening the awareness of what finance does and selling the function.”
Says Laughhunn, “Functional managers are masters of their domain, but don’t see where their task fits the overall strategy.” He views the program’s greatest success as creating “a mindset where [participants] take ownership of performance at their level, and of how their actions and control levers have an impact.”
For McManus and other finance professionals, the finance piece of the training is old hat. But the Fuqua program did open her eyes, she says, in its examination of such operational topics as the need for rapid-fire customer-complaint resolution. “I did stuff on the fly I didn’t think I could do on the fly,” she says.
The Microsoft Way
At Microsoft, the dive into custom training started with the realization last year that its finance instruction needed serious work. “We didn’t do much of it, to be honest with you,” says Norman Tonina, Microsoft’s senior director of finance development. What there was seemed flat, and concentrated rather dryly on a hodge-podge of issues such as communication skills and corporate accounting systems and tools. Tonina arranged Microsoft’s first course, an introduction to finance, with University of Washington professor Jiambalvo.
Microsoft shunned open-enrollment classes, feeling that content specific to the company and its industry environment was essential to any relevant understanding of finance. At the same time, it thought sending people away to school a poor use of employee time, and it wanted to keep as much control over the program as possible. So Tonina decided to work directly with Jiambalvo under contract.
The first class “was a real success story,” says Tonina, who quickly saw the benefits of using a professor paired with a Microsoft manager, the method the company chose for the first training. He won CFO Maffei’s approval to expand the program for finance, and has continued to work with him, taking the course offerings into new areas.
The expansion has been rapid. Courses today include activity-based costing and management, the analysis of variances, performance measurements, and a recent addition, “unstructured strategic thinking,” which includes an examination of competitive issues.
Brian Armstrong, a corporate planning manager who prepares semiannual business reviews for Microsoft subsidiaries, has taken several classes already, including the one on strategic thinking. “That was great, because we really got to drill down on events in the marketplace and do a lot of role-playing trying to understand our competitors,” he says. “I have a better understanding now of what their offerings are, and how I can incorporate that in our business reviews.”
The role of the trainings is likely to increase. Last year, for the first time, the CFO recommended that finance people sign up for executive education programs–a suggested total of 16 hours of them. Tonina believes the recommendation was made because “we now have a credible number of offerings from which to choose.”
Microsoft takes its time selecting professors from the University of Washington stable. “We’ve been careful,” says Tonina, “not to pick extreme academics for this assignment.” The professors are, however, becoming very well versed in the inner workings of Microsoft, and in the nuances of tailoring finance courses to a corporation’s needs. Jiambalvo, for example, has stopped importing case studies from outside the high-tech world. One classic activity-based costing case he introduced, involving John Deere & Co., was popular in open-enrollment trainings. But participants in the Microsoft program made it clear that “managers and controllers want to see situations in their space, as they would say.”
The ability to pursue a business case down to its roots is a professor’s dream. “At Microsoft, they slice and dice information every which way,” says Jiambalvo. “They’re really into drilling down.” In Jiambalvo’s course on variances, analyzing deviations from the various plans Microsoft draws up, participants are constantly suggesting new product areas they want to test, he says.
In another case, an employee from a business unit took Jiambalvo’s performance-measurement class, then volunteered to come back three months later and make a presentation on the balanced scorecard. “I thought she was going to be out of her depth, talking to finance people, but she did a fabulous presentation about what it took to implement the scorecard,” Jiambalvo says. He now routinely asks people from business units to make presentations in finance classes.
While Microsoft values its on-site approach, other companies see benefits in offering students a change of venue. Lucent Technologies began a custom program in finance with Wellesley, Massachusetts’s Babson College in 1997 by running five sessions at the company’s New Jersey headquarters and two at Babson. By mutual agreement, Lucent has been moving more toward using Babson’s facilities, and now offers five of the seven classes at the school. “When executives come here,” says Babson professor of management accounting Larry Carr, “we get more of their minds.”
The belief that first-class facilities will attract companies has led such schools as Fuqua, Kellogg, the University of Virginia’s Darden Business School, and the University of Pennsylvania’s Wharton School to build separate, state-of-the-art conference centers.
Lately, though, some schools seem to view new facilities more as the price of staying even in the executive-education game. “Sure we think our architecture and design will be conducive to facilitating organizational change,” says Steve Hick, director for custom programs at the University of North Carolina’s Kenan-Flagler Business School, which is engaged in a major building project. “But a center just brings you even with the competition.”
Other business schools would rather send professors to company locations, or concentrate on “distance-learning” technology using multimedia presentations. The University of Southern California’s Marshall School of Business is a leader in delivering customized training by teleconferencing. During 1997-98, its professors gave 42 three-hour interactive courses to high-level managers at DaimlerBenz headquarters in Germany. The teachers never left Los Angeles, except during the program’s design phase.
Ties with individual professors often prove valuable to companies, especially that select group of teachers that understands a company’s culture and programs.
“Teaching adults is different from teaching kids,” says Carol Newcomb, executive director of executive education at Ohio State University’s Fisher College of Business. “The faculty needs to be connected to real-world problems, which some professors are not interested in.” At Indiana University, only about 10 percent of business-school professors are heavily involved in the custom-program workload because of the unique skills required. Specialist faculty, says Cam Danielson, “must be facilitators, coaches, critiquers, and students themselves.”
While ABB hasn’t measured the return on investment from its program with Fuqua, treasurer Barry Wentworth says he sees the program’s value daily in corporate interactions that have been transformed. “Can I quantify the heightened awareness and better communications? I think not,” he says. “It’s more of a feel.” S
Stephen Barr is senior contributing editor at CFO; Roy Harris is a senior editor.
The Microsoft School of Finance
It aims for more flexibility by passing up a direct tie to the University of Washington.
Like many high-tech outfits, Microsoft Corp. calls its headquarters complex “the campus.” For much of its corporate finance staff, it’s a campus in more ways than one.
In initiating its finance-training program last year, Microsoft senior director of finance development Norman Tonina opted not to deal directly with the University of Washington, whose professors Microsoft sought. Instead, Tonina contracted with three professors separately, and began designing with them the courses that would all be delivered on Microsoft property.
Why? For one thing, Microsoft wanted greater control over the course planning and logistics than it thought a business school’s custom training could provide. “You don’t always have enough flexibility when you’re working with established programs,” Tonina says, adding that what has made the program work is that “it’s very much tailored to our needs.”
The university hasn’t exactly been shut out, however. Company executives visit the school to talk to MBA students more often. Case-study references are appearing in textbooks such as one Prof. Jim Jiambalvo is writing on managerial accounting. More internships and other employment possibilities have been opened to Washington’s Business School graduates. And Microsoft makes grants each year to the university, in part reflecting its work with university staff.
The business school, which has increased the number of its corporate custom tie-ins from 12 to 19 in the past five years, including a major one with Boeing Co., would love a formal Microsoft custom-education arrangement. It has recently lost business from South Korean and Japanese companies because of the Asian financial crisis, reducing its overall revenues from custom work, notes Ann Lightbody, assistant dean and director of Washington’s executive education programs.
“Yes, we would like to bring the Microsoft business in-house,” she says. But schools often lose business to their professors, and must adjust to it. When it comes to custom education, “you’re really in competition with your faculty,” Lightbody notes. “On the other hand, it’s part of your mission” to bring companies in contact with university faculty. “So it’s a Catch-22, if you will.” –R.H.
A Corporate Curriculum
Microsoft offers a range of finance topics; interested in “unstructured strategic thinking”?
Analyzing and Presenting Variances (Half day)
Studies calculation of sales volume and product-mix variances, estimates of market-share gains or losses, and use of past data to assess current deviations from expectations. Presentation of results is emphasized.
Financial Analysis, Planning, and Control (One day)
Explores managerial uses of information in decision-making and planning and controlling operations. Topics include cost analysis, variance analysis, business-unit metrics, capital investment analysis.
Financial Decision-Making (Half day)
Using the best information to make decisions on a daily basis. Should products be added or dropped, services outsourced, equipment leased? Includes incremental analysis and present-value techniques.
Performance Measurements (Four hours)
How they drive manager behavior, with a look at alternative measures that link a business unit’s strategy to shareholder-value creation. Includes traditional ratios, value creation, and balanced scorecard.
Unstructured Strategic Thinking (One day)
Identifying and evaluating business risks and opportunities quickly, thoughtfully, and creatively. Starts with strategic model/conceptual training, followed by hands-on workshop tied to employee experience.
Finance for Non-Finance Managers (Two days)
Delivers basics on accounting and finance terminology, concepts, and analytical tools for assessing the impact of management decisions in a total financial framework. Uses internal and external information.