HOW EXECS LEARN NOW It's often not the way they used to. Rather than sending managers to Harvard or Stanford, many companies are inventing new methods.
By Brian O'Reilly REPORTER ASSOCIATE Antony J. Michels

(FORTUNE Magazine) – SO YOU BOUGHT a crimson necktie, certain the boss was ready to send you off for 11 weeks of fast-track executive education at the Harvard business school. Might as well send it back, friend. A revolution is under way in how American companies use education to improve their managers' performance. Business schools may never be the same. And you may never get to Boston. Top universities such as Harvard, Stanford, Columbia, and Virginia, which once had a near monopoly on polishing the future brass of big U.S. corporations, are scrambling to keep up with new competitors and new thinking about just what ''executive education'' is supposed to accomplish. In-house programs that companies run for themselves are similarly under scrutiny from enlightened CEOs and human-resource departments. It no longer suffices to march a disjointed parade of ill-prepared B-school profs before a roomful of managers. In their place are arriving a dizzying -- and controversial -- array of new approaches to smartening executives. The universities of Michigan and Tennessee, once better known for football than business acumen, now offer wildly popular short courses. In Boston, 40 companies banded together to develop programs they couldn't get from universities. Dozens of business schools are spending months devising elaborate, half-million-dollar, customized courses that will be given only to employees of a particular company. A few companies, notably General Electric and Motorola, have long run their own unaccredited but impressive ''universities'' and lately have inspired a raft of imitators. Not that traditional purveyors of university-based executive education are starving. Enrollments have been stable, and the programs -- at $32,000 a pop for Harvard's flagship Advanced Management Program -- remain enormously profitable for the institutions. Problem is, fewer American companies are sending up-and-comers to lengthy courses behind the ivied walls. Foreign executives are taking up the slack -- they're two-thirds of the students at Harvard's AMP, up from one-third ten years ago. Students from abroad take up half the seats at advanced management courses at Stanford and Columbia too. Though deans say they are delighted with the global perspective foreigners provide, the decline in domestic enrollments does have some educators concerned. Jay Lorsch, a senior associate dean of the Harvard business school, says that the ''explosion'' of new business courses elsewhere prompted him to bring in the Boston Consulting Group to study the situation. Says he: ''We could have been like General Motors -- stuck, where we don't know what's going on.'' WHAT'S GOING ON is a big move away from the one- to three-month mini-MBA programs that sought to boost a manager's intellectual and analytical skills by dousing him in the basics of such disciplines as finance and marketing. Says a former professor, perhaps with some hyperbole: ''That's as outmoded as rear-wheel-drive, V-8-engine cars.'' The shift was caused in part by a glut of regular MBAs, whose numbers rose sharply -- from under 6,000 in the early 1960s to 77,000 by 1990. Many, despite their impressive credentials, turned out to be dreadful managers. At the same time, corporate mergers reduced the number of companies that routinely send managers to universities. Layoffs eliminated many would-be executive students, and the workers who remained were often too busy to spend several weeks at school. Frequently, says one dean, the corporate education director was among those fired, so companies that regularly sent two execs to every session abruptly stopped. Even more important is a qualitative change in what companies expect from executive education. Says consultant Ram Charan, a former Harvard business school professor who travels constantly, teaching and advising top managers: ''Where it is most effective, executive education is being used as a lever for cultural change.'' Instead of having execs injected full of the capital asset pricing model, companies are groping for programs that will produce better leaders. ''Leadership programs are growing fastest,'' says Frank Morgan, director of executive education at the University of Virginia's Darden school. ''It's a big change from five years ago. Now what's wanted are courses like the global perspective or the enterprise perspective.'' In a recent course named Creating the High-Performance Workplace, a Darden professor brought in on short notice the local Federal Express deliveryman, who adroitly answered questions on how his managers make work satisfying. The ideal program gives managers the skills to be effective in the emerging nonhierarchical corporate milieu. That often means getting managers -- in groups -- to grasp the company's new vision and strategy. Even the term ''executive education'' is probably outmoded, argues Alan White, a dean at MIT's Sloan school. ''Executive development or organizational transformation is probably more appropriate.'' Development? Transformation? What is the best way to deliver such a tall order? Alas, there is so little agreement among experts you could get paralyzed listening to them: Send one or two execs at a time to standard programs at a variety of universities? Critics say that won't develop a critical mass of managers all grappling with the same business and cultural issues. Send dozens of managers at a time to custom-tailored courses at a particular business school? Skeptics argue that the institutions are too bureaucratic and out of date to deliver the goods. Pick the best professors to come in for a day at a time and teach? Nah. They'll just deliver canned speeches. Start your own in-house university? Nope. That's derided as ''drinking your own bathwater.'' You won't get the new culture and fresh perspective you might , derive from sending a few at a time to the universities. Through the muddle, some light is beginning to dawn. Companies such as Weyerhaeuser, Analog Devices, Du Pont, and GE figured out what they needed and plunged ahead. They judge their new programs effective. Weyerhaeuser, the big Tacoma wood and paper company, saw profits in its wood products operation slipping a few years ago. ''We were becoming big and unresponsive,'' says Horace Parker, head of executive education for the division. ''Customers were leaving us for smaller competitors.'' Senior managers determined that the company needed a new strategy and organization. To create a different management style more focused on customers, Parker helped develop what came to be known as the Leadership Institute for Managers. Parker called in James Bolt, former head of human-resources planning at Xerox and now chairman of Executive Development Associates near Denver, a consultant on education. They devised a program in which executives spent one week every quarter in school for a year. In all, 1,240 managers went through the program, at a cost of $11 million. Did it work? Weyerhaeuser's wood products unit is more profitable now. Parker can't prove that the Leadership Institute made the difference but notes that customers who witnessed some of the training say the company is easier to work with. And Weyerhaeuser has made executive training permanent. Observes Parker: ''Ten years ago top brass spent one day a year at it. Now they all spend two to four weeks a year, teaching and learning.'' Weyerhaeuser still sends executives to Harvard and other top universities, but many of them now have a different attitude toward schooling. Robert M. Wiggins, a timberlands manager running a 650,000-acre operation in western Washington, declined a chance to go to a Stanford executive program and instead went to Ford Motor for three months. He spent a week as a laborer and a supervisor on a production line, eventually running the entire line for a while. Back at Weyerhaeuser he brought a Taurus into a conference room full of startled executives, opened the hood, and began pointing out to them what he had learned. OTHER COMPANIES take different approaches. Four years ago Chrysler wanted senior and middle managers to comprehend the problems the company was facing and realize the need for change. It brought in the Center for Executive Development, a Cambridge, Massachusetts, firm run by three former Harvard B- school professors. The ex-profs led Chrysler managers in groups of 40 through Harvard-style case studies. That included a look at the power tool business, to teach them how to analyze an industry objectively, says Richard Hamermesh, one of the partners. Once managers got the hang of it, the teachers led their charges through a comparison of the product development cycles at Mitsubishi and Chrysler. ''They realized it's not the quality of the engineers that makes the difference, but that Chrysler's management processes take too much time,'' says Hamermesh. ''You couldn't get them to understand that by giving speeches. They had to go through it and see it was in their own economic self-interest to change.'' The approach to executive education that is probably getting the most attention these days is ''action learning,'' practiced most aggressively by General Electric and the University of Michigan. It works by giving teams of executives real live business problems to solve. And as practiced by GE, it's enough to make any student's palms sweat. The business problems are identified by the company's top officials, such as CEO Jack Welch or the heads of the lighting or aircraft divisions. James P. Baughman, in charge of GE's executive education, says recent issues have included, What is the market for GE financial services in India? How can GE serve the automobile industry better? How does GE stack up against such foreign competitors as Electrolux, Toshiba, and ABB Asea Brown Boveri? A class of 40 GE executives, culled from the company's top 3,500, is divided into six teams. At the end of a month each team makes a presentation to Welch and other senior managers, sometimes at the company's corporate education center in Crotonville, New York. The student executives race around the world, interviewing and researching. Are they able to create effective teams? Do they know the best ways to get information? Are they unaccustomed to making decisions with so little time and so little information? Preparing them are consultants and B-school professors who teach them new ways of organizing, thinking, and deciding before they go. GE emphatically does not use a student's performance to determine whether to promote him or her. ''If we did that,'' Baughman says, ''everyone would be hiding their weak spots, and they wouldn't do what they have to in order to learn.'' Can action learning be exported to universities? Noel Tichy, who helped develop it when he managed Crotonville from 1985 to 1987, took the approach home with him when he returned to his job as professor at the University of Michigan. For his Global Leadership Program, Tichy has various companies each send one executive. They are grouped in teams of six and must devise strategies for entering industries in a foreign country. ''We link that process to new ideas and new information,'' he says. For two weeks the teams travel around the world. A key ingredient: Their conclusions will be presented to management. ''You've got to put people under performance pressure,'' he says. Will Harvard adopt action learning in a big way? Yes. Lorsch says the Boston Consulting Group deemed the school's traditional case study method good but recommended the school try other teaching styles as well. Professor Earl Sasser, recently put in charge of the Advanced Management Program, is rethinking Harvard's approach. He says he ''rejects'' the notion that the case study method or the length of the AMP course is the source of declining domestic demand, but he is considering cutting the number of cases from three a day to two. His main concern now: ''The market tells us participants think the program is good, but they want a payoff sooner. My premise is that we have to deliver such value to the participants that the organizations see a payoff much sooner.'' If hundreds of business school professors and deans, all with lofty IQs and astounding breadth of knowledge, can't agree on what constitutes decent executive education, how can mere mortals figure how to proceed? A few modest suggestions for companies wrestling with the question of what makes for an effective program: The chief executive must be deeply involved. Executive education's role is to give managers insights and skills that help them execute the strategy of the company. It won't succeed if the corporate education director has to guess what the boss needs. Baughman at GE estimates that only a third of CEOs care enough. ''When a CEO calls and says he wants to visit Crotonville but winds up sending clerks, I'm pretty sure their program will fail,'' he says. The CEO should make the executive education director a powerful figure who can put top executives through a draining experience if he has to. ''A lot of them are bureaucratic grinds,'' says consultant Hamermesh. ''They're dealing with people way above them in the organization, and they wind up being ! overcautious. All they care about is getting high ratings from participants on the last day of class, so they design programs that are entertaining instead of useful.'' If the company is running in-house education programs where senior executives teach, the education director should have the power to can them if they get sloppy or boring. Critics say IBM's enormous training effort put on by company managers gradually degenerated into sonorous lectures. Think hard about whom you're sending away to an education program and how they will be received when they get back. Failure to do so may mean losing your investment, and worse. John W. Rosenblum, dean of the Darden school at the University of Virginia, says: ''Many companies give inadequate thought to why they're sending someone off, so fail to plan for their return. The executive returns to an organization that won't respond to his new ideas. His enthusiasm is lost, and the people who didn't go away are resentful.'' It helps to rejigger your evaluation and compensation practices to reflect the new values you want from managers, says Rolf Reinalda, president of a New Jersey sales and management consulting company. Heck, dumb choices about who goes to school might even cost you the company. Why did GM and IBM falter despite sending numerous executives to Harvard's AMP? ''They sent people to us, but not at the right level,'' maintains Lorsch. ''IBM sent regional sales managers with no influence.'' No single approach to education works for every company and every executive. Many firms will benefit enormously by sending executives to conventional programs, where students develop networks of contacts outside their company from whom they can continue to learn. Some execs build badly needed self- confidence by matching wits with Harvard profs for 11 weeks. Others need feedback and coaching on their management style from a place like the Center for Creative Leadership in Greensboro, North Carolina. And yes, knowledge of disciplines like finance, accounting, and operations management is important, which is why most good schools offer short courses in them. Ask a lot from the business schools, colleges, and professors that do training for your company. Plenty are greedy, lazy, or incompetent. Because executive education is so profitable for universities, many have rushed into the business. The teachers they provide may be academic drones without the temperament or solid consulting experience needed to satisfy veteran . executives. Require even accomplished professors to familiarize themselves with your company's business issues and coordinate their presentations with other teachers'. They should -- they may charge you $7,000 for a day's work. Remember finally that like exercising and eating right, education should be a continuing process, not a painful, one-time experience. Keep sending managers back for more, and make a point of capturing a freshly educated manager's insights as he or she grapples with new ideas or struggles to master a new way of doing things. Good companies don't just teach managers, they learn from them.