Corporate spending on executive development is highly sensitive to economic conditions. The Great Recession of 2007-2009 reduced the executive education revenues of many schools by 30 percent or more over the space of a few months (the events of 9/11 had a similar impact). Typically, it takes five or more years for spending on employee education to return to prior levels after a recession. For executive development programming providers, revenues go down fast during an economic downturn and recover very slowly. After all, expenditures for employee development are obviously the first to be cut and the last to be reinstated.
That statement many major employers like to make, “People are our most important asset,” is not supported by the evidence. Sad but true.
Moreover, open enrollment professional education programs (OEPs) are expensive for institutions to get to market. You need brochures, direct mail ad campaigns and other forms of advertising. You need to invest in PR and detailed websites. You also need to have registration and payment systems in place.
Consequently, many schools want to offer only custom programs, which tend to have higher profit margins than the OEPs and are much easier and less expensive to market and administer. For example, one phone call from an alumnus or alumna about a potential custom program could yield millions of dollars in revenue over a number of years.
The problem with a “custom only” strategy is that there are compelling synergies between OEPs and custom offerings that leaders could be leaving on the table. First, a strong portfolio of OEPs gives a school tremendous visibility in the executive education space. Many of the thousands of managers who attend a school’s OEPs annually can become custom program prospects at some point in time. If they are impressed with your executive education faculty, facilities and services, your school will be top-of-mind when a possible custom initiative surfaces in their companies. In short, the phone is going to ring far more often with inquiries about custom programs for schools with large portfolios of high-quality OEPs covering a wide range of topics.
Second, it is through OEPs that faculty hone their skills in the executive classroom. Teaching executives, who fall into the “non-traditional student” category, is radically different from teaching traditional-age MBA and undergraduate students. Seasoned executives have pressing problems in their organizations and careers that they want assistance in solving. In non-degree executive programs there is no upcoming test to hold their attention in the classroom or motivate class preparation. Plus, there are far fewer contact hours in executive programs than in a degree course. In the executive education classroom, faculty have to immediately demonstrate that they have highly relevant and actionable insights and examples, and then deliver this material in a manner that fully engages the audience. OEPs are also how you introduce younger faculty to the executive classroom experience by having them co-teach sessions with their more experienced colleagues or position them in the program as guest lecturers with a limited exposure. Custom programs are less useful for developing executive classroom skills since clients typically expect you to field your A Team of executive trainers. After all, custom programs are expensive and very high profile within the client organization. In the absence of a strong OEP portfolio, a school is less likely to have an A Team of educators.
What makes a custom program “custom” is not that all of the topics being taught and teaching methods being used are new to the world and the client. For a school with a large, diverse portfolio of OEPs, the custom program designer starts the design process by selecting from the OEP portfolio a collection of topics (and faculty) that addresses the priority needs of the client. Faculty are then briefed on the client’s situation and why they are being asked to cover certain topics so that they can relate their material to specific client issues and problems. Various methods may also be designed to help the participants apply what they have learned to the company (e.g., workshops, simulations). There are times when faculty may develop totally new material or teaching methods for a custom client, but for most custom programs, in my experience, the majority of the topics covered also appear in the OEP portfolio. For a “custom-only” shop, the inventory of possible executive-tested topics is far more limited.
It’s important to note that the synergy between OEPs and custom offerings runs both ways: Custom programs generate ideas for new OEPs. With a substantial volume of custom business, you can begin to recognize themes from the demands of multiple clients (for example, “help us serve our customers better,” or “help me grow organically”). Based on these insights, you can introduce new OEPs that will appeal to a large number of companies. Moreover, faculty often use custom client examples in their OEPs and degree programs (disguised appropriately, of course).
Our experience over the years is that our custom clients also tend to be heavy users of our OEPs. When hundreds (or thousands in some instances) of custom program participants have spent a week or more at the school, there is a tendency to return for a deeper dive into some of the topics covered in their custom program. For example, a custom program may have devoted a half-day to leading teams. If you need more depth on this topic, we are happy to welcome you back to our three-day program on leading teams (and will offer a discounted price for our custom clients).
Historically, our objective was to have a 50/50 mix of OEP and custom business. Some years, if we had a very large custom client, the mix could be 60 percent custom and 40 percent OEP. Other years it could be the reverse. Yes, the margins on custom programs was always more attractive, but we understood that the two lines of business were so synergistic that relative margins were irrelevant to our decision making.
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