Does executive education really improve business performance?

Executive education is perceived by some to be too theoretical. Others express scepticism when it comes to proof that management development actually works. But lack of evidence does not imply that executive education, including MBA programmes, does not improve business performance.

If you accept the fact that leadership development is part of executive education, there is plenty of research that can support benefits of executive education. One problem, however, is that business schools have long been criticised for turning out managers who are not also effective leaders.

In the UK, few MBA programmes include a course on leadership, and, even if they do, it is usually an elective rather than a required course. An exception is Strathclyde and The Leadership Trust Foundation, which jointly created the UK’s first (and only) MBA with a specialism in leadership studies, which started in October 2000.

This programme incorporates the core curriculum of the standard MBA programme and blends an inter-disciplinary understanding of business functions, strategy and strategic thinking with an awareness of the leadership process and the practical development of leadership skills. It enhances self-awareness, self-control and self-confidence through personal experience of practical leadership and teamwork situations. This is done through a combination of distance learning, experiential workshops and leadership project work.

Robert Owen who manages accreditation services at the Association of MBAs, of which Strathclyde is an accredited member, believes that business schools have an important role to play and that MBA programmes need to help managers develop “softer” skills in tandem with rigorous business discipline. He believes that this area often only receives lip service.

“At the moment only a select number of the leading business schools offer modules on leadership. However, schools are starting to respond to pressure from businesses that now consider strong leadership skills a pre-requisite.”

“There is no point in teaching MBAs about the theory if they lack the leadership ability to implement this learning. This is certainly a trend that the Association of MBAs is keen to encourage,” says Robert.

Christopher Young, a recent Cranfield School of Management MBA, is now Chief Executive of The IMPACT Programme, a personal development network for senior IT Executives. He draws the distinction between theory and practice: "Education tends to be theoretical and is really useful for giving people ways to structure thinking. What formal education struggles to give is knowledge about execution.”

One reason why executive education can sometimes fail is that they do not transfer their learning to the workplace. The many barriers in the transfer of learning are well known. They include both intrinsic and extrinsic motivation to learn and apply learning, lack of opportunity and encouragement to put it into practice and the resources to do so.

Organisational context is also an important component of effective leadership development. Organisational culture and systems must provide support for leadership development by linking it to business goals, feedback systems, and rewards and recognition for learning and for coaching others. Learning should not only be individual but a shared and collective experience, with the necessary facilitating systems.

What is needed to prove the case for executive education is more comprehensive research. John Quelch, former Dean of London Business School, says that the focus should be on macro studies that relate executive education to measures of business performance such as shareholder value.

Evidence that companies with an inclusive, empowering, principled leadership outperform those that focus purely on shareholder value is beginning to mount up.

Leaders of corporations are increasingly under scrutiny of shareholders. According to Roddy Gow of the head-hunters Odgers Ray & Berndtson institutional investors are increasingly scrutinising the performance of the leadership of companies. Analysts watch for and are keen to measure how management reacts and how the impact of leadership can be measured.

Odgers Ray & Berndtson have conducted research with Harvard Business School which shows that leadership accounts for at least 15-20% of the total variance in a company's performance. A decline in performance is likely to result in turnover at CEO level

"People are widely recognised as being the greatest asset in any company. If we accept this to be the case, then it follows that the effective leadership of those people must be the most important activity of all. Until now there has not been an accepted means of measuring the return a company receives on its leadership. What is the payback? We have developed a methodology with the Harvard Business School, which measures this aspect called the ROL - the Odgers Ray & Berndtson Return on Leadership.

“Understanding the nature of leadership is one of the key challenges facing executives today. Organisations prosper or decline based upon the capabilities and vision of their leaders”, says Roddy.

According to Jane Fiona Cumming of Article 13, a consultancy which helps to create sustainable businesses and brands by advising on social, corporate responsibility and ethics believes that companies run by charismatic, principled people are prospering because they create the right value systems that are in touch with the way people are thinking today.

"Organisations prosper or decline based upon the capabilities and vision of their leaders. In fact, a consistent theme is the concept of charismatic and principled leadership. Two characteristics are key; an ability to create a strong sense of direction for the organisation and the people in it and the vision to create the values that need to go along side this direction. Managers can also be internal leaders creating the systems and processes that enable these values to be delivered as practical competitive edge."