Dell Computer Corp. decided last year that its in-house executive training programs weren’t doing enough to teach the financial significance of Dell’s unusual business model. So it went direct — to the Graduate School of Business at the University of Texas (UT) at Austin.
The company and the school formed a partnership, which Dell hoped would provide it with a level of executive education far beyond what was available through less-intimate academic relationships. Working closely with Dell executives based in neighboring Round Rock, UT professors researched the company in depth, then created a two-day finance program detailing the special way liquidity, growth, and earnings must be balanced under the direct-sales model. For one thing, “we show students how capital spending can have a significant impact on the profitability of the business — how if it gets too high it leverages in a negative direction,” says Stan Horner, Dell’s director for executive education. “It reinforces for them why we don’t get away from the direct model.”
The Dell-UT partnership is on the cutting edge of an executive-education trend that is winning many corporate fans these days. Partnerships now can be found at such companies as Amgen, with the University of Southern California; DaimlerChrysler, with Oakland University; Texas Instruments, with UT-Austin; and United Technologies Corp. (UTC), with the University of Virginia. These arrangements go further than popular “customized” courses that many companies arrange with schools for a year or two.
For one thing, these programs are much longer term — often running for five years or more, allowing teacher-executive relationships to build, and becoming part of the human-capital component of a company’s strategic development plan. For another, partnerships work both ways, letting the school benefit, as well, from its deep exposure to the company, and opening up future opportunities in and out of the training realm. Universities develop finance and other cases through the relationship, and can acquaint their business students with executives who have a special tie to the school. In the interactive spirit of the Dell arrangement, for example, CFO Tom Meredith is a guest lecturer for a graduate finance course at UT-Austin.
Educational partnerships also tend to range across a company’s operations, from sales and marketing to production to finance, rather than focusing on a specific training need, as most custom programs do. Still, finance seems to be getting an unusual emphasis in partnering arrangements — both in finance classes for nonfinancial executives trying to familiarize themselves with a company’s approach to finance, and in sessions devoted to training finance officers about their own fast-changing world.
That’s significant, because for years finance has been lagging behind other business areas in executive-education offerings.
Focus on ROIC
In recent years, dissatisfaction with Dell’s old, in-house training was acknowledged even among the instructors. “I would do a presentation and deliver finance ideas, but the word of mouth wasn’t very good,” concedes Chris Schipper, Dell’s regional vice president of finance for Northern Europe, who helped launch the UT partnership. “I could come up with concepts, but I had no way to explain how I arrived at them. It’s important for staffers to know how you got from A to B.”
While classes were to be taught at Dell facilities around the world, the company decided that proximity to headquarters was a major factor in selecting a partner school. Partnering corporations often get involved deeply with the school’s development of the course content, and even pick the faculty members to teach specific classes, says Chantal Delys, assistant dean of executive education at UT’s graduate business school.
Dell’s classes teach senior finance executives, along with others on a selective basis, how to develop a business plan based on the criteria that matter most to the Dell executive committee, especially a balanced approach to capital, profitability, and liquidity. UT professors use as a case study the business plan that won the executive committee’s approval when Dell proposed its initial, wildly successful move into the low-cost PC market.
Mike Lazorik, a former Dell treasury staffer who is now a principal in Dell Ventures, the company’s new in-house venture capital division, loved to “work with professors who have expertise in theoretical finance,” and enjoyed their real-world case studies. “They’re able to give us the factors that the outside world is looking at to make the decisions,” he says.
Lazorik’s finance background allowed him to tune in to certain concepts — like the role of Dell’s primary internal metric, return on invested capital (ROIC). As he sees it, the teachers help students from all disciplines see Dell’s financial goals in a useful way, “which is where it ties back in with the Dell focus on ROIC.”
“Buy the Whole Chicken”
The courses introduce another healthy quality to training: a critical perspective beyond what students might expect from internal instructors. “UT can say, ‘OK, the model is great, and ROIC is a good thing, but there are some problems with ROIC,'” says Horner. “You have to understand what goes into it, including things like customer-satisfaction multipliers. UT can do that.”
The UT relationship with Dell is a full partnership in every way, right down to how the school is paid. “We want them to have a share of the risk, too,” says Horner. “We don’t pay them a flat fee; we pay them a share of the tuition.” The rate translates to about $1,000 per hour of courses — or an estimated total of $100,000 for the five classes held so far, attended by about 100 employees.
UT benefits if it creates popular courses that are repeated, and suffers if it fails to do so. Dell is planning to run the current course for executives several more times, at various sites in the United States, and in London.
Considering the premium paid for these partnerships, some experts question whether partnering with a university makes financial sense. Jonathan Schiff, executive director of the Finance Development & Training Institute, in Montvale, New Jersey, and an accounting professor at Fairleigh Dickinson University, says many companies can do the same thing cheaper by “cherry picking” one or two highly qualified professors on a private contract basis. “If all you want is the eggs, why buy the whole chicken?” he says. He notes that “academic linkage doesn’t mean increased productivity,” and suggests that, as for any training, corporations should test and quantify employees’ skills, and skill gaps, and turn to customers in the redesign of executive programs. “A lot of executives will come back from a class at Harvard and say they had a great time,” Schiff says. “But will it help them do their jobs better?”
A Chance to Reflect
While Dell has chosen to hold classes largely at its own facilities and to work with a school whose campus is in the backyard of its headquarters, United Technologies likes the idea of sending executives far away from the workplace for their learning experience. The aerospace and infrastructure conglomerate has its partnership with the Darden Graduate School of Business Administration at the University of Virginia, some 500 miles from its Hartford headquarters.
Bob Harris’s double role in this venture symbolizes the partner relationship. He is both C. Stewart Sheppard Professor of Business Administration at Darden, and UTC’s vice president and chief learning officer. In the former post, he helped the school spearhead the partnership with UTC, which also wanted someone in-house who was accountable for the partnership. Now, Harris coordinates the entire employee-education program at the $25 billion, 145,000-employee company. A large part of that curriculum is delivered in Darden-created courses.
This 18-month-old alliance between UTC and Darden was launched in response to a companywide survey that indicated severe shortcomings in UTC’s executive development programs — and suggested that too little money was being spent there. The company already offered employees more than 400 Web-based courses covering general training topics, says Harris. But it figured it needed a more personal approach to education than existing Web technology permitted — especially for training its high-level finance executives.
“These executives are extremely busy,” says Harris. “If you can get them offsite, away from the particulars of their day-to-day work, they have more of a chance to reflect, and engage new ideas. They aren’t thinking about what needs to be done at the office today.”
Interaction among the students during the classes is also prized. “Just because you work for a company doesn’t necessarily mean you know all the people who also work there. They’re sharing face-to-face in the class, and that’s a big benefit to the whole company, because they find networks they can use across many problems,” says Harris. The Darden curriculum for the company includes a range of case studies and one-, two-, and three-week courses that focus on such issues as balanced scorecard, supply chain management, global management, career strategy, strategic leadership, alliance building, and service-related innovation.
From a Distance
About one-third of the 1,000 eligible UTC executives, many of them from the finance department, have taken the multiweek executive programs offered through Darden, and there is an additional course for high-potential managers from all areas. The finance focus in each class is strong, according to Harris. “UTC is a shareholder-driven company,” he says, “so everything eventually boils down to financial analysis.” In addition to the arrangement with Darden, the company also allows corporate executives to get their executive MBA degrees through other schools.
David FitzPatrick, CFO of UTC, who has taught leadership issues during classes, says the Darden link has improved the quality of the company’s executive education efforts. He adds that the improvement has been noted especially among the finance staff. At a recent UTC “finance executive summit,” updating financial executives among UTC’s operating companies, an in-depth business case study was explored. “The combination of the skills of the Darden faculty and its familiarity with a variety of global business issues clearly assisted in the effectiveness of the case review,” says FitzPatrick. The value of the partnership, he explains, is that Darden provides “a world-class faculty and an infrastructure that we don’t want to duplicate on our own.”
The company and Darden are exploring new technologies to deliver future programs. Experts say virtual classrooms with large TV screens and globally interactive audio hookups may soon become the norm.
The deployment of such technological wizardry in corporate-finance settings has been slowed by cost and bandwidth issues. But the seeds are being planted. USC’s Marshall School of Business has just launched a “distance learning” program in partnership with Washington, D.C.-based Building Owners and Managers Association International (BOMA), a trade association for real estate owners and managers, to deliver graduate-level courses in finance and leadership, for example.
A third collaborator is included: Caliber Learning Network Inc., in Baltimore. Over the past four years, Caliber has built some 40 U.S. and 7 European learning centers, teaching up to 90 students at a time through interactive, live classes from a remote location. Caliber also runs open-enrollment courses through the University of Pennsylvania’s Wharton School, Columbia University, and Johns Hopkins University, among others.
For the BOMA program, USC professors will deliver lessons from a single Caliber studio. Via camera, they will see and communicate with students in multiple classrooms. The association is charging students $1,650 (member price; for nonmembers, the cost is $1,850) for each of two separate three-day classes, which will be broadcast to at least 20 locations.
“After you’re in class for a few minutes, you forget you’re not in a live classroom,” says Patricia M. Areno, BOMA’s vice president for education, conventions, and meetings, who attended a pilot training. The convenience factor, she says, will be a great selling point: 13,000 of the 17,000 BOMA members live within driving distance of a Caliber center.
Kris Frieswick is a staff writer at CFO.
New from Web U.
At the other end of the spectrum from corporate-university partnerships, an entrepreneurial new breed of “education aggregator” aims to offer college-quality courses over the Internet. And these companies say they expect Web-based finance classes to be some of their biggest sellers.
One aggregator is UNext, a Deerfield, Illinois-based venture partly owned by Knowledge Universe, which is backed by Michael Milken and Oracle Corp. founder Larry Ellison, among others. Through its virtual university, called Cardean (after the Roman goddess of the threshold), UNext plans finance-class offerings on asset valuation, capital budgeting, portfolio analysis, the capital asset pricing model, and discount rates. The courses use a “problem-based, active-learning pedagogy,” and work with case studies, says chairman and CEO Andrew Rosenfield.
Although courses were designed with help from some big-name institutions — Columbia University, Stanford University, the University of Chicago, Carnegie Mellon University, and the London School of Economics — UNext will brand them with the Cardean name, and offer Cardean degrees. UNext is wrapping up tests of its finance courses in a program with IBM Corp., and has just begun taking on clients.
Pensare, in Los Altos, California, delivers guided online courses that also use chat rooms and dedicated workspaces to allow students to collaborate on projects. Its courses were designed with academic partners Harvard Business School Publishing, the University of Pennsylvania’s Wharton School, Duke University’s Fuqua School of Business, and the University of Southern California’s Annenberg Center for Communication. Pensare’s finance topics include asset and liability evaluation, risk management, and global financial management.
A third aggregator, Los Angeles-based University Access, offers courses taught by professors from the London Business School, USC’s Marshall School of Business, and the University of North Carolina’s Kenan-Flagler Business School, among others.
Some corporate educators are skeptical about online training. Early experiments indicate that Web courses may get students up to speed on the basics, but don’t make the grade when it comes to teaching high-level executives, or in taking on complicated concept discussions, for which live interaction is still viewed as essential.
Rosenfield concedes that UNext’s programs can’t compete with university-based training. “If people are able to congregate, they are able to learn better,” he says. “We seek to provide the best learning environment for people for whom the congregation is not economically viable.” —K.F.