Executive Education
The Energy Delta Institute on the move
09-03-2006
Author: J. Meijerhof
Thesis for Drs. Economics
Specialization: Bedrijfseconomie, Management & Organisatie
1st Supervisor: Dr. H.F. Lanting 2nd Supervisor: Drs. F.J. Sijtsma
F a c u l t y of E c o n o m i c s R i j k s u n i v e r s i t e i t G r o n i n g e n
Preface
At this point in time it has almost been a year since I started working on this thesis. Meanwhile, I’ve been participating in the Master of Real Estate at the Rijksuniversitiet Groningen, which I hope to finish within a number of months. During the Christmas holidays I finally found the time to finish a decent first version of this thesis. After making a number of adjustments in February, this final version was finished in early March.
One of the most important lessons I learned during this last year is that it is important to set strict deadlines, even though it may seem like you have all the time in the world. I found that, for me, performing under pressure increases efficiency by almost a hundred percent. A second thing I learned is that no matter how difficult something may look, once you really focus on understanding it you are very likely to comprehend it in the end. A final lesson learned is that it is of tremendous importance not to zoom in too much on little details, and to always keep The Bigger Picture in mind.
This preface would not be complete without a word of thanks, so that is what I will turn to now. First of all, I would like to thank the Energy Delta Institute for their request for research and their support during the execution of this research. Next, I would like to thank the Science Shop of Economics, Management & Organization, and especially coordinator Mr. Sijtsma, for allowing me to perform this research and for their input during the first months of this research. Also, I would like to thank Mr.
Pellenbarg for his role in making sure that part of this research could also be submitted as minor thesis for the minor programme Economie en Ruimte. Off course I would also like to thank my supervisor Mr. Lanting for his help and useful insights. A final word of thanks goes to my parents and my girlfriend, who were my main supporters during the past year.
Summary
The Energy Delta Institute (EDI), an International Business School and Research Centre for natural gas located in Groningen, wants to expand the number, and diversify the backgrounds, of participants in their programs and courses. Until now, most of the participants are from either Gasunie or Gazprom, which have also founded the institute together with the University of Groningen. EDI’s programs and courses focus on economical, managerial and geopolitical issues and are aimed at higher management employees from diverse organizations with activities in, or related to, the natural gas industry.
In trying to make EDI less dependent of the support by Gasunie and Gazprom this research, focused on Europe, identifies seven countries in three regions in which EDI’s programs and courses have the highest market potential based on nine national natural gas market characteristics. The identified countries are The Netherlands, The United Kingdom, Norway, Germany, Italy, France and Ukraine.
Focussing on these countries will maximize the chance of attracting a larger and more (international) diverse group of participants. Moreover, the research identifies that the programs and courses of EDI have the highest market potential in the Western European region.
The research also shows that EDI’s marketing department should, when selecting organizations to approach, primarily focus on the organizations with the highest number of employees. The research provides EDI with a list of 171 selected organizations from six countries ranked based on their number of employees. Besides the ranking, the list contains additional information about the organizations.
Other factors important in selecting organizations are listed and discussed. In addition, the research discusses executive education from an organizational perspective and identifies the key factors for successful Management Development within an organization.
The research provides EDI with several recommendations on how to make the programs and courses even more successful for participants and the organizations sending the participants as well as for EDI itself. The main underlying reasoning for these recommendations is that offering high quality, interesting, educational, attractive and enjoyable programs and courses can help client organizations in increasing their employees’ perceived investment in employee development and ultimately increase the performance of their organization.
Table of contents
PREFACE... II SUMMARY ... III TABLE OF CONTENTS... IV INTRODUCTION ... V DEFINITIONS ... VIII 1 HRM, TRAINING & DEVELOPMENT... X 1.1 DEFINITIONS...X 1.2 DIFFERENCES...XII 1.3 BENEFITS...XIII 2 EXECUTIVE EDUCATION...XVI 2.1 REASONS FOR ATTENDING...XVI 2.2 CHARACTERISTICS OF POTENTIALLY SUCCESSFUL PROGRAMS AND COURSES...XVII 2.3 TRENDS IN EXECUTIVE EDUCATION...XVIII 2.4 INVESTING IN EMPLOYEES...XVIII 3 AN ORGANIZATIONAL PERSPECTIVE ON EXECUTIVE EDUCATION ...XX 3.1 CREATING VALUE...XX 3.2 MANAGEMENT DEVELOPMENT...XXI 3.3 CAPABILITIES,KSFS AND RESOURCES...XXII 3.3a Capabilities ... xxii 3.3b Key Success Factors ... xxiii 3.3c Resources ... xxiv 4 GOING INTERNATIONAL ... XXV 4.1 DECISION MAKING...XXV 4.2 MARKET AND CUSTOMER SELECTION...XXVI 4.3 MARKET SELECTION FOR SERVICES...XXVIII 5 BRINGING THEORY TO PRACTICE ... XXIX 6 TARGET MARKETS FOR THE ENERGY DELTA INSTITUTE ... XXXI 6.1 STEP 1.DEFINING THE PROBLEM...XXXI 6.2 STEP 2.DETERMINING THE DIMENSIONS...XXXI 6.3 STEP 3.WEIGHTING THE DIMENSIONS...XXXI 6.4 STEP 4.GENERATING ALTERNATIVES...XXXII 6.5 STEP 5.RATING THE ALTERNATIVES...XXXIII 6.6 STEP 6.THE OPTIMAL DECISION...XXXV 6.6a Ranking the Countries ... xxxv 6.6b Regional market potential of EDI’s services ... xxxvi 6.6c A selection of countries...xxxviii 7 TARGET ORGANIZATIONS FOR THE ENERGY DELTA INSTITUTE ...XXXIX 7.1 STEP 1.DEFINING THE PROBLEM...XXXIX 7.2 STEP 2.DETERMINING THE DIMENSIONS...XXXIX 7.3 STEP 3.WEIGHTING THE DIMENSIONS...XL 7.4 STEP 4.GENERATING ALTERNATIVES...XL 7.5 STEP 5.RATING THE ALTERNATIVES...XL 7.6 STEP 6.THE OPTIMAL DECISION...XLI 8 CONCLUSION ...XLII REFERENCES ... XLV APPENDICES ...ERROR! BOOKMARK NOT DEFINED.
Introduction
Knowledge based capital is becoming increasingly important in contributing to a companies competitiveness, helping companies to obtain a competitive advantage in their markets (Noe, 2005).
Together with the diminishing importance of distance due to the internet and the new view of education as a process and not a one time event, this makes that institutions offering training and development programs and courses to employees of all sorts of organizations find themselves in a high growth industry (Lippert, 2001). The Energy Delta Institute (EDI), being the main subject in this research, is just one of the institutions that acknowledge the opportunities on the globalizing market.
EDI is an International Business School and Research Centre for natural gas, set up in 2002 by N.V.
Nederlandse Gasunie, the Rijksuniversiteit of Groningen, and Gazprom, the world’s biggest gas company located in Russia. EDI’s main goal is to support organizations over the whole world to obtain knowledge and skills for the development of an economic viable gas market and a sustainable gas industry through an international network of knowledge institutions. The curriculum of EDI, primarily focussed on economical, managerial and geopolitical issues, varies from Master Programmes to courses of 3-5 days to In-company programmes (energydelta.nl). The participants in the programs and courses usually are from higher (and sometimes middle) management.
In the last three years, two studies have been carried out for EDI. These studies mainly focussed on EDI’s strategic positioning and its services, and not on the markets in which EDI provides its services.
In 2003, Arentsen and Wolters did research resulting in a strategic positioning plan for the whole Energy Valley knowledge centre. In 2004, five students from the University of Groningen did research focussing on the strategic positioning of EDI’s services.
Currently, EDI is trying to extend its network with several major partners which may assure EDI’s existence in the future. Meanwhile, it wants to expand the number, and diversify the backgrounds, of participants in their programs and courses. Until now, most of the participants in the programs and courses offered by EDI are from either the Gasunie, or Gazprom. When a group of (internationally) more diverse participants would take part in the programs and courses, the exchange of knowledge would be encouraged, and even more participants might want to attend just because they do not want to miss a thing. If EDI does not succeed in attracting a more diverse group of participants, or in finding new partners, withdrawal of financial support and course participants by Gasunie and / or course participants by Gazprom will cause EDI to get in serious trouble. Summarizing: EDI’s main problem is assuring its existence even when Gasunie and / or Gazprom stop supporting the institute. This involves finding other partners, and / or substantially enlarging the number of organizations from which employees participate in the programs and courses offered by EDI.
Based on the second option, EDI has approached the Science Shop of Economics, Management and Organizations of the University of Groningen for doing a project that should ultimately lead to recommendations for EDI’s marketing department on how to attract a more (international) diverse
group of participants to their programs and courses. To come to these recommendations EDI has divided the project into three sub projects: a project about the competition EDI has to deal with, a project about the market potential of EDI’s services in North African, Middle Eastern and South-east Asian regions and a project about the market potential of EDI’s services in three European regions.
This research is the result of the project on the market potential of EDI’s services in the three European regions (West, East and South).
What EDI needs is an overview of the European countries and organizations they should focus on to have the best chance of increasing the number, and diversifying the backgrounds, of participants in their programs and courses, and recommendations on how to make sure their programs and courses become an even bigger success. This research will provide insight in what organizations want to achieve by letting their employees attend executive education courses and programs, what the characteristics of successful programs and courses are, how executive education can become successful within an organization, which organizations are most likely to let their employees participate in executive education, and what the characteristics of the national natural gas markets and the players on these markets are. The main research question therefore is: How can EDI make its educational programs and courses even more successful and on which regions, countries and organizations should EDI focus?
The results of this research will be the identification of the regions, national markets and organizations that should get the highest priority from EDI’s marketing department and a set of recommendations on how to make the programs and courses of EDI even more successful.
The first part of this research will show the relations between executive education and the concepts of Human Resource Management (HRM), training and development, analyze their differences and identify the benefits associated with training, development and executive education. The second part will zoom in on executive education and will provide insight into the reasons for attending, define the characteristics of the organizations most likely to let their employees participate, list the expectations of participants and their organizations and define the characteristics of programs and courses most likely to be successful. The third part will look at executive education and the broader concept of Management Development from an organizational perspective. The fourth part will explore theories on how to decide which markets and organizations to focus on and will explain the approach used in the fifth part of this research in which a ranking and selection of countries and a ranking of organizations are presented to identify the target markets and organizations for EDI’s marketing department. This part will also include an estimation of the difference in market potential of EDI’s services in the three regions. The final part, the conclusion, contains the answer to the research question. The sub- questions that have led to the various parts of the research as explained above include:
Where can executive education programs and courses be placed within the Human Resource Framework (chapter 1)?
Why do organizations invest in training and development of their employees (chapter 2)?
Why do participants attend executive education programs and courses (chapter 2)?
What are the characteristics of a successful executive education program / course (chapter 2)?
Which factors determine an organizations’ level of investment in their employees (chapter 2)?
What are the key success factors for organizations that want to develop their managers (chapter 3)?
How should the decision about on which markets and organizations to focus on be made (chapter 4 and 5)?
In which countries and regions is the market potential of EDI’s educational programs and courses the highest (chapter 6)?
Which organizations are most likely to be willing to do business with EDI (chapter 7)?
Definitions
Below is a definition of a number of concepts and constructs used in this research.
Regions and countries (39): Western Europe(14): Norway, Sweden, Finland, Denmark, United Kingdom, Ireland, Iceland, The Netherlands, Germany, Belgium and Luxembourg, France, Austria, Switzerland and Lichtenstein. Eastern Europe (12): Poland, The Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Estonia, Latvia, Lithuania, Belarus, Ukraine and Moldova. Southern Europe (13):
Spain, Portugal, Greece, Italy, Albania, Serbia and Montenegro, Bosnia Herzegovina, Croatia, Slovenia, Macedonia, Turkey, Cyprus, Malta.
Markets: these are determined by the countries in this research. Each country is approached as an individual market on which EDI can provide its services. The only exceptions are Belgium and Luxembourg, which were put together because of data availability reasons.
Successful: programs and courses are considered successful if they are of high quality, interesting, educational, attractive and enjoyable for the participants, increase the perceived investment in employee development of the participants and attract large numbers of participants.
EDI’s services: for this research EDI’s services are limited to the executive education programs and courses EDI offers. They include two master programs, short-track courses, and in-company training.
Organizations: these are companies that perform activities in, or related to, the natural gas industry in the European countries.
Executive education: the literature studied in this research uses both the concept of executive education and the concept of management education to refer to the education of employees from middle and higher management. Based on this observation, the concepts executive education and management education are both used in this research to refer to the education of employees from higher and middle management and, hence, to the services offered by the Energy Delta Institute.
Management education: see executive education
Investing in employees: for this research this is defined as spending money on training and developing employees.
Going international: intending to do (more) business on foreign markets.
Characteristics: in the case of the countries these are the variables that ultimately determine if EDI’s services have potential in these countries. In the case of executive education programs and courses these are their various aspects that determine if a program or course becomes successful.
Priority: when a certain country is given a higher priority than another country this means that EDI’s marketing department should focus more on the first.
Target markets and organizations: the markets and organizations on which EDI’s marketing department should focus.
Programs: these are usually a series of courses. Because EDI offers both, these terms will both be used to refer to EDI’s services.
1 HRM, Training & Development
Employee training and employee development are both Human Resource Management (HRM) practices. As will be explained later, the programs and courses EDI offers to higher (and sometimes) middle management are a form of formal education, which is one of the four approaches to employee development. Both training and development play an important role in the HRM process in comparison to other HRM practices and are linked directly and indirectly with business strategy and goals. Directly via the development of skills needed to perform a certain job, and indirectly via the creation of a positive working environment that attracts new, and retains current employees (Noe, 2005). This chapter will define the various practices mentioned, show their differences and indicate the benefits of investing in them.
1.1 Definitions
Human resource management refers to all policies, practices and systems of an organization that influence the behaviour, attitudes and performance of employees. Other HRM practices besides training and development include employee recruiting and selecting, designing work, compensating employees and decentralization (Noe, 2003). According to Paauwe and Boselie (2005) there is no static list of HR practices that defines HRM. Most HRM programmes do however have the same objectives, namely to recruit and select the right employees, to provide them with everything they need to perform effectively, to monitor them and to reward them when certain targets are met.
Training is defined by Garavan (1997) as a planned and systematic effort to modify or develop knowledge, skills and attitudes of employees through learning experiences to achieve effective performance in their day-to-day activities. Training methods can be divided into three broad categories (Noe, 2005).
Presentation methods where the trainee is a passive recipient of information:
Lectures
Audiovisual techniques
Hands-on methods which require the trainee to be actively involved:
On-the-job training
Self-directed learning
Apprenticeship
Simulations
Case Studies
Business games
Role plays
Behaviour modelling
Group building methods which are designed to improve the effectiveness of a group or a team:
Adventure learning
Team training
Action learning
According to Noe (2005), employee development refers to formal education, job experiences, relationships and assessments of personality and abilities that can help employees to perform better in their current job, or in future jobs. Garavan (1997) suggests that development is meant to expand one’s potential with a view to the future. Jacobs and Washington (2003) define employee development as:
“an integrated set of planned programs, provided over a period of time, to help assure that all individuals have the competence necessary to perform to their fullest potential in support of the organization’s goals”.
In the past, employee development mainly focussed on employees at the management level, while training, designed to improve performance on current jobs, was given to line employees. The increased involvement of employees and the greater use of work teams have now caused employee development to be important for employees at all levels in an organization (Noe, 2005). In general, the following four approaches are used, often in combination, to develop employees (Noe, 2005):
Formal education programs: company specific on- and off-site training, executive MBA programs and short courses by consultants and / or universities. Lectures by business experts or professors, business games, simulations, and meeting with customers can be part of these programs.
Assessment: used to identify employees with managerial potential and identify strengths and weaknesses of current managers. It mainly involves the collection of information on employee behaviour, communication style and skills. Feedback is given to the employees and managers on the outcomes of this information gathering process. This feedback helps employees to develop an action plan designed to improve their skills.
Job experiences: the things that people experience in their jobs, like relationships, demands, problems and tasks. Job experiences lead to employee development when current skills and past experiences are not sufficient enough for a certain job. At that moment, employees are forced to learn and apply new skills. Development of true job experiences can be stimulated by, among others, enlarging the current job, job rotation, moves up or down in the hierarchy or temporary exchanging an employee with an employee from another organization.
Interpersonal relationships: increasing the knowledge of employees by letting them interact with a more experienced member of the organization in a mentoring or coaching relationship.
As Jacobs and Washington (2003) mention, employee development has a very wide scope that can be defined by the level of employees being served or by the methods of employee development being used. As becomes clear from the four general approaches given above, EDI’s courses, focussing on participants from higher (and sometimes middle) management are a form of formal education programs. According to Crotty & Soule (1997) the right term to use for education that focuses on executives and managers at senior levels within organizations is executive education. From here on
‘executive education’ is used to describe the services offered by EDI. The next chapter will go in to more detail on this concept.
1.2 Differences
The definitions of employee training and employee development given in the previous paragraph seem to indicate that they, although both meant to improve performance, are not the same. Fitzgerald (1992) strengthens this feeling by pointing out the difference in focus between training and development. Training focuses on improving employees’ performance in their current jobs, whereas development is meant to help employees prepare for the future. This focus on the future means preparing employees for changes that might occur in one to three years from now in their current job, for other positions in the organization, or for jobs that currently do not even exist (Noe et al. 2003).
Another difference brought forward by Fitzgerald (1992) is that in contrary to training, development does not occur during class. “It is what happens after the class that causes real development to occur.”
Table 1, derived from Garavans’ article Training, development, education and learning: different or the same illustrates that, apart from the differences mentioned by Fitzgerald (1992), there are a lot of distinctive properties for training and development. Notice for example the different outcomes of the process. Although table 1 indicates that employee training and development are distinctive, this distinction will blur when training becomes more related to business goals. Training will then, like development, be more strategic (Noe et al., 2003).
Table 1. Differences between training and development (based on Garavan, 1997)
1.3 Benefits
According to Jacobs and Washington (2003), there is a widespread belief that a positive relationship exists between employee training and development and organizational performance. Organizations offering various learning opportunities enable employees to perform better on their jobs, enabling the organization as a whole to perform better as well. They also stress that a complementary set of learning opportunities is required, instead of one education program. Gains from enterprise-based training can be looked at in terms both of the human capital held by individuals and the overall productivity of the enterprise. It can be difficult however to show direct links between particular episodes of investment and specific productivity gains, and even more difficult to sum up the effects of the diverse investments to calculate their overall effect on production or earnings (OECD, 1998). The report of the OECD (1998) also gives an overview of research in the OECD member countries on the impact of continuing education and training on performance of workers and enterprises. While, as they admit, it is difficult to generalize from such a diverse sample of studies, the weight of the empirical evidence is that:
Education and training generate increased wages for trained workers, and increased productivity for those enterprises that train and innovate. Approximately half of the gains go to workers in the form of wages and the other half is kept by organizations.
Enterprise-based training has the greatest impact on performance when undertaken in connection with changes in work organization, job structure, and, in some instances, technological innovation.
Bollens et al. (2002) identify two main problems in measuring the influence of employee education and development on organizational performance. First of all, there might be a time lag between the moment of education and the moment the education starts paying off. Second, it is difficult to estimate how long the payoff period of the education is. This makes it hard to estimate the influence of a single course on organizational performance, because influences from different courses may overlap.
Another problem, brought forward by Jacobs and Washington (2003), is that the wide scope of employee development makes it difficult to determine the exact relation between employee development and organizational performance.
Based on research by Paauwe and Richardson (1997) and Lee and Bruvold (2003) figure 1 shows the relation between training, employee development, employee commitment and organizational performance within the framework of HRM activities, HRM outcomes and organizational performance.
According to Paauwe and Richardson, HRM activities will lead to certain HRM outcomes, which in turn will influence organizational performance. The dotted line indicates that when company performance increases, this may cause HRM activities to change, usually in a positive way. Lee and Bruvold (2003) describe perceived investment in employee development (PIED) as the reflection of employees’
beliefs about the organization’s commitment to improving their competence and enhancing their marketability, both internally and externally. Employees tend to devote greater effort to the
organization as their PIED increases. According to Whitener (2001) not only employees’ commitment is stronger when they perceive that the organization is supportive of them, but their trust will be stronger too. As figure 1 shows, increased PIED positively influences almost all HRM outcomes.
Ultimately, these outcomes, together with the other HRM outcomes listed in figure 1, lead to increased organizational performance in the form of, among others, increased profits and market shares.
Figure 1. HRM activities, HRM outcomes and firm performance (based on Paauwe and Richardson (1997) and Lee and Bruvold (2003))
Van Loo and De Grip (2002) have created a performance framework that shows the relation between different measures of individual and organizational performance. In their framework, increased individual performance will lead to higher individual productivity and lower production costs. The increase in productivity will eventually lead to a higher organizational turnover, and together with the lower production costs, to higher profits and improved performance on financial markets. Also, financial measures like return on equity and return on assets will improve. Although Van Loo en de Grip (2002) focus on the influence of the whole HRM process, their performance framework only seems to deal with training employees to reduce costs and increase productivity. As indicated earlier, developing employees means preparing them for the future, whereas training focuses on improving employee performance on the current job.
Interpretation of the research and frameworks above, leads to the conclusion that investing in employee training and development can influence the HRM outcomes, but that this (positive) influence will diminish when the investments are not recognised by the employees. When the investments are
recognised and PIED increases, almost all HRM outcomes are positively influenced, eventually leading to improved organizational performance.
2 Executive Education
This chapter focuses on various subjects related to the concept of executive education. These subjects are discussed because of their relevance for answering the main research question. The first paragraph describes the reasons participants have for attending executive education programs. In the second paragraph an overview is given of which characteristics are considered crucial in making a specific program or course into a success. The third paragraph briefly discusses some current trends in executive education, while the fourth paragraph explains the factors that are of most importance in determining if an organization will be likely to invest in letting their employees take part in executive education programs and courses.
2.1 Reasons for attending
Employee, or more specific, management development is stimulated by a number of factors including external changes, business needs, human resource strategy, goals and practices, individual demand, internal changes, development opportunities and culture and work ethos (Mabey, 2004). Farris et al.
(2003) found that the three main factors in attending executive education programs are: to further functional specialization; to enhance understanding of their company’s strategic challenges; and to prepare for a new position or assignment.
Attending executive education as part of the employee development process has four main reasons, referred to by Long (2004) as ‘reason for attending constructs’. According to Long, executives mainly attend for personal reasons like ‘to affect my performance’ or ‘to get ahead in this organization’.
Employees might also have organizational reasons, like ‘to help me contribute to my organization’s strategic objectives’. There is also a group of employees that attends executive education because of others. They have reasons like ‘because others in my organization have gone’ or ‘because my boss suggested it’. The last construct is based on executives attending because they want to get away from their work for a while, or to further their career outside their own organization. These are the self- serving reasons. When an organization finds out that employees mainly have self-serving reasons for attending executive education, it is triggered to cut back on investments in employee development, even though this may also cause the organization to perform sub-optimal.
EDI was partly set up by the Rijksuniversiteit Groningen, which assures the presence of both academic knowledge and business experiences (via Gasunie and Gazprom). The presence of the Rijksuniversiteit Groningen gives rise to paying attention to two other reasons for attending the programs and courses offered by EDI (Long, 2004). The first reason is ‘to gain new knowledge and models for managerial behaviour’. The second reason, ‘to interact with other participants’, is a very interesting one. As explained earlier, until now, most of the participants in the programs and courses offered by EDI are from either the Gasunie, or Gazprom. When EDI would be able to attract a more diverse group of attendees in the future, they would provide potential participants with an extra reason to sign up and join the programs and courses. A diverse group of attendees will also improve the exchange of knowledge.
According to Mintzberg (2003) the tasks of most of the managers are so complex that formal education and training are of minor importance. Organizations are however looking for short development courses on specific topics and on specific management skills.
2.2 Characteristics of potentially successful programs and courses
Both the research by Long (2004), and the research by Farris et al. (2003) discussed in the previous paragraph illustrate that there are numerous reasons for attending a course. But which factors are important in making a specific course successful?
Moore and Dean (2000) suggest that there are a number of things that organizations want in executive education. First of all, they want industry stars and gurus to be involved. In other words, the status of the lecturers and developers of the educational program is important. Secondly, organizations want talent from other organizations, even from competitors, to participate at the same time. Lastly, organizations want education providers to assign a coach or mentor to individual participants to help them improve their performance. There are however very few institutions that can deliver this service, making it a major challenge.
Orr (2000) found that institutional image and reputation are important success factors for all segments of education. The relationships of institutions with a number of types of agencies, like professional institutions and government authorities, are important for creating and maintaining this image. The reputation of an institution is often conveyed through informal networks and word of mouth, so the reputation perceived by potential participants may differ from the perception the institution has of itself (Orr, 2000). Accordingly, Farris et al. (2003) found that institutional reputation is the most important non-content-related factor in choosing an executive education course. They also found that the reputation of the key presenter, colleague recommendation, and program tuition cost were important factors in course selection.
After selecting and attending a course, participants can judge whether it was useful to them. Usually, a course is considered useful when it can be characterised as being run in a learning-motivating environment, having effectively utilised time, having clear objectives which have been met, having relevant content and delivery, and having a prepared and expert trainer (Mmobuosi and Aduaka, 1997).
It is important to note that to evaluate the success of executive education programs and courses, a clear and shared understanding about the reasons why participants attend a specific executive education course and why organizations send them is needed. Not knowing why the executives are there, makes trying to customize the course to the perceived wishes of the participants and measuring the conformance of the course to the expectations of the participants a waste of time (Long, 2004).
Making executive education successful for the organizations sending their employees requires organizations to explain the purpose, spend time to customize course content, use active learning like
group assignments, make sure that top management is committed to the education, look for the right type of course and provide follow-up support. It should be clear for both the HR departments and the participants that executive education does not start and end with the program or course (Kovach, 2000)
2.3 Trends in executive education
Since the early 1990s there has been an increase in management development activities in Europe (Mabey & Ramirez, 2004). There are a number of important trends influencing these activities. First, many organizations and universities are using distance learning to communicate with participants.
Distance learning involves two-way communication between people, like teleconferencing and web- casting. A second trend is the creation of short courses, with content designed for a specific audience, by organizations and the education provider together. Third, executive education is supplemented with other types of training and development activities (Noe, 2005). Fourth, the effects of global competition require executive education to become more internationally focussed. It should provide participants with knowledge about foreign markets and present ideas on how to deal with opportunities on these markets (Crotty & Soule, 1997). Fifth, executive development is becoming more and more aligned to business goals and is now often part of the strategic agenda of organizations. Consequently, executive development is increasingly being used as a basis for the creation of competitive advantage. A final trend is the development of global partnerships, networks and alliances by organizations seeking to expose their managers to different (organizational) cultures and a new
‘spectrum of perspectives’ (Cairns, 1998).
2.4 Investing in employees
Which organizational characteristics influence the volume and diversity of training and development has been the subject of a number of studies. According to research by Smith and Hayton (1999), the most influential factors determining the demand for training and development of an organization are the size of the organization, the industry sector in which it operates, and workplace changes.
According to Smith and Hayton, the factor ‘organizational size’ is the most important one of these three. Not only is organizational size very strongly associated with both the volume and diversity of training and development, but it is also related to three important factors that determine the ability of an organization to provide training and development programs:
Resources: The larger organization, the greater the economies of scale that can be achieved in training and the better the support of this training with high investments in training infrastructure.
The nature of the workforce: Larger organizations have more skilled and professional employees who require higher levels of training. The demand for training is greater in proportional terms in larger organizations.
Networking: Small organizations have particular problems in accessing training providers whereas larger organizations, particularly those employing training specialists, often have well- developed relationships with a network of training providers and with the training authorities.
Another study by Black, Noel and Wang (1999) found that larger organizations are more likely to purchase outside training courses and that subsidiaries of large organizations turn out to provide more off-site training and development to their employees than independent organizations (often at the parent organization). Westhead (1998) has shown that the percentage of organizations providing formal training is higher among subsidiaries of other organizations, than among independent organizations.
The industry sector an organization operates in also strongly influences the types and degree of training and development activities. Industries often have developed training traditions over time.
Some of them are more likely to use outside training and development sources, whereas others, like the construction industry, keep almost everything in-house. CVT stands for Continual Vocational Training and can be described as permanent education and training that provides job-related skills and knowledge (Oxford Reference online). In Eurostat, statistics about the percentage of organizations providing CVT in the different National Accounts in Europe (NACE) can be found. NACE is a European system to structure the economy into statistical sectors (Eurostat, 2005).
Workplace change is the third important factor influencing training. The research by, among others, Smith and Hayton (1999) shows that it is strongly correlated to the diversity and the volume of training and development. Most workplace changes require employees to be trained in behavioural skills.
The above shows that the single most important factor influencing the volume and diversity of training and development is organizational size, which is, in general, measured by the number of employees.
Organizational size is related to other factors that determine the ability of an organization to provide training and development programs. Interesting to keep in mind is that subsidiaries of large organizations tent to provide more training and development programs than independent organizations, and that subsidiaries provide more off-site training than independent organizations.
3 An organizational perspective on Executive Education
So far, the focus of this research has been on describing the concepts of HRM, training, development and executive education based on what they have to offer for an organization and on why, and when, organizations invest in executive education. In this chapter the focus will be on indicating what capabilities and resources an organization needs to possess to be successful in their executive education (management development). Furthermore, the key success factors of Management Development (MD) from an organizational perspective are listed based on a review of MD literature.
3.1 Creating Value
To achieve a competitive advantage an organization must not only create positive value, it must create more value than its competitors. The organization must be able to offer more value to their customers in the form of lower prices or greater benefits than its competitors (Besanko et al., 2000). The value chain of an organization shows the collection of value-creating activities within the organization (Porter, 1985, from Besanko et al. 2000, see figure 2). In this value chain, inbound logistics, production operations, outbound logistics, marketing & sales and services are distinguished as primary activities, while firm infrastructure, Human Resource Management, technology development and procurement are distinguished as support activities.
Figure 2. Value chain (Besanko et al., 2000)
To be able to gain a competitive advantage, an organization needs to perform a number of activities better than its competitors. To do so, the organizations need to possess resources and capabilities that its competitors do not have. Resources can be described as being the things that firms have, while capabilities are the things that a firm does. According to Johnson and Scholes (1998), resources can be divided into four groups:
Financial resources: the ability of the business to finance its strategy.
Human resources: the skills-base of the business.
Physical resources: the category of physical resources covers a wide range of operational resources relating to the physical capability to deliver a strategy. They include production facilities, marketing facilities and information technology.
Intangible resources: they include goodwill, reputation, brands and intellectual property.
Capabilities, the things a firm does, can reside within certain business functions, might be linked to product design and / or particular technologies, or can reside within the ability of the organization to manage linkages between different activities in the value chain and to coordinate activities across it (Besanko et al., 2000). Capabilities can be characterised as:
Being valuable across multiple products or markets
Being embedded in organizational routines
Being tacit and therefore not easily translated into procedure guides
Key success factors (KSFs) are the skills and assets that a firm must possess to be successful. They are not unique for a certain firm, but can be thought of as market level characteristics (Besanko et al., 2000). Thompson and Strickland (2001) describe KSFs as: “the product attributes, competencies, competitive capabilities and market achievements with the greatest direct bearing on company profitability.” To find out what the KSFs are for a particular firm, one might look at the resources and capabilities it must possess to be successful.
3.2 Management development
Human Resource Management was, in the previous paragraph, distinguished as being a supporting activity. This activity includes, as was discussed in chapter 1, all policies, practices and systems of an organization that influence the behaviour, attitudes and performance of employees (Noe et al., 2003).
The executive education offered by EDI becomes part of the HRM of the client organization and, more precisely, part of the development of their employees from higher (and sometimes middle) management. The whole development process of managers is often referred to as management development (MD). For MD to be successful within an organization and for MD to generate the desired outputs shown in figure 3, inputs of various natures are needed, including resources and a clear HR strategy (Doyle, 1995). The desired outputs of management development are strongly affected by the strategic choices of an organization. These choices stipulate the human resource needs of the organization which, in turn, influence the HRM practices used within the organization (Noe et al., 2003).
In the next paragraph, this research will try to identify the key success factors of MD within the organizations that can be approached by EDI. This identification will be based on the capabilities needed by organizations to perform MD successful. Before doing so, it important to acknowledge the fact that there are different types of MD which might require different sets of capabilities and resources. Jansen et al. (2001) identify four types of MD based on its emphasis on either the organization and / or the individual development:
Administrative MD: emphasises neither the organizational nor the individual development. In a stable and predictable environment attention is focussed on maintenance, accuracy and control.
Derived MD: with this type, emphasis is clearly on the development of the organization. The development is designed to support the organizational objectives and is derived from the
strategic choices of the organization. The environment is unstable but predictable and the focus of development is on efficiency and productivity.
Partner MD: emphasis is on both the organizational and the individual development. Mutual involvement and communication are keywords. External opportunities and internal human capital are combined.
Leading MD: with this type, the knowledge and skills of the employees influence the strategic choices of the organization. The environment is unstable, turbulent and unpredictable.
Figure 3. The Management Development process (Doyle, 1995)
3.3 Capabilities, KSFs and Resources
In MD literature, several authors have dealt with the issue of identifying the capabilities an organization needs to possess to perform MD successfully. Their findings are presented below, after which this research identifies the key success factors for MD. The paragraph ends with listing a number of important resources needed for successful MD
3.3a Capabilities
The capabilities of on organization can be distinctive or reproducible. The distinctive ones are the capabilities that competitors can not replicate, while the reproducible ones can be replicated.
Furthermore, it is useful to distinguish between tangible and intangible capabilities. Tangible capabilities are things like intellectual property rights and exclusive licenses, while intangible capabilities are things like tacit knowledge and strong brands. The capabilities needed for successful MD within potential client organizations of EDI are usually intangible and can be of a distinctive as well as a reproducible nature.
Based on the work of Vicere, Cacioppe (1998) developed a seven stage model to plan leadership and management development. This stage model has helped to identify several capabilities needed for successful MD. They include; basing the needs of MD on overcoming internal and external issues;
taking the backgrounds (level, experience etcetera) of the participants into account; evaluating MD delivery and effectiveness; and integrating MD needs with management and HR systems. Reitsma (2001) found that at Unilever important MD capabilities are; joint ownership of the MD by the business and the individual; identifying talent at all levels; when relevant, making sure that MD approaches are the same at different sites and / or in different countries; and having a transparent MD system. Mahieu (2001) indicates that for MD to be successful it should be strategic, professional and enabling. This means: (1) early identification of skill gaps in the context of business strategy, (2) further professionalizing the MD professionals, and (3) making line-managers and individuals responsible for MD. According to Cole (1995), it is important that senior management provides commitment and leadership. Garavan et al. (1999) explain that for MD to be successful it is important that sufficient attention is paid to the selection of managers that are going to be developed. Furthermore, they state that development should focus on individual development needs and should nod be of an ad hoc nature, but based on a development plan. Being able to identify the competencies needed to perform effectively is another capability brought forward by Garavan et al. (1999). According to Doyle (1995) MD needs a holistic, relational perspective that extends beyond the process view of MD.
3.3b Key Success Factors
Based on the capabilities identified in the previous paragraph it is now possible to list a number of key success factors of management development within the potential client organizations of EDI. The KSFs are based on the division of the capabilities into four broad categories as shown in table 2.
Participants
Backgrounds of participants are taken into account Individual needs are recognised
Selecting the right managers to develop Talent is identified at all levels
Content
Basing MD on overcoming internal and external issues MD is being linked to strategic objectives
Competencies that are needed are identified early Ownership
Line managers and individuals are able to be responsible for MD Senior management serves as a leader in, and is committed to, MD Having joint ownership of MD by individual and organization
Professional
MD is based on a development plan A professional MD system is present
Relationships outside the MD system are taken into account The MD system is transparent for everyone
Thorough evaluation of MD effectiveness
Integration of MD with management and HR systems Table 2. Division of capabilities into categories
The key success factors identified in this research are:
MD has a strong focus on the individual participants to ultimately develop the organization as a whole.
MD content is linked to the strategy of the organization and is based on all issues effecting the organization.
MD should be owned by individuals as well as by the organization, whereby the individuals are made responsible for MD and senior management shows strong commitment to, and acts as a leader in, MD.
The MD (system) needs to be professional in all aspects
The above indicates what factors MD ideally should characterise to be successful. Linking this to the division of MD into four types shown before (Jansen et al., 2001), it is interesting to notice that this indication, for the largest part, basically describes the Partner MD type. This can lead to the conclusion that, according to the literature studied, in a successful MD setting the focus is on both the individual and the organizational development. It is however important to stress that this ideal setting might not be equally ideal across organizations in different industries, across different countries, or even across organizations in the same industry in a particular region. It is the context of an organization that matters (see for instance figure 3, or Garavan, 1999).
3.3c Resources
Without sufficient resources it is impossible for an organization to possess the capabilities and key success factors needed for MD. To complete this chapter on key success factors of MD an overview is presented of the most important resources needed by the potential client organizations of EDI.
Financial resources: needed to attract the appropriate management talent and retain the managers already active within the organization. The organization must also be able to have sufficient funds to professionalize its MD system together with the other HRM activities. To be able to acquire MD from institutes like EDI the organization also needs extensive financial resources.
Human resources: the organization needs employees who are able to recognise internal and external issues early. It also needs the talent that can be developed during MD. Of significant importance is the presence of a strong leader that is committed to MD and of line managers and individuals that can be made responsible for MD.
Physical resources: physical resources needed for successful MD are usually limited to having an appropriate place to work on the development of the managers and having IT networks available for attaining knowledge. One could also imagine that having certain physical resources attracts the talented employees that the organization wishes for.
Intangible resources: the reputation, brands, and etcetera can also help attracting talented employees.
They can also be important for the opportunities to create partnerships with institutions that are able to assist in developing the managers in the organization.
4 Going international
As mentioned in the introduction, EDI wants to attract a more (international) diverse group of participants to their programs and courses. It wants to do so by approaching organizations in, among others, three European regions. This chapter will identify several decision approaches for selecting the appropriate markets and organizations within these regions, and explain some of the specific characteristics of trading services internationally. In chapter 5, the approaches discussed in this chapter will be used to describe the approach used in this research to rank markets and organizations based on the potential of EDI’s services and to select the markets and organizations that should get the highest priority of EDI’s marketing department.
4.1 Decision making
“Decisions are the essence of management. They’re what managers do–sit around all day making (or avoiding) decisions. Managers are judged on the outcomes, and most of them – most of us – have only the foggiest idea how we do what we do.”
The citation above (Stewart, 2006) clearly indicates that decision making is one of the most critical aspects for managers in all organizations. The process for making a decision can differ from one situation to another. Some might be intuitive, while others can have a very analytical nature. In general, four decision making approaches can be identified (Schoemaker and Russo, 1993):
Decisions based on intuition are hard to explain. Intuition refers to certain feelings, holistic thinking, immediate insight, and rapidly accessing compressed experience from the past (Sauter, 1999).
Managers that have often dealt with similar decisions have learned to understand the key issues involved in making the decision. Problems arise when the decision turns out to be wrong and the manager can not explain why he or she has made the decision. Two main problems in making decisions based on intuition are inconsistency and distortion. Inconsistency can occur due to memory failings, fatigue, distractions and etcetera. Distortion is caused by, for example, the fact that the most recent information received is overemphasized. Both distortion and inconsistency are hard to overcome. Intuition should therefore preferably only be used when the time in which a decision has to be made is limited or when there is a lack of information that makes a more systematic way of decision making impossible (Schoemaker and Russo, 1993).
Decisions based on rules are more systematic and often more accurate than those based on intuition.
Rules offer an underlying reasoning for decisions and are less costly than a comprehensive analysis (Schoemaker and Russo, 1993). Decision rules are codified into tests that can search for an optimal choice, that attempt to meet specifications, that find the most feasible alternative or that find the alternatives most often used by respected organizations (Nutt, 2002). Not all the important information is taken into account in rules, which is why managers should look beyond the rules for the optimal decision.
