Business schools have been enjoying a resurgence in demand for executive education over the past year, as companies have paid for their top performers to upgrade skills amid a war for talent. Also, online learning has expanded access to training to those lower down in organizations. Schools were forced to close many courses during the earlier stages of the pandemic, but those classes have now resumed.
The question is whether that demand can be sustained now that the more uncertain economic outlook pushes companies to make difficult choices on costs. “Even if education and training are among the first budgets to be cut in times of uncertain economic circumstances, we are currently seeing no slowdown in enquiries,” says Vera Huebner, Head of Executive Education at Frankfurt School of Finance & Management.
The Frankfurt School offers many courses that are mandatory for participants to complete in order to continue doing their job, for instance programs on regulatory changes in banking. “So while we might see a downturn in some areas in the future, we do not expect this in others,” says Huebner.
There are other bright spots too. “We actually see an increase in interest for leadership courses, which may be due to increasing uncertainty in a rapidly transforming economy,” she says. Furthermore, the school sees a strong demand for ESG-related training, such as sustainability reporting and ESG risk management.
Reasons to be (cautiously) optimistic
Business schools in other parts of Europe are cautiously optimistic as well. “The current custom program demand on the market is still strong,” says Anne-Valérie Corboz, the Associate Dean of Executive Education at HEC Paris.
There may be two reasons for this. “First, the unprecedented challenges presented by the pandemic to global organizations has led them to turn to business schools in search of answers,” says Corboz.
“Secondly, there are varying degrees of consensus as to whether a recession is coming. This means that we are currently protected from a significant drop in demand.”
However, on the open enrolment front, she says “we are seeing a slight dip in some demand, as consumers are more conscious and cautious of how they spend”.
During the 2007-09 financial crisis, companies pulled back on spending - and training budgets were among the first to be axed. However, research shows that the companies that continue to invest in their talent in a downturn, come out on top.
Will training budgets face the axe?
“It would a gigantic mistake [to cut training] - not only because the correlation between stronger human capital and corporate performance is high, but also because the huge ESG challenge affects educational needs in several ways,” says Stefano Caselli, the Dean of SDA Bocconi School of Management in Milan.
Those ways include the need for knowledge on environmental issues as well as sustainability and governance. “That is why uncertain times could not affect severely – or even at all – the demand for executive education,” he adds.
On top of that, there is also an ongoing war for talent, so companies can use executive education as a way to attract and retain high performers at a time when labor markets remain tight, even in the face of economic headwinds.
“Especially nowadays, with what the US calls the ‘great attrition’ or the ‘great resignation’, more workers than ever are quitting their jobs,” says Fankfurt’s Huebner.
It is not simply a question of increasing the pay cheque anymore, she adds. “Workers want to find a new sense of purpose, and they want to be prepared for what’s next in a very unstable and disruptive world.”
And that is where executive education comes in -- whether it’s courses on purpose, organization design, remote work, new leadership models, or change management.
“The quality of the onboarding and of the training offered to new employees and high performing executives is clearly a way to stand out for an employer,” agrees Corboz, at HEC Paris.
Many schools will seek to have a balanced product portfolio, so that downturns in some educational areas can be offset by higher demand in other areas. Traditionally, downturns lead to an increase in demand for degree programs, offsetting any decline in revenue from executive education -- as happened during Covid.
But schools do not see the situation playing out that way this time around - in fact, the natural order of things could be reversed. “There is some indication that the demand for MBA degrees is slowing. Whether this is the product of oversupply, or individual decisions to study later in their careers (with Executive MBAs) remains to be seen,” says Corboz.
Caselli, at SDA Bocconi, adds that “the link between risk of recession and slowdown of executive education is not there yet”. A unique blend of factors --- the ESG challenge, new management problems and the talent shortage -- “suggest executive education demand will keep the same magnitude as in the past decades”.