These are tough times for European business schools. Even the best-known ones lack the huge endowments that some American schools can fall back on and most make only a sliver of profit at the end of a year. Many rely financially on executive education, largely non-degree custom programs designed for companies who generally fly executives to schools in major European cities, where they take residential courses. With travel out of the question, and most businesses seeing income slashed, executive education has been cut to the bone. This is having serious consequences at some well-known schools.
IMD, based in Lausanne, Switzerland, is famous for its executive education and features at or near the top of the FT’s respected executive education rankings. The school says that 80% of its activities come from non-degree activities for executives, which rises to 90% if you include its executive MBA. Almost all custom programs for the second quarter have been postponed into Q3, Q4, or Q1 of 2021, although the good news is that very few companies have canceled outright. Both its full-time MBA and EMBA have moved online.
The loss of income in Q2 had the potential to have a huge impact. “We asked ourselves right at the start, is this a blip or a real crisis?” says IMD President Jean-François Manzoni, “and we realized it was a crisis that could have a devastating impact on our organization. You have to remember that our activities are heavily skewed towards non-degree programs and we are independent, which means there is no university or government or other benefactors who is going to bail us out if we run into trouble. So we have to survive this crisis on our own.”
‘WE PLAN TO DO IN THREE MONTHS WHAT WE WOULD HAVE DONE IN THREE YEARS’
Prudent financial management in the past has softened the blow. “We have zero debt, we have our own buildings and we have cash. So our predecessors have managed IMD well, conservatively in some ways, but today this is a blessing. If this lasts three months, we’ll have no problem at all. If we have zero face-to-face revenue for a year, 18 months, then that is a different situation. But we have also identified these scenarios,” says Manzoni. IMD has not laid off any faculty or staff, although they have taken pay-cuts.
How quickly will things turn around? Many clients have told IMD that they want to come to the campus on specific dates, but whether those courses can happen depends on how soon travel bans are lifted. Similarly, some companies remaining on essential travel until the end of 2020 could perturb Open Program attendance. Manzoni says that IMD is preparing to welcome people back to campus, but also preparing for long-term distance delivery of programs.
Manzoni says that IMD quickly decided to use this crisis to accelerate its evolution. “I would have preferred this not to happen, but as a matter of policy I don’t argue with reality,” he says. “We plan to do in three months what we would have done in three years” in terms of developing virtual offerings, he explains. All faculty were on Zoom within 48 hours of a lockdown being announced, and they have quickly adopted other hard- and software, including the provision of rooms specifically developed for distance teaching providing a “face-to-face” experience. “We saw it as a crisis, yes, but also an opportunity,” says Manzoni. IMD is also offering free content about leading in turbulent times – see link at the end of this article.
IESE EXPECTS A 15% HIT TO ITS EXECUTIVE EDUCATION REVENUES THIS YEAR
Other schools that rely heavily on executive education are also suffering – but adapting. IESE, based in Barcelona, Spain, postponed most of its executive education programs in March and expects that revenues will go down by about 15% this year as a result. “Obviously, the financial impact will be significant sector-wide, given the restrictions on travel, uncertain context, etc. Given that context, like other schools we are taking measures now to help us buffer the crisis, with a view to the long term,” says IESE.
The school has had to make redundancies – but only nine people from a staff of 600, and all of these were in its New York operation. IESE says that it will “cut budget expenditures in different areas for the next few months” and that staff has taken a pay-cut averaging at 11 percent on a sliding scale, with higher earners taking a bigger cut. In recent years IESE has opened outposts in New York, Munich, and Sau Paolo, which cost money to run. Like many European schools, it relies heavily on international students, which account for 85% of participants on its full-time MBA. How this affects the school’s recruitment for next year remains to be seen.
INSEAD, which has campuses in Fontainebleau, just outside Paris, and Singapore, is another executive education-heavy school that has also been forced to cancel or postpone all on-campus programs, although it has also quickly created a series of online courses designed to help executives manage in these turbulent times. “We are also working with existing clients to deliver programs remotely and have even seen new clients coming to us to co-develop programs relevant to the current environment. We have also developed virtual coaching packages to help senior leaders make decisions at this difficult time,” according to the school.
The COVID-19 crisis has acted as an accelerator. Online or blended MBAs, and especially EMBAs, have become popular in recent years. But many companies have valued the face-to-face nature of custom programs. That could change. This period is causing many to re-evaluate whether flying executives to campuses is really necessary. And as travel restrictions look likely to remain for some time across the globe, it is looking tricky, if not impossible for the foreseeable future. Online could become the new normal for executive education. Who will thrive? The big names of the past have a head-start, but the nature of the online world is that incumbents are vulnerable to nimble upstarts. Change is coming, and sooner than anyone expected.
DON’T MISS: THE BOOM IN ONLINE EXECUTIVE EDUCATION
Links to online executive education based around managing in the COVID crisis: