Why successful executives are heading back to business school
Many of the company founders I've talked to over the years have been at a crossroads of some sort. Their roles were changing, or they needed to rethink growth strategies. To deal with these questions, many of them are taking seminars. I decided to attend one of these courses myself -- Harvard's Owner/President Management Program -- to find out what a professor can teach successful executives about managing a growing company. -- J.G.* * *
The night before his first class and before bedding down in a dorm room for the first time in 18 years, Glen Johnson, the president of Oakley Millwork Inc., thumbs through a directory of his classmates, amazed at their diversity. His colleagues at Harvard University hail from all regions of the United States, and from Greece, Kenya, Colombia, and a dozen more countries. The range of businesses represented might well keep a small city running indefinitely. His group includes general contractors, a couple of car dealers, and a health-care company. From others you could order laser printers, a log house, even a used jet airplane.
The international flavor and variety of businesses are a hallmark of Harvard Business School's Owner/President Management Program (OPM), generally regarded as one of the premier executive education programs for small and midsize companies. To date, more than 1,300 company owners and presidents have completed the program's three three-week-long units, one per year.
The success of Harvard's program reflects a growing hunger among business executives for continuing-education programs. Approximately 12,500 executives return to college campuses across the United States each year. With fees averaging upward of $5,000, the annual tab for corporate America easily exceeds $62 million.
Most executive education programs target managers of Fortune 500 companies. For many years, entrepreneurs had only two real choices. They looked to Harvard's OPM, started in 1972, and to Stanford University's Executive Program for Smaller Companies, inaugurated four years later. Even now, only a handful of universities offer programs for executives of companies with fewer than 1,000 employees (see "College Catalog," page 5).
Most of these business programs tackle management issues confronting small companies. A few are more specialized: for example, the University of Pennsylvania focuses on family business and Dartmouth College on minority-run companies. Each program costs at least a few thousand dollars -- Harvard charges $22,500 -- and requires the chief executive to spend a week or more away from the office.
On the plane from Chicago one morning last January, Glen Johnson had weighed the prospect of three weeks away from Oakley Millwork. And surprised himself. Johnson, who has never allowed himself more than a week's vacation at a time, realized he wasn't agonizing over his absence. His employees would have to make do on their own. Besides, he had his own concerns, namely a slight case of the jitters. He was bound for Harvard, after all.
Arrival means shedding suits and ties for less formal attire, donning a name tag, and getting down to the first order of business: sizing up one's classmates. It's like freshman week at Dartmouth or Princeton, where it seemed everyone was captain of his high-school football team or president of the National Honor Society. "That first Sunday afternoon, everybody was so eager to explain who they were. We were all promoting," says Rob Dorfman, director of a Hong Kong manufacturing company.
Scanning the pages of the OPM directory, Johnson spots only a few women. Most participants seem to be men in their thirties and forties. Reading the capsule descriptions they had been asked to provide for their businesses, Johnson figures (correctly) that Oakley's 22 employees and $6.5 million in sales made his one of the smaller companies represented. There are no absolute upper or lower sales figures determining admission, but Harvard looks a bit doubtfully at applicants down around $1 million in sales and up past $100 million. Most important is experience -- 10 years or so of wrestling with a business's problems -- in other words, grist for classroom discussions, more case histories to learn from. Johnson's own, perhaps?
"Oakley Millwork," Johnson had written in the OPM directory, "assembles finished windows, exterior steel doors, and pre-hung interior doors from components that it buys from various vendors. Items that require some assembly comprise about two-thirds of the volume of sales. The remaining one-third of sales is from items which are merely distributed. Although the majority of sales comes from manufactured items, we are really in the service business. Our real job is translating the customers' vaguely perceived need for 'trim' into the complete and correct materials requirements for their houses.'
When Johnson joined the company a decade ago, sales ran at about $500,000 a year. In the three and a half years since he took over from his father, he has tripled sales. And this was one of the main reasons he'd enrolled at Harvard. The growth concerned him. Did he want to keep growing so quickly? "I realized I'd gotten the company beyond the point at which I felt comfortable. Like I was white-water rafting and had lost my paddle, and here I was spinning toward some dangerous rapids.'
Back home at their companies, most OPMers know one way of running their businesses -- their way. At Harvard, suddenly, their way no longer necessarily rules. Their instincts are subject to challenge. Gone is the comfort of a familiar office and set routine. That first Monday morning, upon entering the two amphitheater-style classrooms, these CEOs turned students are greeted by one of the many small details that OPM attends to: assigned seats. Like everybody else, Glen Johnson looks for his name, printed on big block letters on a piece of cardboard fronting the semicircular rows of desks, a little like the country identification signs at the United Nations. OPMers' names appear up near the top, with plenty of room below. The following day, in their first marketing class, they discover why.
Passing out markers, professor Martin Marshall asks them to write down what business they're in. Quickly, many do. Others, like Johnson, are not so quick. Johnson recognizes that the day's case study, on The Saturday Evening Post, involves a publishing company that acquired forests and pulp mills and along the way forgot what its business was -- namely, publishing. He frets that Marshall is popping a trick question. And so on one side of the carboard he writes his primary products -- DOORS AND WINDOWS. On the other side he puts his market -- SERVICE HOME BUILDERS. From that day forth, he turns this side in Marshall's class, the other side to the fore in all his other classes.
Bill Speakman, a CEO from Wilmington, Del., takes a different tack. He writes nothing. His 118-year-old company makes brass plumbing fittings. It also distributes plumbing, heating, and air-conditioning supplies. He's buying more offshore and assembling the product in the States. He's not exactly sure what he should write. The white space below his name does not go unnoticed by Marshall, in this first class, and class after class thereafter. "Speakman, when are you going to figure out what business you're in?" Marshall barks every couple of days, in what becomes a running joke.
Often during their Harvard stay, OPMers hear the term "ratlike cunning." That's what most of them bring to the program, how most of them have managed their businesses. Their instincts or sheer determination and long hours have served them well.
Most find themselves at some sort of turning point in their businesses. Some, like Johnson, are a little breathless; they want help in mustering their second wind. They want to know which skills need strengthening, and if their compass is pointing the right way. They all sense that ratlike cunning may have gotten them this far, but it won't take them to that next big step.
For Johnson's mill-working company, future growth means becoming the industry leader in service -- on-time delivery. "By the time a builder gets to the mill work, he's right at the end of the job," Johnson explains. "If he's like most, he's behind schedule. He couldn't dig the foundation on time because it was too cold. Then it rained and the hole filled up. Everything's behind. He can't afford this mill-work guy to screw up. So it's risky for us because we're foremost in mind, and we tend to get blamed if a house is late, but it's also an opportunity.'
Johnson had to do something about back orders -- often just a single item on a 50-line order, perhaps a stairway banister or things as small as doorstops that weren't ready and had to be sent later on another truck. Back orders cost plenty in reduced efficiency and strained relations with customers. Johnson's solution: he impulsively bet employees $10 they couldn't go a single day without a back order. Within the first week, he gladly handed out a stack of $10 bills. Then upped the ante: $50 to every employee in the company (15 at the time) for a week without back orders. Then $200 for a month. Finally, Johnson made it a year: 12 months without a back order and he'd give everyone a trip to Hawaii. That's when he lost them.
Thanks to the bonus program, Johnson had improved performance fourfold. But he'd erred in setting his next goal. A year was simply too long. The feeling in the shop: "We'd have an easier time winning the lottery.'* * *
By the time the first OPM week (including Saturday classes) has run into the second, fewer and fewer overnight packages arrive from "the office." There are fewer calls back. The first practical joke has been sprung -- a note on university stationery telling a study group leader he's been invited to sip sherry with the dean. Somebody's equated OPM with a fishing trip and is letting unshaven whiskers march on toward a beard. The routine has been established. Breakfast at 7:00, study groups from 7:45 to 8:55. Class from 9:00 to 10:15; coffee break; class from 10:45 to noon. After lunch, a third class from 1:15 to 2:30. The curriculum covers five disciplines: marketing, finance, management control, business strategy, and the human aspects of management.
Before dinner, some OPMers work out in the gym or play squash, go shopping in Harvard Square, grab a nap, or try to get a start on the three case studies for the next day's classes. After dinner, there are several more hours of reading, maybe a beer in the common living room, then bed. Nick Babson, chairman and president of a company that manufactures dairy farm equipment, somebody used to keeping farmer's hours himself -- up at 5:30 a.m., bed by 10:00 p.m. -- often finds himself reading well past midnight.
"It's so much better to be dealing with live problems rather than reading some textbook," he says. "And you also have the interaction with your peers, guys who are struggling with some of the same problems. Most of us function as CEO, COO, and public-relations guy, and we're so busy trying to go as fast as we can that it's hard to look objectively at how all the parts are working together.'
There are no quizzes, no tests, no papers to write. No grades. Nothing of the sort is necessary. OPMers arrive on campus highly motivated. For all they know, today's discussion on acquisitions could save them a multimillion-dollar mistake; tomorrow's class on marketing might trigger a crucial shift in emphasis.
One of the most popular professors is Marshall, the marketing professor. Marshall, who often as not dresses in a comfortable old sweater and who makes frequent and effective use of his astringent sense of humor, is a master of the peculiarly appropriate observation.
Louis Barnes, on the other hand, conducts his lessons almost invisibly at times. He deftly eases students into the roles of those at odds in the case studies. As smoothly and naturally as a fire taking hold on the hearth, people begin to open up -- the personnel disaster in "the Peter Olafson case" applies to their own companies. "How did you handle it?" somebody asks. "I've been there too," chimes in somebody else. Such admissions, sometimes bordering on confessions, herald the meltdown of egos. They are also a sign of educational magic, for Barnes has wandered up behind the back row. It's been minutes since he last spoke; the orchestra is conducting itself.
The OPM program isn't boot camp -- communal living rooms on each floor include comfortable couches, two personal computers, two small refrigerators, even cordial glasses -- but emotions run high. A group of strangers come together under intensely challenging conditions. They live together, eat together, and come to trust one another. The formal instruction is good, but OPMers learn the most from one another.
The tightest bonds are formed in the initial study groups, which bring together the seven or eight students whose private rooms share a common living room. Some groups make liberal use of big scratch pads, outlining key points from the cases. Virtually all translate the initial we're-all-in-this-together feelings into genuine concern and downright neighborly sharing. It's not unusual for somebody to neaten up his class notes on the computer, print up a bunch of copies, and pass them out to everyone in his study group, if not the entire class.
Just as often, the sharing is one-on-one. When talk in one of Glen Johnson's study groups veers to employee-review techniques, Johnson listens hard. He shows special interest when Archie Roberts, president of Intex Construction Corp., in Edmonton, Alberta, explains what he does: the employee evaluates himself, then the supervisor fills out the same form. They compare notes and work up a set of goals for the coming year. Responding to Johnson's interest, Roberts calls his office and orders the form sent by fax to Harvard. Thus does Johnson have a copy to take home with him.
The study groups remix each week. So do the sections assigned to the two classrooms. Often, a classroom debate on ethics will reverberate throughout lunch -- the discussion made all the more riveting by firsthand insights. One entrepreneur explains he walked away from a major contract in Nicaragua because of implied payoffs. Another defends business with an Indian company that elicits his cooperation in falsely lowering invoices to cut import duties.
Professor Gordon Donaldson's finance class provides another set of challenges for Johnson. With Oakley's past and future growth of such concern, Johnson eagerly boots up a computer with a disk Donaldson has provided. The software allows Johnson to plug his company's vital statistics into some sustainable growth formulas. In the past, Johnson had fiddled with something much more basic on "a little sustainable-growth slide rule" from a bank. Then, he came up with 22%. Now, with some different data and a computer keyboard at his fingertips, he comes up with a sustainable growth rate of 35%. Suddenly, he perceives the real value of his 20-year leveraged buyout of the company from his father.
Johnson, who had previously ruled out additional borrowing, tests some other scenarios, upping his current 1:1 debt-to-equity ratio to 2:1, which he feels he might become comfortable with, and 3:1, which his bank would allow. In return he gets sustainable-growth rates of 30% and 48%, respectively. We can grow safely, he says to himself. Financing, anyway, is not the limitation.
A few days later, he spends an afternoon in the library, checking the Almanac of Business and Industrial Financial Ratios to get a better sense of his industry. Back in his office in Illinois he has a stack of index cards, on which he has printed the names, and in some cases his best estimates of the annual sales, of his competition. Here is much more useful information. According to the almanac, mill-work companies similar in size to his own, and only those showing a profit, averaged 1.7% net profit before taxes. The number drops to 0.3% if unprofitable businesses are also counted. Johnson smiles. Oakley made 6.5% last year -- after taxes. "I had always figured we were stronger than the rest, but this really confirmed it," he says. "I realize if we push the competition aggressively, most of them probably can't respond.'
He achieves another bit of enlightenment as he works on his yellow pad. Sitting in his dorm room one afternoon, he assesses his company. On the left side of a sheet of paper, he lists the company's strengths, on the right side, weaknesses. Now, Johnson sees that the strengths are all external. Moreover, 7 of the 10 weaknesses are internal. "Why," he asks himself, "don't we treat ourselves as good as we treat our customers?'
Bit by bit, the program pieces together a powerful mirror. The reflection it provides isn't sharply focused until the general lessons of the first three-week session have been amplified by the sessions in the two following years, which encourage students to develop and act upon specific marketing and strategic plans. But even long before then, the program provides its students many insights.
The 41-year-old CEO of a manufacturing company came by one of his insights publicly. One morning of the third week during the coffee break between classes, he mentions to Barnes the problem he's having with his vice-president of finance. The guy, he explains, is a long-standing employee "promoted not by me, but by my father before I took over the company, and promoted far beyond his management capabilities. He's a terrific technician, but stubborn and unbending.
"What should I do?" he asks Barnes, who asks if he would share his problem in tomorrow's class and engage in a little role-playing.
The next day, this CEO explains his problem to the class, and when asked by Barnes to choose his own adversary, he selects bravely, pointing to one of the strongest figures in the group, John Price, Australia's entrepreneur of the year in 1987. The two take seats at the front of the class, and the hesitant CEO begins.
"You haven't been performing to the expectations of this company," he begins.
The barrel-chested Price barks, "What do you mean?'
The CEO stammers, repeats some mush about the company's expectations, and is silenced by a chorus of boos from the bleachers. He's similarly rebuffed after a second enactment in which Price rises to his feet in angry defiance. The CEO seems close to breaking down.
He rallies on take three. He tells Price to sit down and, significantly, he shifts to the first person: "I feel as your supervisor that you need a change. I'm relieving you of your responsibilities," he says, reaching for a sheet of paper on the table. "Here's an explanation of your benefits and severance," he ad-libs. This time his colleagues applaud him.
The last couple of nights of the session finds small groups of OPMers, not in their rooms bent over the next day's cases, but dining together off campus. Nearly all of these convivial forays back in the direction of the real world reunite the members of the initial study groups. It is at one of these spirited gatherings that the notion of a mock OPM Academy Awards ceremony begins to gel. All sorts of memorable and dubious moments are to be suitably remembered.
"If you don't get an award, you did well," says master of ceremonies Peter Shihadeh, wineglass in hand, on the final night after the last lobster claw has been cracked. The first award, he announces, is for "permanent solutions to problems." A burst of knowing laughter fills the room. Everyone looks to Texan Chip Harper, a general contractor whose classroom attire rarely drifted from jeans and cowboy boots. Harper rose to prominence when, in one of the cases discussed in class, he took the six-shooter approach to managing a difficult employeee: "Fire him. Fire the bastard.'
Finally, one of the CEOs asks Marshall to step forward. For once, Marshall is upstaged. Before he knows it, he's standing nose-to-beak with two live chickens -- squawking, flapping, pecking chickens. Now, he remembers it, that case study of Frank Perdue, the entrepreneur who brought name-brand recognition to chicken parts.
Near the close of his final class on the human aspects of management, Barnes suggests that the nature of a healthy person is to work and to love, not to work or to love. He concludes by asking the class members to share what they plan to do when they get back home. The room falls as silent as a cathedral. One by one, people begin to speak up:
"I'm going to sit down with my partners and assess whether our goals are really as similar as we thought.'
"I've got two brothers; I'm the oldest. I never really realized until I came here that I was hell-bent for destruction. As the older brother, I was always trying to help them and care for them, but I think that my brothers probably see me as trying to control them.'
Barnes is off the floor, behind the last row of desks. He looks down as the talk continues:
"I think I'll try to find out what changes they expect me to make. They may be expecting a lot of lengthy memos -- `he'll be full of all this garbage and it will take him six months to get it out.' '
Glen Johnson is deep in thought. After class, he explains what's foremost on his mind: "The biggest change I'm bringing back to Oakley is me. I need to change my thinking. For a long time, I couldn't figure out why people didn't want to attach their cars behind my engine. I've learned here that the business is not an engine, but more of an organism, human beings working together, and that to get things implemented I've got to create a cohesive unit.'* * *
Three weeks later, in the third Monday-morning production meeting after his return from Harvard, Johnson is attempting to follow through on those sentiments. For the last week he's had everybody tracking certain management and production functions necessary for timely delivery of Oakley's products. In the past, following Johnson's lead, employees considered back orders in terms of inconvenience to the customer. Johnson, acting on his OPM realization that he needs to rededicate more of his management focus inside Oakley, wants to broaden the back-order concept. He wants to experiment with the idea of identifying and monitoring the bottlenecks that aggravate his own employees, for instance, a truck not loaded for its 7 a.m. departure, which delays the driver.
Soon he plans to hand out a survey that will begin by asking, what would Oakley Millwork look like if it were an "ideal" company? If everybody writes candidly, Johnson will have some interesting reading. While he was away at Harvard there was some joking about "one more diploma for the wall' -- Johnson already has a divinity degree and an M.B.A. Besides the standard shop/office dichotomy, Oakley is crisscrossed with other tensions.
"It's like you need a can opener to get your feelings out around here," complains purchasing agent Tom Mittler. "I don't think Glen realizes how bad it is. I can't always express my feelings to him. He makes people feel guilty about asking. I'm not really impressed with what he came back with from Harvard. I was looking for something that would help him personality-wise. Glen comes across too cold.'
Some apparent changes in Johnson's management style have been noticed. People see him stepping back, becoming less involved in the day-to-day operations. It had been Johnson's custom to call on several key accounts, personally measuring for windows and doors, and then entering the order in the computer. Granted, this kept him in touch with his customers, but Johnson spent two days of most weeks on this kind of work. Before he left for Harvard, he'd placed his accounts with his employees. That's where they remain.
When he asks them about the tone of the internal back-order reports, nobody speaks up. Johnson waits a moment or two, then steps in: "I would like to have ideas on how to make this more positive, because to me, this is too much like a report card. Some things went real well this week. I don't think we want to focus just on the negative.'
Before the meeting breaks up, they talk about rolling back the no-back-order goal from a year to three months, about whether money is the best motivator, or, say, a trip to New Orleans, and then they bog down on precisely how to define a back order.
Late that afternoon just before heading home, Johnson is sitting in his chair. He's tired. His wife and kids are sick. The business needs a lot of attention. Running his life and his business seems so complicated. Leaning back, he reflects upon the morning meeting. He says he wishes he'd let a few of the silences last longer. "I've got to develop them more to come up with the ideas instead of telling them the answer," he says.
"When you're at Harvard," he continues, remembering the emotions of a month earlier, "you feel now you can control these problems -- and you need to believe that in order to make any attempt to do so. When I came back, I was all charged up. But then you hit this wall, and then that wall. Now, it's the third week, and. . . . " In voice and body he imitates an old-fashioned record player in need of a good crank.
He mentions he's planning to have dinner sometime soon in Chicago with a few OPMers. And he says if he runs into any trouble with the employee evaluation he'll soon be trying, he won't hesitate to call Archie Roberts, the classmate who shared his technique. At the moment, next January and the second unit of OPM seem a long way off.* * *
John Grossmann is a free-lance writer based in Lansdale, Pa.
Who's offering executive education programs
The following are some of the best executive education programs for small businesses:
Owner/President Management Program (OPM) (founded 1972)
Boston, (617) 495-6450
Program length: Three units of three weeks each, held over a three-year period
Cost: $7,500 per unit
Class size: 120
Next session: April 30-May 19, 1989
Remarks: Case method, study groups, and intensive, three-week schedule help cement strong ties; professors very accessible
Executive Program for Smaller Companies (founded 1975)
Stanford, Calif., (415) 723-3342
Program length: Two weeks
Class size: 132
Next session: July 23-August 4, 1989
Remarks: Case studies and lectures cover finance, marketing, control, human resources, and policy-making; company size is 50 to 1,000 employees; good international representation
UNIVERSITY OF PENNSYLVANIA
Wharton Seminars for Family-Held Businesses (founded 1981)
Philadelphia, (215) 898-4470
Program length: Four to five days
Cost: $1,450 to $1,595
Class size: 35
Next session: August 28-September 1
Remarks: Sessions focus on family businesses; a trio of seminars are held twice a year: summer sessions at Wharton, winter sessions in Florida or California
UNIVERSITY OF SOUTHERN CALIFORNIA
The Program for Developing Companies (founded 1988)
Los Angeles, (213) 743-2098
Program length: Three or four annual units of two weeks each
Cost: $7,500 to $8,000 per unit
Class size: Initial class planned for 50; thereafter 100
Next session: November
Remarks: New program designed by former Harvard OPM professor John Davis
Minority Business Executive Program (founded 1980)
Hanover, N.H., (603) 646-3740
Program length: One week
Class size: 60
Next session: August 28-September 2
Remarks: Black, Hispanic, native American, and Asian-American businesspeople, $250,000 to $4 million in sales
UNIVERSITY OF VIRGINIA
The McIntire Entrepreneurial Executive Institute (founded 1987)
Charlottesville, Va., (804) 924-0898
Program length: Five days
Class size: 25
Next session: July 1989
Remarks: Last summer's inaugural session had 11 students, mostly from mid-Atlantic companies; $500,000 to $20-million range in sales
The Smaller Business Association of New England (SBANE): Entrepreneurial Management Program (founded 1958, in third year with Babson)
Wellesley, Mass., (617) 890-9070
Program length: Four days
Cost: $1,800 for SBANE members; $1,950 for nonmembers
Class size: 42
Next session: October 23-26
Remarks: Attracts CEOs, COOs, and CFOs; 90% of businesses are members of SBANE; $300,000 to $10 million in sales