China's Executive Education at a Crossroads

China's Executive Education at a Crossroads
                                                      
                                                                                  by Eveline Chao in late 2008

In January 2006, BusinessWeek published an article called "China’s B-School Boom," noting the flood of Western educational institutions setting up programs in China, in order to "tap into the enormous demand for talent created by China's white-hot economy." Fast forward to May of 2008, and the same publication ran an article titled "China: Why Western B-Schools Are Leaving."

Executive education is, and will remain, crucial to the economic reform agenda in China, and this is evidenced by the government’s active role in promoting business education programs here (a large number of them joint ventures (JVs) between overseas and Chinese institutions). McKinsey recently released a report about the dearth of talented managers in China, which Dean Rolf Cremer of China Europe International Business School asserts is "the most important bottleneck to bringing about reform in China." China has a massive backlog of people who have found great success as engineers and executives of the country's most important companies, but who never got the chance 20 years ago to receive an international-caliber education. Now, they are seeking this out through executive education programs.

But while this situation is rife with opportunity, it doesn't necessarily spell out instant success for educational institutions? just ask Cass Business School in London, which, having established a joint venture executive education program in Shanghai in 2004, shut down its China program in February of 2008. Other programs are said to be exiting China as well. Clearly, Western business schools in China have reached a turning point. CIB spoke separately to representatives from Washington University's Olin Business School and the University of Maryland's Robert H. Smith School - overseas business schools with programs in China - and for a different perspective, China Europe International Business School (CEIBS) - a local program that boasts the longest history in China - about some of the major issues they and their peers are confronting at the moment.

Why do you think Western business education programs are exiting China?

Patrick Moreton, assistant dean and managing director of Washington University-Fudan University's executive MBA Program: The short answer is that China's leadership pool - people that are really qualified for study in a rigorous English-language EMBA program - is paradoxically small. Many people look at China, see the headline numbers and get very excited: it is very large and very important economically, and the multinational companies are screaming that they need better-trained senior managers. All of this suggests China would be a good place to train senior managers. But you have to look at the situation more deeply to understand the reality: true, the demand is great, but the supply of qualified students is not. 

To succeed, Western EMBA programs need students who have enough knowledge and experience with international business to take advantage of the training of a professional EMBA degree. Ideally, these programs look for people with 10-15 years of experience working in international companies. This means that the target population available for JV EMBA programs now entered the workforce somewhere in China between 1992 and 1995. At that time, the number of multinationals operating in Shanghai was quite small, so the entry point to the pipeline that feeds Western EMBA programs today is really small. So despite what people are saying, the number on the supply side - the managerial talent - is limited. 

Total enrollments in the five EMBA programs I track have been growing at about 7% per year since 2002 and are now at about 230 students per year. Obviously, that seems like a very small number in a city as big and economically important as Shanghai. But, it's quite consistent with the McKinsey estimate that there are only 3,000 to 5,000 globally prepared managers in all of China, and the complaints from the multinational companies about the talent shortage here. 

Many predict that the market will start to look more respectable in size by about 2014 or 2015. That's 13 to 14 years after China joined the WTO and international business really started to take off in Shanghai. This improvement doesn't necessarily make this a good place to be for a JV EMBA program, but those that have built a reputation for quality will have a pretty good pool of candidates to choose from. 

Rolf Cremer, dean and vice president of CEIBS: About five years ago, up to maybe 2002 or 2003, management education was importing knowledge and transferring knowledge from outside China into China, pretty much without moderation; without adapting to Chinese conditions and so forth. This has fundamentally changed [today] because the expectations of the market are totally different. The [students] who come today expect the faculty to be totally [plugged into] Chinese reality.

The [schools] withdrawing from the market? I expected this five years ago, because they are in the transfer/import model. Ten years ago it was perfect if they could fly a teacher to Xi'an to teach the same course they teach at home; there was still some kind of market for that. But now the market is way past this point and the schools that do not have faculties on the ground cannot match the quality of those [like us] with people on the ground.

Dr. Steve Feld, Executive Director of International Programs, Robert H. Smith School of Business (University of Maryland):

I think a lot of schools entered the market thinking to not only make an impact globally, but also to make money. But that’s not why you do what we do. The opportunity to impact that emerging market is the reason to be in China. The schools that don't get that are the ones that are leaving, and the ones that do are the ones that are staying.

The May BusinessWeek article said that CEIBS and the Robert H. Smith School had both suspended their programs in Beijing. Is this correct?

Cremer: No. We are building a campus in Beijing which is stopped at the moment because of the Olympics. We will expand our Beijing program, and have told BusinessWeek that was wrong.

Feld: We're as committed to China as ever . . . We’re still delivering courses in Shanghai, and plan to relaunch our program in Beijing. We’re here to stay.

Patrick Moreton of Olin says that the market realities of EMBA programs are limited in China because of the number of qualified applicants. Do you find this to be true?

Cremer: Actually, CEIBS disagrees. We just finished interviewing, out of 900-1,000 applicants, 370 very qualified candidates to fill just 65 places. So we have a selection ratio of 1:6? we do not have a problem attracting qualified applicants in sufficient numbers. We've even admitted a number of students provisionally for next year.

[However,] in the English segment, over-subscription is not that big, so in that Patrick may have a point. [But] in China very rarely are numbers a problem. Why do other programs have this problem? Because of [their lack of] "China-relevant" and "China-focused' content.

Feld: I don't think that's true, other than perceptually. I think there was a tendency for Western businesses in general, and higher education institutions in particular, to never break away from the "China has 1.3 billion people so there must be a huge market" outlook.

What we're seeing is a huge need for senior-level business education. One of the issues going on now is the incredible talent challenge in China. How do we find talented middle- and senior-level managers who can work not only in the domestic market, but in the global market? The need is right now, right now, right now. Not 18 months from now at the end of the EMBA. So the greatest demand in fact is in one-off, non-degree short-term executive education.

The market is sufficiently large that high-quality business education can absolutely make a go in China.

Harvard Business School is now establishing a program in China. What do you foresee for them and for the future of business education in this country?

Feld:  Chinese institutions are going to come into their own as players in the global market. That's going to impact executive education. We’re already seeing that in terms of the faculty we're hiring. Peking University, Fudan, etc. are already world-class institutions. And I wouldn't have said that 10 years ago. There are a lot of analogies comparing what's happening in China with what happened in the US, say, 100 years ago, but with China moving at 10 times the speed. I think that's likely to continue and we’re going to see lots of high-end programs develop in China, both from domestic and overseas institutions.
 
Cremer:  I think there will be somewhat of a consolidation, some of the players will disappear, and for some of the very good schools [like Harvard] there is definitely a place for them, for schools with a grand vision, long-term planning, deep pockets, and excellent faculty. Others may reconsider or specialize very strongly or enter into a cooperation [structure with a Chinese institution]. Nobody's going to monopolize this market here.