When times are tough, business education suffers. But companies that slash training budgets do so at their peril. In a downturn, directors must sharpen their leadership skills to emerge from the crisis stronger

As hopes of a swift end to the recession fade, businesses are bracing themselves for an unprecedented set of challenges, with responsibility for their survival largely falling to their leaders who must chart a course through the uncertain and testing times that lie ahead.

Having confidently led their organisations during a sustained period of economic growth and prosperity, they now find themselves calling on a different set of skills to steer companies through a deep-seated crisis. Do conventional business education programmes, such as a Master of Business Administration (MBA) or similar post-graduate management qualifications, equip them to handle these difficulties, or does the situation call for more specialist training and development?

Some business academics argue that the requirement is not for a new style of leadership, but to return to the fundamentals that were previously known and acknowledged, making organisations more effective and able to offer the right choices for stakeholders and the wider society that have been lost to an ethos of short-term gain.

Ken Starkey, a professor of management and organisational learning at Nottingham University Business School, believes that such an approach will help to bring about a more empathetic leadership style—more appropriate for the economic climate, and in direct contrast to the bottom-line mindset that has marked MBA development.

"For too long MBA programmes have been dominated by finance and economics," he says. "There is a pressing demand for a much broader curriculum, and the elite business schools that continue to champion entrepreneurial capitalism, in spite of what has happened to global markets, really need to redress the balance."

Changes to the Nottingham University Business School MBA that reflect the demands of modern leadership are already underway. They began immediately post-Enron, with a re-focusing of the programme around two key elements,corporate social responsibility (CSR) and entrepreneurship.

"If we want to get away from a cycle of boom and bust, we need leaders who can foster relationships between society and business, mediated by government, and who understand the importance of sustainability issues, rather than simply that greed is good," says Starkey. But there is also a need for short-term immediate support for businesses and individuals so that they can be better informed about the economic climate and how they can best respond to it.

Dr Sally Watson, director of executive education at Lancaster University Management School, says: "No single MBA or masters programme can teach leaders how to handle a crisis. These programmes will help you learn about leadership, the historical issues and the technical issues, such as marketing and strategy, but they won't help you to deal with dramatic changes or the impact that they can have emotionally. You can't develop leaders by prescription."

What she believes is needed is quality leadership development, with increased focus on transparency and trustworthiness; not topics that immediately spring to mind as lecture hall material. "We recently took a top team from a large organisation on a leadership event in the wilds of the Yorkshire Moors, where they were encouraged to face up to the reality of the future and contemplate how bad it could get for their organisation," says Watson. "When they returned to work, the first thing they did was to email all staff explaining where they had been, what they had been discussing and promising to inform everyone of any developments. Transparency encourages trust, drives up motivation and engagement, and puts companies in a stronger position."

One thing that business education providers all agree on is that in spite of a widespread tightening of budgets, leadership training and development should remain a priority. But will cash-strapped businesses continue to invest in the skills of their current and future leaders? 

Professional development is still high on the agenda for many organisations, and interest in the director development programmes run by the Institute of Directors (IoD) has remained strong since the outset of the downturn.

Ryan Ahern, the IoD's head of learning and development, says: "For younger directors these are unprecedented economic times, throwing up challenges that they have never encountered before. For them, simply being in a room alongside other very experienced directors is extremely valuable. These programmes are led, practically, by experts who understand the challenges that directors face. They are also a means by which companies can demonstrate to their investors and stakeholders that the organisation is running effectively and that the board is taking a pragmatic attitude."

Slashing investment in training and personal and professional development during a recession is thought by most business academics to be short-sighted behaviour and the opposite of what companies should be doing. Professor George Stonehouse, dean of Napier University Business School, says: "Investment in skills development pays dividends in terms of organisational performance, motivation and morale. It helps the organisation to survive these difficult times and, importantly, gives it a head start in terms of recovery."

To reflect the long-term leadership needs of business organisations, Napier has made changes to its MBA programme, supplementing it with modules from the school's Confident Leaders programme.

"The aim is to develop the next generation of entrepreneurial, emotionally intelligent, socially responsible leaders, who will pioneer a period of new enlightenment and economic prosperity," says Stonehouse.

Dr Bill Snaith, director of the Management Development Centre at Durham Business School, argues that putting together new and more relevant MBA programmes, which can take up to two years to be introduced, is not the solution. The centre's response has been to take the bespoke approach to leadership development a stage further, personalising masters programmes around individual businesses and providing leadership development that is relevant to the problems and opportunities of each.
 
"Business leaders need to have skills to deal with the current challenges to their organisation," Snaith maintains. "That includes having a much better understanding of risk, with the emphasis on reducing risk, being able to motivate people over this difficult period and demonstrating strong communication skills."

In the short term, he adds, it is also important that managers and business leaders fully understand their roles; what they are doing, why they are doing it and how this fits into the bigger picture. This is crucial at a time when people are worried about job security, which in turn may impact on their own motivation and performance.

"When times are good, leaders of successful companies often become complacent and inactive, and when problems arise they become reactive," says Snaith. "Our aim is to develop leaders and organisations that are not merely proactive,  but pre-active-prepared for anything."

Nature over nurture

Who James Norvill
Position Managing director, GD Environmental Services
Sector Waste disposal
Business education No formal training

James Norvill has no qualms about admitting his lack of formal qualifications, or that his style of leadership at Newport-based waste management firm GD Environmental Services is "made up as he goes along", yet he firmly believes in providing training and development opportunities for his 50 employees when they request it.

As is the case with many successful entrepreneurs, he subscribes to the nature rather than the nurture theory of good leadership. "Academic study at school never interested me. I was too busy thinking up ideas for making money, and so far I have been quite successful at it," he says.

Since launching in 2004, the business enjoyed rapid growth until six months ago when the downturn struck. Difficult decisions had to be made while maintaining motivation and productivity levels, which Norvill says he has managed without formal training. He credits this success to having an open company culture, where every member of staff has access to sales figures—good or bad—and where difficult issues are openly discussed.

Where he does admit to honing his leadership abilities is through informal mentoring, tapping into the experience and knowledge of several successful business owners who are also friends. "You can learn a lot from other people's success, but you learn even more from their mistakes," he says.

In spite of his own views on professional development, he recognises that training and education are a key part of staff motivation, even when the financial climate appears to dictate otherwise. "Whether a member of staff chooses to formalise their skills through additional waste management qualifications, or apply to study for an MBA, I won't be cutting the training budget," he says. "I don't believe that you need formal certificates to be a good leader, but I am 100 per cent behind anyone who wants to improve their skills and career prospects through training."

Eyes on a bigger picture

Who Chris Eaton
Position CEO, ILS Group
Sector Corporate advice
Business education IoD Chartered Director

Chris Eaton is chief executive of ILS Group, which provides tax and corporate governance advice and services. ILS, which he helped set up 18 years ago, assists clients in running international trading and holding structures. This involves Eaton acting as a director for "more companies than I should probably admit", he says.

Many of his clients are in financial services and in such a heavily regulated environment he explains that learning and continuing professional development are important. But having gained a law degree he'd had enough of exams.

"As I walked out of the last exam of my law degree I swore I would never sit another," he says. So professional development had been limited to piecemeal training days that never amounted to a qualification. About four years ago he accepted that to achieve another qualification would require more exams. He looked at the fledgling Chartered Director course offered by the IoD, but rejected it because it didn't suit his lifestyle. "At that time it wasn't done on the Isle of Man and it would have involved a lot of travel," he says. He then considered an MBA, but dismissed the idea because he was "the wrong side of 40". As an established CEO, he also felt there was little to be gained. "MBAs are about helping people move on or move up. As group CEO, there was no need to move up and I didn't want to move on."

By 2007, the Chartered Director qualification was available on the island. And so Eaton started the certificate in company direction, with an eye to moving on to the diploma and chartered status, which he achieved last September. "I was wary that the other people would have the same backgrounds, but our cohort was very diverse, with people from retail, local government and financial services."

Eaton says the training has improved his ability to think strategically and taught him how to stand back from the day-to-day detail to see the bigger picture. His improved boardroom performance has benefited his own business, the clients on whose boards he sits and also some Isle of Man government boards he sits on. As he says: "The benefits are felt by my shareholders and staff, my clients and the wider Isle of Man community."

I'm a better leader

Who Mark Cowley
Position Managing director, Audience Systems
Sector Spectator seating manufacturer
Business education MBA at Henley Business School

After eight years as a board director at spectator seating manufacturer Audience Systems, and in the final stages of completing an MBA at Henley Business School, Mark Cowley was appointed managing director of the company last November. And it was a transition, he says, that no business school could have prepared him for. "In planning my move I had developed a number of strategies for taking the business forward that anticipated challenging times," he explains. "But on day one, just two hours into my new role, I received a telephone call to say that a client had gone bust, owing the company more than £300,000."

While he agrees that the MBA provided him with the detailed theoretical knowledge of business management, with hindsight he felt that it could have provided more substance relevant to the changing context of risk management. "The MBA programme has equipped me with better skills for understanding some of the more complex business processes and critical thinking, but there could have been more emphasis on the less common market forces that affect these processes and the decisions that a business leader has to make as a result," Cowley adds.

Audience Systems is a Japanese-owned business, and he also felt there was a lack of emphasis on overseas business culture, in a truly global economy. The firm, based in Westbury, Wiltshire, employs around 100 people, and Cowley admits to being surprised at how personally responsible he felt for the organisation and its people just hours into the top job. "As a leader you have to deal with the daily twists and turns of economic circumstances, while keeping staff motivated and productive," he says.

"Has an MBA made me a better leader? It was an eye-opener into all areas of business, such as human resources and performance management, and crucially, it has provided financial analytical training that I would not have got on short courses, so technically, yes, it has equipped me to be a better leader."

Ringing the changes

Who Toby Foggo
Position Head of talent development, O2
Sector Telecommunications
Business education O2 programme run jointly with University of Michigan Ross School of Business

Leadership training is a core part of O2's people development strategy. In the fast-moving telecommunications sector, organisations must be prepared to adapt to rapid change, including a major economic upheaval. This is reflected by the fact that the company, which employs around 11,000 people in the UK, has cut back on training spending. In terms of investment in leadership development, O2 rarely takes anything off the shelf; working in partnership with the University of Michigan Ross School of Business, it develops its own.

Toby Foggo, head of talent development, says: "In the current climate we recognise more than ever the need to build leadership capacity, and that has the absolute full backing and support of the CEO and the board."

In 2007, the company launched a programme for senior leaders, Leading for Total Engagement, which Foggo himself took part in, and which he describes as one of the biggest personal impacts of his career.

"Part of the programme involves analysing feedback from colleagues, past and present, and from friends and family on when you perform at your best," he explains. "The consistency of that feedback defines your strengths and weaknesses; you recognise from others the things that you excel at and the things that you ought to delegate to those with the relevant skills. Being able to recognise that and act on it makes you a more effective leader."

A junior version of the leadership programme, Engaging Our People, is aimed at changing the mindset of employees in terms of how they manage their roles.

"We expect to see some major transformation in the industry over the next two or three years, and with the extreme competitiveness of the market we must constantly look for ways of taking the business forward," says Foggo. "We are developing programmes aimed at preparing line managers for a different set of circumstances. The biggest challenge for us is anticipating what is coming next and ensuring that we have the skills to deal with it."

Skills for sale... if business benefits

Whether recovery from recession is underway or not, next year around
25 million employees are expected to gain the legal right to request time at work for training. Under the Children, Skills and Learning Bill, due to go before parliament later this year, anyone who has worked for their employer for more than 26 weeks can ask to study for accredited courses leading to a qualification or to undergo unaccredited training.

The right to request training relates to skills that are relevant to the employee's job, and using similar processes they have in place to manage requests for flexible working, employers will have to consider these approaches seriously. Given that many business leaders will be preoccupied with recession survival measures, how willingly are they likely to comply?

David Langdon, a director at business psychologists Xancam, is confident that many will have learned from mistakes of the last recession when companies were quick to withdraw training to their detriment.

"When times are tough business leaders are bound to question any extra spend on training and development activities," he says. "But if you have to offer training as a legal obligation it is worth doing it well."

The proposals will give employees the right to request time to do relevant training, so staff will have to be clear about how it will benefit the business. Equally, employers will not have to agree to every request as long as there are sound commercial reasons for not doing so.

"There are plenty of things companies can offer, particularly around management and leadership development," says Langdon, "and as organisations continue to move in a new direction, it is one way of keeping people engaged and getting the best out of their talent for the long-term benefit of the business."