Worldwide schools are increasingly struggling between the academic nature of their research mission  and faculty demographics on the one hand, and the increasing relevance and value for money demanded by corporate and individual customers.  A number of recent reports indicate a new level of soul searching in American Business Schools and their acknowledgment that the more diverse and often University-independent population of European B-Schools may be ahead of the curve in terms of innovation and adaptation to the new environment [1].

In the meantime the economic pressures and the demands of accreditation have led to an increasing bifurcation also among European B-Schools between those re-integrating the University departments, and those resolutely seeking autonomous survival based on own research, faculty and financial strength. The former try to play it both ways, being part of the University in terms of including faculty research in the B school rankings, and performing their non-degree (and even degree)  B school activities largely with external faculty. Their Achilles heel is the non-involvement and sometimes non-respect of the core faculty in the hand that feeds them. The latter group of Schools , among which Vlerick, tries to develop a consistent B-School culture, bridging between academic research, research for business and teaching. Their challenge is faculty development because of the ambidextrous demands on their faculty. Easing the pressure requires slack which only reputation and pricing power can bring.

Schools are competing in two markets: the educational  market where they compete for both individual and corporate customers,  and the academic market where they compete for junior and seasoned faculty.

In the educational market one can distinguish between degree programmes and non degree programmes. In  degree programmes especially , the market is more and more determined by reputation , and reputation is more and more rankings sensitive. Legitimate questioning of some of the relevance of the rankings with respect to the emerging needs does not diminish their use as a shorthand for quality by prospective students and corporations alike.

The  MBA market is mature in the US and Europe, but growing in the emerging economies. More importantly  the market has increasingly winner take all characteristics. Lower ranking schools  in both the US and Europe saw their enrolment and applications of fulltime MBA’s fall significantly. In the US the number of FT MBA’s dropped from 5527 in 2000 to 4642 in 2008. In Europe 4 of the top 15 schools and 12 of the next 15 schools saw a significant drop in enrolment[2]. Competition for good students is intense on scholarships and loans in the short term, and placement power in the long term.  In this context our doubling of the Vlerick MBA applications and admissions over the last two years is all the more remarkable.

At the same time part-time and executive MBA enrolment grew significantly  (from 41%to 67% of the total of MBA enrolment in the US). This growth was largely facilitated by the sponsoring by employers which has however recently reduced since the economic crisis.

In executive education open programmes are mature if not in regression. Both long programmes general management programmes and   especially shorter functional  ones undergo cost cutting pressure and a  trend toward selectivity. Brand is a key requirement for internationalizing open programmes. Besides brand  and  the reputation of faculty, it is  the level and quality of participants which attracts other participants,- a chicken and egg challenge for schools to break into that market.

The market move toward CSP’s is undeniable. Here the barriers to internationalization relate more to demonstrated professionalism, client focus , international faculty resources and delivery, though brand strongly determines pricing power (by a factor of one to three). Corporations do not seem to value ‘academic research’ as evidenced in their equal respect for the applied research of more business focused organizations (IMD, Duke Exec Ed, Fondacao Dom Cabral, and CCL). More important is the ability to create end to end solutions and architectures, and to field a faculty team that understands the client’s issues and has great teaching, workshop and coaching skills  Upgrading the size, capability, ambidexterity  and international composition of our faculty is the number one priority of  Schools that want to thrive in this new environment.

Ultimately Schools are in a supply driven business: competitiveness in these customer markets depends on the supply of the right faculty. Not only is the market for Ph.D.  students in Management thin, most doctorates are also geared almost exclusively to preparing students for a journal research in their functional domain of expertise. Resource  schools compete for the top graduates based on very limited teaching loads and guaranteed research funding.

At the same time those same young faculty often find the classroom, where they are faced with smart students with business experience and who paid high tuition fees , extremely challenging. No matter how light their teaching load, the teaching pressure often weighs on their research output. Faculty development , to bridge the gap between the initial training of faculty and the expectations of students and companies has always been the most challenging process for Schools, taking several years even for successful individuals.

Given the changing programme environment which we described earlier with its demands for relevance, cross functional approaches and applicability of the teaching, many schools have increasingly subcontracted most of the seasoned teaching to a new category of Adjunct Faculty and Professors of Practice , abandoning the effort to make their career faculty become ambidextrous and adjust to the reality of the business education. Ironically, whilst depending on such faculty for a large part of their teaching and income, the same adjunct faculty are often considered as second class citizen’s in those Schools.

At Vlerick we are conscious of trying to follow a more difficult, but satisfying path. Our Assistant Professors are early on in their career exposed to business reality through supervision of student projects and through Research for Business activities which represent over 20% of our budget. As an Academic Business School we too expect our faculty to make their mark with A journals, but are committed to privilege quality over quantity, and to factor in relevance and cross functional contributions in the evaluation. To speed up their development we have initiated an array of pedagogical development initiatives. We too are complementing the career faculty with a number of Adjunct Professors and Professors of Practice, but are committed to value them equally , both financially and in terms of  what we call “partnership” potential, our equivalent for tenure. In the past two years we have recruited or internally promoted 16 career and adjunct  faculty, for a net gain of 11. We now have 44 core faculty up from 33 in 2008. In the process our faculty internationalization ratio has evolved from 27% (9 nationalities) to 32% (13 nationalities). Recruiting, developing and retaining great faculty remains our most challenging  task if we are to serve our student and company customers.

 Rakesh Khurana, From higher aims to hired hands (Princeton University Press, Princeton N.J.2007)

[2] Statistics from  Shrikant Datar, David Garvin and Patrick Cullen,  Rethinking the MBA (Harvard Business Press, Boston MA, 2010) Chapter 2.

There is no shortage of American–style Leadership book (Warren Bennis, John Kotter, Jack Welch etc…), mostly with sound but somewhat mechanical or simplistic advice. The one that questioned me the most is this recent book by a team of Harvard Kennedy School professors who formed their own consulting practice not only in the business but also in the public sector realm. The driving force is Ron Heifitz, a pupil of Dick Neustadt, whose qualifications include that of a brain surgeon and cellist…

Anyone ever put in  charge of an organization which was fit to thrive in yesterdays world, ok in today’s but at risk in tomorrow’s, will  recognize the power of an organizational system to sustain itself  and to avoid or postpone the difficult adaptive challenges. It is especially difficult for people in mid-career, who enjoyed success, to move away from what worked in the past.

The book is about what the authors  call  “ adaptive leadership”, which they define as mobilizing people to tackle tough challenges and thrive. Their concept of thriving is derived from molecular biology, which provides multiple insights for organizational change such as the fact that  successful adaptation builds on the past rather than jettisons it,   occurs through experimentation, and relies on diversity. Or that successful adaptations generate loss, and take time.

The authors distinguish between technical problems which the organization must tackle, and true adaptive challenges which require a change in people’s priorities, beliefs, habits and challenges.

Tackling adaptive challenges  in an organization will not make one  popular, because in a sense the organisation is not dysfunctional: it is the way it is because enough important people like the situation as it is , whatever they may say.  As Heifitz et  al. call it: the elegance of the status quo.  If you bring change it is not the change per se that people resist but the loss that the change brings. Hence the need to understand that loss and deal with it.

Adaptive leadership thus is not about meeting or exceeding peoples expectations, but about challenging some of those expectations, finding a way to disappoint them with out pushing them over the edge. In other words finding a productive zone of disequilbrium and conflict. Here formal authority is of little help. This will require patience, and also anticipation and counteraction of the tactics that people will use to lower the heat to more comfortable levels. At the same time, unlike with technical problems there is not a clear linear path. Once you unleash the energy you cannot control the outcome, multiple outcomes are possible, because working through an adaptive challenge always involves distributing some losses, albeit in the pursuit of a higher purpose. Heifetz et al compare it to the flight of the bumblebee: you do not even know if you move in the right direction, and the end solution may be quite different from what you envisaged.

In the second part of the book the authors provide insights to diagnose the challenge of change, the politics around it , and the qualities the organization has or doesn’t. The emphasis on diagnosing the situation is not by accident. It is the authors belief that surfacing the adaptive , conflictual, and systemic aspects of the situation provides the  opportunity for a mindshift in interpretation.

 In the third part they discuss how one can mobilize the system through often unwelcome interventions. For action junkies like myself one of the challenging observations is that the first effective step toward action may be non-action, and slowing down the organizations tendency for a quick response. Another is to stay connected to the opposition, to the change even though that may not be naturally what you like to do, nor be much fun.

In the fourth part the authors provide their insights for building an adaptive culture, where elephants around the table are named, responsibility is shared, independent judgment expected, leadership capacity developed and reflection and learning institutionalised. It is the one part which reeks a bit of the many airport leadership books one finds. The idealized image may be difficult to recognize in the reality of most organizations.

Finally they return to the importance of understanding oneself, one’s loyalties and what the musician in the author  calls ‘your tuning’: knowing how the environment is pulling your strings because of where you came from. Besides your own tuning, you also embody different roles in your organisation. What is the purpose for the organisation you believe in which is beyond your self interest? Have you negotiated your purposes with other key stakeholders? Can you move up and down in abstraction to test the coherence between the broad purpose and direction you are setting and the daily activity in which you engage?

Leadership as Heifitz and al. describe it is an improvisational art. Everything you do in leading adaptive change is an experiment. Always with a chance of failure. Your intervention is evidence of your commitment to your purposes, but it is not your final word on how to get from here to there.

The book of Heifitz et al. reflects a deep understanding of the challenges leaders face and the capacity of organisations to stay mired in their technical challenges, postponing the difficult work of adaptation. It is a call for exceeding one’s authority, and taking the risk of turning up the heat. Provided one stays connected to one’s purpose, inspires others, creates the right conversations and also names one’s own piece of the problem, one may make a difference. It takes combining unwavering optimism and cool realism. The title of Heifitz first book says it all: “Leadership without easy answers”.

Your School has weathered 2009 well. Research-wise, we met all our KPIs, including a significant growth in academic output. Organisationally, we became stronger in both faculty and management. Financially, we succeeded in breaking even, with modest growth in the topline. I want to thank all of you who turned to Vlerick Leuven Gent Management School for your personal and organisational management development. Given the lag between economic recovery and corporate spending on training and development, it will be a feat to repeat this performance in 2010 as budgeted. But that is what we intend to do.

The latest issue of Vlerick reflect has Strategy as its main theme. Strategy courses in a business school serve a dual role. Strategy has become a discipline in and of itself, with concepts, tools and practices. At the same time strategy serves as the integrative force to bring a lot of what is taught in other disciplines together in the minds of our students. In real life there is no such thing as an important production or sales challenge. If a challenge is important, then it probably has many angles and cuts across several functions. The most important things we as a business school can perhaps bring participants is a general management point of view, a strategic perspective, a willingness to change and a bias for action.

In an interview, our Director General Patrick Degreve and I comment on the strategy of the School itself. Though the best strategies are simple, one also needs to deal with the complexity of one’s mission. And as a full-service academic business school with international ambition we are indeed complex, and stretching in many dimensions. Holding up our three business branches, which are degree programmes, open programmes and customised programmes, is a strong stem: an ambidextrous faculty of researchers and educators, nourished by the roots of multiple research for business partnerships. The pace of faculty development determines both our qualitative and quantitative growth potential.

In this issue you will find articles which cover the strategy research of our faculty. An interview with Visiting Professor Marcus Alexander examines corporate strategy, dealing with the logic of a portfolio of businesses and the value added (or destroyed) by the corporate level. Interviews with Professor Kurt Verweire look at business strategy, dealing with the quest for sustainable competitive advantage, and an interview with Professor Christopher Voisey explores international strategy, dealing with cross-border challenges and the dual identity of subsidiaries, both as part of the parent company and embedded in the local environment. You will also come across interesting Vlerick strategy cases. The ING Direct case is one such example. The Deloitte-Andersen merger case is another, commented upon by Rik Vanpeteghem, CEO of Deloitte Belgium.

You will get a feel for company-specific programmes such as the ‘Lead the Organisation Programme’, which Vlerick has been running for Dexia senior management since 2003, or open programmes like the MBA-FSI, which celebrated its tenth anniversary as a unique programme focusing on the general management of financial service firms.

Organisations cannot become great if they have no memory, because we all stand on the shoulders of those who gave their best before us. It is therefore more than appropriate, in conjunction with our January Board meeting, that the School has decided to honour Jean Van Marcke, who steered the School between 1991 and 1997, as Honorary Chairman; Eric Dejonghe, then COO of Barco, and Dirk Lannoo, VP of Kattoennatie, who gave time and energy to support the School, as Honorary Partners; and Roland Van Dierdonck, who from 1998 to 2007 laid the foundations that I benefit from, as Honorary Dean. We are sure you join us in saluting their contribution to your School.

Finally, to all of you in a position to recruit international talent: in June we will have another 250 Masters and 90 MBA graduates of forty nationalities looking to put their new-found skills and confidence to work. Why not take a look at their CVs at http://apply.vlerick.com/Recruitment?

All the best for 2010!

Our school also consolidated its first position in Belgium. We are delighted to be able to serve as an example for our fellow management schools (44: Solvay Business School; 48: IAG-Louvain School of Management; 54 UAMS) and to contribute to setting a high standard for management education in Belgium.

I must say that rankings are volatile and should be taken seriously only if they show a stable pattern over time. We are therefore pleased with this confirmation, especially as this is a combined ranking, reflecting the quality of Masters, full-time and part-time MBA, open executive programmes and customised ones. As such it reflects the efforts and quality standards of teachers and staff across the whole School. It will stimulate us to keep building the international leading business school which our partner companies need and deserve.”

Methodology

I want to explain a little how these rankings are put together.  This meta-ranking is based on the results of five FT Business Education rankings published this year:

• the full-time MBA ranking (January)
• the Executive MBA ranking (October)
• the Masters in Management ranking (September)
• the open enrolment executive education ranking (May)
• the customised executive education ranking (May)

The FT European Business School ranking takes into account the number of programmes ranked by the FT for each school and the quality of these programmes.

For more information: www.ft.com/businesseducation

The theme of this latest issue of Vlerick reflect is Marketing & Sales. Over the past year companies have been doing their utmost to reduce their balance sheets, cut costs and find ways to increase efficiency. As they get ready for resumption of normal demand, the winners will surely be those who have not only the right product innovation, but also the most effective market positioning and sales machine.

As in any sector, the marketing channels of business schools are evolving rapidly. Depending on your age, profession or location, you may be listening to this editorial as a podcast, clicking the pages on the website, or holding a glossy magazine in your hand. More and more, our marketing is happening online and in the social media. Yet individuals care less and less about what we ourselves say about our programmes. Instead they seek the opinions of our current and past students out there in the blogosphere and in social networks. As a School, we can try to create the conditions for the outside world to find out about us, and to join our knowledge platforms. Yet at the end of the day participants have to rate our programmes highly and we must have something to say. We need high-quality content.

The changing marketing landscape is not only a challenge for the School’s management; fortunately it is also one of the strengths of our faculty. The tone of the marketing dossier in this Vlerick reflect is set by a round-table discussion in which seven of our marketing people comment on the challenges facing marketing professionals today. Other contributions discuss our research on the relationship between retailers and suppliers, and on planning and evaluation of e-business initiatives. Those who want to find out more are invited to join our new Vlerick Brand Community, or check out our Executive Master Class in B2B Marketing & Sales.

As always, this issue of Vlerick reflect also brings you up to date on other aspects of the School. I would like to draw your attention to three in particular. The first is the development of our Chinese partnership. You can read about our new intake of 57 full-time MBAs and 118 part-time MBAs, a new book about “China 2.0” co-authored by Bruce Stening, our Vlerick International Dean at BiMBA, and the exchange visit of our MBA-FSI students to BiMBA.

Business schools are in a supply-driven business: our programmes and our content can only be as good as the talent of our faculty. Hence the importance of faculty recruitment, the second aspect worth highlighting. This issue contains the profiles of seven new faculty members who were recruited this autumn.

And finally, we comment on the latest Economist ranking, which places the Vlerick International MBA at number 10 in the world, and number 4 in Europe. Whereas the emphasis in the Financial Times ranking (where Vlerick ranks 75th and 20th respectively) is on salary increases, the Economist ranking stresses the experience of students in the programme. Let’s just conclude that we are getting somewhere up there….

We hope that your markets are steadying and gradually returning to normal. Those of you who have continued to develop your management talent will be well poised to take advantage.

We look forward to hearing your comments on our Vlerick blogs (Dean’s blog, blog on entrepreneurship and various student blogs), or to seeing you on Twitter, LinkedIn and Facebook.

Source: De Standaard, 31.10.2009
Author: Karin De Ruyter

PHILIPPE HASPESLAGH, DEAN VLERICK MANAGEMENT SCHOOL

We’re in tune with the times

Last week, Vlerick Leuven Gent Management School took 10th place in The Economist’s worldwide MBA ranking, 4th place for European business schools, and No. 1 in the Benelux. Gaining this position in the top 10 rewards years of dedicated effort to climb up the rankings of MBA education.

 ‘Vlerick has worked hard for many years − and is still working hard − to internationalise the School and to improve the quality of its programmes,’ says Philippe Haspeslagh, who was appointed Dean of Vlerick last year. ‘The rise in the ranking is a result of these efforts, not a goal in itself.’

Just how important are these rankings for a business school?

‘In Flanders, Vlerick might well be a symbol − but from the international viewpoint, the quality that we deliver is greater than our brand recognition. And so, the ranking will certainly help our recognition. But you mustn’t exaggerate its importance. The rankings are for full-time MBA programmes, and that’s just a part − less than 10% − of our activity. But of course the full-time MBA is your flagship programme, your calling card. It’s also significant that we achieve  this with our own faculty of professors and not with visiting professors who are here for only a few weeks or a year at best.’

‘For potential students, though, these rankings are an important aid. Earning an MBA is a major decision for them: an MBA programme is expensive, and it also costs a year of their life, which they will often spend in a region they’re not familiar with. And only afterwards can they judge whether they’ve made the right choice.’

‘So, the rankings are an important source of information on which to base this decision. They’re a kind of external validation of the various business schools − because these rankings are drawn up very seriously with rigorous playing rules and audits.’

‘In addition, there is of course the word-of-mouth advertising, the information that ex-students and others put on the Internet. That’s also an information source not to be underestimated − it’s even more important than the information that we ourselves provide in our brochures.’

But the position that a school attains can differ markedly from one ranking to another. In The Financial Times’s ranking, for example, Vlerick is in 75^th place. Which ranking should a potential student believe?

‘Not every MBA is suitable for every student − and each student might expect something different from an MBA programme. So, in a number of areas, the rankings speak to well-defined profiles, because they attach more or less importance to certain criteria. The Financial Times, for example, surveys the rise in salary of the students three years after they had received their MBA, and they give that criterion a weight of 40%. The Economist, on the other hand, gets 50% of its information from students of the past year, 30% from students of two years ago, and the rest from students of three years ago. Furthermore, The Economist looks particularly at the level of income, and not so much at its increase. The Economist also gives greater weight to the experience of the students in the programme, while The Financial Times looks more at things like: how many profs have a doctorate; or, how much does the faculty publish in top research  journals? Incidentally: worldwide there are more than 3,000 MBA programmes. So, even 75^th place is not so bad.’

Apparently, Vlerick scores well on the income criterion: according to The Economist last week, Vlerick alumni are also the best paid.

‘Oh, I wouldn’t make too much of that. First of all, Vlerick has somewhat more mature students than some other business schools, and so they also earn more. Besides, that comparison is a bit distorted by the low value of the dollar, so that the salaries of European managers automatically come out to be quite a bit higher than those of American MBAs. So, you really need to put this into perspective.’

You said that not every business school is suited for every student. What do the students at Vlerick think?

‘In a certain sense, you could say that Vlerick is still a business school in the traditional model. Business schools originally grew up around engineers, who were looking for productivity improvements, and psychologists, who were focused on labour relations. But over the years a lot of schools have been populated with economists and finance faculty. They are also typically drawing in young students − 24 and 25 year-olds − who want to specialise in financial techniques and market models. After graduation, when they start to work in the financial world, they see their salaries immediately shoot up − especially when their previous salary was based on Indian or Chinese salaries for example. It’s logical that such schools score high in the FT rankings, because their graduates often enjoy a steep rise in income upon graduation.’

‘What we do leans more towards the original business school: we train entrepreneurs and managers. Therefore, we not only provide our students with a number of tools and techniques, we also impart judgement capabilities and ethical insights.’

‘We place great importance on that last ability. This year, for the first time, Vlerick has participated in the Aspen Institute’s Beyond Grey Pinstripes ranking, coming in at 70^th place. This bi-annual ranking looks at the extent to which Corporate Social Responsibility is treated in the MBA programmes. One of the criteria is the degree to which students are confronted with social and environmentally related topics in the course of their studies, and for this criterion we jumped into 20^th place.’

A minute ago, you said that there are over 3,000 MBA programmes worldwide. Even in Belgium, there is a whole assortment, six of which are offered by universities. Is that not in fact too many?

‘Here at Vlerick we offer a complete range of programmes: a full-time and a part-time MBA programme, Master’s degree programmes, open programmes, and a number of tailor-made programmes. To be able to do all that, you do need a certain magnitude. Even with our 60 professors and our €30 million turnover, we’re too small to really be able to work internationally in all these areas. So, colleagues that are even smaller can at best aspire to play a role locally and to specialise in certain niches.’

‘For us, in any case, the competition is increasingly from outside Belgium. Under my predecessor’s administration, Vlerick took a number of daring steps. By merging with Leuven, we added a small campus in St. Petersburg, and we’re moving forward with an MBA in China in collaboration with the National School of Development at Beijing University. My job, first of all, is to further internationalise our core products. In our pre-experience Masters programmes, for example, we now also have 30% international students. Of course our post experience MBA has over forty nationalities’

‘Actually, the ultimate challenge is to make Vlerick more international, while at the same time continuing to play our role in Flanders − in order to ensure that we don’t end up with two Vlerick schools: one Flemish and one international. My motto is: “Act and behave as one Vlerick.” And that goes for several areas: unity between Leuven and Ghent, between Flemish and international, the School and its alumni…’

How is the relationship with the alumni?

The quality of the alumni is very important for a business school, in addition to a whole series of other aspects like the quality of the service, of the programmes, of the professors, of the recruitment and placement service, and so on.’

‘Vlerick’s alumni association is an independent organisation, but it is certainly important for our international recognition. So, we’re also working with them to further develop their international chapters or branches. Our alumni are in fact our best ambassadors. They’ve also helped the School through a number of difficult times in the past. And many alumni are still actively engaged with the School, as godmother or godfather to foreign students, for example. Or they help conduct interviews in the student recruitments.’

But in Flanders the so-called ‘Vlerick network’ − meaning the Vlerick alumni − doesn’t always have a spotless reputation.

(smiles) ‘I know it: people are sometimes surprised that I live in Brussels and not in Sint-Martens-Latem. Some people apparently think that the Dean of Vlerick School has a kind of official residence there.’

‘But seriously: the stories in the media about that ‘Vlerick network’ have sort of taken on a life of their own. From time to time, it so happens that someone is portrayed as a ‘key figure in the Vlerick network’ − while he or she has actually never studied or held a position here.’

‘On the other hand, of course, you run into our ex-students everywhere in Flanders. We have some 14,000 alumni: you find some of them in all corners of the world, and some 10,000-12,000 in Flanders. That means that a whole lot of Flemish companies are being run by Vlerick alumni, and inevitably you have both good and less good among them.’

‘It is certainly a pity that all those stories about ‘the Vlerick network’ sometimes lose sight of how much Vlerick has done for the professionalisation of the business community and management in Flanders.’

In order to have good alumni, you must first attract good students. How many candidates are ultimately accepted into Vlerick?

‘Just as in all good schools, the rule of thumb is that, out of every 10 – 12 candidates, 2 or 3 make it through the entire recruitment process − the era when all candidates made it through the recruitment process is a while behind us. There is also a kind of self-selection among the candidate-students. The quality of the students that submit their application is also connected with the school’s ranking. Insead, the London School of Economics, and Spain’s IESE are at the absolute top. We’re somewhere in the middle of the group that comes next, in the company of (for example) Rotterdam, Cambridge, Oxford…’

Is the poor − or non-existent − image of Belgium an obstacle to attracting students?

‘Let me say that it’s not easy to establish a brand name when you have to present yourself as ‘Vlerick Leuven Gent Management School from Belgium’. We don’t even have ‘Brussels’ in our name. And yes, Belgium is not Milan or Madrid… But when we can get candidate students to the point of coming to visit the campus, and they then discover Leuven or Ghent as student towns, fortunately it’s often a whole different story. Those are real plus points.’

The School’s name is extremely long as well…

(laughs) ‘I think that we’re in the process of making a shorter name. The merger of the Leuven and Ghent business schools has turned out very well. Not only because that has given the School the necessary critical mass, but also because it has combined the academic accents of Leuven with the more entrepreneurial focus of Ghent. The School’s interaction with the universities themselves is also very good now. For instance, the two rectors are on our Board of Directors.’

Do you feel the effects of the crisis?

‘Yes. Particularly in the second half of this year, we’re seeing a clear decline in executive education. But we’ve been able to compensate for that with an increase in the Masters programmes and the full-time MBA, and with more income from research. So, we’re one of the few schools in Europe that will still achieve a small growth this year and that will be in balance financially. But we have very little idea what next year will bring.’

You also receive subsidies from the government − other business schools do not.

‘Those subsidies comprise only 7% or so of our income, that’s not really very much. Roughly, you can say that we have four about equally important sources of income: the Masters and MBA programmes, the open programmes, the programmes that are designed specifically for companies, and partnerships with companies that sponsor research via academic Chairs and so forth. That last one is quite unique: it’s not contract research or consulting, but rather research that is also academically significant.’

And has the crisis also had an impact on the content of the courses?

‘The crisis is providing a fantastic learning opportunity − both for the profs as well as for the students. For 10 years now, we’ve offered a Masters programme in financial services, which is focused on general leadership and management in the financial services field. There are students in that programme who work for 10 different banks and insurance firms. Well now, those students have learned lessons this year that they will probably never forget. And as I’ve already said, we’ve always been fairly strongly focused on entrepreneurship, with a lot of attention on Corporate Social Responsibility. And that is even being reinforced by modules that we have recently added to our MBA, such as ‘Vlerick Giving Something Back’, in which the students in the full-time MBA do a project of at least a month in an NGO or a non-profit organisation. So, we’re moving in the direction in which the wind is now blowing. This mind-set is also in our marketing, and that’s why we also appeal to students who feel drawn to these things.’

Getting to know me…

Who: Philippe Haspeslagh

Workday: Luckily, every day is  different…

Free time: First, a dip in the fitness centre’s swimming pool, then a gallery visit, a bite to eat and a film

Hell: A flight connection at Heathrow

Heaven: A walk or bike ride through beautiful nature, a tête-à-tête with my wife or one of my grown-up children

Restaurant: Casa Bini in the 6^th Arrondissement in Paris

Favourite city: Paris

Gadget : At Vlerick, I had to exchange my Blackberry for an HTC

Music:  Portuguese Fado

Book: At the moment, From higher aims to hired hands, a history of business schools, by Rakesh Khuranna

What is corporate governance?

Corporate governance for me is the system of rules, regulations and practices by which we hold managers and owners accountable and responsible for whatever performance society expects. Remark that I did not say “by which we hold managers accountable for shareholder value”. That shareholder value and social responsibility are twin brothers in a sustainable world should no longer need defending. That investors and owners should be an integral part of the corporate governance system however is often underestimated.

Corporate governance thus involves many aspects. For example we should have paid more attention to the rules and regulations that govern banks as lenders and as investors. We should also have done a better job of clarifying rights and responsibilities of investors as shareowners. Ultimately however the main instrument of corporate governance remains the role and responsibility of the Corporate Board.

Not that Boards will ever be able to be up to the job of holding management accountable. For that reason we need to add a process of active ownership, which requires investor governance, we also need to have active disclosure and transparency in several areas, and we need sound accounting and reporting. In fact we need al the help we can get to create a system of accountability within which free enterprise can flourish. Even then we will also need a measure of self-responsibility which requires managers to behave as professionals.

Based on my own interviews of directors of financial institutions, and examining recent studies by the OECD and others, it is clear a failure of corporate governance is at the basis of practically every financial institution’s downfall in this crisis, and is also separating those who came out relatively unscathed from those that ran completely aground. Basically, in case after case Boards were either unaware, ill informed, ill equipped or not proactive.

Yet all of this is barely eight years after the previous value meltdown resulted in Sarbanes Oxley, and a whole wave of corporate governance rules and revised codes across the globe.

Did we then not remedy things after 2001? Actually I am afraid not. Based on the primacy of shareholder value and belief in principal agent theory we added financial reporting, strengthened audit committees, assured independence of directors, required financial expertise of committee members, put mathematical risk models in place and moved to fair value accounting, whilst creating an ever greater reliance on variable remuneration to align executives both at the top and on the trading floor.

I would submit that whilst all the corporate governance effort and codes may have helped to bring unsophisticated companies or countries to the basic level of governance structure, it has blinded us for the fact that complex companies were literally out of control. Code compliance gave a false sense of security.  As a result we have destroyed the credibility of business to mind its own shop for a while to come.

One problem with corporate governance , and this is a challenge to academics and code makers who want to understand causal relationships and develop structural prescriptions,  is that it ultimately it is an issue which is to be dealt with company by company, board by board, as each individual board member steps up to the plate or doesn’t. Structural features of governance are a very poor indicator of real quality of checks and balances in practice.

I would like to suggest that many if not most boards are still struggling to fulfil the roles which are theirs, and also that the root cause of this failing are weaknesses in the Board’s process.

Roles of the board

1) Set direction and approve strategy

From working with Boards I would surmise that in this crisis they typically fell short in three key areas. One is goal setting. What are reasonable stretching objectives? How to look at internal objectives, peer based ambitions or market based expectations. Few Boards have a proper view, little theory is available, yet a lot of the disasters start from inappropriate goal setting and lemming effects. From this flows the next challenge: providing proper business focus.  I would surmise that much of the problem is due to inappropriate business scope and product offering extension in search of satisfying these performance expectations. This brings us to the third strategic issue: what is the proper risk appetite for the organisation. This is something Boards failed to set appropriately.

2) Provide proper performance and risk oversight.

Here Boards have fallen equally short. Partly because they did not see both sides of the coin together, partly because they did not understand the risks, partly because they had incomplete information – which in turn is because the underlying processes of risk management were segmented, void of judgment and highly technical. Again, a lot of soul searching and process design will be required to tackle these issues.

3) The selection, development and rewarding of leadership.

Whereas the first two are the biggest challenge, it is the latter which gets all the attention. Only 22% of the compensation of the main European Bank managers and 6% of that of the six largest American Bank managers was fixed. This says a lot for the underlying assumptions about what we expect from these managers, and how we expect them to behave. The top manager’s job is multidimensional, has to deal with multiple time horizons and should be evaluated as such, using a combination of KPIs and judgment. Shareholder value even over an interval is a poor proxy.

4) Set the tone at the top, to shape the values and to ensure they are brought to the coalface.

Here too it is clear that in many financial institutions the fish was rotting from the head. Chuck Prince said: as long as the music plays you have to dance. Perhaps not. Perhaps leadership means leaving the floor when the rhythm is too hectic. What is clear is that in most banks the traders that brought in the dough were clearly put ahead of the risk managers that raised questions or proposed limits.

How then do we get Boards to do a better job?

By realizing that this is a very special group situation: we are dealing essentially with a high prestige group of people who are travelling in for occasional meetings, to do two very conflicting things: giving support and council to management on the one hand and providing oversight and questioning on the other hand.  They have to do this largely in the presence of the managers they are supposed to oversee, and based on information provided by the very people they are supposed to monitor.

Improvements come first of all from creating a quality team. We should recognize that technical independence and diversity matter less than competence, character, experience and dedication. When ABN AMRO was in trouble, it did not help that the Chairman was a US based American and the senior director a Dutchman living in NY.

A quality team needs to spend quality time. It is hard to fulfil the roles I mentioned in the fifty to sixty hours an active Board meets a year. Committees and executive sessions help, but no executive would dare to spend as little time on fulfilling his duties in his own firm as he does as a Board member in another company.

A quality team also needs quality information: a board can only be as good as the processes inside the company that feed it. In most companies strategy dialogues, enterprise risk management systems, reward processes, and corporate responsibility practices at the coalface are still up for serious improvement.

Finally, the whole thing is about quality process. How the Board, under leadership of the Chair critically examines the essence of management’s proposition, acknowledges and builds on each others questions, holds of premature answers and ultimately converges and supports, s is what makes the real difference.

I believe there is plenty of scope for academic inquiry into board focus and board process. I also think there is merit in debunking the myth that board structure and code compliance suffice. Finally I submit that without experienced Board members individually acknowledging and communicating about the reality of the challenge they are facing, the gap between public expectations and reality will remain too big for trust to be redeemed.

Let me start with a special welcome for all the spouses and partners of our 120 Executive Master Class graduates. You have been very patient and supportive; at least I hope so, over the past eighteen months. Fulfilling the requirements of a Vlerick Executive Master Class is indeed a lot of work, with over two hundred contact hours, a project and all of this on top of the normal job. And for many of you the normal job was all but normal this year, as we have been going through some of the most challenging times in history.

And of course there is the networking, or should I say drinking, which is a crucial ingredient in the mix. Many evenings dear spouses and partners thus that you have not seen your partner, and I am sure you have a small list of things you now would like him or her to do for you, now that they will have graduated. But frankly, dear graduates, in a business year like 2008/2009, you were privileged to have such a good support group outside the work environment.

Read full speech | Watch photos | Watch video

As the Dean of the Vlerick Leuven Ghent Management School it is a pleasure to be able to attend this opening ceremony of the 2009 Bimba programme for which the Vlerick School is the degree granting institution since last year.

Bimba , under the leadership of the National School of Development- then CCER- and in partnership with Fordham has established itself as one of the early and leading MBA programmes in China. As we have taken over the relay from Fordham in terms of  the academic accreditation responsibility, we  committed to help the National School of Development  further internationalise and improve the Bimba programme. Indeed, as your wonderful Olympics last year demonstrated: what was good for gold in Athens five years ago, was no longer good enough  for the podium here in Beijing last year: we can and will make a good programme even better.

We are also committed vis-à-vis you students to maintain a healthy balance of teachers from the National School of Development,  and from Western Business schools such as , besides Vlerick, Fordham , Esade, and Smurfit, so that you are truly exposed to Chinese, American and European perspectives.  As all Vlerick students your degree will have the triple accreditation of AMBA, the British Association of MBA’s, of AACSB, the American Business School accreditation body as well as  the European Equis accreditation. That, and the association with Beida and the National School of Development should stand you in good stead.

Download full speech in pdf | View the photo’s of the opening in Beijing

For the first time we were joined by a delegation of our Chinese Beijing International MBA (Bimba) students who are graduating this summer. The first year of Bimba under Vlerick saw a successful transition to the Vlerick model, complete with in-company projects, and has laid the foundation for closer cooperation and exchange possibilities in the future.

We have also passed our re-accreditation by the Flemish Government with flying colours, with former Education Minister Frank Vandenbroucke writing that: “Vlerick Leuven Gent Management School is performing very well. It has made impressive progress over the last five years: from strengthening the health of the School’s financial position and building and strengthening its corps of professors, to improving research results, internationalising the School’s programmes, and professionalising its management.”

In this issue of Vlerick reflect, you’ll find news of a new initiative we are keen to welcome you to: starting this October, Vlerick will hold Research Café evenings in which our latest research will be presented and discussed together with a seasoned speaker from business. It’s our opportunity to show that good theory can be highly practical.

We have dedicated this issue of Vlerick reflect to our core business: individual and organisational development. The participants in our programmes and the HR professionals with whom we are partnering are better placed to describe their Vlerick experience than we ourselves, so in the pages that follow you will hear from them.

Of course, your School not only delivers programmes but also actively researches trends in executive education, requirements for competency development, continued contribution of older employees, and many other management development related topics. We are also advising firms who want to acquire the ‘Investors in People’ label and encouraging others to participate in the ‘Great Place to Work’ contest. All these topics and more are covered in this issue. You can find out even more on the web, or by contacting the Vlerick staff member mentioned in the articles.

We hope that this issue will give you a better feel for the fantastic learning environment Vlerick Leuven Gent Management School has become, via e-learning, in its up-to-date facilities, and above all through a stimulating and challenging learning community. Why not join us sometime this year?

Philippe Haspeslagh
Dean Vlerick Leuven Gent Management School

If you are interested in reading this edition of our magazine, go the Vlerick Reflect.