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The Business Case for Creating a

Corporate University

Peter McAteer

CEO, Corporate University Xchange

Mike Pino

VP Research, Corporate University Xchange

September 12, 2011


The Business Case for Creating a Corporate University

Executive Summary
This paper sets forth the business case for creating a corporate university, based on the premise that
corporate universities are the current best practice for systematically building human capital – a key
capability for adaptive, innovative, knowledge-based organizations. The term “corporate university” is
most prevalent in the United States, Western Europe and Japan, but whether it is called an academy,
institute, or center for excellence, the feature that distinguishes it remains the same: the alignment of
key learning programs so they actively support the strategic interests of the business.

Corporate universities offer a curriculum designed to support major change initiatives, serve to align
staff development with business goals and improve the ROI associated with training investments.
Corporate universities help create the conditions for strategic agility and innovation in a knowledge
economy. Successful corporate universities have executive support and oversight to assure corporate
goals and training align; appropriate technologies to assure and measure transfer and retention of
knowledge and skills; and a well documented organizational plan for execution. Companies with
efficient and effective corporate universities show measurable improvements to the bottom line in
shareholder return, productivity, and customer satisfaction.

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The Business Case for Creating a Corporate University

We are living in the information age, and business strategy is increasingly dependent on human capital
as the key to growth and business differentiation. An efficient and effective corporate university
maximizes human capital development, providing a measurable competitive edge. In addition to
codifying knowledge as it directly relates to business needs, a corporate university also helps to increase
employee engagement, improves operational effectiveness and internal communication, and, most
critically, transforms the learning department from a training provider to a business partner. The
bottom line is that top talent businesses have a significantly higher return to shareholders than
businesses rated as having average talent. Corporate universities are the way leading firms get it done. 1

The Business Challenge


Global workforce challenges are well documented and a subject of increasing concern. The U.S. labor
force will continue to experience slow growth while becoming both older and more culturally diverse,
and the pool of skilled workers is shrinking even as organizations increasingly require employees with
analytical, communication and collaboration skills. 2 Or, as one analyst more bluntly stated, the
workforce is “aging, undereducated and rife with shortages.” 3 Despite the current unemployment rate
and delayed retirement for many older workers, the risk of brain drain looms as they will eventually
leave the ranks of the employed. Employers with global workforces face more cultural issues and,
especially in emerging markets, more deficiencies in education among potential employees who, in the
words of Vijay Govindarajan “while talented, suffer from what we would call last-mile
employability….They lack communications skills, don’t know how to work in teams, are extremely
theoretical, and are taught to be overly obedient.” 4 Many would argue that the graduates of
educational systems in developed countries fare no better, and even the best educated college
graduates require skills and training in organizational practices and culture that can only be acquired in
the workplace. The pace of change and the brief shelf life of knowledge demands lifelong learning for
even the most senior and experienced worker.

In addition to these demographic and worker preparedness issues, organizations face internal
challenges in developing, engaging, and retaining employees. The current job market around the globe
is highly variable, but talented workers are in demand in any economic climate, and retention based on
workers who believe they are without options is not any company’s goal. A recent study shows that the
recent economic downturn may not have exacerbated employee disengagement, but that employers
should not take heart since the 2007-2008 study indicated that 38% of employees were already

1
Smart, Bradford D. 1999. Topgrading: how leading companies win by hiring, coaching, and keeping the best people. Paramus,
NJ: Prentice Hall Press.
2 st
Karoly, Lynn and Constantijn Panis. 2004. The 21 Century at Work: Forces Shaping the Workforce and Workplace in the
United States. Santa Monica, CA: The Rand Corporation.
3
Akin, Jeffrey and Brenda Worthen. 2008. “Managing the Impending Workforce Crisis,” Capturing the People Advantage:
Thought Leaders on Human Capital. s.l.: Booz & Company.
4
Margolis, Mac. September 13, 2010. “Corporate Learning: Big companies are setting up university campuses all over the world
to help produce the kinds of employees they most need,” Newsweek. Accessed online on 5/19/11 at
http://education.newsweek.com/2010/09/13/across-the-globe-big-companies-start-own-colleges.html.

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The Business Case for Creating a Corporate University

“disenchanted or fully disengaged.” What can improve engagement and retention? Learning
opportunities, effective leadership, company image, career development, and empowerment. 5

Perhaps the most pressing challenge is organizational, since without the right systems in place, the
workforce is unlikely to benefit from development or other opportunities, and much of even committed
employee’s lack of engagement and frustration can be attributed to organizational impediments. 6 A
quick perusal of the current crop of business publications—books, journals and industry analyst
papers— makes clear that companies are looking to innovation to drive growth and success. This trend
is not a fad, but the recognition of economic realities. A common refrain within discussions on
innovation is the need for corporations to manage organizational structure in order to successfully
generate and execute innovation initiatives. Linked to organizational structure and innovation are issues
of leadership, training, talent management and corporate culture.

The Roots of the Corporate University

Every business has recognized the need to educate and train its members in order to further the goals of
the organization and enhance the skills of its employees. From the earliest craft and guild societies, to
the foundation of universities and professional schools, the centrally organized learning institution has
developed the core curriculum for disciplines, and established the authority to issue credentials that
designate who has achieved mastery of that core knowledge.

The university has its roots in Europe where it was the first official institution for training knowledge
workers, including the professional classes and the governing elite. Under the umbrella of the
university, individual colleges and courses of study were created in addition to a basic, core curriculum
meant to encompass what an educated person should know, on top of which the emerging professional
schools and independent disciplines established specialty courses. With the growth in complexity of
commerce came the recognition that business itself was a discipline requiring its own schools, starting
with the École Supérieure de Commerce de Paris (ECSP) in 1819, and continuing with the establishment
of professional business schools with Wharton Business School in 1881 and Harvard Business School’s
MBA program in 1908.

These institutions of higher learning brought academic rigor and recognition to the practice of business,
and educated an elite body of managers, but alone they could not solve the needs of businesses that
required managerial expertise for a growing workforce in an expanding, complex, and increasingly global
economy made up of larger, multinational businesses. In response, the institutes of higher learning
began offering programs, such as Harvard University’s Advanced Management Program, begun in 1945,
to address the post-war shortage of qualified managerial candidates. Increasingly, though, businesses

5
Towers Watson. 2011. The New Employment Deal: How Far, How Fast and How Enduring? Insights from the 2010 Global
Workforce Study. New York: Towers Watson.
6
Herman, Jeffrey et al. March 2011. Motivated by Their Organization’s Mission or Their Career?: Implications for Leaders in
Turbulent Times. New York: Booz & Co.

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The Business Case for Creating a Corporate University

began to create their own programs, including AT&T, the world-famous Tata Management Training
Center, major airlines and global professional services firms throughout the 1950’s and 1960’s.

University of Bologna, 1088

École Supérieure de Commerce de Paris (ECSP), 1819


Wharton Business School, 1881

Harvard Business School MBA Program, 1908

Harvard University’s Advanced


Management Program, 1945
Tata Management Training Center, 1966

Motorola Training and


Education Center, 1980
More than 4,000 companies worldwide
have invested in a corporate university

First generation corporate universities followed the traditional university model in terms of delivery
methodology – large facilities, class room instruction – basically, putting people in seats. Second
generation corporate universities are becoming more diverse, helping to drive innovation, capturing
more informal learning, and helping to manage the shift from centrally managed knowledge to user-
generated knowledge, and support the trends toward distributed decision-making and cross-functional
collaboration.

The broader adoption of the Corporate University Model can be traced to the 1970’s and 1980’s and
largely follows changes in market conditions. As economies became more dependent on services and
knowledge industries, companies saw the importance of more dedicated training functions with higher
levels of investment. As the figure below illustrates, the percentage of US non-governmental GDP in 4
major industries now accounts for almost 50%. That number is up 9 percentage points in the last 20
years and almost double 15 percentage points from the mid- 1970’s.

% Of Non-Governmental GDP
United States
1990 1995 2000 2005 2010

• ICT 4% 9% 9% 5% 5%
• Educational services & health care 8% 8% 8% 9% 10%
• Professional, scientific & technical services 6% 6% 8% 8% 9%

• Finance and insurance 21% 22% 23% 24% 24%

• Knowledge Total Work 39% 45% 47% 45% 48%

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The Business Case for Creating a Corporate University

The numbers for total GDP in the US follow the same pattern at 33%, 39%, 42%, 39%, and 42% for the
corresponding periods. The same pattern can be seen in major European and Asian economies. As the
figure below illustrates, the percentage of UK total GDP in 3 major industries now accounts for 30%.
That number is up 9 percentage points in the last 20 years and up significantly since the mid- 1970’s. 7

% Of Total GDP
United Kingdom
1990 1995 2000 2005 2010

• ICT 6% 6% 7% 9% 10%
• Education Services & Healthcare 12% 10% 12% 12% 10%
• Finance Services 3% 6% 5% 8% 10%
• Knowledge Total Work 21% 22% 25% 28% 30%

Similar shifts in the type of work can be seen in Japan where knowledge work in 3 major industries now
accounts for 48% of total GDP spending. That number is up 16 percentage points in the last 20 years.

% Of Total GDP
Japan
1990 1995 2000 2005 2010
• ICT 0% 7% 9% 8% 8%
• Education Services & Healthcare 10.0% 10.5% 11.1% 11.8% 12.4%

• Financial Services 22% 24% 26% 28% 27%

• Knowledge Total Work 32% 41.2% 46% 46.7% 48%

The table below offers a simple illustration of GDP from service industries in major economies across the
globe. These are industries dependent on intellectual property, key business processes and knowledge
workers. Maintaining competitive differentiation requires higher investments in learning and
development – hence the increased interest in corporate universities.

Services GDP % Services GDP % Services GDP %


Country Country Country
2010 2010 2010

US 77 India 55 Brazil 67

Canada 78 Singapore 73 Philippines 55

UK 77 South Korea 58 South Africa 66

France 79 Hong Kong 92 Australia 71

China 44 Thailand 44 Thailand 44

7
All country data taken from CIA Factbook, World Bank and individual country websites.

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The Business Case for Creating a Corporate University

The Business Solution


A well-designed, well-implemented corporate university is Definitions of a Corporate University
the key to addressing these workforce and organizational
Mark Allen, Jeanne Meister and Annick
challenges, creating a learning function that contributes to Renaud-Coulon have all written
the bottom line through efficient and effective human extensively about corporate universities,
capital development. and here are some definitions they have
provided:
What is a corporate university?
“A corporate university is an educational
Though corporate universities have been in existence for entity that is a strategic tool designed to
assist its parent organization in achieving
more than thirty years, the definition of what a corporate
its mission by conducting activities that
university is varies, in part because there is no one cultivate individual and organizational
standard model (see sidebar). Also, as Martijn learning, knowledge, and wisdom” Allen,
Rademakers notes, each corporate university is as unique Mark. 2002. The Corporate University
Handbook. New York: AMACOM.
as the organization it serves, so one size will not fit all and
“the ideal best corporate university does not exist.” 8
“A corporate university is the centralized
strategic umbrella for the education and
The term “university” is more frequently used in the U.S. ,
development of employees and value
but whether it is called a university, an academy, or a chain members such as customers,
center for excellence, the distinguishing features are the suppliers, and dealers. Most importantly,
same. A corporate university is a strategic developer of a corporate university is the chief vehicle
for disseminating an organization’s
human capital that is aligned with the business goals of
culture and fostering the development of
the company, an organ for transmitting corporate culture, not only job skills, but also such core
and a catalyst for knowledge creation and transmission. workplace skills as learning-to-learn,
Like the academic model upon which it is based, the leadership, creative thinking, and problem
solving.” Meister, Jeanne. 1998. “Ten
corporate university creates a mechanism for the Steps to Creating a Corporate
exchange of existing knowledge and the creation of new University.” Training and Development.
ideas, while fostering a sense of community and shared 52(11): 38-43.
purpose.
“Corporate university is a generic name
How many corporate universities are there? given to educational structures based in
private and public, commercial and
To get a sense of the growth of corporate universities noncommercial organizations, to help
since the days of Crotonville and Motorola University, implement – through education – the
organization’s strategies in human,
consider that the total number was estimated at 400 in
economic, financial, technological, social
1988, and Corporate University Xchange (CorpU) data and environmental terms.” Renaud-
suggests that this had increased to over 2,000 by the Coulon, Annick. 2008. Corporate
1990s and double that worldwide by 2010. Universities: A Lever of Corporate Social
Responsibility. Paris: GlobalCCU.

8
Rademakers, Martijns. 2005. "Corporate universities: driving force of knowledge innovation." Journal of Workplace Learning
17(1/2): 130-136.

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The Business Case for Creating a Corporate University

To get a better understanding of the total number we examined the publicly available annual reports of
the Forbes Global 2000. We searched the reports for a specific mention of a corporate university or
academy function. The assumption was that if it was important enough to merit a mention in an annual
report, the investment had been raised to a strategic level. The data shows that nearly 900 or 45% have
an entity they describe as either a university or an academy. This breakdown of the group by industry
shows that financial and industrial sector companies account for approximately 40% of the total.

Corporate Universities by Industry Type (n=783). Source: CorpU 2011.

Of course, labeling something a university or academy does not in itself mean that it fulfills the functions
of corporate university: more than one training department has been renamed, given a logo and a
mission statement, and carried on just as before. 9 Traditional training departments are often described
as tactical, directed toward specific unit needs, and focused on providing individual employees with job
skills. Corporate universities are more often strategic, directed toward achieving corporate goals, and
focused on corporate capabilities as well as the needs of the individual learners that make up the whole
value chain—customers, suppliers and dealers as well as internal employees. 10 The most essential
distinction between a training department and a corporate university centers on strategic alignment
with corporate goals, which includes measuring effectiveness based on total business outcomes and
transitioning from learning provider to a business partner working collaboratively and with the support

9
Allen, Mark. 2002. The Corporate University Handbook. New York: AMACOM.
10
Meister (1998). Allen, Mark. 2007. The Next Generation of Corporate Universities: Innovative Approaches for Developing
People and Expanding Organizational Capabilities. Hoboken, NJ: Pfeiffer.

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The Business Case for Creating a Corporate University

of senior leadership. The scope, flexibility and structure of corporate universities are manifest directly
and indirectly in firm’s growth and productivity.

Do corporate universities deliver results?


What kind of measurable results do companies with a corporate university typically experience?
Research has repeatedly affirmed that firms that can capitalize on their human capital have significantly
higher shareholder return than average firms. The chart below illustrates a ten-year total return
comparing a market cap weighted index of more than 500 public companies that identify themselves as
having a corporate university and the Russell 3000 index. Both the CorpU weighted index and the
Russell 3000 index track predominantly large US-listed companies. In this comparison the CorpU index
of companies with corporate universities beat the index by a solid 9%.

Figure 1 Connecting Business Performance with Corporate Universities (n=557). Source: CorpU 2011.

By reviewing reports from client companies for which it has first-hand knowledge of corporate university
systems, CorpU has collected numerous examples of measurable financial, programmatic, and
organizational results realized by those firms on their investment in a corporate university. A range of
examples are provided on the following page. The value proposition of the corporate university rests
both in what it helps the company avoid (prevent a gap), and in what it addresses due to sub-par
performance (fill a gap), as well as in building on that which currently is in place (building on strength).

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The Business Case for Creating a Corporate University

Company Self-reported Results from


Their Corporate Universities
• A Fortune 50 Technology Firm moving from decentralization to centralization under three
groups – Strategy, Design and Development, Delivery—realized a reduction of 40% of training
staff.

• A Fortune 500 Insurance Company saw its new agent success rate increased from 39% to
75%, and its new agent productivity increased 38%. District productivity increased 27% over
non-participating districts.
• A Global Bank attributed a 28% reduction in turnover to better apprenticeship training.
• A Global Manufacturing / High-Tech Firm estimates time saved in selling, supporting and
servicing products at 132 hours per person for a total savings of $66 million (US) per year, and
costs saved by moving to elearning strategies was $74 million (US) in 2004.

• A Regional Health Care Provider’s nurse on-boarding program lowered its turnover to less
than 10%, a significant improvement over the 20% turnover average in the industry.
• A Global Manufacturing Firm attributed $1.4 billion (US) savings to the bottom line after two
years of teaching Six Sigma in the corporate university. They saw the correlation and power of
targeting the investment in people to a specific business objective, rather than individual
professional skills.
• A Global Confectionary and Candy Firm measured a $33 million (US) cost savings due to lean
programs delivered through its corporate university.
Results from client company reports in: Corporate University Xchange. 2007. Corporate
Universities: Delivering Value to their Businesses. Mechanicsburg, PA: Corporate University
Xchange.

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The Business Case for Creating a Corporate University

About the Authors

Peter F. McAteer
Chief Executive Officer
The Corporate University Xchange
pmcateer@corpu.com
www.corpu.com

Perspective:

The number one issue affecting global competitiveness in the


coming decade will be education – its quality, cost and accessibility.
Degrees, continuing education and micro-credentials will be
increasingly important as will the educational brands that make the
market more efficient for both employees and employers.
Generation “C,” those born after 1990, will begin to dominate the
developed western economies, the BRIC countries, major markets in
Latin America and key southeast Asian economies as both
consumers and employees. They will be more familiar with technology, more adept at social learning
and more skilled in the use of video. The business opportunity is to reinvent education – to make it
more personal, relevant, accessible and effective at lower costs.

Biography:

Peter McAteer is Chief Executive Officer of Corporate University Xchange (CorpU) - a membership-based
research, advisory and educational services firm serving clients around the world. Most recently, Peter
was a member of the Executive Committee for Harvard Business Publishing (HBP) and Managing
Director for HBP’s Corporate Learning business. Peter has also served as Chief Learning Officer and
Director of the Learning Resources Center for the United Nations Development Programme (UNDP), was
Managing Director for Giga Information Group’s HR e-learning services group in Cambridge, MA, and
was Vice President of Leadership Development at Fidelity Investments in Boston. Peter has been a
sought after speaker at global conferences, has served as adjunct faculty in human resource
management at Columbia University’s Graduate School of International and Public Affairs and has been
a guest lecturer at various business schools around the world. He holds undergraduate and graduate
degrees from Rutgers University, and has written commentary and articles for numerous publications
including the European Business Forum, Harvard Business Review, Directors and Boards, and Training
and Development Magazine.

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The Business Case for Creating a Corporate University

Mike Pino
VP, Research
Corporate University Xchange
mpino@corpu.com
www.corpu.com

Biography:

Mike Pino is VP, Research of Corporate University Xchange (CorpU) - a


membership-based research, advisory and educational services firm serving
clients around the world. Most recently, Mike served as Director,
Technology Innovation, at Harvard Business Publishing’s Corporate Learning
business. Mike has also served as Course Management System
Administrator and Lead Web Development at Brandeis University. Mike has
presented, moderated and keynoted at global conferences, has served as
adjunct faculty at Providence College, Queens College (CUNY), and New Jersey Institute of Technology
(NJIT). He holds a Ph.D. from the Graduate School and University Center of the City University of New
York (CUNY).

Corporate University Xchange (CorpU)


Since 1997, CorpU has helped design or improve hundreds of learning organizations around the world,
including those for Caterpillar, M&M Mars, Exxon and many others. We help organizations through our
Membership, Advisory Services or CorpU Academy programs.

CorpU Membership

Membership in CorpU provides access to the best advice on learning and leadership development.
Membership offers access to key research reports, blogs, videos, analyst assistance and networking
opportunities on a variety of topics that affect key decisions and investments – saving you time and
money while achieving real bottom line impact. Additionally, membership includes access to the CorpU
Buying Center that includes detailed analysis on hundreds of learning vendors, big and small, local and
global – all designed to save you time and money.

CorpU Advisory Services

CorpU Advisory Services support individual client projects. We help clients start a Corporate University
or take the one they have and make it best in class. In addition to our Advisory Services, we offer Buying
Services, which focus on helping organizations make informed decisions that improve their Learning
Supply Chain. CorpU's Advisory Services leverage years of experience, benchmarking, and best practice
data, and include our market leading 12 Dimension FrameworkTM and annual benchmarking survey.

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The Business Case for Creating a Corporate University

CorpU Academy

CorpU Academy offers blended and virtual on-line education from leading authors and top schools from
around the world. Our programs cover general management topics such as Innovation, Change, Talent
management and leadership development as well as functional topics such as strategic sales
negotiations and supply chain management. We represent leading institutions such as the University of
Pennsylvania, bestselling authors such as Stewart Friedman, author of the Harvard Business Publishing
book, Total Leadership, and leading experts such as Lawrence Susskind, professor at MIT and world
renowned expert on negotiation.

For More information:

Website: www.corpu.com Headquarters Mailing Address:


Email: info@corpu.com Corporate University Xchange
Telephone: 1 -212-213-2828 401 East Winding Hill Road, Suite 200D,
Fax: 1-717-620-3212 Mechanicsburg, PA 17055, USA

©2011 Corporate University Xchange Page 13