Editorial: Scratching the Fa‡ade

HBS launches its first-ever capital campaign to raise $500 million, to be separate from the endowment

Last Saturday, September 21, at a business-star-studded, all-day event held on campus, Harvard Business School launched its first-ever capital campaign – to raise $500 million.

Coverage of the event will be featured in next week’s Harbus, and that may contain more insight than we have now at the time of publication, but the promotional materials made available last week provide a cursory view of the school’s case for donations.

This was no small affair. Eight faculty served as panel moderators during discussion sessions such as “Society and Technological Innovation,” “The Complexities of Globalization,” and “The Leadership Challenge.” They are F. Warren McFarlan, William Sahlman, Debora Spar, Richard Vietor, Dean Howard Stevenson, Michael Porter, Thomas DeLong, and Linda Hill. Panelists included 28 of the school’s most prominent alumni, a veritable “Who’s Who” among the Fortune 500.

The evening concluded with the premier of a “multimedia celebration of Harvard Business School” featuring testimonials about how HBS has changed individual lives and a dinner whose keynote speakers included Dean Kim Clark and Harvard University President Larry Summers.

In the pre-released promotional material, the first page is written as a mini-case with a protagonist who’s just received a fundraising letter from Dean Clark. It concludes with questions such as, “Why did the School even need a capital campaign? Didn’t Harvard already have a substantial endowment? Was there a compelling reason to give more now?” Exactly. These case writers really know what they’re doing.

The brochure mentions that endowment distributions account for only 17% of annual sources of revenue. Academic programs (executive education included) account for only 40%, and Publishing 32%.

As for how we got here, there is a paragraph tucked away in the middle of the brochure that may provide a good clue:

Because HBS wished to keep MBA tuition levels reasonable, accessible, and commensurate with the market, growth in publishing and executive education revenue were key to generating sufficient resources to fund research and curriculum development… Demand for executive education, while strong, fluctuated with broader economic conditions.

But the fundraising is not without a visionary stroke. In the itenerary sent to participants, Dean Clark outlines five areas of purpose: to mentor and develop faculty “with the same passion and skill for teaching as those who came before them,” to extend the use of technology, to fund global research, to fund campus improvements, and “to attract a wider group of potential students, including those whose career paths include not-for-profit or public service here and abroad, as well as talented students who may have less work experience, and support them with financial aid.”

According to the administration, the School uses a “need-blind” admissions process and they would like students to be “need-blind” when choosing a career. However, in 2002, average student debt levels were $70,000 and “rising disproportionately to starting salaries.”

If these trends continue, few applicants with stubstantial career experience will be able to afford the opportunity cost of an MBA. But presumably the capital campaign will help ease the opportunity cost – for future classes, anyway.

The preliminary budget for the campaign is as follows:

1. Attracting the Best Students: $100 million
2. Attracting and Developing Faculty: $100 million
3. Increasing Global Impact and Outreach: $100 million
4. Deepening the Learning Experience: $120 million
5. Renewing the Residential Community: $80 million

The biggest item, Deepening the Learning Experience, seeks to build on the average $24 million per year the school has spent on IT since 1996 and includes a “new instructional technology center.”

The more one investigates the new capital campaign, the more questions get raised. Perhaps the most significant stumbling block is the giant cognitive leap one has to make just to be able to conceive of it. Isn’t this the school where no leaf touches the ground because a landscaper will step in and catch it? Don’t we have a campus full of flat-screen TVs that just scroll announcements like a local cable channel? (Not everything’s a myth.)

To some, HBS hosting a fund-raiser (even a half-billion dollar one) is a bit like Bill Gates hosting a local telethon. Still, in these Alice in Wonderland times around the world, the unimagineable only a year (and thirteen days) ago somehow seems untroublingly plausible now. And perhaps this is no exception. Look for coverage in next week’s Harbus.

-The Harbus Editorial Board