Business Training Ground or Just Another Job?

Chuck L. Proudfit '87 had a plan a few years ago to bring laser printing to Harvard students and local businesses. A distribution manager at Harvard Student Agencies (HSA). Proudfit hoped to implement the plan with two other HSA managers from his familiar workplace in the basement of Thayer Hall.

When his proposal was rejected as being "not viable" by the decision-makers at HSA in 1985, Proudfit left the agency and formed his own profitable company, Personal Processing Inc., located in Harvard Square, says Proudfit. He later sold his customer list to HSA, and text processing at HSA has grown rapidly in the past two years.

The story of Proudfit's fledgling company highlights a trend in HSA management, students and College officials say. The agency, which celebrated its 30th birthday this fall, is evolving into a large and steady employer of undergraduates by limiting student risk-taking, they say.

"My vision for HSA would be that it provide a full management experience to students which includes both functional experience and innovation. Unfortunately under current management that type of innovation isn't encouraged," says Proudfit, who now works for Proctor and Gamble in Cincinatti.

But HSA President Vivian Hunt '89 says the agency tries to maintain a balance between innovation and day-to-day management. "HSA is a very dynamic corporation," she said. "I don't think it is fair to say that HSA is all entrepreneurial or all corporate management."

Those who have watched HSA over the decades say the issue of student innovation raises other questions about the degree to which responsibility for the $2 million, non-profit company should rest with adult professionals.

As HSA has grown from a collection of small student-run businesses to an employer of more than 1900 undergraduates who receive more than $750,000 per year in wages, the agency has also had to pay more attention to its balance books.

Gone are the days when students at HSA were encouraged to come up with ventures in which they could make big bucks in a short time, as when undergraduates sold soft ice cream in Cambridge.

Warren S. Berg '44 remembers when the company invested $65,000 to buy ice cream trucks for the project. "That was one of the real risks. The students made money, but we lost in the long haul because we were [up against] professionals," says Berg, who was chairman of the HSA Board of Directors from the company's inception until 1975.

"The whole idea was to get a super hourly wage, [so] we took a lot of risks," Berg says.

1957 Founding

HSA was founded when a student and Harvard officials agreed that the College needed some organization to provide students with a "structured outlet" for student-run businesses. The student, Gregory B. Stone '58, had been selling beer mugs out of his dorm room.

HSA opened its doors in the fall of 1957 with the stated objective to "provide jobs for students, provide quality products and provide management experience."

Students who were involved with HSA at that time say they remember the excitement of those early days.

"I was able to design things and try things and see if they would work, and it was a lot of fun," says Andrew P. Tobias '68, who was student president in his senior year. Tobias, who is now an author, was responsible for the initial success of the Let's Go travel guide series, which is designed for travelers with small budgets.

In many ways, HSA is the direct result of a College rule that no student living in a Harvard dormitory may operate a business out of his or her room.

Though not intended specifically to help HSA, the rule has given the company a virtual monopoly in providing both on-campus services and business experience, says Dean of Students Archie C. Epps III. Over the years, Epps has allowed few exceptions to the rule, but he says he recently granted an exception for the Organization of Harvard Spirit, an insignia agency.

Harvard officials enacted the rule "so that the University would not be associated with the running of businesses which were failing at an alarming rate," the dean says.

In the early 1970s, however, HSA itself sponsored many failing student-run businesses. The company had a running deficit--losing a combined total of $100,000 during fiscal 1973-4. In that year, HSA hired its first full-time general manager, Bradlee T. Howe '63.

"It was clear that [HSA] couldn't continue to survive unless it turned a modest surplus," Howe says, adding that board members had decided that HSA needed "stronger central control, but hopefully not overbearing central control." Howe has served on the Board of Directors since 1972.

Michael F. Cronin '75, a former HSA president, says that when he first took over he was charged with the duty of finding safe new businesses that would make money and provide jobs for students. Entrepreneurialism was still encouraged, but was kept under greater control by Howe, Cronin says.

Also at this point HSA for the first time received financial assistance from the College so that the company could continue operating.

The same type of careful decision-making policy instituted by Howe has been pursued by the two general managers who succeeded him. The two managers cut down the number of agencies from a peak of 32 in 1972 to the current 12.

Spruance, the current general manager, has seen the company's cumulative balance sheet reach positive figures.

Spruance could not be contacted for this story.

Now that HSA is back in the black, students, alumni and Harvard officials associated with HSA are calling for a looser atmosphere in which there will be more avenues open to student entrepreneurialism.

Robert S. Klepper '87, a former sales manager at HSA said that management "really tried hard" to implement his idea for a new agency called "We-Haul," which would have transported student belongings between Cambridge and the New York City area.

But Klepper, who currently works at Bain & Co., a management consulting firm in Boston, said that though Spruance and others "had the right attitude, they weren't supporting that attitude 100 percent."

The business never became a reality because of insurance problems. Spruance did not allow Klepper and his friends, Bill Ackman '88 and Lionel Leventhal '87, to present their idea to the Board of Directors, which makes final decisions on new agencies and expenditures.

"There should be a special procedure whereby a Harvard student who has an idea for a business project can present it to the HSA board," says Ackman, adding, "Once you systematize it, it'll make it easier."

Role of Adults

Currently, students must have an idea approved first by Spruance, who consults only with the student president. The important role of Spruance, who is in her mid-40's, is the most ready example of the control placed on the students at HSA--an organization that bills itself as "a million-dollar corporation run by 20-year-olds."

At the present time there are eight full-time adult professionals who work at HSA. Their jobs range from general manager to data processors.

"The General Manager, the President, and the Operations Manager form a three-pronged team that supervises, plans and coordinates the various activities of the corporation," according to the HSA employee handbook.

An article in the Boston Globe this fall stated that these adult professionals have taken over the jobs students used to do and that students are no longer running the company. But, says Hunt, "That eight are by no means the dominant force."

HSA's managerial system is complicated because the agency is not just concerned with profit-making but with having a steady stream of jobs for students, said Stone Professor of International Trade Richard E. Caves.

College administrators say they rely on HSA's jobs to employ students on financial aid. "It provides a whole series and much wider range of term-time opportunities that would not exist if HSA itself did not exist," says Dean of Admissions William R. Fitzsimmons '67.

Says Dean Epps, HSA's "main purpose, after all, is to provide jobs for Harvard students and not to meet a profit margin."

Though some students, like Proudfit, say they are restricted in what they can do, others say they have a large amount of responsibility and that they need the adult professionals there to train them and provide continuity from year to year.

"You develop a large degree of professionalism," says Chris Wyett '89, a former assistant manager.

In addition to the position of president, there are seven positions for students on the 23-member Board of Directors (seven go to alumni, seven to members of the Harvard faculty and administration, and two to ex-general managers). There are 12 student managers in the company.

Ideas for new companies and new expenditures both come before the board; so does the vote for president.

Students say they work at HSA for a variety of reasons, including financial gain and an opportunity to obtain business experience. Some say they plan to pursue a career in business, while others have no idea what they will do.

Entrepreneurial Opportunities

Hunt says she feels that there is a place for those who want to fine-tune their management skills as well as those who want to be venturesome. The opportunity to be entrepreneurial is only as good as students make it, she says.

Other managers say they agree.

"We're encouraged to come up with new ideas, and even if they don't happen to come [within the realm] of our agencies, we're still encouraged to bring them up," says Jill Maza '88, HSA's direct sales manager for 1987-1988.

Hunt says there has been some entrepreneurial activity in recent years. She points to the formation and expansion of the text processing agency and the plans for a new information processing agency, which will perform research for local businesses.

Other managers analyze the market to explain the lack of entrepreneurial activity within HSA.

There is little room left in the local market for HSA to expand its 11 agencies, says Akira Hirai '89, who recently ended his term as sales manager for the extremely successful Let's Go travel guides as well as the Unofficial Guide to Student Life at Harvard. Hirai points to this fact as an explanation for the decline in innovation at HSA.

Another manager says that her HSA experience has been one of "reactive management," which stresses day-to-day activities and says she is not sure whether or not this is the type of experience she needs.

"Maybe it's not the purpose of HSA to have entrepreneurs. Maybe the purpose is [managerial] training, [but] maybe that's not such good training because in today's world, if you don't have new ideas, you can hardly compete," says Bridget S. Bailey '89, who recently completed her term as distribution manager at HSA.

Both Epps and Howe agree that there is room for more innovation at HSA. "There probably is more we can do to foster entrepreneurism, and I think Hope Spruance feels that way too," says Howe, adding "I think it has not been so much reluctance to do it as it has been having the time and establishing that as a priority."