B-School Woos Alums and Their Checkbooks

Like many other B-schools across the country, Harvard Business School (HBS) prides itself on teaching its students the art of money—making money that is.

But it is the giving of money that is of concern to HBS these days.

Despite a winter economy and a business environment plagued by scandal, the school is banking on the hope that its alums will have learned the value of generosity along with entrepreneurial skills during their time in its hallowed halls.

In the first solo capital campaign in the school’s hundred-year history, HBS is looking to collect $500 million in gifts from its alums—half of which has already been raised in the so-called “quiet phase” before the campaign’s public announcement and kickoff last month.

Playing off the now famous “case study” method that the school pioneered, the campaign, called “The Case For Harvard Business School,” seeks to strengthen the school’s programs in financial aid, classroom learning, residential environment and faculty research and support.

A Stated Vision

The stated goals of the campaign are an expression of a vision for HBS well into the future.

“It started out as a feeling and it grew into a careful analysis of both the school’s opportunities as we saw them, and its challenges,” says HBS Dean Kim B. Clark. “It was done out of a very strong belief that the nature of the opportunities and challenges were such that we needed to invest significantly in areas of the school in a way that could not be done without a campaign.”

In large part, the campaign stems from Clark’s ambitious nature and his expansive vision for the school’s future and the new challenges it faces in a changing business climate.

“[Clark] has lots of incredible ideas about the opportunities facing us these days, and in looking at what we’d like to do, we realized the only way to do it was to raise another substantial amount of funding,” says HBS Chief Financial Officer Donella M. Rapier.

Although Rapier acknowledges the largesse of the school’s endowment—at approximately $1.3 billion, it is second only to that of the Faculty of Arts and Sciences (FAS)—she stresses the need for it to stay at the forefront of business education.

“People expect [HBS] to do everything with excellence.... If people saw differently [in the future], they would think we lost our edge,” she says. “If we were to continue doing everything the way we do today, we’d probably be fine.”

Campaign Committee Chair and University Overseer C. Dixon Spangler concurs.

“I guess the dean’s approach is that it’s a very good B-school, and that in order to be a stay a very good B-school, we have to raise $500 million,” he says.

In fact what inspired the campaign in the first place was Spangler’s donation of money for the creation of a student center. The Spangler Center opened in January 2001, making the centerpiece of the campaign be built even before the scope of the entire effort was announced. The stately center, which housed much of the campaign’s kick-off events last month, overlooks the empty land to the south of the school where its future—and likely that of all of Harvard’s professional schools—will be developed.

However, administrators at HBS stress that the campaign is more than fundraising—it’s a chance to reconnect with the vast HBS alumni network in a way that Clark says is only possible with the massive outreach of a capital campaign.

During the campaign kick-off in September, several hundred alumni and friends of the University were wined and dined through a day of panels and speakers showcasing the school and its work. As alumni discussed the technological revolution, the stock market bubble of the 1990s and the scandals that have embroiled the markets since last fall, they were treated to displays of the school’s innovative uses of technology, star-studded faculty and luxurious surroundings on the Allston campus.

Eyes on the Prize

Of the $500 million being raised, each dollar is earmarked for one of five specific areas, outlined in campaign documents as, “attracting the best students, attracting and developing the faculty, increasing global impact and outreach, deepening the learning experience, and renewing the residential community.”

The most visible of the school’s needs involves the campaign’s residential initiative—which seeks to improve student life at the school by enhancing the dormitories and apartments that house MBA candidates.

In other matters, Rapier attributes much of the school’s greater need to an ever-growing global marketplace, citing the need to educate leaders from more parts of the world.

“Over the last 15 years, over 3 billion people have joined the market economy, so 15 years ago we were relevant in maybe one-fifth of the world,” she says. “But today it’s five-sixths, so the relevance and importance of what we do stretches.”

HBS’ case-study teaching method—which relies heavily on real-world examples from major firms—mandates that faculty conduct research on business all over the world in order to examine the multitude of situations that graduates will face in the course of their careers.

But such global research does not come cheap. Spangler estimates the cost of the writing of a case in Shanghai at $50,000 to $60,000, whereas a domestic case might cost only $15,000.

Financial aid is also of major concern to the business school.

“We believe...that we’ve reached a level of cost and loans that are stopping some very good students from coming to HBS,” Spangler says.

Over the past five years, HBS has more than doubled its budget for MBA financial aid from $3.5 million to $8 million—endowed by a full 20 percent of the school’s endowment—but the average student aid amount stands at $16,500 out of an all-inclusive total cost of nearly $100,000 for the two-year program.

“They’re still having to debt-finance most of their education,” she says.

Spangler says the campaign seeks to change that.

“There’s a major component to provide financial support that would not be a loan, that would be a grant,” he says.

Richardson further cites the changing backgrounds of incoming MBA students as reason for increased aid spending. Aside from being more ethnically diverse, the candidates may have less than the previously standard four-to-five years of work experience.

“We want to make sure that if they don’t have enough experience to have saved a lot of money that they can come,” she says.

In addition to making the school easier to attend, the campaign also seeks to enrich students’ experiences at the school.

Among the proposals is a $25 million teaching and learning center that would be modeled on Harvard’s Bok Center and would serve to study how learning occurs in the case study method.

Building on the popularity of satellite speaking events in the newly constructed Haas hall, the $15 million Instructional Technology Center (ITC) would focus the school’s efforts involving technology in the classroom.

“[The ITC] would bring together all of our resources devoted to technology to be used in the classroom for enriching the student experience and it would go both ways—bringing the world into the classroom and the classroom into the world,” Richardson says.

In an attempt to remain connected with its strong network of alumni, $20 million of the campaign will be dedicated to enhancing and endowing life-long learning programs that organize global alumni conferences, educate entrepreneurs and help women looking to re-enter the work-force.

“This campaign is not just about raising money,” Rapier says. “It’s a galvanizing force to help us get our message out, to help us explain more about the business of the school and to really generate a lot more of enthusiasm.”

Crisis in Confidence

Because the campaign has been in the planning stages for more than two years, it has not been directly shaped by the recent string of highly publicized corporate scandals such as those involving energy giant Enron—headed at one point by Jeffrey Skilling, who earned his MBA at Harvard in 1979.

Nonetheless, such events have shaped the current HBS environment and the lives of its students, faculty and alumni. The scandals even prompted an all-but-unprecedented letter from Clark to the school’s alumni explaining how the school would take on the challenge.

Officials are quick to point out that all current MBAs participate in a required ethics course—a rarity among HBS’ peer institutions.

“Now more than ever, it’s important to be educating principled leaders because there is this crisis in confidence,” Rapier says.

But neither she nor Spangler say they are very concerned about the ramifications of corporate scandals compromising gifts made by alums to the school.

The Kennedy School of Government’s Taubman Center for State and Local Government suffered embarrassment last spring after its benefactor, A. Alfred Taubman, was jailed in connection with a price-fixing scheme between two major art auction houses.

“If [Clark] suspected that there was something that was amiss in the source of the funds, I think that he would just simply go to the next door,” Spangler says.

But the school is considering putting a clause in the terms of gifts that would protect the school, particularly in cases of corporate donations, according to Rapier.

Clark says the school has a strong record of honor in taking gifts, citing the fact that the school once changed the name of a building after its namesake was arrested for fraud.

“We have in the past in this school encountered situations where we’ve worried that we have received funds that we are concerned about...and when that’s happened, we’ve done something [about it],” he said.

Something For Nothing

If the corporate scandals weren’t enough to tax the school, the tumbling stock market and a flat economy will also make raising $500 million difficult—despite the fact that half of the money has already been raised.

“We think that the second $250 [million] is going to be challenging,” Richardson says. “We’re pretty confident that we’ll be able to make it...but we hadn’t anticipated that the economy would be where it is today.”

Spangler emphasizes the need for an individualized approach to raising funds, matching donors’ funds to projects that fit their connection with the school.

“The secret to any effort like this is to see that these people are individuals,” he says. “What the dean does is to try to fit the approach...to the individual. There would be some people who would like to renovate the dorm they lived in. It’s a value-added experience.”

In fact, there is no mass-mail effort as part of the campaign. Rather, the slick booklet which outlines “The Case” is meant as a tool for HBS staff meeting with alumni—a way to walk them through the process and goals of the campaign.

“The magic happens when you take a clear need that has been articulated...and you match it to an alum who has strong interest and who finds in that opportunity something that will bring them great satisfaction and enjoyment being able to see that and make that happen,” Clark says.

—Staff writer David S. Hirsch can be reached at hirsch@fas.harvard.edu.