The Best Business Schools
The Money Factory
Chana R. Schoenberger, 10.13.03
What is it about
the Harvard Business School brand that causes dollars to rain down on students
and teachers alike?
You can bet 7,000 case studies at Harvard Business School--white papers discussing
strategic decisions faced by real corporations. Let's turn the tables and try
a case study on the school itself, which is, after all, a business. The operation
netted $8 million on sales of $294 million in the June 30 fiscal year. Should
it raise prices? A careful study would certainly explore that possibility. Could
it get away with a cut in professors' pay? Therein is another intriguing way
to boost the bottom line. One thing that any analysis would be sure to include:
some discussion of the Harvard B-school brand, which is immensely valuable and
perhaps underexploited. In that regard this business looks a little bit like
Disney did before Michael Eisner swooped in two decades ago. The intangible
assets could be milked a little better.
Harvard has not ignored the obvious brand extensions. The name goes on a lucrative collection of publications: the case studies, reprints of which are sold for $6.50 a copy to corporations ($3.70 to academics); books; and a monthly magazine that gets $118 a year from subscribers and $34,000 a page (before discounts) from four-color advertisers. The publishing arm brings in revenue of $93 million a year. Among the bestsellers: Geeks and Geezers, by Warren G. Bennis and Robert J. Thomas, and How Customers Think, by Gerald Zaltman. (For an excerpt from a new book by Harvard professor Clayton Christensen, see p. 82.)
Another way the brand is put to good use is by allowing corporations to dress up the résumés of their executives. Here's how this venture works: A corporate sponsor sends an executive to a nine-week course of study, taught by the same famous professors who teach the 27-year-olds in the two-year M.B.A. program. The corporation pays $51,000, and the exec can describe himself as a Harvard B-school alumnus.
Harvard Business School,
at 95 years old, is the iconic business school. The school pioneered the case-study
method for business schools and last year sold 6.7 million reprints. It developed
the first business school course in entrepreneurship, in 1947; it popularized
the meticulously spaced amphitheater classroom; and it knows how to keep its
name in view. On the Charles River its sculling crews sport oars painted with
dollar signs.
Brand Loyalty
An admission ticket to Harvard is a hot commodity. Some 8,500 students applied last year. Just 12% got in; of those, 90% showed up on the first day of school, the highest yield of any business school. The Executive Education Program, the arm that offers the quickie midcareer courses, is less selective (70% acceptance rate). If you don't want to go for nine weeks, sign up for a four-day seminar, like the $6,000 "Managing Brand Meaning" course. Last year the division had 6,600 enrollees, with up to 80 students in a class.
Talk about brand loyalty. James Dettore, who founded Brand Institute, a Miami name-consulting firm, wanted to attend the Owner/Presidents' Management program (a three-year exec ed course) so badly, he applied seven years running. After he got his certificate in 1997, Dettore helped the alumni association's New York chapter raise $4 million last year for a professorship--and he plans to send several employees to HBS programs.
Of course, even sterling reputations get squeezed by economic slowdowns. Graduates aren't getting jobs as quickly as in the past. Historically, 90% to 95% of HBS students had a job offer on graduation day. The class of 2003 had an 88% offer rate, with 95% expected to have an offer within three months.
And yes, there are layoffs in academia. Over the last two years the publishing arm has laid off 10% of its staff, now down to 240 people. To goose sales, last year the unit hired David Wan, a publishing veteran of Penguin and Simon & Schuster, as chief executive of HBS Press. He is marketing in places like China, where the case method is catching on slowly, and has also spruced up the Web site last year to sell case studies. A business school gets more businesslike.
How else to raise profits? The theory that Harvard could perhaps get away with lower salaries for its 200-person business school faculty is speculative, and, indeed, we can find no professor who espouses this view. Harvard's starting salaries for tenure-track teachers are in the range of $115,000 to $120,000. The pay scale probably ranges up to $200,000. But, as with basketball stars, so, too, with Harvard profs: Their income just starts with the salary. Professors keep fees from directorships and consulting, which they get a day each week to pursue.
The Harvard affiliation is immensely
valuable, and as a result its professors' consulting fees are better than their
counterparts' at, say, the University of Michigan. Professors are often able
to earn as much from outside gigs as from the classroom, say some Harvard ex-professors
and deans at other schools. So it's quite possible that the university could
be a cheapskate and still attract talented faculty. One Harvard success story:
professor Rosabeth Moss Kanter, the author of dozens of books, an authority
on management and the chairman of her own consulting firm. She also sits on
the boards of a venture capital fund and several charities, including City Year,
an urban volunteer program.
Brand Loyalty
