Harvard Business School Alumni

How does HBS manage its business? For alumni interested in the financial operations of the School, HBS has published its first-ever financial report (PDF download, 642k). The 42-page document provides an overview of how the School manages its resources as well as detailed information on revenues, expenses, endowment performance, and gifts for the year ended June 30, 2002 (FY02).

Dean Kim B. Clark notes in the publication’s foreword that one of the reasons for producing the report was the School’s capital campaign. “We are asking our alumni and friends for a more substantial commitment,” he writes, stressing that it is important they understand how their contributions are being used.

The report explains the School’s strategic and flexible rolling five-year plan, which is responsive to changes in the operating environment. “During a year of multiple pressures on revenues, the School’s solid financial performance demonstrated the value of this approach,” writes HBS CFO and Associate Dean for External Relations Donella M. Rapier (MBA ’92) in the report.

“Alumni response to the report reflects the tremendous interest they’ve always had in the finances of the School,” said Rapier in a recent interview. “Our intention with this report is to increase transparency and respond to any questions our alumni may have.”

Highlights from the report include:
• HBS operates year to year on a relatively narrow operating margin — 2.5 percent of revenues or $7 million in FY02. This margin must fund all capital expenditures and innovation to the extent such projects are not specially funded by gifts.
• Revenues from Executive Education and publishing activities help fund research and curriculum development.
• As in any large service organization, compensation is the School’s largest single expenditure, including salaries and benefits for HBS’s 207 faculty (on a full-time equivalent basis) and approximately 1,000 professional and administrative staff. HBS also must manage and maintain its own discrete campus, which now comprises 33 buildings totaling nearly 1.5 million square feet on 47 acres.
• The HBS endowment represents about 7.5 percent of Harvard’s overall endowment. Over 93 percent of the HBS endowment is restricted for purposes specified by donors.
• The University distributes approximately 4 to 5 percent of the market value of the endowment funds each year to support the specific activities designated by the donors. In this way, the endowment supports the work of the School while protecting against inflation, preserving principal, and building capital for the future.

To view the full report in PDF format, click http://www.alumni.hbs.edu/supporting_hbs/financial_report/hbs2002finrept.pdf (642k). For more information, please call 617-495-6550 or e-mail drapier@hbs.edu.