01 Oct 2002


Dean Clark on Leadership, Educational Priorities, and Funding the Future

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This fall marks the launch of the first capital campaign in Harvard Business School's 94-year history, with a goal of raising $500 million by the end of 2005. In the following interview, Dean Kim B. Clark talks about the current state of the School, the responsibilities of business and business leaders in society, and the ed-ucational priorities that are behind the most ambitious fundraising effort ever undertaken by HBS.

Looking back on the past year, the School — like other institutions around the world — faced a number of challenges, including the economic downturn and a difficult job market. Last month, moreover the nation marked the anniversary of September 11. What has all this meant for HBS?

I believe an institution's true character is revealed in times of great stress, and that certainly has been the case at Harvard Business School this past year.

September 11 affected HBS in profound ways. Several members of our community lost their lives. Countless others lost family, friends, or colleagues. In the immediate aftermath, the campus community responded quickly and with an unerring sense of what was right. The extended community — especially our alumni — came together as well, checking on classmates' safety, communicating messages of support, and making remarkable personal gestures.

In terms of the job market, although our students easily could have become discouraged, they didn't. There was a great sense of camaraderie and energy, and if you look at the accomplishments — both academic and extracurricular — of the Class of 2002, what you'll see is a triumph of spirit.

This trying time for the country was aggravated by some dismaying developments in the business world.

Dismay in no way captures my sentiments as I watched events unfold at Enron, Global Crossing, and WorldCom. I think all of us felt a sense of downright anger.

From the School's perspective, these events reinforced in my mind the importance of the work we have been doing for many years. At HBS, we have a long-standing commitment to upholding the highest standards of integrity, respect for others, and personal accountability. These are the values we believe are essential to effective and principled leadership. Our goal is to make HBS a living model of these standards, not only in our classrooms but in everything we do.

In our research and teaching, we examine and discuss critical issues such as corporate governance, the relationship between values and leadership, corporate accountability and the challenges of financial disclosure, executive compensation, and the role of intermediaries in capital markets. Through our work, we can help shape not only the public debate but also practice — because that's really what HBS is about.

Has the School's mission changed in light of recent developments?

No, our mission remains the same: to educate leaders who will make a difference in the world. This is not mere rhetoric, but fact; and not just fact, but necessity.

Now, more than ever, the world needs principled leaders. Business has become one of the most dynamic forces in our society. If you look at what our graduates are asked to do, you will find them holding influential positions on the boards of major nonprofit and community organizations, whether in education, health care, the arts, community development, the environment, or government. The influence of our alumni is truly remarkable, in business and beyond, and it is absolutely essential that we comprehend that scope as we think about how and what we teach. That's what our mission is all about.

Given the vital role of business in the world today, do you foresee new opportunities for HBS?

In most institutions that endure, there are “inflection points” — times when forces like the economy, technology, and the social environment converge, and the future is uncertain. I believe Harvard Business School is at such an inflection point today, and we must seize the opportunities before us that are central to our mission.

Let me give you an example. In the coming years, the leaders of major enterprises will need a truly global perspective. Events such as the emergence of China as a major force in the world economy — a scenario that seemed unlikely just a few decades ago — affect what we teach and how we carry out our research. We must test our ideas against a broader range of experience and bring work informed by this understanding back into our classrooms.

Our research centers around the globe — to date in Hong Kong, Tokyo, Buenos Aires, and Paris, as well as in Northern California — enable our faculty members and students to deepen their understanding of global business.

Over one-third of each MBA class is now drawn from outside the United States. How has that changed the HBS experience?

If you visit the campus today, you can't help but be impressed by the diversity of our student body, which includes representatives from more than seventy countries. These students' life experiences and perspectives are unique, and they make our classroom discussions more powerful and more informed than ever before. Not only that, but when our students go on to lead enterprises and governments around the world, they will do so having formed strong bonds here at HBS — bonds that will help to promote understanding between nations in the future.

HBS is consciously drawing students from a broader pool — not just internationally but from nonprofits and the public sector, as well as applicants with less work experience. Does that present new challenges for financial aid?

We need to guarantee that we always can bring the very best students to the School, regardless of their background or future career plans. There are outstanding international students from modest backgrounds who may not even consider applying here because of cost concerns. Similarly, there are students ready to come to HBS right out of or shortly after college who may lack financial resources. And some students may be attracted to careers that are less financially rewarding. We need to find ways to help them focus on their ambitions rather than on the repayment of heavy debt. For all these reasons, it is crucial that we develop more sources for financial aid.

Are there other areas where the School needs to grow?

Information technology is one. In the last five years, we've made amazing progress, and technology is like air on campus — it's everywhere, from prematriculation modules to the course platform and multimedia cases. In the next five years, we anticipate that new technologies will emerge offering opportunities to enhance the student experience in even more powerful ways.

IT is exciting because it enables us to do things central to our educational mission and philosophy that couldn't be done as effectively in any other way. Take an abstract concept such as the “whiplash effect” — the idea that small changes can reverberate through a supply chain, causing huge swings of inventory and production levels. That's a difficult idea for a faculty member to convey at the blackboard. This year, we used our wireless network to run a simulation exercise, with students filling all the different roles from the producer up to the customer. They experienced the whiplash effect personally, on their laptops, in real-time. It's just one example of how technology can deepen the learning experience.

Values and leadership is another. Again, this is an area where we've witnessed significant accomplishments, including the development of community standards and a system of accountability for students, faculty, and staff. We also have launched a distinguished speaker series and have plans under way for additional workshops and panels. Like IT, I would like to see learning and discussion around leadership and ethics permeate everything we do.

Can you talk about these initiatives in the context of the School's capital campaign? What kind of investment is required, and how much of it can be funded through the School's endowment?

Our goal is $500 million by the end of 2005. We've raised nearly half that amount in the campaign's “quiet” or nucleus fund stage, so I am confident we can do it.

Harvard Business School has a wonderful legacy and very generous alumni. Over the years we have developed an endowment of about $1.3 billion. But there are two key points to understand. First, about 93 percent of the endowment is restricted, in binding terms laid down by the donors. Fortunately, those gifts go right to the core of what we do; half of the endowment is devoted to professorships, for example, and close to a quarter to financial aid.

The second point is that the distribution from the HBS endowment — not its income, but the amount the University allows us to spend — ranges from 4 percent to 5 percent of the endowment's market value. This policy may seem conservative, but it ensures that the endowment is protected against inflation and provides critical stability over the long term.

The distribution accounts for roughly 17 percent of our operating cash flows. So the endowment is a critically important source of funds in that it supports the work we do today. However, if we want to pursue new goals, if we want to seize the opportunities at this inflection point, we need new funding that can be provided by a capital campaign, which is what we've decided to do.

What else should HBS alumni know about the campaign?

I would like them to know that every single one of the priorities I've mentioned is critical to the mission of the School. As we go forward, I'm confident the campaign is going to be a great success. I've met and talked with thousands of alumni over the past seven years, and I know they share our commitment to the future of HBS.

Through their generosity, our alumni allow us to develop new ideas, to bring our knowledge to bear in new kinds of programs, and to broaden our outreach. With their help, we can move forward on initiatives that will guarantee the School's leadership in the field of business education for decades to come.

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