01 Jun 2018
Sustaining HBS’s Unique Economic ModelTopics:
Harvard Business School’s continued excellence requires ongoing investment—in people, programs, and ideas. The HBS economic model is tightly aligned with its mission of educating leaders who make a difference in the world, where the revenue sources fund and enable the generation and dissemination of the School’s intellectual capital.
“HBS strives to be a living example of a well-run organization, embodying the skills, tools, and frameworks taught in its educational programs,” says HBS chief financial officer Richard Melnick (MBA 1992). “The foundations of the School’s financial health include multiple revenue sources, continued investments in the campus, and limited debt. The surplus we generate allows us to invest in innovation, self-fund faculty research, and offer generous need-based financial aid.”
Increasingly, however, many of HBS’s revenue sources—MBA tuition, Executive Education tuition, and Harvard Business Publishing—are facing constraints. A desire to limit tuition increases, for example, and growing competition for professional development mean that growth trajectories across these three areas are lower in the coming decade than they were in prior years.
That’s why the School relies on philanthropic revenue from past and current giving to fund over a quarter of its operating expenses.
The HBS endowment, built over decades with gifts from alumni and friends, provides crucial funds in the form of an annual distribution earmarked for specific purposes — such as fellowships and professorships — by their donors. Current-use gifts to the HBS Fund provide an annual influx of funds that can be spent immediately. “As HBS has made strategic investments in recent years, gifts to the HBS Fund have provided an important source of seed capital to launch ambitious initiatives such as field learning, the Harvard Innovation Labs ecosystem, HBX, and joint degree programs with other Harvard schools,” says Melnick.
Philanthropy is essential to the School’s financial health, providing the security and flexibility that will position HBS for excellence in its second century.
“HBS strives to be a living example of a well-run organization, embodying the skills, tools, and frameworks taught in its educational programs.”
Richard Melnick (MBA 1992), Chief Financial Officer
Class of MBA 1992, Section D