(Poets&Quants) — “I remember like yesterday when I got the letter from HBS saying I had been admitted,” confides Harvard Business School super star professor Clay Christensen. “I thought, ‘Oh my gosh, how are we going to pay for this thing?’ because I was newly married. We had no money and a baby on the way. When I found out that HBS was going to help me, I was so grateful. Who I am is in part what the Harvard Business School allowed me to become.”
Christensen, the world’s foremost authority on innovation, is speaking from the school’s iconic library, surrounded by shelves of books. In the background, a series of gentle, heart-tugging piano notes set the mood.
This brief video is part of an ambitious capital campaign publicly announced last Friday by Harvard Business School to raise an unprecedented $1 billion, the largest ever fundraising effort by a business school. The goal is part of Harvard University’s $6.5 billion campaign announced last September. The last HBS campaign brought in $600 million between 2000 and 2005.
HBS is the richest and most endowed professional school in the world. The school’s endowment is $2.9 billion, nearly three times the size of the next largest endowment at rival Stanford University’s Graduate School of Business. The business school’s endowment is so large it already exceeds the endowments of many of the country’s most prominent universities, including Brown, Johns Hopkins, Boston College, and the University of North Carolina at Chapel Hill.
The business school also boasts among the most lavishly appointed facilities of any institution of higher learning, with a massive 118,000-square-foot fitness center, a separate chapel for what the school calls “quiet contemplation,” and a 10,978-square-foot Georgian Revival-style residence for the dean. Only a day before the fundraising announcement, HBS broke ground on what will be its 35th separate building on the business school campus.
And when Harvard unveiled its new online learning initiative in March, called HBx, the school revealed that it had hired 32 full-time staffers to support it. As for helping students with their tuition, HBS already hands out more scholarship money than any professional school in the world: $32 million a year to 1,860 MBA students.
So, why does Harvard Business School need another $1 billion?
The school, which has already collected more than $600 million in gifts and pledges as part of the campaign’s “quiet phase,” which began in 2012, said it wants the $1 billion to support priorities such as student financial aid, faculty research, globalization, and curricular innovation, as well as enhancements to the school’s residential campus.
In a new section of its website, HBS makes the case for additional funding by noting the impact of the school’s alumni on business and society and the need to help future MBAs afford the cost of their education. The school cites a spate of statistics: 96% of the Top 25 universities, 84% of the Top 50 U.S. arts organizations, and 72% of the Top 25 liberal arts colleges in the U.S. have an HBS alumnus on their boards.
The school says that 139 of the Fortune 500 companies have an HBS alumnus in a senior leadership position and 50 of the Fortune 500 chief executives have earned their MBA from Harvard. One in four of the Standard & Poor’s health care CEOs with MBAs went to Harvard. What’s more, 33% of the school’s 80,000 alumni in 165 countries serve on non-profit boards and 13% of the enrolled students are the first in their family to attend college.
Without more funding, fewer people who can’t afford a Harvard MBA would have access to one. This fall, the “sticker price” of an incoming Harvard Business School MBA — including the school’s own estimate of living expenses for someone with a “moderate lifestyle” — is now $95,100 a year. That sum does not include the opportunity cost of taking two years off from a job that likely pays $75,000 a year or more. Even with HBS discounting tuition and fees by more than $30 million annually for roughly half of its students, Harvard says its MBAs borrow an average $73,926 each to get through the two-year program. In 2013, about 61% of its graduates left the school with debt.
The school says it needs to beef up fellowship funding for students to “inspire and enable the highest-potential leaders with the broadest possible range of backgrounds and experiences to attend HBS,” to “encourage students to broaden their career horizons by providing summer internship support,” and to “empower career choices driven not by debt but by the students’ interest and desire to make a difference.”
In yet another brief video, Youngme Moon, Harvard’s senior associate dean and chair of the MBA program, talks up the school’s training of leaders in a wide range of fields. “Business leadership matters more than ever today in more spheres than ever,” she says, “not just in business, in areas such as health care, education, government, social enterprise, non-profit organizations, the arts, the list goes on and on. And it all comes back to our being able to fill our classrooms with folks from different backgrounds.”
In making the case for the billion, the school is placing emphasis on the students and alumni who work in what some might consider socially redeeming areas, such as health care or non-profits — not hedge funds, private equity firms, or money managers, fields that attract the largest numbers of MBA grads. Obviously, few Harvard MBAs are immediately attracted to the low paying jobs in education and social enterprise. Last year, only 5% of its graduates went into the non-profit and government sectors. The vast majority of Harvard MBAs took positions in financial services (27%), consulting (22%), and technology (18%).
Yet the sea of statistics HBS is sharing with its potential funders are all in the do-gooder camp: the $10 million worth of pro bono services provided annually by alumni clubs, the more than 800 books and cases on social enterprise by HBS faculty since 1993, the 500-plus students in the social enterprise club, and the more than 1,300 social enterprise summer fellows since 1982. It’s as if making money and employing people is out of style.
Harvard, of course, is not the only business school seeking to raise money. After all, fundraising is a habitual requirement of a deanship these days. Northwestern University’s Kellogg School of Management is $200 million into a $350 million fundraising goal. Columbia Business School is in the middle of a campaign to raise $500 million to fund the construction of a new campus. London Business School is currently trying to raise $160 million.
But next to HBS’ $1 billion, those sums don’t look daunting. The kickoff for the capital campaign took place last Friday on the HBS campus with hundreds of alumni, students, faculty, staff, and friends participating in a day-long series of events that featured case discussions and faculty-led student and alumni panels on a wide range of business topics. In the evening, Harvard President Drew Gilpin Faust, Harvard Business School Dean Nitin Nohria, and Campaign Chair John Hess (MBA 1977), CEO of Hess Corporation, offered remarks.
“What truly distinguishes Harvard Business School is our capacity to continually innovate,” said Nohria in a statement. “We see a challenge or an opportunity and we can respond quickly but thoughtfully to develop a novel solution. This is what led to the launch of the MBA degree, the first management case study in 1912, and the retraining programs that ultimately became Executive Education after World War II.”
The campaign, Nohria added, will emphasize the importance of flexible funding to support the school for years to come.