The Economist presents data that may back the case that it’s not just the economy.  In examining data accumulated in their annual ranking of the top 100 MBA programs, they note that in 2010, the average cost of an MBA for the 85 schools outside of the top 15 was $81,911 while the average starting salary for the graduates of those schools was $81,178.  Five years earlier, the two year cost for the same 85 schools was $60,247 while the starting salary average was $78,442.  The attached graph shows that the disparity was greater ten years ago when the average starting salary was over $80,000 and the average cost was slightly less than $50,000.  The comparison could hardly be more dramatic; increasing costs of tuition have cut the noticeable advantage of attending a residential MBA program outside of the top 15. 

Elite schools like Harvard still have an advantage according to The Economist’s survey data.  Additionally, the article mentions a recent event at Harvard hosted by a large consulting firm where a member of that firm’s senior management noted while speaking to the faculty that the most valuable player on the Harvard Business School team was the Director of Admissions, a not so subtle reference to the elite students recruited to the school and subsequently recruited by that consulting firm.

While the purpose of the article is to compare costs of high end MBA programs, the comparison can easily be made across the entire continuum of accredited business programs.  The Association of Advance Collegiate Schools of Business (AACSB), one of the accrediting bodies for U.S. business schools, estimates that there are 13,670 institutions world wide that offer a business degree.  Being able to distinguish your program and your graduates from the masses is more than likely the only way that you can command a premier price going forward.  In more recent commentaries on the general state of global higher education, books like The Global Auction: The Broken Promises of Education, Jobs, and Incomes and The Innovative University: Changing the DNA of Higher Education from the Inside Out also stress the need for differentiation, tuition reductions, or both in order for institutions to maintain their competitive edge.  My theory is that regardless of your business program’s relative ranking, competing on price and product differentiation is the only safe way to ensure long term success.

I don’t know if the omnipresent nature of the media has drawn more attention to ethical lapses of our political, corporate, governmental, and sports figures or if the frequency has, as I suspect, increased.  However, a recent article in the New York Times spurred me to write this piece.  Written by Leslie Wayne, the article mentions that nearly 20 percent of this year’s graduating MBA class at the Harvard Business School have signed a voluntary student oath that pledges to “serve the greater good” and to “act responsibly and ethically.”  MBA programs have not stopped teaching ethics.  In fact, Harvard, Wharton, and Columbia have several ethics classes and Wharton and Columbia have ethics centers.  I think it is good that these students created this pledge.   However, ethics is not just business ethics.  Ethics is ethics.   Good ethics is good for business.  Good ethics should be good for all of our leaders and followers, no matter what their chosen field.

With more than a little trepidation, I ventured into the unknown and launched it last year.  For the most part, writing pieces for the blog has been fun.  When I get busy or suffer from writer’s block, I find it difficult to publish at a consistent pace.  Recently, I thought about what I could do to make the blog more relevant and more current.  I decided that I would try to write more often but with less verbiage.   Hopefully, that provides more people with a perspective about what I am thinking about and talking about.  If you have any thoughts or ideas on topics, feel free to send them my way.  After the end of July, let me know what you think about my new style.  Thanks.

In a typical year, the federal government contributes approximately $20 billion to higher education and the states contribute about $80 billion. At the state level, funding for higher education is behind mandated priorities such as K-12 education and Medicaid.  Many governors and legislatures have relied on the public’s willingness to bear tuition increases and in times of budgetary crisis, have pared back funding to higher education assuming that the colleges can increase tuition to offset the state funding cuts.  Given the fall in real estate values and real estate foreclosures, the unprecedented level of job layoffs at companies reacting to the economic downturn, the lower income taxes paid by fewer people working, lower sales taxes paid by people forced to pare back on their discretionary expenditures; it is inevitable that most of the state budgets have to be reduced this year and next.  Some states like Maryland are using some of the stimulus funds to delay cuts to education.  Other states are unable to use stimulus funds to absorb all of the declines in tax revenues and are cutting higher education before K-12.  Among the more notable state cuts that I have read about include:

• Tennessee – $180 million in cuts over two years
• North Carolina – $175 million in cuts this year and $191 million next year
• Washington – $500 million in cuts
• Arizona – $388 million in cuts
• California – $1.1 billion in cuts
• Louisiana – $219 million in cuts

Public institutions are not the only ones tightening their belts.  Faced with endowment values that have plummeted due to the global stock markets declining in value by as much as 40 percent, private universities have implemented staff reduction plans as well.  The most notable of these was the plan that Harvard announced in February.  Most private institutions are not as financially secure as Harvard, and many have announced staff reductions, wage freezes, hiring freezes, etc., in order to prepare for reduced earnings on their endowment as well as lower charitable contributions. 

Meanwhile, families who find their college savings investments diminished by 40 percent or more due to lower stock values and interest rates are encouraging their children to apply to public four year and two year colleges resulting in higher application levels with fewer available spaces.  Several state institutions have announced that they will admit more out-of-state students in 2009-2010 in order to increase the tuition revenues paid to the institution.  The FAFSA applications for financial aid are up 20 percent over a year ago through February according to the National Association of Student Financial Aid Administrators.  The Princeton Review released a survey last week of parents and students and the number who are considering a more affordable school have increased by more than a third.  Because of these concerns of families about affordability, several private institutions have announced that they have admitted more applicants than usual as they are hedging their bets on whether or not students choose to attend more reasonably priced public institutions next year.

All of this points to a crisis in the funding of higher education.  The Spellings Commission, the Measuring Up reports, and numerous papers published by other policy commissions indicate that America has fallen behind on the percentage of working adults who hold a college degree and that America will need an additional 15-16 million more college degree holders by 2025 in order to meet President Obama’s goal of returning America to its position of pre-eminence in the percentage of adults with college degrees.  The Measuring Up 2008 report indicates that a college education is unaffordable for those in the lowest quintiles of household income.  Other data indicates that the lower income population of the United States is not successful in completing or even attending college.  Affordability and access were two of the four tenets of the Spellings Commission.  The National Center for Public Policy and Higher Education measures preparation, participation, affordability, completion, benefits, and learning for each of the states in their Measuring Up reports.  Unfortunately, California is the only state with a passing grade on affordability.

In the last 50 years, states have funded the majority of the costs of higher education.  Given the importance of an educated citizenry in our quest for global competitiveness in the 21st century, we need to examine whether or not the current system is working.  Increasing the amount of Pell Grants available to low income students will not solve this problem.  If the President were to create a National Commission on the Future of Higher Education that could bring together representatives of students and families, policy organizations, the state governors and legislatures, and Congress, a meaningful dialogue could be established to address the most fundamental obstacles to the future of higher education.  The problems are systemic, the solution is not nigh, and many different factions have to align.  The major higher education initiatives at the federal level; the Morrill Land Grant Act of 1862, the G.I. Bill of 1944, and the National Defense Education Act of 1958; spurred higher education and the country to action.  Perhaps President Obama’s stimulus package and its shortcomings in relation to higher education, and the economic crisis facing higher education and our nation, will be the impetus for another call to action.

While many books have been written about sports including college sports, there are a few that I found interesting for their background about the origins of the modern college sports “game” and its current state of commercialization.   John Thelin’s  A History of American Higher Education is a fairly comprehensive book about the origins and development of America’s colleges and universities.  In a chapter entitled “Alma Mater,” Thelin outlines major developments during the 1890’s to 1920, a time period that he calls the “age of university building” and the “golden age of the college.”  During this period, going to college became “fashionable and prestigious” and the national media covered the daily life of a college student in the same manner that the lives of the rich and famous are covered today.  During that period, university colors and mascots were conceived and adopted and the role of alumni associations and fundraising became very important.

Originally, intercollegiate sports were run by the students.  The coaches were unpaid seniors or graduate students and the athletic association funded the cost of team sports through the assessment of student fees or donations.    During this critical period of 1890 to 1920, the focus shifted from student-run to professionally run under the auspices of an athletic director and professional coaches.  Thelin provides a glimpse of how corporations and/or alumni contributed to the funding of the programs and how the professors were left out of the circle of power regulating the activities of athletics.

Carlisle vs. Army, written by Lars Anderson, covers the same time period in college athletics as Thelin.  Anderson, a writer for Sports Illustrated, chose to focus his book on college football, more specifically a game in 1912 between the Carlisle Indian School and West Point.   Anderson’s narrative focuses on the development of Jim Thorpe and Dwight Eisenhower as students and football players and the professionalism of Pop Warner, Carlisle’s coach, who was one of the innovators and pioneers of modern football.  The book is a very interesting read for anyone familiar with the story of Jim Thorpe and his athletic successes including winning the Pentathalon and Decathalon at the 1912 Stockholm Olympics.  The book is also successful at outlining some of the major events that changed college sports and why (Theodore Roosevelt’s summoning of the major college presidents to Washington to discuss the deaths and injuries of student athletes, the creation of the NCAA in 1906, etc.).

Derek Bok, former President of Harvard, addresses the commercialization of college sports in his book, Universities in the Marketplace: The Commercialization of Higher Education.  Bok states that college athletics are the “oldest form of commercialization in American higher education.”  He also provides some interesting insights into the effectiveness (or lack thereof) of the NCAA as well as the difficulty college presidents have in controlling the spiraling costs of athletics as well as the constant pressure on coaches and athletic directors to win.  Bok also cites the dismal academic performance of recruited student athletes, the relaxed admissions standards for athletes at public and private universities, and their graduation rate that is lower than that for non-athletes.  Bok portrays the costs of all but the most successful programs as an example of commercialization attempts by colleges and universities that do not provide the payback originally intended.

I enjoy watching college sports and have purchased season basketball tickets to Maryland and Duke men’s basketball games.  Watching is entertaining.  When I think about the complexity of the underlying athletic enterprise including facilities, fund raising, recruiting, etc., I am grateful, however, that “our athletes don’t play games” at AMU and APU.

Gates passionately believes that technology provides solutions to many of the world’s key problems.  He also believes that life changes due to technology can only occur where people can afford the technology.  In a speech that he delivered at the World Economic Forum in Davos, Switzerland in January 2008, Gates spoke about Creative Capitalism. In that speech, he defined it as “creative capitalism – an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequalities.”  Some examples of companies engaging in creative capitalism include:  (1) Microsoft – provides low cost or free technology to those who do not have access; (2) Crucell, a Dutch company that holds the patents on a cholera vaccine in the developed world but shares those rights with drug manufacturers in developing countries so that the drug can be manufactured and delivered at very low costs ($1/dose in Vietnam); (3) Iscar, an Israeli metalworking company, that locates its plants in areas where it can employ minorities such as Israeli Arabs; and (4) other companies such as Converse, Gap, Armani, Dell, and Apple that participate in the RED Campaign started by Bono.

Gates’ remarks to the 2008 graduating class of Harvard include a sobering remark: “Melinda and I read an article about the millions of children who are dying every year in poor countries from diseases that we had long ago made harmless in this country…We asked: ‘How could the world let these children die?’  The answer is simple, and harsh.  The market did not reward saving the lives of these children and the governments did not subsidize it.  So the children died because their mothers and their fathers had no power in the market and no voice in the system.”

Gates has left Microsoft to become Co-Chair of his Foundation.  With the more than $50 billion in assets and the similarly-sized pledge to his foundation by Warren Buffett, I hope that his beliefs and financial clout will help governments and corporations partner in efforts similar to those cited in his recent speeches.

When I first read Rosovsky’s book, I thought about my experience as a student, which was similar to the description under the university college. I thought about the teachers that I considered great teachers during my years as an undergraduate at Duke University.  Seymour Mauskopf (history), James Charlesworth (religion) (currently the George L. Collord Professor of New Testament Language and Literature and Director of the Dead Sea Scrolls Project at Princeton Theological Seminary), James Bonk (chemistry), Richard Hodel (mathematics), and Calvin Davis (history) were at the top of my list for instructors who provided me with inspiration in my learning.  I created a similar list for my graduate school experience at Tulane University.  Stephen Zeff (accounting) (now the Herbert S. Autrey Professor of Accounting at Rice University), Larry Arnold (operations research), Ed Strong (marketing), Jim Murphy (finance), Anthony Hope (accounting), Richard Hays (organizational behavior), Bill Mindak (marketing), James Linn (accounting), Kenneth Boudreaux (finance), Victor Cook (marketing), and David Harvey (accounting) came to mind.  

Thirty years later, the number of memorable instructors for my graduate school is double the number of memorable instructors for my undergraduate years which were also double in length (four versus two).  I don’t know if others who attended university colleges had a similar experience or not.  I enjoyed my years at both institutions.  I waived out of a number of required general education courses at Duke through Advanced Placement and Achievement tests, so I don’t attribute my lower number of memorable teachers to a year or two of required courses similar to my high school curriculum.  I happen to believe that the diversity of the undergraduate curriculum, the restricted access of some upper level courses to program majors only, the fact that some courses were taught by graduate students versus full professors, AND the more focused nature of graduate school provided me with more qualified instructors and led to a better teaching/learning experience as a graduate student.  I would be interested in others’ perspectives on this topic, particularly if you attended a liberal arts college before attending graduate school.