Friday, June 09, 2017

Harvard Business School sources of funds

Schumpeter, writing in the Economist, gives an interesting breakdown of the sources of funds for HBS: tuition fee (17%), executive education (23%), publishing (29%) and endowments (31%). The IIMs and other business schools should compare their own funding pattern with that of HBS and see how they stack up. The crucial thing to note is that tuition accounts for only a sixth of revenues.

The break-up for IIMA in 2013-14 (the last year for which the annual report is available) is: tuition fee (43%), consulting (22%), interest income (21%) and others (14%). It should be clear that tuition bears a much bigger chunk of the burden of generating funds at IIMA than at HBS.


6 comments:

Anonymous said...

Hi Prof. Ram Mohan,

The first thing that strikes is the total of tuition and executive education for HBS is 40%. Now, I haven't seen what is included in the line item 'tuition' but I guess it includes the fees from all programmes taught at IIMA. In that case both are comparable, aren't they?

-Abhay
Class of 2016

Mimi said...

Tut ion Fees.. is not that a kind of rent? I think that the IIMs especially the older ones-IIMA, IIMB and IIMC have oligopoly and percentage of the tuition fee reflects that Also consulting - my understanding is that it is from the govt and quasi govt agencies For instance report on 7th Pay commission Railway etc Also some other programs such as Armed Forces (where army picks up 50% tab and the candidate the other 50% - though I understand is no longer available) As an aside it is more than 50 years and none of the IIMs is in the top 200 let alone 400) and also ASCB accreditation is long long over due Also some of the faculty even after retirement gets sinecures - traveling and per session- as if there are no other faculty available in India It is a closed system So many new IIMs rely on the faculty of the mentor IIMs/ older IIMs as if outside faculty not available

Anonymous said...

Interesting comment and source article. HBS used to be known as the "West Point of Capitalism" for its MBA program, so it is somewhat ironic that MBA now accounts for the smallest percent of revenue. The large endowment and endowment payout is the result of many years of successful capitalist alumni "giving back" to support the MBA program. How do these donors feel now that it is clear that their generosity mainly funds burgeoning admnistrative staff and swollen faculty salaries?

Also, presumably "consulting" does not include the private consulting gigs and lucrative board seats that HBS faculty get through their cosy relationships with the subjects of those cases studies. Not surprisingly, very few cases present their subjects in a negative light.

The Big Picture said...

Abhay, Executive education at IIMA gets included under 'consulting', it's not included under tuition. So my contention that tuition bears the brunt of fund raising at IIMA stands.

TTR

The Big Picture said...

Mimi,

You are right, the high fee at the top IIMs today reflects their ability to extract rent from a scarce resource. Consulting does not include Armed Forces programme nor is it mainly government related- it's most executive training, of which a big chunk is programmes at the middle and lower levels. As for the IIMs operating a closed shop, no comments!

TTR

The Big Picture said...

Anonymous, You are right, consulting at HBS would not include consulting done by their profs. Unlike at IIMA, faculty at HBS (as other major B-schools in the US) do not have to share their consulting income with the institution.

There are certainly conflicts of interest in HBS faculty writing cases about firms they consult with. A recent book also argues that HBS faculty have supported high levels of exec pay because it enables HBS to extract high fees from its students who know that payback will be pretty good!

TTR