Universities are hiring experienced corporate managers to cope with schools' growing size, complexity—and funding difficulties
This is the first of a multi-part BusinessWeek series on the business of colleges.
Call Steve Spinelli a businessman, or call him an academic. Either way, you're right. His career is split evenly between the two fields: 15 years in the business world as a member of the team that founded Jiffy Lube (RDSA) and 15 years as a professor of management at Babson College, during which time he earned tenure and the title of vice-provost. For anyone else, this would amount to a pretty good career, but not for Spinelli. Last September he accepted the position of president at Philadelphia University. He figured the job would be equal parts business and academia, but what he found surprised him.
After a week on the job, Spinelli saw that running a university was more like his experiences at Jiffy Lube than at Babson. "I was able to approach it like a business," he says.
Spinelli isn't the only one who has come to this realization. As higher education becomes more and more complex, especially on the funding side, many colleges—including the University of Missouri system, Oberlin College, the University of Kentucky, and Harvard—are turning to the corporate world for help, specifically to fill high-profile leadership positions. But given the sometimes strained relationship between the two worlds, this kind of change comes with a few hurdles.
The main reason for the shift to corporate hires is that higher education's business model is changing rapidly, especially at public universities. State funding decreases more and more each year, and state schools are being forced to look elsewhere to meet budgets. Many times, this means partnerships with the business world. Moreover, today's university is structured a lot like a corporation. —Universities are complicated businesses," says Paul Osterman, an expert in work organization at companies and a professor at Massachusetts Institute of Technology's Sloan School of Management. "You need a good HR department, IT, construction, someone to manage the portfolio. You need someone with a business background running these operations."
In Spinelli's view, the trend is here to stay. "This change is continuous, and it's not going away," he says. "If we don't deal with it, we're in trouble."
Historically, academia and business have mixed like oil and water. The rule was to keep business talk in the business school. Lately, though, the old conflict has moved front and center as schools have started hiring corporate executives to be president or dean, positions traditionally reserved for members of the faculty. Some schools report more acceptance of business in academia, but it's still a long way to complete harmony. "The conflicts are self-evident," Osterman says. "You have the academic culture vs. the business culture. The leadership styles are very different." Osterman explains that while the academic mindset centers on such things as earning tenure or investing in research, the corporate side focuses on efficient management and growth. "There are trade-offs on both sides," he says.
Winning Over Faculty
When former Sprint-Nextel (S) CEO Gary Forsee accepted the position of president at the University of Missouri last fall, he knew that getting the faculty and administration on his side was crucial. "I came in early and wanted to dispel any animosity," Forsee says. To do this, he used the 45 days before taking office to get up to speed, visiting the four campuses, meeting with faculty and alumni groups, explaining his goals, and asking for help. "I know I have a steep learning curve. I wanted to make sure that they understood that I'm their loudest advocate," he says.
Lucky for Forsee and others in similar positions, it's not as tough a sell as it was, say, a decade ago. "The times have changed," says Judith B. McLaughlin, director of the Higher Education Program at Harvard. "The higher-ed community is more accepting now of people with [a business] skill set." But reassuring faculty still poses a major challenge to individuals taking on these high-profile positions. "They have to bring what they know to a world they don't know, and they have to find a way to make that work successfully," she says. "In the best cases, these marriages are enormously successful, but there is always the possibility for disaster."
Robert J. Birgeneau, chancellor of University of California at Berkeley, is aware of the pitfalls, but he is willing to take the risk. In his four years guiding the elite public university, Birgeneau says he has "professionalized" the staff. "A university is a very complicated business enterprise," he says. "Rather than use people who have spent most of their careers as academics, we need the kind of expertise you find in a major corporation."
Finance Help From Wall Street
His recent actions reflect this sentiment. Last month, Birgeneau announced the hiring of Frank D. Yeary, a longtime executive at Citigroup (C), to take a new vice-chancellor position. Yeary's assignment: to develop a financial plan that establishes more stable funding for the university. "We're looking to produce a financial model that is less vulnerable to fluctuations in state funding," Birgeneau says. No small task, considering that the school's budget is $1.7 billion this year, with money coming from a wide range of sources. But Yeary says he's up to the challenge. "There is an enormous amount to work with," he says. "I'm convinced that the skills and relationships I've developed over the past 25 years will be very useful."
Just as Berkeley hired Yeary, Harvard recently tapped Goldman Sachs (GS) executive Edward C. Forst to fill a newly created executive vice-president position. Forst's main job is to oversee finance, administration, and human resources, reporting directly to Harvard's president, Drew Gilpin Faust. While a new post at Harvard, executive vice-presidencies have existed at a handful of Ivy League schools for years. Columbia, Princeton, and MIT, among others, have similar back-office positions held by former corporate executives.
Philadelphia's Spinelli expects the trend of business people moving into academia will continue, especially as universities find the right blend between the two. "I think higher education, as an industry, is still figuring this out," he says. "Does it have to be the president who has the business experience? Can it be the provost or the chief operating officer?" These are questions that many universities are asking. But in Spinelli's mind, just the fact that schools are considering it is good for the future of higher education.