MBA Alumni Giving: Why Do European Schools Lag Behind?

Europe has several top-notch business schools. In a field historically dominated by North America, Europe's top schools have been steadily climbing up the rankings for the last two decades. Institutions such as London Business School (LBS Full-Time MBA Profile), INSEAD (INSEAD Full-Time MBA Profile), IE Business School (IE Full-Time MBA Profile), IESE Business School (IESE Full-Time MBA Profile), IMD (IMD Full-Time MBA Profile), and HEC Paris (HEC Full-Time MBA Profile) all have MBA programs ranked in the global top 20. And statistics show these schools match their top U.S. competitors in terms of salaries, GMAT scores, placements with top recruiters, faculty quality, and most other objective measures.

However, there are two key areas in which even the very best European business schools still lag their top-tier competitors from North America: facilities and endowments. Clearly these two issues are linked; improving the former requires growing the latter. But how do we help them change? Are there fundamental cultural differences between Europe and North America with regard to charitable giving? Or is the disparity in donations caused by school-specific differences that can be erased, thereby closing the gap? These are some of the many issues that were discussed at the Graduate Business Forum at ESADE's Barcelona campus last month.

Some say the psychology of giving is fundamentally different in the U.S. and that this will not change. They point out that undergraduate schools and even high schools in the U.S. receive donations that dwarf their European counterparts'. Even world-class universities such as Oxford and Cambridge live off "old money" from property assets and a few key benefactors. Among Europe's top business schools, alumni giving rates at INSEAD and IE are 12 percent, and at LBS the figure is 14 percent. By contrast, U.S. business school giving rates are much higher: 41 percent at Stanford (Stanford Full-Time MBA Profile), 46 percent at Yale (Yale Full-Time MBA Profile), and 67 percent at Dartmouth (Tuck Full-Time MBA Profile).

Defunct Argument

In my opinion, this "psychology of giving" argument is rendered defunct by the Charities Aid Foundation's World Giving Index, which shows that 73 percent of the U.K. population donates money to charity on an annual basis. This compares favorably with the 60 percent who do so in the U.S., suggesting that Europeans in general, and the British specifically, are not opposed to giving—they are just opposed to giving to educational institutions.

Further to this point, major schools such as LBS and INSEAD are, in reality, global institutions. There is no reason why British culture should have such an impact on giving habits when only 10 percent of LBS students are British (the same percentage as North American students). LBS benchmarks itself against top-tier U.S. schools when making decisions on salaries of professors, admissions standards, and tuition fees. So why would it compare its level of alumni giving to anyone else?

It seems the reason for giving in the U.S. is social proof—"everyone else does it so I should too." Similarly, outside the U.S., there is an attitude of "why should I pay if no one else does?" If this hypothesis is true, then the real question becomes: What would it take to break this cycle and get European alumni giving at higher levels? Of equal importance is the follow-up question: How do we create this shock? For European schools to continue their meteoric rise of recent years, it is imperative we answer these questions.

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