Capital and Gown at Oxford
When Oxford University appointed John A. Hood vice-chancellor last fall, the venerable institution made a sharp break with tradition. Although Hood, a New Zealander, attended Oxford on a Rhodes Scholarship and holds a doctorate in engineering, he is the first vice-chancellor to come from outside Oxford's academic ranks. Hood worked in business for 19 years, running both the construction and pulp-and-paper arms of Fletcher Challenge, a New Zealand conglomerate. He became vice-chancellor of the University of Auckland in 1999.
Along with colleagues Giles Kerr, Oxford's newly appointed finance director, and Pro-Vice-Chancellor William D. Macmillan, chief author of a recent paper on the university's academic strategy, Hood recently spoke at his office with BusinessWeek London Bureau Chief Stanley Reed about the challenges Oxford faces in its efforts to keep up with top-flight U.S. universities. Edited excerpts from their conversation follow:
Q: Why did you leave business? Hood:
Q: Why did you leave business?
Hood:I had been in business for 19 years, but always stayed close to the university sector. I didn't get the top job at the conglomerate, and I didn't believe in staying in those circumstances. Second, I really wanted a change. I woke up one day and thought what a terrible thing it would be to spend your whole life working for one organization.
Q: You have brought in a top private-sector CFO. [Giles Kerr came from medical diagnostics outfit Amersham, recently acquired by General Electric (GE ).] How did you decide to do that? Hood:
Q: You have brought in a top private-sector CFO. [Giles Kerr came from medical diagnostics outfit Amersham, recently acquired by General Electric (GE ).] How did you decide to do that?
Hood:We made the decision here. We are thrilled Giles is willing to make this transition. I think an institution of this scale and complexity is a major task for a CFO. We have a research enterprise that has a couple of thousand research contracts. [It is comparable] with a construction company -- it's the same process you go through in contracting. Exactly the same discipline is required to manage that scale of activity. The nature of the function is very similar to the private sector.
Q: Giles, what are you finding here? Kerr:
Q: Giles, what are you finding here?
Kerr:The financial issues you have to deal with are really very similar. It is just that the cultural differences are of course quite substantial. Companies are focused on generating shareholder value, [but] there are much more complex motivations at universities. But at the end of the day you need good financial information on a timely basis (For more on Oxford's financial situation, see BW, 02/14/05, "The Reeducation Of Oxford").
Q: How are the financial-reporting systems? Kerr:
Q: How are the financial-reporting systems?
Kerr:Nowhere near as good as they need to be.
Q: How is the university's financial situation? Hood:
Q: How is the university's financial situation?
Hood:We are running a [$38 million] recurrent loss financed out of Oxford University Press earnings each year. But the question is not what the recurrent loss is. It is, what sort of revenue increase would we need...to operate at the level we would like to, and to be able to pay our colleagues what we would like to pay them? Our estimate is a minimum of [$190 million] and, desirably, closer to [$380 million].
Q: How large is your endowment? Hood:
Q: How large is your endowment?
Hood:In the colleges [Oxford has 39 independent colleges] and university it is about [$3.7 billion]. There are many trusts of which we are beneficiaries. If you took that and wanted to capitalize Oxford University Press, you could probably create a case where the endowment is closer to [$7.4 billion].
If you compare our annual giving with Ivy League universities, it's disappointing. Whereas you're talking about 62% [of alumni] giving at Princeton and 48% for Harvard, here it is probably less than 5%. We have a job of work to do there. Another hire is Development Officer Jon Dellandrea from the University of Toronto. We think we will benefit from bringing North American technology to the British scene. (For more on giving, see BW Online, 02/04/05, "Britain's Universities Go Begging".)
Q: How has your endowment performed? Hood:
Q: How has your endowment performed?
Hood:The university endowment [80% of the endowment is held by individual colleges] is making 6.5% to 7% a year. Could we do better? Some North American universities have achieved above 15% in the last 5 to 10 years. We are looking to see if there is merit in more common endowment management and...how we do manage and how we could bring the right skills to the table in terms of endowment management.
Q: There was a fuss about your plans to cut back on British students. Macmillan:
Q: There was a fuss about your plans to cut back on British students.
Macmillan:We thought it would be appropriate to maintain, indeed, to improve, the quality of the student experience [by diminishing] the number of undergraduates while increasing the number of graduate students. The net effect of growing graduate numbers and reducing undergraduate numbers is the number of British students coming here will probably stay the same or marginally increase.
We have a really low percentage of overseas students in our student body, much lower than Imperial or the London School of Economics, where undergraduate numbers are 50%. We want to create the sort of learning environment that mirrors the world of work into which they'll move when they graduate. They are going to work in an international context. We feel they should learn in an international context.
Q: Do you compete with the U.S. schools for undergrads from there and around the world? And can you compete in the U.S. for undergraduates? Hood:
Q: Do you compete with the U.S. schools for undergrads from there and around the world? And can you compete in the U.S. for undergraduates?
Hood:We don't actively go out and seek [undergrads], but we do get a lot of applications. As we go to broaden the base of our undergraduate students, and to really try to find the most talented students out there, we're going to have to try to find more financial support for these students. At the graduate level, we do that -- we have the Clarendon Trust and the Rhodes. But at the undergraduate level, we haven't been able to.
Q: What sort of person is Oxford trying to produce? Macmillan:
Q: What sort of person is Oxford trying to produce?
Macmillan:Those who don't go into an academic field will probably in 5 or 10 years remember very little of what they studied. We want them to have intellectual curiosity [and] leadership qualities.
Q: How are you doing in science and math? Macmillan:
Q: How are you doing in science and math?
Macmillan:The U.K school system is not as good at producing science students as we would like it to be. But we are still able to get the best students. It is a national issue, not an Oxford issue.
Hood: Fewer and fewer students are studying science. We found exactly the same trend in New Zealand and Australia. But I think it may be mirroring perceptions of job-market opportunities. These things are all connected at the end of the day.
Q: What is your assessment of Oxford? Hood:
Q: What is your assessment of Oxford?
Hood:I think Oxford is a preeminent international university. If you take the research aspect, it is an international enterprise with many, many transnational collaborations. Forty percent of our graduate students are international. It is highly competitive internationally to get into Oxford's graduate programs.
At the undergraduate level, only 7% to 8% of our undergraduates are from outside the U.K. or the E.U. In that area, we have a international challenge.